Version 1.0
Prepared by: @Lorraine Sebata
Approved by: @Simon Cooper @Marcia Wilkinson
Reviewed date: 2025-09-17
Next review date: 2026-09-17
This SOP details the step-by-step procedure for preparing the monthly management accounts for Easyterms. It aims to ensure consistency, accuracy, and efficiency in the financial reporting process.
This SOP applies to all finance personnel responsible for preparing and reviewing monthly management accounts.
Anti-Money Laundering (AML) Policy - Relevant for bank reconciliations and general compliance
Finance Officer/Accountant: Primary responsibility for executing the steps outlined in this SOP, preparing journals, and compiling reports.
Senior Finance Officer/Manager: Reviews prepared accounts, journals, and reports, performs sanity checks, and addresses anomalies.
Loan Officers/Collections Department: Provide necessary reports from the loan platform.
5.1.1 Bank Reconciliation: Ensure all bank accounts for all companies are reconciled. (CIBC, Fidelity, Undeposited Funds) Validate the bank statement against the reconciliation report for each bank account. (Refer to separate Bank Reconciliation SOP).
5.1.2 Loan Book Balancing: Confirm the loan book ledger balance on the loan platform matches the total balance on the accounting system's balance sheet (1160). Run a loan aging report from the loan platform to verify the total balance.
5.1.3 Accounts to be cleared or balanced:
Cash posting suspense (1099)
Posting suspense (1430)
Payment refunds pending (2190)
5.1.4. Following bills to be posted:
Petty cash
Vendor bills for open purchase orders for the period
5.2.1 Generate Balance Sheet: Run the balance sheet report for the end of the previous month, comparing it with the month prior to identify significant variances. Export this report to an Excel spreadsheet for use as a checklist.
5.2.2 Generate Income Statement: Run the income statement report for the previous month, comparing it with the month prior to identify significant variances. Export this report to an Excel spreadsheet for use as a checklist.
5.2.3 Consolidate Checklists: Combine the balance sheet and income statement exports into a single document, adding a checkbox next to each line item for tracking purposes.
5.3.1 Bank Accounts: Verify that any month-end balance in "Undeposited Funds" is reconciled and deposited in the following month's bank statement. This validates that the account is being used as a temporary holding account rather than a permanent repository.
5.3.2 Accounts Receivable: Validate the figure against the Aged Receivables Report from the accounting system.
5.3.3 Accounts Receivable Consumer Loans: Validate the figure by checking it against the total balance on the Loan Platform.
5.3.4 Accrued Interest and Fees:
Obtain the Loan Aging Report report from the loan platform.
Filter the report to split figures between the private sector and the government sector.
Add excel spreadsheet to "Schedules" Folder in Company Server.
Create a journal entry (duplicating the previous month's entry is acceptable, updating figures) for the accrued amounts. Round off cents.
Ensure the journal is set to auto-reverse for the following month-end.
Attach the exported report as backup to the journal along with the screenshots of both Private and Government loan books.
5.3.5 CFAL Account:
Log into the CFAL account and check the balance.
Post a manual journal (CFAL Money Market) for any difference (typically accrued interest).
Attach the exported balance from CFAL as backup to the journal. No Reversal on Journal.
5.3.6 Petty Cash: Verify the petty cash bill has been posted. Note that the petty cash float rarely changes. (Refer to separate Petty Cash SOP).
5.3.7 Prepayments: Postpone until after income statement review.
5.3.8 Reserve for Bad Debts:
Obtain the relevant figures for bad debt reserve from the loan report, split by private and other sectors.
Create a journal entry for the calculated bad debt reserve. Round off pennies.
Ensure the journal is set to auto-reverse for the following month-end.
Attach the full export of the file and a screenshot of the split as backup
Management Discretion: Management will determine if the bad debt reserve is adequate and may post an additional auto-reversing journal to adjust it based on profit performance or other factors.
5.3.9 Reserve for Specific Bad Debts:
Generate the receivables report from the accounting system for the month-end, ensuring it is not grouped.
Exclude negative balances (where the company owes the client) and specific contra accounts from the report. (Filter from 0 to Any)
Export the filtered information into an Excel spreadsheet.
Use the stored spreadsheet (on the server) for calculation: copy the previous month's table, paste the current month's filtered data into the correct place, and correct the date. Reminder: Remove Percentages
Post the calculated reserve as an auto-reversing journal entry.
Attach the updated spreadsheet as backup.
5.3.10 Security Deposits:
Download and transpose the security deposit schedule from the server.
If there is any movement, update the schedule and keep a copy as backup in the management accounts schedules folder.
5.3.11 Fixed Assets: Postpone review until after income statement review, as items may need to be capitalized.
5.3.12 Accounts Payable:
Ensure all bills and expenses have been posted.
Run the Aged Payables report for the month-end and verify the total balances with the balance sheet figure.
5.3.13 Accruals: Postpone until after income statement review.
5.3.14 Charitable Donations Fund:
Drill down into the account to review any expenditure against the fund.
Verify correct coding.
Note the recurring monthly accrual of $2,000.
5.3.15 Deferred Income for Mitigation Fees:
Navigate to the Fees Tab in the loan Platform
Run the deferred income report from the loan system for the appropriate period.
Download the report in its entirety.
Create a pivot table to split income between private sector and "no sector" (unassigned/government). Note: To delete Second Row within spreadsheet.
Create an auto-reversing journal entry for the deferred income, splitting it as per the pivot table.
Attach the exported spreadsheet and pivot table as backup.
5.3.16 Rounding Error: Acknowledge this is system-generated and immaterial.
5.3.17 Staff Training Fund:
Open the account and review monthly accruals and any expenditure from the fund.
Verify correct coding and ensure funds are paid out of the fund rather than expensed.
5.3.18 Undeposited Funds:
If a balance exists, perform a reconciliation to identify the source of funds. Ideally, this account should be zero.
5.3.19 VAT Payable:
Access the special Xero Sales Tax report in Nuclino.
Validate the figures by comparing the total between the Sales Tax Report and the Balance Sheet.
Ensure all payables are reconciled, as they impact VAT.
5.3.20 Preference Shares:
Drill down into the account and review any movement.
Validate the total amount against the investor portal. Check for miscoded entries.
5.3.21 Dividends:
Drill down into the account and review transactions for anomalies. Note that this is typically a consistent monthly payment.
5.3.22 Retained Earnings / Share Capital / Contributed Surplus / Current Year Earnings: Acknowledge these are system-generated or static figures.
After reviewing the Balance Sheet, Prepayments & Accruals should be the only items left unchecked.
5.4.1 General Review: Look for anomalies (e.g., non-round figures where expected, unusual amounts).
5.4.2 Administration Fees & Credit Search Fees: Cross-check that administration fees are approximately four times the credit search fees ($100 vs $25). Investigate discrepancies.
5.4.3 All Other Income/Expense Accounts (unless specified below): Drill down into each account, look for anomalies, and ensure correct coding. Make corrections as necessary.
5.4.4 Interest Income: Sanity check the figure against the size of the loan book and the number of days in the month.
Calculation: Interest - Consumer Loans / Amount of Days on Month
Answer x Days in Year (365)
Answer / Loan Book Amount
Answer should equal your Percentage Average (18%/19%)
5.4.5 Other Interest Income: Typically driven by interest from the CFAL account.
5.4.6 Mitigation Fees: Note that the deferred income journal (from 5.3.15) makes adjustments to this figure. (Check for Posted Mitigation & Reversals)
5.4.7 Vehicle Lease Income: Verify for any changes, as it's typically consistent with the government contract.
5.4.8 Bad Debts Expense: Verify this figure matches the bad debt journals created from the balance sheet.
5.4.9 Credit Search Expenses: Review relative to credit search fees to ensure all credit bureau expenses are posted. (CRIF should be the ONLY items listed)
5.4.10 Interest Expense: Verify consistency with preference share payments.
5.4.11 Leased Vehicles (Depreciation): Postpone until after income statement review.
5.4.12 Loans Written Off: Check that the figure matches the schedule created by the collections department.
5.4.13 Recoveries Against Bad Loans:
Verify negative entries (income) for funds received against previously written-off loans.
Ensure any related fees are also coded to this account.
Accrue for any open purchase orders from lawyers related to recoveries if billing is slow. See section 5.6.1 for Purchase Order Accruals.
5.4.14 Business License and Government Fees:
Verify recurring journal validity.
Adjust fee as necessary based on year-to-date turnover.
5.4.15 Charitable Donations Expense: Verify recurring journal.
5.4.16 Insurance Cost: Verify annual posting and recurring journal for spreading over the year. (Refer to separate SOP for this).
5.4.17 Legal and Professional Fees: Note recurring journals for accruals (e.g., audit fees).
5.4.18 Salaries, Wages, and Commissions:
Obtain staff commission report.
Accrue staff commission for the relevant month (earned in current month, paid next).
Create an auto-reversing journal entry for the accrued commission.
5.4.19 Staff Bonuses:
Calculate the staff bonus accrual (e.g., 3% of net profit, rounded to the nearest thousand) on a year-to-date basis.
Create an auto-reversing journal entry for this amount. This account is reset to Xero and recomputed monthly.
5.4.20 Staff Training: Verify recurring journal.
5.4.21 Utilities: Ensure all utility bills are posted.
5.5.1 Capital Item Review: After reviewing the income statement, identify any expenses that should be capitalized (e.g., large computer expenses for a server).
5.5.2 Capitalization Procedure: If a capital item is identified, follow the separate SOP for removing it as an expense and capitalizing it.
5.5.3 Run Depreciation: Once assets are reconciled and any new assets capitalized, run the depreciation process in the fixed asset system to generate necessary transactions.
5.5.4 Fixed Asset Reconciliation:
Run a fixed asset reconciliation report.
Verify that the total fixed assets on the balance sheet match the asset register.
For specific categories (e.g., Lease Vehicles), net down the asset register figures and compare them to the corresponding balance sheet figures. Address any discrepancies.
5.6.1 Purchase Order Accruals:
Run the "Outstanding Purchase Orders Summary" custom report for the relevant month-end (e.g., June 2025). Extend the date range back as needed to capture older open purchase orders.
Identify outstanding purchase orders (e.g., from lawyers for collections fees).
Create a journal entry to accrue these outstanding amounts, typically debiting the relevant expense account (e.g., Recoveries Against Bad Loans) and crediting Accruals.
Attach the report as backup to the journal.
5.6.2 Accruals and Prepayments Schedules:
Export the accruals and prepayments schedules (maintained externally on the server).
Clean up the schedules to include only necessary items.
Validate that the total figures in these external schedules balance with the corresponding figures on the balance sheet. Troubleshoot any discrepancies.
5.7.1 Checklist Completion: Ensure all items on the balance sheet and income statement checklists have been checked off, indicating validation, journal posting, and backup attachment. If any item is unchecked, revisit and complete.
5.7.2 Overall Review: Perform a final comprehensive review of both the balance sheet and income statement for any remaining anomalies, significant variances, or unresolved issues.
5.7.3 Documentation and Filing:
Ensure all supporting information is available.
For information natively stored within the accounting system (e.g., Accounts Payable), it is sufficient to rely on the system's storage.
For information generated externally to the accounting system (e.g., accruals, prepayments, bank reconciliations), ensure the relevant files are captured, filed, and saved in the designated schedules folder on the company server (etltd-pdc/ET Data/Accounts/___ CFO ___/Schedules) .
5.7.4 Closing of the accounts:
5.7.5 Save and Archive: Save all final reports, journals, and supporting documentation in the designated folder for monthly management accounts.
Easyterms Reports to be Saved within the Server:
Path: CFO → Management Accts → Choose Date → Review Previous month Files for guidance.
Actual Vs. Projected
Balance Sheet Condensed
Budget Variance Condensed
Budget Variance
Income Statement Audit Presentation
Income Statement Vs. Prior Year (Condensed)
Easy Holdings Reports to be Saved within Server:
Same Path as above
Balance Sheet Shareholder Presentation
Balance Sheet
Income Statement Profit & Loss Shareholder Presentation
Income Statement
Balance Sheet (Exported Excel)
Income Statement (Exported Excel)
Loan Aging Report
CFAL Account Statement
Receivables Report (for specific bad debts)
Security Deposit Schedule
Deferred Income Report from Loan System
Xero Sales Tax Report (VAT)
Investor Portal (for Preference Shares)
Loans Written Off Schedule (from Collections Department)
Staff Commission Report
Fixed Asset Reconciliation Report
Outstanding Purchase Orders Summary Report
External Accruals Schedule (on server)
External Prepayments Schedule (on server)
All Journal Entries with attached backups
All finance staff involved in the management accounts preparation process will receive mandatory training on this SOP and related policies annually or upon significant revisions.
Management og Accounts Loom
Addendum Loom (Closing of Accounts)
This SOP will be reviewed annually by the Finance Department to ensure its continued effectiveness, compliance, and alignment with business objectives.