Some people save money for their next tax payment by putting it in a separate bank account. This is a great method to avoid spending that money before it is due.
I don’t have a separate bank account, but I still like to keep track of how much to leave in my bank account for upcoming tax payments. In this post, I outline how Xero shows me that figure.
Assumption: This only works if your bookkeeping is up to date.
Xero can display an Account Watchlist in the top right of the Dashboard screen. For each account in this Watchlist, Xero shows the movement in the current month and a year-to-date (YTD) figure. The YTD figure for balance sheet accounts (i.e. assets, liabilities and equity) is the current balance of the account, not just the movement for the current year.
Add your GST, Superannuation Payable and PAYG Payable accounts to the Watchlist (see steps below), then the YTD figure in your Watchlist will be the amount you owe.
Make sure to leave at least this much money in your business bank account, so that you can pay the Tax Office on time.
To add an account to the Watchlist:
- Click on the Settings heading.
- In the drop-down menu, click General Settings.
- On the next screen, click Chart of Accounts.
- Click on the name of the account you want to add to the Watchlist. The account is likely to be under the Liabilities tab.
- On the window that pops up, click the checkbox next to ‘Show on Dashboard Watchlist’.
- Repeat steps 4 and 5 for each account you want to track on the Watchlist.
Extra tip: this concept can also be used for other liabilities. It can also be used for your Trade Creditors (i.e. unpaid bills from suppliers), although this is covered by the Money Going Out heading on the Dashboard.
Some clients also use the Watchlist to track other KPIs, e.g. by adding their sales income accounts to monitor their progress towards sales targets.