Leading global debtor finance specialist, Bibby Financial Services, says that businesses should embrace the end of the financial year as an opportunity to plan for the coming year while keeping a sharp eye on cash flow.
Mark Cleaver, Managing Director, Bibby Financial Services, Australia and New Zealand said: “At this time of year it is critical that businesses seek expert advice from independent and qualified advisers. Our latest research shows that businesses are not engaging financial experts, with only one third making use of a financial adviser. By working with an accountant and a financial adviser, small to medium enterprises (SMEs) can review their financial position and accounting system ahead of the end of the financial year, enabling them to take advantage of opportunities to minimise tax and prime their business for future growth.”
Here are 10 top tips from Bibby Financial Services to help businesses make the most out of the end of this financial year:
1. Pay and clean up any super owing before 30 June 2015
Superannuation is not tax deductible until it has been paid. It is therefore important to ensure all superannuation contributions have been paid.
2. Be aware of relevant tax changes
The centre-piece of the Government’s $5.5 billion “Jobs and Small Business Package” announced in this year’s budget is a 1.5% tax cut for small businesses with annual turnover of under $2 million.
Cutting the tax rate to 28.5% will apply from July 1, 2015 for up to 780,000 small businesses and companies with Pay-As-You-Go installments can claim their first payment after July 1, 2015. The current maximum franking credit rate for dividends will remain unchanged at 30 per cent for all companies, maintaining the existing arrangements for investors. There have also been changes to depreciation rules for businesses with a turnover of less than $2 million; the instant asset write-off threshold has increased and you now may be able to claim an accelerated deduction for new motor vehicles as well. To help all Australian small businesses grow, the Government will also provide a 5% tax discount to unincorporated businesses with annual turnover less than $2 million from 1 July 2015.
3. Get your tax-deductible expenses in order
An easy way for SMEs to claim tax deductions is to pre-pay services and supplies such as accountancy fees, up to a period of 12 months in advance. By bringing forward tax-deductible expenses and deferring income, you can reduce your taxable income for the financial year. Approach your suppliers now for all invoices up to 30 June 2015 and organise payments to secure tax deductions.
4. Be aware of all applicable tax benefits
Any business with a turnover of less than $2 million is eligible for a wide range of tax benefits. For example, small businesses now benefit from Capital Gains Tax rollover relief when changing their legal structures but keeping the same owners. From 1 April 2016, you’ll also no longer need to pay Fringe Benefits Tax on any portable electronic devices that you provide to your employees for work-related use, such as mobiles, laptops and tablets. Be sure to consult an accountant so you don’t miss an opportunity to claim a legitimate benefit.
5. Know the value of your depreciating assets
The Government has allowed small businesses with an aggregated annual turnover of less than $2 million to immediately deduct the value of each asset that cost less than $20,000. This measure will apply to assets acquired from 7.30pm on 12 May 2015 until 30 June 2017. Business assets which may fall into this category include office equipment, computers, printers, work tools, etc. Make sure you keep track of assets up to value for potential tax deductions.
6. Keep your income producing assets up-to-date
You can reduce operating costs, increase productivity and free up cash by structuring your financing and repayments to suit your tax and cash flow needs. Make an effort to keep your income producing assets up-to-date, as this helps keep your business operationally efficient and maximises cash flow.
7. Write off bad debts
If you are chasing invoices from the last financial year, now is the time to write them off. Bad debts are tax deductible and can be used to offset your taxable income.
8. Review your cash position and funding arrangements
Starting the year with a healthy cash position is crucial. Ensure you review your cash management processes and consider the most appropriate funding solutions. Businesses should look for funding arrangements that are flexible and take their growth plans into consideration. They should ensure the funding is not over secured, and that directors are not exposed to unnecessary risk as a result of funding secured by personal property. There are a number of finance options to help you better manage cash flow. Debtor finance is gaining in popularity as it provides advances of up to 85% against receivables without needing real estate security, and it is scalable in line with the sales growth of the company.
9. Have an accounting spring clean
Make sure you review and update your accounting systems to include all this year’s changes; it is a good idea to consult your accountant and financial planner when making a decision relating to your financial and accounting software.
10. Reward your staff
The end of the financial year is always a good time to reward your hard-working staff and thank them for their contribution to your business. Take them out to lunch or consider rewarding them with a cash bonus. It may also be a good time of year to review their KPIs and present your refreshed business and marketing strategy.
“Make the most out of the end of your financial year by consulting with your accountant and financial adviser. Knowing the exact financial position of your business and staying on top of your cash flow will help you set new business goals that are measurable and achievable. You’ll then be in a position to develop a strategy for achieving those goals. It pays to establish these good financial habits and discipline; this will not only benefit your business in the next six to 12 months, but also for the next five to ten years,” concluded Mr Cleaver.
