Firms should upgrade software to avoid costly errors, writes Debbie Marshall, director of Business Solutions.
Despite media coverage and public commentary on the tax changes, a number of businesses may have underestimated the preparation needed to ensure a smooth transition.
There seems to be a misconception among business owners that the GST increase on October 1 (from 12.5 per cent to 15 per cent) will
be a simple process of changing their GST code.
This is certainly not the case, particularly with clients who report GST on a payments basis rather than invoice basis.
Any changes to GST incur a cost to business owners in ensuring they can comply correctly with those changes - this includes cost of software upgrades - and time in preparing for the changes and additional administrative costs in compliance.
Business have two options in order to prepare their accounting software for the changes ahead.
The first is to upgrade their software and to run the GST upgrade assistant. This will help in changing the settings within the software and changes to reporting in order to accommodate the GST increase.
Alternatively, business owners can adjust their settings manually within the software, but it is a more labour intensive process and may be prone to error.
For those reasons alone, I would recommend that business owners upgrade their software, as this will ensure it is correctly prepared to account for the GST increase.
It will also ensure the GST reporting within their accounting system will incorporate the additional requirements and GST changes.
Common concerns among many small business owners are contracts and invoices dated prior to the changeover.
The issues arising from the GST increase are the effects on contracts entered into prior to October 1, where a deposit has been received, but the balance is not due until after the GST increase; and the need to issue credit notes after October 1 for invoices issued prior to the GST increase.
Bad debt write-offs are also a potential concern, as are payments received after October 1 for invoices issued prior to the GST increase.
The main concern though is the potential for businesses to be effectively "out of pocket" for the 2.5 per cent increase if the GST is not reported correctly, particularly for the period ended September 30.
This can be avoided through preparing and being well-informed about the GST changes and the additional reporting requirements.
Make sure your accounts are reconciled and any adjustments required made prior to September 30. Check your receivables and payables lists, and confirm that all receivables amounts are genuine and recoverable accounts, and make any other adjustments necessary.
Business owners should seek additional professional advice if they are concerned about how to prepare for the changes on October 1, as being well prepared will save both time and money, and will ensure businesses continue to run smoothly through the GST increase.
Information provided in association with Myob.
