5 simple steps to prepare your business for EOFY
Whether you are a start-up or an established small business, keeping proper records is very important not only for calculating your income tax and BAS payments, but also for determining the financial health of your business.
I’ve outlined five basic steps you need to do to start preparing for your business’ end of financial year (EOFY).
Step 1: Gather all receipts
Organising your receipts can be painful, but doing it now can save you time later on. All business owners are required to keep records for for years in either electronic or paper form. These include:
- Sales records (invoices, vouchers, receipts, credit card statements and cash register tapes)
- Purchase/expense records (invoices, receipts, cheque butts, credit card and bank statements)
- Employee records such as wages and superannuation details, and PAYG Payment Summaries
- End of year tax records (motor vehicle expenses, debtors and creditors list, stocktake sheets and asset purchases).
Here’s a tip. Forget your shoe boxes of receipts and invoices. If you have to flick through countless documents for details of individual asset purchases or breakdowns of repair and car expenses for your accountant, you’re not doing it right. Imagine how much easier it would be if you use accounting software. All you need are just a few clicks to send the information across to your accountant for EOFY.
Step 2: Organise your records
Now, you need to organise your documents for EOFY. This is the list of what you need to prepare:
- Listing of Accounts Receivables (debtors or people that owe you money) as at 30 June
- Listing of Accounts Payables (creditors or people that you owe money to) as at 30 June
- Review your Accounts Receivable (debtors) and write off invoices which you deem cannot be recovered.
- Employees PAYG Payment Summaries
- A stocktake on 30 June
- Employees PAYG Payment Summaries
- Employees Superannuation records
Step 3: Review and reconcile
Keeping good records makes it easier to prepare business activity statements and to collate the information for your accountant to prepare your income tax return.
When reviewing your financial records, there are a few basic things you should undertake.
- Prepare bank reconciliation for each bank account. This will compare the transactions in your records against your bank statement.
- Missing transactions can be added to ensure accuracy
- Duplicate transactions are easier to find and correct
- Unpresented amounts are identified and will provide the business with a true bank account balance
- You can make changes to earlier transactions. However, keep your accountant in the loop. They may have an impact on your next BAS or require your old BAS to be amended.
- Match your receipts against your bank transactions. If there are missing receipts, you should acquire copies from your suppliers.
Unless your business has very few transactions each month, then it pays to use accounting software to prepare your BAS accurately and provide the right information to your accountant at tax time. This will reduce the time you spend on bookkeeping and allow you to focus more time on running your business.
Step 4: Calculate income and expenses
Technically, you could do this while you’re doing your return, but it saves you time if you do it now. You need to go through each income and expense category and calculate a sub-total. If you are registered for GST and prepare a BAS, then you need to exclude the GST to determine the GST exclusive amounts required for tax return reporting. You’re now ready to see your accountant about preparing your income tax return, should you have an accountant review your books.
It’s important to note that the income and expenses on your tax return are calculated on a GST-exclusive basis unless of course your turnover is less than $75,000 per annum and you are not registered for GST. If you have accounting software, it will automatically exclude the GST and produce the information required for your tax return.
Step 5: Avoid doing this manually for next EOFY
Let’s face it, this is a mind numbing exercise that many small businesses undertake every year. The longer you leave it, the harder it is to catch up. If you’re using accounting software, you would be saving time by entering transactions on a weekly basis to keep the files up-to-date and reconciling the amounts entered to the bank statements at least monthly.
Your accountant will need to make end of year adjustments for items such as depreciation, to reduce any private expenses claimed as business and for capital expenses posted to repairs (for example, purchase of equipment). They can do this quite easily by syncing in with your accounting software.
Avoid the stress of using a manual system and simplify your processes by considering a cloud accounting system. If you’re looking for a light and easy to use accounting solution, *MYOB Essentials, is now available at a low monthly subscription. But if you’re after a solution that will grow with you over time, AccountRight is also available at a low monthly subscription. This solution is used by many small businesses with simple accounting needs. Give it a try – it’s FREE for 30 days.
Is your business healthy?
After you’ve handed your data over to your accountant, it’s time to take a step back to determine if your business is doing great or barely breathing.
This is where accounting software comes in. You get up-to-date information about your business, which allows you to make better business decisions. By maintaining good records, you get to monitor your cash flow by keeping track of your creditors and debtors so you can plan ahead.
Banks and other financial institutions will also require information about your business when you apply for a loan or lease equipment for your business. This includes financial data such as profit & loss statements and balance sheets for previous years and current year-to-date. Having these reports easily accessible will save you the pain in having to create them manually.
Your accountant can advise you which MYOB product is suitable for your business. Our accounting software is simple enough to be used by tradesmen, professionals and even manufacturers.
In the early stages of using the software, it is advisable to send your file to your accountant at BAS time. Your accountant can then check your file for accuracy and correct any bookkeeping issues you may have. This method would save any accountancy fees, as your accountant won’t need to spend more time correcting the same errors. MYOB’s reporting functionality allows you to produce a list of your debtors and creditors anytime as well as provide profit & loss and balance sheets to your bank when applying for finance.
It’s important to meet all your tax and compliance obligations this EOFY. Check out MYOB’s Tax Changes Information section, meant to help startups and small businesses stay on top of their game with tax changes.
*MYOB Essentials was previously known as LiveAccounts
The information provided here is of a general nature for Australia and should not be your only source of information. Please consult an experienced tax agent as each small business’ circumstance will vary for end of financial year.