Overwhelmed by the thought of closing your accounts? We guarantee you that you’re not alone. In fact, it’s something we get asked about quite a lot. That’s exactly why we’ve created this handy step by step guide to the year-end close. Now you can sleep soundly knowing you have everything in place to successfully close your books.
What is year-end accounting?
The most important thing to note is that year-end accounting is a statutory requirement, a way to uphold financial accuracy and integrity. As companies are free to choose their year-end date, every company’s accounting year will look a little different. Either way, year-end financial close is usually the official conclusion of 12 months of business, though in some cases you may be able to shorten or lengthen your year.
As the 12-month period comes to a close, you’ll be required to complete a number of accounting and finance tasks that will demonstrate a detailed account of the business’ finances (costs, profits, sales, losses, etc). You’re legally required to file these documents with Companies House by a certain filing date (normally 9 months and 1 day after the company year-end). Submitting this information ensures your company is operating compliantly and all financial records are accurate.
We’ll go through the financial year-end checklist in more detail later, but the process includes tasks like reconciling bank accounts and sorting out balance sheets and cash flow. As an added bonus, it’s also a great way to stay organised as you’ll need similar information for other submissions further down the line, such as Corporation Tax Returns. Corporation tax documents have a different deadline and will need to be submitted to HMRC 12 months after company year end. Bear in mind that this differs from the corporation tax payment which is due 9 months after year end, usually in line with the Companies House filing date.
Why is it necessary?
The main idea behind year-end accounting is that you’ll be able to provide a snapshot of your financial performance, clearly reflecting profits and losses made in the year. This information is vital for stakeholders, especially investors, as it helps determine how much reserves are available to pay out as dividends. It also gives you a clear idea of what financial state the business is in, identifying positive strategies used that should be implemented again or any adjustments that should be made for the following years.
Perhaps most importantly, it’s a way of checking that that all transactions and finances are accounted for and recorded in statements. If you’ve been keeping your accounts and collecting monies throughout the year, the end of year accounting will be minimal. It also gives you a chance to correct any mistakes that may have happened on the books earlier in the year too. Accurate accounts are vital as they form the basis on which corporation tax is calculated.
Your year-end accounting checklist
As promised, we’ve listed below the main tasks involved in getting yourself ready for the financial year-end. These don’t necessarily need to be completed in the order listed, however, each one is equally important!
- Collect past due invoices
This one can be time-consuming, but it’s worth putting the effort in to chase money owed to you by clients before you start a new financial year. A little invoice reminder could be the way to go. You also need to ensure you have raised and issued all invoices for work carried out in the company financial year.
- Reconcile bank accounts and credit cards
Compare bank and credit card statements to accounting records to see if statements match. This will help you find discrepancies and adjust records accordingly.
- Gather & analyse your financial statements
This includes income statement, cash flow statement and balance sheet. You want to be in the know to do with all your profits and losses.
- Review accounts payable and receivable
This step ensures you’ve settled all of your debts and collections. Make sure you leave plenty of time to do this before submission in case people are slow getting back to you.
- Back up important information
You want to make sure your data is safe and that you don’t lose important info from previous years. Year-end is the perfect time to get on top of backing up and ensuring you have a good tech system in place.
- Organise documents and financial information
This is especially necessary if you use an accountant for your business. Depending on which section of the business they deal with, you’ll need to gather things like petty cash records, invoices and receipts, payroll records, financial statements, etc. Regardless of whether you do use an accountant or not, having these assembled and ready to go means you’ll save yourself the stress of sifting through large volumes of paperwork in a rush further down the line. Better still, get into the habit of filing things like receipts chronologically as and when they come in so they can be easily located.
- Plan ahead
While you’re getting organised and scouring your financial info, this is the perfect time to set yourself some business goals for the month ahead. After having gone through all the previous steps, you’ll be in a good position to evaluate your financial health.
If you have people you can trust, it’s a good idea to delegate tasks out and share the workload – that way there’s less pressure on you to be meticulous. If not, share it with an accountant who can help ease the burden and check over the numbers and paperwork with a fresh pair of eyes.
If you’re a smaller or dormant business, it’s worth noting that requirements for filing annual accounts are slightly different. You can find out more about this here.
What are the main challenges?
Year-end closing can be a complex process because it requires acute attention to detail in order to be able to spot discrepancies, combines manual processes with technology, and involves compliance requirements too. It’s no wonder that all of this together can feel like an overwhelming task. Make sure you don’t leave it to the last minute or the problems could just pile up.
For example, missing documents can wreak real havoc and end up causing delays. Especially if your company is on the larger side, tracking down a rogue receipt or invoice amongst mountains of financial documentation will really slow you down. You also need to account for human errors which can occur across the year for several reasons from exhaustion to oversights to lack of correct skills. Give yourself enough time to spot and correct them.
Keeping your checklist to hand is a great way to get organised throughout the year and maximise efficiency as it will remind you of all the things you need to get sorted. It’ll also ensure your financial data is accurate and reliable by encouraging you to double check paperwork you might not have done otherwise. A set list of steps will ensure you maintain legal compliance, have good financial health, and catch any errors nice and early.
What can we do to help?
Hopefully you’ve got to the bottom of this page feeling confident about year-end tasks and clear on what’s required of you to complete. If you’re on the flipside and this has just made you feel more confused on how to close the fiscal year, not to worry! This is our area of expertise.
Whichever boat you’re in, we’d recommend employing an accountant to prepare your documents or, at the very least, check them at the end before submission. This way, you can rest assured that everything adds up as it should and you’re submitting correctly. The last thing you want is issues to be cropping up further down the line.
Accountants like us will help you sift through the seemingly never-ending list of steps. You may find it useful to have a look at our accounts filing services for a breakdown of what we do. We essentially use your data and work with you to pull together a profit and loss account, a balance sheet, a director’s report and general notes ready for submission. If you’re looking to minimise your workload and get your accounts in on time, we are the helping hand you’ve been dreaming of!
Get in touch with us today to speak about your options and how Baa can make your year-end preparation a positive rather than something you dread. Need more information on accounts filing and our pricing? Head to this page for more info.
