Creative Firm Tax Rescue

The Company

At Tax4u we work with a number of photographers/designers/artists/stylists/creative directors’. The common traits we see in these businesses, is irregularity of income from year to year, lack of accounting skills from the person who is processing the accounting software spanning from the owner trying to take on as many hats as possible. We find that the problems that they experience are quoting a price for their work and sticking to the hours they have quoted. On top on these pain points, creatives tend to do their own bookkeeping and miss tax savings or incorrectly manage their books.

The Situation

We had an issue crop up this year with a growing photography business that as they business grew would spend less and less time on his financials, the books became over looked and a burden that were always pushed to the last minute and rushed to complete.  Originally, we only worked with them with their tax compliance work on a very high level and relied upon them to completion the books and reconcile the transactions.

The lack of time, training and education with the bookkeeping software lead invoices and payments of those invoices being allocated as income. It looked wonderful on the profit & loss statement as his income was 50% higher than it should have been. What we also noticed is that the bigger the operations got with a move in to directing and managing the shoots as a whole, the company was not making any more money even though their income was going up.

The Solution

After noticing the bank balance was growing at the same rate as his profit, we dove a little deeper into his financials to learn what was happening. Finding this simple error in not allocating payments to invoices we were able to find large tax savings. We were able to correct the errors and amend his BAS and Tax return.

With further education in using Xero, he is now completing the bookkeeping with no time and we are providing quarterly business coaching and advisory.

We also used this opportunity to talk to the client about the project management side of Xero & scheduling of jobs using a free software call Asana.

The Results

The amended tax returns netted just under $20,000 in tax refunds and clearer picture of the health of his business. These tax savings allowed to enjoy a longer than expected Honeymoon and invest some money into new camera equipment. We also were able to have conversations with client about profitability of jobs and management of time & assets.

We suggested that we could increase the profitability of jobs by us taking a more hand on roll in the accounting & bookkeeping, taking over this side of the business, providing the director with a set of custom reports that allowed them to keep their finder on the profitability of jobs. At the start they still ran over with time but were able to see the point when they started to lose money. What they were then able to do was to quote on jobs at a rate that better reflected the time that was needed to complete the job, they also changed up their procedures in running a job that pushed more time to assistants which were working at a cheaper rate.

The Last Shout

This is the essence of what we try to do at Tax4u, take a bad situation and see the opportunity. We start to make the data work and adjusted accordingly. The client started taking steps to be a owner and not just a worker a very big step and one we are very proud of. We have year of experience knowing where to look to find tax savings and gst reductions.