The message to prepare early for the end of the financial year (EOFY) is resonating amongst SMEs, who report they are not waiting until after March 31 to start work on their compliance obligations.
In the March 2014 MYOB Business Monitor, almost half reported they start preparing at least a month before (27%) or between one to four weeks before (20%) EOFY - only 10% reported not starting preparation until two months after March 31.
MYOB Executive Director Scott Gardiner says it’s heartening to see a high number of SMEs getting to grips ahead of time with compliance issues and other matters to do with EOFY.
“Preparing for EOFY early means SMEs can start the new financial year on the front foot," Gardiner says.
"While EOFY is a compliance-driven exercise, it can be an ideal opportunity to draw a line under the previous year and look at what worked for your business, and what didn’t.
"This way when you look ahead to the next year you’ll have a much better idea of what activity will drive your success."
According to the report, 71% of SMEs use an accountant and a further 6% a bookkeeper to help them with EOFY compliance.
Gardiner says the EOFY process is when SMEs are likely to spend the most time with their accountant, so they should take advantage of the opportunity for sound advice.
“For most business owners their accountant is their most trusted financial adviser,” he adds. “A good accountant can help create and/or update their strategic plan.
"They can also advise on the best way to seek additional resources to grow the business; whether that’s moving to online solutions, funding a new employee or acquiring a complementary business.”
With the advent of accounting software making EOFY technical compliance much easier, Gardiner suggests SMEs use the time gained from increased productivity to work with their accountant on plans for the coming year.
“The economic indicators point to 2014 as shaping up to be the year in which many local operators can fulfil their business potential.”
The March 2014 MYOB Business Monitor survey also highlights that SMEs can face a tough few weeks ahead as they grapple with EOFY requirements with 30% reporting working weekends, 18% having worked past midnight and 13% turning down invitations to catch up with friends in order to complete their EOFY obligations in the past.
Whether an SME is well ahead of the process, or has yet to begin preparation, Gardiner offers the following top five tips for EOFY.
• Take advantage of deductions, write-offs and rebates before March 31
Contact your accountant to discuss the deductions, write-offs and rebates available to your business before March 31. Take action to scrap worthless stock, plant and equipment by reviewing your asset register (which keeps track of your company equipment including items purchased, sold or disposed of).
• Provide relevant information to your accountant or book keeper
Once the previous step is completed, provide all necessary financial information to your accountant or bookkeeper. There are several options; for example, have them make a point-in-time copy from your data file in the cloud or provide them with a secure copy of your backed up files. Check what best suits them.
• Finalise end of year adjustments
Your accountant or bookkeeper may want to make a number of adjustments to your reports or accounts. Once changes have been updated, lock all accounts relating to that year so that data remains accurate. This will help ensure an easy transition into the new financial year.
• Create a separate copy of your accounts and back it up
Whether you’re working on your accounts in the cloud or on your desktop, you should seriously consider making a point-in-time backup outside your accounting system that creates a data file for the 2013/2014 financial year only. Carefully save and store your 2013/2014 financial year file elsewhere in the cloud or offline.
• Prepare for the new financial year
The end of financial year shouldn’t be all reports and numbers. It’s also a good time to reassess and tweak your business plan and ensure you’re on the right path for next financial year.
It’s a good idea to review your accounting software and think about how your business can benefit from cloud accounting solutions, whether that’s moving to online accounting or removing pain points by using add-on solutions.