4-Step Checklist For The End Of The Financial Year
It’s that time of year again, when your accountant gets serious about what tax deductions you can and can’t claim eligible, your finance team or bookkeepers are busy preparing your books for end of financial year reporting and it feels like everyone is talking about end of financial year deals.
This financial year has been a challenging one, especially with the extra financial complexity as a result of government initiatives like Jobkeeper, Cashflow Boost and Instant Asset Write-offs, so that’s why we’ve put together an easy to follow checklist to help you with your end of financial year processes.
What is the End of Financial Year?
The financial year officially ends on the 30th of June, after which both businesses and individuals must submit their tax returns to the Australian Taxation Office (ATO). The ATO then uses this information to determine how much these individuals and businesses need to pay for the financial year and whether they owe the government money or are entitled to a reimbursement from the government.
1. Check your deadlines
The deadlines for businesses to lodge their income tax return can vary depending on how you lodge them. Here are some key dates below to help you understand which deadline is applicable to your business:
• June 23
◦ Deadline for making Superannuation Payment through Small Business Clearing House if you want to be able to claim a deduction for that payment in the 2021 financial year
• July 14th
◦ Deadline for finalising your Single Touch Payroll (STP), if you’re required to be registered for STP
• July 28th
◦ Deadline to lodge the final quarter’s Business Activity Statement (BAS) if you’re registered for GST
◦ Deadline to pay the final quarter’s Super and PAYG Instalments if you’re an employer
◦ Note: If you lodge your BAS using a registered BAS agent your deadline may differ so reach out to them before July 28th to confirm what your due date is
• October 31st
◦ Deadline to submit to your income tax return
Note: If you lodge your income tax return using a registered tax agent your deadline may differ so reach out to them before July 28th to confirm what your due date is
2. Prepare your payroll
There have been significant changes to Payroll with the rollout of STP here in Australia, so we’ve simplified the process to help ensure your payroll is ready for the end of financial year.
Step 1: Check if you need to be registered for STP
Most businesses will need to be registered for this end of financial year unless you’re eligible for a concession. You can find a list of concessions available to small businesses on the ATO Portal here.
Step 2: Review details in your STP software
Regardless of what cloud accounting platform you’re using for keeping your books and managing end of financial year reporting it’s important to check key information like the company details and employee details are all accurate.
Step 3: Reconcile
It’s important to check all of your pay runs throughout the financial year have been posted, paid and that everything reconciles. A great way to do this is to run your payroll summary report for the financial year and the general ledger report to ensure all amounts match.
Step 4: Finalise
To complete the STP process for the financial year you’ll need to finalise it using the finalisation capability within your STP software. When finalising your STP report for the financial year always double-check that all employees are listed, check that their year to date summary of wages paid looks accurate, enter any reportable fringe benefits and then submit to the ATO.
3. Check everything is accounted for
On the 30th of June you’ll want to ensure all transactions for the financial year have been recorded and reconciled – often called ‘closing off the books’ – ready to start the new financial year. Closing off the books can be a daunting process, so we recommend working with a trusted advisor on this. If you are going to be working on it yourself, here are some key tasks you don’t want to miss to make sure your end of financial year reporting is accurate.
When it comes to the transactions in your accounting file, every movement between accounts will have two sides to it, and the process of linking one side of the transaction to the other is known as reconciliation.
When reviewing your accounting file at the end of the financial year, the first key task is making sure all of the reconciliations completed throughout the year have been recorded accurately.
Make sure you review all of the following elements to check the data is complete, accurate and matches is crucial to ensure an accurate closing off of the books:
• Bank reconciliation:
◦ Be sure to review your bank accounts and make sure that every account is fully reconciled. Most cloud accounting software packages streamline the bank reconciliation process and help you to identify any unreconciled items
◦ Once the bank accounts are reconciled, check the balances of the bank account in your cloud accounting software with the balances in your actual bank accounts to ensure that the figures match. If they don’t you’ll want to review your reconciliations to identify the cause of the discrepancy
• Accounts receivable:
◦ Check that all of your invoices for the financial year have been raised in your cloud accounting software
◦ If the software has draft invoice capability be sure to check these too
◦ If you use Float we will also provide you with a full list of outstanding invoices which you can use to help determine if there are any invoices that need to be collected or written off as bad debts before the end of the year
◦ If you don’t use Float you can use the aged receivables report in your cloud accounting software to determine what should be collected prior to the end of the year or write off any as bad debts
• Accounts payable:
◦ Follow the same procedure for accounts payable, but just using the bills section of Float or using the aged payables report in your cloud accounting software
◦ If your business relies on inventory then make sure to complete an end of financial year stocktake and make any necessary adjustments
• Payroll Clearing:
◦ Check that your Payroll Clearing account is Nil or investigate any balances as it might mean that you short paid or overpaid your staff during the year
• PAYG Withholding Payable:
◦ The balance in your PAYGW Payable account should equal the amount that you will pay as part of your June BAS. If it doesn’t, check that all your previous payments to the ATO during the financial year have been allocated to the correct accounts
• Superannuation Payable:
◦ If possible, make your superannuation payment before 23 June in order for the payment to be received by your employee funds prior to the end of financial year. Note that deduction for superannuation is only available when paid
4. Plan for the Year Ahead
Wrapping up the financial year is a great opportunity to review how the business is tracking and what you’d like to achieve in the next financial year. Taking the time to reflect on your wins, as well as lessons learned, will help you to see what areas of the business you want to double down on and what aspects could be improved moving forward.
We’ve put together some top tips to get the most out of your end of financial year review:
• Tip 1 – Complete and review your end of financial year reports
◦ Completing and reviewing end of financial year reports is a great way to see the financial performance of the business
◦ Review the standard performance metrics like overall profitability, revenue growth and the time it takes you to collect payments from customers (debtor days)
◦ We also recommend digging into some of the numbers a little deeper to optimise your business. Some examples would be; reviewing your cash outflows to determine how the majority of cash is leaving the business, reviewing the total collection time for specific customers to determine which customers are creating the largest strain on your business due to late payments and reviewing the return on investment (ROI) of certain business initiatives that you undertook during the financial year
• Tip 2 – Plan for the new financial year
◦ Outside of just reviewing your historical performance, we recommend using this as a foundation to plan for the new financial year
◦ After taking stock of the financial year that was, look at where the business is excelling and stay focused on these to ensure this continues. Similarly, if there are areas where the business could improve, highlight these and come up with strategies that could be implemented to overcome these challenges
• Tip 3 – Leverage software
◦ With 100’s of apps available for Quickbooks Online and over 1000 apps available for Xero use the financial year as an opportunity to see where you can work smarter not harder by leveraging the efficiencies these apps bring to the table
◦ Some apps that can help with managing the end of financial year process include:
XBert: A powerful tool to help you identify issues or discrepancies in your cloud accounting file as well as continually notify you if there are any future issues using their AI power XBerts
A2X: If you’re an e-commerce business and you’re struggling with the reconciliation side of your end of financial year process then we’d recommend looking into A2X as it’s specifically designed to streamline the reconciliation process for businesses that use any of the major e-commerce platforms
Float: If you’re struggling to understand where your cash is going, what invoices need to be collected or what bills need to be paid or want to easily see which business opportunities you can afford to invest in, Float is an end to end cash flow solution that can help.
While the end of the financial year can be a challenging time to get everything in order, it also presents an opportunity to look to the future and start planning how you’ll grow your business in the year ahead.