What do I need to do at YEAR END?
ExpensePlus provides all of the financial reports needed for your end-of-year accounts. The following video and checklist is designed to guide you through the additional tasks you might need to undertake within ExpensePlus at the end of each financial year.
IMPORTANT NOTE: Year-end accounts typically include more than just the financial reports from your accounting software. To learn more please read this ***YEAR END ACCOUNTS FAQS*** article.
This is a guide intended for the year-end, however much of what is suggested (e.g. comparing bank balances to bank statements) should be better done on a monthly basis and not left until year-end.
(1) Bank Transactions - to confirm that you've uploaded all of your bank transactions for all bank accounts, we'd recommend that you double-check the closing bank balances at the end of the financial year in ExpensePlus to match your actual bank statements (they should 100% matched).
If they don't match, this means that you've either missed uploading or have double uploaded some of your bank transactions. If you are unsure which transactions for a particular bank account are missing, we'd recommend that you compare the closing balance of month 1 of the financial year with the bank statement, then month 2, etc. until you come to a month where the closing balance for that month in ExpensePlus doesn't match the bank statement.
For this month, click on the 'view statement' button in ExpensePlus, and check through it transaction by transaction until you find the issue. If transactions are missing, you will need to upload these missing transactions. If you've double uploaded any transaction into ExpensePlus, you will need to delete these by first clicking the 'unmatch' button to the right of these transactions, followed by the 'delete' button to the right of these transactions. If you've wrongly imported any transactions, then you will need to delete, then re-upload these particular transactions.
(2) Petty Cash - If you have any petty cash accounts, you should also check that the closing balances for each petty cash account match what you were actually holding at year-end. If it doesn't then you should add in the missing income or expenditure transactions that make up the difference between the closing balance total in ExpenePlus and what was actually held year-end. If you are unable to ascertain what the difference relates to, then you may want to consider adding in an income or expenditure transaction with the description of 'petty cash correction' dated on the last day of your financial year with the amount needed to align the petty cash account total in ExpensePlus with the money being held. If the unexplained petty cash discrepancy is large then it may be a good idea to discuss this with your independent examiner at an early stage.
(3) Adjustments - Accruals and Deferrals enable transactions that 'end up in the wrong financial year on the bank account' to be 'moved' to the correct financial year in your accounts. Most smaller churches and charities (less than £250,000 turnover) file accounts on a Receipts and Payments basis, which means that Accruals and Deferrals are not needed, except for any uncleared cheques, however, they will still need to provide a breakdown of monetary assets and liabilities (see the receipts and payments template on the ***HMRC website here*** for more details).
Note: If you are submitting accounts on a receipts and payments basis and you raise customer invoices e.g. for building hire, do check the balance sheet report in ExpensePlus. The total for 'Accounts Receivable' needs to show as 0.00 when the year-end date is selected. If it doesn't, then you will need to update the invoice date of any outstanding invoices at year end to be the first day of the next financial year. This will then make the 'Accounts Receivable' balance at year-end show as 0.00 (which it needs to do if you are submitting accounts on a receipts and payments basis).
IMPORTANT: When adding adjustments, only items with ' material value' need to be adjusted (see exert from Charities Commission guidance below).
Therefore, do you need to adjust for £8 purchase that 'lands in the wrong financial year on your bank account'? Of course not. What about if it was an £800 purchase? Possibly. You can read this help guide article for more guidance on this issue.
So at what point does something have 'material value' and need to be adjusted? This will be different for different size charities, for example, you may set your organisation transaction threshold at £500. If you are unsure, you should ask your independent examiner.
Here are the adjustment types:
- Account Receivable - used where income from a financial year hits the bank account in the following financial year (e.g. Gift Aid that is still yet to be claimed from HMRC)
- Accounts Payable - used where expenditure from a financial year hits the bank account in the following financial year (e.g. PAYE and Pension contributions typically get paid in the month after the one they relate to)
- Prepayments - used where expenditure gets paid in advance (e.g. a deposit for a weekend away venue paid in the financial year prior to when the event is taking place)
- Deferred Income - used where income is received in advance (e.g. ticket income received in the financial year prior to when the event is taking place)
Note: When you come to adding Accruals and Deferrals for a year-end, the Accruals and Deferrals added the prior year should have been reversed and should not be showing as 'outstanding'. If any are still showing, then it's important that you reverse them (assuming they are not still outstanding).
(4) Assets & Depreciation - whether you need to add in adjustments will depend on the basis on which you are creating accounts (see the section above). If you are a smaller church or charity working on a receipts and payments basis, you can ignore this section.
If your organisation is creating accruals based accounts, then it is likely that you may have dealt with all item purchases as expenditure, but for some items, it may be more appropriate for them to be classed as asset purchases (e.g. buildings, vehicles, computers, larger PA kit purchases, etc.). Unlike expenditure, where when a purchase is made, the value of the fund where the purchase was coded against reduces immediately by that amount, assets work differently.
Most assets will lose their value over time and this is accounted for by what is known, in accounting terms, as depreciation. Typically, each organisation will have a policy that determines the minimum value an item has to be in order to be accounted for as an asset e.g. £500, and the number of each, over which each item type will be depreciated e.g. IT purchases over 3 years.
(5) Review reports
Finally, it's worth checking your financial reports.
- Income & Expenditure Report - chances are you will be checking your income and expenditure report month by month, so you should have a good idea of whether this looks correct. Often though, you may have funds that you don't check as regularly and if so, this is the time to do so. You may realise, for example, that transactions have been assigned to the wrong fund, or you may need to account for money moving between funds by creating a transfer (click here to find out more about transfers).
- Balance Sheet - this report gives you a breakdown of the assets and liabilities that make up the fund balance for each fund. If you have an 'events and projects' fund, year-end is a great chance to create transfers to move any surpluses and deficits to your general fund, to 'reset' your fund balances for such funds. You may also wish to do any transfers between funds, however, before making transfers out of restricted funds you should check that these are allowed; if in doubt, you may want to speak to your independent examiner.
- Statement of Financial Activities - This report is a summary of Income & Expenditure for the whole organisation, and chances are this isn't a report you'd regularly use. Income & Expenditure is shown on this report based on which category it has been assigned to and in terms of what category type has been assigned to that category. Looking at this report may flag up any issues with any category types that have been assigned incorrectly and if so, you will need to change these in the category settings screen. For more information on setting category types click here.
Once you are happy with your accounts, you can simply give your independent examiner access to ExpensePlus to allow them to log in. You will need to still send them a few additional bits of information including a pdf download of your bank statements (so they can check that the statements uploaded into ExpensePlus match this).
When preparing your End-of-Year accounts you may find the Category Connectors functionality particularly helpful. These enable you to link together multiple income or expenditure categories that are most helpfully reported on as an aggregate total within your EOY account notes. For example, you may have multiple categories including administration costs, but you may want to report them as a single Administration total for EOY purposes.