Tax Time Deadline: Review Your Accounts And Reconcile Now
This post first appeared on the MYOB blog titled ‘Countdown to tax time: Review debtor accounts, creditor accounts and reconcile‘.
Let the countdown begin!
Online accounting software has now revolutionised the way bookkeepers and business owners manage the accounts and prepare for End of Financial Year (EOFY). Products such as MYOB AccountRight and MYOB Essentials have made this all too easy.
EOFY can be stressful, particularly for those who don’t plan ahead. The ATO requires Australian business to submit a number of compliance obligations for 30 June 2016 within timelines. Failing to plan means you could get caught out and have penalties imposed upon you or your business.
Be stress-free as possible by keeping your records up to date. To achieve this implement great systems around your business finances.
Here are five simple strategies you could use:
1. Strive for a paperless office
Say goodbye to paper filing with innovative tools available in accounting software like MYOB Essentials and AccountRight’s ‘In Tray’.
It enables businesses to automatically receive, store and link electronic ally formatted bills and have the program record the details of the bill with minimal data entry at the same time.
2. Keep up to date and organised
Collate, process and file receipts, paperwork including bank/credit card statements and file chronologically digitally where possible.
It is important to keep records and books clean, so nothing goes astray and it makes for a stress-free EOFY.
Try to avoid using cash as the receipts that prove the spend can be easily misplaced, so opt for bank or credit card transactions where possible. Another solution is to take photos of the dockets as proof of expenditure.
Daily record keeping means that everything is kept up to date. If everything is organised, the end of financial year will be much less stressful.
3. Reconcile, reconcile, reconcile
Live bank feeds mean that reconciling accounts has never been easier.
If you have unreconciled items sitting in any account, investigate early.
Reconcile any accounts that you can – for example, all clearing accounts should be reconciled back to zero, BAS accounts, superannuation payable, PAYG payable, customer and supplier deposit accounts are all able to be reconciled.
Ideally, you should be able to prove the balance of every account in your balance sheet so that all will be in order if an audit should take place.
4. Review Debtor account
Ensure your debtor accounts are reconciled to your general ledger account. If not, you will need to correct this by running a report in MYOB Essentials called ‘Sales Reconciliation’ and AccountRight called ‘Receivables Reconciliation Summary’. This will ensure you have no “out of balances” ie the total of your outstanding invoices equals the balance of your trade debtors account.
If you do have an “out of balance” you will need to identify why that is and correct it. Check for any sales orders sitting in your accounts and if they are going to be supplied. If not, you may have to clean these out.
Review whether orders are fulfilled. If the goods have been supplied, the order should be converted to an invoice. Also check to see if the orders are fully paid it, as these may need to be converted to invoices too.
Review all debtors in your list and if there are any that you are unlikely to be paid. You may wish to clean these out by writing them off to a bad debt account. Generally if an invoice has not been paid after 12 months and you have made reasonable attempts to collect payment, then the debt can be considered as bad.
Although not necessary for EOFY, it may be a good time to review whether your debtors are adhering to payment terms and implement better procedures for payment collection if debtors are falling outside the terms. It is a good time to contact outstanding debtors to collect payment too, as they often will pay prior to EOFY in order to be able to claim a tax deduction in the current year.
5. Review your Creditor account
Like your debtors, your creditors also need to be reviewed and balanced to your general ledger account. This is done by this by running a report in MYOB Essentials called ‘Bills Reconciliation’ andin AccountRight called ‘Payables Reconciliation Summary’ to ensure you have no “out of balances”.
If you do have “out of balance” you will need to identify why that is and correct it.
Check purchase orders to see that they are still current. If not you may have to clean these out.
Review whether purchase orders are fulfilled. If the goods have been supplied, the order should be converted to a bill. Also check to see if the orders are fully paid it, as these may need to be converted to bills too.
Review all creditors in your list and if there are any that you are unlikely to pay, then you should delete or reverse them. You may identify duplicate entries while going through this process.
Additionally, you should reconcile your supplier bills against the supplier statements. The outstanding bills on the statement should agree exactly to the bills showing as owing in your accounting file. And all supplier bills should be entered to the end of the financial year so that all businesses on an accrual basis can claim the associated tax deduction for the expense.
By following these tips, your EOFY work will be complete more quickly and with less stress. You should feel confident that the accounts are an accurate reflection of the business’s financial position.