As the end of financial year approaches, now is the time for business operators to consult with their accountant or bookkeeper to ensure their books and accounts are in order.
With a little forward planning, it’s possible to avoid the stress of negotiating piles of paperwork and usher in the new financial year with confidence and clarity.
Here are five EOFY paperwork mistakes that businesses frequently make that can cause eleventh-hour blues, and how to avoid them.
1. Not keeping up with changes to tax compliance
The end of financial year is a time for businesses to prepare for the year ahead, which includes being aware of changes to tax compliance. Laws and regulations change frequently so it’s important to ensure you’re up to date.
Changes that will be in play as of 1 July 2013 include:
- The superannuation guarantee rate is going up to 9.25%, increasing gradually to 12% by 2019
- The existing superannuation upper age limit will be removed and employers must make superannuation guarantee payments for employees 70 years and older
- Reporting of taxable payments for building and construction industry is due in July
- The Living Away From Home Allowance tax concession will change in terms of eligibility and timeframe
Staying up to date with compliance changes can give business operators a head start on the new financial year.
2. Not keeping detailed documentation
A common mistake is being unprepared. If accounts and records aren’t reconciled and updated regularly throughout the year, this can make the end of financial year period much harder than it needs to be.
Missing invoices and receipts can result in large gaps in reporting, as well as lost time spent tracking down misplaced paperwork.
Keep your paperwork organised to avoid ongoing tax time tangles and free up time to focus on growing your business and doing what you love.
3. Inadequate planning and monitoring of cash flow
Businesses often fail to monitor incoming and outgoing cash flow within a set timeframe – such as a financial year or a quarter – and are left without vital funds to service their obligations.
Generally, this is because they don’t have the data to monitor and track ongoing, fixed and variable costs, and ad-hoc expenses.
Consider using software to track your expenses, payroll, inventory and GST estimates, and talk to your professional accountant and/or financial adviser to better understand your business and manage cash flow in real-time.
4. Leaving tax paperwork until the last minute
Some businesses don’t take a long-term approach to their tax, leaving them unable to forecast or make accurate, informed decisions about their business. These limitations can impact a business for years to come.
It’s never too early to get organised so you can spend less time on paperwork.
5. Relying on just a head-in-the-sand approach to accounting
Some business operators aren’t cut out for accounting. Regardless of automation, they’re better spending time working in and on the business than on the books.
These businesses are best off working with a bookkeeper or accountant to get their books done for them.
Many accountants can sign the business up for BankLink, a service MYOB acquired this week that sends the businesses bank transactions directly to the accountant, minimising the amount of paper records the business owner needs to provide.
Tim Reed is the CEO of MYOB, an Australian company that provides tax and accounting software to SMBs.
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