Session 2 - 05 ABA files + Other Bank and Economic terms

Summary

This 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

00:00

💼 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.

05:00

📊 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.

Keywords

💡ABA File

An ABA (Australian Bankers Association) file is a payment file format used in Australia for electronic funds transfer. It is crucial in the script as it helps automate the payment process to suppliers or employees, reducing the need for manual entries at the bank. The script mentions uploading ABA files to the bank to streamline transactions.

💡Integra Pay

Integra Pay is highlighted as a merchant facility in the script, similar to other services like Square and Stripe. It is significant because when integrated with Xero, an accounting software, it automates the closing of invoices upon payment, reducing errors in financial record-keeping.

💡Xero

Xero is an accounting software system mentioned in the script, which is used for managing financial records. Its integration with payment systems like Integra Pay is emphasized for its ability to automate invoice closing, reflecting the theme of streamlining financial processes.

💡BPAY

BPAY is described as an electronic bill payment method used in Australia. The script positions it as one of the various payment methods available, contributing to the broader discussion on diverse payment options in the financial landscape.

💡Direct Debit

Direct Debit is a payment arrangement where a customer authorizes recurring payments to be automatically deducted from their bank account. The script highlights its benefits for businesses in reducing bad debts and streamlining payment collection, with the example that nearly all clients are on direct debit.

💡EFT

EFT, or Electronic Fund Transfer, is another payment method mentioned in the script. It is simply the electronic transfer of money, which is part of the broader discussion on various methods of making payments in a digital age.

💡Cash on Delivery (COD)

Cash on Delivery is a payment method where payment is made at the time of delivery of goods. The script notes that it happens less frequently in modern times, indicating a shift towards more digital payment methods.

💡Bank Statements

Bank statements are source documents that confirm the transactions recorded in an accounting system match those of the bank. The script discusses their importance in ensuring all invoices are accounted for and help in reconciling the financial records.

💡Outstanding Statement

An outstanding statement, as mentioned in the script, informs what is owed to suppliers, emphasizing the need for businesses to keep track of their payables and manage their cash flow effectively.

💡Business Activity Statement (BAS)

The BAS is a key document for reporting business taxes in Australia. The script explains that it is used to declare the collection and payment of taxes, including Goods and Services Tax (GST), and is lodged with the Australian Taxation Office (ATO), reflecting the script's focus on tax compliance.

💡Goods and Services Tax (GST)

GST is a tax mentioned in the script that applies to most goods and services in Australia, with a rate of 10%. It is linked to the BAS and is a part of the tax system that businesses must navigate, showing the complexity of tax regulations.

💡Australian Taxation Office (ATO)

The ATO is the government body responsible for the administration of taxation in Australia. The script describes it as the entity to which businesses lodge their BAS, emphasizing its role in tax collection and compliance.

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