Accounts preparation should not be seen just as a compliance, pre-audit or tax return requirement. Businesses that stay on top of their accounting gain a great many benefits.
Having audit-ready accounts indicates a business is organised and has good financial discipline.
Clerical employees are also likely to be more efficient and productive.
One step is simply to take advantage of the work completed every quarter in preparing the compulsory BAS returns.
The calculations done for these returns mean that a significant proportion of the work required to complete a full set of accounts is already underway.
It doesn't make sense to complete the BAS and then put all the calculations to one side so that details are forgotten when final accounts for the year are prepared, or an audit undertaken.
Manage finances
Timely reports allow a business to manage its finances better, reducing the cost of external funding by improving internal funding in areas such as inventory and debtor management.
Good financial discipline also reduces the chances of fraud. If accounts are being processed correctly, any discrepancies or inconsistencies are more likely to be spotted.
Another good tip is to use your accountant's experience to develop an approach that suits your needs. Sometimes, accounts clerks are left to decide upon, and implement, new accounting systems that the external accountants only find out about when there is a problem.
Installing new systems without proper evaluation often leads to information being produced that no-one looks at, and a more complex process than is really needed.
External accountants work for clients in a variety of businesses and this experience can be used to help decide the best, and most cost-effective, approach for other clients.
Improve efficiency
There are a number of proprietary software programs available to help improve a business's efficiency in producing accounts. They are easy to use, provide useful reports, and also help maintain filing, even manual files.
Having accounts up-to-date also means that you are "opportunity ready" for any external approaches that may arise, such as new business ventures, acquisitions, agency opportunities or trade buy-outs.
Being able to produce accounts promptly shows you are on top of the business and will get any new relationship off to a good start.
There are ways of saving costs and at the same time making best use of the accounting function, including:
- Keeping processes simple so that accounts are easy to prepare,
- Doing as much simple processing as possible in-house, and
- Giving information to your external accountants in easy-to-use ways so that preparing final accounts is simpler.
If accounts are up-to-date, when the accountants get them, they are already in a usable form rather than the proverbial "bunch of vouchers in a shoebox". Maintaining accounts regularly will inevitably cost less than leaving it until the end of the year.
The type of information that needs to be kept on file include:
- Bank statements and reconciliations - particularly important in times of direct debit and internet transfers
- Aged general debtors - very useful in showing that customers are paying on time and that debtors are being followed up in a timely and effective way so that bad debts are avoided
- Lists of expenditure by type which reconcile back to the bank statements - this allows you to identify potential areas of waste and should be undertaken at least monthly. Ledger accounts only need to be reconciled annually
- Fixed asset register - including supporting documents for all major transactions undertaken
- Tax invoices and BAS returns
- Insurance documents
- Payroll summaries - including employee entitlements and superannuation statements and payments