Preparing for EOFY
What should you be doing ahead of the end of financial year?
The end of financial year is a great opportunity to clear the way for a new financial year, particularly in making sure that your business is in the best position it can be tax-wise.
These are health and hygiene decisions that any business should review and plan for to ensure the right tax strategies and decisions on expenditure are in place at the right time.
With the recent introduction of a significantly increased deduction threshold, many businesses are looking at whether they can bring forward some expenses. Before you do, consider whether you're in the right shape to spend or whether you should wait until next financial year.
Here are our key tips for EOFY 2015.
Cash flow is the lifeblood of any business and it's a vital health check for a sustainable business. Review your current position with your accountant early so that you can work out whether your cash flow needs a boost or if you've got the cash flow to bring forward any expenses before the end of the financial year.
If the coffers are looking a little bleak, it's a good time to corral your sales, marketing and promotion teams to generate new business via strategic discounting or end-of-financial year promotions.
If you've been thinking about moving your accounts to the cloud, June is a great time to get everything in order for go-live on July 1.
Be aware that there is usually a fair bit of work to import and allocate data, however you'll reap the benefits from having your data easily accessible and in good shape for the new financial year. Your accountant will also thank you!
One of the key strategies for end of financial year is to pre-pay some expenses. One area to look at is whether you're currently paying month-to-month for subscription services that you may instead be able to pre-pay for the year to come.
Another advantage of pre-paying some of your expenses is that you may be able to take advantage of discounts for services as well. Broadly, only small businesses (that is, businesses with a turnover of less than $2m) can access the deduction for prepaid expenses.
Make sure that you've paid any additional superannuation contributions before 30 June to ensure that it is tax deductible prior to 30 June..
If you're still chasing invoices from last financial year, now is the time to write them off, as bad debts are tax deductible and can be used to offset taxable income.
EOFY is the right time to make sure that any compliance-related work is up-to-date, such as outstanding BAS lodgements, super guarantee contributions and payroll.
If your business carries stock, then you should review inventory ahead of 30 June 2015 and adjust your accounts accordingly. Identify any obsolete stock that can be written off.
If your business has plant and equipment, then check that any changes are noted in your asset register, such as descriptions, location, quantity, whether it has been disposed of, new assets in the business and damaged or obsolete plant and equipment. This is important for a range of reasons but particularly for CGT.
Below is a checklist for some basic housekeeping requirements at this time of year, because there is no accounting magic in cash movements, physical or legal arrangements that make up your tax return.
- Writing off damaged or obsolete stock;
- Writing off bad debts;
- Scrapping any out-of-date or obsolete plant and writing of off your asset register;
- Making loan repayments to satisfy Division 7A loan agreement;
- Finalising any inter-entity management charges;
- Review your deductions; and
- Take advantage of timing benefits and permanent savings.
These actions need to be undertaken before 30 June 2015 and your accounts need to be updated to reflect that they were completed before that date.
As always, if you want to review your strategies for EOFY or start planning for next financial year, contact us on 02 9957 4033.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.