Managing your order schedule pre EOFY

The end of financial year can mark a traumatic time for any business - even the heavyweights who have teams of accountants on the case. But for small business owners in the building and construction industry, tax time can be particularly daunting.

You might not be aware that there's a myriad of savvy tips that can help you maximise the financial position of your business in preparation for EOFY, and better manage your inventory and order schedule for the financial year ahead. 

Stocktake

As tedious as it may be, under Australian tax law all businesses trading in the building and construction industry (including us here at Latham) must conduct a stocktake of physical assets and materials at 30 June each year. This sets a baseline stock value for the year ahead, starting at 1 July.

The stocktake process determines whether or not your business has incurred taxable income throughout the financial year. If any remaining stock has decreased in value over the course of the year, your assessable earnings will be reduced by that amount. However, if your business' remaining stock has changed in value by an amount under $5000, you are not required to conduct a stocktake.

In any case, it's wise to conduct an annual stocktake for the simple purpose of inventory management alone; observing this business best-practice will hold you in good stead should the time come when your stock crosses the $5000 threshold.

When to reorder stock

During the stocktake process, identify any slow moving or out-of-date stock that is unlikely to ever sell, and adopt a disposal strategy so that it doesn't follow you through to the next financial year. The ATO allow businesses to claim a tax deduction for devalued or obsolete stock - even if it still has some worth. To do so, you'll need to estimate the value of such stock and record a loss in your books (receipts must be retained to substantiate your claim). You'll also be required to prove that the stock is unlikely to move in the following financial year, and that your business will continue to pay taxes in the next period.

When timing your next stock order around EOFY, bear in mind that any expenses that are incurred before 30 June will be eligible for relevant deductions. For instance, if you were working on a project that would require installation of safety step tread nosings other slip resistant stair tread nosing in the near future, it might be advantageous to purchase these products before EOFY — and realise the full tax benefits in the current financial year — rather than wait for the expense to carry over into the next financial year. Unlike traders who deal with perishable stock, products such as safety step tread nosings and other building and construction materials don’t have a use-by date — so purchasing them ahead of time can be a smart move.

EOFY is also a great time to re-examine your stock ordering procedures. Are your stock records up to date? Do staff have access to a policies and procedures manual regarding the recording and movement of stock? Meticulous records are your best weapon against financial loss; you'll be able to clearly see when new stock needs to be ordered and how long that process might take. It will also highlight any discrepancies due to theft, fraud, or human error.

Inventory management software

Small businesses might not have access to the same, expensive inventory management software systems that large organisations use. However, new mobile apps and low-cost computer software options are now making it possible to digitally manage your stock to realise the same efficiencies the big companies typically enjoy.

If your current business accounting systems feel a little haphazard, now is your opportunity to start fresh. To complement your accountant — who should be knowledgeable in regards to the deductions applicable to small businesses and contractors operating in the building and construction industry — adopt an inventory management or accounting app that can work on mobile devices. This will mean you can keep track of your assets no matter where you are — whether it be onsite, in the truck or at the office.

Timing of invoices at EOFY

Where possible, finalise any outstanding payments owing to you before June 30. If you have reason to believe that the debt is unrecoverable, write it off now as a loss rather than carry it over to the next financial year so that you are eligible for a tax deduction.

Likewise, if you know there will be expenses arising shortly after June 30, ask your suppliers whether there's potential to bring your invoice forward. Not only will they be paid sooner, you'll also be eligible to include the payment in your deductions. In fact, it's not even necessary to settle the invoice before EOFY — you just need to incur the expense.

The tax gauntlet can be difficult to navigate, so while these tips are a great heads-up on things to look out for when managing your inventory in preparation for EOFY, they may not necessarily be appropriate for your own business circumstances. Before filing for deductions, check with your personal or business accountant to ensure you're maximising your tax return and managing your inventory as effectively as possible. Alternatively, if you'd like to talk to our staff at Latham about current or pending stock orders, contact us and we’ll take you through the ordering process and work out what’s best for your business.




To find out more about Latham products, please visit www.latham-australia.com. To talk to a Latham product expert, call 1300 LATHAM (528 426) or email sales@latham-australia.com.