XERO have a huge amount of resources to assist you in better books for your accountant, but more importantly for you to have an accurate set of books to UNDERSTAND and gain INSIGHT to MANAGE your business BETTER! Your books and accounts are a treasure-trove of information that tell you about the health of your business and what areas you can work on to improve your business financial results!
The main Resource Page Get your business ready for EOFY is packed with all the key things to do!
Here are 4 key excerpts –
What is the Australian financial year?
The Australian financial year (also the Australian tax year) runs from 1 July to 30 June. At midnight on 30 June, the financial year ends, your business books are closed, and you report your financial situation to the Australian Tax Office (ATO). They use this information to figure out how much tax you owe.
1. EOFY checklist
Make your end of financial year beautiful with our easy to follow checklist for small businesses. DOWNLOAD CHECKLIST
2. How to have a better end of financial year
For the new financial year, try to set up systems that:
- Limit the amount of work you have to do at tax time;
- Give you a running report of business performance (so you don’t have to wait till this time next year to find out how you’re doing);
- Create an automatic audit trail.
Online accounting software automates data entry, so your books are always up to date. That’s great for end of financial year and the tax season, but it also means you can create a P&L statement or a balance sheet whenever you like – not just at tax time. And because you’ll have digital records of everything, there’s no need to fear an audit.
Also, ask your accountant to come up with a tax plan for the new year. They’re in a much better position to lower your tax bill if they can put a 12-month strategy in place.
3. Simplifying tax
Tax is all about record-keeping. You need to account for every dollar that comes into, or goes out of your business. And you should have documents such as receipts and invoices to back up those records. Try to avoid doing this work manually as it will take a heap of time, which will make the end of financial year really stressful. Manual entry also leaves a lot of room for human error:
- Use software to record business transactions automatically;
- Get accounting and payroll software that calculates GST and income taxes as you go;
- Photograph paper receipts – an app like Receipt Bank will create a digital record for you.
4. Important items for Australian financial year end
To assess your business’s tax obligations, the government relies on a range of documents. The two most important are your:
- Profit and loss (P&L) statement;
- Balance sheet.
Profit and loss (P&L) statement
In its simplest form, a P&L statement shows your income (or revenue) in one column, and your expenses (or costs) in another. Expenses are subtracted from income to show how profitable the business is.
Creating a P&L statement can be intense because it needs to reflect all of your business transactions for the year, including:
- Every sale, mark-up, and fee you charged, plus interest earned;
- Every dollar spent on things like supplies, rent, energy, payroll and loan repayments.
P&L statements can also be complex because costs include things like depreciation of assets.
Simplifying P&L statements for end of financial year
Your accountant needs a really comprehensive and accurate record of transactions to get P&L statements right for you. You can help them by:
- Using only business bank accounts to pay business bills;
- Getting online accounting software that retrieves transaction data straight from your bank;
- Staying on top of bank reconciliation so income and expenses are correctly classified.
A balance sheet summarises your assets and liabilities. Assets are things the business owns, like work tools, vehicles, and cash in the bank. An invoice that you’ve sent but which hasn’t yet been paid is also an asset. Liabilities include debts and bills that you’ve received but haven’t yet paid.
Figuring out your assets and liabilities can be tricky if you don’t know:
- Which invoices have or haven’t been fully paid;
- Exactly how much money you owe to suppliers and lenders.
Simplifying your balance sheet for end of financial year
It’s best to stay on top of your assets and liabilities throughout the year, rather than trying to catch up at financial year end.
- Record new assets as soon as they come into the business, so nothing’s forgotten;
- Make sure you record bills as soon as they’re received (not just when you pay them);
- Use invoicing software that shows what has and hasn’t been paid.
You may need to do a stocktake
Unused inventory needs to be declared as an asset. You’ll need to count what you have and assign a value to each item.
If you carry a lot of inventory, consider getting an app to keep track of it. An inventory app allows you to record inventory as you buy it. It’ll also sync with your sales system, so items are subtracted from your inventory as they’re sold. Find out what inventory management software can do for your business.
For more see the main Resource Page Get your business ready for EOFY for Xero!
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