Session 2 - 05 ABA files + Other Bank and Economic terms
Summary
TLDRThis script discusses various payment methods and tax systems, particularly in Australia. It explains the use of the ABA file for bank transactions to avoid manual entries, mentions merchant facilities like Integra Pay and its integration with Xero for automated billing, and highlights payment options like BPAY, direct debit, EFT, and cash on delivery. The script also covers the importance of bank statements and business activity statements (BAS) in reconciling accounts and managing GST, emphasizing the role of businesses as tax collectors under the Australian Taxation Office.
Takeaways
- 📄 The ABA file is used for making payments to suppliers or employees, which can be uploaded to the bank to streamline transactions and avoid manual entries.
- 🛒 Integra Pay is a merchant facility used for online purchases, offering integration with Xero accounting software to automatically close bills upon payment, reducing errors.
- 💳 Merchant facilities like Square, Stripe, and eWay are payment processing services that facilitate online transactions.
- 🔄 Wholesalers can offer clients rates and set them up with merchant facilities like Integra Pay for streamlined payment processing.
- 💡 BPAY is an electronic bill payment method commonly used in Australia, providing an alternative way to make payments.
- 🗓 Direct Debit is a payment arrangement where a customer authorizes regular payments to be automatically deducted from their bank account, beneficial for reducing bad debts.
- 💸 EFT (Electronic Fund Transfer) is a method of transferring money electronically, a common payment method.
- 📦 Cash on Delivery (COD) is a payment method where payment is made at the time of delivery, though it is less common in modern times.
- 📊 Bank statements are essential documents that help ensure the accuracy of financial records by comparing with the bank's supply statement.
- 📝 Outstanding statements inform you of what is owed to suppliers, highlighting the need to pay certain parties.
- 🏦 Business Activity Statements (BAS) are reports declaring the amount of tax collected and paid, linked to the Goods and Services Tax (GST) and lodged with the Australian Taxation Office (ATO).
- 📈 GST is a tax system similar to VAT, with a 10% rate in Australia, but with certain exclusions and complexities due to different rates and exemptions.
- 🔑 The Australian Business Number (ABN) is used to register for tax purposes and is linked to the BAS for tax declaration.
- 🌐 The ATO in Australia has made every ABN holder a tax collector, requiring them to account for the tax collected and paid through the BAS process.
Q & A
What is an ABA file used for in the context of making payments?
-An ABA file is used for uploading to a bank to automate the payment process to suppliers or employees, preventing the need to manually enter each payee's details.
What is IntegraPay and how does it relate to Xero accounting software?
-IntegraPay is a merchant facility used for online purchases. When integrated with Xero, it automatically closes a customer's bill upon payment, reducing the chance of errors in invoice management.
What are some of the other merchant facilities similar to IntegraPay mentioned in the script?
-Other merchant facilities mentioned include Square, Stripe, and eWay, all of which facilitate online transactions.
Why is IntegraPay preferred for a wholesale business in the context of the script?
-IntegraPay is preferred because it offers automatic bill closure in Xero upon payment, which is beneficial for a wholesale business to manage their accounts efficiently.
What does BPAY stand for and how is it used in Australia?
-BPAY stands for 'Bill Payment' and is an electronic bill payment method used in Australia for making payments without going into detail in the script.
What is Direct Debit and how does it benefit a business?
-Direct Debit is a system where a customer authorizes a business to regularly withdraw a set amount from their bank account for bills, reducing the risk of bad debts and simplifying the payment process for the business.
What is the difference between EFT and Cash on Delivery as payment methods?
-EFT, or Electronic Fund Transfer, is a method of electronically transferring money, while Cash on Delivery involves paying in cash at the time of delivery, which is less common in modern times.
What is the purpose of a bank statement in financial management?
-A bank statement serves as a source document that helps ensure the accuracy of a company's financial records by comparing it with the bank's supply statement.
What is an Outstanding Statement and how does it relate to a business's financial obligations?
-An Outstanding Statement informs a business of what it owes to suppliers, indicating the payments that are currently due.
What is a Business Activity Statement (BAS) and its significance in Australian tax system?
-A Business Activity Statement (BAS) is a document used to declare the amount of tax collected, paid out, and withheld for employees, among other things, and is linked to the Goods and Services Tax (GST) system in Australia.
How does the Australian Taxation Office (ATO) utilize the BAS?
-The ATO uses the BAS to calculate the net amount of Goods and Services Tax that a business needs to pay, either quarterly or monthly, depending on the business size.
What is the concept of 'automatic transaction tax' mentioned in the script?
-The concept of 'automatic transaction tax' suggests a very small percentage tax on every transaction, collected and remitted daily by the big four banks, to simplify tax collection and potentially improve the efficiency of tax systems.
Outlines
💼 Payment Methods and Accounting Integration
The first paragraph discusses various payment methods used in business transactions, such as the ABA file for bank payments, which streamlines the process by eliminating the need for manual entry of suppliers or customers. It also introduces 'Integra Pay,' a merchant facility that integrates with Xero accounting software, automating the closing of invoices upon payment and reducing errors. Other payment methods mentioned include BPAY, direct debit, EFT, and cash on delivery. The paragraph emphasizes the importance of these methods in managing business finances and the role of bank statements and outstanding statements in reconciling accounts.
📊 Understanding GST and Business Activity Statements
The second paragraph delves into the complexities of the Goods and Services Tax (GST) in Australia, highlighting the varying rates and exclusions that make the tax system complicated. It explains the role of the Australian Business Number (ABN) in tax collection and the function of the Business Activity Statement (BAS), which is used to declare tax collected, tax paid out, and employment tax withheld. The paragraph also touches on the Australian Taxation Office's (ATO) system of making every ABN holder a tax collector, simplifying the process of tax collection and remittance. Additionally, it presents a personal note on the potential for an automatic transaction tax system that could improve efficiency and reduce administrative burdens.
Mindmap
Keywords
💡ABA File
💡Integra Pay
💡Xero
💡BPAY
💡Direct Debit
💡EFT
💡Cash on Delivery (COD)
💡Bank Statements
💡Outstanding Statement
💡Business Activity Statement (BAS)
💡Goods and Services Tax (GST)
💡Australian Taxation Office (ATO)
Highlights
ABA file is used for making payments to suppliers and employees, streamlining the process by uploading to the bank.
IntegraPay is a merchant facility that integrates with Xero accounting software, automating bill payments and reducing errors.
Merchant facilities like Square, Stripe, and eWay are online payment options, with IntegraPay being preferred for its integration with Xero.
Wholesaler liquidity allows setting up clients with merchant facilities like IntegraPay for efficient payment processing.
BPAY is an electronic bill payment method commonly used in Australia.
Direct debit is a payment strategy where funds are automatically deducted from a customer's account at regular intervals.
Direct debit is beneficial for businesses to avoid bad debts and streamline payment collection.
EFT (Electronic Fund Transfer) is a method of transferring money electronically.
Cash on Delivery (COD) is a payment method that is less common in modern times.
Bank statements serve as a source document to ensure that the accounting system matches the bank's records.
Outstanding statements inform about the amounts owed to suppliers, aiding in managing payables.
Business Activity Statements (BAS) are used to report tax obligations, including GST, to the Australian Taxation Office (ATO).
Goods and Services Tax (GST) in Australia is 10%, but not applicable to all goods and services, adding complexity to tax calculations.
The Australian Business Number (ABN) is linked to GST obligations and is used for tax reporting on BAS.
BAS includes declarations of collected tax, tax paid out, and employment tax withheld for employees.
The ATO requires lodgement of BAS to calculate and pay GST, with frequency depending on the size of the company.
Individuals and businesses with ABN act as tax collectors, remitting the collected GST to the ATO.
A suggestion for an automatic transaction tax collected by banks to simplify tax collection and improve national operation.
Transcripts
this is what i was talking about the aba
file um when we're making payments
um you know two suppliers or
even to employees we'll get this aba
file um which will we upload to the bank
it's
what it does it prevents us from having
to go again into the bank
and manually um enter every
every supplier or every um customer uh
in integra pay you'll hear about this as
well
um integra pay is one of those merchant
facilities that i was telling you about
so when you're going um online to
purchase something or you're going to f
plus
you're using um a merchant facility
there's so many of them
there's square there's stripe there's
e way there's a whole there's so many
um integral pay is one of them it's it's
one particular type
we are wholesalers liquidity we're a
wholesaler so we get the
um the rates and we can set our clients
up
um you know to use this one the reason
we like integra pay
is because in xero um
the accounting software system when we
um
uh integrate it with integra pay and
a customer pays a bill it automatically
closes the bill
so there's less chance of making a
mistake
um if somebody pays money into the bank
account and doesn't put the invoice
number
it's easy to make a mistake and close
the wrong customer
invoice but with integra pay it closes
it automatically
bpay bpay is just another way of
making a payment in australia it's an
electronic bill payment method
i won't go too much into it it's just
another way to make a payment you guys
can
look it up have a look at what it is to
get an understanding
direct debit you'll hear this a lot
direct debit is when
um somebody a customer
um agrees that you know every time
there's a bill
or a certain amount you're going to take
it from their bank account
at a regular interval they don't have to
pay it
we actually have nearly all of our
clients on direct debit
it is a really good way it's a good
strategy for a business
to not you know have bad debts
because you're not waiting and chasing
for the money to get paid it's
automatically being taken
in our case generally it's every week
and yeah direct debits are fantastic eft
electronic fund transfer it's just
another way
to make a payment it just means you're
electronically transferring money
cash on delivery is also another way of
making payment
this happens much less these days
bank statements we talked about that
it's a source document it's the thing
that you're going to get
to make sure that your system equals the
bank
supply statement i spoke about that as
well that's a source document it's a
summary of
every invoice that you have to pay the
customer
um again it is what helps you make sure
that you have all of the
invoices in the system um outstanding
statement
it's a similar thing it's just telling
you what you um
owe the supplier it's telling you what
you need to pay somebody
now we'll move on to business activity
statement we call these baz
i'm not expecting you to remember all of
this right now
i'm hoping that at least some of the
things that i say will
trigger as you look at these today and
research some of them and look at the
pictures of it and
examples and things like that business
activity statement
um you guys what's the tax system what
is it is it
vat over there
so over here
all right so goods and services tax is
like the pede there is that right katja
yes okay
i think it's 20 in serbia in australia
it's 10
but it's not on everything this is what
makes our system complicated
there are some things that are excluded
and there are some things that um
that are gst free and then there are
some things where there's 10
this is where you're going to have to
look really look at the invoice
um and make sure you're looking at what
the invoice the invoice is but having
said that you also
need to start to learn um you know
slowly over time
what has gst what doesn't have gst and
you're going to
be researching on the ato sometimes or
asking questions
so the gst is the tax
is the 10 tax um
the australian business number is
the registration number that you attach
the tax to
the business activity statement is the
um the actual document that gets
completed where you declare
how much tax you collected how much tax
you paid out
how much employment
tax you withheld for your employees
and a whole host of other things i won't
go into the details you'll learn that
later
but the gst is linked to the business
activity statement
and the australian taxation office the
ato they are the people
that you lodge the business activity
statement for
to work out how much goods and services
tax you need to pay
and it's as simple as that it's a
process it's a process that happens
um depending if the company is large or
smaller it'll be either quarterly
or it'll be monthly and basically what
to give you an idea of what the ato
in australia has what our system is like
they have made every single person with
an abn
australian business number whether
you're a big company
um a small private business or a sole
trader
they have made all of us their tax
collectors
right and so they've said every single
person every time you get money you're
gonna
you know count your ten percent of tax
and every time you pay out
you're gonna have a proper valid tax
invoice so that you can deduct off of
that money so let's say you collect
a hundred thousand in tax and then you
look at everything that you purchase
that month
um it ends up being eighty thousand
dollars um that you
actually paid in tax and you've got all
the invoices
then when you do your business activity
statement that you lodge with the
australian taxation office
you are paying them twenty thousand
dollars that's simplifying it
right so we are all the tax collectors
personally as a side note i believe that
we live in a time when
you literally could have um automatic
transaction tax that is a very very
small percentage of every single
transaction
and you make the big four banks collect
it and remit it every day
automatically it would make the world
like it would make the country operate
so much better and
you'd remove a lot of you know what
we're currently doing
but anyway we're not there yet
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