Your Business Finance Questions

This is honestly one of the trickiest things new business owners face. Most people start by mixing everything together - using their personal card for business expenses, transferring money back and forth randomly. It feels easier at first, but it becomes a nightmare around tax time.

Get a separate business account. Not tomorrow, now. Then be strict about it - all business income goes in, all business expenses come out. Pay yourself a regular amount from the business account to your personal one, just like you're an employee.

The psychological shift matters too. When you treat your business money as genuinely separate, you make better decisions. You stop "borrowing" from the business for personal stuff, and you get a clearer picture of whether the business is actually profitable.

The ATO says five years, but that's just the legal minimum. In practice, you want everything that shows money moving in or out:

• Invoices you send and receive
• Bank statements (both accounts if you've got them)
• Receipts for expenses over $75
• Payroll records if you've got staff
• Any contracts or agreements that involve money

Digital is fine. Scan receipts or use your phone - just make sure they're backed up somewhere. A shoebox full of faded thermal receipts won't help you in an audit.

The stuff people forget: vehicle logbooks if you claim car expenses, home office records if you work from home, and details about any assets you buy. These are the things that cause problems later.

Most small operations start with cash accounting because it's straightforward - money comes in, you record it. Money goes out, you record that too. Simple.

But if you're invoicing clients with payment terms, or you're buying inventory that sits around for a while, cash accounting starts lying to you. You look profitable one month and broke the next, even though nothing really changed.

Consider switching when you're regularly carrying receivables over $10K, when you've got significant inventory, or when you need to understand your real financial position for planning. Around $75K in turnover is where most businesses start feeling the limitations of cash accounting.

Fair warning though - accrual is more complicated. You're tracking what you're owed and what you owe, not just what's in the bank. Most businesses need proper accounting software at this point.

This depends on your structure and income level, but a rough guide: put aside 30% if you're doing well, 25% if you're more modest. Better to have too much saved than scramble when the bill arrives.

Set up an automatic transfer every week or month. When money comes in, immediately move the tax portion to a separate savings account. Don't touch it. Pretend it doesn't exist.

Remember GST is separate - that's not your money at all, it's the government's money that you're temporarily holding. Keep that in its own mental bucket (or actual account if you can manage it).

Profit is what's left after you subtract all your costs from your income. Cash flow is whether you've actually got money in the bank right now.

You can be profitable on paper but have no cash - happens all the time when you've invoiced work but clients haven't paid yet, or you've bought inventory that hasn't sold. You did the work, you're technically profitable, but you can't pay your bills.

The reverse happens too - you might have cash in the bank but not be profitable because you haven't paid all your expenses yet, or you're living off a loan.

Both matter. Profit tells you if your business model works long-term. Cash flow tells you if you can keep the lights on this month. Plenty of businesses fail with good profit margins simply because they run out of cash at the wrong moment.

You have to register once you're turning over $75K, but you can register earlier if it makes sense. The main reason to register early is if you're buying expensive equipment or inventory - you can claim back the GST on those purchases.

The downside is paperwork. You'll file BAS every quarter (or monthly if you're keen), track GST on everything, and your prices effectively go up 10% if you're selling to regular consumers who can't claim GST back.

If you're selling mainly to other businesses, registering early often makes sense. If you're selling to the general public and your turnover is well under $75K, the admin burden might not be worth it.

Weekly for cash flow - just a quick check that you've got enough to cover upcoming bills. Monthly for everything else - proper review of income, expenses, and whether you're tracking toward your goals.

Quarterly is when you do the deeper analysis. Are your margins holding? Which products or services are actually profitable? Where's the money going? This is where you make real decisions about the business direction.

Most people don't look at their numbers enough. They work hard all month, assume things are fine because they're busy, then wonder why there's no money in the account. Busy doesn't equal profitable - you need to check.

Anything that's genuinely necessary for running your business. The key word is "necessary" - the ATO looks for a clear connection between the expense and earning your income.

Office supplies, equipment, software, professional fees, insurance, marketing costs - all straightforward. Vehicle expenses work if you keep a logbook. Home office expenses are claimable but you need to calculate the business portion properly.

Where people get creative (and sometimes into trouble): clothing is generally not claimable unless it's protective gear or has your logo. That nice suit isn't a business expense even if you only wear it to client meetings. Meals are tricky - buying lunch while you work isn't claimable, but client meals or travel meals often are.

When in doubt, ask yourself: would I buy this if I wasn't running this business? If the answer is yes, it's probably not claimable.