The GST Divide: Why Your Revenue Figure Never Matches Your Cash In

A simple guide to understanding your reports and mastering your upcoming tax payments.

Have you ever looked at your Revenue, Expenses & Profit Reports and then looked at your Cashflow Report and noticed the numbers don't quite line up? You're not alone! This difference is normal, and one of the key culprits for the confusion: Sales Tax (like GST in New Zealand).

The Golden Rule: Tax is Not Your Money

The simplest way to think about Sales Tax (GST, VAT, etc.) is that it’s not part of your business's revenue or profit. It's money you collect on behalf of the government (like IRD, ATO, etc.) and you simply hold it until it's time to pay your tax return.

Understanding Your Hello Cashflow Reports

To give you the clearest picture of your business's true health, we use two different views for your money:

• 1. Profit/Loss Reports (Revenue, Expenses, Profit):

  • EXCLUDES Tax.

  • These reports show you how much money you actually made from sales and how much you actually spent on business costs. This is the only way to accurately measure your business's profitability.

• 2. Cashflow Reports (Cash In, Cash Out):

  • INCLUDES Tax.

  • These reports show you the actual movement of money through your bank account. When a customer pays you $115 (including $15 tax), all $115 goes into your bank, so we show the full amount. This is essential for reconciling your movements with your bank balance.

  • This report also includes things like owner drawings and loan payments which do not appear in your Profit reports.

Report Type	What is it measuring?	Does it include GST/Sales Tax?
Revenue, Expenses, Profit	True profitability	NO (Excludes Tax)
Cashflow (Cash In, Cash Out)	Bank account movements	YES (Includes Tax)

This difference is why your Revenue does not equal your Cash In. Cash In includes the sales tax you collected, plus other non-revenue items that hit your bank (like loans or capital injections).

The Budgeting Challenge

When you build your budget, you want your future Cash In to be accurate, especially for predicting your bank balance. But calculating your future tax bill is tough because:

1. Not everything is taxable. Items like interest income or certain financial fees do not have tax added to them.

2. Tax rates vary. You can't just apply a blanket 15% to all your future sales and expenses.

Hello Cashflow cannot calculate your exact tax bill because tax rules and your specific situation are unique and complicated!

The Best Solution: Operate as if the Tax Isn't Yours

Our best advice for managing tax payments is to use your accounting software (like Xero) to find the exact figure:

1. Keep it separate: As soon as you receive a payment from a customer, put the tax portion aside. A separate savings account works great for this.

2. Check your accounting software: At the end of each month, log into your accounting software. In Xero, you can find the exact amount due under the Tax tab > GST Returns > Current period.

3. To budget for this in your Cashflow Forecast in Hello Cashflow, go to your Hello Cashflow Budget Editor Cashflow tab.

4. Copy that GST figure Tax Payments line item for the month it is due to be paid (as shown below).

5. This will then be added to your cash out calculation in your Cashflow Forecast Report:

By doing this, you are budgeting for the true tax amount due, ensuring your cashflow forecasts are accurate and you’re never caught short!