WNA Blog

Fri 10 Sep 2021

Buyer Beware — When in Business


Finance & Insurance
As business owners, we buy from other businesses, but how do you ensure that you get what you pay for?

 

 

 

 

Here are some simple tips: 

1. Contract 

a. What are the contract terms? Is it spelt out exactly what is being supplied. 

b. What are the payment terms? 

c. What are your responsibilities as the customer? 

d. What are the responsibilities of the supplier? 

e. If the contract does not state these then do a 1 pager that you can both sign off so that there is nothing to be misconstrued.  You have to feel comfortable because once you pay the money, it is harder to get it back.  

2. Supplier registrations

a. All suppliers have to have ABN’s to trade in Australia. You can check here https://www.abr.gov.au/ and then by clicking on “Check ABN details using ABN look up”.  As an example, this is our registration: 

How to read it and it’s implications: 

1. Entity name – this should be on all invoices, the contract etc. from the supplier. 

2. ABN status – this confirms that M&P has been active with its ABN from 3/3/03.  If the ABN is not active, then you shouldn’t be contracting with them at this stage as technically they shouldn’t be trading. 

3. Entity Type – M&P is a company, this could be a trust, partnership, sole trader. 

4. GST – this proves that we are registered for GST and therefore on all invoices raised by us we have to charge GST.  If this was “Not registered” then the supplier cannot charge you GST and you cannot claim it. 

a. If you have an invoice with GST on it, go back to the supplier and ask them for their evidence of GST registration. 

b. If you’ve already paid the invoice with GST, don’t claim it, but go back to your contract and fight for the overcharging on the invoice.  Stop immediately the work being conducted until the situation is rectified otherwise you could be paying 10% more than you have to. 

5. Location – where the business is. 

6. Business names – any registered business names are recorded here.  Your supplier may operate under a business name but to ensure that the invoice provide them is correct-  they have to have the entity name and the business name  or just the entity named on the invoice even if it is in tiny print.  They cannot provide an invoice/contract with just a business name.    

7. ASIC registration – as M&P is a company, then it shows the ASIC registration confirming it is still registered with ASIC. 

8. Deductible Gift recipient status – if we were a charity/not for profit then this status was completed.

b. 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 are very limited. 

c. You have to keep checking so as part of your policy and procedure, the review of ABN’s is to occur to ensure that you are still compliant for your dealings with the ATO.  I know it sounds silly but at the end of them 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 have 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/ Some clients ask if a PayPal or a credit card receipt is sufficient.  They are not as they do not have the information listed as per the link. If the sale is for less than $82.50 including GST there are exemptions. 

5. Do your searches 

a. Look at their website 

b. Look at their google reviews 

c. Look at linked in or other social media platforms for legitimacy 

d. Go to their premises 

e. Talk to the employees that are going to handle your job – not just the business owner 

f. 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 worse than a marriage.  Having said that I’m in a partnership but we have all the 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.  So to ensure you have it right then make sure it is set up properly, otherwise someone is going to lose.  See our tips: 

https://marshpartners.com.au/business-improvement/our-tips-for-successful-business-partnerships/ 

https://marshpartners.com.au/legal/what-is-a-shareholders-agreement-and-why-do-i-need-one/ 

My last tip – 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 and regretted it – I’ve now learnt and this isn’t an option 

If you have any other questions or comments regarding “buyers beware” please call me and we can discuss as there are solutions but the earlier we deal with it the better. 


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