Tips for Making Financial Year End Less Taxing

Financial year end is looming. It is a crucial time of year for your small business as you take stock of the year that has been and plan for the year ahead. Whether you have done it before or this is your first time, financial year end can be a little taxing. There are tax returns to submit and your books need to be in order. Use your prep work for the financial year end to develop a clear picture of the financial health of your business!

Here are six must-have marketing strategies for your small business:

Before you start – plan your tax!

Planning your tax is the crucial first step in preparing for your financial year end. The government uses the financial year end to work out what your company is liable to pay in taxes. If you plan correctly, you will pay the least amount of tax that is allowed under the law. You can maximize deductible expenses and reduce taxable income by purchasing much needed equipment, paying vendors or renewing software licenses now.

This is where a knowledgeable tax consultant or accountant is of immense benefit. They will be able to help you calculate your deductions as well as advise you on any changes to tax laws and concessions that may apply to your business.

Here’s a checklist to help make your financial year end less taxing:  

  • Run your year-end financial reports including your profit and loss statement, balance sheet and cash flow statement. Your Profit and Loss Statement is one of the most important pieces of bookkeeping with which you should be familiar. It provides a summary of income and expenses that will give you a good indication of your company’s true running costs and whether it is profitable or not.
  • Create a summary of your debtors and creditors. If you owe vendors or suppliers money, pay them now so as to avoid carrying over that debt into the new financial year. If you are still awaiting payment from customers, resend statements and invoices to those owing you money. Don’t wait to collect payments as this will mean being taxed in the next fiscal year.
  • Collate all the records of asset purchases. This includes any new equipment or vehicles you may have purchased for your business. It could also include improvements or extensions on your premises as well as upgrades to your Information Technology (IT) infrastructure. These expenditures will be used to calculate depreciation expense claims as well as for Capital Gains Tax.
  • Conduct a stock take. You should know what inventory you still have in hand as you enter the new financial year. Take stock of what products or services were great sellers and those which weren’t. Doing an audit of your inventory will not only give you a picture of what you have, but will also guide your strategy for the coming year. You should focus on products and services that are in demand and scrap those which are low-value and time or resource-intensive.
  • Complete and lodge your income tax returns as well as your returns for Fringe Benefits Tax, Good and Services Tax and Pay As You Go. Your tax consultant will be able to guide you on which apply to your business and what you need to do. If you don’t have a tax consultant, visit the Australian Tax office website for information.
  • Tabulate your deductions. You can claim deductions for certain operating expenses that relate to earning an income. For the vehicles you use for your business, have a record of kilometers driven, the reason for each trip, destinations and dates. You can also claim some expenses like rent, utilities, maintenance, and insurance on your tax return. Remember that you must have records to prove these expenses in order to claim them as business deductions.
  • Organise and backup your documents. Go through all of your paperwork, throw out what you no longer need and file what must be kept. It is a good idea to scan receipts and other records so that you can organize them digitally. Also, clean and back up customer information, emails and other important business information. Use hard drives or back up to a cloud based storage platform such as Google Drive, OneDrive or Dropbox.
  • Check your payroll and employee benefits schedules. Make sure your people have been paid what they are owed, including salaries, bonuses, transport subsidies and other benefits. Check that your employee agreements and contracts are in place and up to date.

You’ve got the birds-eye view

Now that you have a birds-eye view of how your business performed over the last year, you should have a good idea of where it is heading this year and what to expect. Certainly the COVID-19 pandemic has changed the trajectory for many businesses but that does not mean that you should not have a plan – or goals. It is more important now than ever before to plan ahead!

Create an action plan and set your goals. These can include rolling out a new marketing campaign, applying for a business loan, engaging in new product development, or upgrading your store or office space.

You might want to change your marketing messaging, relook your supply chain, and make some changes to the way in which you operate on a day to day basis in order to help prepare your business for the coming year’s challenges.

Consider working with a business coach to better understand your market, your industry and your potential customers in order to make informed decisions!