End the financial year for your small business with a fresh start
Like it or not, you need to face that pile of receipts, sort out your late payers, and assess your cash flow for the coming financial year. While you’re at it, take a little time to consider the broader health of your business and what you can improve for the new financial year.
Look at the numbers before June 30
According to the practice manager of Sydney’s IMB Financial Planning, Rob Weston, plenty of small business owners are scrambling to get their numbers ready at the end of the financial year. “It can make the world of difference to your small business to simply take the time to get your accounts in order efficiently rather than chasing your tail,” Weston says.
Ideally, a small business owner should set aside a weekend before June 30 to prepare for the end of the financial year. The Australian Taxation Office offers a range of services to help small businesses, including ATOtv, featuring short videos on tax basics, keeping control of your business and GST recordkeeping. Getting your number in order also provides the chance to correct any GST errors before the auditors come knocking.
For those who just don’t know where to start, head to the Federal Government’s 10-point checklist of essential EOFY tasks to see exactly what needs to be covered off before June 30.
Work with a good accountant
Yes, book-keepers are great when starting a small business, but come EOFY an accountant might be a better fit. Not only do they ensure that your numbers add up for the ATO, they can also advise on business strategies, help with tax minimisation and set up systems to make the business run more smoothly.
Accountants are a necessity not a luxury, small business accountant and co-owner of Sydney’s m.a.s Accountants, John Corias says. “We’ve seen plenty of small business owners who’ve been using a book-keeper for years, who has documented all the financials of that small business in an Excel spreadsheet – which has put the business into a state of turmoil,” Corias says. “The biggest problem is often that book-keepers aren’t keeping up with compliance matters that small businesses are required to address.”
Do your share
One mistake some business owners make during EOFY is assuming their accountant can iron out all problems. Corias says that before seeing their accountant, business owners need to make sure their business activity statement (BAS) information is up to date, complete their pay-as-you-go (PAYG) tax reconciliations, and ensure superannuation contributions for employees are up to date.
Small businesses also need to be sure they’ve calculated all earnings and tax liabilities correctly if they’ve got a self-managed super fund (SMSF) in place, Corias adds. “So many small business owners don’t plan in advance, or they don’t consider deferring income for a year later or writing off any bad debts they’ve been carrying,” Corias says. “They forget to make sure they’ve made the right super payments to staff, or don’t take into consideration all their earnings, such as property and shares.”
Look at the legislation
Small businesses need to consider whether their business could be affected by potential changes to legislation such as negative gearing, superannuation or capital gains tax. If you have a SMSF, keep up to date and comply with all the relevant standards with a platform such as Australia Post’s SMSF Gateway Service.
“It’s also wise to do some scenario planning with your accountant to help assess whether your financial structures are serving you best,” Corias says.
A little forward planning in the lead-up to the end of the financial year will give an opportunity to make several potentially valuable decisions that cannot be left to the last minute. “Check whether there’s any value in capital expenditure, accelerated depreciation or additional superannuation payments,” Weston says.
Improve your invoicing
Having records in order increases efficiency around tax time – not just because you need to deal with your own finances, but often because others will call on you for help, the founder of invoicing app Invoice2Go, Chris Strode, says.
“Most small business owners ultimately end up with clients requesting statements for the whole year to be sent through because their own records are questionable,” Strode says. “Ensuring that your invoices are accurate so you can deal with these requests is an important part of running a small business.”
There are a number of services, including Invoice2Go, that can streamline your invoicing processes. And many of them, including Reckon, are available as an app that you pay a subscription to access. Talk to your accountant about the type of service that you might need, depending on the complexity of your business.
Take your business’s pulse
The end of the financial year is a good time to ask your accountant to extract some reports based on your business’s performance over the previous year. If you’ve adopted a cloud-based accounting system, you should be able to generate your own reports, though you may prefer an objective set of eyes to help analyse them, Weston says.
Based on income and sales over the past year, take some time to assess where your business has grown and where new opportunities lie. This will give your accountant the chance to make some financial projections that will help you budget for expenditure in the year ahead, he says.
This kind of planning also helps broader thinking about the health of your business and whether system changes could improve the bottom line. Take time to understand which aspect of your offering has grown so you can shape your services to best meet your customers’ needs, Corias says.
See the silver lining
The beginning of a new financial year is the perfect time to implement new systems to bring greater efficiencies to your business. For example, investigate project management tools such as Basecamp and Trello, which can ensure you’re on top of your workload and allow you to share projects with staff.
Don’t overlook the simple things that make running a business easier, such as whether you need a separate bank account or credit cards for your business to simplify tracking expenses. Loyalty programs are everywhere, so make time to explore your options so your business and personal expenditure can earn you points and discounts.