Prepare for the end of financial year
You don’t have to wait until June to start preparing for EOFY – there are things you could do today to make your life easier come 30 June.
This is something I tell all my clients once we are into the last quarter of the financial year.
This is because I’ve seen many, many business owners in a panic over the years as they leave their end of financial year preparations to the last minute.
However, you can get a clearer picture of your financial situation today by making an appointment with your accountant for an interim review of your finances.
This will allow you to do the important tax and strategic financial planning which will make life so much easier – but there are a few things you need before you put your EOFY game plan into place.
Reconcile your accounts
If you’re using MYOB Premier or Accounting version you should have MYOB BankFeeds set up.
Many of my clients who use bank feeds do daily bank and credit card reconciliations, however you also need to reconcile loan accounts and petty cash accounts.
If you’re using an electronic banking or clearing you should reconcile these too.
For any of you that are in retail and are using a Cash Drawer or Undeposited Funds account, it’s really important that this is regularly reconciled.
I had an experience with a client who engaged our services and he had never reconciled his Undeposited Funds account.
When we took over his bookkeeping his accounts showed he had over $60,000 in this account (which of course it didn’t).
It took hours of work to work out where it had gone wrong over the years.
We eventually discovered he had not been taking up discounts and income values correctly since he had started the business.
This goes to show how important it is to reconcile all accounts regularly, it can pick up errors that may have a significant impact on your financial reports which in turn, could lead to you making incorrect financial decisions.
Reconciling payroll is an important process that must be done before issuing your payment summaries at the end of the financial year.
It’s a great way to identify coding or payroll processing errors that could lead to incorrect figures displaying on your employee’s payment summaries as well as incorrect values in the GL Accounts.
Some common mistakes that can cause issues with payroll figures are:
Incorrect handling of returned pays
Many people will receive money back into the accounts for a returned pay, but still code it to a wages account rather than doing a proper transaction reversal, then they will re-process a new pay transaction. This means incorrect wages are reported.
Review your Working Capital
What is Working Capital? Basically, it’s the money your business has on hand to cover the day to day costs and expenses in your business such as purchases, payroll and overheads.
Business owners that don’t have working capital often find themselves worrying about paying bills and meeting payroll obligations.
If you’re using great features in MYOB Premier or Accounting such as click to pay invoicing and MYOB BankFeeds, it’s an easy process to analyse your working capital as your accounts should always be up to date.
You can quite simply review your Balance Sheet to calculate Current Assets (cash at bank, accounts receivable, inventory, short-term investments) and deduct your Current Liabilities (accounts payable, payroll and ATO liabilities) – the difference is your Working Capital.
There are various factors that could cause a shortfall in Working Capital in a small business.
Some businesses find they have seasonal fluctuations and sometimes it’s caused by expansion costs.
Although it is essential to review working capital at the end of the financial year, it’s good practice to analyse this regularly throughout the year.
It allows you to make better financial decisions for now and for the future.