End of the financial year, or EOFY in short, is an important and busy time for business owners – and employees involved. EOFY consists out of a number of accounting and financial tasks that needs to be finalised. Putting hard work in each financial year will help you get your business organised and help with planning to work smarter in the year ahead.
Here are a few points to take into account when taking on your End of the financial year:
- Summarising income and expenses
- In most cases, this is done by accounting software. This summary is important to establish how profitable your business was in the year, what expenses you can cut on, and see where you can make changes to increase profit.
- Conducting a stocktake
- If your business is selling products, you must count your stock in order to know how much of your capital is invested in products that can still be sold in the new financial year. This is also an opportunity to update your stock quantities (for budgeting purposes) and improve on stock control if necessary.
- Summarising records of debtors and creditors
- During the year we seldom reflect properly on our debtors and creditors (or customers and suppliers). EOFY is the ideal time to see who still owes you money, and who you still owe money to. This information can be used to see which suppliers are expensive, who you’d rather support etc. You will also be able to make changes to policies to prevent bad debt from certain customers – such as higher percentage deposits etc.
- Summarising records of liabilities
- Having money in your bank account and stock in your store room tells one story. By taking into account your liabilities will give you a more accurate picture of your business’ liquidity or nett position. This is especially important when applying for credit.
- Collating records of asset purchases
- Assets increase the value of your business, and depending on the asset, your business may get some TAX relieve on depreciation and maintenance expenses.
- Completing and lodge your income tax returns
- An ITR14 or Income Tax Return is a form that SARS requires all companies registered with CIPC to complete and submit to SARS once every year.
- Bank reconciliation as at 28 February 2018
- A bank reconciliation is the process of matching the balances in your business’s accounting records for a cash account to the corresponding information on bank statement. The goal of this process is to ascertain the differences between the two, and to book changes to the accounting records as appropriate.
- Find out what tax deductions you can claim
- Now this is why it is important to have the proper records and summaries as mentioned above. As a rule, you may get tax deductions on all expenses needed to run your business – but there are exceptions! This information will also help you to know what assets have tax benefits for your business, and what assets don’t.
- Use a registered tax practitioner
- Tax laws, regulations and rules change from year to year, and what applies to one business, does not necessary applies to another business. It is therefore advisable that you make use of a registered tax practitioner to advice you. When choosing a tax practitioner, make sure that they are registered with one of the currently recognised controlling bodies.
List of recognised controlling bodies:
- Chartered Institute of Management Accountants (CIMA)
- Chartered Secretaries Southern Africa (CSSA)
- Financial Planning Institute (FPI)
- Institute of Accounting and Commerce (IAC)
- SA Institute of Chartered Accountants (SAICA)
- SA Institute of Professional Accountants (SAIPA)
- SA Institute of Tax Practitioners (SAIT)
- The Association of Chartered Certified Accountants (ACCA)
- Association of Accounting Technicians Southern Africa (AAT(SA))
- Dynamitech is registered with the SA Institute of Tax Practitioners (SAIT)
- Keep up to date with tax changes starting next financial year
- You can find tax changes on the SARS website
- Many accounting firms offer seminars, newsletters or articles on their website where they discuss these changes.
- We at Dynamitech write articles that are available on our website, and facebook page.
- Be wary of tax refund scams
- There are unfortunately many scams out there. Scam emails these days look very legit. Best way is to rather confirm any correspondence with a SARS agent, or have your tax practitioner follow it up using their standard, secure and reliable processes.
- Review your finances
- Sit down with your accountant or bookkeeper and review your finances.
- Look at whether you met your targets last financial year and what you can do differently next financial year.
- Set performance targets for the year to help you stay on track. Create a cash flow forecast to manage any potential shortfalls and ensure you can still pay your staff and suppliers.
- Review and update your business and marketing plans
With all the information you gathered from your End of financial year, you can now make changes to your business and marketing plans.
Business plans may include:
- Improving your stock control
- Choosing suppliers you want to support
- Change credit application criteria
- What expenses to cut on
- What assets you should purchase
Marketing plans may include:
- Type of customer you want to sign up
- What products to promote
- Marketing campaigns based on new budget
- Business plans may include:
- With all the information you gathered from your End of financial year, you can now make changes to your business and marketing plans.
Review your business structure
- When people hear restructuring, they tend to think of downsizing. But restructuring also mean improve use of resources or expanding. Based on the information you now have, your new budget may allow the hiring of sales staff, and the chatty lady in the HR department will love a sales position. Also, due to a product you will no longer stock, the extra space in the storeroom may now make way for the new sales department office.
Backup and secure your files
- Your financial statements must be signed by your accountant, and stored in a save place. This document will be required when opening new bank accounts, applying for credit or financing and opening new accounts.
- Taxpayers (Companies and Individuals) are required to keep certain tax records for 5 years, however SARS urges us – as consultants, to keep records for 7 years.