Keeping a close eye on your finances, being disciplined about the amount of money you draw down and the amount you put aside to cover expenses, superannuation and tax obligations is a challenge. That’s especially true when as a contractor, your income can ebb and flow… and then there’s the challenges of keeping your records in order.
A report by the Australian Securities Investment Commission (ASIC) is a strong reminder of the need to carefully manage your business finances and maintain your records.
According to ASIC, in 2015/16, “poor financial control, including lack of records”, was one of the top three reasons nominated for cause of company failure. In fact, in 42% of failed companies, the directors breached the Corporations Act by failing to keep proper books and records.
According to the ASIC report, companies failed during this period because of:
- Inadequate cash flow or high cash use in (4,318 or 46% of reports)
- Poor strategic management of business (4,315 or 46% of reports); and
- Poor financial control including lack of records (3,183 or 34% of reports)
If you’re running a company, the Corporations Act states that you must keep written financial records that:
- correctly record and explain its transactions and financial position and performance; and,
- would enable preparation and audit of true and fair financial statements.
Your financial records include invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers. Additionally, ASIC lists documents of prime entry, and working papers and other documents needed to explain the methods by which financial statements are made up, and adjustments are to be made in preparing financial statements.
If that sounds daunting, it’s time to talk to Ayers. Our finance and payroll experts can take the burden of payroll management and compliance off your shoulders, leaving you to focus on growing your business and creating wealth.
We have over 20 years contractor payroll knowledge and experience, backed by award winning payroll systems, state of the art software and highly secure data storage. Talk to us today.