Three days until the end of financial year. We've made it. Almost. Now's the time to assess your businesses' position as April 1 hits. Was FY18
Here are 5 small business accounting tips to help you see through the silly season and avoid the January bookkeeping blues.
1. Know your cashflow
You can’t plan anything if you don’t have an idea of what’s coming in and out. There is no point looking back and thinking ‘Oops, we didn’t bill enough last month’. You need to be proactive in your planning.
Cloud accounting software such as Xero gives you an instant snapshot of your incomings and outgoings. Online job management software WorkflowMax also allows you to have complete visibility over the time and costs you have to bill, and what work you have in the pipeline.
2. Be proactive with your invoicing
Issue your invoices as soon as jobs are completed, rather than at the end of the month if that is how you usually manage your billing. This will help get the payment process underway and see cash coming through the door earlier. WorkflowMax helps make this process super easy - with just a few clicks of a button you can turn your job into an invoice and have it sent off to your client.
If you email your invoices, rather than snail mail, you can be certain that your client is going to receive it (and it won’t get caught up in all the Christmas post!). With Xero, your client is sent a clickable link to their invoice; this allows you to see whether your invoice has been opened by the client or not so you can send them a reminder email if necessary.
3. Chase late payments
Now is the time to give your debtors a cheery Christmas nudge. Consider making contact a few days before the due date to ensure that they have received your invoice and are ready to process the payment. If you find that you’re too busy getting projects wrapped up before the end of the year, consider outsourcing this job.
Sticking with the Christmas spirit, you also need to ensure you are managing your own creditors. You don’t want to end up with late payment charges or damage business relationships. If you are struggling, communicate with your creditors and arrange a payment plan if necessary.
4. Change your terms
Consider taking a percentage of your quote as a down payment for new clients or new projects, especially if you are going to have to cover project expenses before you begin. You may also want to think about reducing your payment terms - for example from 30 days to 14 days - and ensure your clients agree to these before you begin.
Encourage direct bank transfers to your bank account by including this information on your invoice. If possible, consider introducing a late payment penalty to encourage on-time payments.
5. Work out your tax deductions on expenses
Of course, around this time of year you want to show your appreciation to your clients and staff. But without meaning to put a dampener on celebrations, it does help to be aware of which of your common Christmas expenses are claimable before you go planning a lavish Christmas do. An important issue to understand is possible fringe benefit and income taxes that may arise when it comes to providing entertainment to staff and clients.
Each country has specific tax rules, so you will need to check in with your own accountant or tax department. Ask them about taxes, deductions and GST claims on the following expenses:
- Gifts to clients
- Christmas parties
- Client entertainment
- Gifts to staff
- Gifts of food and wine
- Cash bonuses
With a little forward planning your holiday season can be a financial success and see you start the New Year with the right foot forward.
What other measures do you take to keep your finances in check over the holiday season?