It’s tax time! The end of financial year is looming, but don’t panic. There is still time for you to get on top of your end of financial year responsibilities. Follow these tax tips and you will be on your way to financial freedom.
Ideally throughout the year you have undertaken regular tasks to ensure your financial statements are up-to-date. However, we know that small business owners like yourselves are time poor and you may have not found the time to be that prepared.
Yes, the end of financial year can be a stressful time—and more so if you have left it to the last minute—but with careful planning, even setting a schedule, it is possible to reduce the stress and lessen the impact of 30 June. It will also allow time to focus on planning for 09/10.
At the end of June you (and every business owner) face end of financial year tasks, and you also need to complete your final Business Activity Statement (BAS) for the year. We expect you will soon be meeting your accountant to prepare for the end of financial year. To be ready to provide all the relevant information to your accountant we suggest that now you should be reconciling your:
- Bank accounts
- Receivables
- Payables
- Inventory
This leads in to completing your quarterly or annual BAS statements at the end of June.
At the same time as completing your BAS statements, you should also reconcile your payroll. You will need to generate payment summaries and distribute them to your employees before 14 July 2009.
Don’t feel daunted by this, if you are not able to complete this work yourself, your accountant or bookkeeper will be able to assist you. If you don’t use a bookkeeper, some accounting software providers run classes or have information available on how to complete this work.
Once all your data entry and reconciliation has been completed the end of financial year reports can be run after 30 June. To understand what you need to provide to your accountant for the end of financial year wrap-up, request a checklist from your accountant (they will be able to provide you with a checklist that best represents your business situation).
However, for your business’ tax return, the most common reports (for most software) that your accountant will need include:
- Profit and Loss Statement for the financial year
- Bank Reconciliation report
- Balance Sheet and Trial Balance
- General Ledger report
- Receivables Reconciliation report
- Payables Reconciliation report
- Inventory Value Reconciliation Report
- GST reports for the June month or quarter
Having your paperwork organised and preparing your end of financial year documents before seeing your accountant to go over your tax, not only makes life easier but saves you time and money. Once all the documentation is ready, remember to back-up all your data for your record-keeping requirements. The ATO requires that you keep copies of your accounting records for at least five years.
Preparing for 09/10
Every year the Federal Government implements some changes to the compliance requirements for small businesses. One compliance change that small business owners need to be aware of for 09/10 relates to superannuation (Reportable Employer Superannuation Contributions) and the way it’s reported. Essentially these changes relate to superannuation over nine percent that the employee can influence, such as salary sacrifice or employer additional payments. From 1 July 2009, you will need to report these additional payments on employees’ payment summaries.
There will also be several other compliance requirements. The ATO will have full details and explanations for small business owners, or alternatively your accountant will also be able to advise you of the compliance changes and how they affect you.
If you are using accounting and payroll software, then you will need updates to address all the compliance changes. Therefore, you need to ensure you are scheduled to receive compliance updates so that you meet the changed compliance requirements from 1 July 2009.
Realistic planning for 09/10
Even though your focus is on the end of 08/09, the new financial year presents an opportunity to implement new work practices to set your business up to work smarter. Making improvements to your work processes now will ensure that preparing for next end of financial year will be less stressful than this one. Generating new business and maintaining existing customers is a common concern for business owners. Planning for the end of financial year should allow more time for this.
Some areas to consider improving your work processes to make the 09/10 end of financial year easier include:
- Business planning and goal setting
- Budgeting and setting realistic financial goals.
You can track how you are going in meeting these goals by:
- Keeping all accounts and records up-to-date (maintain data entry into your accounting and payroll software)
- Running year-on-year comparative analysis reports
- Monitoring and managing your cashflow, with a particular eye on your debtors (people who owe you).
Finally your end of year processes will be helped if you stay on top of your inventory and follow tasks lists and schedules, which will ensure you are regularly performing the core administration functions (for example, a task list from your accountant or bookkeeper for BAS, end of financial year, etc).
Business planning
With the global economic downturn, virtually every business will feel some impact. The March 2009 MYOB Small Business Survey revealed that a significant 78 percent of small business owners surveyed have not spoken to their accountant about developing a plan or strategy to ensure their business survives through a potential economic recession.
Remember… your accountant is there to help you, and not only with your tax, but with your business planning and ensuring your business is running as efficiently as possible. You may need to ask them specifically for help, as they’re not mind readers! Yes, the more you ask of them the greater their fees, but good accountants are conscious of delivering value for money. They should be happy to explain how their advice can deliver a significant return on your investment.
For many businesses, times are getting tougher. But as an independent business owner you can choose your own path. Rather than just react to the daily challenges (and there will be many) now is the time to create your plan for meeting and beating the challenges ahead.
Spending time planning now will give you more time to focus on other areas and the long term, which is becoming increasingly important. Don’t be fixated on coming up with a thick written plan. As former US President Eisenhower once said: “Plans are nothing; planning is everything.”
If you already have a business plan, now would be a good time to review and revise this plan for the new financial year. If you don’t have a business plan, now, more than ever, is a good time to put one in place that sets out how you will get through the next 12-to-24 months.
A number of Government websites have free templates that you can download. Remember, business plans are dynamic and sometimes circumstances change, which may mean you don’t hit your targets. Don’t be surprised if the first set of goals proves to be unrealistic. Plans need to be dynamic and you need to adjust based on learning what’s working and what’s not in changing times. Consider how often you should be revising your plans—daily or weekly is too short and annually, too long.
Developing a plan with goals that you can share with your team will ensure you can focus your team’s energy towards achieving success. Running a business without goals is a bit like playing football without goals: there’s a lot of action but it’s hard to get a result.
Research
To put together a meaningful business plan with realistic goals, you should research both the internal and external environments of your business. As part of this research, sit down with your accountant and review your books and internal processes over the last year. Consider:
- Cashflow – How can you better manage relationships with customers and suppliers to maintain consistent cashflow?
- Finance – If your business plan will include future growth plans, is there enough capital to finance this?
- Employees – There needs to be a balance between optimal head count and short-medium future expectations.
- Customers and suppliers – Optimise your relationships up and down the supply chain. Look at the buying and selling terms that you’ve negotiated with your suppliers and customers, do they need to be renegotiated?
- Marketing – During tough times, you should review and possibly revise your marketing plan. Now might be an excellent time to win market share if your competitors wind back their marketing activity.
To further assist with developing your business plan you could also examine the landscape inside and outside your industry, profession or trade. Things you could consider include:
- Will your category expand, maintain or contract in the short-medium term?
- Gather information from industry bodies, consumer groups, ABS, business.gov.au and research groups. There’s loads of information available so carefully consider which information is most relevant to your category.
- Source information about your target market (eg demographics, disposable income, spending habits, etc). This information, along with industry data, will help construct a realistic business plan and really help you understand key statistics about your customers and prospects.
- Don’t forget to seek customer feedback. Seek insights from your very best customers as well as drilling into why someone chose another supplier over you.
This information will help you work with your accountant to develop a comprehensive business plan.
Remember…
- If you’re behind for 08/09, start your catch-up right now.
- To avoid being behind again for the end of the 09/10 financial year, use the new financial year to implement improved work processes.
- Business planning is important: talk to your accountant and think broadly about your business, its category and opportunities for growth.
—Tim Reed is CEO of MYOB (www.myob.com), international provider of accounting and payroll software and business solutions.
Now is the time for business owners to…
- Pay outstanding accounts
- Chase payment of outstanding invoices
- Ensure all super contributions are made before 30 June (for your employees and yourself)
- Start preparing the necessary documentation for your accountant.
Setting new financial year resolutions
Now’s the time to set yourself and your business new financial year resolutions. Make sure they have a real payback—in time saved, stress reduced or money in your pocket. That way you’re much more likely to stick with them.
For example:
- Commit to a business plan
- Review the business plan regularly (e.g. every quarter)
- Talk to your accountant more regularly and don’t just discuss your accounts—talk about where you want your business to go and how you can get there, business planning, etc.
- Develop a budget and measure performance against it
- Improve work practices (for example, improve your debtor management).
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