Why is EOFY important?

The business financials show how a business has traded in the previous 12 months and often compared to the previous years financials. These reports enable Inland Revenue to ascertain the business’ tax position as well as assisting lenders review the business’ position to borrow and make repayments. The reports are also useful for succession planning for the sale of the business.

What is included in your end of year financials?

The following documents are included in your end of year financials:

• Balance Sheet (statement of financial position): This shows assets, liabilities and equity of the business as at balance date.
• Profit and Loss:  This shows how the business traded, starting with turnover, less direct cost of goods sold, which provides a gross profit. It also shows overheads, expenses and depreciation, which will ultimately produce the bottom line of net profit or loss before tax.

Here are  some top tips I share with my clients to prepare for their end of financial year: By being prepared, your bookkeeper or accountant  will be able to use these source documents for verification and you will be ready for their end of year questionnaire. If you’re using cloud software, like Xero, upload important documents into your accounting system during the year and this minimises the effort needed at EOFY.

You can also take photos of receipts and upload them directly using Hubdoc.

• Save end of year investment certificates and bank statements that cover the date of 31st March 2021
• Collate all your bank, loan, and investment interest statements as well as your RWT (resident withholding tax) Certificate
• Check that you have any lease or sale and purchase agreements saved
• Check your debtors / accounts receivable outstanding and talk to your financial advisor about writing off bad debts prior to EOFY
• If you plan to claim home office expenses, gather utility bills such as power, water, rent
• Let us know if you utilised government COVID subsidies and how you have treated these

Top tips from our community of bookkeepers

I also asked our wonderful community of bookkeepers for their tips. Here’s what they shared:

Haylee Wrenn

Learn about your shareholders current account – is it overdrawn? Talk to your financial advisor about this to make a plan to correct this in the next financial year.

Lisa Nightingale

Stock – count it and record it!  It is important to have the information about your stock on hand (closing stock balance) and accurate as at EOFY balance date. This is because your financial advisor will include it in the end of year financials and compare it to the beginning of the financial year’s opening stock balance.

Donna King

Intercompany loans – your financial advisor will be looking to have any intercompany accounts balancing. Also remember to collate all fixed assets receipts (ideally upload these into your accounting software as you go during the year) – please note that this year, due to COVID, the New Zealand government has changed the low value fixed asset criteria.

Jo McLeay

If invoices do not appear in Xero through Hubdoc (or similar),  it’s a good idea to save them all in a folder throughout the year. This is, especially important for those invoices that are required by an accountant, such as invoices relating to ACC, legal, repairs and maintenance, and assets. This way, the folder is ready to forward to an accountant, or you can use Xero Files with a folder for this information required for the year end.

Donna Agnew

Don’t forget about any loan/hire purchase statements that you need to provide your accountant.

Remember to review the General Expenses, and consider if it can be analysed out. Also, review Repairs and Maintenance and declare any asset purchases over $1,000 or $5,000.

Laura Mason

Asset review, additions and disposals. Although you may not work in the asset area of Xero, when you code bank transactions or bills to an asset code you are creating a draft asset. If you need help understanding this, please reach out to your accountant or bookkeeper. You should also review your entity type – look at the pros and cons, and talk to an accountant or new age bookkeeper about whether this is the best option for your business.

I also recommend to plan ahead, be proactive, and make sure you have a  strategy for further impacts from COVID-19 or other crisis situations.

Josh Hawkey

If you have any capex (capital expenditure) plans in the next few months, seriously consider doing this before 16 March 2021 to receive the full tax deduction.

Lisa Martin

Have you used Xero for all your accounting transactions (single ledger) or are there financial statements out there in another Tax software system? If so, it’s important that the data aligns in Xero so your balance sheet reconciles to 31st March 2020.

Donna Carswell

Encourage suppliers to send their March invoices to you ASAP so you can capture the full financial year in the accounts. If the business handles cash, but doesn’t go to the bank every day, get them to bank it by the 31st of March.

Verena Meintjes

Ensure payroll employment information is filed with Inland Revenue up to 31st March.  Make sure any loans balance against schedules from the finance company reconcile.

Mary Moore

Get to know (and check the figures in) your balance sheet to make sure everything is correct and makes sense. If there is any incorrect information, then it may affect your profit and loss report  (and maybe your tax).

With thanks also to Sue Pak, Head of Accounting at Xero, for her thoughts: If you’ve paid business expenses using cash, or from a personal bank account, make a list of these and provide evidence of these to your bookkeeper or accountant. They add up, so ideally organise separate credit/debit cards – one for your business and one for your personal expenses.

We’re here for you!

Phew! That’s quite a lot of information…the bottom line is save source documents (preferably as you go), make sure your transactions are up-to-date, count your stock (if applicable) and reach out to your bookkeeper or accountant if you need any help. Remember, we are all in this together.