The end of the financial year isn’t glamorous. But alittle preparation beforehand can mean a cleaner set of accounts, a lower taxbill, and a much smoother experience when it’s time to file. Here’s yourpractical checklist.
Most business owners know the financial year-end is coming.Far fewer do anything about it until it’s already arrived, and by then, sometax-saving opportunities have already closed.
The good news: none of this is complicated. It just requiresa bit of time and attention in the weeks leading up to 31 March. Work throughthis list and you’ll hand us a much cleaner picture to work with, which meansfaster accounts, fewer back-and-forth questions, and a better result for you.
1. Bad debts: Write them off before year-end
If a customer owes you money and you know (hand on heart) that you’re never going to see it, now is the time to act. To claim a tax deduction on a bad debt, you need to have formally written it off in your accounting system before the last day of your financial year.
Miss that deadline and the situation flips: you’ll pay tax on income you invoiced for but never actually received, because as far as the IRD is concerned, it was technically owed to you at year-end.
Chase your debtors now. If the money isn’t coming, write it off before year-end and at least get the tax deduction.
Go through your debtor list, follow up anyone who’s overdue, and make a clear decision on anything that looks unrecoverable. Your bank balance and your tax bill will both thank you.
2. Petty cash: Count it and reconcile it
This one’s quick but easy to overlook. On the last day of your financial year, do a physical count of your petty cash and note the total. Then reconcile it against your petty cash receipts and make sure every expense has been entered into your accounting software.
Why does it matter? Any petty cash expenses not entered before year-end could miss out on a tax deduction, and any GST that wasn’t claimed during the year needs to be caught now. Small amounts add up, and it only takes a few minutes to get this right.
3. Stock on hand: Count everything (yes, everything)
If your business holds stock, whether that’s product on shelves, raw materials, or livestock out in a paddock, you need an accurate count as at the last day of your financial year.
Getting this wrong has a direct impact on your tax bill. Your closing stock affects your cost of goods sold, which affects your profit, which affects what you pay in tax. An inflated stock figure means you’re overpaying. A deflated one creates its own problems.
One important note: obsolete stock that you want to exclude from your count must have been physically disposed of before year-end. Simply deciding it’s worthless isn’t enough, it needs to be gone.
4. Work in progress: Tally your unbilled costs
If you have jobs that are substantially underway but haven’t been fully invoiced yet, you’ll need to account for the costs sitting inside them at year-end.
Work in progress (WIP) includes the direct costs applied to a job (materials used, employee time, subcontractor costs) that haven’t yet been matched to a sale. These costs are treated as an asset at year-end, not a deductible expense, so it’s important to get an accurate picture of where each job stands.
Note that any costs already covered by an interim invoice don’t count as WIP. If you’re not sure how to calculate your WIP position, give us a call, it’s one of those areas where a quick conversation saves a lot of confusion later.
5. Deposits for undelivered goods or incomplete work
If a customer has paid you a deposit, but the goods haven’t left your premises or the work hasn’t been completed by year-end, that money isn’t taxable income yet. It’s a liability, because you still owe the customer something in return.
Make a note of any deposits or advance payments in this category and let us know when you send through your year-end records. It’s a straightforward adjustment, but only if we know about it.
6. Shareholder current accounts: Check the balance now
If you’re a shareholder who’s drawn more from your company than you’ve put in, your current account is overdrawn, and the company is required to charge you interest on that balance. The company pays tax on that interest income; you don’t get a deduction for it. It’s not a great deal.
The fix is simple: check the balance before year-end and, where you can, pay back any overdrawn amount. The less interest that accrues, the less tax the company pays on income that’s really just a bookkeeping entry.
A quick check of your shareholder current account before year-end can save real money. It’s one of those things that’s easy to overlook and easy to fix.
A smarter year-end starts a few weeks before it
None of these tasks are complicated in isolation. The challenge is remembering to do all of them at a time of year when the business doesn’t stop just because the financial year is about to. Set a reminder, block out a couple of hours, and work through the list.
If anything here raises questions specific to your situation, WIP calculations, bad debt decisions, shareholder accounts, etc, we’re always happy to talk it through before year-end rather than untangle it after.
Want to get ahead of year-end this time around?
Give us a call and we’ll walk through your specific situation. A bit of preparation now makes everything easier — for you and for us.
