With the end of the financial year fast approaching, SMEs need to be prepared for tax time. And while all the administrative requirements that come along with tax time may feel like a burden, there are some easy ways you can easily get organised. Here’s our list of what SMEs need to do to make tax time go smoothly.
Use current accounting software
With the ease and affordability offered by modern accounting software platforms such as Quickbooks, Wave and Xero, staying organised for tax time has never been easier. If you haven’t already, pick an accounting platform and keep it regularly updated. These platforms all allow you to connect your business bank accounts making data input seamless.
Keep detailed records
Keeping detailed financial records is something SMEs should do all year, not just at tax time. To do this, set up a system that ensures you’re capturing all of the money moving through your business. This system may look as simple as taking a photo of receipts and sending them to your bookkeeper. Or, you could even set up a rule in your email inbox that automatically sends your tax invoices to your bookkeeper. The key is finding a system that works for you and sticking to it, especially if you’re someone who dislikes administrative tasks.
If, like many SME owners, your days are too busy for administration, set aside a dedicated place where you’ll file financial documents that need to be actioned. This may be an intray in your office or a dedicated folder in your emails. It doesn’t matter where it is, just make sure you have a dedicated place to keep everything that needs to be actioned. This stops things getting lost and reduces the stress of a frantic search for documents at tax time.
Setup effective bookkeeping practices
If you haven’t done this already, your SME needs effective and consistent bookkeeping practices. Not only will this help you stay aware of your financial position, but it will mean you’re always ready for tax time. Your regular bookkeeping time will likely depend on your turnover and when your expenses such as payroll are paid. Pick a time that works for you in your calendar and stick to it.
If you know you’re unlikely to stick to a bookkeeping schedule, consider hiring a bookkeeper. Some online freelancing platforms have bookkeepers available for less than $10 per hour. This makes outsourcing your bookkeeping affordable and ensures everything stays up to date.
Get help from an accountant
Unless you’re an accountant, you’ll probably need help preparing your business activity statements (BAS) and tax return. While this adds an expense to your business, it reduces the risk of mistakes with your financial reporting. Depending on how hands-on you want your accountant to be, you can use them for your quarterly BAS and tax time by simply adding them as a collaborator to your accounting software. This will give your accountant visibility of your business’s finances and make completing your tax return quick and easy.
Understand your reporting requirements
One of the biggest headaches for SMEs is understanding reporting requirements to the ATO. This builds on the point above about seeking advice from an accountant. Many SMEs face larger than expected tax bills at the end of the financial year. To reduce the risk of this occurring, speak with your accountant to ensure you understand your reporting obligations. Your amount of turnover determines these reporting obligations.
With all of the right tools and systems in place in your business, tax time doesn’t need to cause headaches. And while it’s not the most exciting process for a lot of people, getting organised now saves potential stress later.
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