Smart financial management for business with authorities

The article was written in collaboration with YPAY

Financial management of a business is not a simple matter. Many business owners who start a business take into account mainly the professional, business and marketing aspect and less the managerial-financial aspect. Gradually they are exposed to different concepts that they did not necessarily know, at least not in depth, very important and essential matters, such that will make the difference between a positive cash flow (yes, another concept that a business owner does not always know at the beginning of his career) and a negative cash flow.

It is important to know the duties and rights, the things that must be observed and carried out as a business owner in front of the authorities, customers or suppliers. Even more important is knowing ways to make it easier for yourself, and today, when everything is online, there are different ways to do this.

The way the business is defined: A matter worth considering

When a person starts a business, one of the issues that must be decided regarding dealing with the authorities is its definition. Most of the time, the definition of the business as a limited company will be completed after the business has gained momentum, and established itself. There are advantages to defining it as a limited company from a legal point of view. A limited liability company is considered a legal entity in itself, which means that in the event of a lawsuit it will not be directed against the owner but against the company itself.

Of course, the owners of the company are responsible for what happens, but they are not personally sued. Along with this there are also disadvantages such as different procedures and payments that exist when a business becomes a company. Therefore, often a business will become a company at later stages if at all. Regarding the other two options for defining the business, there is not always a choice. There are situations in which already at the starting point, regardless of the revenue cycle of the business, the business owner will be defined as a licensed dealer, mainly in liberal professions such as lawyers, architects, journalists and more.

When there is a choice, you should consider the advantages and disadvantages of each. If there is a choice as exempt dealers, you can receive reimbursement for expenses through input VAT, but you will be obliged to submit and pay such a report every month or two. As exempt dealers, you will be exempt from this report, but you will also not be able to report input VAT and receive a VAT refund.

What does the bureaucratic dealings with the Tax and National Insurance Authority include?

The first action that a person interested in starting a business must do is to open an independent file with the Tax Authority: In the Income Tax and in the VAT. In addition, he must also open an independent file with the National Insurance, which means paying National Insurance every month independently, when the payment to the National Insurance is determined based on turnover The income reported as part of the annual income tax report. Opening the income tax file is the first and most basic action.

When the VAT file is opened, this is the place to determine whether you are an exempt or licensed business, when, as mentioned, the choice is not always in your hands. After the business has already opened and you have entered into regular activity, such and other reports become part of the routine. On a regular basis, you must perform book management, Whereas today, of course, everything is done in a computerized and online environment, and there are also services that offer everything under one roof (more precisely: One cloud...), including account management.

In order to meet the requirements of the tax authority in terms of reports, you must manage things in an orderly manner: Income and receipts versus expenses. As mentioned, one of the most important reports is the annual report, Form 1301 for the self-employed, in which you must detail your income, from the current income cycle following the business activity to passive income such as training funds, provident and pension funds for the self-employed, and more.

As authorized dealers, a report that you will have to submit much more often is a monthly or bi-monthly VAT report in which you will indicate the total amount of the transactions subject to VAT, alongside the expenses subject to VAT and an offset will be made between the two. "H. It is important to submit on time so as not to receive a payment fee just for being late, including by a few days.

Make it easier for yourself in managing the business: This is how you will do it

Many business owners are sure at the beginning of their journey that the management of financial and bureaucratic matters is marginal compared to the management of the business from a professional and marketing point of view. Gradually, they see that things are not always like this, and that one must behave correctly and wisely. So they find themselves in a quandary: Should they hire an employee who will be responsible for financial matters, should they outsource it? Are there complicated matters that are meant to be handled by an accountant and are there things that can be done independently? Today there are ways to help yourself manage your affairs more easily.

An excellent way to do this is to use an application that will first of all give you the basics: The possibility to issue a green invoice digitally very easily, whether it is only a receipt, a tax invoice, a tax invoice/receipt and also shipping certificates. There are applications that offer a whole basket of services for free, including an easy platform for managing clients, reports to the authorities and more, alongside basic paid services such as clearing services for collecting payments, capital declaration, issuing an annual report.

There are applications that also offer full accounting services, issuing payslips and everything that is required for a business. All documents are safely stored in the cloud without having to worry about space on the computer. 

YPAY was established with the aim of helping business owners manage their financial affairs in a convenient way through a single system that provides a wide range of services, from daily services such as issuing invoices and customer management that are provided free of charge to advanced paid services such as payslips, a clearing system, producing reports for authorities and more. You are invited to contact us via the email service@ypay.co.il