How do you ensure that you are getting what you think you are paying for when you buy from other businesses? Here are 7 simple tips:
- What are the contract terms? Is it spelt out exactly what is being supplied?
- What are the payment terms?
- What are your responsibilities as the customer?
- What are the responsibilities of the supplier?
- If the contract does not state these then do a 1 pager that you can both sign to ensure that there is nothing misconstrued. You have to feel comfortable with the contract because once you pay the money it is harder to get it back.
2. Supplier registrations
All suppliers have to have ABN’s to trade in Australia. You can check ABN details on the Australian Business Register. As an example, this is our registration:
How to read it and it’s implications:
- Entity name – this should be on all invoices, the contract etc from the supplier.
- ABN status – this confirms that Marsh & Partners has been active with its ABN from 3/3/03. If the ABN is not active, then you shouldn’t be contracting with them as technically they shouldn’t be trading.
- Entity Type – Marsh & Partners is a company but this could also be a trust, partnership or sole trader.
- GST – this proves that we are registered for GST and therefore on all invoices raised by us we have to charge GST. If this says “Not registered” then the supplier cannot charge you GST and you cannot claim it. If you have an invoice with GST on it, go back to the supplier and ask them for their evidence of GST registration. If you’ve already paid the invoice with GST, don’t claim it – go back to your contract and fight for the overcharging on the invoice. Immediately stop the work being conducted until the situation is rectified otherwise you could be paying 10% more than you have to.
- Location – where the business is.
- Business names – any registered business names are recorded here. Your supplier may operate under a business name but to ensure that the invoice provide by them is correct- they have to have the entity name and the business name or just the entity name on the invoice even if it is in tiny print. They cannot provide an invoice/contract with just a business name.
- ASIC registration – as Marsh & Partners is a company then it shows the ASIC registration confirming it is still registered with ASIC.
- Deductible Gift recipient status – if the business is a charity or not for profit then this status would be listed here.
As the customer, it is your requirement to confirm the above details. If the business does not have an ABN then legally you are required to withhold 47% of the payment and submit it to the ATO on your BAS return. There are some exclusions to this rule but they are very limited.
You have to keep checking so as part of your policy and procedures, the review of ABN’s is to occur to ensure that you are still compliant for your dealings with the ATO. It may sound overly cautious but as a customer it is your legal requirement.
3. Business names
If someone is operating under a business name it should be registered. The ABN lookup will confirm this or you can review the ASIC website as well. The most important thing is the entity name (which is the legal entity) and the ABN match. The business name is not so much a priority in the scheme of the tax legislation if you have the right legal entity with its ABN.
4. Tax invoices
Invoices need to be in a specific format to be able to claim the GST. The format for invoices can be found here https://www.ato.gov.au/Business/GST/Tax-invoices/ . A PayPal or credit card receipt is not sufficient as it does not have the required legal information. If the sale is for less than $82.50 including GST there are exemptions to this rule.
5. Search the business online
- Look at their website
- Look at their google reviews
- Look at linked in or other social media platforms for legitimacy
- Go to their premises
- Talk to the employees that are going to handle your job – not just the business owner
- Look at the testimonials and then Google them to confirm they are legitimate
6. Business partnerships or joint ventures
My personal philosophy is – a business partnership is more complicated than a marriage. Having said that, I’m in a partnership but in our business we have all the right legal agreements in place and we’ve had the hard conversations to ensure that, if it doesn’t go according to plan, we all know the consequences. If you’re entering into a partnership or contracting with a partnership, make sure it is set up properly. For further information on partnerships see these articles:
7. Listen to your gut instinct
My last tip is…if it doesn’t feel right then don’t do it. Your gut is your barometer. Many a time I’ve gone against my gut instinct and later regretted it. I’ve learnt my lesson the hard way!
Marsh & Partners are forward-looking business specialists with the expertise to identify and help mitigate business problems. We work alongside you all year, not just at tax time. To find out how we can assist you, talk to a Marsh & Partners advisor. You can reach us on (07) 3023 4800 or at firstname.lastname@example.org.
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