EOFY is the bane of many healthcare practice owners in Australia. And now, with one of the most challenging years almost over, you may have suddenly found yourself at a point where you can no longer avoid looking at the financial state of your practice.
The fear of the unknown leads to a lot of stress and anxiety when it comes to getting your books in order for tax time.
But it doesn’t have to be stressful.
In fact, with the right processes in place and the help of the right professionals, such as experienced bookkeepers and accountants, you can start to take back control of your finances, improve your admin flow and even increase your practice’s profitability.
If you still keep your invoices in shoeboxes or have no idea whether you’ve actually made money this year, you don’t want to miss this one… In this blog post, we will discuss 9 tips for preparing your business for the end of the fiscal year:
1. Review Your Accounts and Bank Statements
Start with your bank statements and check each transaction to make sure everything is accounted for. You may need to ask employees about any transactions that don’t match what you expected, but it’s a good place to start.
Check your account balance, all outstanding invoices and see if there are any out-of-place charges or items which haven’t been paid off yet. Once this has been done, take another look at your other expenses like phone bills or electricity costs – anything that needs to be settled before EOFY.
It might seem daunting, so why not break it down into smaller tasks?
These could include:
- Reviewing and reconciling bank statements
- Checking account balances
- Paying off any outstanding invoices on the business account
- Follow-ups with all outstanding invoices
- Claiming all your deductions
- Running end of financial year reports to see what you owe, what’s owing to you, and how much has been paid so far this year
Malisa Clarence, Director, MBooks Business & Accounting Solutions offers this advice: “So we are heading to the End of the Financial Year and besides seeing ads on Harvey Norman wanting you to buy computer equipment before 30 June there are a couple of things you should do from an accounting perspective to get ready. The first thing is to get your bookkeeping records completely up to date! They should be fairly close considering the last BAS lodgement period has just happened.”
At this point, it’s important not to get overwhelmed because there are still a few things to tick off the list.
2. Assess the Financial Health of Your Practice
One of the questions that Power Diary partner Jayne Kilsby from Bookkeeping N More asks her clients is, “When was the last time you assessed the health of your business?” According to Jayne, “We see a lot of business owners who haven’t yet mastered their cash flow and aren’t sure if they’ve actually made any money until the end of the year.”
If that sounds familiar, keep reading – there are a few easy-to-implement solutions that will put you back in the driving seat.
3. Leverage Your Software
Whichever accounting system you use, ensure that it is up to date with all the relevant information so you can work from your own records. If you use Power Diary with the XERO integration, you’ve already made your life a lot easier. Now you need to take advantage of this because, with the right software, you can have full clarity on your financial position.
Digitisation is essential for healthcare practices, and the area of your finances is no exception. Financial management and streamlining back-office processes will go a long way to reducing stress come at the end of the financial year.
At a minimum, consider:
- Accounting software
- Electronic invoicing
- Client templates
4. Enlist the Help of a Trained Professionals
Many therapists go into private practice because they love working with people, but finances and marketing and other aspects of owning a business can end up taking up all your time and energy…
As a trained healthcare professional, it’s likely that you don’t have a background in accounting or finance, making the accounts a potential weak area. Don’t bury your head in the sand! If you’re like most private practice owners, you want to help your clients and make money, but you don’t want to be tied to the administrative tasks.
With a bookkeeper, you can simplify the equation. Outsourcing your accounts gives you more time for your business. A bookkeeper is not someone who just records your entries; they will add value to the business, work with your accountant, ensure that statutory requirements are met, and help manage the cash flow of the business.
This gives you:
- More freedom to focus on other aspects of the business
- Confidence because you know your cash position at any time
- More clarity, because your books are always up-to-date
Most importantly, the right bookkeeper will ensure that you understand and feel comfortable with the financial reports. And your work will be more fulfilling and sustainable when you have control. (You can see the Power Diary partners here.)
5. Explore All Tax-saving Opportunities
As a health professional, there are a number of areas where you can save on tax that you might not know about. Malisa, Director of MBooks, shares that, “Once your records are up to date, it’s time to book an appointment to see your accountant BEFORE the end of the financial year. This gives you an opportunity to review how your business has done over the last 9 months and if you’ve had a great year – which I hope you all have – make some tax planning decisions around that profit you’ve made.”
One of the most significant new opportunities is the $150,000 Instant Asset Write-Off that applies to an asset you have purchased and used. The deadline has passed (it needs to have been purchased before December 31st, 2020). But, if you look back, there may be purchases that would qualify and should be submitted in your 2020/21 tax return.
Any assets such as computer equipment, medical furniture, utility equipment and various dental equipment are eligible.
It may be worth speaking to a tax accountant as COVID has meant far-reaching changes for many private practice owners, and there are potential financial implications.
6. Consider Using a Health Specialist Accountant
An accountant that specialises in your industry will help with a lot more than just getting your EOFY documents taken care of.
They’re also there to help you with some of the bigger financial concerns such as:
- Simplifying and automating tax, payroll and accounting functions for your practice
- Ensuring that your tax structures protect your assets from potential lawsuits
- Advising on tax reduction strategies
- Offering tax-efficient structures for loan repayments
- Sharing knowledge on tax-efficient estate planning strategies for asset protection
There are many areas where a medical accountant can step in and offer advice, and these can save you thousands of dollars in the long run.
7. Use the Opportunity to Do Things Differently
One of the areas that we keep coming back to is trying to find a work-life balance, and the financial year-end could be the perfect opportunity to make the changes that you want as you start to focus on the year ahead.
Jayne from Bookkeeping N More suggests asking yourself questions like:
- Do you have control of your money, or does your money control you?
- Do you pay yourself before you pay your expenses, or do you take what is left over?
- Do you have financial security for yourself and your family?
- Do you have a cash flow plan for the next 12 months, or will it be another year of waiting untill June 30th to see if you have made any money and hoping you have put enough aside for your taxes?
As Jayne explains, “when we talk about cash flow with our clients, we don’t talk about income and expenses. We talk about PROFIT. Are you taking your Profit First and paying yourself before you pay your expenses? It might sound crazy, but I know, but it can happen, and it should happen!”
The team at Bookkeeping N More – Certified Profit First Professionals and Profit Coaches recommend you use EOFY to assess the health of your business. Get off the treadmill, be proactive, not reactive, take your Profit First and have a solid foundational plan for your finances for the next financial year.
8. Plan for the Future
Times have changed and your finances may need to change with them. If your business plan is a few years old, it may need an overhaul to reflect the new, more uncertain economic conditions that we now find ourselves in. Plans that you have in place may need to be delayed, and you may need to build in a larger financial buffer to future-proof your practice.
Malisa puts it like this, “As a lot of practitioners are trading as a “Sole Trader” you should also think about putting some superannuation aside for yourself! You’re 65-year-old self will thank you for making these contributions now. And make sure you get your tax return done as soon as possible after 30 June. I know that a lot of people leave this to the last minute but how will you plan for your business if you are always looking in the rear-view mirror?”
9. Take a Break, Rest and Recharge; You’ve Earned it!
The last year has been one of the most challenging for private practice owners in Australia. The emotional burden of the pandemic added to the stress of trying to look after clients and keep your practice afloat may mean that your needs have taken a backseat.
Try to balance this time and take care of yourself. And, if that’s not workable, keep going, submit your documents and then enjoy a well-deserved break from work.
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The EOFY doesn’t have to be stressful if you’re organised and have the right team backing you up. To set yourself up for a successful year-end, ensure that you have a good grasp of your finances and that you’re taking advantage of the time and efficiency savings that your software offers. You could also use the time to make meaningful changes to the way you do things to make it easier for you going forward.
If the end of the financial year seems like an overwhelming task, get professional help now, rather than waiting until it’s too late. A bookkeeper and a health specialist accountant will give you peace of mind, and may even be able to offer advice on tax-saving opportunities that you weren’t aware of.