Now that you’ve spoken to your accountant and set in motion the 5 things you need to process before June 30th, or miss out for this year, it’s time to work on the equally important, but less time-sensitive items to ensure that your 2016-17 Financial Year gets off to a great start.
There are 7 essentials that you should have in order before 30th June. No-one is going to penalise you if you don’t have them all completed, but you are running a growing business so it’s important to take care of all these things promptly and accurately.
1. Reports: Review your Profit and Loss Statement and Balance Sheet to ensure these accurately reflect your position and are and up-to-date at 30th June. You’ll be able to compare these with your other records and update them as you go through everything. This provides you with a valuable summary of your financial position.
2. Receipts: Now is the time to check that you have all your receipts filed appropriately either electronically or on paper. These include your sales records, expense records, employee records, and end of year tax records.
It is much easier to chase down missing receipts before 30th June than later and the knowledge that everything is in order will help you get a fresh start on the year. This is also a good time to review your system for collecting and filing receipts. Unless you have a very small number of receipts to deal with each month I strongly recommend Receipt Bank for this. It makes collecting, organising and finding receipts simple and is well worth the small monthly fee.
3. Stocktake: If you sell physical products the end of the financial year is the best time to carry out a stock take and ensure that the inventory on the shelves matches the inventory in your records. This is also a good time clear out any obsolete stock (hence the number of EOFY sales) and evaluate your ordering procedures to avoid carrying excess stock.
For professional service businesses your work-in-progress is the equivalent of stock and should be accounted for.
4. Reconciling Accounts: All your accounts need to be reconciled as at 30th June including your bank, capital, loan, debtors, creditors, and investment accounts. This will provide you with vital information about the true condition of your business and will also help you evaluate existing clients and billing procedures if you have a number of outstanding debtors.
Once you have your statement for each account, you will want to compare your records agains your bank statements and identify duplicate or missing entries. This will also help you identify any missing receipts.
5. Payroll, Leave, and Superannuation: In addition to verifying wages paid, you will also need to include accrued leave obligations, superannuation and long-service entitlements.
6. Systems Planning: The end of financial year is a good time to look at your systems and consider ways to improve them for the coming year. As you prepared your financial information to give to your accountant you probably realised that there were some parts of your system that could be improved to make life easier next year.
This is a great time to evaluate existing systems for and software to determine what is working and what needs to be reviewed. Systems to evaluate include purchasing systems, filing systems, invoicing systems, hosting, internet, software licenses of all kinds, and domain name registration.
7. Cashflow Forecasts: Using your budget this is a good time to ensure that you know how much cash you will have on hand at any time. If you do not have the money in your bank account and cannot arrange finance to cover any shortfall, your business will be in grave difficulties.
This is also a good time to identify clients who are persistently late in paying their bills and actively follow them up. You may need to ask yourself whether these clients are worth continue to accommodate. If you are heavily dependent on a client who is always late with their payments then you need to develop a strategy for diversification.
As part of your cashflow forecast it is a good idea to evaluate your expenses and determine whether you are paying for items you no longer need, or which are not providing an adequate return on investment.
As you go through the process of organising these 7 things before 30th June, you may identify gaps in your systems or processes for tracking each of these items. Now is the time to act on your discovery so that everything is in order by 1st July, and this time next year you won’t face the same tension.
This level of organisation and preparedness will add momentum to your business management for the new financial year.