Monthly Archives: November 2012

As 2012 Comes to a Close – Are Your Payroll Files in Order?

As the hustle and bustle of December quickly approaches, many in our industry stop to review a mental checklist of end of year tasks. Included in this is payroll accuracy. This is of utmost importance as the T4 summaries and the associated T4s are prepared on a calendar year basis. Therefore all companies should take heed of this advice regardless of their own year-end date.

If you use the services of a payroll company or have in-house service, it is wise to go out with an email to all staff requesting changes in addresses over the year. Addresses show up on T4s and while an outdated address can be OK if the T4s are personally delivered to an employee, many are mailed and therefore risk not being delivered to the intended recipient. This simple task can result in less work in February when staff will approach you saying that they never received their T4. Make it an annual task to do a check of addresses now (in November) and update systems prior to Dec 31 st as an internal efficiency.

Payroll personnel may also want to review the pay dates at the end of the year to see when the last payday falls in 2012. This is the last time you will be able to correct any outstanding issues regarding employee payroll queries. Do you owe your employee OT? Does your employee owe you time? Are vacation accruals/pay up to date? Has retroactive pay been addressed? When are bonuses paid?

Finally, don’t forget to compute any amounts that should be included on BOX 40 – Other Taxable Allowances and Benefits. Any issue that affects the amount of income shown on an employee’s T4 should be reviewed NOW, not at the end of December when it may be too late to process or costly to perform another pay run.

For all the accountants and bookkeepers out there – have a look at the Statement of Accounts for Current Source Deductions form from the government for Oct which you should have received by now. Dos the year to date contributions reconcile to your GL accounts? If not, it is best to look into it now while there is still time to make adjustments on the Nov remittance, (due Dec 15 th). Not having the same record that the government has will prompt discrepancies on the T4 summaries and can also result in PIER reports needing completion later, not to mention payment by the employer required for any shortfalls!

Remember, when it comes to payroll, it is imperative that the T4s accurately reflect the true earnings and deductions of your employees. Following these simple steps will help ensure a clean and uneventful T4 run come February.

What not to do – Plugging the Numbers!

Q: What should business owners avoid doing?

If there is one word that can get the hair on an accountant’s back to stand up that one word would be – PLUG. Also known and referred to as ‘Plugging the numbers”.

Most accountants and bookkeepers won’t plug. However, let’s be realistic. If after completing a multiple page bank reconciliation where we are ‘out’ by mere cents, then in all likelihood plugging 3 cents to bank charges would not only be acceptable but recommended from a client cost savings perspective. Most plugs of this nature result from a data entry, adding or rounding error and it is simply not cost effective to go back through numerous transactions to find the culprit. The acceptability of a plug is of course dependent upon the amount – immateriality must be in play in order to justify a plug.

HOWEVER…..most accountants we know also are quite bothered when having to plug even a few cents. The reason: it should not have to be done. If accountants and bookkeepers account for every cent, then there should be no plug at all. So, we are bothered – annoyed actually. We have been trained in our profession to account, and not plug.

An owner may argue that a $600 plug is immaterial to a half million dollar entity. That may be so to him, but as an accountant, how do we not account for this money. What about the side effects of taxes? Could you justify your plug to a CRA auditor? A major concern is that plugging can often be a result of some other error in a transaction. Plugging even a small amount could hide the source of what could be a material problem – one which may then lead to significantly incorrect financial statements.

If you are finding yourself plugging lots of numbers, or finding you need one ‘big’ plug to make things work, well, it may be time to bring your books to someone who actually likes to balance the correct way.

Plugging now just to balance will often come back to bite you – especially after a year end.  Properly accounting for a plug after the fact can cause lots of headaches, reversals, journal entries, fees, penalties and embarrassment – not to mention plugging takes away from the integrity of your entire financial reporting.

So, when in doubt – Don’t Plug!!! Ask for help to get your books in order. Pay to have a bookkeeper set you straight and establish a procedure to avoid the same issue going forward. Contact the staff at Five Star Accounting and we will get you on your way to ensuring all your business transactions have been PROPERLY accounted for!