At EOFY you should look at the reports created by your bookkeeper more closely before you start with the process of preparing your income tax statement with your accountant.
1 Get your paperwork to your bookkeeper as soon as possible.
This sounds very common sense, but in our busy and time consuming industry we do often forget about the important paperwork that goes with the business. Take a few moments and go through all your bank accounts, even the private ones, for something that you haven’t claimed. Look for lost receipts, maybe in your pockets, maybe in your handbag or in your car (I’m talking from own experience) – there is always something that you forgot to give to your bookkeeper. Bear in mind, every little expense that relates to the financial year can still be claimed, even when it was not recorded within the relevant BAS period.
2 Give your accountant a copy of all your unpaid bills.
At the end of financial year you can claim accrual expenses for everything that relates to the past year even when you pay it later. Make sure you pass it on and talk with your accountant if it is beneficiary to claim it this year. You need to keep in mind though – if you are already not making a lot of money or running a loss, maybe it’s better to claim a big expense in the next year, where you are hopefully expecting to run a profit.
3 Make sure there are no unallocated transactions (clearing accounts) in your books.
A good bookkeeper will put unclear transactions into a clearing account rather than allocating it as an assumed transaction. Some bookkeepers even don’t allocate expenses into their relevant accounts if you haven’t provided them with a receipt for it. Have a look at the balance sheet and make sure there are only relevant lines on the statement that you can verify for validity.
4 Check your money inflow transactions that are not sales.
Did you get money from a relative? Did you transfer money from a private account? Did you get a business loan that you forgot to mention to your accountant? Don’t forget to claim all costs that are traceable back to a form of funding, like interest from your personal credit card when you paid something for the business.
5 Reconcile your cash account.
Bank and credit card accounts get reconciled at the end of every period to make sure the statement shows exactly the money you have or owe at that time. But this does usually not happen to cash accounts, unless you have a petty cash account or float that you can count back. If you have a cash account on your balance sheet make sure you are not overstating cash reserves – think about how much cash you really have available right now and adjust the account accordingly.
6 Count your stock – or at least estimate it.
When you open your business the first purchases of stock will always be recorded as opening stock. That means that you are not claiming this cost against your income at that moment, it turns into a cost when you sell it (reduce the stock level). If your stock level decreased through the year, you need to make sure you claim this as expense.
7 Check your “payable” accounts.
On your balance sheet you will find a number of “payable” accounts referring to liabilities to agencies, companies or people. Take a few minutes to check these accounts for validity (tip: let your bookkeeper give you a summary explaining the balance) because errors in these accounts could weaken your financial position and could affect your profit & loss.
8 Verify your “Prepayments” or “Deposits” listed as assets.
Make sure that these balances are correct. A prepayment is anything you paid for but have not received yet (can be stock, supplies or a service). A deposit should be checked if it is current (will be paid back or turned into an expense within a year) or non-current e.g. Bank Guarantee or Rental Deposit.
9 Verify your “Customer Deposits” or “Gift Cards” listed as liabilities.
Make sure these figures are correct. A balance on a customer deposits account should always have a list attached with the breakdown of which customer payments it refers to. The same for gift certificates listed as liabilities – these are usually gift certificates that were purchased by customers. Make sure they are still valid and redeemable – any unallocated or expired gift card amount needs to be balanced out to a revenue account.
10 Keep a cool head.
Sometimes the preliminary statements prepared by your bookkeeper show a very undesired end figure as profit or loss. Don’t freak out, go through the above tips and check that all the balances are correct, and then tell your accountant about your concerns. He will have a few more tricks up his sleeve that will help your business shine in the best light possible.