Client Overview
Client with a medium-sized business operating in the Agriculture sector has experienced significant growth, leading to an increase in the complexity of its financial transactions. As the business expanded, the need for accurate GST (Goods and Services Tax) reporting became more critical to ensure compliance with regulatory requirements and optimize cash flow.
Client Challenges
- Lack of Timely Audit and Review Process: Upon conducting a routine audit of financials, we identified discrepancies in the GST coding in the client's General Ledger over the past two years. The errors by the past bookkeeper, including incorrect GST classifications, had led to the company paying more taxes.
- Inaccuracies Affecting Cash Flow: These inaccuracies not only affected the company's cash flow but also exposed it to potential penalties and interest from the tax authorities.
befree's Solution
- Data Extraction and Analysis: Extracted all relevant financial data from the past two years, focusing on transactions with GST implications.
- Reconciliation and Adjustment Entries: Reconciled the corrected GST amounts with the amounts reported in the past BAS’s. Prepared adjustment entries to reflect the accurate tax liabilities and credits in the General Ledger.
- Correction of GST Coding: Reclassified transactions with incorrect GST codes, ensuring that each transaction was accurately categorized with applicable GST codes. Identified missed opportunities and made the necessary adjustments.
- Lodgment of Amended BAS’s: Prepared and lodged amended BAS’s for the relevant periods, ensuring compliance with all regulatory requirements. Engaged with the tax authorities to explain the discrepancies and took corrective actions.
Results/ Benefits
The thorough review and correction of the GST coding in the General Ledger resulted in a significant financial benefit for the client.
The client received a GST refund of $110k due to the correction of overpaid GST and books reflected proper claim of GST on sales. This inflow of cash improved the company's financial position.
By correcting the coding errors, the client ensured compliance with tax regulations, thereby reducing the risk of future audits and potential penalties.