Last month I wrote about things that you should do BEFORE 31 March that could save you time or tax. This month I will highlight things that you should be doing now to make the process of creating your year-end accounts easier.
- Value your Inventory
Last month I wrote about doing a stock-count. Now you need to convert that to a dollar value. Inventory is valued at the lower of cost or net-reliasable value. Let’s say you sell it for $9.99 incl GST but you bought it for $6.20 plus GST. Your inventory value is $6.20 per unit. However, if you bought it 5 years ago and you are offering it at $6 including GST to get rid of it, then your inventory value is $5.39 ($6.20 less 15% GST). If you are registered for GST then your values will exclude GST. If you’re not registered then your values will include GST.
- List your Debtors
If you invoice customers then you should get your invoices for work done entered and dated 31/3/12. If your accounting system doesn’t allow you to manage to debtors then talk to us about how Xero may help – and in the mean time you should make a list of the invoices that are dated 31/3/12 and earlier, but which had not been paid by that date. Also, think about anything where you have earned the income (usually because you have done some work) but are not ready to send the invoice. This is called “Accrued Income”. Make a list of all income that you have earned but not billed.
- Identify your Creditors
Many of your expenses will be paid after you have incurred the expense. Make a complete list of all business items that you owe at 31/3/12 but haven’t yet paid. A great place to start is the accounts that you pay in April and May.
- List your Home Office Expenses
If you use your home in any capacity to manage your business you can probably claim some form of Home Office expense deduction. You need to know the proportion of your home that has been dedicated to your business, and then you should add up everything you have paid during the year on rent/interest, rates, power, phone, rubbish removal, repairs and maintenance, etc. Generally you can claim 50% of your internet access (but not cable TV or Sky – sorry) and 50% of your home phone line rental, plus actual cost of calls.
- List your Vehicle Expenses
If you use your personal vehicle as part of your business then you can probably claim back a portion of running expenses. We need to know the portion of total use that relates to the business, so keeping good logs is important here. You should make a list of all vehicle expenses, including fuel, WOF and maintenance, registration, and insurance.
- Reconcile your Balance Sheet accounts
We also highly recommend doing a review of your balance sheet before sending your data off to your accountant. If you can’t explain EVERYTHING on it, don’t expect him or her to be able to work it out. Look for suspense balances, accruals that haven’t been reversed, balances that haven’t change since last year.
If you’re a Business Express client we’ll send you a more detailed questionnaire soon. To talk to us about getting your year-end and accounting processes working faster, call Peter on 04-831-1232.
We’re here to help you succeed.