Why does end of financial year processes matter?

Right now, businesses in Australia are in the midst of checking and making sure that their year-end accounts and records are all in order. This also includes creating statements of their year-end position.

This is all part of the comprehensive financial reporting that the Australian Taxation Office (ATO) requires. Essentially, this ensures the business is in the best financial shape possible going into a new financial year.

Year-end can be a stressful time so the entire finance team must be ready to crunch numbers and manage any potential issues that appear. As such, they cannot forget that the groundwork they do in advance can make all the difference. This includes closing each monthly financial period properly throughout the year so that discrepancies are picked up early on.

When done correctly, this will help reduce errors in all accounting processes.

Once everything is properly completed, the leadership team can make robust decisions and plans thanks to the in-depth insights they get from the year-end analysis of their financial management. At the same time, finance teams can be confident that legislative responsibilities have been met correctly, on time, and without potentially causing any penalties.

As end-of-financial-year (EOFY) comes around every year, it's also an opportunity to take a longer-term view of your financial position and plans.

What is a year-end accounts checklist?

Managing the end of a financial year for your business involves many specific tasks, each of which needs to be completed accurately and on time. It’s important that everything is checked and that any loose ends are tied up well before the financial period is closed. Using a year-end accounts checklist can make a difference as it helps everyone focus their mind on the job at hand and help makes sure nothing gets missed.

To help your business with this process, we have prepared an easy-to-use EOFY checklist to help you and your team organise what needs to be done.

Read our EOFY checklist to tick off each item as you go.

10-step Year-end Accounts Checklist

The end-goal of all finance teams is to identify and resolve any irregularities, ensure everything balances, and that all data-sets are properly in their respective places to close off the year. The EOFY checklist below outlines 10 key areas to cover.

1. Process employee bonuses – If you’re giving annual bonuses, don’t forget that these are subject to income tax. That means making sure the bonuses are included in the correct financial year.
2. Safeguard cash balances – Consider postponing payments to suppliers by a short period to keep cash balances as high as possible for year-end. While supplier liability will be logged on the balance sheet, a higher cash balance is preferable and helps to improve credit agency ratios. Do take care to maintain open communication with your suppliers and safeguard cash balances whenever possible.
3. Employee expenses – All employee expenses (including any home working expenses) must be processed before the end of the financial year and included in costings for the correct tax year. This will help to reduce your corporation tax liability.
4. Review control accounts – Review wages, income tax, Pay-As-You-Go (PAYG), superannuation, and GST control accounts and ensure they reflect accurate liability positions. Also check prepayments, accruals and deferred income. If your balance sheet is incorrect, your profit and loss account record is likely to be incorrect too.
5. Balance sheet analysis and profit and loss – Use your accounting software to generate a balance sheet and profit and loss reports and then spend some time analysing and identifying what your business did well, what requires more attention, and where improvements can be made.
6. Cash flow analysis – Accounting software makes it easy to create a cash flow statement. Use this to analyse and forecast, taking into account upcoming company plans as well as any changing legislation on the horizon.
7. Corporation tax estimation – Calculate an accurate estimate of the corporation tax liability using the applicable rate and include this in your cash flow forecast.
8. Tax payment extensions – Decide whether a tax payment extension will be needed. If it is, you will need to consult the Australian Tax Office (ATO) as soon as possible to avoid having to pay a penalty.
9. Client list review – Ensure the contact information you have for your current client list is up-to-date and delete any unnecessary data as per adhering to local privacy Year-end is also a great opportunity to thank your clients for their business and look forward to the new year.
10. Set goals for next year – Take time to review performance against goals for the last financial year, taking into account the factors that had a positive or negative impact on the outcomes. With this as context, you can now set new objectives for the coming year in line with business plans and goals.

With all the points in view, it is a matter of making sure your business ticks the boxes to ensure the financial year-end processing is done properly.