Dynamic Business

For most small to medium enterprises (SMEs) tax planning can be pushed down the agenda and only dealt with on an annual basis with little time and effort given. However, tax represents one of the most significant business costs and by implementing ongoing tax planning it can save a business time and most importantly, money.

Michael Derin, managing director of Azure Group, a Chartered accountancy firm specialising in providing strategic advice to SMEs, says many businesses don’t understand the benefits of ongoing tax planning.

“Under the current economic climate with the government announcing many tax concessions it is essential to have planned and considered the opportunity to be able to access these earlier then later.

“We have helped many clients save considerable money and time by identifying potential tax issues and reviewing their affairs before the financial year end.

“By implementing an ongoing tax planning system, businesses can have better control over cash flow, better plan business activities and set budgets and be in a position to maximise opportunities that come their way, like new business ventures and acquisitions and application of government grants,” added Derin.

According to Derin, an effective tax plan includes many elements with varying levels of complexity. But the key areas for SMEs to consider when implementing an ongoing tax plan include:

Record keeping
Ensuring your financial records are kept up to date and in order can make a considerable difference in the time it takes to process tax information.

“Often it is inadequate record keeping systems that let small businesses down with their tax. It may be your accountants job to process your tax return but you can certainly help make this process more efficient by ensuring financial records are prepared,” said Derin.

Consideration of your financial position
“There are big advantages to knowing and reviewing your current financial position.  Managing profits and expenditure can include activities such as obtaining substantiation for writing off bad debts and considering incurred expenditure or any unearned revenue.

“Unearned revenue is revenue you may have earned without yet providing any goods or services, for instance a project has been pushed back and your services have not been required although you have been paid,” said Derin.

Tax deductions
Tax deductions are made in order to reduce taxable income and also payable tax.  A business may make a number of tax deductions, including donations, self-education expenses, insurance premiums and other work related expenses. Small businesses with a turnover of less than $2 million may also be eligible for tax concessions.

“It’s a good idea to plan for tax deductions. For instances, an organisation can put in place a sponsorship management plan, which is not only favourable in terms of corporate responsibility but can also be tax effective. Looking at educating your staff to improve their level of skills and knowledge can also be a tax deductible activity. There are many activities and expenses that small business can claim tax deductions for, by putting in place a plan a business can make the best use of these,” said Derin.