Countdown to tax time: What you need to do today – start a stocktake
The ATO require businesses to undertake a stocktake to work out the value of trading stock at the end of the income year. This means you must work out the physical quantities of stock on hand and assign a value to each item of stock.
You can choose from three methods of valuing trading stock:
- Cost price – this includes all costs connected with bringing the stock into existence. The cost of finished goods, for example, must include freight, customs duties and delivery charges, as well as the purchase price. For manufactured goods and work in progress, the full cost includes the cost of labour and materials, plus an appropriate proportion of fixed and variable factory overheads, such as power, rent, rates and factory administration costs.
- Market selling value – the current value of the stock you sell in the normal course of business. Under this method, you cannot allow a reduced valuation where you are forced to sell the stock for some reason.
- Replacement value – the price of a substantially similar replacement item you purchase in your normal buying market on the last day of the income year.
You can change the method you use to work out the value of trading stock each year and can also use different methods for different items of stock. However, the value of stock at the beginning of each income year must be the same as the value of the stock at the end of the previous income year.
- Print an Inventory Reconciliation as at today’s date.
- What you are looking for is that the only items that you have on hand actually appear on that report. This is your chance to scan the list and make any obvious adjustments prior to actually performing a stocktake on June 30.
- If you are using the inventory module in an accounting program, print out the report and physically tick off items on hand. If items are no longer on hand or you have more than the report states, make the necessary stock adjustments.
If you don’t use an accounting program to track your inventory, make up a stock sheet on paper or an excel spreadsheet and capture the following information:
|STOCK ITEM||QUANTITY||UNIT PRICE
|TOTAL PRICE (GST exclusive)|
|Vinyl for signs||65 metres||$5.75 per metre||$373.75|
|Metal Sheeting||4 metres||$20.50 per metre||$82.00|
If you missed last week’s blog head to countdown to tax time: What you need to do 2 weeks from 30th June – start planning for 2015/2016
The BIZ Buddy signoff
I do hope that you enjoyed my tips over the last 8 weeks. Many concepts may have been new to you and I congratulate you for persevering.
We are all constantly learning in business, whether it be learning a new technique to use in our businesses or learning how to adapt new technology in our businesses. I would like you to consider what I have covered over the last 8 weeks as another learning experience.
I encourage every business to utilise cloud accounting and to ensure you are using data feeds. The significant time you were spending data entering information should now be used initially to ensure the data in your accounting file is accurate and once you have mastered that, you can move on and start generating weekly and monthly reports to use in your business. The end result will be that you will be so much more in tune with your business, you will gain a thirst for more knowledge and funnily enough you may actually start to enjoying this part of your business.
I am also hoping that it will facilitate a better relationship with your accountant. Because you will have a better grasp of your business’s financial results, you will be able to identify problem issues of the business and then seek advice from your accountant in a more timely fashion.
I would also like to take this opportunity of wishing you all the best for the remainder of the 2015 financial year and continued business success for the upcoming 2016 year!
The information provided here is of a general nature for Australians and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’s circumstance will vary.