Financial Planning

Every small business must do financial planning, here’s why?

Considering the economic turbulence that has been encapsulating the market for quite some time now, it wouldn’t be completely wrong on our part to qualify economic planning as an indispensable factor for all businesses alike, regardless of their mode of trade and size.

Financial planning, or what is more commonly known as budget is the process of delegating a fixed amount of money for the cumulative expenses that will be carried out during the course of the business thus, guiding its day-to-day process of decision making. Predicting numbers for the upcoming year and comparing them with the average configurations of the past will assist in determining the overall efficaciousness and health of the business even if the organization is single-handedly run by the owner. In the following section, we will be jotting down the chief reasons that elucidate why every business needs a financial plan to help you form a clearer insight into the same.

Helps you plan a quick response to financial crisis

The fact that a small business doesn’t have a reserve of voluminous funds to fall back on when crisis strikes cannot be steered away from. However, the vulnerability of the business to market instabilities cannot narrow down owing to this truth. In fact, if the company fails to delineate effective business planning, the repercussions are likely to deteriorate its permanence further. Possibly, there is a string of issues that can pop up such as property ownership and loss, illness, interruption in the business, lawsuits and the like. Thus, in order to come out clean, your business should have the specialized insurance protection that most importantly, safeguards the interests of the business and provides coverage for all employees’ compensations. Apart from this, the potential risks stemming from the volatility of the industry too can be tackled by strapping financial planning before it’s too late.

Separate business and personal funds

Most small business owners, in the face of a monetary crunch, tend to engage their personal funds to fill in the vacuum thereby, deliberately stepping into the vicious cycle of borrowing and returning. Bear in mind that no matter how worse the situation gets, you should always think of the future where you and your family will be able to lead a stress-free life after your retirement. This is why having a budget for your business is imperative as it will help you set realistic goals for your business.  For instance, if you are looking forward to investing to expand your business but, do not have funds at the moment, you can be swayed in believing that rolling out your personal savings here will be a wise recourse to resort to. Nonetheless, it is not; instead of taking the leap of faith and moving ahead without tracking and analyzing your past experiences, invest only when the financial steadiness and planning allows you to do so.

Develop a formidable tax strategy

Business planning is particularly advantageous when you are on the verge of submitting your tax returns or want to sell your company altogether. If you believe that you have been paying a lot of tax, your budget and past records will aid you in outlining the prospects of superannuation contributions that are at hand. For small businesses, the tax requirements differ as per their legal standings. Thereby, to comprehend your tax obligations as a business owner, get in touch with your attorney or accountant to get acquainted with the federal commitments and strategies. Your personal income and expenditure can be coupled with that of your business to maximize the benefits for the company.

Comply with the sales trends

A business owner’s dubiousness, when asked to identify which of his decisions worked in the favor of his company from a humongous pool, is nothing unusual. Nevertheless, if your financial plan contains a documentation of the sales targets and their respective performances, concluding which of your yields complied with your anticipations and which of them need to be worked on will not be difficult. Moreover, this picture will facilitate the effectual illustration of marketing policies that keep up with the latest sales trends hence, boosting the returns of your company.

Financial Planning

5 Tips to Create Financial Plan for Your Business Quick and Easy

In order to lead a successful brand, the first step is to create a solid business planning. Many small businesses find this step crucial, and they need some professional guidelines to complete it. And the important part is that you should do it ahead of time so that everything can stay under control.

Here we have highlighted five important tips to help you create quick and easy financial planning for your business:

  1. Plan regular cash flow:

Whether you own a big brand or are running a small business, it is important to understand that businesses cannot always boom. The sales keep on fluctuating up and down month by month. The variations may be more if your business is offering seasonal services and products. Experts advise saving some funds for the rainy days so that you can stay prepared to handle the losses. Make sure you have prepared your emergency funds in advance so that they can be utilized during the dry spell.

  • Go paperless with your accounting:

For the past several years, you might be using papers to manage your financial systems. But the scenario is changed now with the advancements in technologies. It is now possible to streamline things with online accounting systems. There are plenty of options in the market, such as Zero or QuickBooks Online. One can also manage other digital files like Payroll, Banking, and Invoices, etc. with this system. The software can make it easier to manage all the records, and the calculations can be easier at the time of tax compilation.

  • Keep retirement funds:

It may appear a very basic thing, but make sure you plan it well. The small business owners usually target their immediate needs, and they fail to create solid plans for the long term. But it is important to understand that your business must support your future as well. So, look for some healthy retirement options around and set up your financial planning accordingly.

  • Create separate business and personal finances:

There is no doubt to say that your business is an integral part of your life. But it should be separated when we talk about bank accounts and financial aspects. When you mix your personal and business accounts, it becomes difficult to track the transactions. Experts advise keeping separate accounts for both so that you can build legitimacy for your business. It will also be easier to manage your tax details.

  • Check business insurance options:

The world of business is growing continuously; in this situation, it is better to re-access your business insurance plans. Spare some time to evaluate your current insurance plan and check if it makes sense for the changing scenario. If not, we advise you to look for new options around.

Once you follow these simple financial plan tips, it becomes easier to maintain a proper cash flow in the long run. Business owners that have solid business planning can take potential decisions at the time of risk as well.

Financial Planning

Flying blind is not good for your business, pitfalls of not having a financial plan

As a business owner, the biggest mistake you can commit is not to have a solid financial plan for your company. The scope of question do you really need a financial plan is as the imperative establishment itself. Moving ahead without a budget and flying blind might seem amiable during the initial days of the business but, once it starts growing and the funds start spreading, everything will go haywire and if not rescued on time, the company might even fall flat on its face. 

Unreasonable investments

The biggest and the most glaring disadvantage of not having a business plan is investing in unreasonable areas with the hope that they will bear fruits in the long run. Also, it can so happen that because you have capitalized on all the funds that the business had, you are falling back on your friends, family, insurance agents and bankers to help you with the rest of the obligations. Entrepreneurs who follow this path of unruly investment end up spending a bomb in procuring services and products that are useless or at least, would not enhance the returns of the business in any way. Therefore, when you have a budget, you have a clear picture of the domains that stand as the topmost priorities and should be attended before everything else. hence, business planning chiefly accomplishes two purposes, a) you steer clear from capitulating to the unending cycle of borrowing and spending without purpose, and b) the indispensables of the business are focused on in due time.

Non-recurring expenses will soon start overshadowing

In a business, expenses like the payments of your employees, electricity bill, transport costs, and such others are classified under the category of recurring expenses as they have to be cleared at the end of every month and are intransient. Nevertheless, outlays such as paying the medical bills of an employee or reimbursements in the face of emergencies are non-recurring and don’t come with warnings. This is why these incidentals are either overlooked or not paid heed to assume that they are only one-time costs. But, the truth is, these payments are being made from the business reserve itself and if you do not have solid financial planning to track these expenses and render you with the amount left after each outgoing, soon all your assets will be stripped off thus, compromising the necessities. 

There will be no clarity

Regardless of the size of your company, when there’s no rigid business clarity, you cannot expect to have clarity about its financial status. Running a business is essentially a two-way road where both the investments and returns should be at par with each other; meaning, neither of them can function without buckling support from the other. If your archives reveal that your profit margins and revenues are not broad enough to comply with the anticipations that you have from the company this year, then defying them and sponsoring your proposals might backfire only to open doors to an irrevocable financial gap.

GST Small Business Accounting

10 Accounting Mistakes Businesses must strictly avoid for accurate GST Filing

GST Return Filing

It has been over two years since the implementation of the New Goods & Service Tax Regime. And the GST regime has effortlessly taken over the former VAT & Service Tax system.

The GST System has eliminated the Cascading effect or the tax on tax effect on goods & services thus decreasing the costs of Goods & Services.

The GST System has also introduced various advantageous rules & relieves such as

  • The Composition Scheme for Small Businesses
  • Elimination of the Cascading Effect
  • Automating the Filing process online- Digitalization
  • Simpler Compliance
  • Improvements in Logistics
  • Systematization of the unregulated Sectors such as the E-Commerce
  • Input Tax Credit

In other words, the GST system was introduced to make the Indirect Taxation more efficient & sophisticated both for the Business as well as for the Government.

However, just like no system is perfect, the GST Regime has also faced backlash due to its not so effective implementation & the flaws in the system.

Out of the lot, the most basic issues faced by Taxpayers still remain Compliance. The former VAT system allowed the Taxpayers to rectify any errors while filing their Returns. The GST System does not provide any such facilities to the Taxpayer.

If a certain Return is wrongly filed there is no chance the Taxpayer can modify the returns until the next Filing. In the meantime, the Taxpayer shall receive a Notice & maybe even penalties.

Hence it becomes crucial for Businesses to comply with the GST System & file accurate taxes, not just for the sake of compliance but also for the Business.

A well-prepared Tax return helps the Business track their growth & progress. It helps the Business to learn the exact numbers of Inward & outward supplies and on that basis, they can understand the cash flow cycle.

An accurate GST Filing also ensures an accurate amount of Input Tax Credit Claim. ITC is an indirect form of cash inflow for Business & saves them from paying double taxes.

The Taxpayer must take the precision of the GST Return Filing into utter consideration & make sure to avoid errors, as errors in the filing cannot be rectified once submitted.

But Tax filing cannot always be accurate since the filing needs to be done manually some errors may still occur. The GST Norms are complicated & the Taxpayer may miss out on something or the other, such as missing records like invoices, or wrong entering wrong GSTINs, etc.

We have identified & stated The Most Common Mistakes Taxpayers Make & Must Avoid while filing their Returns-

GST Return Filing Mistakes To Avoid

 1. Manual Data entry errors– This is the most basic mistake in GST Return Filing & the one that should essentially be avoided. The taxpayer must ensure the details are entered correctly & in the right format, such as the date format, non-repetition of Invoice numbers, correct Invoice values & value format, correct counterparty GSTINs & Supply address, etc. The special characters must be used wisely by the taxpayer only where required.

2. Tax Slab Compliance– The taxpayers must ensure that the tax rates of the items are calculated as per the Tax Slabs given by the GSTN & the HSN summary must be calculated accordingly. Currently, there are 5 tax slabs- 0%, 5%, 12%, 18%, & 28%.

3. Non Filing of the NIL Returns– Taxpayers usually feel that since they had no transactions for a particular tax period, they don’t need to file their GST Returns. This is a misconception, even in case of zero transactions, Businesses must file a nil return.

4. Reverse charge Mechanism– The Supplier taxpayers must thoroughly understand the Reverse Charge Mechanism under GST. Under Reverse Charge, the Buyer pays the Tax for purchased goods directly to the Government. In normal cases, the Buyer pays this tax to the Supplier who then pays it to the Government. While filing their GST Returns the supplier must understand if they fall into the RCM category & file the Returns accordingly to avoid double tax payment. There may also be cases where the RCM is ignored even for eligible transactions. This practice is incorrect & must be avoided

5. Confusing Zero-rated Supply with Nil-rated Supply– Yet another common concern is the confusion in Zero-rated supplies & Nil-rated supplies. Goods & services with 0% applicable GST is Nil rated Supply, whereas, exported goods & supplies to SEZs are Zero-rated supplies. The taxpayers must categorize the supplies carefully & accordingly.

6. ITC Reversal & Credit Blockage– As per the various amendments in the ITC laws, the ITC shall be reversed in situations like ITC on goods used for personal use, lost or destroyed goods, non-payment to the supplier within 180 days, sold capital goods, & samples, etc. Also, there are certain goods for which the Credit is blocked. Taxpayers must keep in mind the ITC laws while filing & claiming ITC.

7. Paying Taxes under the wrong GST head– There are GST heads such as CGST, SGST, IGST, etc. The payment of taxes under the wrong GST Head can invite trouble for the Taxpayer. The CGSTs must be paid under the CGST head only.

8. Mismatch of monthly/quarterly filing with Annual Returns– The taxpayer must file accurate GSTR-1, GSTR-3B, & GSTR-9. The mismatch in the three reports can cause the taxpayer to receive notices. The GSTN is highly dynamic about the same & does not tolerate even the slightest mismatching of even negligible amount. Hence the taxpayers must be highly cautious while filing these returns.

Mismatch in GSTR1, GSTR3b and GSTR9

9. E-WayBill Compliance – The taxpayer must comply with the E-WayBill system since the GSTN has announced the reconciliation of the      GSTR- 1 & E-WayBill data. Hence the taxpayer must file their GSTR-1 accurately concerning the e-WayBills & vice versa.

10. Precise ITC claim – The taxpayer must thoroughly cross-verify their auto-populated GSTR-2A, Purchase books & GSTR-3B & claim the correct value of ITC. Since return once filed cannot be rectified or changed until the next filing. The delay caused due to the error can attract notices, fines & penalties. The taxpayer must keep in mind to claim only the accurate value of ITC in their filing to avoid concussions. That is, the taxpayer must know, how to claim input tax credit in gst

To conclude, it is advisable to the taxpayer that they must take their time & file accurate GST returns, to track the exact Business progress & to comply with the GST system to dodge Notices, Scrutiny, Late fees, fines & penalties.

GSTR Filings can be done accurately using APIs & Integrations of the billing systems with software solution providers such as GSTHero Software Solutions.

Small Business Accounting

Business budget samples, examples, and templates

Having a budget that sincerely secures all your needs throughout the month in an excellent idea but creating one for your business qualifies as indispensable. Instead of rushing with the procedure, take your time with the budget so that you can readily control the costs, steer away from overspending and achieve the financial goals that you have been looking forward to. There are several ways of approaching the task but, referring to business budget samples and using budgeting worksheets that would eventually furnish you with enough clarity is the ideal way of complying with its requirements.

The requisites of the budget

According to business analysts, there are a few things that a business budget must contain under all circumstances and in the following section, we will be jotting them down.

  • Estimated sales, revenue, and profit.
  • Fixed costs including loan payments, rent, electricity bills, business license expenses and the like that must be cleared off regardless of your income.
  • Variable costs- the ones which depend on your sales namely cost of raw materials, production, labor charge (if they work overtime) and several others.
  • Semi-variable costs- these are the expenses that partially depend on the trades and can be adjusted if the sales are not at par with the expectations.
  • Projected profits

Basic budget

For you are comparatively new in this realm and do not want to go wrong the whole setting, then starting with a basic business budget examples containing strategic templates would be the right choice. Move on the more detailed and complicated examples once your revenue starts multiplying and your business grows in size. Till then, a basic budget plan will take care of all your needs. In this, the income and expenditure are isolated from one another to deliver a firmer comprehension of the funds that are being drawn and spent.

  Labor wages Materials Fixed costs Variable costs Budget Actual Difference
January $100 $100 $100 $100 $600 $400 $200
February $120
March $90
Total of Q1 $310

Department budget

The thing with a department budget is that you will be able to transparently draw out the income and expenses of your company as per its different divisions and therefore, efficiently calculate the percentage change across the years. Furthermore, you will easily get hold of the numbers right when you need them and weigh the configurations of the departments against each other to identify the shortages and surpluses.

Income Budget2018 Budget2019 Budget2020 Budget2021 Budget2022
Salary/Wages $100        
Pension $87      
Business $264 56    
Dividend $37 32 91  
Total $- $- $- $- $-
Administrative $100        
Marketing $87      
Public Relations $64 56    
Development $37 32 91  
Total $- $- $- $- $-

12-month business budget

Lets say you are trying to settle for something that is more detailed and neatly laid out, then the 12-month business budget template is your ultimate answer.Then all you have to do is enter the details of your revenue and income estimations for each month of the year and then check if the real figures are at par with your appraisals.Next you can create two of the following tables if needed to separate out the income and expenses to gain a clearer perspective.

Profit and loss category January February March Total of Q1 April May June Total of Q2 July
Sales and marketing costs $100 $70 $80 $250
Revenue $90 $80 $70 $240
Labor costs $80 $100 $90 $270
Admin and general $70 $60 $100 $230
Small Business Accounting

How to create budgets for your business yourself quickly?

If you are an entrepreneur whose business is still in its blooming years then, fabricating a budget will be the first step towards building the foundation that would keep lending support to the company throughout its tenure. In the following section, we will be jotting some tips that will help you to quickly create business budgets all by yourself without any professional intervention whatsoever.

  • Analyze your revenue

The first and the most important thing to do would be to thoroughly analyze your business revenue. Take into consideration all the sources of your income and then add them together to delineate the closest figure of your monthly revenue estimation. While outlining your income remember that you must calculate the revenue and not the profit only; because in business, the funds constantly flow from one point to another and in such a scenario you cannot simply rely on the profits to protect its interests. Additionally, do this for multiple months; even if not the entire year than at least for the last six months because considering the present upheavals of the economy, drawing out a budget that is a single month’s descendant can open doors to a huge risk.

  • Figure out the fixed costs

If you are not looking forward to losing your direction midway into the budget then, keep figuring out the fixed expenses including that of rent, loan dues and depreciation of assets, taxes, insurances and the like. The biggest mistake that most businessmen commit is that they equate their budget with the average monthly revenues but, that is not the case. There is a string of other components that must be considered with equal sincerity to fabricate a budget that proves beneficial for your company and the not the other way round. Collect as many bills and tax papers as you can from the past because that way, it will only take you a few minutes to bring together all your fixed expenditures and subtract them from your income to create business budgets.

  • Set aside a chunk of your fund

To avoid the potential confusion and smoothly make your way out with your budget, set aside a chunk of your fund that will be sufficient to serve your variable and emergency expenses. Instead of segregating them any further and investing your precious to assign individual amounts to each of your needs, assess an overall amount and let it cover you whenever a secondary need arises in your business. Keep in mind that the arrangement should be such that no matter how grave the contingencies are, they will not force you to scoop out resources from your ultimate budget.

  • Use budgeting tools

Lastly, without rushing through the process of budgeting like a thunderstorm, take your time to understand the requirements of your business and then break the mechanism into small steps. This idea might seem lengthy but, trust us when we say, this is the most effective approach when you are running short on time and yet want your budget to be characterized by the virtues of transparency and accuracy. Attend the distinct bits on different days and you will see ideas that can are capable of adding value to the budget seeping into your mind. Arrange the procedures that will help you to readily find the numbers you need to steer away from unwanted complications. Additionally, you can refer to some budget samples and examples and effectually choose from a wide array of templates to make your task a lot easier.