The 31st of March is rapidly approaching. Now is a good time to think about getting organised for your annual accounts to minimise hassles.
The following comments are based on a 31 March balance date. If yours is different, please adjust accordingly.
Review your debtors and if you have bad debts, write them off before you get to 31 March or you’ll have to include the amount owing to you in your sales for the year. To write off the debt you must have taken reasonable steps to attempt to recover the amount owing. However none of the above actions prevent you from continuing to try to collect the debt.
If you have invoicing to do in April for work done in March, remember these sales belong to the past financial year and must be included in your accounts receivable (sundry debtors). We find some professionals, particularly if they have only one invoice to issue, overlook this.
Stock take - If you have to count stock, think about how you can minimise the effort at balance date. Can you get rid of obsolete stock? Have you organised people to count the stock? It’s unlikely your stocktake can be done after you close for business on the last day of the financial year and before you reopen the next day. You will, therefore, need to take a record of transactions occurring after the stocktake and before the year end and deduct these from the stocktake. Note: To claim a deduction for obsoletes or slow moving stock, it should be disposed of before March 31.
Money owing by you at the end of the year (accounts payable or sundry creditors) needs to be listed so we can claim the expenditure for tax purposes. Some accounts, such as power, are easily overlooked. The easiest way of getting this list is to go through all your April payments and decide which ones relate to the previous financial year. We’re assuming you pay all your bills promptly.
Fixed assets - Review your fixed asset schedule. Are there any fixed assets that have been scrapped? You could claim a deduction for their remaining adjusted tax value. You no longer have to apply to the IRD to write off these assets, so long as you or an associate do not intend to use them for a business purpose in the future; disposal would cost more than they were worth; and they are not buildings depreciated by the pooling method.
Sales and Purchases - Examine significant intended sales and purchases to see which side of the balance date they should be made, that is assessable/deductible this year or the next.Some people think if they change their motor vehicle before balance date, it could save tax. It’s probably better to make your decision based on good business rather than on tax. If you’re going to change the vehicle shortly, have a look at the book value you would anticipate at 31 March 2018 and compare this with the market value. If you’re going to make a loss, change your vehicle before balance date. If you’re going to make a profit you can defer the tax on that profit for a year by changing the vehicle after balance date.
Find out more about getting your debtors correct at 31st March here