End of financial year! Don’t panic here’s a quick checklist – but be quick
It’s the end of the financial year, but don’t panic! This EOFY checklist for small to medium size businesses is a great way to tick all the boxes you need to stay on top of your year end.
In my experience small to medium sized businesses that implement a simple and effective year end process set themselves apart from their competitors and position themselves for advantage for the year ahead. Your business plans might include selling some or all of your business, acquiring another business or obtaining finance, and you might even need to answer questions from the ATO or other statutory bodies. Having a process in place to consider, document and implement an end of financial year process will set you apart and help you achieve your business objectives.
The good news is that even though the new financial year is around the corner, not everything needs to be completed today.
What’s worked well for you and what could be done better? The EOFY is the perfect time to plan ahead. Think about your business strategy across a 2-3 year time frame. Depending on your organisation’s size and level of sophistication this may be a formally documented strategy or it might be the plans running through your head at 2 am in the morning.
So here are some points for reflection, future planning and even some you can commit to today
Tick off achievable goals
Can you decrease asset finance, pay down bank debt? Think about simple and constructive matters you can finalise.
Review your payments made prior to year end that relate to the next financial year and recognise prepayments.
Review invoices received and payments made post year end and ensure any liabilities relating to prior to the end of the financial year are accrued.
Update your annual leave and long service leave liabilities, ensuring you include on-costs, forecast pay rises and for long service leave an assessment of the probability of the liability being paid, particularly for relatively new employees.
Accruing for any unpaid wages where wages are paid post 30 June and relate to pre 30 June or recognise a prepayment for wages paid prior to 30 June that relate to post 30 June.
Ensure your record keeping relating to government grants is up to date, including collating any information required for reporting back to Government.
Sign off on all liabilities, including statutory obligations
Complete Company Tax calculations.
Finalise GST accruals.
Ensure Payroll Tax is paid to State Revenue Offices.
Recognise Superannuation liabilities.
Ascertain accuracy of Fringe Benefits Tax provisions.
If your organisation is audited, ensure that you engage with your auditor now regarding any accounting treatments that have an element of judgement/interpretation involved to ensure any potential issues are discussed and resolved now.
Have a spring clean in winter! The joy of inventories
It’s best practice to hold a stock-take at year’s end, or close to it, and ensure that any missing stock/leakage can be written off. Equally important, review your inventory to ensure it is saleable, undamaged and relevant. If it isn’t, then again, this is the time for a sell off/write off.
What about cash-flow management?
Have you prepared your budget for the next financial year to assist you in managing your cash-flow, including customer collections, payroll and supplier payments?
Look at your fixed assets (property, plant and equipment)
Ensure your fixed asset register is up to date including:
Capitalising assets acquired during the financial year.
Removing assets disposed of during the financial year.
Reviewing the useful lives of your assets and whether you need to adjust the expected useful life based on the current condition of the asset.
Ensuring your accounting and tax depreciation are calculated accurately (they are not always the same).
Don’t forget taxation considerations
Any non-recoverable debtors or inventory should be written-off to ensure a tax deduction is available.
Is the business eligible for Research & Development incentives, which can include cash refundable incentives?
If you prepare financial statements (either by regulation or to meet other obligations such as bank agreement requirements), review deferred tax consequences and any related deferred tax asset or liability.
How will your business be impacted by the reduced tax rate of 27.5 percent for small businesses? For 2017 a small business has revenue <$10million; 2018 revenue <$25million; and 2019 revenue <$50million. How will this impact your tax payable, deferred tax balances measurement, and R&D tax offsets?
The year ahead
So now you’ve worked through the list, take some time to reflect on your business strategy for the coming year, clean out your inbox and set up your folders in preparation for FY2016/17.