EOFY best practices checklist for SMEs

While the entire year is packed with to-dos for SMEs, the end of the financial year (EOFY) can be particularly hectic for business owners. From reporting your business’s financial position to claiming tax deductions and everything in between, EOFY calls your attention to a number of business aspects.

If you can cut out the stress, you will find that this time of the year is also a great window into past activities. It’s a great time to reflect and do a post-mortem of all your financial decisions to know what worked and what did not. You can plan and strategize your next move and implement the required changes.

This blog brings a checklist that SMEs should consider to make the most of EOFY. These tips should help ensure nothing has been overlooked and that you are prepared at the start of the next financial year. 

The Basics

First and foremost, you need to get all your business’s financial accounts ready for EOFY. Ensure your Business Activity Statements (BAS) are accurate and updated. Here are some considerations you will have to make during EOFY:

1. Payments

Review payments you have made before year-end that relate to the next financial year

2. Invoices and liabilities

Review invoices received and payments made post-year end and ensure liabilities prior to the end of the financial year are accrued

3. Leave liabilities

Update long-service leave and annual leave liabilities.

4. Wages and payroll

Accrue any wages to be paid after 30 June but relate to pre-30 June, and recognise prepayment of wages made before 30 June that relate to post-30 June

5. Government grants

Update records of government grants, including all documents for reporting to the government.

Sign off all liabilities and statutory obligations

During EOFY, you will have to sign off all liabilities. Besides current liabilities towards parties that conduct business with you regularly, there are also statutory obligations that you will have to meet during this period including:

• Complete company tax calculations
• Finalise GST accruals
• Payment of payroll tax to the state revenue office
• Superannuation liabilities

Inventory

EOFY is when you write off damaged/missing stock and spring clean your warehouse. It’s important to note that the EOFY presents a great time for businesses to stocktake and align records with your company’s physical inventory. 

Stocktaking is essential for small and medium enterprises because it helps owners ensure that they have enough inventory to fulfil orders and that the quality is saleable. The process becomes crucial in negotiating large contracts and wholesale deals. Taking proper stock of your inventory helps to meet the needs of customers who are looking for immediate purchases. 

Assets

The EOFY is the time when you take stock of all your fixed assets. You will have to update your fixed asset register and provide it to your accountant to reflect any changes in your accounts. Some important considerations while looking at your fixed assets include the following:

• Capitalising assets that your business acquired during the financial year;
•  Eliminating assets that were disposed of during the financial year;
• Evaluating the lives of your fixed assets and deciding whether any adjustments are required in their expected useful life by checking their current condition; and
• Ensuring the accurate calculation of accounting and tax depreciation.

Tax Deductions

Your business can get tax refunds and exemptions from the government, provided you meet specific conditions under taxation law.

However, there are some considerations to keep in mind:

1. Write-off bad debts

You will have to write off any bad debts or unsellable inventory to avail of a tax deduction. 

2. Incentives

You will have to find out how many R&D incentives you can get from the government. 

3. Review deferred tax

If you prepare your financial statements, either to meet regulatory requirements or other obligations such as bank agreement requirements, you will have to review your deferred tax.

Audit Review

If your business conducts an audit during EOFY, you will have to engage with the auditor regarding accounting treatments to discuss and resolve issues promptly. The overall purpose of conducting an audit review is to ensure that your business’s financial statements are free from errors and material misstatements.

Cash flow management

Cash is the lifeblood of businesses, and cash flow management certainly takes a crucial spot during EOFY. By taking care of this function, you will know whether your business has sufficient funds to operate smoothly for the next financial year. Modern-day businesses depend on accounts receivables automation and other software solutions to keep tabs on money movement.

Proper cash flow management ensures you have the liquidity to pay your employees’ salaries, meet regular expenses, and invest in your business growth and expansion.

Conclusion

There’s no doubt that the EOFY can be a stressful time for small- to medium-sized businesses. However, you can get over much stress with proper preparation and enough foresight. 

When you define your plans clearly and execute them systematically, you will be able to make the best use of your budget and meet compliance norms. Leveraging robust accounting tools and working with the right professionals can ensure your EOFY goals are met and help you transition seamlessly to the new financial year ahead.

Ready to start the new financial year right?

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