Some considerations at period-end time

When the time comes to “close off” a financial period, does it feel overwhelming? What are some key things that you can focus on in this process?  

Bank Reconciliations

As you draw each financial period to a close (whether monthly, quarterly or annually) there are some key areas that you’ll be wanting give attention. The first of these is you bank reconciliations.

Your bank reconciliations record all movement of money into and out of your business bank and credit card accounts. The process of reconciliation ensures that what is occurring in your bank is correctly and helpfully being captured and recorded in your accounting software. In this way, your bank reconciliation acts like a kind of “gatekeeper” controlling the information coming into your accounting system.

While your software makes this process quicker, your reconciliation needs to be checked and errors corrected so you don’t end up with growing inaccuracies in your figures that could come back to bite you. (Sometime automation can simply automate mistakes!).

Perhaps when you review past reconciliations, you may find that money has been allocated to the wrong place in the accounting software, or even entered multiple times. If your accounts are incorrectly reconciled, it can lead you to unhelpful reporting, or worse – you or your team could be making decisions that you regret based on wrong information.

Knowing where to look to spot these errors (and knowing how to fix them), can make the difference between you having accurate or inaccurate accounting. So, during the reconciliation review process, it’s helpful to check the reconciliation reports and follow up discrepancies that you find. Resolving these will help you experience increased reliability and usefulness in your financial reporting.

Tracking Reserves

Some of the funds that your business or organisation collect may need to be set aside for specific purposes (for example accruing for upcoming liabilities).

Without good and careful processing of these transactions, it can become quite complicated for your teams to accurately track the movements and balances of the funds and remain compliant with the reporting requirements of your accountant.

Also, it is particularly important that specified funds do not become confused with your general operational funds (which can lead you to misread how much money you have available).

So, as part of your bookkeeping process, you’ll want to be:

  • keeping track of your funds that you have set aside for special purposes or accruals
  • implementing effective and compliant bookkeeping procedures to account for these funds
  • processing the monthly, quarterly or annual general ledger journals required to maintain good records of these amounts
  • getting helpful information and reporting on movements in your fund transactions and balances
  • ensuring that you are correctly treating the different types of funds you have according to your accountant’s advice

Part of this may also involve ensuring your chart of accounts is aligned with this clear accounting process, further assisting your business to see how you are achieving your growth goals.

Checks and Balances

You may be surprised how easily and quickly your accounting system can get out of whack (you may have experienced this firsthand!).

Some of the reasons this can happen to you may be:

  • you have multiple users of the system and your information is being duplicated
  • your new users may be uncertain of how to process your transactions correctly
  • your experienced users may not have the knowledge or time to check the integrity of the system data as they are entering this into your system

So that you are not caught out by unwanted errors like these, why not put in place some additional period-end review that includes:

  • check for extraneous transactions in your system (where things have been entered, but are not showing up in your bank account)
  • checking and reconciling your Wages Payable (ensuring that your employees have received payments in line with your payroll system)
  • checking and reconciling your PAYG (checking that amounts you’ve remitted to the ATO for PAYG match your system)
  • checking and reconciling your Superannuation Payable (checking that what you owe for superannuation has been correctly sent)
  • checking and reconciling your ATO Client Account (checking that your system is accurately aligned with your ATO client account in areas of GST, PAYG, interest and penalties, and that any balances you owe the ATO, or that the ATO owes you, are correct)

Major unplanned adjustments in key areas like these can directly affect your bank account and available funds. And so regular checks of these key places in your system helps keep things in order and alert you to where issues may be occurring before they get bigger.

In addition to these regular checks and balances, you may also benefit from considering some of the more irregular (but important) items that may come up, sometimes only annually, like depreciation.

Keeping track of these items on a regular basis can not only make your accounts more accurate, but also help speed up the process if audit time comes around.

Would you like to explore further topics related to bookkeeping and payroll in your business or organisation? eBook available now:

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