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December EOFY accounting checklist for NFPs
The Australian tax year ends in June and therefore that is a common ‘financial year’ period for many organisations, although some organisations choose to run theirs on a calendar year, especially education-based organisations.
Although the dates change, the EOFY preparation does not. And at this time of year, the education sector has many other competing priorities as schools prepare to close.
We offer some strategic ideas to help you keep on top of your accounts in preparation for a December EOFY, with an accounting checklist specifically for NFPs with a 31 December balance date.
Consistent planning throughout the year
Schedule WIP (work-in-progress) meetings with your team during a quieter part of the month that is devoid of any other deadlines. This will allow you to sit with your support and administration team for 30 minutes to an hour and check in on any ‘road blocks’ in bank reconciliations or payroll, any existing or upcoming projects that may require financial support and to keep running tabs on your balance sheet.
Balance sheet checklist
The balance sheet is an important task to work through, so rather than wait until EOFY time, maintain regular reviews on the bank accounts, petty cash, debtors, asset register and depreciation, payroll-related, advanced income, leases and any other liabilities.
Creating a running agenda to talk through each month may be an efficient way to monitor a balance sheet checklist. Based on a previous blog we’ve published, here is a task list breakdown with a brief outline of the task requirements.
Bank accounts and petty cash
Task aim: to quickly identify any discrepancies or missing documents.
- Run a reconciliation report alongside a live bank feed to immediately spot any outstanding transactions or discrepancies.
- Verify your accounting system balances against the bank-issued statements to identify any data errors in the bank feeds and ensure you have full and accurate data.
- Analyse petty cash, ‘load+go’ card and credit/debit card spend and make sure the spend has the necessary paperwork to support it.
Debtors
Task aim: to check the details of your aged debtors and flag if they are more than two or three months old.
- Check if your accounting software system like Xero has an automatic reminder function.
- Schedule automatic email reminders for your overdue customers.
- Get on the phone and have a conversation with each of your debtors, especially those owing more significant amounts.
- Take action on any persistent non-payers – you may need to write them off as bad debts or engage a debt collector, if appropriate, to pursue on your behalf.
Asset register and depreciation
Task aim: to calculate asset depreciation.
- Use an accounting software tool to calculate depreciation for you, like Xero.
- Check whether there have been any asset sales and record any profit or loss on disposal.
- Check that you have included all new assets on your asset register.
- Reconcile – ensure your asset register value matches the balance sheet accounts.
Payroll
Task aim: to ensure that there are adequate provisions for employee entitlements.
- Do a sense-check of leave applications and leave accruals.
- Maintain regular reviews of:
- Leave accruals
- Superannuation
- Workers compensation insurance
- Long service leave on-costs and probability rates.
- Make sure that payroll clearing accounts are routinely cleared to a nil balance with PAYG, superannuation, wages payable and salary sacrifice payable.
Income in advance
Task aim: to monitor current liabilities as any misstatements could skew the result for the year on your P&L (Profit & Loss) statements.
- Note any income in advance and make sure it is stated correctly in the balance sheet.
- Analyse the income drawdown plan for any funding you have received during the year to understand whether it will be fully drawn-down by EOFY.
- Review funded program P&Ls to ensure you are on track for the result you expect and funds are neither under-spent nor over-spent.
If the funding covers 12 months, you need to make sure the monthly drawdown amount has been adjusted for CPI increases and any other contract variations during the year.
Leases and other liabilities
Task aim: to analyse other liabilities, including accrued expenses.
- Make sure any accrued expenses have been reversed if they have been paid.
- Reconcile your GST account and check your ATO integrated account.
Based on the AASB 16 Leases changes introduced in 2016, you should have agreed how you would treat recognition of your lease liabilities during last year’s audit. If you do not have a worksheet to work out the calculations going forward, ask your auditor, as they each have their own approach.
Other assets
Task aim: To keep a record and update other current assets. These could be:
- Accrued income should accurately reflect funds due to you for work performed in the financial year. This could include last-minute fundraisers where the donation was made on 31 December but doesn’t come through your payment gateway.
- If you have accrued income older than three months, you may need to make adjustments and get them approved.
- Check your prepayment schedule to ensure any payments that relate to the new financial year are treated correctly, with a supporting schedule to guide how you’ll recognise them in the P&L.
Keep on top of stock-on-hand and inventory throughout the year. Do a final stocktake as close as possible to the last day of the financial year. If any clear-outs are required, make sure they’re done before your inventory count is finalised.
Profit and loss analysis
Now it’s time to run your profit and loss report. This will allow you to identify unallocated transactions and sense-check your cost centre allocations. Be sure to correctly allocate any shared costs to the necessary programs, including management fees and management salaries.
Compare your previous P&L reports to identify any significant changes or irregular allocations. Compare to budget also, so you can see how each cost centre compares to original plans.
We know EOFY not-for-profit accounting
So, get in touch with our team of not-for-profit accounting specialists who understand NFP sector complexities and support organisations with June, December and other less-common balance dates.
