Top Ten things to do before the new financial year
  June 1, 2015

As the 2014-15 financial year draws to a close, it’s important to make sure your business affairs are in order and you are positioned for even more success in the coming 12 months.

You need more than New Year Financial Resolutions – you need a plan!
We have put together a list of the Top 10 things every business owner needs to get sorted out before the 30th June.

1. Pay any outstanding superannuation expenses, and consider making a lump sum payment.

Compulsory super rose from 9.25% to 9.5% last year. Make sure you’ve paid your team correctly and any additional amounts are finalised. If you have any money left over to contribute to your own fund, consider making a lump sum payment. This is tax deductible for your business, and a great investment vehicle for your future. The tax rate in super is only 15%, making it a great long term investment strategy. This will have an effect on how much income tax you pay, but of course there are cash flow issues to consider. Also a good time to review your trading and credit terms with suppliers and customers. Speak with your trusted business advisor about this.

2. Be aware of all applicable tax benefits

Businesses with a turnover of less than $2 million are eligible for a broad range of tax breaks around such things as Goods and Services Tax, Fringe Benefits Tax and Capital Gains Tax. It’s very important to understand the specific impact these could have on your financial affairs so you can have them sorted in plenty of time. 1st of July will be too late.

3. Make yourself familiar with any changes in the tax system

Plenty of tax changes come into action at the start of July and it’s important to consider what immediate and long-term effect these will have on your business and cash flow position. Changes to the Medicare Levy and the Temporary Budget Repair levy were introduced in 2014 and may impact some of you. More recently changes to depreciating assets under $20k were introduced. Find out if you’re affected and plan accordingly.

4. Write off bad debt

National data from one of the largest credit organisations in Australia suggests the average number of days business-to-business payments are made has increased. It’s now sitting at an average of 56 days. If you’re still wasting time chasing invoices from the last financial year, perhaps now is the time to write them off. Although this is painful, bad debts are tax deductible and can be used to offset your taxable income. Probably also a good time to review your trading terms with suppliers and customers.

5. Get your tax-deductible expenses in order

One way small business can increase business deductions is to bring forward payments for office supplies and costs associated with supplier services and professional advice. By bringing tax deductible expenses forward you’re actually reducing your taxable income for this financial year. Now is a good time to start organising this with your suppliers.

See also our article on ‘Budget Update – invest in new equipment before 30 June’ relating to the new budget measures that came into effect on 12 May 2015.

6. Keep your income producing assets up-to-date

You can be more efficient in your business by using modern equipment, and when it has been financed according to your specific business structure requirements it can have a positive impact on your cash flow. This is especially relevant since the most recent budget, where a rapid depreciation rule for assets under the $20k mark was introduced. This is for each asset purchased and installed for less than $20k not including GST or on road costs. Interestingly there are some very keenly priced work vehicles that now just creep under this level.

7. Have an accurate and up-to date depreciation schedule for business assets

SME’s with a turnover less than $2M have tax deductions available on any depreciating assets up to the value of $6,500, which were purchased before 31 December 2013. Business assets which may fall into this value category include office equipment, computers, printers, work tools, etc. Make sure you have an accurate record of assets within this value category for potential tax deductions.

8. Have an accounting spring clean

A large number of tax and superannuation changes are due to take place from 1 July onwards. So make sure you review and update your accounting systems to include them all. Get your chart of accounts aligned to your business activities so you can more accurately measure the costs of doing business and just where you’re making the most profit. You need this information in real time.

9. Reassess your cash position

Get your cash flow forecast and budget in order. Starting the year with a good understanding of the financial ebbs and flows of your business is critical. This allows you to predict when there may be cash shortages that you need to manage to stay solvent. Lines of credit, overdrafts, even credit cards can sometimes be the difference between survival and the abyss. Another method gaining popularity is Debtor finance. This can provide an advance of a large percentage of cash against the value of your receivables. It’s also scalable as your business grows.

10. Develop a strategic plan and reward your staff

As the financial year comes to a close, use it as a time to review your business strategy. This is the perfect time to set yourself up for a successful 2015-16 by engaging a business consultant to fine tune your systems and help you to set up goals which are SMART, specific, measurable, action oriented, results focussed, and time bound.

It’s also a good time to reflect on you and your teams performance, and reward the hard work and efforts they’ve contributed. Happy end of financial year to our readers, and here’s to an even brighter 2015-16. And it all starts now.

 

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