Correcting GST errors and making adjustments on your business activity statements
If you identify any error in identifying a goods and in a service tax for a previous period or on an already lodged business activity statement (BAS), there is always scope to make a correction.
The ATO has understood the necessities of these adjustments for businesses, which can easily come about because of change of circumstances or facts. These can include:
If your business overstated its GST liability, then ATO imposes a four year time limit for making changes, which is considered down from when the error was made. For the mistakes on which not enough GST has been accounted for, then in that condition there is an added factor relating to business’s turnover. If the annual turnover for the business is less than $20 million, then in that scenario adjustment must be made within 18 months. If the annual turnover is more than $20 million then it must be paid within 12 months In General, it can be much easier to correct a GST error on a later activity statement rather than revising the earlier statement. But being able to make an adjustment can be important to avoid liability to any penalties or general interest charge.As adjustments relate to changed facts or circumstances, which will have an impact on the subsequent GST outcome of a transaction, the resulting change in need of an adjustment will generally have resulted in a business having either claimed too much GST, or not claimed enough.
Claiming too much GST
How does business claim too much GST on a BAS? Whoever provides the information in order to include the BAS could have:
Not calming enough GST
There are some scenarios in which this might be the case include where a business:
Non-payers can cause significant cash flow issues for any small business. Having said that, non-payer is also an inevitable liability for most small organizations. Several small business operators really feel baffled and bewildered when dealing with problems of non-payment or particularly if a non-payer is a recurring offender or if the sum of money owed is considerable.
How do you cope with non-payers in your organization?
Absolute Accounting Solutions recommendations:
1. Partial payment up front for products or services. A customer can’t take their groceries home without paying. When you supply products or services with an invoice period, you essentially become a creditor. You’re doing your client a favour by giving them something before they remunerate you. A minimum deposit is fair and it also minimizes risk of non-payment.
2. Avoid doing business with large companies who don’t care about you or respect you in interactions and negotiations. Basically, you can't effortlessly bargain with a business on completely different foot-hold. Size sometimes equals leverage, and it’s in your best interests to conduct business with like-sized companies — except if the big company offers something that you can’t get anywhere else.
3. Do not do too much business with a single company. Always have a back-up or Plan B in case projects ever go wrong. Of course, when you are first starting out, it can be difficult to avoid exclusive dealings. But it’s worth having something — or someone — else up your sleeve at all times.
4. Understanding contracts. A quote or service agreement document are both examples of contracts. Unless you’re a business of considerable size having a complex contract drawn up by a solicitor usually represents an unnecessary expense. An engagement letter, on the other hand, is always a good idea. An engagement letter outlines what is expected of each party over the course of a project.
5. Don't send generic, template statements. They can be frustrating, and are very easily disregarded by intentional non-payers. We have found that an invoicing time period of 14 days is ideal. We also recommend that you wait around right up until 45 days following the due date before chasing after payment. Follow up the letter or e-mail with a phone call once the client has had enough time to receive the message. Ask the client when they think that they will be able to pay the invoice. Record the day/date. If the client does not pay within the promised time-frame, remind them that they communicated this date as the cut-off. Ask them to confirm another date of payment. Repeat as necessary.
6. Be honest with a client about the impact of non-payment. As a small business, reliable payment for products or services delivered is very important for retaining cash flow. Point out to your client that their business is valuable to you but that you might not be able to work with them again or any more if you do not receive payment.
7. Factor non-payment into your rate — hopefully, this will come to no more than 2% of your total gross sales. Over the course of a financial year, most small businesses have to write off some projects as debts. You’re planning needs to take this into account.
Normally if a client has paid a few times, you will not have trouble with them paying in the future. However, this is not always the case. Be consistent with chasing your debtors, no matter who they are. Yes, it takes time — but this is another reason to factor non-payment into your rates.
At some point, we all hope that our businesses will expand to include a client base that allows us the position of picking and choosing only supportive, attentive clients.
Developing the skills of assertiveness, negotiation, and tenacity are important when dealing with non-payment in your small business. But learning when to let go is just as crucial.
Contact us if you want to discuss this further or for any others Accounting Solutions!! Talk to our Experts!!