End of financial year housekeeping, combined with a review of cash management processes, will help put businesses in a stronger starting position for the new financial year, even amongst the impacts of COVID-19.
More so than usual, cash flow conversations need to be the key for any business owner at this time of year and this means conversations within the management teams as well as an external dialogue with the business’ financier and with trusted advisers including brokers and accountants.
Our CEO, Peter Langham, stated that “Cashflow is key to the health of any business. Now is the perfect time for owners and managers to get a clear understanding of their position, and explore the funding options that will help them in their business situation as the new financial year unfolds.”
Our key advice for every business looking to navigate EOFY in this current climate:
1 – Reassess Your Cash Position
Thinking what has happened over the past year and what is about to happen in the upcoming financial year, now is thetime to review strategic goals and consider whether the business is using the most appropriate funding solutions to meet these goals.
Working capital and cash flow finance is essential for all business situations and without it, you will not be able to fulfil your ambitions. Therefore, it is critical to consider all working capital options and make sure you pick the right one for you.
Trade and Invoice Finance are two options. They are linked to the business performance and not personal assets, and should not require real estate security, providing flexibility to expand.
2 – Keep Your Income-Producing Assets Up To Date
SMEs can reduce their operating costs, sometimes very significantly, by structuring finance and repayments to suit tax and cashflow needs.
Keeping your income producing assets up to date contributes towards keeping a business operating efficiently, and maximises cashflow. Make sure you utilise all the tools and tax planning assistance you can find, to keep assets up to date and possibly avoid costs in the future.
3 EOFY housekeeping must-dos
- Meet your superannuation commitments before June 30
- Put tax changes on your radar
- Bad debt – write it off
Meet your superannuation commitments before June 30
Superannuation is not tax deductible until it has been paid, so ensure all your superannuation obligations have been completed prior to July 1. It’s the right thing to do by staff, and is a great way to reduce your company tax bill. Look at funding options, including debtor finance, that allow obligations to be met while smoothing out the cashflow implications.
Put tax changes on your radar
New financial year, always new tax updates to be aware of. Your financial advisers will be able to highlight changes, or the ATO website is a good source of tax amendments that SMEs should be aware of. It’s important to be well-positioned to take advantage of positive change (continuation and extension of the $20,000 instant asset write-off, for example – the turnover for eligible businesses has increased from $2 million to $10 million) and to be prepared for adverse change.
Bad debt – write it off
If you’re still chasing old invoices from the last financial year, now might be the time to write them off. Bad debts are tax deductible and SMEs can use them to offset their taxable income.
To discuss your EOFY cash flow needs, or find out more about how ScotPac can help, be sure to get in touch with one of our lending specialists today.