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At my BNI meeting last week I spoke about the importance of applying the principle of saving for a rainy day to your tax and payroll liabilities. All too often I see clients get themselves in hot water because they don't have the cash available to pay the money they thought was theirs but really belongs to the tax man or the super fund or something similar.
A good practice to get into is to transfer cash from your working account to an offset account on a regular basis. For my partner's cafe we do it weekly because this make sense for this business from a cash flow perspective. Based on past periods we work out what is likely to be due and payable at the end of the quarter and simply divide this by 13 to work out how much to put aside each week. Then at the end of the quarter there is no stress. We just transfer the money back into the working account (after it's earned us a bit of interest), and pay it where it's due.
If you're starting a new business or you're in a high growth phase and you're not sure what your quarter liability will be, then a good rule of thumb you might like to apply is to just put aside a percentage of the cash you receive which may change from week to week. Eventually you will be able to forecast ahead and get into a more regular process.
This is one of the things I love helping my clients with so please let me know if I can be of help to you or any of your clients?
PS. Just a reminder that Dec 12 BAS lodgements are due by the 28th of this month. If you have got yourself into hot water and won't have the cash you need by this date give me a call and I'll tell you how you can deal with it without penalty.