Business expenses – are yours legit?

The second in a series of Small Business Basics by Lisa Martin, Executive Director of professional bookkeeping and accounting firm, GoFi8ure.

If you’re running a business you’ll have business expenses – that’s a given. Every so often, usually two or six monthly (to coincide with your GST returns), you’ll have to reconcile these expenses from your bank account to your accounting/bookkeeping software. That’s all fine. However, it might be worth double checking that everything you claim is legitimate.

Amongst your transactions there’ll likely be a good mix of petrol and parking receipts, office stationery, advertising and entertainment (that’s the round of sandwiches you bought at lunchtime when you met with one of your clients). But sometimes, personal expenses can slip through. It could be that you combine a business trip with a visit to see friends and you don’t adjust the business vs personal proportions of your travel claim. Or, you make a personal purchase with your company credit card by mistake and, in the name of keeping things simple, you just put it through under ‘general expenses’ anyway.

You might think these examples are just minor inconsistencies and that they don’t really matter. After all we’re not talking about the claims that some people make which are obviously un-related to business (the British MP famous for claiming to have the moat around his house cleaned springs to mind). But they do matter. You might not have a moat, and you might not be so silly or greedy to put something like that through, but you don’t want to get into the habit of being blasé about what goes through your books. You want every transaction to be a legitimate one.

The best way to keep your bookkeeping squeaky clean – remembering that your industry could be the next one to be audited – is to check, check and double check when you reconcile your expenses. If you know a purchase didn’t directly benefit your business then it’s not a business expense and you can’t claim it. If you are unsure, simply ask your Bookkeeper or Accountant.



Are You Prepared Financially For The Holiday Season?

The holiday season is a tough time for business owners, not only have they just gotten through the last GST round, they have to cover wages, downtime and GST again in early January.
So, what can you do to avoid financial distress next holiday season?

Having a budget for the holidays will help you achieve the year-round goal of avoiding unnecessary and inefficient debt. You also need to think about your staff wages over the holidays, paying for public holidays and holiday pay.

Get your Bookkeeper or Accounts person to calculate your GST before you close for the holiday break. Don’t risk a late payment just because you are unprepared. You end up paying interest and penalty fees which could go on other expenses so do it before you go away.

Do you know what you can claim for? Just in case you had forgotten or were not aware, here is a quick summary of expenses you can claim for. An important thing to remember is: some expenses are 100% deductible while others are only 50% deductible.

Gifts to Staff – Each quarter or a year there is a fringe benefit tax (FBT) exemption of $300 per employee – as long as your gifts to staff are under $300 for October to December the costs will be 100% deductible. If they are over the $300 then FBT will be payable to Inland Revenue, however, the costs can still be claimed as well.

Cash Bonuses for Staff – These must be included in the employee’s wages for the week and PAYE paid on them.

Gifts of Food and Wine to Associates or Clients – The cost of gifting food and wine to associates or clients will normally be 50% deductible for tax purposes.

Other Gifts to Associates or Clients – The cost of gifts (other than food and beverages) to associates or clients will normally be 100% tax deductible for tax purposes.

If you need assistance with getting on track after the holiday season, the team at GoFi8ure can help. We have bookkeeping and accounting experts ready to help you get through the holiday season with less stress. Contact us via email