The Lead up to a New Financial Year.
For businesses across the country, End of Financial Year is the time to wrap up the year that was and plan for success over the next 12 months.
The end of financial year means change – some good and some that can a bit more challenging. With the right planning and preparation these things can become a seamless transition and benefit both you and your clients.
Early last year, the government passed its Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018, which was proposed to reduce the depletion of superannuation balances, excess fees and unfair insurance arrangements.
The changes mean that superannuation accounts with balances below $6,000 that have been inactive for 13 months will be transferred over to the Australian Taxation Office (ATO). It will also require all Australian Prudential Regulation Authority – regulated super funds to report and pay inactive low-balance accounts to the ATO as a new category of unclaimed super money for the first time by 31 October. Self-managed super funds won’t be required to report though they may receive roll-in’s from other inactive accounts.
This provides a vital opportunity for accountants to proactively discuss with clients, the advantages of superannuation consolidation before funds are closed and transferred to the ATO.
In business, sometimes difficult or awkward decisions need to be made that may impact future ‘sales’. A pricing increase on goods and services can be one of those. Many businesses are concerned about losing customers over a price increase, but one thing to keep in mind is if a business is concerned about price, it may be a question of value for goods and services. Maybe it’s time to consider ‘value add’ products and services? If they are receiving value a small price increase shouldn’t be a concern. Service based businesses often review their client service experience mid-year, to implement improvements to increase sales and revenue for the new financial year.
If businesses are considering a price change on goods and services, it is important to consider if this is consistent with direct competitors and if the client will be receiving the same (if not better) service experience to justify the price change.
Debt recovery or write Off
Debt is in every business, it’s just part of doing business, however businesses can of course have tools/systems and processes in play to manage it. Often, the end of financial year is the perfect time to review how a business is managing their debt and to tidy up their accounts receivable. The Australian Government’s Department of Industry, Innovation and Science, has published key points for consideration to assist businesses:
- Ensure the invoices look professional and are easy to understand.
- Get your client to research each payment method. It’s important to choose payment methods that meet the needs of your clients business finances, as well as their customers
- Get your client to set payment terms and have payment policies in place to help ensure that they receive payment on time. Make sure everyone is clear about timeframes and expectations for payment.
- Ensure your clients are making invoicing a regular part of their business activity. This will not only help with cash-flow, but they’ll be able to keep a track of their clients more easily.
Everywhere we look today, there’s a lot of noise about cashflow, and with good reason. According to Kate Carnell, Australian Small Business and Family Enterprise Ombudsman, 90% of small business failures are due to poor cash flow. In addition, the Australian Taxation Office’s (ATO) Small Business Education Research found almost half of small businesses are under financial pressure within the first year of starting business and this pressure increases in years 1-3.
The Small Business Engagement Research Report 2017 by the ATO found that cashflow is one of the top 3 most sought advice by from businesses provided by tax professionals, along with Business Structure & Business Planning.