Year End Check List
The end of the financial year is rapidly approaching and if you want to be ahead of the game, here’s a few things you can do to get things in order.
- Stock take
If you carry trading stock, you are required to do a stock take to record the value of your stock on hand at 31 March. If at all possible, do this on the actual day. Stock is to be valued at the lesser of cost or realisable value (the amount that you’d likely get if you tried to sell it). If this is your first year and your trading stock is less then $10,000 cost (excl GST) then you don’t need to include it for tax purposes. If its not your first year, but your turnover has been less then $1.3 million per year, and your closing stock can reasonably be estimated to be less then $10,000, then you can value it at the opening stock value.
Dispose of any obsolete or damaged stock – this must be done before 31 March otherwise it will need to be included in the stock take.
- Fixed assets
Review your fixed asset schedule from the previous year. Sell any surplus assets. Write off any which are no longer in use, and have no potential for future use.
- Repairs and maintenance and upgrades
If you’re planning on doing any significant repairs and maintenance, or renewing tools or equipment, consider doing this prior to 31 March to get the tax deduction within the year. You’ll need to ensure of course that the repairs are fair and reasonable and are within the IRD guidelines – also make sure you keep all receipts as your accountant will ask for these
- Shareholder Current Account
Where a business owner has put his own money into a business they establish a shareholders current account, effectively a loan advanced from the person to the company. They can draw these funds out without there being any tax issues. However, if they draw too much and the shareholder’s current account becomes overdrawn then this can present tax issues with actual financial costs. We often find this is the case with small businesses and one-man-bands where the cash in the company is used liberally to meet personal living costs. If this is a concern then please let us know and we can advise on ways to mitigate or avoid the tax issues.
- Write off bad debts
If you have debtors who are unlikely to pay, write these off before the year end. They must be written off physically and financially so they don’t show up on your debtors list, and this must be done prior to 31 March – Click here to see how to write off a bad debt in Xero
If you are considering making charitable cash donations, do so before 31 March to claim the tax deduction. If these have been made in your personal names then we can claim a third back as a rebate when compiling your tax returns. Make sure you keep the receipt.
- Log Book
If you are using your personal vehicle for business use, make sure you are keeping a record of your vehicle expenses, and have completed, or are completing a log book. See our article here on how to keep a log book
- Source Documents
Be aware that your accountant will ask you for a variety of documents such as bank statements, loan documents, invoices/receipts, particularly relating to asset purchases, so now is a good time to make sure you have everything in order, or even better, electronically stored! – Click here to find out how to store your documents electronically in Xero
If you are serious about achieving your life and business goals then you must have a plan to get there. Share your plans and goals with your accountant and if you need some help putting a plan together then check out our Business Planning service.