Can you feel it? It’s springtime for accountants … the End Of Financial Year (EOFY) is fast approaching.
While most normal people dread doing their tax, stocktaking, and all that fun stuff, we accountants see mountains of opportunities. If you’re organised and know what to look out for, you can avoid all the stress and hassle – and maybe even save yourself a few dollars to boot.
Best of all, EOFY is a great chance to close off the past 12 months of activity, and reset for the coming financial year.
Here’s my three-step plan for a happy new financial year:
EOFY is the perfect time to stop, step back from your business, and assess how the year has gone. Was it to plan? Better? Not what you wanted? You can then make informed decisions about the changes required for the coming financial year.
Always look at performance through the lens of your overall objectives – your end game. What do you ultimately want your business to look like? I encourage owners to Have your cake and sell it too – build a business that generates great profit and is a dream to run and doesn’t rely on you … and is a valuable asset you can one day sell for top dollar. Win win.
A budget is the foundation of success, and now is a great time to start forecasting for next year so you set yourself up for success. Remember to always do it bottom-up (start with the profit figure you want, and work backwards).
I’m a firm believer that complacency costs you – always review any ongoing financial arrangements (such as loans, insurances and even your utilities) at least once a year.
Owners need to pay more attention to their business insurance, which is a critical part of any successful business. At the very least, you need to review your cover each year to ensure it still meets your needs. Don’t just roll over your cover. Use the EOFY as a chance to review your policy (an experienced broker may be able to help). Understand and review policies and check the inclusions and exclusions, heading into the new FY, ensuring adequate coverage.
Some other questions to ask:
· Are valuations of stock/inventory accurate since the last time they were valued? Is the policy suitable to those valuations or does it need to be amended?
· Review your public liability insurance to ensure you have sufficient cover in case you are sued – this is particularly important if your objective is to grow the value of your business.
· Are there new risks to consider? For example, is your geographical region more prone to natural disasters? Are you covered for cyber-risk?
· Have you made any major new purchases that now need to be included in your insurance policy?
· Are you covered for possible business interruptions – such as not being able to trade, and protection for employees and suppliers? Do you need key person insurance to cover the business in case you or other key people are unable to work for an extended period
I urge every business to conduct annual tax planning with their accountant or business advisor – it’s a great way to understand your position and plan your tax obligations ahead of time, and you can take action to ensure you only pay the tax you are required. For example, smaller businesses (turnover under $10 million) can pre-pay business insurance for the next 12 months.
Contact your insurance provider to arrange payment of next financial year’s insurance before June 30, so you can enjoy the tax benefits this financial year.
The Understand Insurance website has great general insurance resources for small business – and the EOFY checklist lists everything you should consider at this time of year: http://understandinsurance.com.au/types-of-insurance/business-insurance.
Follow these tips, and you’ll set yourself up for a very happy new financial year.