With the end of financial year fast approaching, it’s important that your business’s books are all in order. Beyond this, there’s many things you’ll want to do to ensure you’re not only complying with your obligations as a business owner, but also planning for what you want your business to achieve next year. Read this guide to find out 10 common mistakes made during the latter part of June – so your business can avoid them.
1. Not touching base with your accountant
If you’re a business operator who isn’t experienced in accounting, using a bookkeeper or accountant can be a huge help. A bookkeeper or accountant will keep your accounts in order and be able to answer your questions when you have them. By doing this, you’ll also be kept up to date on accounting or tax changes. To truly reap the benefits of this, you shouldn’t only contact an accountant when it’s coming up to the end of the financial year. You should have a good handle on your business’s finances all year round. Leaving this to the last minute is akin to doing all your Christmas shopping on Christmas Eve – things will go much more smoothy if you’re prepared.
2. Not keeping your accounts up to date
One of the most common mistakes is failing to keep your accounts up to date, because this can make the end of financial year harder than it has to be. There are many online platforms which can not only help you with your accounting, but also with the other legal elements of your business. Keeping this updated and organised means you won’t have to trawl through a barrage of documents, but be able to find everything you need with ease.
3. Leaving your financial statements to the last minute
Similar to our point above, leaving your financial statements to the last minute is one of the mistakes businesses make all too often. Keeping your accounts up to date will help ensure the burden of preparing financial statements is not left to the last minute. Further, you won’t have to fork out extra money to get your statements done quickly.
Leaving more time for your statements to be done means they’ll be more accurate too. If your statements aren’t accurate, then you may face sanctions from the ATO.
4. Not knowing how your accounting software works
Software and technology can make EOFY a much more bearable time. Cloud based accounting technology will help you ensure your accounts are up to date. Tracking your cash flow with a software program will save you time and money down the track.
5. Inadequate record-keeping
Unpreparedness culminates in one of the other common mistakes, which is not providing enough detail or supporting documentation. Accounts and records are required to be reconciled and updated. If this is not done regularly, then the end of financial year may present a challenging time for businesses. Records should be kept up to date and in an easily accessible location. You should also regularly update them so there’s no room for confusion down the track.
6. Not keeping your important documents in the one place
You may need to refer to other documents than just what you have on your accounting platform. If you need to refer to any documents relating to employees or other contacts, it is useful to have them all in one place. If you keep your documents separate, there is much higher chance that you won’t be able to find them.
7. Not knowing what you can and can’t claim
Depending on how your business is structured, you may be able to claim certain expenses on tax. For example, if you operate as a sole trader, business expenses such as equipment or even internet usage can be claimed. Knowing what you can claim will be advantageous for you and your business’s bank accounts. Don’t make the mistake of failing to claim something that’s perfectly claimable.
8. Not doing a stocktake at the end of financial year
If you sell goods, now is as good a time as ever to review, assess and count your stock. Many businesses do this towards the end of the financial year so the records they submit are as accurate as they can be. This can also be a good opportunity to have a sale on your goods (if you have excess stock) and bring in more customers and your business sets off into the next financial year.
9. Not separating your personal and business expenses
The line between your business and personal expenses can understandably get murky. However, you have to be careful not the claim things that won’t be considered a business expense by the ATO. A lot of small businesses can get into trouble making this mistake. Make sure that if you’re claiming a business expense, firstly that it’s sufficiently connected to the operation of your business and secondly, that you have the evidence to back it up.
10. Not planning for the future
Where do you see your business in a year’s time? That is a question many businesses don’t ask as they’re preparing everything for EOFY. However, if you have an idea of where you want to go, you can plan ahead and be ahead of the curve. If you want to change business structures, such as from a sole trader to a company, you can take advantage of EOFY promotions. Further, you can gather the data from your current records and use them to plan for even better results next year.
If your business is gearing up for the end of the financial year, it’s important to avoid these mistakes because they can be costly for your business. If you’re well-prepared, your business can transition into the new year with little stress.
