With End of Financial Year upon us, here are five tips to help you remain on top of your business finances at tax time.
At the End of Financial Year for small to medium enterprises (SMEs), business owners can be forgiven for never wanting to pick up a calculator again, with stocktakes, tax declarations and payroll summaries all requiring completion before 30 June.
Accounting fatigue is real, but the temptation to scrimp on the detail can harm your business.
Five essential tips from Australian online accounting software company Reckon, who have more than 29 years’ experience supporting small businesses, can help you remain on top of your finances at tax time and generate long-term benefits for your business.
1. Take advantage of deductible expenses
With significant benefits offered to SMEs in the past two Federal Budgets, there has never been a more important time for business owners to be across tax deductable expenses. For example, the previous threshold for instant tax write-offs for depreciable assets was $1,000 but was expanded in May last year to $20,000 until 30 June 2017.
Considerable tax savings can be made as a result, especially if you need to make a major purchase in the near-future. Some small businesses are even eligible to bring forward deductions on known expenses for the next financial year.
2. Review debtors and write off bad debts
Like many small businesses, you may have accrued bad debt in the past as the result of unpaid invoices. One option to address bad debt is to write it off, this may provide your business with a tax deductable expense. The amount owing must be 12 months overdue to be classified as bad debt and the debt must be written off during the year.
Make sure you try all options for collecting your Accounts Receivable balance before deciding to write off bad debt as it will impact your profit.
3. Be charitable
Charity contributions might seem trivial but in 2014, in total $6.8 billion was donated to Australian non-profit organisations.1 It is common for businesses, especially community-minded small businesses to make contributions, which can be tax deductable. Check your donation is to an organisation with a deductible gift recipient (DGR) endorsement on the ABN Lookup, and you are able to declare anything above $2.
Keep track of your donations and you might find you’ve not only helped someone else but also helped reduce your tax as well.
4. Keep detailed records
Make sure you keep track of your business records. Receipts, invoices and even a decrease in the value of your inventory found during a stocktake can be major sources for a tax deduction. Consider using online accounting software such as Reckon Onewhich automatically backs up to the cloud.
This will protect your business from losing valuable information through a computer failure or misplaced papers.
“Accounting fatigue is real, but the temptation to scrimp on the detail can harm your business.”
5. Don’t fear seeking expert advice
If you’re a sole trader or operate a very small business it can be tempting to take tax matters into your own hands. The simple truth is that if you don’t understand, it makes good sense to seek advice.
An accounting professional may cost money, but in the long run they will help you gear your business towards growth by putting in place a plan to best minimise your tax burden and take advantage of small business incentives.
Source: Flying Solo
