End of Financial Year Stocktakes are stocktakes which aim to provide accurate stock on hand figures for the business tax returns. The stocktake itself does not need to be performed on June 30th, however if performed within a few weeks the stocktake figures can be modified simply by taking the sales and purchases into account from the intervening time and applied to the result. This enables the business to satisfy the ATO requirement that every business supplies them with accurate stock figures – here is an excerpt from the ATO legislation ‘the Income Tax Assessment Act 1936 requires that the value of all trading stock on hand at the end of the year of income be arrived at in order to calculate the taxpayer’s taxable income. The Act does not stipulate that it is necessary to do a physical stocktake but in the majority of instances there is no other way of arriving at an accurate value and a physical stocktake should be completed. This should be done as close as possible to the end of the year.’
We have performed EOFY stocktakes for some of our clients for over 20 years, and provide a comprehensive and detailed report counted by a third party.
THE BENEFIT OF AN ANNUAL THIRD PARTY STOCKTAKE:
Not only does the annual stocktake satisfy the requirements of the ATO but it also validates the trading figures of the business!
When looking to sell the business the business owner will provide a set of figures to determine the value of the business. These figures are validated by an annual externally conducted stocktake. In our experience businesses which neglect to have an accurate stocktake often find to their shock that there is either a massive shortfall in the stock figure – which can actually put them into financial difficulty and additionally calls into question the value paid for the business by the purchaser – which can lead ultimately to legal action! Please understand all professionals dealing with business changeover are protected by their terms and conditions – therefore the responsibility and liability sits with the vendor of the business.
A third party annual stocktake validates the business trading figures and therefore the brokers valuation of the business – if the stocktakes are conducted internally there is a massive trust issue when believing figures. Doing an accurate annual stocktake also avoids some of the unpleasantness that can happen when the changeover happens as the business owner actually has a good handle on their inventory.