I live in Melbourne, Australia where our tax year finishes at the end of June. That’s just three weeks from now and lots of people are busy making sure they have their business affairs in order before the end of the financial year (EOFY). So, what should you be thinking about as the tax year wraps up? Here are 5 actions to take before EOFY.
Action 1 – Understand the profitability of your business. It helps to be across the profitability at all times of the year, but especially just before the end of the financial year. To understand profit, the main drivers are sales minus costs. Work out your total sales income, and subtract your total costs to get a simple understanding of your business profitability. The amount of tax you will pay will depend on the tax rate and how much profit you’ve made.
An understanding of profit will help you understand your likely tax bill with time to do something about it
Action 2 – Consider purchasing new assets. Once you understand the level of profitability your business has achieved, you will have an idea of how much tax you will have to pay. To reduce the amount of tax you can increase your expenses by buying new assets. For example, you could purchase a new camera body or lens or computer which would increase your costs. (There are rules around what things can be expensed versus what needs to be capitalized and depreciated, so have a chat to your accountant before you go shopping). Here in Australia the retailers understand that there is an increase in business spending just before the end of financial year, and that’s why you will see a lot of ‘sale’ activity in June.
Action 3 – Review your sales and marketing activity. The primary difference I see between financially successful photography businesses and unsuccessful businesses is the effectiveness of their sales and marketing activity. The end of the financial year is a great time to assess whether your activity is working or not. Be honest. Most have significant room for improvement. The good news is that with improvement it will generate more business for the same amount of effort. Take the time at the end of the tax year to pause and reassess.
Financial year end is the time to assess the fitness of your business
Action 4 – Build a plan for the new year. Big business doesn’t get away with drifting from one year to the next without have budgets and a plan to achieve them. And they shouldn’t – they have shareholders who will hold them accountable. Budgets and plans bring structure and purpose to their activity – and those should be used in small business too. Take the time to put together a budget and a plan before the new financial year starts.
End of financial year is a great time to make a plan for the new year
Action 5 – Resolve to act differently. I have never come across a photographer who is serious about their business who says ‘I just want things to continue the same as they are today’. Everyone wants to make more, or work less, or both! To get a change in outcome you have to change what you are currently doing. You need to resolve to act differently if you expect a different outcome. Make that decision today and be ready to act in the new financial year.
Thanks for reading 5 actions to take before EOFY. May you have a prosperous year ahead!