189. Avoiding Tax Shock With Josh Hallam and Sam Falanga

⏱️ 34:11 🎤 Host, Will Blunt, Josh Hallam, Sam Falanga

AUDIO EPISODE

189. Avoiding Tax Shock With Josh Hallam and Sam Falanga

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Chapters

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0:00

Introduction to Tax Shock

The hosts introduce Josh Hallam and Sam Falanga from Falanga and Co., discussing the common issue of 'tax shock' among builders and the episode's focus on financial planning.
5:34

Common Tax Pitfalls

Sam and Josh explain why builders often struggle with tax obligations, highlighting issues like a lack of understanding, poor cash flow management, and neglecting to set aside funds for tax.
10:06

Planning for Tax Obligations

Josh emphasizes the critical need for planning, including separating a percentage of revenue into a dedicated tax account and understanding payment frequencies to avoid financial surprises.
17:19

Monthly, Quarterly, Yearly Cadence

Sam details a structured approach to financial management, outlining monthly reviews of receivables/payables, quarterly forecasting, and annual reviews of job profitability and staff capacity.
29:53

The Role of Your Accountant

The discussion shifts to the crucial role of an accountant as an advisor, stressing the importance of regular communication and finding an accountant with industry-specific experience.
49:16

Forecasting and Cash Flow

Sam and Josh highlight the importance of forward-looking financial practices, including cash flow forecasting and managing payment terms, to prevent liquidity issues.
1:00:12

Avoiding Costly Mistakes

The guests share examples of common mistakes, such as incorrect spreadsheets and not charging for variations, underscoring the need for accurate data and communication.
1:03:39

Final Advice on Planning

Josh and Sam summarize their approach to helping builders manage finances, reiterating the value of accurate information, clear communication, and proactive planning with an accessible accountant.

Speakers

Host

Will Blunt

Host

Josh Hallam

Falanga and Co

Sam Falanga

Falanga and Co

Key Takeaways

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Always set aside a percentage of incoming revenue into a separate 'tax liabilities' account to ensure funds are available when tax bills, GST, or superannuation payments are due.

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Implement a routine of monthly financial reviews focusing on accounts receivable and payable, and quarterly forecasting to anticipate cash flow needs and staff capacity.

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Prioritize collecting payments rigorously and aligning your payment terms with subcontractors and suppliers to maintain healthy cash flow and avoid financial strain.

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Work with an accountant who specializes in the building industry and establish a relationship where you feel comfortable asking any question, no matter how basic.

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Proactively engage with your accountant for annual reviews before the financial year-end (e.g., pre-June 30) to discuss potential tax liabilities and strategies to optimize outcomes.

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Automate your accounting processes with systems like Xero, BuildExact, or Buildertrend to ensure data accuracy and efficiency, moving away from error-prone spreadsheets.

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Systematically document and charge for all variations on projects, ensuring clear communication with clients to prevent unbilled work and improve project profitability.

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