Maybe you don’t plan on doing your annual audit until mid-year. Or year-end. Maybe you plan to delay it until the last possible second. It doesn’t matter. (Well, it does, up-to-date financial statements make a great impression on potential investors. But I digress.) Now is the time to start to get your audit stuff together. Now, while reams of lovely statements and documents are floating across your desk and landing in your email in-box and it is just no work at all to collect it. Now, before collecting information involves a call to the bank and request for older statements or an hour of annoying inbox searches. It’s right there, on top, so grab it, stick it in a designated physical or virtual folder for “year-end audit” and see how much smoother this year’s audit goes. J
Not sure what you should be collecting? Start with the following.
Banks
- Balance confirmation statements (אישור יתרה) for all of your bank accounts. These should come in the mail, but you’ll probably get a copy in the “mailbox” section of your bank’s website as well.
- Bank account activity detail for December through February. This can be downloaded from the bank or you can use the monthly statement provided by the bank (here as well, it will come in the mail or you can download from the mailbox section).
- Paypal activity. Don’t forget that statement! I find that PayPal’s monthly financial report (download from the site) does the job for the ending balance, but you’ll want to do a separate activity download. The same applies to any other similar online services.
- Big things! Your auditor is going to want to check out large transactions (money in and out). Most of these are covered below, but if something goes in or comes out that isn’t related to a customer, supplier or employee, grab the documentation for whatever it is as the transaction goes down and stick it in the binder.
Suppliers/ credit cards
- Credit card statements for December and January.
- Supplier payment and invoices. For supplier payments that you make in January, February and March, save a copy of the payments (e.g. check copies/ wire transfer advices) and the invoices that were paid. If you are doing batch payments (as you should—see here for more on that) save a copy of the batch detail (e.g. the Masav file or bank batch payment detail). If you tend to make individual transfers, while you can limit the collection to larger items, it’s sometimes easier to just make a copy of everything, stick it in a binder, and let the accountant figure it out.
- Check copies hack. Some bank statements will include an image of the check. Where they don’t, go into the bank website and pull up your activity data and click on the checks (שיק in Hebrew). On a lot of bank websites, this will bring up an image of the check. Go through, click on all the checks, print out the resulting full picture and, voila! You have check copies.
Customers
- Remittance advices. Not all companies use these, but if you receive a remittance advice noting that the payment of $X received from customer Y is in payment of invoice Z, save it. Same goes for copies of checks received from clients.
- Last invoices issued in the old year and first invoices issued in the new year. The accountant is going to ask for these—may as well stick them on the side as you are doing them.
- Bad debt and disputed items. If any of the invoices outstanding at year-end end up being uncollectible (e.g. client goes bust or disputes an invoice) stick any related correspondence into the binder.
Employees
- Payroll reports. Save a copy of your December and January payroll reports, including details of pension and social welfare obligations and so on. Whatever you get from the payroll controller –just stick it in the binder
- Salary payments. Save a copy of the December batch payment detail / check copies showing that salaries were paid.
- Statutory and social welfare payments. Save a copy of payments on each of the following (as applicable) for your December and January payroll.
- Retirement savings plan deposits (Pension/ 401K/ 403b/ Kupat Gemel / Bituach Minhalim/ )
- Income tax withholding (FICA/ PAYE/ nicui’i Mas Hachnasah/ etc.)
- National insurance (Social Security & Medicare/ National Insurance / Bituach Leumi & Mas Briut/ etc.)
- Other payments (Keren Hishtalmut deposits/ flexible savings plan deposits/ flex benefits/ etc.)
- Year-end commission reports or bonus awards with a copy of any payments made (some amounts due may be payable later, depending on your specific plan).
- Employee expense reports for December and January. If they are small, don’t bother, but if you get giant reports, stick a copy in the binder.
To be clear, there’s plenty more to collect; this won’t cover the whole audit. You’ll need contracts, reports, invoices, support for tax payments, copies of VAT submissions and so on. We accountants do like documents! Still, if there’s low-hanging audit fruit to be picked, it’s a shame not to grab it.