As the financial year end approaches, many businesses begin to think about how to get ready. Taking a few preparatory steps ahead of time, and checking that your accounts are in order could save you a lot of time in the long run.
What does ‘year end’ mean?
It is a definitive report on how your company has performed over the past 12 months and is a statutory requirement. It needs to be accurate, as it will give an indicator to potential investors, banks or other lenders the financial circumstances of your company. It’s also a good time to review the performance of your business and plan for the future.
Things to do now:
Create a countdown
Preparing for the financial year end can be a lot of extra work on top of the day job, so create a year end countdown. Brief your employees on the fact that it’s year end and encourage them to do everything they can to tighten expenditure, collect purchase orders and invoices, file expenses, and clinch every last order.
Make sure your accounts are up to date
Every column of figures in your financial accounts should add up correctly and tally with all your invoices, bills, paying-in books and bank statements. List sales made before the year end, but not yet paid for, as outstanding debtors. Include the amount, invoice number and invoice date. If there are any invoices that you suspect may not be paid, write a note of them with a brief explanation.
You don’t have to run the year end specifically on the last day of the year, most businesses wait until they have processed all of the payments and receipts for the year they are closing. In the meantime, you are free to post transactions for the new financial year.
Check your chart of accounts
The chart of accounts, or COA, defines which accounts relate to your profit and loss report and which relate to the balance sheet. Ultimately at year end the COA controls which accounts are cleared down for the new year so it’s important to make sure it’s right.
Ensure your employee data is up to date
HMRC take a keen interest in payroll and expenses so ensure your calculations are correct. Your business will be liable for incorrect tax and National Insurance deductions, not the employee. Keep track of all expense claims and ensure employees attach the correct receipts to their expenses forms.
Do your housekeeping
Make sure your files are all in order and your invoices, receipts and statements are filed and stored neatly where you can find them – either as hard copies or online. If you’re queried on your accounts by HMRC you’ll need to have the evidence to back it up – so be prepared.
Check your data and create a backup
If you’re using accounting software it has a data checking routine that will tell you if there are any problems. Run it now and make sure you tackle any errors early. If you have no errors, take a backup so you can always get back to where you started.
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