It is important that at the start of the new financial year you put in place some checks and balances to make sure the year runs smoothly.  While there are many administrative issues to review, there are some simple accounting related issues that are often overlooked but which can cause significant problems later on.

Often mistakes found in accounts late in a year can be tracked back to the start of the year when some basic issues were not adequately addressed.  Identifying these mistakes can take a lot of time, effort and be costly especially if the auditors are doing the work.

Pull up those green tights, keep your eye on the target and get ready for business.  Here are some key issues you need to take action on at the start of every new financial year.

  • Ensure the opening balances as at 1 July have been reconciled and that you know what the balances are made up of.  They may include end of year adjustments, reversing entries and other balance day entries.
  • Track any reversing entries to ensure they are properly accounted for.  For example, a reversing entry processed at the end of June may not be offset in July and can occur later in the year.  Therefore you need to track these to make sure they occur.
  • Make sure the reversing entry and the offsetting entry go to the same account because if it is not done correctly, it can result in an over or under statement in the accounts.
  • If you received grants and have unspent funds as at 30 June you need to reconcile the amounts and match them to the respective projects.  You then need to review your cash flow budget to ensure you will have adequate funds to meet you contractual requirements.
  • The other important reason for reconciling the unspent funds is because if you have overspent on general operations (expenditure not covered by the funds from the grants) by using funds from the grants, you may encounter a short fall during the year and that may mean projects might not be able to be completed.
  • If you have subscription or membership fees make sure you have reconciled these so you know who has paid what and for what period of time.

This list is not exhaustive as there are other issues that could also be considered depending on the organisation.

The other important reason for taking the time to manage the start of the new financial year is that often the previous financial year may not be finalised until well into the new financial when the auditors have completed their audit.

Remember that you cannot wait until the end of the audit to start managing the new financial year because you and your committee of management must be able to rely on your financial reports from the start of the year to make relevant decisions.

Have you managed the start of your financial year or just let it happen?