How small business operators should prepare for EOFY
With just under two months until the EOFY, SMEs around Australia are starting to get all their ducks in row in preparation for tax time. Here are some things they’re doing this year and the reasons behind them.
Anyone who runs a small business will tell you that if you aren’t adequately organised, the End of Financial Year (EOFY) can be a particularly stressful time.
Aside from preparing the company tax return and all the paperwork that comes along with it, it can be quite difficult to find the time and/or head space to prepare all the other bits and pieces properly.
But if you can manage to map out the process and start preparing things far enough in advance, you may be able to lessen the stress and increase productivity during that would-be stifling time of year.
But before getting into what can (or should) be done in the lead up to the EOFY, it’s important to understand the benefits of being ready for tax time as early as possible.
The key to success is staying organised
Procrastination is dangerous for anyone in business, but for SMEs, it can be a cancer.
Ensuring that your financial statements (like your BAS, profit and loss, balance sheet, payroll tax, and so on) are in order by the time the EOFY comes around means that you are working efficiently and will likely have more time and capacity to focus on the important (and let’s be honest – more enjoyable) parts of the business.
On the flipside, if you are constantly behind on these important administrative tasks, you’re forever chasing your tail and falling behind, something which is guaranteed to slow you down and impact your productivity and efficiency in the other parts of your business.
While we’re on the topic of being ready and compliant for EOFY, the new Single Touch Payroll (STP) method of reporting is now a requirement for all businesses. And if you’re not set up for STP by 1 July this year, you’re likely setting yourself up for some hard questions from the ATO.
Cash is king, of course
Another reason why early stage businesses should prepare for the EOFY as early as possible, is because of the potential cash flow benefits it can bring to the business.
There are various tax breaks and government grants that only come into play as the new financial year begins and can only be accessed once the company’s tax return has been filed.
For example, many tech startups can receive a refundable tax offset as part of the R&D Tax Incentive, which is submitted together with the company tax return.
Eligible businesses are entitled to claim this cash rebate (or reduction in their tax bill) as soon as the new financial year begins, so the earlier you have your paperwork in order, the quicker you can access that benefit.
In short, it doesn’t matter which way you look at it, being properly prepared for the EOFY can significantly add to the productivity and efficiency of any business – especially SMEs.
Now that you’re convinced as to the ‘why’ of good preparation for EOFY, let’s discuss the ‘how’.
Q4 is a good time to start preparing
When it comes to preparing for the EOFY, you can never really start preparing early enough, but according to Natalia Florez, CFO of RedEye Apps, SMEs should really begin their EOFY preparations in Q4 of the financial year.
For businesses with a 30 June financial year end, this means from 1 April.
“An SME needs to try and make all the necessary changes and updates for the new financial year ready before it starts,” said Florez.
“Don’t wait for the new financial year to start thinking about what to do differently.”
Florez recommends that processes be “maintained and updated” over the course of the year, with extra focus and time commitment in the last quarter of the financial year.
“This allows you to have your processes in place, follow them throughout the year, and end up with a clean close off towards the end and beginning of following financial year.
“Keep your eyes open to see changes and your mind open to make them happen.”
So even though we’re almost half way through FYQ4 now, getting started now is still better than waking up after 1 July with a whole lot of admin to take care of.
Find a good bookkeeper
When advising companies on other ways to arrive at the EOFY calmly, Jeremy Goldman, Founder of GetWag, says that ever since he hired a good book-keeper, his EOFY preparation experience has become incomparably better.
“We hired an in-house bookkeeper who is a registered BAS agent which really lightened the load for me as the business owner,” said Goldman.
In addition to hiring a good accountant, Goldman also encouraged SMEs to meet with their bookkeeper regularly, as it will keep them “up-to-date” with changes in law and tax legislations, making it easier to implement those changes in advance and avoid going through old processes redundantly.
Use the latest technology
These days, there are highly advanced and user-friendly, online accounting software that assist businesses in keeping their finances in order.
Both Florez and Goldman strongly encouraged small business owners who aren’t doing so already, to explore the ways that they can integrate the latest accounting software solutions into their existing processes.
“Technology in the field is getting better every day,” Florez added.
“We constantly try to find smarter ways to do our tasks.
“This has turned our preparation for EOFY into an evolving process that improves each year.”
So, by getting the process started nice and early, delegating the tasks to a proficient bookkeeper and taking advantage of the latest accounting software tech, you’ll cruise your way to the EOFY smoothly.