Preparing for End of Financial Year
The thought of tax time for many business owners can be overwhelming, to say the least. Ensuring you have everything in order and the dreaded fear that comes with owing the ATO potentially more than anticipated are common anxieties many have suffered.
With one of the most challenging years for businesses almost over (thanks again, Covid19), the fear of the unknown can lead to a lot of stress and anxiety when it comes to getting your books in order for tax time. We've seen many first-time clients avoid tax time planning in favor of looking at other (or any) part of their business that feels less bleak. But the reality is, EOFY planning can be an incredibly positive time of year for your business - and it doesn’t have to be stressful. What it does take, is time and strategy to assess your business finances and get back on track.
In fact, with the right processes in place and good, professional support, you can start to take back control of your finances, improve your admin flow and even increase your business's profitability for the year ahead. No business owner will deny that with each year, mistakes are made and lessons are learned. Our number one tip before we start today's blog is this - don't be afraid of accepting some of your mistakes. Learn from them, and take the time to ensure that the same ones aren't made again.
If you still keep your invoices in shoeboxes or have no idea whether you’ve actually made money this year, you don’t want to miss this one… In this blog post, we will discuss our best Gecko tips for preparing your business for the end of the financial year and planning for a stronger 2021.
1. Review Your Accounts and Bank Statements
We know it seems time-consuming, but starting with your bank statements is the most efficient way to review your spending and to ensure everything is accounted for. You may have software that connects to your bank feeds, but it's still a great habit to balance your actual bank balance on 30th June to your software and reconcile each bank account.
Check your account balance, all outstanding invoices and see if there are any out-of-place charges or items which haven’t been paid off as yet. Once this has been done, take another look at other expenses such as phone or utility bills – anything that needs to be settled or can be claimed before EOFY.
If this seems daunting, try breaking your revisions into smaller tasks.
These could include:
Reviewing and reconciling bank statements
Checking account balances
Paying off any outstanding invoices on the business account
Following up outstanding invoices
Ensuring your deductions are business-based
Running end of financial year reports visualise what you owe, what’s owing to you, and how much has been paid so far
2. Assess the Financial Health of Your Business
Ask yourself “When was the last time I assessed the financial health of my business?”
We see a lot of business owners who haven’t yet mastered their cash flow and aren’t sure if they’ve actually made any money right up until the end of the year.
If that sounds familiar, keep reading – there are a few easy-to-implement solutions that will put you back in the driver's seat.
3. Leverage Your Software
For those that don't have accounting software, we highly recommend setting yourself up with one. Subscriptions can start from less than $20 a month and will not only save you money in the long run, but will truly help to scale your business in the future. Accounting Software has been developed to make your finances easier to manage and scale. If you're not sure where to start, give your bookkeeper a call and find out what program would suit you the most.
For our business owners with accounting software - give yourself a pat on the back. You already have the services available to you to start making the most of your business. Whichever accounting system you use should be as up-to-date as possible before tax time, with all of the relevant information so you can work from your own records. Financial management and streamlining back-office processes will go a long way to reducing stress at the end of the financial year.
At a minimum, consider:
4. Enlist the Help of Trained Professionals
Unless you want to learn your financial lessons the hard way or invest much additional, (unpaid) time spent on your finances, get some support. Save time and future pain by investing in experts that know how to help you!
Many entrepreneurs go into business for themselves because they want more freedom. They're generally great ideas people and amazing at their trade or profession, but can easily be led astray or buried in fields they aren't experts in such as finances, marketing, and other aspects of owning a business. Good business owners know that outsourcing the right help to achieve their goals is their biggest investment. It frees up their time on the important things - growing their business and utilising the skills they do have.
Don’t bury your head in the sand. If you’re like most business owners, you want to help your clients/customers and make money. Don’t tie yourself up with administrative tasks that could easily be passed onto professionals that can help your business.
With a bookkeeper, you can simplify the equation. A good bookkeeper doesn't just records your entries. They add value to your business, work with your accountant to ensure you're staying on track, compliant and that statutory requirements are met. They also help manage the cash flow of the business and break down the confusing financial jargon.
This gives you:
More freedom to focus on other aspects of the business
Confidence because you know your cash position at any time
More clarity, knowing your books are always up-to-date
Most importantly, the right bookkeeper will ensure that you understand and feel comfortable with your financial reports. Your work will be more fulfilling and sustainable when you have control, and the right support.
5. Explore All Tax-saving Opportunities
One of the most significant new opportunities is the $150,000 Instant Asset Write-Off that applies to an asset you have purchased and used. The deadline has passed (it needs to have been purchased before December 31st, 2020). But, if you look back, there may be purchases that would qualify and should be submitted in your 2020/21 tax return.
If you're not sure if this applies to you, check out the eligibility criteria here.
Depending on your industry the claimable assets will change. Assets such as furniture, computer, or utility equipment are eligible.
It’s always worth speaking to your tax accountant to make the most of claimable opportunities.
6. Use the Opportunity to Do Things Differently
One of the areas that we keep coming back to is the importance of work-life balance. The financial year-end could be the perfect opportunity to make the changes that you want as you start to focus on the year ahead.
Ask yourself questions such as:
Do I have control of my money, or does my money control me?
Do I pay myself before I pay my expenses, or do I take what is left over?
Do I have financial security for myself and my family?
Do I have a cash flow plan for the next 12 months, or will it be another year of waiting until June 30th to see if I have finally come out on top?
Have I made any money and have I put enough aside for my taxes?
What do I want to achieve from my business and my life outside of business?
We recommend using EOFY to assess the health of your business, and your life. Get off the treadmill, be proactive, not reactive. Have a solid idea of what you want to gain from running your business and a foundational plan for your finances for the next financial year to ensure your goals are in sight.
7. Plan for the Future
Times have changed and your finances may need to change with them. If your business plan is a few years old, it may need an overhaul to reflect the new, more uncertain economic conditions that we now find ourselves in. Plans that you have in place may need to be delayed, and you may need to build in a larger financial buffer to future-proof your business.
8. Take a Break, Rest, and Recharge; You’ve Earned it!
The last year has been one of the most challenging for business owners in Australia. The emotional burden of the pandemic added to the stress of trying to look after clients/customers and keep your business afloat may mean that your needs have taken a backseat.
Try to balance this time and take care of yourself. And, if that’s not workable, keep going, submit your documents, and plan to enjoy a well-deserved break from work. Even if for now that may just be a long weekend without your phone.
* * * * * * * * * * * * * * * * * * *
The EOFY doesn’t have to be stressful. With good organisation and having the right team backing you up, it can become (somewhat) enjoyable. To set yourself up for a successful year-end, ensure that you have a good grasp of your finances and that you’re taking advantage of the time and efficiency savings that your software offers. You could also use the time to make meaningful changes to the way you do things to make it easier for you going forward.
If the end of the financial year seems like an overwhelming task, don't avoid, panic, or put the world on your shoulders. Get professional help now, rather than waiting until it’s too late. Engaging Gecko bookkeeping will give you peace of mind. Give us a call!