Streamlining year-ends

Transcription

1 Streamlining year-ends Michael Ford, Intuit TWN Member, Jonathan Carter, 12/5/17 WiFi: QBConnect Password: Connect2017

2 CPD Process In order to receive CPD credit Be sure to sign in or scan your badge for this session You must stay in the session for the duration of the training This session is eligible for 1 hour of CPD credit CPD certificates are ed directly to you within 4 weeks of the conference date to the same address you used to register CPD credit administered in coordination with 2

3 Take a few moments to Connect with your neighbor

4 Today s speaker Michael Ford, CPA CMA Intuit Trainer/Writer Network Member President, The Ford Group Professional Corporation, 4

5 Guest speaker Jonathan Carter, CPA CMA Guest Speaker Owner & Principal, KATA Accounting Solutions 5

6 Topic introduction Year-end!! As a bookkeeper or a small business owner, you might be wondering: What do I need to give my accountant to do my year-end and close the books? Although, accountants can help you sort and summarize, it s a lot less expensive if it's done right. This session will cover all the key the things that your accountant really needs, and to create an accountant ready year-end package. 6

7 Agenda Overview of accountant s role Key balance sheet areas Key income statement areas The accountant s package 7

8 Overview of Accountant s Role

9 Overview of accountant s role An accountant performs financial functions related to the collection, accuracy, recording, analysis and presentation of a business, organization or company's financial operations. The accountant usually has a variety of administrative roles within a company's operations. In a smaller business, an accountant's role may consist of primarily financial data collection, entry and report generation. Middle to larger sized companies may utilize an accountant as an adviser and financial interpreter, who may present the company's financial data to people within and outside of the business. Generally, the accountant can also deal with third parties, such as vendors, customers and financial institutions. 9

10 Key Balance Sheet Areas

11 Bank reconciliations We look at the bank statement, the bank balance in the books and the reconciliation to tie the two together Ensure that the reconciliation report ties to the book and statement balance Ensure that outstanding deposits and outstanding cheques are legitimate Any cheques over 6 months old should be stale-dated Any transactions that are not cleared should be validated before passing the books to the accountant Make sure system-generated cheques are cleared over possible manual entries (Payroll and tax) The bank reconciliation reveals errors in the bookkeeping, clean them up before passing along the file 11

12 Accounts Receivable Does the Accounts Receivable balance as a whole make sense? Do the individual customer balances make sense? It is possible to have a negative balance if the customer has an unused credit Is there a consistent policy for setting up Allowance for Doubtful Accounts Review of specific balances, formula, based on old uncollected balances, etc Difference between Allowance for Doubtful (may be uncollectible) and Bad Debt write-off (all avenues for collection have been exhausted and account is definitely not collectible - unless a lottery win) Are there any invoices at 90+ days that should be bad debt? DR Bad Debt, CR Accounts Receivable This is a good time to evaluate and tighten collection processes 12

13 Prepaid Expenses Review Prepaid Expenses and remove any items that should have been recognized as expenses during the year: DR Expense, CR Prepaids Add any expenses that should be recognized in the following year: DR Prepaids, CR Expenses Common prepaid expenses include: Rent and Utility deposits Insurance Annual subscriptions 13

14 Fixed Assets Prepare a fixed asset register This is a list, by group, of all fixed assets the company owns All items should be grouped according to CCA classes and be over $500 Prepare a fixed asset schedule This is a list of the groups of assets from above outlining the depreciation for the prior periods by class Any additions or disposals need to be recognized Depreciation may or may not be calculated Work with your accountant partner to create an easy-to-update schedule 14

15 Accounts Payable Does the Accounts Payable balance as a whole make sense? Do the individual supplier balances make sense? It is possible that there could be negative balances if credits have given but not been used Are there any very old payables? Over 90 days Are these amounts owing? Or should they be written-off? Prepare a list of proposed write-offs for the accountant This is a good time to review AP processes 15

16 Accrued Liabilities Are there items for which the expense should be recognized, but for which invoices have not been received: DR Expense, CR Accrued Liabilities One trick to check is to look at AP invoices set up and cheques issued for a period of time after YE (one month?) and see if any relate to pre-ye activities Common accruals include: Legal fees Year-end bookkeeping fees Tax preparation fees 16

17 Shareholder loans This account should not be a dumping ground for unknown items This account needs to be reviewed with the relevant shareholder prior to providing the books to the accountant (and they should agree with the balance) This is a high-risk account CRA doesn t care if the company owes the shareholder CRA does care if the shareholder owes the company May result in tax complications if the shareholder owes the company for more than one year 17

18 GST/HST payable It should be clear that the amount payable at year-end is paid during the next period CRA s Represent a Client may need to be consulted to ensure accuracy The balance may be higher if the client is behind in GST/HST filings and payments Do not let your clients delay in this area - These are funds held in trust for the government, and the government tends to be very unforgiving in this area Other provincial/state sales taxes can be handled in a similar manner 18

19 Source Deductions payable Source Deductions payable should only consist of the amount due the on the 15th of the month following the year-end The only exception is if the client is behind on Source Deduction payments DO NOT let your client delay paying these funds, they are funds held in trust and are not at the company s disposal 19

20 Prepaid income tax (Income tax provision) Reconcile the income tax provision with the payments received by CRA This can be checked through CRA s Represent a Client Post all income tax transactions to the Balance Sheet account, not to the Income Statement provision account The Income Statement tax account is reserved for a current estimate of tax on the net income for the period, and will get messed up if payments/refunds relating to prior years are posted there For all transactions with CRA, note the nature of the payment/refund and the applicable tax year, which CRA will identify 20

21 Key Income Statement Areas

22 Legal fees Prepare a schedule of legal fees incurred for the year Be prepared to send copies of all legal invoices to your accounting partner 22

23 Key expense categories Legal Fees Other professional fees Charitable or political contributions Payroll and payroll related expense (and liability) accounts Income tax expense and provision 23

24 Does everything make sense? Review the P&L and the Balance Sheet from a big picture standpoint Are there any balances that are backwards? Negative cash? Negative Inventory? Negative AR? Negative AP? Do the results make sense based on the operations of the company as you know them? 24

25 Lock the books Make sure the books are locked Use a password, a warning is not enough Nobody but the primary bookkeeper in consultation with the accountant partner should make changes to prior periods DO NOT make Changes to prior periods after tax returns are completed. This will require tax amendments and complicate the tax prep process 25

26 The Accountant s Package

27 The accountant s package Consider giving your accountant access to your internal accounting system (QuickBooks Online or Desktop) temporarily to help with calculating your taxes. If that's not possible, then this is the Accountants Package: 1. Company documents 2. Tax documents 3. Loan documents 4. Financial documents 5. Other documents 27

28 Company documents For your first meeting with your tax accountant, provide them copies of your corporation's organizational documents. This includes your: Corporation's articles of incorporation Bylaws Lists of key shareholders or company owner's names Copies of your corporation's tax identification numbers for both CRA and provincial governments Any other organizational documents issued by the province in which you registered your corporation 28

29 Tax documents When you use an outside accountant to prepare your tax returns, bring with you: The corporation's previous tax returns, if any All payroll tax documents filed quarterly through the year, including CRA forms PD7A. Copies of all payroll reports, which includes copies of employee t4 forms and t4 summary. All T4a forms issued to vendors, subcontractors or independent contractors. Any end-of-year provincial sales tax reports, gst/hst reports and quarterly filings or remittances. 29

30 Loan documents Corporate loans that you make payments on throughout the year provide an opportunity for tax deductions. Let your accountant know if you: Purchased any large assets during the year Such as delivery trucks or equipment used in your business Invoice copies of old and new assets that show The purchase date of the equipment, the date you bought the equipment And a description of the asset purchased Line of credit with your lender or any other corporate loans paid monthly Copies of your leases or any supportive documents that provide backup Year-end statements for each of your loans, leases or lines of credit 30

31 Financial documents Consider giving your accountant access to your internal accounting system (QuickBooks Online or Desktop) temporarily to help with calculating your taxes. If that's not possible, you will need to bring: Copies of the year-end financial statements such as, Corporate balance sheet, the income and expense statement Retained earnings, owner's equity, and the statement of cash flows Year-end chequing and savings account balances, monthly bank statements and bank reconciliation information Copies of any year-end investment account balances or dividends paid out to shareholders throughout the year 31

32 Other documents When you run a corporation that makes a product, produce copies of: Year-end inventory reports Cost-of-goods reports used to calculate the year-end cost-of-goods sold report as backup for the year-end financial statements If your company employs salespeople, include a report that indicates The business KM s driven throughout the year for each vehicle the business owns or reimburses km s Detailed records that back up the amount of KM s driven each year 32

33 Questions?

34