By Cathy Anderson
For small business, getting finances in order for the end of the financial year is a bit like getting fit for summer – you often have good intentions but the deadline sneaks up on you. So instead of being trim, energised and ready for that bikini, your tax records are slovenly, scattered and may have developed a little muffin top.
But don’t panic – there’s plenty of time to whip your accounts and document practices into shape with a finance ‘boot camp’ of sorts, says Ben Fletcher, Managing Director of accounting firm Generate.
Here are his six top tips to creating fit and fabulous finances before June 30.
1. Get the records straight
Forget multiple files of complicated Excel sheets that don’t speak to each other – you need an accounting system that allows you to see how your business is performing at a glance and will make reporting, as well as lodging BAS and tax returns, a breeze.
“We recommend using a cloud-based system with bank feeds like Xero and partnering it with a system to capture your receipts to make life simple when it comes to tax time,” Fletcher says.
“It’s never too late to get a great accounting system in place.”
2. Super-duper superannuation
Making sure all your superannuation liabilities have been taken care of as dictated by the ATO is vital. If you have employees you must pay the super guarantee – the minimum amount of super – each quarter. As a self-employed individual, you can make your own contributions which are tax deductible.
“If you’re unsure if you have paid the super required for employees and contractors before 30 June, have a chat with your bookkeeper and accountant to make sure you’re getting all the deductions you can and avoid possible penalties and interest on late payments,” Fletcher advises.
3. Pay it forward
Made a lot of cashola this year? Don’t blow it on a new sports car, invest it back into the business to get ahead of repayments – also claim a deduction this financial year: it’s win-win.
“If you’ve had a profitable year and have excess cash it can make sense as a small business to prepay your expenses such as rent, insurance or interest on investment loans for the coming year so you can claim a tax deduction this year for the entire amount – and keep your landlord super happy with you,” Fletcher says.
4. Spend now, claim now
Small businesses with annual turnover of less than $2 million that spend less than $20,000 on single asset purchases can take advantage of the current tax break which makes those purchases eligible for an immediate depreciation write-off. The rules will change on July 1 – but we’ll have to wait for the upcoming Budget to find out how exactly.
“If you’ve got any purchase plans it might be a good idea to make sure they are sorted before the end of the financial year,” says Fletcher.
5. Think about your billing
As they say in life, timing is everything. And it is even more true when it comes to tax time.
“If you’ve got some big jobs that are due to be invoiced close to the end of the financial year, just keep in mind that if you report on an accruals basis for tax (and most businesses do) then you’ll need to pay tax this year on those invoices if they are booked pre-30 June,” Fletcher advises.
“But if they are delayed until July the tax won’t be payable for another 12 months.”
6. Give bad debt the flick
Fletcher says all good business owners should check to see that money is coming in on time, but June 30 is a great opportunity to give your ledger a proper review and determine if anything needs to be written off.
“If you’ve chased and threatened and are still getting nowhere then it may be time to bite the bullet and write off that debt, and at least get the tax deduction for your troubles,” he says.
Simplifying the tax-time paperwork
Of course, keeping your documents and records in order is key to ensuring sure your finances are healthy. Adobe offers several tools to help small business owners to better manage their documentation at EOFY. Now is the time to set yourself up for an easier tax time for the next financial year.
1. Snap a picture of your receipts
Forget the old-school shoebox full of paperwork, use the Adobe Reader app on your smartphone to create a digital copy of your receipts. You’ll save time, have the files on hand for your accountant and never worry about losing a crucial piece of business information again.
2. Create a digital tax folder in Adobe Document Cloud
Adobe Document Cloud is a very cool tool that allows business owners to securely store receipts and electronic statements for your accountant. Not only can you access it from multiple devices, securely storing files in the cloud offers a security safety net should anything happen to your computer.
3. Digitise paper documents
Paper documents are slowly becoming a thing of the past but it’s important to keep digital records to be referenced at tax time. Simply scan important tax paperwork to a PDF format and store them in your digital tax folder.
4. Send documents to your accountant using a secure Dropbox folder
Adobe’s Acrobat DC Dropbox integration is a very nifty way of handling sensitive and confidential business information. Instead of sending sensitive financial files over multiple emails to your accounting team or bookkeeper, simply drop in your relevant documents and securely share your digital tax folder.
5. E-sign any necessary documents
Even when you file your taxes electronically, there can still be some paperwork that requires a signature. Adobe’s Fill & Sign tool allows business owners to fill, sign, and send any form electronically from your desktop, browser, or mobile app. By e-signing documents you can save valuable time and fuss.