Successful businesses are organised – they don’t procrastinate or hesitate. This means ensuring you’re prepared for the end of financial year as March 31 fast approaches.
Have you got your tax receipts in order?
Are you clear on how any legislation changes could affect you?
Do you understand what tax deductions you’re entitled to?
Are you entitled to any government incentives as a result of Covid-19?
These are our top tips for your business to maximise tax time on 31 March 2021.
REVIEW YOUR FINANCES
A crucial part of EOFY preparation is reviewing your business’ finances. This involves getting in touch with your accountant or bookkeeper, and checking to see if you met your targets last year and how you can do things differently next year.
Does your business have performance targets throughout the year? Look back on these to see whether your business is on track with plans, and create a cash flow strategy to manage potential shortfalls while ensuring you can still pay your staff and suppliers, as well as meeting your business obligations.
BE AWARE OF LEGISLATION CHANGES
Each year, there are often a raft of new legislative changes that are due to commence as you fill out your tax return. It’s important to understand if any are going to affect you, and what you need to do to prepare, in order to minimise any potential impact.
ARE YOU ELIGIBLE FOR ANY DEDUCTIONS, WRITE-OFFS OR REBATES?
When speaking with your accountant or financial advisor, prioritise discussing any deductions, write-offs and rebates available to your business before March 31. For your accountant or bookkeeper to determine eligibility by the cut-off period, provide all necessary financial information in a timely manner.
FORECAST YOUR CASHFLOW
There are many tools available to help businesses forecast their cash flow. Having a clear understanding of the cash flow of the business (whether positive or negative) will set you up for success for the next financial year. Evaluate where the business sits financially by understanding all of the ins and outs expected for the year ahead.
2020 highlighted the importance of having a ‘rainy day fund’, and those businesses that were prepared by having an emergency safeguard talk about how having savings helped their business and offered peace of mind during a stressful time for everyone.
ASSESS ALL OF YOUR FINANCE OPTIONS
In today’s market, it’s easy to be tempted to take on a loan. Even if the banks won’t lend to you, there are many businesses now advertising immediate approval for business loans. But beware, many of these fast finance solutions can turn out to be a long term problem for businesses.
Fortunately there are a lot of independent experts that can give you advice when cash flow gets tight. Finance brokers can help you find a finance solution that will help you grow without becoming crippled by debt or hidden terms and conditions. They may be able to help renegotiate or consolidate existing debt, as well as educating you on finance alternatives to standard business loans. Alternatives such as equipment finance facilities and invoice finance, can may help free up additional capital.
ANALYSE YOUR CLIENTS’ PAYMENTS
Do you find that the ingoings and outgoings of your business don’t align? Expenses such as wages, rent and equipment can generally be predicted in relation to forecasting your business cash flow. However, client payment dates can wildly vary. Large businesses often have delayed payment terms, which small businesses are unfortunately beholden to. This can lead to a huge amount of stress knowing you have a mounting pile of bills awaiting payment, whilst you’re still waiting for your own invoices to be paid.
Do you know who always pays late? Do you know who pays early? If you can see distinct patterns, then you can better plan your collection processes and expenditure.
USE A SELECTIVE INVOICE FINANCE FACILITY
For businesses who struggle with delayed payment terms, invoice finance allows businesses to get their money back into their business faster to manage their outgoing expenses better and avoid taking on any unnecessary debt.
When looking at the cost of invoice finance, it is important to remember that a dollar today is worth more than the dollar you get tomorrow. By accessing your owed funds sooner, businesses can reinvest those funds at their gross profit margin. Compound this month on month and it’s easy to see that the funding cost of invoice finance can easily be offset by the value of faster payments.
The biggest criticism of the different cash flow finance models are the very stringent contracts that providers place companies under. However, Apricity Finance offers invoice finance ‘at call’ for your clients, known as selective invoice finance. This means businesses get the flexibility to choose which invoices to fund, when, and at what percentage without being charged when not in use.
GET READY FOR THE NEW FINANCIAL YEAR AHEAD
The end of the financial year shouldn’t be all about tedious reports and numbers. It’s also a great time to reassess and tweak your business plan to ensure you’re on the right path for the next financial year.
Write down your targets and goals for the new financial year (and beyond) to make sure your business is set up to achieve those plans. If you already have goals you’re working towards, now’s the time to check to see if you’re still on track.
ACCESS AVAILABLE RESOURCES
Inland Revenue has a wide range of resources and practical information about tax, for businesses and organisations for New Zealand.
Additional information can be found at Business.govt.nz to make it easy for small businesses to understand and comply with tax rules and regulations.
GET IN TOUCH WITH APRICITY FINANCE
SMEs are facing a growing number of pressures and something almost all have in common is the challenge of managing their cashflow. Is your business one of them? Get in touch with one of our team here to tell us more.
For more information on how Apricity Finance can help your business with cash flow at tax time, visit here.