End of financial year business checklist

SMALL BUSINESS

The financial year is the centrepiece of an annual calendar of regulatory and other activities. No matter what business structure you have, the end of financial year is a time to take stock of your financial position and prepare your business accounts for tax.

End of financial year: what does it mean for your business?

In Australia, the financial year is a 12-month period used for tax purposes which ends on 30 June each year. The end of the financial year is an important time for your business.

Where possible, do not leave all of your end of financial year activities until the last minute.

The following checklist contains steps you can take to make your year-end process run more smoothly.

Review your business plan

Many businesses make plans for the next financial year half-way through the current financial year, if not earlier. This is good practice because it takes time to review and revise business goals, strategies and priorities. This process can include such considerations as:

  • Reviewing how your business is performing against its financial plan/forecasts
  • Examining staffing requirements
  • Identifying changes in your operating environment
  • Making the most of new opportunities as they come your way – important for new and existing businesses to always focus on maintaining strength in their core business, before they consider new products/services/diversification
  • Determining any new process automation needs
  • Reviewing your marketing plan
  • Examining insurance – it is a good idea to check your insurance annually.

Always be searching for better deals and make sure you understand the insurance cover you have. A broker will work with your business to make sure you get the best deal from an insurance company.

Set aside sufficient time to review your business finances yourself, or with your accountant or BAS agent/bookkeeper.

Your business can a use forecast and then budgets so you can see if you are meeting your targets and what you can do differently next financial year.

Operational and financial management tasks

No matter what business structure you have, the end of financial year is a time to take a stock of your financial position and prepare your accounts for tax. This usually means all your business transactions will be processed into some form of profit and loss position.

You might need to:

  • Conduct a stocktake.
  • Summarise debtors and creditors.
  • Review your Fringe Benefits Tax processing (although ‘FBT’ has a different year end, 31/03/XX)
  • Collate records of fixed and other assets and improvements, to calculate depreciation and capital gains tax.
  • Close the year end for pay as you go (PAYG) withholding tax, Single Touch Payroll and the end of year Income Statements for payroll, plus superannuation requirements.
  • Process and reconcile goods and services tax (GST).

Note you will need to file digital or paper records of all transactions. The Australian Tax Office requires substantiation of all business expenditure.

Checklist

Use this checklist to help you navigate the end of financial year process from start to finish. You are advised to utilise the services of a good BAS agent/bookkeeper/tax agent. You can utilise a contract professional completely customised to your needs.

  1. Step one: Review your settings in your accounting software – Check the Legal/Trading name, ABN and postal address (including post code) are correct.

Chart of Accounts – Review your account names and account codes for accuracy. Archive any old or unused accounts.

Contacts – Check all customers and supplier details for accuracy. Merge duplicate contact records and archive records no longer in use.

  • Step two: Close off your accounts

Reconcile Accounts payable – Check the bills entered for the financial year. Pay close attention to the Draft tab and action any required.

Reconcile – Accounts receivable – Check the invoices entered for the financial year. Pay close attention to the Draft tab and action any required.

Reconcile – Inventory – Perform a stocktake and record any adjustments to inventory items.

  • Step three: Complete a bank reconciliation

This is where you check the statement lines on your bank account match transactions entered into your accounting software.

Check the bank statement balance at the end of the period, equals the bank balance in your software. Fix any errors that you identified above.

  • Step four: Fixed asset reconciliation (if required)

Check the assets entered into your fixed asset register. Your tax professional will assist you to record disposal or sale of any assets and depreciation.

  • Step five: Process adjustments

These are best left to your accountant to process when they are finalising and reviewing the accounts for taxation.

  • Step six: Finalise reports

All financial reports can be produced after finalisation of the accounts; profit and Loss Statement, Cashflow Statement, Balance Sheet would be the main ones.

Find out which tax deductions and concessions you can claim

Firstly, you are advised to have a registered income tax professional helping you. Referrals work well. Interesting how in this world of LinkedIn and a host of other ways of sourcing people, word-of-mouth is still very effective.

Check your tax agent is registered with the Tax Practitioners Board (TPB). Look for the registered tax practitioner symbol on their website, stationery, brochures or business cards. The registered tax practitioner symbol includes the type of registration and their individual registration number.

There are so many tax changes occurring constantly that it is impossible to keep up-to-date with all the tax changes. Your tax professional can help you understand any changes, or you can stay up to date by subscribing to the ATO Small Business Newsroom.

You can claim deductions for most business expenses if they directly relate to earning your income. However, you must have records to prove the expenses that you claim as business deductions – ATO record keeping requirements for businesses.

Ask your tax agent about any concessions you can claim.

Also ask them to let you know about any changes you can make to your operations that will be of benefit to your business.

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