The end of the financial year can often be a busy time for small business owner. Here are a few tips to help you get through the period as easily as possible, and hopefully save your business some money and plan for an even better year ahead.
All your business accounting needs to be finalised, tax returns need to be completed and submitted, and planning for the year ahead needs to be done, , writes James Solomons, head of accounting, Xero Australia.
It’s not all bad news however, as tax time is the perfect opportunity to reassess where your business is at and where you want it to be.
Get your records organised early
An important part of being a small business owner is ensuring you are compliant with all business laws, including those about record-keeping.
You will need to summarise your income and expenses in a profit and loss statement, list your debtors and creditors, show records of your asset purchases to calculate depreciation expense claims and complete your Business Activity Statements (a bookkeeper or accountant is your best friend here).
Consider keeping electronic records, stored in the cloud, to save yourself time and space.
Understand your employee commitments
Everyone employed by your business (including you, depending on your business structure) needs to receive a PAYG payment Summary to be able to lodge their personal tax return. You’ll need to reconcile your payroll and provide these payment summaries to your employees by the due date in July, usually the 14th.
Before you provide PAYG Payment Summaries, reconcile the totals to your business accounts including the amounts withheld and reported at W2 on your Business Activity Statements. EOFY is also a great time to check your business insurance requirements. If your business circumstances have changed, you may need to update your level of cover.
Another part of record-keeping is recording your stock levels. If your business buys or sells stock you’ll have to conduct a stocktake unless your turnover is less than $2m and the change in value is less than $5,000. This is because the value of your stock plays a role in determining your profit or loss for the year. Conducting a stocktake is often a long and laborious task, so plan ahead, communicate with your customers early if your stocktake means you need to change your business hours, and make sure you don’t leave it until the last minute. Using an electronic inventory system can certainly reduce the effort required at stocktake time.
Know what you can claim
You don’t want your business to miss out on potential tax deductions, so make sure you’re clued up about what you can claim. The majority of costs you incur whilst running your business can be claimed as a tax deduction as long as they directly relate to earning your income.
The 2016 federal budget introduced changes to the small business equity concession, increasing the threshold from $2m to $10m in annual turnover.
As a result, from 1 July 2016 many more business owners will be eligible for small business concessions such as access to the immediate deduction for assets costing up to $20,000 and the opportunity to account for tax on a cash basis. But for the upcoming end of financial year, the threshold remains at $2m.
Use what you’ve learned
With all the information about your business updated and in one spot, EOFY is a great time to take stock and reflect on the past year. I suggest sitting down with your accountant or bookkeeper to review your finances and discuss what you could change next year to improve.
It’s also a good time to set goals for the new year, and to review your business and marketing plans to ensure they’re still appropriate for the size of your business or the stage it’s at.