It’s EOFY: Three tips to make tax time a breeze
For so long, the end of the financial year has been approached with apprehension by small businesses; a complicated, confusing and stressful reminder that finances aren’t easy, writes Mark Bartels, Chief Financial Officer, Invoice2go.
Today, though, it’s never been easier for small business owners to master their money and make the end of the financial year little more than another task in an otherwise autonomous and empowering small business adventure.
Whether it’s ditching your stack of receipts and replacing it with small business financing software, or committing a little time to your finance regularly throughout the year to avoid any last-minute panics, here are some simple strategies to help you get back to enjoying parts of small business ownership.
Stay up-to-date, it could save you time and money
The end of the financial year isn’t just about you paying your tax, it’s also about finding out the schemes and initiatives that might give your small business a little more financial breathing room. Unless this is your first EOFY as a small business owner, you’ll likely have a good understanding of the various deductions and schemes you can benefit from, like expenses for travel and equipment. This year, however, the government has introduced or updated a number of responsibilities to help small businesses better weather the financial burden of the coronavirus pandemic.
The first, for example, is the instant asset write-off threshold increased from $30,000 to $150,000 for eligible businesses from 12 March 2020 until 30 June 2020. Eligibility has also been expanded to cover businesses with an aggregated turnover of up to $500 million. It allows for immediate deductions on the business portion of the cost of an asset in the year it is first used, or installed ready for use. So, if you’re a mechanic, for example, and invested in new tools or renovated your garage, include it in your tax deduction. In addition, is the shortcut method for calculating additional expenses incurred while working from home – something many small business owners will have found themselves doing more often recently. Business owners can now claim 80 cents per hour for additional expenses incurred – including electricity, phone and internet, stationary and home office equipment – from 1 March 2020 until at least 30 June 2020.
Good habits can be gold dust
Gathering information is half the battle when it comes to tax, so ensure your records are accurate and up-to-date. Good reporting habits will not only help you complete and lodge your tax return, but in the new financial year will help you manage cash flow and understand how your business is performing in real-time. Collate your reports in one digital location, or consider implementing accounting or invoicing systems to streamline the process.
With technology at our fingertips, it’s never been easier to capture and organise expenses the moment they’re incurred. Take a photo of each receipt on your phone while you’re out, and save it alongside important expense details such as the date and the client or project. It may sound like a difficult habit to develop, but by committing a little time to it now, it’ll quickly become second nature. And, as if you needed any extra motivation, the more accurately you can collect and log receipts throughout the year the more money you may be eligible to claim back at tax time.
Befriend technology and ditch the paper trail
Whether you’ve started your tax return or not, if completing it is going to involve a large amount of time frantically searching through boxes of crumpled receipts, work schedules and project notes, you’re wasting valuable time that could be better spent out working and earning. If that’s you, it’s time to embrace technology when the new financial year rolls around.
Thanks to digital tools everything from your income and expenses to your financial reports and customer details can now exist digitally in the palm of your hand. What’s more, you can use it to formulate and send professional invoices and estimates and schedule automatic payment reminders for your customers. Considering that time is money for small businesses, ditching the paper trail and befriending technology could be just the competitive advantage you need to take your business to the next level.
Running a small business is one of the most rewarding, autonomous and flexible ways of earning a living. However, there can be drawbacks; handling your own taxes is one of them. While we can’t promise we can make every aspect of business ownership easier, a few simple steps can help you and your finances sleep easy when the new financial year arrives.
This post was originally published on Kochie’s Business Builders and is republished here with permission.