Now that the new financial year is here, it’s essential to set aside time to go through your finances and ensure everything is in order for the year ahead. While often a stressful time, it needn’t be. With a few simple steps, your small business can ease the typical tax time stress.
Step 1: Get your paperwork in order
First, gather all the necessary paperwork for your tax return and financial statements. Collect relevant financial records such as profit and loss statements, balance sheets, and cashflow statements for the entire financial year. Additionally, compile records of sales and purchases, including invoices, receipts, and bank statements, to substantiate your transactions and provide evidence of revenue and expenses. Don’t forget to gather any documentation related to tax compliance, such as Business Activity Statements (BAS), PAYG summaries, and superannuation contribution records.
Step 2: Update your financial reports
Maintain accurate financial records by updating and organising your financial reports. The profit and loss statement summarises your revenue, costs, and expenses, allowing you to assess profitability. Update this statement monthly and include all relevant figures from July 2022 to June 2023. The balance sheet provides a snapshot of your financial position, including assets, liabilities, and equity, enabling you to evaluate your business’s overall financial health.
The cashflow statement tracks cash inflows and outflows, providing insights into your cash generation. Lastly, keep the general ledger up to date to reflect all financial activities accurately. Through accurate, organised financial documents, you can comply with Australian accounting standards and smoothly fulfil your obligations more efficiently.
Step 3: Conduct a stocktake
Conducting a financial year stocktake is crucial to accurately determine the value of your inventory, which impacts your financial statements and profitability. It helps identify discrepancies and irregularities in your inventory levels, ensuring reliable data for financial calculations. Comparing physical count with inventory records can uncover theft or record-keeping inaccuracies.
Addressing and rectifying discrepancies promptly is essential to avoid distorted financial statements and inaccurate financial performance analysis. Analysing your stocktake can improve inventory management, minimise wastage, and enable you to make informed decisions all year round, not just at tax time.
Step 4: Research tax deductions and audit your assets
Then, understand which tax deductions you can claim for business expenses. These can include costs of setting up a website, vehicle and travel expenses, or equipment and inventory purchases. Keep receipts to prove these expenses.
Step 5: Finalise payroll and process superannuation payments
Review payroll records and reconcile any discrepancies promptly before completing the final pay runs. Calculate and prepare payment summaries (annual payment summaries or group certificates) outlining total income, taxes withheld, and superannuation contributions, which must be provided to employees by July 14th. Ensure compliance with reporting requirements and process superannuation payments before year-end to claim tax deductions and comply with Superannuation Guarantee regulations. By processing superannuation payments before year-end, you can also reduce your business’s taxable income and potentially lower your overall tax liability.
Step 6: Consult a professional
Partnering with a tax professional can help navigate the complexities of tax obligations, maximise tax benefits, and ensure compliance. Employing a tax professional will also save time and resources, allowing you to focus on core operations while benefiting from expert guidance.
Preparing for the financial year can be a daunting task for business owners. From gathering and organising all necessary paperwork to updating your financial reports and researching tax deductions, there’s a lot to consider. However, by following these steps and seeking professional guidance, you’ll be able to ease the stress and spend more time working on your business not in your business.
