Cashing Out Annual Leave – Here’s How
Cashing Out Annual Leave – Here’s the Lowdown
Are your staff asking about cashing out annual leave? There are some important rules to remember before paying out annual leave.
Firstly, you must review the employee’s modern award to check that cashing out leave is explicitly allowed.
Most awards allow for excess annual leave to be paid out, and we give you the general rules here – but you need to check the relevant award for special regulations before agreeing to cash out leave.
Common Rules for Cashing Out Leave
- The leave must be paid at the same rate as if the employee takes the leave. That means you must pay leave loading if it applies, and super is always payable on cashed-out annual leave.
- The employee must have at least four weeks of leave left available after paying out any excess amount.
- You can’t pay out more than two weeks of leave per year.
- While leave accrues as usual when an employee takes leave, you don’t need to accrue leave on cashed-out leave.
- You need to have a written agreement with the employee stating the number of hours being paid, the total amount, and when you will pay it.
- Remember to check the employee’s award first and keep all records and calculations!
You Can Direct Employees to Take Excess Leave
You can’t force an employee into cashing out annual leave, but you can ask an employee to take leave in some circumstances. If you have employees accruing a lot of leave, check the award for guidance. For example, some awards allow an employer to direct an employee to take one week or more of leave if they have more than eight weeks accrued, give at least six weeks’ notice, and leave at least six weeks of leave available.
Need Help?
Remember, annual leave is paid out when an employee leaves your business. So it’s good to keep an eye on how much is owing and not let too much accrue. Also, employees should be taking leave regularly for their health and well-being.
If you need help, talk to us, and we can review your payroll, leave accruals, and modern awards to help manage employees’ annual leave.
Business Tips: Go Digital and Cloud
Business Tips: Go Digital and Cloud
Transforming into a digital and cloud business sets the best possible infrastructure for future growth. And, as your business scales, the benefits of going digital will become apparent.
Running your key business processes in the cloud and using the latest digital software and apps adds to your efficiency and productivity. And most importantly, digital systems are designed to scale with you as your enterprise grows and the need for resources increases.
Here are some significant reasons for taking the plunge and diving into digital.
Automate your key manual process to increase efficiency
A scalable business has to systemise its processes and procedures. Is your business model still tied to manual processes and a system that only exists in the owner’s head? If so, you’ll eventually come up against a capacity brick wall. Therefore, systemising and automating your processes is a fundamental step when you jump to digital.
Look at every internal and external step in your operations and write down how these systems work. Note down each task, who actions what, and how the whole system links in with the next step in your operational chain. If there are opportunities to automate a step, automate it. Many business apps now include artificial intelligence (AI) or automation features that can chase up unpaid invoices, send automated replies to customers in live chats, or take automatic payments, etc.
Work in the cloud to stay more connected
Since the start of the 2020 pandemic, the world has seen a quantum shift to remote working – and that’s only been possible because of cloud technology. Instead of working from local applications on our laptops or office-based servers, most tech-savvy businesses now use cloud-based apps that are accessible anywhere you have an internet connection.
Switching to cloud-based systems is a game-changer. You and your team are no longer tied to a physical office and can be productive from any WiFi-enabled location. That could be your home, customer’s warehouse, regional office, or local coffee shop. And the benefits aren’t just limited to remote working. With your applications and databases in the cloud, you can access customer information, sales data, or financial numbers wherever you happen to be. Everything is securely backed up and available at the press of a button – that’s an invaluable benefit if you want to be flexible, connected, and scalable as a business.
Create your own custom app stack
Your business systems and software no longer have to remain static and based on the office server. By combining a business and accounting platform like Xero, MYOB, QuickBooks, or Sage with your own choice of business apps, you can create a truly tailored ‘app stack’.
Apps use an API (application programming interface) to connect with each other, share data and form a more extensive business system. This can include apps to:
- Manage and automate your bookkeeping and accounting tasks
- Send out e-invoices to your customers to speed up payments
- Take automated payments and reconcile your transactions
- Automatically chase late-paying customers and carry out credit control duties
- Project manage your operations and provide detailed reporting
- Manage your job utilisation and time spend on each project
- Keep a detailed real-time inventory of your products
- Send out marketing campaigns and social media posts to your audience
- Interact more closely with your end customers and learn their habits
Record and track your business data
App integrations and a customer app stack don’t just improve your productivity. Because your apps are connected via APIs and share your business data, you also have access to a wealth of data, information, and reporting features.
Look in detail at your cash flow, expenses, and spending to improve your cash position. Take a deep dive into your sales and marketing information to determine your best (and most profitable) customers. Run projections and ‘What if…’ scenarios based on your historical data to forecast the future path of the business. There are plenty of ways to use this bountiful data to help you review, understand and improve your performance as a company.
Make better-informed business decisions
A business in the pre-computer age would have had very little information on which to base its decision-making. Annual accounts, cash flow statements, and some basic management information would have been available, but there was very little real-time data to refer to.
In the digital age, you can see every aspect of your company’s performance in real-time – and, in some cases, in the future. That’s a game-changer and something every business owner should use to improve strategy, financial management, customer experience, and business decision-making.
To summarise, a digital business:
- Creates systems that are integrated and connected
- Shares and records all your business data
- Reviews, analyses, and finds insights into your business information
- Connects with your customers in more meaningful ways
- Makes better-informed business decisions as a result.
Get in touch to discuss embracing cloud tech and a digital business model.
Business Performance vs ATO Small Business Benchmarks
Your Business Performance vs ATO Small Business Benchmarks
Are you interested in comparing your business performance against the ATO Small business benchmarks? It can be a valuable exercise to see whether your business is performing well, on average, or lower than the benchmark figures.
Each year the ATO publishes industry-based data to highlight specific ratios of financial and other types of performance.
For example, you can compare your cost of sales to turnover, total expenses to turnover, or labour cost to turnover. Comparing to average data gives you an idea of how your business performs compared to others in your industry.
It’s no problem if your ratios are different – but it can be a helpful starting place to look if you want to improve financial performance or reduce costs. If your ratios are very different from the ATO’s, then it could be worth diving deeper into your financial reports to see if you have problems that can be addressed. For example, a hospitality business might realise that its food cost is much higher than average and then take action to change suppliers and manage wastage.
The ATO benchmarks are based on your business industry code used in your activity statements and tax returns. If you’re unsure what industry you fall under, check the ATO Business industry code tool to find the correct code for your business.
Information will you need to compare your business against benchmarks.
To start comparing your business, you’ll need some information from your accounting software financial reports.
- Gross sales income
- Salary and wages expenses, including superannuation
- Vehicle expenses
- Interest on credit cards and loans
- Cost of sales
- Total other business expenses, including all running costs, administration, contractors, suppliers, rent, freight, training, and website fees.
Once you have these totals, either from your software or your last tax return, you can compare your figures to the ATO benchmarks.
Want to learn more? We can analyse your business performance using the ATO benchmarks as a starting place for comparison and discuss areas you can target to increase profitability, reduce costs and streamline operations.
Spend Efficiently with Digital Credit Cards
Spend More Efficiently with Digital Credit Cards
Do you need to manage expenses for your business and team? Digital credit cards have been around for some years but have recently grown in popularity. Their user-friendly practicality is becoming appreciated by many business owners.
How do Digital Credit Cards Work?
The provider issues a digital card number in exactly the same format as a regular credit card. Cards are assigned to individuals who can use the card for all expenses. Such as automatic credit payments for subscriptions or buying business purchases in-store using their Android or Apple wallet.
The cards are linked to the business bank account. This means the owner can control the amount of money allocated to a particular card. Within each card, you can set limits according to budgets for different types of spending categories or projects. You can always see exactly how much of the set budget a team or individual staff member has spent. Staff can request additional funds if needed, and you can customise limits and authority levels for each user. Managing expenses becomes far more efficient and structured rather than relying on expense reports submitted long after the expense has been incurred.
Benefits of Digital Credit Cards
Digital credit cards are easy to activate and, in some cases, are virtually immediate. You’ll get a dashboard from the provider that lets you see real-time information about where your money is being spent.
Using the card on a smartphone means a photo of the invoice or receipt can be uploaded immediately. Therefore, making business bookkeeping more effective and accurate as data is captured at the time of the expense.
There are many providers of digital cards, and we encourage you to research the options. If you need to manage team expenses, getting some form of digital card will be well worth your while.
Apart from the improved control and efficiency digital cards give the business owner, one of the most significant benefits is the minimisation of fraud and unapproved automatic billing.
Talk to us if we can help integrate the digital cards into your accounting software file.