Get your books in order now

Posted on Mar 24, 2012 | 0 comments

Well there’s just over 3 months until the end of the financial year – and you know what that means.

So do yourself a favour and make sure your books are in order now. Here are some tips from Julie Wise about things you should be doing right now to ensure that you have a trouble-free start to the year end process.

Cut-off procedures

When the financial year comes to an end, it is particularly important that you have a proper cut-off point for the company’s operations. Therefore, you should:
Ensure your suppliers provide you with the relevant invoices for all purchases and expenses for the period up to the end of June.
Identify your work in progress or sales not yet invoiced and raise the relevant invoices for the period up to June 30th.
Identify all of the following to confirm that they are correctly recorded:
pre-payments received from clients
prepaid expenses to suppliers
cost accrued for which no invoices will be received before the year end
stock levels at the year end for goods or work in progress

 

Profits are Likely

If you’re forecasting a profit, you may want to start thinking about the implications of the result. For example:
Do you have any past tax losses to be utilised?
Will your cash flow situation allow you to meet your tax obligations?
You may be able to legitimately reduce your levels of profit by:
ensuring your accruals are indeed reflected in your results
incurring extra expenses – especially ones you have been delaying
identify potential bad debts and make the necessary provisions – if you do write off bad debts don’t forget the GST adjustments
ensure all of your fixed assets have been depreciated correctly in accordance with tax legislation
review your list of disallowable expenses. Some of them maybe due to a lack of supporting paperwork. You have time now to put some effort into requesting the full invoices from your suppliers.

Losses to date

You’re forecasting a loss for the year so you may want to start thinking about the potential business implications of the result. For example:
Is this expected because of your business stage?
If not, can you fix the loss situation for the longer term?
How strong are your cash reserves?
Are your creditor levels much greater than your debtors?
You should start reviewing your results in depth with a view to identifying areas of improvement and taking corrective action.
You may be able to legitimately increase your levels of profit by:
Ensuring any services rendered or goods delivered are invoiced before the year end
Delaying expenses planned until after the first of July
Ensure that investment items are capitalised as an asset on the balance sheet rather than treated as current expenses
Once you’ve done this work you need to keep a vigilant eye on your budget and cash flow forecasts over the coming weeks and days.

Plan for next year

Even if all of the above is in good order, these disciplines always help you reflect on your business performance. Here are some steps you may want to take to improve on your performance:
Prepare the budget for the coming year
Review your credit terms with suppliers and customers and make changes if required
Arrange credit facilities with your bank if you anticipate cash shortages
Reduce costs on areas identified as excessive in the current year
Implement new internal control systems to address weaknesses identified

I will contact you shortly regarding a series of Tax Planning Seminars we will be holding over the next couple of months. But in the meantime, start thinking about these issues and make a note of any questions you may have so you can raise them at your seminar.

 

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