Every June, I meet business owners who are stressed by their imminent end of financial year (EOFY) obligations and deadlines. They’ve been busy, let their account-keeping lapse, and are often unsure of how to proceed. Keeping your financial affairs in order can be tough when you’re in business, but there’s no need to dread the days before June 30. In fact, it can be an exciting time to measure your progress and plan for the future. Here are some tips to keep you on track:
- Be tax ready
It’s easy to put off getting your accounts in order, especially when you have so much else to do. But a proactive approach to your financial wellbeing will keep overwhelm out of the equation. Make a list of tasks that need to be completed, noting your tax responsibilities and lodgment deadlines, and then tackle them one at a time. The Australian Taxation Office (ATO) recently announced it will be scrutinising work-related deductions, so get out your financial folders (or shoebox – whatever works!) and check all of your money-related documents are in one place, including receipts and invoices to justify all of your spending. Ensure all your business activity statements (BAS) are lodged and that your employee payment summaries are being prepared.
Good business record-keeping habits are important, and make your life so much easier at tax time. If you are using cloud technology, you’re already one step ahead (and probably considerably less stressed). Cloud accounting software, like Xero, easily tracks costs and records. If you’re considering switching to cloud-based software, the new financial year is the perfect time to start.
Checklist
√ Ensure all your accounting records are in order
√ Make a to-do list
√ Switch to cloud-based software
- Claim deductions and defer income
Do your homework and know what tax deductions apply to you. Most small and medium enterprises (SMEs) are able to claim expenses for vehicles, home-based business costs, websites, travel, office supplies, machinery, tools, computers and more. You can also immediately depreciate any eligible asset costing less than $20,000 that you buy between now and June 30, 2017.
If you want to reduce a profit, pay your super expenses for this financial year before June 30. Are you able to bring forward other tax deductible expenses, such as subscriptions, office supplies, insurance premiums, bank interest or accountant fees? Make sure that what you do prepay is for a period of less than 12 months, otherwise it doesn’t qualify for the advanced tax deduction.
If your business is assessed on a cash basis, you may be able to take advantage of a simple EOFY tax strategy by delaying the receipt of income until after June 30, 2015. Income received in advance of services being provided is generally not assessable until the services are provided. This allows you to move the revenue into the next financial year and reduce this year’s taxable income. Have a chat to your accountant or bookkeeper so they can help to choose your best options.
Checklist
√ Claim expenses and deductions
√ Prepay relevant services and supplies
√ Discuss deferring income with your accountant
- Review financials and plan for next year
The days before June 30 can be an exciting time, as they will highlight your business progress. Sit down with your accountant or bookkeeper to analyse whether you met your targets this year and what you can improve upon next year.
Reconcile your accounts to ensure all your numbers are accurate. Bank, credit card and loan account reconciliations will identify any differences between how much cash you may think you have, and the amount shown as your bank balance. It will also reveal any errors you may need to address. Ideally, monthly bank reconciliations will best monitor your cash flow and cut down your EOFY workload.
A clear picture of cash flow and costs will allow you to update your business plan and budget, so on July 1 you can hit the ground running. You may also want to review your financing arrangements and business insurances to ensure you have a sufficient level of coverage for the new financial year.
EOFY is also the time to plan your business’s future and set goals for the year ahead. Will you produce new products? Buy new equipment? Hire staff? What steps will you need to put in place to achieve these new plans and goals?
Checklist
√ Reconcile bank accounts
√ Update business plan and budget
√ Set new goals and targets
If you’re unsure of your EOFY obligations, Cloud CFO can help. Cloud CFO provides finance, operations, business development and strategic planning assistance for an all-inclusive business management solution. Email us at info@cloudcfo.com.au or post your questions in the comments.