End of financial year is a complicated time for small business owners. In addition to the normal operational requirements, EOFY means breaking out your accounting software and checking your finances in preparation for lodging your tax return.
If you aren’t a financial professional, getting everything in order can seem overwhelming. That’s why we’ve put together the ultimate EOFY checklist – it’s got everything you need to prepare for lodgement and get you on track for the future.
Reconciling accounts? Check.
Tax deductions? Check.
Ways to improve your finances? Check.
At the end of the guide, we’ve even included a free PDF checklist that you can keep in your office, car, or home for handy reference. Keep reading to find out exactly what you need to do at the end of the 2021 financial year.
Reconciling your internal accounts, like point-of-sale ledgers or check registers, with external statements, like bank or credit card statements, is an important part of maintaining your business’s finances. Comparing internal and external accounts helps you detect discrepancies, which may be signs of poor recording or fraud.
Once you’ve finished reconciling your accounts, your bank statement balance should match your company balance sheet. If you use online bookkeeping software like Xero, you can easily reconcile transactions from your bank feed with the transactions you’ve recorded in Xero.
Make sure you pay attention to your accounts payable and receivable. Properly recording money you’re owed (as well as money you owe others) is important for keeping your general ledger up to date.
Keep Your Receipts
Businesses are generally required to keep receipts for up to five years after they lodge their tax return, so make sure that you:
- are keeping your receipts; and
- have somewhere secure to store them.
The ATO accepts digital copies of receipts (as long as they accurately and clearly represent the originals), so you can use tools like Xero’s receipt scanner to easily store your receipts online. You won’t have to worry about collecting paper receipts, and you’ll have a more accurate view of your finances.
Make sure you’ve claimed your tax deductions correctly. Minimising the amount of tax you need to pay is generally good – although there are some situations where having a higher taxable income may be better – but it needs to be done in the right way.
Common taxes to claim deductions for include:
- You can claim GST credits on most business expenses.
- There are specific CGT exemptions for small businesses.
- Trading stock. If your trading stock value doesn’t change by more than $55,000 in a financial year, you record your stock value at EOFY as being the same at the start of the year.
Complete STP Reporting
If you’re an employer, you need to report single touch payroll information to the ATO. This includes small employers with closely held employees, such as family members of a family-owned business, directors, shareholders, trustees, and trust beneficiaries.
If you’re using STP-enabled payroll software, your employees’ information will be automatically submitted to the ATO, including salaries and wages, PAYG withholding, and superannuation. If your software isn’t STP-enabled, you can also submit via a third-party sending service provider.
Once you’ve finished reconciling your accounts, claiming deductions, and reporting STP information, you should be ready to lodge your tax return.
There are three ways most small businesses can lodge tax returns:
- Using a registered tax agent
- Using standard business reporting-enabled software
- By mail
Sole traders can also lodge online via myTax.
Generally, the easiest way to make sure your tax is submitted correctly and on time is by using a registered tax agent. Any fees they charge are tax-deductible, and you’ll have peace of mind knowing that a licenced professional is handling your lodgement. If you choose to lodge your return by yourself, it will normally be due by 31 October.
Review Areas for Improvement
Once you’ve finalised your return, it’s a good idea to sit down with your bookkeeper and accountant to go over last year’s finances. With a full data set in hand, you and your team will be in a good position to assess areas for improvement and help you get ready for the coming year.
If you don’t have an accountant or bookkeeper working with you, here are a few ideas to get you started:
- Keep better books. Cleaner, more up-to-date bookkeeping helps your financials stay top of mind, which means you’ll be more cognisant about related activities. You can improve your bookkeeping by implementing processes for data collection, automating as much as possible, and using cloud-based software like Xero.
- Setting a budget. Every business should have a budget – without one, you’re likely to spend more and be blindsided by unexpected costs. Forecasting can also give you indications about your business’s future finances, which might help you decide whether you need to take actions like cutting costs or raising prices.
- Monitor cash flow. Poor cash flow is a serious problem for many small businesses. Better stock and debtor management policies (as well as improved marketing and sales) can often help improve cash flow issues.
- Review your pricing decisions. Improving profitability can be as simple as a 10% price increase across the board. Always make sure you consider your customer base, any increases in costs, and margins.
- Review your costs. Maintaining a lean operating model can help you keep more of your profits. Most businesses can reduce costs by automating repetitive tasks or by cutting small costs that don’t significantly affect quality, safety or customer experience.
- Review your assets. Is your stock being managed in the best way possible? Are your investments performing at their best?
- Review your liabilities. If you have debt, can you consolidate it to make it more manageable? Can you sell off underperforming assets?
- Review your risks, and think about worst-case scenarios. How can you stop X from happening? If X does happen, what controls do you have in place to minimise damage?
Get Your Free Checklist
Ready to make this end of financial year a successful one for your business? Download the free JTRB EOFY Checklist to help you get your records, claims, and lodgements in order.