June Preparation for Financial Year End
Normally we do a spring clean, but with business, we need to do a winter clean. .June is the time to do a tidy up for the end of the financial year.
So what things should be doing?
Make sure that you have maximised your allowable deductions
1. If your business is showing a profit that is going to bring on a tax bill, then you should make sure that you have maximised your allowable deductions.
a. Enter all the expenses relating to this financial year are entered into MYOB
You should make sure that all the expenses relating to this financial year are entered into MYOB. It is good practice to reconcile your supplier statements against the bills that you have in the system, so that both agree. If you are a cash-based business, then you should pay as many suppliers as possible, to reduce your tax bill (accrual based businesses just need to have the bills entered).
While you are doing this, have a look to see if there are any bills in the system that are not truly owed – for example, bills that have been double entered. It is time to reverse these. You should also look at your debit notes and make sure that they are also true and applied to the relevant bills – again, reverse any that are not true. This is just a good tidy up for your file.
b. Asset purchases
Make sure your accountant knows of any asset purchases during the year and that you flag any that were under $20,000, as they can be claimed as an expense in this financial year. Also make sure that your accountant is aware of asset purchases from prior years, so that depreciation can be claimed.
c. Get your accountant to look at your file
Get your accountant to look at your file too, as accountants often have good suggestions to help you legally minimise your tax. It is so easy with MYOB Essentials and accountRight Live, as your accountant can log into your live file to see how your business is performing and to make recommendations.
d. Look at your outstanding invoices
Are there any there that can be claimed as a bad debt? These are invoices where you have actively tried to get the invoice paid and taken all reasonable steps, but despite all efforts, there is little or no chance of the invoice being paid. If this is the case, then you may be able to write them off as expenses.
And while you are looking at your outstanding invoices, check to see if there are any credit notes that are not truly owed. Credit notes should be applied to appropriate invoices. Reverse any that are not true. Another good tidy-up.
e. Make sure that superannuation is paid
You can only claim superannuation that is PAID in the current year. So it is a good idea to get the June superannuation owing off to the super clearing house before 30 June (and allow time for the payment to be transferred too).
f. Think of super fund contribution
Have a think about whether you want to contribute to your own super fund too. It might be worthwhile salary sacrificing to reduce your profit. However, be careful to not exceed the maximum allowable and have a chat to your accountant.
g. Financial institutions’ loans
If you have financial institutions’ loans, then make sure you have seen a statement for the year and enter the interest expense and reconcile the account.
If you carry stock, then the end of June is the time to do a stocktake to identify what you have on hand and what it’s value is.
If you are carrying old stock, then June is the time to think about the best way to move it – maybe it is time to have a sale to move it out? You raise the cash from the sale and reduce the amount of stock that needs to be counted come 30 June.
And if you can’t move the stock, then it might be time to write the old/obsolete stock off. This too will reduce your profit for the year. But don’t forget to keep your stock take records as your accountant might ask for them as justification for claiming the expense.
3. Reconcile your bank and credit card accounts
To make your accountant happy, you should reconcile your bank and credit card accounts as at 30 June and keep the reconciliation reports – many accountants ask for your statements and match them to the reconciliation reports. And now is the time to look at your bank and credit card reconciliations to see if there are a lot of unreconciled transactions and have a think about why they are showing as unreconciled – again, they may be duplicates that need to be reversed or maybe you just aren’t up to date with your reconciliations.
4. Account balances
Run your eye over the accounts and make sure that balances look sensible. If you have clearing accounts, then the balances should be zero. If you have reconcilable accounts like staff loans, PAYG payable, GST payable, Super owing payable, Leases – then get them reconciled.
5. Payroll tax threshold
Have a look at your payroll for the year…have you exceeded the Payroll tax threshold for your state? Make sure that if you have, that you have registered and reported your payroll tax as there are hefty fines for getting this wrong.
Same with your Workcover – is your estimate of your wages for the year realistic? If your estimate is too far out, then Workcover also imposes fines.
7. Review your business plan
And finally, now is the time to review your business plan for next year.