June 27, 2011 – RSM Bird Cameron offers businesses 12 tips for starting the 2011/12 financial year.
Andrew Graham, national head of business solutions, RSM Bird Cameron, said, “Often the end of financial year creeps up on businesses. While we know it is coming, preparation is often frantic and last minute.
“Wrapping up the end of financial year successfully helps businesses roll into the new financial year smoothly, and ensures business owners put their best foot forward right from the get go. It is important to have a check list to methodically work through to ensure that every aspect is covered, and nothing is missed.”
RSM Bird Cameron offers the following 12 tips for starting the 2011/12 financial year:
1. Trading stock – physically count stock on hand at June 30. If this is not practical, ensure systems are in place to ascertain correct stock levels at year end so your balance sheet is correct. Incorrect or unexpectedly low (or high) stock levels can change the fundamental financial position of your company and impact cash flow, debt management or even the overall liquidity of your business. It can also uncover fraud, theft and inventory control systems which may need to be upgraded or reviewed to reduce stock loss through damage or inadequate logistics.
2. Obsolete stock – identify any obsolete stock and write it down or off your books as a special rule. It is unlikely that obsolete stock can ever be sold and it should not be reflected on your balance sheet as an asset as it will give you an inaccurate position of your financial position.
3. Bad debts – review debtors prior to June 30 to identify all bad debts. In order to write off a debt it must be bad, not merely doubtful. That means the business can demonstrate that it has tried all reasonable, practical measures to recover the monies owed to it and, in spite of that, it is unlikely that the debt will be repaid. A bad debt must have been previously included as assessable income.
4. Superannuation guarantee – ensure that superannuation obligations are paid and cleared prior to June 30 to obtain a deduction in the current financial year.
5. Additional superannuation – consider making additional superannuation contributions as an employer (subject to current limits) before June 30 to take advantage of concessional tax rates afforded to superannuation contributions.
6. Consumables/repairs – consider restocking consumables such as fuel, stationery, sprays and chemicals before June 30. Also undertake any necessary repairs before the end of the financial year to maximise taxable income and prepare yourself for the year ahead.
7. Staff bonuses and commissions – a tax deduction may be claimed for staff bonuses and commissions that are unpaid at June 30, provided they were ‘definitely committed’ to the expense prior to the date.
8. Accrued wages –wages that have been accrued at June 30 but not made until after that date may be claimed as a tax deduction.
9. Defer income – look to defer income if possible until after June 30 to decrease taxable income while not impacting cash flow.
10. Prepayments – are available if the entity is permitted to prepay expenses under tax legislation i.e. SBE (Small Business Entity).
11. Prepaid interest on passive assets, such as commercial and residential properties – look to prepay interest prior to June 30.
12. Fixed assets – review last year’s depreciation schedule to determine if assets listed still exist. Identify missing items, any that have been scrapped or disposed, and any new ones that have been acquired. Update your depreciation schedule accordingly.
About RSM Bird Cameron
RSM Bird Cameron is the largest mid-tier accounting firm in Australia with national ownership and profit sharing and offers a full range of specialist advisory services, including business consulting and advisory, assurance and advisory, taxation consulting, corporate consulting and turnaround and insolvency. RSM Bird Cameron is a core member firm of RSM International, the sixth largest network of independent accounting and consulting firms in the world.