Preparing for the End of the Financial Year: A Comprehensive Checklist

It doesn’t matter if you’re a brand-new startup or a large, well-known brand, the end of the financial year is an important time. It’s a key time in the life of any business, and ensuring that your records are current, correct and ready for review isn’t something to leave until the last minute. Think about it, do you want to be stressed, rushing and at risk of making mistakes?

By being organised as a business owner and preparing well in advance, you’ll find the end of the financial year a lot less stressful. Like everything, nothing good comes from having an ‘out of sight, out of mind’ mentality, as your financial reporting won’t take care of itself. Your business will be ready to transition smoothly into the new financial year.

Why is it Important to Prepare for the End of the Financial Year?

There’s a lot to consider on the financial side of a business, even when the financial year comes to an end. The end of the financial year shouldn’t be overlooked, because the way your business handles that time will determine its future financial health. An up-to-date record of all of your finances is what helps your business to meet its legal obligations by filing true tax returns and financial statements. It reduces the risk of penalties or legal issues resulting from errors or mistakes in reporting.

There are plenty of reasons as to why early preparation for the end of the financial year is key, especially if you want to maximise your business’ financial performance. Reviewing the financial statements, reconciling accounts, and looking over cash flow make it much easier to identify opportunities for tax savings and better expense management. By getting everything in order early, you will be in a position to think accurately about the financial year ahead of you. This includes knowing whether you’re in a position to make big purchases or investments ahead of the end of the next financial year, allowing optimum tax benefits and generally having better financial outcomes. You can set more realistic goals and budgets for the upcoming year with a clear picture of the year that’s just ended.

The ‘Must Use’ End of Year Accounting Checklist

• Make sure you gather all relevant documents related to your financial year. This includes everything from receipts and invoices to statements from banks and statements from credit cards. This will create a clear overview of your financial records.

• Verify that all payments are accurately recorded by reconciling your bank and credit card statements, ensuring that all transactions are accounted for.

• Look at your accounts receivable payable and accounts payable, and make sure that all of the amounts are correctly recorded and settled. There shouldn’t be any discrepancies.

• Update your records to show any assets that you have bought or sold during the financial year. This will ensure that your records reflect what your business currently owns – for example, equipment, computers and vehicles – and they don’t include anything that you’ve got rid of recently.

• Go in and count all of your inventory yourself, in person, to determine the stock value at the date of your end of year. This helps in accurately reporting inventory levels and costs.

• You will need to add all of your payroll data into your end of year accounts, even if you have used an external payroll service provider. Your accounts need to show who you have paid, how much and when.

• It’s a good idea to keep all financial records and documentation organised and accessible for future reference. After all, there’s no knowing when a potential audit might happen.

What Should You Include in Your End of Year Finances?

• Income Statement – This should detail your revenue and expenses for the past year. It provides a snapshot of your business’ profitability and financial performance, showing what you’ve spent money on and what you’ve made.

• Balance Sheet – This showcases your company’s assets, liabilities and equity. It provides an insight into your business’ overall financial health and stability. This is especially important to investors and stakeholders, who want to know that they’re putting their faith in a healthy business.

• Inventory – Ensure that all of the inventory you have at the end of the financial year is accurately recorded in your accounts. What you’ve got on paper should match what you have in person.

• Accounts Receivable – By making a note of all outstanding payments that are due from your customers, you’ll have an accurate idea of how much is owed to your business. This should be included in your finances.

• Accounts Payable – It’s important to document any unpaid invoices or amounts your company owes to suppliers, as this will show your company’s liabilities.

• Depreciation – Include depreciation expenses to account for the reduction in value of your fixed assets over time. You don’t want to be accounting for equipment that cost a lot five years ago, but is now worth much less.

• Tax Returns – Of course, your tax return is a big part of coming to the end of your financial year. Prepare and file your business’ tax return with HMRC to comply with tax regulations.

End of Year Finances are Important, But Do You Know Why?

Doing your end of year finances is crucial to the success of your business, regardless of the type of industry that you’re in or the services and products you provide. It makes sure that your business’ financial statements are both accurate and compliant, and ready for an audit should there be one. This accuracy serves not just as a way to cope with the tax obligations, but also to avoid fines for getting things wrong.

Your end of year finances also gives you a unique look at how well your business is doing. This information forms a very important part of the profitability and financial stability assessment. You can use this to help you to decide on future business strategies, budgeting and how you plan to allocate your resources going forward. It’s also important when it comes to planning for submitting your tax return, estimating your tax owed and claiming eligible deductions.

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