To avoid the end of financial year – EOFY – mad rush, businesses should start taking action now to prepare. A smooth and easy EOFY is always preceded by spectacular preparation.
30 June always seems to sneak up on us doesn’t it? There’s a lot involved in preparing your business documentation for the end of financial year.
If you are a small business, it is highly likely that you need to do everything to manage your business, from administration, marketing to bookkeeping. Business is running well as usual and you believe you are able to manage everything…and then, end of financial year approaches…The calm before the storm.
To avoid the end of financial year – EOFY – mad rush, businesses should start taking action now to prepare. A smooth and easy EOFY is always preceded by spectacular preparation. If you’re a larger company, you should still take action. You’re more than likely to have more paperwork and more time will need to be invested into EOFY preparations.
With the end of financial year only a few months away, here are five important tips for businesses to prepare for the EOFY. There are also a few general spring cleaning tips too – organisation is key to running a successful business and the EOFY is a great excuse to do more than just tax.
- Make sure your company documents – such as your trust records, constitution, company resolutions – are current and valid in accordance with the latest laws. The ATO is getting stricter on businesses’ paper trails and evidence, especially in light of the recently-released Panama Papers.
- Review your cashflow to include big ticket items so you don’t get any surprises towards the EOFY. Make sure your cashflow includes – but is not limited to – last quarterly BAS, last quarterly superannuation, fringe benefits tax, company tax return, personal tax return, accounting and/or auditing costs.
- Make sure you are personally up to date with the simple work-related deductions and small business rules – especially in light of deductions and grants available to innovative small businesses through the current government.
- Know the categories of your employees – for example, is he/she a full time or casual? This will affect your EOFY. Also, have your payment summaries sent to employees by 14 July even if you were not required to withhold any tax.
- Check all your employment contracts too. There might be changes to workplace law that you may need to implement or an award that may affect your rate. Check with your lawyer who can easily revise these contracts for you or assist you in the termination process.
- Be organised and do things early. Putting yourself under pressure just before EOFY may increase risks, mistakes, business performance and efficiency. Financial data is important for decision making to business owners, directors and management staff as well as legal documentation throughout the year – not just the EOFY.
- Follow up and urgently review those that owe you money but haven’t paid you within your required time – i.e. your debtors. Get a collection agent or engage a lawyer to draft a letter of demand prior to starting your EOFY lodgement so you know whether to include them as bad debt or not. You may be able to write them off and/or use them as a tax deduction or offset for your company.
- Check whether your client, customer or consumer contracts and/or agreements are still valid and if so, its term. While this is not completely tax related, the EOFY is an important time to get all your affairs in order and check your cashflow. Renew or amend your contracts/agreements if you need to and perhaps talk to your lawyer about extending contractual periods.
Carolyn Dorrian, Principal solicitor, Dorrian & Co