Issue link: http://viewer.e-digitaleditions.com/i/131994
forefront Crunch time The end of the financial year means lodging your tax return, but it's also a good time to take stock of where your business is heading, writes Oryana Angel. In 2011, in a landmark Australian legal decision, eight executives and directors of Australian retail property ownership and management giant Centro were sued for signing off on financial reports that failed to disclose billions of dollars of short-term debt. While there was no suggestion that the directors were dishonest, the Federal Court ruled that the directors had breached their duties when they failed to notice the multimillion-dollar errors in the property group's accounts. This is a situation no company director or business owner wants to end up in. To avoid end-of-financial-year blunders and to boost the bottom line, it's vital to be in the know. Here are some tips to prepare you for the upcoming year's end. Take responsibility Most directors could be caught out in the same way that Centro's were, according to a new Financial Literacy of Australian Directors survey. Alarmingly, the report found that only 14 per cent of directors thought their peers had a good or better understanding of general accounting standards, and nearly half rated their own understanding of foreign exchange and asset valuation as fair to poor. Make sure you're up to date with current changes to laws and accounting standards is the advice of Kerry Hicks, head of reporting policy at the Institute of Chartered Accountants Australia. Accountants should be up to date with the changes, but the burden of responsibility ultimately falls on the shoulders of the person signing off accounts. "They should talk to their accountants before the year's end, making sure they are aware of what changes they can expect, so they are comfortable that changes have been made by their advisers," says Hicks. Check your assets Assets are particularly relevant to small business owners and it's important to get across this area before the end of the financial year, Hicks advises. If the industry is being impacted by economic conditions, business assets may be overvalued. "A huge drop in the market impacts cash flow, and it's crucial to make sure assets aren't impacted," she says. If the economy is roaring along in leaps and bounds, this generally isn't an issue; however, in the current economic conditions, it is relevant. The new carbon tax could be impacting the cash flow of many businesses across many industries, Hicks warns. When preparing for the upcoming financial year, it would be worth digging up last year's accounts, she suggests: "Look into any issues you had last year early on and check any final adjustments you made last-minute. It's better to catch these early." "Assets are particularly relevant to small business owners and it's important to get across this area before the end of the financial year." 54