3rd June, 2024
As the end of the financial year (EOFY) rapidly approaches, most small business owners are gearing up to tackle their outstanding invoices and other financial responsibilities.
EOFY is a critical time for businesses to review invoicing practises and ensure accuracy and efficiency.
Here, we explore some common invoicing mistakes that SME owners make at EOFY and how to avoid them to streamline and improve your finances and prepare for tax season.
Don’t wait until the last minute to send out invoices or your EOFY goals may be impacted.
While working life is busy and it’s easy to think you can put off invoicing to another day, try not to make this mistake.
Instead, promptly issue invoices for all provided goods and services to maintain a steady cash flow and avoid payment delays.
This is particularly true during the weeks leading up to the end of June, when you want to give customers as much time as possible to settle up their bills before the EOFY.
Leanne Berry, Community Relations Manager (Partners) at MYOB, says this is one of the biggest mistakes she sees.
“Not keeping up with the invoicing you need to do creates a problem, so make sure you’re always invoicing as you’re delivering goods and services.”
To help with this, you can utilise automated invoicing tools like MYOB’s to schedule regular invoicing intervals and send out invoices promptly to clients before EOFY deadlines loom large.
Consistency and good formatting are crucial to getting invoices paid more quickly, something which is even more important at EOFY.
Ensure your invoices maintain a standardised format with your company’s logo, contact information, and clear indications of total balances owed.
Consistent formatting makes it easier for both you and your clients to track and manage invoices and due amounts, reducing the risk of errors and delays during tax season.
Note, too, that using software such as MYOB’s online invoice payments gives clients a prompt to pay that they can’t miss.
Leanne says, “MYOB’s software provides a big green ‘Pay Now’ button. This means customers are often prompted to do that as soon as they get the invoice, rather than waiting.”
You need to clearly define payment terms on all invoices to avoid confusion and disputes with clients, especially at this time of the year.
Specify due dates, accepted payment methods, and any late payment penalties to set clear expectations.
Wherever possible, give customers multiple ways to pay their bills, too.
Leanne advises, “Give your clients the opportunity to pay by BPAY, PayPal, direct deposit, credit and debit cards, etc. This will make them more likely to pay you.”
EOFY is not the time to let overdue invoices slip through the cracks.
However, many entrepreneurs fail to focus on chasing payments.
You can minimise outstanding bills by implementing a proactive approach to follow-ups on outstanding invoices. This will help ensure more timely payment from clients.
“You need to have a really good debt management policy and chase clients for money,” Leanne says.
“But MYOB online invoicing software can help, because they automate a lot of your debt management.
“Especially when you turn on invoice reminders in the software that sends out reminders to customers about their overdue invoices.”
Over the coming weeks, if you’re not already doing it, utilise automated reminders and escalation procedures (which MYOB’s solutions provide) to prompt clients to settle overdue balances before EOFY deadlines.
Good financial management requires meticulous attention to detail in your invoicing process.
But not everyone takes the time to double-check (or have two sets of eyes on) each bill that gets sent.
Throughout the year and in the lead-up to the EOFY, double-check all invoice details, including item descriptions, quantities, prices, and tax calculations, to ensure accuracy.
Inaccurate invoices can lead to discrepancies in your financial records and complicate EOFY reporting.
Reviewing each invoice and verifying all information before sending them out will save time in the long run.
While software tools take a lot of the hard work out of invoicing, you can’t just send invoices, receive payments, and leave it at that.
Reconciling your invoices with financial records is vital to ensuring accuracy and integrity in your EOFY financial reporting.
Regularly reconcile invoices with bank statements, sales records, and accounting software to identify discrepancies and errors.
Also, if you’re using MYOB and another platform specifically for tracking invoicing, you must ensure the two systems match.
Kyelie Baxter, Managing Director at IQ Accountants, says, “If you create invoices in something like Simpro or WorkGuru, ensure the total amount of invoices raised for the year matches with your bookkeeping system.”
Then, address any discrepancies promptly to maintain financial accuracy and integrity during EOFY reporting.
Conducting thorough reconciliations helps ensure compliance with tax regulations and minimises audit risks, too.
If you have bad debts (unpaid accounts receivable by the EOFY), you need to take action.
Leanne says, “Have you made every attempt to get that money in the door? If not, it’s probably time to talk to your accountant about writing that bad debt off.”
Kyelie agrees and says to keep all data on hand for your accountant or another relevant advisor.
“Don’t delete anything,” she suggests. “Then, advise your accountant if there are any invoices you’re not going to be paid for and let them know the “story” of what has happened and how you’ve attempted to collect the invoice amount. They can then determine whether the invoice can be written off as a bad debt.”
As EOFY approaches, it’s crucial for small business owners to avoid common mistakes that can impact financial accuracy and compliance.
By taking the right action, you’ll navigate EOFY more easily and ensure a smooth transition into the next financial year.
Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.