The financial year-end can be a stressful time for small businesses that don’t have their bookkeeping in order. But it doesn’t have to be. Here’s what you need to get through it, including our tips on how to minimise the drama.
What is the Australian financial year?
The Australian financial year (also the Australian tax year) runs from 1 July to 30 June. At midnight on 30 June, your business books are closed for the year and you report your financial situation to the government. They use this information to figure out how much tax you owe.
Profit and loss (P&L) statement
In its simplest form, a P&L statement shows your income (or revenue) in one column, and your expenses (or costs) in another. Expenses are subtracted from income to show how profitable your business is.
A balance sheet summarises your assets and liabilities. Assets are things the business owns, like work tools, vehicles and cash in the bank. An invoice that you’ve sent but which hasn’t yet been paid is also an asset. Liabilities include debts and bills that you’ve received but haven’t yet paid.
How to have a better end of the financial year
For the new financial year, try to set up systems that:
- limit the amount of work you have to do at tax time
- give you a running report of business performance (so you don’t have to wait till this time next year to find out how you’re doing)
- create an automatic audit trail
Online accounting software automates data entry, so your books are always up to date. That’s great for the end of the financial year and tax season, but it also means you can create a P&L statement or a balance sheet whenever you like – not just at tax time. And because you’ll have digital records of everything, there’s no need to fear an audit if one comes knocking at your door.
Other crucial things to consider
Some business owners find it useful to use this information as a checklist to keep on track and improve their systems:
- Use only business bank accounts to pay business bills
- Get online accounting software that retrieves transaction data straight from your bank
- Stay on top of bank reconciliation so income and expenses are correctly classified
- Lodge accurate and up-to-date BAS returns – if not attend to lodgement, arrange an ATO plan and consider how you can keep up to date in the new financial year
- Ensure super guarantee (SG) contributions are accurate and up-to-date
- Are your Single Touch Payroll lodgements up to date?
- Reconcile your payroll and ensure this agrees to Single Touch Payroll lodgements and BAS returns lodged
- Have your bookkeeper review your automatic bank rules and the GST codes assigned to the P&L and Balance Sheet items to ensure you are lodging accurate BAS
- If your business carries stock, ensure you complete and end of year stocktake
Also, review your Balance Sheet and P&L to ensure you have completed the following items:
- Bank accounts, petty cash, credit cards, loans and HP/Chattel Mortgages are reconciled
- Compare your Accounts Receivables and Payables reports to amounts shown on the Balance Sheet to ensure no ‘out of balance’
- GST and PAYG withholding accounts are reconciled to the June BAS
- Wages and Superannuation in the P&L are reconciled to the Single Touch Payroll Lodgements
- Amounts in suspense have been allocated to the appropriate ledger account or, if unsure, complete a note in the memo to assist your bookkeeper to determine the correct treatment
- Personal expenses have not been claimed as business expenses
- Material differences to the prior year can be properly explained
No wonder business owners’ heads can be left spinning after reading all of that! But that’s where a safe pair of hands like a business bookkeeper can be worth their weight in gold, especially one that uses up to date technology so you and your advisers (and even the Tax Office) can review your business information in real-time whenever they need to.
Notch Above Bookkeeping are Platinum Certified Xero bookkeepers and BAS Agents. We help small business owners across Australia to prepare BAS returns and streamline their bookkeeping processes, payroll and accounting records using cloud technology.
Call us on 1300 015 130.
About The Author
Jac Gallagher, BCom MIPA
Jac uses her Xero expertise to build systems that simplify workflows and the lives of small business owners. As a wife, a mum to three gorgeous kids, and also a business owner, she knows how busy life can get and understands the pressures of small business.
“I love helping people simplify their businesses so they can get on and enjoy their lives. The simpler the better is my philosophy to work and life.”
As Notch Above’s Business Development Manager, Jac is passionate about connecting more business owners and accounting firms with cloud bookkeeping. She does this by understanding each business’ needs and appointing Notch Above’s Xero remote specialists to expertly carry out the day to day bookkeeping.
In her spare time, you will find Jac outdoors enjoying the beach or a bushwalk. Otherwise, her personal time is spent reading a good book or furthering her knowledge about best business practices.