MYOB – Payroll Cash out Annual Leave – How to reduce the Holiday Leave Accrual

Client Skyped me - Hi Paul, I've had a look and our special Pay Category, Holiday Cash Out doesn't seem to be reducing from the balance of Holiday Leave Accrual. It's not listed under entitlements under the Payroll Category List window.

Paul - Yes it is NOT linked to the accrual because only one can be linked at a time to a pay category (in older MYOB Classic v19 and earlier, but new AR can link several!)- the Holiday/Annual Leave pay category that is regularly used, is linked to the Holiday Accrual and deducts from the accrual - if you go to Entitlements, and then open the Holiday Leave Accrual, you will see down at the bottom it says it is linked to Holiday Leave.

Your Holiday Cash Out is not an entitlement - it will be under the Wages Payroll Category to be used when paid , but it has no effect on the accrual, in older MYOB classic v19 and earlier back.

Client - Thanks. So how do we reduce the accrued holiday leave by the hours that have been paid as a holiday cash out which is allowed in the award, up to 2 weeks per year? Can we put it as an entitlement that gets deducted or can we manually deduct from accrued holiday pay?

Paul – In classic MYOB, it needs be manually deducted - the more automatic way is to set up the Hol Cash Out as a separate entitlement, and choose to link it to the Holiday Cash Out wage category.

BUT- If the 2 weeks are optional it will be difficult to balance with the regular Holiday accrual if not taken every year - it becomes messy - if not used regularly but occasional years.

I would adjust the Accrual in this way - do a pay cheque with ZERO hours, and in the lower lines at Holiday Accrual, adjust the holiday accrual with NEGATIVE the hours cashed out, and write a note in the memo for the reason and date the cash out occurred, there should be no super generated, ensure any other allowances etc are ALL ZERO also – then record, and this pay updates the accrual and there is a clear record with note and date for the reason for the adjustment.

Client - OK I will try that. There's only a few done so far. So will need to do that for those ones. May make an adjustment today so these are all done now and up to date. Thanks.

Paul - Yes do as a pay, then it updates and provides a note and proper record on the staff pays record.

Client -  Thanks. is the other option to use the "Unused Holiday Pay" for Cashed Out pay as well?

Paul - NO Unused is for a different Reason - when they leave and still have Unused Leave owing due to them on leaving. The Unused Holiday will ALSO NOT decrease the Holiday Accrual, but it is used to be clear what the pay is for - and when you enter the Termination date in the card it closes OFF the entitlements.

Client  -  OK thanks. Thought I'd check. Will org. Cheers.

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Business Tax Tip – Correcting GST mistakes – Common errors and how to correct them

The Australian Tax Office (ATO) website has information on what to do when you find you have a GST error correction to make – and how to put it right in a way that is easier than revising a prior statement, as well as avoiding penalties (you see!... the ATO is really NOT your business enemy!)

Correcting GST Errors -

If you make a mistake (that fits the definition of a GST error) when reporting GST on an activity statement, you can correct that error on a later activity statement if you meet certain conditions.

The benefit of correcting a GST error on a later activity statement is that you will not be liable for any penalties or general interest charge (GIC) for that error.

Generally, it is easier to correct a GST error on a later activity statement than to revise an earlier activity statement. Revising an earlier activity statement that contains an error can incur penalties or GIC.

Here are a series of links about correcting GST errors –

• Definition of a GST error - A GST error is a mistake you made in working out your GST net amount on your activity statement that would, if it was the only mistake that you made, result in you reporting or paying too much GST (credit error) or reporting or paying too little GST (debit error).
• Correcting GST errors
• Completing your activity statement to correct GST errors - To correct a GST error, you include the correction amount at boxes 1A or 1B. If the net result of the error(s) is that you have paid too little GST include the amount at 1A, alternately if the net result is that you have overpaid GST include the amount at 1B. You may also reflect the correction at boxes G1, G2, G3, G10 or G11 as appropriate.
• GST errors that cannot be corrected on a later activity statement
• Revising an earlier activity statement – eg when you aren’t allowed to correct in later statement
• GST definitions

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Business Financials – What is Current Ratio formula / meaning & what does it show us?

There are many financial ratios that can be used to analyse business financial, and a common one is current ratio formula which shows the proportion or amount of current assets to current liabilities.

The current ratio is also known an indicator of a company's liquidity.

Put in another way, if there is a large amount of current assets in relationship to a small amount of current liabilities there is some assurance that the obligations coming due will be paid.

“Current” refers to amounts available or due within 12 months, such as cash, inventory and credit cards, money debtors owe you and supplier creditors who you need to pay, unlike equipment assets that are help over several years, and finance and loans to be paid over several years, which come under Long-term categories.

If a company has –

Example 1

current assets are $500,000

current liabilities are $250,000

current ratio is 2:1   (500/250 = 2).

Assets are 2x Liabilities

Example 2

current assets are $600,000

current liabilities are $500,000

current ratio is 1.2 : 1    (600/500 = 1.2)

Assets are 1.2x Liabilities

Clearly a larger current ratio is better than a smaller ratio in comparison to current liability.

Generally, a current ratio that is less than 1:1 indicates insolvency, and the preference is at least 2:1, or over 2.

When benchmarking a company, or comparing your own, it is wise to compare a company's current ratio to those in the same industry. It is also worth keeping a close look at the trend of the current ratio for a given company over time.

Is the current ratio improving over time, or is it deteriorating?
Also, the composition of the current assets is also an important factor. If the current assets are predominantly in cash, marketable securities, and accounts receivable, that is more valuable than having the majority of the current assets in slow-moving inventory.

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