The end of the financial year is approaching, and that can be daunting for small business owners. You might be asking yourself questions like: What state does my accountant need my books to be in? How can I reduce my accountancy fees without giving myself a headache?
There’s lots you can do to get your books in good shape for your accountant. If you are looking for someone to help with this (and lower your overall accountancy bills by doing so), we’re here to help. But for those of you who like to do it yourself, we’ve put together a list of five simple tasks you can do to wrap up for the end of the year. (Bonus: your accountant will love you for doing these tasks!)
Check your coding
One of the first things your accountant will do when preparing your taxes is check where you have coded each of your transactions. Beat them to it by doing this check yourself. You can run a transaction report to view all the transactions within each code. Check each transaction to make sure it is in the correct code and that you have treated it correctly for GST. If you find an error, edit the transaction and apply the correct code! This will not only make your accountant happy but will also mean you have more accurate financial reports to assist with decision making.
Review your Accounts Payable/Receivable
Run the aged payable and aged receivable reports in your accounting system to review this data. Look for any customers that have not paid you yet. Are they overdue? Do you expect to receive these funds from the customer?
When you don’t expect to receive funds from a customer, this is called a Bad Debt. Write these Bad Debts off prior to the end of the year so you do not have to pay tax on that unreceived income.
Check the aged payable report for any bills you have not yet paid. Also check for bills that you have paid but are still showing on the aged payable report; this indicates you have coded the payment incorrectly. Go back and find the payment to allocate it against the accounts payable.
Reconcile your bank accounts and credit cards
Your accounting system will show you the balance of each of your business bank accounts and credit cards (if you have any). At the end of the financial year it is good practice to compare the bank balances according to your accounting system to the bank balance according to your bank statements. If there is a variance between the two balances, it’s time to figure out why, and correct it! This is another big check that your accountant will always do. They could spend a few expensive hours trying to fix the balance. Make sure the balances are correct before your accountant looks at it to save you some money!
Stock on Hand
Stock on Hand is all of the inventory items that you have available to sell at the end of the financial year. This could be clothing items for your clothing store or the number of livestock on your farm.
You’ll need to calculate your stock on hand value and provide this information to your accountant. To calculate your stock on hand, add up all of the GST exclusive cost prices for each item. If the total value is greater than $10,000 then this needs to be adjusted for in your financial statements. Stock on hand should be counted as close as possible to your end of financial year.
A quick note for farmers: If you have livestock on hand at the end of the year, simply take note of how many of each age group you have. Livestock is valued at a set rate by the IRD and the stock on hand value will be calculated by your accountant.
Collating Documents
You should be keeping all invoices and receipts relating to business transactions throughout the year. Double check that you have all documentation relating to:
- Asset purchases
- Insurance
- Legal fees
- Any new loans or hire purchases
- Dividend payments
- Bank statements showing end of year bank balances
- Details of any new investments
Still not quite sure where to start? Found a problem you don’t know how to fix? Reach out! We can answer questions, fix problems, or do a full End of Year Review of your accounting system.
