A checklist to streamline EOFY processes
Here we are again, the time of year when your bookkeeper or finance team is reviewing your accounts line by line for end of financial year reporting , accountants are confirming and ruling out last minute tax deductions, and everyone seems to be talking about buying things before 30 June,
This financial year has been the most challenging we have seen, with the increased financial complexity created by government initiatives such as Cashflow Boost, JobKeeper, Carry Forward Losses and Instant Asset Write-offs. To make it easier to step through your year end reconciliation, we are sharing this checklist so you ca help streamline the end of financial year process with us.
What does End of Financial Year (EOFY) mean?
In Australia, our financial year runs from 1 July to the 30 June. Taxpayer businesses and individuals must prepare and lodge tax returns to the Australian Taxation Office (ATO) after 1 July. The ATO then uses this self-assessed tax return to generate their assessment of how much income tax the individual or business must pay for the financial year. The result of the ATO assessment notice shows whether they owe the government money or are entitled to a refund (of overpaid PAYG tax and credits).
1. Check ATO deadlines
The deadlines for businesses to lodge their income tax return depend on your entity and how your return is lodged. Here are some key dates of deadlines which are applicable to most business:
• June 22
- Deadline for making Superannuation Payment through Small Business Clearing House or Xero Superchoice if you want to be able to bring forward a deduction for that payment in the 2021 financial year.
- Done! We already determined which of our clients would benefit from this action and processed the option for them last week.
• July 14th
- Deadline for employers to finalise Single Touch Payroll (STP) reports through payroll and accounting software, if required to be registered for STP.
- Note: Important because of the new non-deductibility of non-compliant payments rules. PAYG must be withheld and reported or no deduction for paying workers can be claimed.
- The ATO must have this information on time to generate payment reports on employees' MyGov, which replaces the need for employers to give their employees and PAYG Payment Summary.
• July 28th
- Deadline to lodge the June quarter Business Activity Statement (BAS) if registered for GST
- Deadline for employers to pay the June quarter Super and PAYG Instalments (unless June Super was paid in June)
◦ Note: If you lodge your BAS using a registered agent the deadline is extended, so reach out to your accountant or bookkeeper before July 28th if you are unsure of your actual due date.
• October 31st
- Deadline to submit to your income tax return if you do not use a registered tax agent
- Contact your tax agent between 14-28 July if unsure of your extended due date, as that is when the ATO is likely to inform them of it.
At Electra Frost Advisory, we manage our clients statutory obligations all year round, so most tax returns are completed before 31 October if we have been engaged to maintain their books and report their provisional PAYG tax throughout the year.
2. Process payroll
The changes to Payroll reporting have been significant with the rollout of STP, and we follow a structured a process to help ensure everyone's payroll is ready for the end of financial year.
Here are some pointers to help you get yours ready, if you DIY:
Step 1: Are you required to be registered for STP?
Most businesses have to be registered for this EOFY unless they are eligible for a concession. A list of concessions available to small businesses is on the ATO Portal here.
Step 2: Review details in your STP software
Make sure the right details are submitted. Whichever cloud accounting program you use for your year end reporting it’s necessary to check key information in the company details and employee details sections are all correct and up to date.
Step 3: Reconcile your payroll
Before lodging the STP finalisation to the ATO, make sure all of your pay runs from last July to this June have been posted, paid and that they pay runs reconcile with the accounts. To do this, generate your payroll summary report for the financial year end 30 June and the general ledger report to ensure the totals are matching.
Step 4: Finalise
Completing the STP process for the year end 30 June means using the finalisation function within your STP-enabled software. Before finalising the STP report always triple-check that every employee is listed, confirm their year to date summary of gross wages, allowances, deductions and withholdings looks correct, and enter any reportable fringe benefits. Then you can submit to the ATO.
3. Has everything been accounted for?
From 30 June you need to ensure all transactions for the financial year have been recorded and reconciled. We call this ‘closing off the books’ before getting ready to start the new financial year.
Closing off the books can bean overwhelming process, so we recommend working with a professional. At Electra Frost Advisory, we take care of this for all our clients in July and check with them for any missing pieces.
If you are going to be tackle it yourself, here are some major items you won’t want to miss to make sure your end of financial year reporting is accurate.
- While reviewing transactions in your accounting file, be aware that every movement between accounts has two sides to it. The process of linking one side of the transaction to the other is known as reconciliation. Also known as double-entry accounting.
- Part of this review is checking that every reconciliation completed throughout the year has been recorded accurately.
- Check the balance of cash on hand from undeposited funds, including floats and petty cash and cash held in safes, are shown under Current Assets.
- Check the business financial account to make sure that each account has been reported from year start to end. Most cloud accounting software packages help with the bank reconciliation process by identifying any unreconciled items for you.
- 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 on 30 June to be sure that the figures match. If they don’t you’ll need to dig into your reconciliations to find the cause of the discrepancy. If you have been doing this monthly you shouldn't have to go too far back.
- 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
- Your management reporting software should 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
- Otherwise, 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
- Follow the same procedure for accounts payable, but just 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
- Count all stock on hand, including items and sales, packaging etc, as at 30 June
- Check the Payroll Clearing account shows a nil balance or investigate any balances that indicate underpayment or overpayment to employees during the year
PAYG Withholding Payable
- See the PAYGW Payable account balance under Liabilities on the Balance Sheet.
- This balance should equal the amount shown as payable on 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
- If you made the superannuation payment before 23 June in order to claim a tax deduction early, check that the payments were received by your employees' super funds by 30 June. A deduction for superannuation is only available when paid
4. Goals and targets for the new financial year
While closing the books for this financial year, take the opportunity to review how the business is tracking and what you’d like to achieve in the new financial year.
Note any financial achievements and any areas of your businesses which did not perform as well as was expected, to help you see which areas of the business you could improve upon moving forward.Here are some tips for a productive 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
- With over 1000 apps available for Xero, use the new financial year your opportunity to see where you can work smarter not harder by leveraging the efficiencies these apps create.
- At Electra Frost Advisory, we use many apps to save time and work more smoothly with our clients, and we explore other digital apps to help them manage their businesses better
Some apps that we use with our clients, that integrate with their accounting software, and 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.
- Dext A powerful document management app which provides the tools to capture, upload and track cashflow all in one app, making sure no invoices are missed.
- 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.
- Dear Systems Cloud ERP multi-modular software and standalone inventory management system to connect all sales channels and automate processes across the business
- Pinch payments An online payments platform that connects to your accounting system to take payments directly from invoices, speeding up accounts receivable processes. Pinch also collects recurring payments automatically from customers
- Lightyear On the accounts payable automation side, our favourite software for consolidating purchases, bookkeeping and bill approval, with line item bills extraction so you get the full purchase details with correct GST in Xero.
Many other apps in the Xero marketplace provide solutions to integrate with accounting software, including reporting software, bills and expenses management, HR, payroll and time tracking software, and more.
How we can help with your EOFY
The end of the financial year is a high pressure time to get everything into order, but is also the best time to work out what the future figures should look like and start planning how you will grow your business in new financial year.
At Electra Frost Advisory, we are closing out our clients' books in early July while setting up their budget forecasts for the year ahead.
Part of our budgeting process is to create a statutory obligations calendar - making a good estimate of how much will be payable to the ATO and employee Super funds over the next 12 months, so that tax never keeps us up at night.
Contact us now for bookkeeping, financial reporting and budget forecasting services. And of course we can take care of all your tax lodgments too, as part of an annual service package!