New financial year tidy up


8th July, 2020

Now’s the time to tidy up your business practices for the new financial year

At the start of a new financial year, SMEs have the opportunity to adopt practices that can improve their internal processes, allowing them to operate with greater efficiency throughout the year ahead.

Being a small business owner or startup founder can be challenging at the best of times. What might be the responsibility of five different people in larger businesses, often falls onto a founder’s shoulders, and when it comes to matters like legal and finance, it can be extremely difficult for a founder to get ahead of the things.

Now that we’re beginning the new financial year, small and early stage business owners have a unique opportunity to wipe the slate clean with many of their internal processes that run on the financial year calendar and start the new year on a blank canvas.

Old habits die hard, so those founders who are looking to get off to a fresh start this financial year need to place a significant emphasis on adopting better internal practices like bookkeeping, accounting, corporate structure and legal.

To get some pointers on how SMEs should approach life after the rush of EOFY, we reached out to Daniel Ross, CFO and Head of Financial Services at LUNA, a Melbourne-based professional services firm for startups.

Ross broke it down to three key areas that diligent founders should be emphasising as they begin the new financial year:

  1. Clean bookkeeping
  2. Retain specialist advice
  3. Re-evaluate tax minimisation strategies

Naturally, all of these activities will rely on you having great access to financial records and transactions of all kinds, so don’t forget to make sure you’re using an appropriate cloud accounting package for your needs as well.

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1. Focus on cleaner bookkeeping

Messy bookkeeping habits are notorious for being the source of endless heartache throughout the financial year. They make it difficult to lodge the company’s quarterly BAS, they turn grant submissions into nightmares, and end up draining time and resources, commodities that no startup founder has to spare.

According to Ross, if a startup founder wants to start the new financial year right, they need to keep their books clean.

“When your bookkeeping practices are smooth, your life as a founder becomes so much easier,” Ross told The Pulse.

“Having proper visibility over finances makes it easier to make quick-snap decisions, and it makes all of the company’s lodgements far less expensive.

“Use 1 July to pull the trigger.”

Ross also highlighted that tidy books can also play a crucial role in an SMEs battle against COVID-19.

“This ocean of uncertainty that all businesses are currently living in makes organised books the key to being able to adapt to the sudden dips and spurs in the road up ahead.”

2. Retain specialist advice this year

The downfall of the entrepreneur is when they try doing everything themselves, or when they look for shortcuts on services that need to be delivered by experts.

Keeping costs down is important but delegating key services to specialists is something that startup founders cannot compromise on.

As part of his advice for SMEs on kicking off the new financial year strongly, Ross encouraged founders and small business owners to shop around for high quality professional services providers that can be relied on.

“Engage a high-quality network of experts this year. Find a registered tax agent who knows the startup space and take on an experienced legal professional for all your corporate governance needs.

“If you run a tech-business, retain advice from an expert R&D Tax Incentive consultant, and if you’re exporting, reach out to an EMDG expert.

“Prices vary significantly, so do your due diligence and shop around. Cheap service providers may cost you more in the long run, and expensive doesn’t necessarily mean high-quality.”

By building this circle of high-quality advisors, Ross guaranteed “increased agility” and “decreased stress levels” across the board.

3. Re-evaluate your tax-minimisation strategy

Ross’ final point was that SMEs should be addressing their tax-minimisation strategies early on in the financial year, rather than leaving it all to the eleventh hour.

Tax minimisation is about developing strategies and adopting practices that decrease your company’s tax liability. According to Ross, having those discussions at the start of the financial year, sets SMEs up for smooth sailing when the going gets rough for everyone else.

READ: Tax deductions not to leave off the table in 2020

“Set up a time with your legal advisor to look at your corporate structure to see if you are running your business out of the right type of entity and distributing your profits wisely.

“Get on the front foot with your tax accountant to ensure that you’re doing everything you can to take advantage of the tax breaks available for SMEs, including the instant asset write-off, gifts and donations, bad debts and keeping track of your stock.”

Taking proactive measures to put an emphasis on all of these areas increases cash flow in the short term, reduces the madness associated with EOFY, and gives founders the ability to respond with ease to urgency and inevitable change.

Want to take control of your business health? Start comparing MYOB’s online accounting options for small business today.