The five most common mistakes SMEs make at tax time

Reprint from SmartCompany.com.au 15 June 2016

ENGEL SCHMIDL / Monday, June 16 2014

“Miscoding bank transactions, failing to keep accounts up to date and losing touch with your accountant are among the most common slip-ups made by SMEs at the end of the
financial year, according to a survey released by the Institute of Public Accountants and MYOB this week.

The survey of IPA members found miscoding bank transactions (65%) and failing to keep accounts and records up to date throughout the year (58%) were the most common mistakes made by small businesses.

But Tony Greco, general manager technical policy at the Institute of Public Accountants, told SmartCompany despite the survey results, SME operators failing to keep in contact with their accountants throughout the financial year and making coding errors in their tax return were the two biggest pitfalls.

Clients not making contact with their accountants will not know what changes they need to adjust to and may miss things they need to factor in to their returns and this cannot be corrected once the clock ticks over, says Greco.

Additionally, coding errors can result in overpaying tax and not minimising a client’s tax liability,he says.

These errors can be fixed retrospectively. But accountant’s time is valuable and the less error the more time the accountant has to value-add to the client’s business.

When asked about the most important steps business operators could take to prepare for the end of the financial year, accountants ranked receiving advice on major financial transactions throughout the year as they happen (sales of land, shares, etc) first (91%).

This was followed in “equal second place” by responding to requests for additional information in a timely manner and providing clarity and consistency of information in support of their financial statement (84%). Third was ensuring all documents sent through are labelled and organised.

IPA chief executive officer Andrew Conway said in a statement the IPA encourages small businesses to draw on the expertise of their public accountant beyond compliance reporting and income tax returns.

Engagement with their accountant during the course of the year can be very beneficial, as they can access strategic business and planning advice to help them become more profitable, said Conway.

They can also be provided with more holistic service including assistance with sales growth forecasts, cash flow management, accessing funds and succession planning, he said.

The top five mistakes made by small businesses at the end of the financial year, according to the IPA and MYOB:

1. Miscoding bank transactions (65%)
2. Not keeping accounts and records up-to-date throughout the year (58%)
3. No contact with their accountant over the financial year (58%)
4. Does not provide enough detailed or supporting information (49%)
5. Not fully trained up on accounting software functionality (46%)”

If you have any concerns or questions regarding your End of Financial Year procedures or reconciliations, contact Tony at Jaguar Accounting Group on 08 8212 0217 or info@jaguargroup.com.au.