It’s coming close to that time again – EOFY. For many, the term brings up memories of sleepless nights, or tearing hair out while trying to find an unlabelled payment to reconcile the bank account. All businesses will experience some measure of stress in preparing for EOFY, however when good procedures and workflows are in place this burden can be greatly reduced. Additionally, this time of year is a great time to compare your business growth to previous years.
Here are our top tips and tricks to get your books in order now so you can approach EOFY rollover with minimal fuss.
Pre EOFY – Everyday guidelines to keep your accounts in check
- Enter or record all your transactions in a timely fashion. Try and make sure you are up to date at the end of each week, so that any reporting that you do is accurate.
- Keep your business and personal accounts separate. When you mix the two together, it creates headaches working out which transactions belong to the business and which don’t. Having a business credit card only for business transactions will simplify your data entry and speed up reconciling.
- Use an accounting software package to keep track of your transactions. Working on spreadsheets or pieces of paper can end in disaster if something gets misplaced. Have a central repository for all your bookwork, and make sure that it is backed up to a secondary location.
- Make sure your BAS lodgements are up to date, and if they’re not, arrange a plan with the ATO to get them in hand.
- Ensure you understand your tax and compliance obligations – do you have an active ABN? If your business turnover is expected to exceed $75,000 per year, have you registered for GST? If you employ staff in your business, have you registered for PAYG withholding? You can check your registration requirements on the ATO website to make sure you are compliant.
At EOFY – Complete the following by June 30:
- Ensure that all your purchases, receipts and payments have been entered into your accounting software.
- Reconcile your accounts. Credit cards, bank accounts, loan accounts and petty cash – you need to ensure that you have recorded all transactions making up the statement balance in your accounting software.
- Clear out any suspense or holding accounts, and allocate amounts out as required.
- Reconcile your payroll. Are your super payments up to date, and have you correctly recorded your PAYG? If you are using Single Touch Payroll (or STP) you may no longer need to provide your employees with a payment summary, so check on the ATO website to see if you need to complete this process.
- Reconcile your Accounts Receivable and your Accounts Payable:
- Check your supplier statements and match them back to your invoice entries to check that the values balance. You can also reconcile your Creditor Trial Balance against your Trade Creditors Liability account.
- Check the balance of your Trade Debtors Asset account, and match it back to your invoice reports, or statement balances.
To make these jobs easier, it’s a good idea to focus on collecting any outstanding payments from your clients in the weeks leading up to the end of June.
- If you hold inventory or stock, reconcile your inventory through a stocktake, and write off any missing items. If you track your inventory as an asset, check the balance of your Asset account against a Stock on Hand report to see if the figures match.
- If you need to perform a stocktake, make sure this has been completed by June 30 to give you a true picture of what you were holding at EOFY. Backdating a stocktake entry after June 30 can skew the result.
- Print out your Profit and Loss Statements and your Balance Sheet for review. It’s a great idea to see if you can print out a balance for each month in a side by side view, so that you can quickly identify any discrepancies or missing entries, e.g. a recurring monthly subscription expense can be quickly spotted if it was missed out on in one month, and doubled up in another.
- Ensure you have kept accurate tax records that may be required by the ATO in the case of an audit being performed – receipts, payment records, invoices, etc. Remember, records need to be kept for a minimum of 5 years, so ensure you have stored them away safely.
- Ensure you have left plenty of time before lodging your reports for your bookkeeper or accountant to go through your paperwork and ledger accounts, as they may need to make adjustments.
- Lastly – book an appointment with your accountant nice and early, remembering it’s their busiest time of year!
Post EOFY - Get your business ready for a smoother 2024 EOFY:
- Get a software package that links your core business processes to your accounting system. Job management software like AroFlo is a huge timesaver, and an absolute gamechanger come tax time. Software streamlines your trade business processes and helps you store and move information throughout your business with ease. But by far the best part about going digital with your operations is the ability to integrate your new system with your accounting package. Nobody wants to be stuck double-handling financials come EOFY, and with a proper system in place, you won't have to.
- Keep up to date with the latest tax initiatives from the Australian Tax Office. Unless you're running a multi-location multi-million dollar trade business empire, then the information provided by the ATO to small business owners every year is likely very useful to you. There's always tax incentives on the go for small business owners, particularly in a sector that's as intertwined with government infrastructure as the trades. For example, a scheme such as the Small Business Technology Investment Boost could help you make the jump to a new digital job management system for next to no cost.
- Plan and prepare for the next EOFY. When you've got a good digital system feeding your financials directly into your accounting package, there's no excuse not to get on top of next EOFY now. Make sure all your tax info is being properly documented and stored, get your deductibles recorded as they happen and keep digital copies of all your receipts, you'll thank yourself later for all the hard work!
2023 Update:
We're heading into yet another period of change and uncertainty regarding the economic outlook for Australia. As the 2023 EOFY period looms, we cant stress enough just how important it is to ensure your tax reporting is watertight.
As always, we recommend talking to your accountant to find out more about your tax obligations and what you can claim this year versus what you could last year. If you're on the fence about using an accountant versus personally doing your tax, remember that an accountant's services are actually tax deductible so it technically won't cost you a thing after your return arrives!
