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Risky Behaviour: Where Are You On The Super Spectrum

The super guarantee (SG) means that if you are in full-time employment your employer pays a minimum amount (currently 9.5%) into your super account. You can view your super and investment portfolio via an online platform provided by your superannuation fund. While knowing your super balance is important, understanding your superannuation risk profile – and acting on this knowledge – could make a difference to the amount you have when you want to retire.

Lara Bourguignon, General Manager of Customer Experience at MLC, warned against the “set and forget” mentality of some people to super:


“Being in the right super risk profile is one of the key factors that will determine how much you have when you retire, but it’s often overlooked.”


Until last year, if you did not select what type of investment strategy you preferred (ie, high-risk/ high-return, or lower risk/stable return) your money would automatically go into a default fund. From July 2017, however, super funds were obligated to transfer monies from default funds into a MySuper account. Thus, no distinction is made whether you are an aggressive investor, or, at the other end of the scale, a passive one, as you are placed automatically in a low-cost fund with a diversified investment strategy; it is, therefore, a good idea to select your own super risk profile.

Understanding your super risk profile

The amount of financial risk you can take is linked to your life circumstances. Accordingly, you can decide to take conservative, moderate, or aggressive risk in terms of investment and each will lead to different returns. Generally, the younger you are, the greater financial risk you can take in terms of investing because you have longer to make up any shortfall. Looking at your super risk profile will show where you sit on the investment risk-taking spectrum.

“If there’s one thing every Australian can do right now to improve their retirement it’s to get in touch with their super fund and check what risk profile they are in, and, if it’s not right for them, adjust it,”

The latest survey has highlighted a general lack of awareness among respondents that could be contributing to a shortfall in super. Young women are particularly at risk, with 45 percent being unaware of their super risk profile.

The following example was given by MLC:

A woman aged 25 on $80,000 a year who has a conservative risk profile until she is 70 could improve her super balance by around as much as $294,000 if she knew and adjusted her profile according to her circumstances and life stage.

How to fix your super risk profile

We may be able to help you with advice on how to adjust your risk category to get the most you can out of super. Please contact us to discuss your circumstances and find out how we can assist further.

 

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Critical Accounting Mistakes That Bookkeepers Should Avoid

There are several common accounting errors committed by bookkeepers that can have an adverse effect upon the finances of a business. Sound financial management starts with a solid understanding of bookkeeping fundamentals. We will present you with some of the most commonly committed bookkeeping mistakes that may negatively impact the finances of your business.

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Co-mingling Personal And Business Finances

In order to accurately track your business finances, it is imperative that you separate all of your personal and business transactions, regardless of the size of your business. Separate business and personal financial accounts should be maintained and you should avoid depositing any funds from the business into your personal accounts. You should also implement a strategy for withdrawing funds from your business account to disseminate profits to investors and to provide funds for your personal expenses.

Erroneous Monthly Balance Sheet Reconciliation

Each month the balance sheet of your business must be reconciled so that you have an accurate assessment of the financial status of your business including its income, expenses, and inventory. This is one of the most fundamental accounting tasks, and it is sometimes overlooked, or not performed properly. It is important to perform this task accurately to avoid, and correct, any accounting errors that occur, so that they will not accumulate and lead to larger financial problems.

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Accurately Track Petty Cash

Many businesses do not keep proper account of petty cash, due to their relatively small amounts. However, petty cash can add up to a significant sum over time. A simple accounting system should be in place to log the amount of funds initially placed into the petty cash reserve and each employee who needs petty cash should submit a petty cash slip every time they require funds. The sum of these slips should balance with the original amount of money deposited in the petty cash reserve fund, prior to replenishing it.

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Cannot Accurately Track Cash Flow Versus Profit

At times, businesses are unable to properly distinguish between cash flow and profit. This can frequently occur when expenses and outstanding payments due are not accurately accounted for. For example, there may be a positive cash flow, but there may actually be a business loss, due to outstanding expenses that are unpaid. Similarly, a negative cash flow may be of a temporary nature, due to outstanding payments due from customers, and the business may actually be profitable.

Judicious Use Of Computerised Accounting Tools

Automation is beneficial, and quite necessary in the modern business world. However, computers can crash and data can be lost. This could devastate your business finances. Consequently, it is of the utmost importance that all of your financial records are backed up on a frequent basis. It will be beneficial if the data you backup is stored in a physical location that is separate from your business. This will safeguard your valuable corporate data should a disaster like a flood or fire destroy your records.

Reluctance To Retain A Bookkeeping Professional

Quite often small businesses owners choose to save money by performing bookkeeping tasks themselves. This can be a tedious and labour intensive task that can detract from focusing on the core aspects of a business and adequately serving the needs of customers. Furthermore, they are likely to commit bookkeeping errors, which will be more costly in the long run. Retaining a bookkeeping professional is likely to be cost-effective for most businesses in the long term.

Lack Of Automated Accounting Tools

Today, it is almost imperative that all businesses make use of automated accounting software. This software generally has numerous mechanisms in place that can avert fraud. All business records can be saved electronically several times a day and if any evidence of fraud takes place, there is a continuous backup of saved business records that can be used to pinpoint when and where the fraud took place.

Improper Employee Classification

Employees can have different classifications and there are different tax and accounting rules that apply to various employee classes. For example, there are hourly and salaried employees that must be handled differently. Furthermore, many Australian businesses employee workers from foreign countries that work remotely, to handle many tasks that involve electronic documents and computer software. These types of employees form another employee classification. Consequently, all of these employees must be properly categorised so that they are accounted for based on applicable Australian laws and the proper amount of income tax is deducted from their salaries.

Improper Deductions

Properly deducting payroll taxes from employees is imperative to avoid running afoul of government officials responsible for enforcing tax laws. Furthermore, other types of taxes, such as value added taxes (VAT) must be properly collected and accounted for. In addition, corporate taxes must be accounted for based upon the businesses’ profits. .
There may be other types of employee payroll deductions for various types of employee benefits offered by a business that require employee contribution as well.

Conclusion

Accurate and professional bookkeeping services are essential for the successful operation of any business. In addition, professional bookkeeping services can assist a business owner in successful business operation by providing them with data on revenue sources and expenses associated with their business. This service is also imperative for complying with all taxing authorities and maintaining your business records. We have outlined several bookkeeping errors that small business owners should be aware of in order to avert financial calamity.

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