Countdown to Tax Time: What you need to do 8 weeks from 30th June – Let’s reconcile!
Don’t be scared by 30 June. All too often it’s a time of the year most businesses dread as they associate it with onerous tax obligations and that grudge spend with their accountant. Sure, if this is your mindset it is easy to see this time of the year as a burden. Well it’s time to change your mindset – think about this time of the year to take stock of what has happened in your business and what fabulous opportunities await you in new financial year.
The first mind shift is to start preparing your numbers for yourself and not just to prepare your BAS’s and annual tax return – know your numbers, understand your numbers, use them all year round for monitoring your performance, for decision making, for preparation of your BAS and then hand them over to your accountant after 30 June for them to weave their magic (surely this represents better value to you and your business).
Now is the perfect time to start getting everything in order for you to finish the year off well and start the new financial year off on the right foot. Over the next eight weeks, I will be providing tips that my clients have been relying on for years, to ensure that the data in your accounting file is accurate and you can start placing greater reliance on the reports your generate from 1 July. Unfortunately, unless your accounting files are up to date and accurate, the reports being generated may be misleading and will not provide you with the information you need to make informed business decisions. You know the saying “garbage in, garbage out”, well don’t let this apply to you!
If you find problems with your file or need a little more direction, then maybe an SOS phone call or email to your accountant is needed. If you are currently using cloud based accounting software, your accountant will be able to jump into your file and resolve issues for you. Don’t forget to ask them for feedback on ways you can improve how your enter your data as this will be invaluable next year as you start to generate regular reports to monitor your profitability etc.
This week you should review every account that you are able to reconcile. As a guide, the following balance sheet accounts should be reconciled to 30 April 2015 and then again on 31 May, including:
- Bank accounts
- Petty cash accounts
- Electronic clearing accounts
- Payroll clearing accounts
- Credit card accounts
- Loan accounts
- Hire purchase and chattel mortgages (if you have schedules)
As far as actual bank accounts, basically that is any account that you receive a bank statement for or any account that comes up on your internet banking screen.
This practice is a practice you should be doing each month in order to cut down your workload at year end and will ensure that your numbers will be more accurate going forward.
Go into the banking reconciliation module and bring up the first account to reconcile. In MYOB AccountRight go into “Reconcile Accounts” and select the account on the drop down menu
What you are looking for is accounts that do not balance or accounts that have unreconciled items showing.
If there are outstanding deposits or outstanding cheques on your Reconciliation Report, you should review each of these transactions thoroughly. Perhaps the transaction has been entered twice and the outstanding transaction merely needs to be deleted or in the case of a cheque, this cheque may be stale and needs to be written-off (either delete the transaction if in the current year or a credit note may need to be raised).
If you do have expenses that have been entered twice, then that would mean that the profit that is showing on your Profit & Loss Statement will actually be more than what you think it is! In the case of income, if you have entered a sale or a payment twice, your profit will be less than you think it is!
If you can’t get the particular account to come up as an account to reconcile, then you will need to change the account type to a “Bank Account.” In MYOB AccountRight, go into Accounts Tab, select Accounts List, find the account and then change the account type.
If you don’t know where to start or there are lots of transactions from prior years that haven’t been reconciled, ask your accountant. They would’ve reconciled the account up to 30 June 2014 in their system and it just may not have been updated in your system.
The information provided here is of a general nature for Australians and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’s circumstance will vary.