Whether you’re a first-time business owner starting up a new venture or an established brand that’s looking to expand, the end of the financial year (EOFY) can be tricky to navigate. While every business has different needs, everyone has to make sure their tax is done on time.
A basic principle? Start early and stay organised. The aim is to keep your tax liability to a minimum (within the law), avoid Australian Taxation Office (ATO) interest and penalties, and plan for the timing of income, expenses and purchases.
Lee Duffield, All In Advisory
“When you’re trying to make decisions before June 30, if you don’t have your information up to date, you can’t do any tax planning,” says Lee Duffield, the general manager of Adelaide-based accounting firm All In Advisory.
Only a few years old, Duffield’s firm is fully cloud-based and a Xero champion (a badge that certifies the practice is highly adept at using the small business platform). In previous roles, she’s helped several “shoebox accounting” clients leave behind paper receipts and bank statements to embrace modern practices that help balance their business health and financial position.
Want to know her tricks of the trade? Here are Duffield’s top five tips for staying proactive about year-end financial prep.
1. Automate your record-keeping to free up time
“The long-term pay-off of automating your record-keeping is that it ends up being more efficient,” Duffield says. For example, instead of manually preparing business activity statements, these monthly, quarterly or annual processes can be scheduled and automated to save time.
“It might be a bit harder to get it set up in the beginning because you’re starting from scratch. But once it’s up and running, automated processes help tackle the repetitive nature of certain tasks in your business.”
The result? Business owners win back time that they can spend on tasks they actually like doing, such as building relationships with their customers.
2. Figure out your business structure to get the right advice
As you expand your business, its structure will likely need to change over time. To make sure you’re paying the right tax rates and avoiding potential legal issues, work with an adviser to determine what approach suits your current needs and future plans.
“It’s one of those things where one-size-fits-all advice won’t work,” Duffield says. “You need to figure out where you fit – for example, do you want to bring employees on as shareholders someday? – and plan accordingly.”
3. Use real-time insights to keep track of cashflow
If you’re building up your financial literacy, dashboards and data visualisation can help you understand your business’s financial position at a glance. “We have a few that we recommend to our clients, like Fathom, Float, and Futrli,” Duffield says.
“It’s a bit different to looking at a traditional financial report and works really well for visual learners. For example, with colour-coded signals, red means something’s at risk, and green means everything’s on track. Or arrows going up and down mean something’s increasing or decreasing. The systems rely on a commonly understood visual language.”
4. Build a long-term relationship with a business adviser
Paying for a business adviser can help you gain access to an expert who has knowledge of key dates in the financial year, can help translate any EOFY jargon, and is aware of changes to tax law and compliance, such as Single Touch Payroll Phase 2.
“Any big changes in tax requirements generally come in on July 1,” Duffield says. “We help clients prepare for anything that needs to be implemented on a deadline.”
Duffield encourages business owners to engage specialised support for EOFY concerns. Having that one-on-one relationship can also give owners of new or growing businesses regular feedback and coaching on how to improve.
“We’re here to help, explain things simply, and make life easier for you. We enjoy this side of the business and understand that most of our clients tend not to.”
5. Find the balance between investing and spending as you grow
As a business evolves from a startup to a scale-up, it can be tempting to ignore some of the operational realities in favour of the thrill of trading in multiple currencies and winning new trading partners. But Duffield advises that “spending money rather than putting it aside” isn’t a sustainable strategy for most businesses.
“Many scale-ups are cashflow poor, and that’s an issue when you have to spend money to be eligible for tax deductions,” she says. “Also, when you first start out, your tax bill ends up being a double whammy because you have to start paying next year’s tax in advance, which is hard when you’re a newer business.”
As these growing businesses start making a profit, the cash doesn’t necessarily flow with it. And tax bills can be confusing when businesses don’t necessarily have the money to show for it.
The solution? “Put money aside as you go and make sure it’s available when payments are due. Or use payment plan arrangements with the ATO. But mainly, be mindful that it’s a thing you have to deal with.
“It’s about helping to reduce the element of surprise, and helping business owners plan for the long term.”
While the lead-up to EOFY can be daunting, taking steps to win back time provides an opportunity to reassess your strategy, celebrate wins, and reflect on valuable lessons learned. And with the right guidance from an adviser, you’ll be ready to tackle FY24 head-on.
Tackle the end of the financial year with support from Xero.