Financial reporting at year-end is a statutory requirement, providing a summary of how your company has performed over the previous 12 months. It can also be a good opportunity to take stock and look at ways you could improve your business in the coming year.
If you are a limited company owner, you have some control over when your financial year-end falls. If yours is a new company, your initial financial year-end will be 12 months from when you set up the business, after which you can shorten the accounting period, or lengthen it, to suit your requirements. For instance, if your business is seasonal and particularly busy around the Christmas period, you may want to avoid a December financial year-end to avoid additional workload when you are at your busiest.
If you leave it to the last minute, getting ready for your financial year-end can be time consuming, and quite a lot of additional work on top of running your business, so make sure you’re prepared!
Of course, you can easily avoid a last-minute panic. Here are the key steps you should take to make sure your year-end goes smoothly.
Step 1: Have a planning meeting with your accountant
Organise a time well in advance of year-end to go through the critical dates, the tasks that need to be completed, and what learnings you can take from the previous 12 months.
It’s also a good time to talk to your accountant about tax planning for the coming year. Tax planning isn’t always straightforward, but you want to be sure you’re keeping up to date with changes and taking advantage of any deductions you may be eligible for. Your accountant may be able to identify ways to make tax savings on areas such as VAT, how you pay yourself, or other tax deductibles.
Having this meeting in good time will mean you and your accountant can decide if any further action is needed to reduce your tax bill. At Blue Rocket, we’ve structured our teams to provide the best people and guidance for your business, whether you’re a sole trader, start-up or consultant.
Step 2: Make sure your paperwork is in order
Make sure you have records to back up your accounts. You’ll need to have copies of bank statements and insurance documents, as well as expenses and receipts from you and your staff. Business expenses are deducted from your profit, which means you pay less tax, so it’s worth chasing these up.
File all your paperwork as hard copies or online – your accountant will be able to recommend a cloud-based system that will help you access business information in real time and keep you HMRC compliant.
Step 3: Reconcile your accounts, payroll and stock inventory
Now is the time to chase any unpaid invoices or outstanding transactions that might have fallen through the cracks during the year. This will give you a clear idea of any discrepancies and the time to investigate them before you submit your accounts.
Late payments are a headache for small business owners, with as many as seven in ten invoices being paid late[1], causing problems with cashflow and often restricting business growth altogether. Year-end can be a red flag if you suffer from persistent late payments, and could be a sign you need to review your invoicing process. At Blue Rocket we believe you have the right to the money that’s owed to you as soon as it’s due, and there are a number of ways we can help you.
If you have stock, you should handle this in a similar way, completing a full inventory and noting any discrepancies. The value of your stock will have an impact on the amount of tax you pay.
As an employer, you will need to update your employee payroll records and software, provide your employees with a P60 and report any employee expenses and benefits.
Step 4: Review and prepare
Your final considerations at this stage should be any benefits that are about to expire that you haven’t taken advantage of, or any charitable donations that could be offset.
Although getting organised for year-end can seem like a daunting task, being prepared well in advance by using tools and accounting systems, alongside guidance from your accountant, should make it less stressful.
Financial year-end is a busy time for business owners, but also a great opportunity to reflect on the improvements you could make to grow your business in the following year.
If you need any support with bookkeeping, payroll, credit control or preparing your accounts, get in touch at happytohelp@bluerocketaccounting.com,or call us on 01322 555 442 for a no-obligation consultation.
[1] https://www.bluerocketaccounting.com/news/its-accrual-world-when-your-customers-dont-pay-on-time
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