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End of Year Housekeeping

End of Year Housekeeping

As another financial year rolls around, it's time for a little accounting and tax housekeeping. For most taxpayers the year end is 31 March, but even if your year end is 30 June or 31 December, you would still be advised to read on.


Figure 1: Waterfalls in Bali - Photo by Robert Collins on Unsplash

Trading Stock (Inventory)

Inventory is valued at the lower of cost or market selling price. If you sell an item below cost just before balance date, then you can value the remaining items at that price. Dispose of stock that is unsaleable before your stocktake.

Inventory should be counted as close to balance date as possible. Remember to include stock in transit, if the purchase cost has been paid or included in creditors. If your turnover is $1.3m or less for the year and you estimate your inventory on hand is less than $10,000, you don't have to do a stock take; you can use your opening stock figure for your closing stock figure.

Prepaid Consumables and Expenses

If you estimate your consumable aids on hand cost less than $58,000 then you don't have to make a prepayment adjustment at year end. Source: IRD technical tax

Similarly, you can claim these expenses invoiced in one income year even if they are for the next income year. Just remember, you still need to pay for the invoices, so don't go incurring costs you don't need:

Accounting costs (mandatory) and audit fees

Advertising (under $14,000, up to 6 months)

Insurance (contract under $12,000, up to 12 months)

Periodic charges (under $14,000, up to 12 months)

Postage and courier tickets

Professional subscriptions (under $6,000, up to 12 months)

Rates

Rent (under $26,000, up to 6 months)

Services (under $14,000, up to 6 months)

Stationery

Subscriptions for newspapers, magazines

Telephone maintenance (up to 2 months)

Travel and accommodation (under $14,000, up to 6 months)

Vehicle registrations, road user charges

Warranties or equipment service contracts as inseparable part of the asset

Repairs and Maintenance

With the ring-fencing of rental losses from 1 April 2019, many landlords will be trying to ensure their repairs are done before 31 March. Expenditure on an asset may be a repair or an improvement. Chat with us about any major work you have done, so that we can appropriately analyse the costs.

Write off Bad Debts

To claim a tax deduction for bad debts, they must be written off before the end of the financial. In your accounting software raise a credit note to clear the debt or write Bad Debt across the invoice in your invoice book. To decide whether a customer balance (debtor) is a bad debt or merely doubtful, consider the age of the debt, how much effort has gone into chasing the debt and the likelihood of the debt being collected. Writing off bad debts give a more accurate reflection of the business's financial results but does not prevent the business from continuing to seek recovery of the debt.

Holiday Pay

Note any holidays (except for public holidays) taken by staff within 63 days of balance date, so that you can claim a tax deduction.

Property, Plant & Equipment

Purchases of assets costing less than $500 (excl GST if registered) can be automatically expensed, unless they are part of the construction of a larger asset. Review your depreciation schedule from last year. Assets which have been disposed of or put in a dingy corner because they are too costly to dump can be written off from the books so that a loss on disposal can be claimed.

You may want to defer the sale of a significant asset until after balance date, to push the depreciation recovery income into the next tax year.

Retentions

Retentions on building contracts are generally taxable in the year the contractor becomes legally entitled to receive them. Let us know of any retentions so we don't include them in income.

Preparation for 2019-2020 year

If you're changing accounting software, the start of a new year is a good time to do it. Set up now, so your bank feeds start from 1 April.

Have you checked that your payroll software is ready for payday filing? All major software companies claim to be ready, but desktop versions require a software upgrade at your end. The first time you sign in, you will need to allow the software to access IRD with your MyIR login and password.

The minimum wage increases to $17.70 per hour on 1 April 2019. Review all wages and salaries, not just those on minimum wages.

Consider how changes in your business will affect your income tax and talk to us about estimating your provisional tax or spreading your tax payments differently across the year.

 

It's time for some housekeeping: tidy up your end of year accounts and prepare for the year ahead. If you have any questions or concerns please contact us at JDW, so we can help you.

Download a PDF version here or contact the author by email. Like our Facebook page for regular tips.

Serena Irving is a director in JDW Chartered Accountants Limited, Ellerslie, Auckland. JDW is a professional team of qualified accountants, auditors, business consultants, tax advisors, trust and business valuation specialists.

Should I Change Accounting Software?

Article – Should I Change Accounting Software?

By Serena Irving


Photo by rawpixel on Unsplash

Are you using the most suitable Accounting Software for your business? If you are using a Desktop product, do you have the most recent version?

These are valid questions, considering:

·         Payday filing will be mandatory from April 2019

·         MYOB is ceasing support for its Desktop products from September 2019

·         Banklink and Xero have both put up their fees recently

Mandatory Payday Filing

From 1 April 2019 employers will be required to provide details of employees' incomes and details of new or departing employee within two working days of the payday. For employers with payday filing capable software, this will be either an extra push of the button through the software's gateway service (API) or a file download which can be uploaded using your MyIR login. This is very similar to how GST is lodged through the accounting software.

We suggest that you opt in early for payday filing as soon as your payroll software provider is ready. If you have any implementation and training issues around the software, the IRD and software provider helplines will be extremely busy in April 2019. By early adopting, you will be ahead of the rush.

MYOB Ending Desktop Support

From 30 September 2019 MYOB will no longer be providing compliance updates, feature patches or product support for its Desktop version of AccountRight v19. If you are happy to continue using the Desktop version you can still do so, but you may be missing out on additional functionality that the Online version has available. This may be the best time to move to a cloud-based solution because MYOB and Xero are offering free migration to their products.

Banklink and Xero Fees Increased

MYOB increased its Banklink subscription fees in January 2019. An insider has suggested that MYOB is gradually phasing out Banklink in favour of its MYOB Essentials Connected Ledger option, which is in the cloud, has more functionality and daily bank feeds. Other alternatives to Banklink are Xero Cashbook available only through Xero Partners such as us, and Reckon One Basics with Bank Reconciliation.

We will contact our Banklink clients before 1 April 2019 to discuss options.

Xero increased its Standard and Premium plans in late September 2018, soon after adding Xero Expenses to its Standard and Premium plans. We recently achieved Xero Gold Partner status, so our 25% discount which we pass onto our clients, will absorb most of the price increase.

Why Accountants Prefer Cloud-Based Online Software

We prefer online software to desktop options, because we are accessing the same data that you are working on, from wherever we are. No need to send us backup files, post year end journals. We can sign in any time of the year, so we can help you with issues and see how your business is tracking on a regular basis.

You get a high-quality product with dashboards to show your business health, real-time tracking of your customer balances and cashflow. No need to install new versions of software. Access your accounts from most devices, anywhere, as long as you have internet. Xero is introducing automation and machine-learning capabilities which will speed up your processing time.

Our preferred cloud-based accounting providers are Xero, MYOB and Reckon One. Their software is written for the NZ tax system, easy to learn, and rich in functionality. For micro-businesses there are some good free options, like Wave.

How Do I Move Accounting Systems?

Consult us first to help you choose the right accounting system and to ensure the transition is smooth. We have several years' experience and can help you to avoid the pitfalls.

Before switching accounting systems, make sure that the old system is as tidy as possible. Delete old contact and inventory records, tidy up the chart of accounts. Make sure that your bank, debtors, inventory and creditors balances are correct as at conversion date. Ideally choose a year end for your conversion date, otherwise a GST period end would be the next best option.

 

If you are moving from Banklink to MYOB Essentials Connected Ledger, or from MYOB (Desktop) AccountRight to MYOB (Online) AccountRight, MYOB will do the transition for you, for free.

http://help.myob.com/wiki/display/ar/Upgrade+to+the+new+AccountRight

If you are moving from MYOB (Desktop) AccountRight to Xero Standard or Premium, Xero's Jet Convert will do the transition for free, if you sign up before 31 March 2019. There are extra charges if you use tracked inventory, multiple currencies and/or need data beyond the previous two years.

https://www.xero.com/nz/freemove

For other types of migrations, we have skilled staff and contractors who can do this for you and train you in the new system. Contact us for a quote.

Download a PDF version here or contact the author by email. Like our Facebook page for regular tips.

Serena Irving is a director in JDW Chartered Accountants Limited, Ellerslie, Auckland. JDW is a professional team of qualified accountants, auditors, business consultants, tax advisors, trust and business valuation specialists.

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