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 www.adviceco.com.au/events/ 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

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