With end of financial year (EOFY) fast approaching, the Tailored Accounts team is counting down to the last day of the financial year! Offices of accountants and bookkeepers will be filled with the hustle and bustle of time-critical challenges. You may wonder why EOFY often becomes such a hectic time for us. I hope this article can shed light on the inner processes of EOFY preparation.
Having worked in the accounting industry for more than a decade, I consider EOFY preparation as a chance to place extra effort to ensure accurate, up-to-date numbers as well as presentable reporting. These outputs are the results of, what I call, a magical touch on your books.
The following list articulates the main examples of magical touches that we exert to ensure your books are in the best order:
1. The year-end payroll
During the financial year, we process 12 – 52 payrolls for our clients subject to their pay cycles. At the end of each month or quarter, our team reported the payroll information to Australian Taxation Office (ATO), including Gross Wage and Tax details. In addition to the accurate reports regularly lodged to the ATO, payroll reconciliations at year-end takes care and attention to ensure all requirements are met. Here are the core tasks that our team has been undertaking in the process of EOFY preparation:
- Final super payment runs must be done before 25th June each year to ensure the last super payment is eligible for a tax deduction in the current financial year. Final salary sacrifice payment runs must happen on or before the same date to ensure all salary sacrifice arrangements are captured in the current year’s payment summary for employees. These particular tasks will require a few extra hours of work during the EOFY period.
- Payment summaries are to be communicated to employees via email/post before 14th July. We ought to undertake a full year payroll reconciliation to ensure the accuracy of the information in payslips, Business Activity Statements (BAS), and payment summaries. This significant task requires half a day at a minimum, depending on the number of employees and complexity of the payroll structure.
- Payment summary reports must be submitted to the ATO before 14th August in the following year. The task usually takes an hour to complete. To illustrate, 300 clients at Tailored Accounts are interpreted into a budget of minimum 300 hours for all payment summaries with no mistakes allowed.
2. The last GST & BAS of the financial year
As you may be aware, April-June BAS is not due until 28th July in the next year. Regardless of the due date of BAS, our team finalises the last quarterly BAS before 14th July to reconcile balances between payslips and BAS. To prepare the end of the year BAS, the assignments below must be carefully completed:
- Our team undertakes all reconciliation processes for the last quarter BAS as usual, requiring half a day.
- We review all quarterly sets of BAS submitted during the financial year to reassure the integrity of your financial data since all adjustments need to be made in the final BAS. This task usually takes half a day.
3. The final review of all other accounts
After the big year-end reconciliation processes of Payroll and BAS, our team also reviews every single account in your Trial Balance prior to closing your books. If your business has 50 accounts codes, for instance, we will need to thoroughly go through all 50 of the accounts. To deal with the sheer volume, the Tailored Accounts team implemented the effective way to review the accounts as follows:
- We reconcile final bank account, credit card, petty cash & term deposit first. These reconciliations are usually completed by 30th June; however, a good summary of the whole year bank reconciliation will be prepared separately to support your tax agent in finalising their files. This task takes up to two hours.
- We undertake stock-taking and complete the asset register. If on-site, physical stock-taking is required, it will take from three hours to a day for completion. Based on the volume of stocks and assets, our team may require another half a day for their reconciliation and adjustment.
- We reconcile debtors’ information, normally taking half a day. This task includes a follow-up with debtors to identify doubtful debts and subsequent end of year adjustments.
- Our team reconciles creditors’ information, which usually takes less time since most businesses pay their creditors regularly.
- We reconcile loan accounts where businesses have internal loan transactions with directors. Preparing interest schedules and calculating a final balance should be completed before 30th June, which will then be rigorously reviewed for another two hours.
- Our team prepares consolidation of all accounts after the reconciliation of Payroll and BAS, taking an hour to methodically consolidate them. The items include Salary & Wages, PAYG withholding, Super payable, Super expenses, Leave entitlement, GST, Sales, Capital purchases, Non-capital purchases, and PAYG tax installments.
- We finally analyse other accounts from the Statement of Profit and Loss, including a Budget versus Actual comparison and discrepancy identification. This task will require up to four hours as Tailored Accounts places its accuracy as a top priority.
Total hours of required effort tend to rely on a number of factors, such as the size of your books, your accounting software, and the maintenance status of your accounts.
For instance, a small business, with up to five employees and having less than $500,000turnover,would need three hours for the year-end payroll processes, three hours of finalising all sets of BAS, and another six hours for other EOFY tasks. An additional provision of three hours is required for assisting your tax agent or auditor.
Accordingly, one-hundred small business clients can be translated into a budget for 1,500 hours (equivalent to 6.5 full-time staff) at a minimum for six weeks prior to EOFY. This response, hence, addresses the original question, "Why are accountants and bookkeepers busy during the EOFY period?"
At Tailored Accounts, we adopt the latest technology to minimise manual reconciliations. The purpose of implementing the most recent systems and processes is to save time and cost during EOFY period, consequently providing you with optimal savings. With strong attention to details, the Tailored Accounts team and I have always delivered neat, error-free and presentable reports to more than five-hundred clients since 2008. As the EOFY period is now approaching, this is an opportunity to set your financial reporting right by contacting Tailored Accounts today!