5 Secrets to a Carefree EOFY

Not to spoil the punchline of this story, but if you’re expecting to be busy with your financials at the end of the financial year (EOFY), you should be asking tough questions about your financial processes now. This year, 30 June should feel no different from 30 May or 13 October or 1 July. You get the picture.

Here’s how you can make that happen.

EOFY Tip #1: Do Your Bank Rec

Keep your bank reconciliations up to date! We’ve all had a Sherlock Holmes moment when it comes trying to piece the accounts puzzle together—tracking a fading Cabcharge receipt through old diaries and scribbled annotations. With cloud software, there’s no excuse for filling a shoebox with paper and saving it up for a frantic run down memory lane when tax time rolls around.

A great small business will be using the best tools available—Xero, Receipt Bank, and the rest—to have up-to-the-day financials. Looking at the year in review, not the present and the future, is holding back your business.

EOFY Tip #2: Review Reports Now

Look at your balance sheet at least once before the end of the financial year. Small businesses will often rely on their profit and loss statement (P&L) to take a sounding of their business health. But your P&L is only a rear view mirror. It’s your balance sheet that gives you a way of looking forward.

If you want to check that, ask your accountant whether they’d buy a business based on its P&L or its balance sheet. They’ll tell you the balance sheet is what shows whether the future for the business will be smooth going or bumpy.

That’s because the balance sheet is where the good and the bad are:

  • The good: Receivables (yes, please), cash on hand (that's the way we like our cash)
  • The less good: Your liabilities—what do you owe? Do you have PAYG outstanding?

If your balance sheet isn’t up to date, it needs to be. You can hope your future will be as good as or better than your past (as shown in your P&L) or you can know what it will be like by having a current balance sheet.

Some Balance Sheet bookkeeping tips for those who may not have done Accounting 101 at university:

  1. Do a reasonableness check on what’s on the balance sheet. Is your bank account showing up in your accounts with roughly the right amount, e.g. it’s not showing on your books with $1 million when there's only ever $10k in the account? If the amount showing is in the rough vicinity of where it should be, you don’t have to worry. Your bookkeeper and accountant will smooth it all to the cent. If there's a significant discrepancy, it's time to ask questions.
  2. Look for old news. Are you showing a loan—car loan, director’s loan, etc.—that was paid out years ago? Is there an asset in there that you no longer have?
  3. Make sure each business bank account is mapped to its own account in your books. That way you have an accurate picture of your banking.

EOFY Tip #3: Check Employee Details

Check your employees are actually on the books. You have just 14 days from the end of the financial year to issue your employees with payment summaries. You won’t be able to do that if there are errors in your records.

  • Are employees’ addresses complete (and up to date)?
  • Do you have everyone’s tax file number (TFN)?

Run a draft end of year pay run now. You’ve got plenty of time to find any errors, so sending out payment summaries after 30 June is a breeze.

EOFY Tip #4: Receipts, receipts, receipts

Receipts are only the solution to your bookkeeping accuracy if you:

  1. Have them
  2. Can read them (those thermal prints love to fade into illegibility)
  3. Know what they’re for

Use Receipt Bank or the Xero filing cabinet (attaching a scan or a photograph of the receipt to a bill or expenses claim). That way you can’t lose your receipts, and your accountant has instant access to the source if they have questions.

EOFY Tip #5: Auto-Allocation

Set up the auto-allocation rules in Xero or your cloud software

Whether you’re a bookkeeper or not, there’s something insanely rewarding about clicking “okay” repeatedly to achieve 100% reconciliation of your bank accounts in 30 seconds or less. You get there by setting up auto-allocation rules—“if the payee or recipient is x or y, then allocate to z account.”

You should be doing this for any receivable or payable that you expect to see more than once. If you haven’t done it already, it will change your (bookkeeping) life in two ways:

  1. Bank reconciliation becomes like a stress-relieving game of whack-a-mole.
  2. Even if you allocate an expense to the wrong account, you’ll be allocating wrongly consistently. And when you’re consistent in your mistakes, your accountant can find and fix them all in one place instead of hunting through your books. That can save hundreds (if not more) in billable time.

What every day should feel like, not just 30 June

Having financial records that you can make sense of at a glance means:

  1. No frantic paper chasing and clue hunting at any time of year, let alone when government deadlines and penalties are looming
  2. Better decision making because you’re looking at a current picture, not one that’s months old

With Xero, Receipt Bank and bookkeepers who can be working on your books every day, not driving in once a month, there’s no reason you can’t feel well-informed and on top of your financials every day, not just when the ATO is breathing down your neck.

Setup a time for a chat if you would like help getting on top of your numbers.

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Topics: Bookkeeping