As the EOFY fast approaches, business owners are being urged to get their financial paperwork signed, sealed and delivered well before tax-time and reap the rewards over the long-term.
Failing to organise business finances prior to the June 30 deadline may result in extra stress business owners can live without.
MYOB Tim Reid said businesses that take action prior to July 1 put themselves strides ahead of their competitors and allow them to take a proactive approach to the year ahead.
“For example, a business that pays building and construction contractors should start capturing those contractor payments as of next month. Otherwise they’ll be playing serious catch up when the first report is due next year,” Reid said.
Businesses should see the EOFY as an opportunity to give their finances, operations and strategy a tune-up, Reid said,
“…the end of a financial year can be a launch pad to a happy and prosperous new year,” he added.
With this in mind, Reid has the following 10 tips for ensuring headache-free, happy new financial year:
1. Get professional help to know your business better:
Don’t wait to get to know your business better. If cashflow, taxation and forecasting aren’t your areas of expertise, contact an accountant with experience in your industry to help. They can immediately identify potential EOFY issues, such as incorrect transaction dates, foreign exchange rates or inventory anomalies, and these aspects can be monitored throughout the year.
2. Compare the current financial year against the previous year:
Compare your 2011 tax year against previous years to pinpoint the positive and negative trends. When were your peak periods? How well did each of your products/services perform? Talk to a professional who can help identify which ones deliver the healthiest returns, re-evaluate your margins and loan terms, help you with managing cash flow, inventory and staying on top of debtors, and on the like. They can even perform business-benchmarking activities, comparing your performance against similar businesses.
3. Familiarise yourself with key compliance changes for the new financial year:
Did you know the flood levy will no longer apply after 1 July and tax-free thresholds are changing? Are your systems prepared for the introduction of the carbon tax? If you operate a business in the building and construction sector, are your systems prepared for the annual reporting of contractor payments in 2013? Click here for everything you need to know about EOFY compliance changes.
4. Ensure your BAS and superannuation guarantee charge statements are lodged and paid by July 28:
Be sure to pay your super guarantee contributions for the fourth quarter of 2012 by 28 July 2012. If you or your clients miss this deadline, you must submit a Superannuation Guarantee charge statement to the ATO.
5. Take advantage of deductions, write-offs and rebates before June 30:
Take action to scrap worthless stock, plant and equipment before June 30 by reviewing your asset register (which keeps track of your company equipment including items purchased, sold or disposed of). Consider holding off buying business assets until the new financial year, because the instant asset write-off increases from $1,000 to $6,500 from 1 July 2012.
Conversely, there are several government initiatives valid only until the end of the financial year that allow business owners to write-off purchases for business. Maximise these in the current financial year by purchasing any such assets before the end of June. Contact your accountant to discuss what is available to you based on your business.
6. Write off bad debts before June 30:
If any debts have been outstanding for more than 12 months and/or are considered non-recoverable, you may be able to claim a GST credit and write them off as an expense. Be sure to look into this now.
7. Back up your data to ensure compliance with record-keeping requirements:
An ATO requirement is for businesses to keep detailed business records for a minimum of five years. Make sure you have a secure data back-up system. If you don’t use accounting software currently, consider starting the new year on a product like MYOB LiveAccounts that automatically does the back up for you.
8. Get on top of your books and diarise dates to review them:
From now on, lock in time to update your data entry and records at least once a week. Compile as much information as you can in preparation for updating your financial records.
Identifying errors is much easier over a short time period than after 12 months’ time has passed, so perhaps review your books every two months rather than every quarter. Mistakes can be picked up sooner, potentially saving you money in the long term.
9. Keep your business house in order:
Your transition to a happier financial year will be more seamless if your financials are well organised and compliant. Up to date accounting software acts like a virtual assistant by automating many aspects of this. It also gives you a comprehensive snapshot of your business that’s available at a glance at any time.
10. Invest time working on, your business rather than in, your business:
Take the time to formulate a refreshed business strategy for FY2012/2013. It should contain everything from a SWOT analysis to competitor intelligence, a marketing plan and specific, measurable goals. These targets may be financial, such as increasing lead conversion by X percent, reaching a revenue target at a specific time and halving operational costs. Or, they may be operational, such as expanding your product line, moving into another geographic region and up-skilling staff.
Consider involving team members in building the strategy to help improve their buy-in.