EOFY Survival Guide for Small Business
Judging by the TV and radio ads, you’d be forgiven for thinking that EOFY was another holiday, up there with Christmas, Easter and New Year. Just like Christmas campaigns, they encourage us to buy up big before the special day, have a festive feel and play on the pressure of a deadline. You almost expect savvy kids to be drawing up an EOFY present list!
But putting aside the hype, the end of the financial year on 30th June, or more specifically the period leading up to it, is an important time for small businesses. If the end of the tax accounting period that means there are certain financial actions to be taken. Also, as with the end of a calendar year, it is a time that straddles two periods, and is therefore often a chance for reflection – looking back over the last year and forward to the new year.
Let’s look in more detail at some of the things that a small business owner might want to do as the EOFY approaches:
The approach to the end of financial year is first and foremost of course a time to ensure all your financials are in order. Your accountant and/or bookkeeper is your best friend at this time of year (as they are all year!) and will be able to help you with looking at:
Debt – the lead up to the end of the financial year is the time to review the list of people or organisations that owe your business money. You’ll need to divide these into two groups – the ones from whom you have a good chance of collecting the debt and the ones that you are just going to have to write off to experience.
Then it’s a question of chasing the first group hard to collect all the cash you can before the end of the financial year, and maximising your revenue.
Super contributions – contributions to a superannuation fund are taxed at a lower rate than salary income, and many small business owners therefore put some of their revenue straight into their super fund. There is an ATO defined maximum amount that can be paid into a super fund in any single financial year and once the clock has ticked over into the new financial year, the count starts over again. So it’s wise to review how much you have put into your superannuation fund so far in the current financial year and consider whether to make an increased payment to take you up to your maximum level.
Bring forward purchases
The purchase of certain items, relevant to the running of your business is tax deductible, meaning that you can offset the amount of tax paid against the tax you owe. So as the end of financial year approaches, think about any items you need for your business and whether it makes sense to purchase them before 30th June, and therefore have the tax deduction in the current tax year, rather than waiting until July or later to make the purchase.
Sell surplus stock
Unsold stock not only represents unrealised revenue, but will be shown as a liability on your balance sheet, impacting the overall financial health of your business. It is a good idea to review your stock position, and decide whether to carry stock over, or whether you want to have a campaign to sell as much as possible before the 30th June deadline.
But EOFY isn’t only about getting your financials in order. It’s a time to review and plan and small businesses might also want to think about:
Review your strategic plan
The financial year changeover is a good trigger to review your progress against your business goals.
Michele Carson of Influence is a strategic planning expert and business coach. She explains: “The end of one year and beginning of the next is the perfect time to review your strategic plan. Take a look at what you have achieved and whether it aligns with goals you set for the business. Look at your business figures for the last year and get underneath the numbers to understand what they are telling you. Are you growing at the rate you planned for in your strategy? If not, can you work out what you need to change?”
Prepare budgets and cash flows
Part of your planning process will be to prepare budgets and cash flows for the coming year. Use data from the current year to plan for the new one. And remember that it’s not just about revenue - cash flow is king, so ensure you work with your bookkeeper or accountant to plan not only your expense and revenue plan but the cash flow that will keep you afloat.
Allocate time for your business
Michele has one final tip, which is to allocate time in your diary every week to work on your business - before and after the new financial year. “It’s one of the most important things you can do for your business”, she says, “because all of the 'must do' lists in the world are useless unless you take the time to action them.”
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