Get organised for annual accounts 19 Feb 2018

The 31st of March is rapidly approaching. Now is a good time to think about getting organised for your annual accounts to minimise hassles.

The following comments are based on a 31 March balance date. If yours is different, please adjust accordingly.

  • If you have bad debts, write them off before you get to 31 March or you'll have to include the amount owing to you in your sales for the year.
  • If you have invoicing to do in April for work done in March, remember these sales belong to the past financial year and must be included in your accounts receivable (sundry debtors). We find some professionals, particularly if they have only one invoice to issue, overlook this.
  • If you have to count stock, think about how you can minimise the effort at balance date. Can you get rid of obsolete stock? Have you organised people to count the stock?
  • It's unlikely your stocktake can be done after you close for business on the last day of the financial year and before you reopen the next day. You will, therefore, need to take a record of transactions occurring after the stocktake and before the year end and deduct these from the stocktake. If your stocktake occurs after balance date, you will need to keep a record of sales from balance date until stock is counted and add these back to stock. If any deliveries occur around stocktaking time, you may also have to adjust for these. Some people refuse to accept deliveries at such a time, to keep things as simple as possible.
  • Money owing by you at the end of the year (accounts payable or sundry creditors) needs to be listed so we can claim the expenditure for tax purposes. Some accounts, such as power, are easily overlooked. The easiest way of getting this list is to go through all your April payments and decide which ones relate to the previous financial year. We're assuming you pay all your bills promptly.
  • If you have an investment in a PIE, you will need to provide your PIR (prescribed investor rate), which is your tax rate. You get this rate by looking at your income for the previous financial year and your income for the current year. For example, your taxable income for the year ended 31 March 2017 was $43,000 and you anticipate your income for the year ending 31 March 2018 to be $49,000. The tax rate applicable to the $43,000 is 17.5% and the tax rate applicable to the $49,000 is 28%. You are entitled to use the 17.5% for the year ending 31 March 2019, being the lower of those two. If you accidentally choose too high a rate, you can’t get the overpaid tax back. If you go too low, you have to put the PIE income in your tax return and pay the extra tax.
  • It might be a good idea to get some maintenance work done before the end of the year, so you can get a tax deduction for it.
  • Some people think if they change their motor vehicle before balance date, it could save tax. It's probably better to make your decision based on good business rather than on tax. If you're going to change the vehicle shortly, have a look at the book value you would anticipate at 31 March 2018 and compare this with the market value. If you’re going to make a loss, change your vehicle before balance date. If you're going to make a profit you can defer the tax on that profit for a year by changing the vehicle after balance date.

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