Your end of financial year checklist

With the 1st July fast approach there are a number of small things business can do to not only make the financial year end go smoothly, but also position it for success for the next financial year. Here is a checklist of some of those items – each small but collectively they will make a big difference.

1. Reconciliation of all balance sheet accounts. Make sure they are all completed up to the end of May so that it is not a big job at the end of June.

The reconciliation process will help ensure items are accounted for correctly and doing the reconciliations early gives you more time to sort out any unreconciled items than during the rush at the first few days of July. Accounts receivable and payable, bank accounts and payroll accounts are some normal accounts that can absorb a lot of time to reconcile.

There is also a right way and a wrong way to do reconciliations – if you are unsure how to do a balance sheet reconciliation correctly ask your auditor. Asking the auditor you will both learn the correct way, and save yourself fees for the audit. If you don’t have an auditor that can help then click here for a short video about how to correctly do a balance sheet reconciliation.

2. Ensure all invoices are entered in the accounting system and not sitting in an in tray, a draw or an unopened envelope. Also ensure that all sales invoices have been sent too. If you are getting behind either block some time out in your diary or get a temp in to help you. You will have more time to get up to date before 30th June than after.

3. Accrual, depreciation and provision entries can be posted prior to month end – just one less thing to do at end of financial year. Also get ready for a stocktake – a stocktake will allow you to write-off any obsolete stock and investigate any theft or shrinkage.

Also take advantage of any write-offs deductions and rebates. Review your asset register and be aware of the small business instant write-off and deductions which for the 2015-2016 year have increased to $20,000.

4. You might also consider doing a ‘soft close’ prior to the end of June. A ‘soft-close’ is effectively doing everything for financial year end up to say the end of May – then you have done most of the reconciliations, sorted out and corrected the majority of problems which will make the June 30th close a lot easier and faster.

5. Start preparing and writing reports and commentaries for financial reports prior to end of financial year. You will have most the information you need and where you don’t you can easily go back and insert the information.

6. Sole traders should make sure they know what deductions they can and cannot claim on your tax returns. Prior to each financial year end the ATO usually ‘advertises’ areas they are focusing on through their website, newsletters to tax agents, and in the newspapers. Three main considerations are

a. You have to have spent the money yourself
b. It must be related to your job
c. You must have a record to prove it.

Each year, more than 650 million pieces of data are reported to the ATO by third parties including banks, employers, health insurers, state and federal agencies and overseas treaty partners. They know more than you think.

Each year ATO contacts about 350,000 taxpayers about errors or omissions in their returns and the ATO raised $950 million in liabilities from reviews-audits of these types of deductions last financial year.

7. Backup and secure data outside your accounting system. Also once your accounts have been finalised lock all accounts relating to the financial year so the data remains accurate (and then also backup that data outside the accounting system).

Financial year end is not all about the financial numbers. It is also an opportunity to assess all parts of the business against the business strategy and plans. Being organised and planning ahead will ensure that not only the financial year end process will go more smoothly and without as much stress, but will also set your business up better for the upcoming financial year.