CCBR Business Review

22 B U S I N E S S T I P S By Troy Marchant, Director, Adviceco Chartered Accountants It’s a common question. The P&L reports a profit, but there’s no money in the bank? Here are some of the reasons why: • Invoices: The work is done but the invoice hasn’t been paid. The invoice is recorded in the profit & loss state- ment but no amount will show in the cash flow statement until the invoice is paid. One way businesses might try to preempt this is to invoice 50% upfront. This leads us to point number 2… • Deposits and prepaid income: When a deposit is received it will show as an increase in the cash flow statement but there will be no cor- responding increase in the profit until the full invoice is issued and paid. • Expenses and bills: When a bill is issued to you/your business, it will appear in the P&L but not show in the cash flow statement until the Where has the profit gone? MIND YOUR BUSINESS account is actually paid. • Personal withdrawals from the business: This will show as a reduc- tion in cash available, but have no impact on your P&L, sometimes called ‘drawings’ or ‘Directors loans’. • Loans and hire purchases: Cash is reduced by the loan repayment how- ever the profit is only impacted by the interest component. • Asset purchases: The impact of the Instant Asset Write Off means cash is reduced by the same amount as your profit thus reducing your tax. The best way to marry your P&L and your cash flow statement is through: 1. Systematised software management, such as Xero or MYOB 2. Habitual reporting and review to con- sider the trends retrospectively and to preempt the opportunities and risks ahead 3. Professional support. If you don’t have in-house accounts, talk to your accountant about making sure your profit is reflected in your bank account. Troy Marchant is hosting a business seminar called: The U-Factor – your busi- ness pre, during and post COVID-19 on Wednesday 21 October at 5.30pm at the AdviceCo offices in Gosford. Complimentary places are limited in keep- ing with COVID Safe standards. Register at The Federal Court confirmed that this avenue remains open for employers to not have to make redundancy payments in such circumstances. However, the court limited this exemption to one where a reasonable person – in the position of the employer and employee – would have understood that the job was not perma- nent and would come to an end within a reasonably foreseeable timeframe. Some roles in particular industries, i.e. logistics, welfare and security, are often understood to be contract and/or govern- ment funding dependent. In such situa- tions, employees would have an expecta- tion that work is not ongoing. Also, for redundancy not to be payable, there needs to be a clear link between the reason the worker was made redundant, and the ordi- nary and customary turnover of labour (i.e. loss of contract or government funding). Redundancy can be a significant cost for a struggling employer or one with a rapid turnover of staff. Seeking advice early can potentially remove the obligation of this expense where it is not required by law. CONTINUED FROM PAGE 21 When is a redundancy payment not required? CENTRAL COAST BUSINESS REVIEW OCTOBER 2020