What are the things to look out for when coding off account transactions in the new financial year?
This is a small but important part of the finance system in your school that can be easy to miss.
What do I mean by coding?
We are talking about the use of your general ledger (GL) codes, the chart of accounts that form the basis of all your financial reports.
Whether it is a bank reconciliation, sales invoice or purchase invoice, your coding regime needs to consider the new financial year’s budget, for allocation and rationale.
Note: For the purposes of this article, we are assuming that the 2022 Jan to Dec budget has been approved by the BoT and has been entered into your system ready to go.
Often data entry staff have not necessarily been involved with the budget setting process, which may have happened months prior.
If they continue to code account transactions off as they always have, there may be the need to have a tidy up down the track. The ideal is that staff receive guidance at the start of the year to code according to the new budget.
Here are the key questions to review:
- Has anyone ensured that any new GL codes have been entered into the accounting system? Who is responsible for passing this information on to whom?
- Do the data entry staff know the new codes exist and what gets allocated there this year?
Note: Key people responsible for reporting will need to know about any codes that did not exist last year, so they can build them into the reports and ensure they fall into the right categories. This is usually part of entering the new budget.
- Have key staff been advised to cease using some existing codes as they no longer have a budget for this year?
In this case we suggest you edit the name to have the words ‘DO NOT USE’ in front of them so staff know not to keep using these codes.
Note: Because the year-end process is still underway, it will be important not to archive these codes as they will be needed for running year end reports, and may be needed for further year end journals and last-minute audit adjustments.
Tip: Once the year end accounts for the prior financial year has been finalised, then the codes no longer in use can be archived so they are not creating confusion for the rest of the year. This is hard to remember so we suggest you calendar this as a reminder.
At School Accounts Ltd when you use our financial services your account manager becomes part of the fabric of your accounts team. To us, managing the chart of accounts, budget entering and coding rationale is part of our psyche and comes naturally. One more peace of mind item for your team.
Give Nicola if you would like to discuss further or find out more: 021 116 4747