There’s no getting around it – the end of the financial year is a crazy time of year for business owners. From finding receipts and reconciling bank accounts through to preparing financial documentation, just thinking about all there is to do can give you a headache.
While you can’t avoid attending to your end of financial year to-do list, you can get yourself prepared. To help, here’s a checklist of tasks to give you confidence in tackling this essential financial milestone.
Complete a stock take
The details captured in a stocktake are included as part of your gross profit in your profit and loss statement, so it’s important to make sure this information is recorded correctly. Gross profit is a crucial figure in your end of year reporting and is calculated by deducting the cost of goods sold from net sales.
As the cost of goods sold is calculated by subtracting the closing stock from the sum of the opening stock plus purchases, any stock throughout the year that has gone unsold due to damage, theft, obsolescence or error needs to be accounted for.
To get the most accurate information, it pays to carry out a stocktake as close to the end of the financial year as possible and either close, or defer, large orders close to this time. When carrying out your stock take, the Australia Tax Office (ATO) also recommends keeping the following records:
Reconcile bank accounts
It’s important to make sure that the information you have recorded throughout the year is accurate, so check to confirm that the financial data you have collected matches the balance on your physical bank statements and investigate any discrepancies.
Similarly, if you have separate accounts for GST and Superannuation, make sure these accounts are also up-to-date and reconciled.
Update accounts payable and receivable information
Create a summary of all outstanding creditors and debtors and try to reconcile any debts. If it’s possible to pay back any outstanding purchase invoices, do so.
Make sure you have all the receipts for your Profit and Loss Statement
Make life easy for whoever is doing your end-of-year accounts and ensure that you have all the necessary receipts to complete your profit and loss statement. Petty cash receipts, for example, will need to be reconciled with the petty cash balance.
On the loss side, you’ll also need receipts for any business-related expenses, including equipment purchases, utility expenses, rent/lease documents and advertising costs (to name just a few). Ideally, receipts will already be filed away and organised and the process will simply be one of checking to ensure everything is accounted for.
Are there any coding or processing errors in your payroll information? Before you send out any payroll summaries, ensure that your payroll information is up to date and check for any discrepancies between payroll reports and BAS and IAS reports. Confirming you have this information right the first time can save valuable time later, as the ATO will follow up on any errors.
Review asset information
Asset information is important to your balance sheet, so carefully review all documentation. Make sure you have receipts for assets purchased or sold, as this will help to calculate depreciation. The ATO allows you to claim deductions for a decline in the value of your assets and in some circumstances, assets may be eligible for being written off. Any fixed assets that are obsolete or unusable, for example, may be able to be written off by the ATO.
Similarly, to help small business owners, the ATO has also offered to write off eligible assets costing less than $20,000 each for companies with a turnover of less than $10 million. If this applies to you, update your balance sheet by writing off any eligible assets costing less than $20,000 each and pooling depreciating assets that cost $20,000 or more.
Write off old or outstanding debts
Unfortunately, it’s all too common when the end of the financial year rolls around to find you have old or outstanding debts from customers that have failed to pay. When this happens, you can write off the debt. This will mean your expenses and GST liability are correctly updated.
So, what does this mean for your end of year documentation? The ATO will only write off debts that are 12 months overdue and if they were included in your previous year’s tax return. This means that for it to be written off in the next financial year, you need to include it in this year’s tax return and provide updated information on the non-payment the following year.
To ensure any old debts are accounted for in this year’s return, check the dates of your outstanding invoices for those that date back as far as the previous tax year.
Reach out for help if you need it
Completing your end of year bookkeeping can be a stressful and at times complicated task! If you need any help, don’t hesitate to reach out for professional help and advice.