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	Articles Blog Cash Flow tip – Day-to-day Accounting activities – daily weekly monthly Details Published on Thursday, 18 April 2024 08:19 There are essential day-to-day accounting activities or “things to do” to ensure your business cash flow stays healthy and your accounts are in order, daily, weekly and monthly, even if just to check the items that need action. Mostly it comes down to the discipline to keep on top of key practices and good communication with your customers, suppliers and banks. Debtors Before extending credit to a customer, it's crucial to have a comprehensive understanding of their background. Gathering all necessary information about the customer is essential, and for larger transactions, conducting a credit check is advisable. Clearly establish and mutually agree upon the credit terms at the outset of the business relationship. It's important to communicate the payment due date and recipient clearly to the customer, and ensure that invoices prominently display your terms and banking details. While it's beneficial to offer terms that suit both parties, it's advisable to keep the credit period under 14 days. Regularly send reminder statements to follow up on outstanding payments and ensure timely settlement of invoices. Creditors Cultivating strong relationships with your suppliers is crucial. Strive to make timely payments whenever feasible, as this can lead to potential flexibility in credit terms during periods of financial strain. In the event of encountering financial difficulties, it's important not to hesitate in requesting extended credit terms or the option to spread out payments over a period of time. Assess your stock to identify the products that are selling well and those that are not. It's advisable to eliminate slow-moving items and sell them promptly, as holding onto stock ties up your available funds. Cashflow Forecast It's important to consider various scenarios, such as the potential impact of non-payment by your largest customer or an increase in average payment terms. Regularly updating and tracking your financial progress can help prevent unexpected surprises. As an exercise, you can download last year's Profit and Loss statement into Excel, organize it as a monthly multi-period, and adjust for anticipated sales and expense changes for the upcoming year. Incorporate formulas to calculate your cost of sales, gross profit, total expenses and operating profit each month. Additionally, include a line to input the opening bank balance and exclude any non-cash expenses, such as depreciation, to accurately record actual cash flow. This comprehensive approach will provide a clear understanding of expected cash inflows and outflows based on customer history, allowing you to identify potential surpluses or shortfalls in cash. It's advisable to reconcile your bank account on a daily basis to monitor incoming and outgoing payments. Utilizing reliable accounting software with daily bank feeds that are automatically categorized can provide real-time awareness of your cash balance. *Need help? Not sure?* *Call for FREE 30min advice / strategy session today! 0407 361 596 Aust – No obligation!* ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Bookkeeping – How to enter a Chattel Mortgage in your accounts books Details Published on Thursday, 11 April 2024 10:10 What is a Chattel Mortgage? A chattel mortgage is a type of finance loan where the business (borrower) takes ownership of the financed goods (chattel), while the lender holds a 'mortgage' over it until the loan, including any balloon payment, is fully paid off. Businesses may opt for a balloon payment to either lower regular repayment amounts or structure repayments to cover the entire loan amount over the loan term. A balloon payment is a single lump sum paid to the lender, typically at the end of the loan period. This sum is often a percentage of the total loan and can be subject to negotiation with the lender. Alternatively, loan repayments are spread out over the loan term and encompass both principal and interest. GST is applicable to the purchase of the goods and, with adjustments for private usage if relevant, whether reporting on a cash or accrual basis for the BAS (Business Activity Statement) at the purchase date. For specific advice on this matter, it is advisable to consult with an accountant. What is the difference between Chattel Mortgages and Hire Purchase Agreements? In a chattel mortgage, the purchaser holds title to the goods from the time of purchase until the loan is repaid in full. The borrower secures the purchase price (or a portion of it) through a loan and uses the borrowed funds to settle the supplier for the goods. Legal ownership of the goods is transferred at the time of purchase. Once ownership is transferred, the business can claim depreciation (if applicable) and GST on the goods, as well as the interest expense on the loan. On the other hand, a hire purchase agreement involves a contract for hiring goods, where the title of the goods remains with the lender and does not transfer to the purchaser until either the option to purchase is exercised or the final installment is made. This represents the distinction between a chattel mortgage and a hire purchase agreement. Bookkeeping Setup and Processing Accounts needed for Chattel Mortgage Process for vehicle purchase - Plus a Current Asset A/c: ‘Deposits to Suppliers’ Enter the Purchase of the Chattel Mortgage Goods – example a Car Deposit paid before purchase– Allocated to Current Asset A/c: ‘Deposits to Suppliers’. Purchase of Car Journal Making the Repayments Monthly payments – sample figures Monthly Payment: $887.43 Number of Payments: 48 Look at the Finance Company schedule, as the first* monthly payment will be recorded like this: Note – The first repayment may include the establishment fees, put these to expense account “Finance Costs” as they are usually claimable immediately, so verify with advisor. Note:* If you do not have the breakdown of the interest as per the above example, do not make it up. The accountant will work out the interest and unexpired interest charges at the end of the financial year (EOFY) and include the amounts in the adjustment journal to be processed at EOFY. If you only have the repayment amount (in above example $887.43) simply post the entire amount to the loan account. *Optional* Optional and not necessary, some prefer to show the total value of Interest for the term of the Chattel Mortgage on the Balance Sheet using Unexpired Term Charges to show Interest due later. Additional accounts are required. *Need help? Not sure? Call for FREE 30min advice / strategy session today!* *Email* *This email address is being protected from spambots. You need JavaScript enabled to view it.* *or call 0407 361 596 Australia* ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ More Articles... Business Tip – Success advice of 2 millionaires Business Financials – What is equity meaning in a business & accounting? Cash Flow tip – 5 ways to increase sales in business Business Tax Tip – ATO Record keeping requirements for small businesses Business Financials – Liabilities and Debt - Difference? 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