Accounting for RTO’s (Registered Training Organisations):
Accounting for Registered Training Organisations (RTOs) is complex in nature due to the technicality of accounting activities and the mandatory compliance regulations. The Victorian Registration and Qualifications Authority (VRQA) is the Victorian regulatory body that oversees RTOs, who are nationally recognised and quality-assured training providers. To qualify as an RTO, stringent compliance is required with the Australian Qualifications Training Framework (AQTF) to ensure eligibility for state and territory funding. The purpose of this article is to explore the fundamental accounting and compliance requirements for any effective RTO.
Income Statement and Balance Sheet
These are the two fundamental financial statements for any business wishing to monitor their financial position in order to assist with making decisions for their organisation. The income statement monitors the cash inflows and outflows, determining the profitability for the period in question, while the balance sheet gives an overview of the financial position, calculating the equity the RTO has.
Aged Debtor Report
An aged debtor report is a useful tool in determining the amount owed to you and the duration of time the amount has remained unpaid. The likelihood of an amount being collectible from the debtor decreases as the debt ages. In the context of a RTO, if an account receivable remains unpaid from a prior student, the longer it remains unpaid, the less likely it is that it will be received. Therefore, an aged debtor report assists businesses in identifying overdue payments and subsequently collecting them. Trends in non-payment are easily identifiable through the use of an aged debtor report, which then allows for collection methods to be adjusted accordingly in order to offset the risk of providing services which remain unpaid.
Cash-flow Forecasts
At different stages of the business cycle, you could experience either a cash surplus or deficit. During periods of cash surplus, it is advisable to pay off any debts or make investments and during stages of cash deficit, you need to assess your options including collecting outstanding debts, taking out a bank loan or staggering payments made to creditors. Cash flow forecasts enable users to analyse the financial position of their business and manage their operations accordingly.
Bank Reconciliations
Bank reconciliations are an effective internal control used to cross check the amount of money in the internally generated cash ledger account with the business bank statement at a specific date. This procedure highlights misstatements due to human error or fraud. For example, if an amount paid to the business was $89, but recorded as $98, the $9 difference will be detected during the bank reconciliation process, increasing the reliability of the underlying accounts produced. If fraudulent or inappropriate payments were being made with business funds, these would also be uncovered during the reconciliation process.
Additional Compliance to be considered
The above applies to training institutions within Victoria that educate domestic students. Victorian RTOs providing courses interstate through physical or online services must comply with additional requirements outlined by the Australian Skills Quality Authority (ASQA) who are responsible for RTOs throughout the Australian Capital Territory, New South Wales, Northern Territory, Queensland, South Australia and Tasmania. RTOs endeavouring to provide vocational training to international students must also be registered with the Commonwealth Register of Institutions and Courses for Overseas (CRICOS). As you can see, due to the complex environment an RTO must operate under, it is advisable to consult with an accounting professional to ensure that your operations meet the vast compliance requirements and can achieve long-term financial feasibility.