‘Failing to plan is planning to fail.’ Alan Lakein
If this is your first financial ‘year end’ in business there are four time critical actions that need attention to ensure your close out is planned with no nasty surprises. Here they are:
1. Seek advice
Seek advice from your accounting adviser before the end of the financial year to ensure you have planned for your businesses specific circumstances. In this regard it is important to ensure your bookkeeping records are up to date so you know exactly where your financial position is at.
2. Maximise your deductions
Maximising your tax deductions is important to manage the tax payable by the business. However you need to be aware that not all deductions are gained the same way. Below are three deduction areas to consider during your planning:
Pay superannuation contributions early
Does your business employ team members that require the payment of superannuation contributions? If so, a deduction is generally available only in the year the superannuation fund has actually receipted your contribution. Not just when your business has made the payment.
Take care with last minute asset spending if seeking a tax deduction
Whilst some asset purchases will result in an immediate deduction some may not. It all depends on the size of your business and the amount spent on the asset. If an immediate deduction is not available the deduction for the asset will be claimed progressively over the life of the asset which can be many years.
Write off bad debts before the end of the year
If your business has debtors at the end of the year, such as clients who owe it money, consider writing them off as ‘bad’. To be entitled to a deduction in this area it is important you have made significant efforts to collect the debt and the amount is written off in the financial records as ‘bad’ before year end.
3. Complete a stock take
If your business has stock, don’t forget to do a stock take at the end of the financial year. A stock take is one time critical task that if you miss, it is difficult to reconstruct the records subsequently.
4. Tax Payment and Cash Flow planning
If your business has traded at a profit in its first year, well done! Once your tax return is lodged your first years tax will generally be payable.
In addition to the tax payable on that tax return the ATO will be seeking tax in advance of lodgement of the next tax return. This means two years tax maybe payable in quick succession placing a serious strain on the businesses cash flow. Cash flow planning is essential.
One final thought regarding closing out your financial year end is to complete your annual records and compliance documents (E.g. tax return) as soon as you can. The longer this task is left the more your memory will be challenged making the close out that little bit harder.
Craig Stanmore is the CEO of The Jaques Stanmore Financial Group. He has over 20 years expertise in all areas of business services namely Tax and Business Services, Audit, Superannuation, Business Structuring and Advising.
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