Countdown to tax time: prepare a stocktake
Imagine you’re running a marathon. You’re about to turn that last corner and head for the finishing line. Parts of the race now seem like a blur. To get you over the line, you’re already thinking about what your next event will be.
Do you feel like you have run a marathon this financial year? Perhaps a triathlon? Do you sometimes wake in the middle of the night and think you have forgotten something that could set your business back?
Well, 30 June is almost here and it’s time to for you to do two things:
1. Take stock
All businesses need to ‘take stock’ before 30 June. This process is very important and one that many businesses overlook as they are too zealous putting their plans into action for the new financial year.
I like to have some uninterrupted time alone during which I can reflect, reward myself and really make some plans for the new financial year. I have my staff do the same and then in around mid-June we close our office for our annual planning day where everyone shares what went well for them, where they think improvements could be made and as a group we come up with what we want for the new financial year.
If your business sells stock, you need to count it on 30 June – with the exception of those businesses whose stock at 30 June is either $5,000 more or less than the stock held the previous 30 June.
The ATO says you can make a reasonable estimate to determine this, but I would still recommend that you do a stocktake. I don’t know how many times I have heard a client say “I didn’t think I was carrying that much stock!”
Why do this?
There are a number of reasons that a stocktake is crucial.
- It gives you the count that the ATO wants.
- Your Profit and Loss Statement will be more accurate.
- You will learn just how much money you have tied up in stock, which may force you to improve the way you buy and sell stock. For example, you may have thought an item was popular and had no idea how much you still had sitting on shelves.
- You may discover that some of your stock has gone missing, possibly due to theft.
- You may realise that some of your stock is obsolete or about to become obsolete. It could spark a sales campaign to get some money back.
How to do this?
1, 2, 3 4…
That’s right – start counting!
If you are using the inventory module in MYOB AccountRight, lucky you – you get a head start!
You will need to print off the Inventory Count Sheet report which lists all your inventory items. Then all you need to do is to manually record your actual quantities as you count.
The price per item will either be:
- the cost (what you paid for the item), or
- net realisable value (what you could sell the item for)
The price used by most businesses will be cost, however in situations where an item may be obsolete, outdated or superseded, a lower price can be used.
If you are registered for GST, the price per unit and the total value should be excluding tax. If you are not registered for GST, however, then the value to use will be including tax. Just make sure that you note on your stocktake list which price you used.
What are you waiting for? Are you going to be taking stock this 30 June? Try MYOB AccountRight for free.