Year-end accounting Checklist
The last weeks of each financial year are usually fussy and messy times for most business ventures. The prepping time to gear up for the year end accounting is literally twisty as it sounds.
There are numerous tasks to manage – prepping the payroll for your employees, sending customer statements, filing taxes, drafting financial reports, and many more. All these fiscal chores take away your time to focus on the core functionalities of your business.
And if you are a small business entity, then all this will become even more knotty. If you do not have professional assistance to manage your year end accounting needs, you may invite future troubles. Checkout our year end accounting services here.
The tricky thing is to complete year end accounting in due time. If you exceed the time of filing, you may end up facing legal fines and additional charges.
So how can we mitigate risks and avoid such liabilities? Early preparation! Team Initor Global UK is here to explain the essential things you need to take care of before getting ready for the year end accounting process.
First and foremost, let’s grasp the meaning of year end accounting.
What is year end accounting?
In simple terms, year end is the conclusion of the financial period for a business. It is popularly known as the accounting reference date.
This process involves gathering and organizing the financial data into reports as per pre-determined legal formats and is essential for statutory filing needs. The financial year of each business entity varies according to their birthday or the day you commenced trading.
For instance, your financial year is typically the day before the following calendar year of your inception. Also, note that your financial year is the same as your corporation tax period. But do not get it confused with your tax year that happens every month of April. The year end accounting process of your company usually covers the following:
- Director report
- Balance sheet
- Profit & Loss
- Explanatory notes
How to prepare for Year end accounting?
As you might feel, preparing for year end accounting is no walk in the park. You need to handle obstacles such as unpaid invoices, unnoticed expenses, and inaccurately recorded transactions. At the same time, there will be financial obligations that require compliance.
You also need to submit all your year end accounts as your corporate tax returns to HMRC. If you are a corporate entity, you also must consider submissions with the Companies House. You can file these records online and ensure that these are accurately maintained, as HMRC uses this for tax estimations.
For smooth year end accounting, it is crucial to have up-to-minute information on assets, liabilities, and expenses. Thanks to modern cloud-based accounting, today, you can streamline all financial paperwork and number crunchers.
Consider the following tips to prepare efficiently for your year-end accounting endeavour.
1. Collect your paperwork
Gather all your paperwork. Any information you submit as part of your financial report needs to be backed up with supporting documents or corroborating evidence. Keep all your client agreements, receipts, bank statements intact. Regular management of paperwork will make your year end accounting easy and hassle-free.
2. Keep a watch on overdue payments
Maintain track of your unpaid checks and ensure they all are closed before the end of that financial year. It will help to warrant precision. If they remain overdue, consider that they are duly accounted as outstanding payments.
3. Double-check your accounts data
Cross-check whether your accounts information and tax figures match the documents that you have submitted. If there are unreceived sales checks, then do not add them as a part of your revenue. Instead, mention them as outstanding income.
4. Update your employee data
As your business is expanding, new employees will be hired regularly. Hence, maintain up-to-date data of their payroll, benefits, and expenses. Avoiding any such crucial data can put your business growth at risk. So, sustain the employee data information quality no matter what.
5. Prepare data backup
Since almost all aspects of year end accounting are done digitally, it is important to maintain the necessary data backup. If your information is being compromised, then this backup will divert severe damages. It will also help in organising your data professionally.
What information needs to be included in year end accounting report?
Your business tax return has to be submitted to the HMRC.
You need to keep a regular track on your
- Bank Statements
- Income Records
- Details of Check payments
- Invoices, purchases, and receipts
- Any changes in assets
Let’s take a quick glimpse at the key information for the year end accounting reports.
1. Company Tax Return
It is basically covers netting of the income and expenditure of your business and calculating the tax payable as per the profits. It is the CT600 form submitted to HMRC that displays their spending and profits. The deadline is not universal but depends on your financial year.
If you are a limited company, then you need to register for corporate tax. If you are the sole proprietorship, then you need to send a self-assessment tax return instead. The HMRC will then send you a notice to deliver company tax returns.
If you haven’t received any correspondence, it is always preferable to contact them. It will avoid any penalties or prosecution during the year end accounting and tax filing process.
2. Statutory Accounts
These are the annual accounts of your company’s performance and financial actions. While preparing statutory accounts, it is vital to conform with the HMRC and UK GAAP standards. You have to send a copy of the statutory reports to the following parties.
- Companies House
- Attendees at the company’s general meetings.
Depending upon the company you own, your statutory account requirements may vary.
For instance, if you are a small business with 50 employees or less, you need to give an ‘abridged’ account to the Companies House in the UK. On the other hand, if you function as a micro business with 10 or fewer employees, submit a simpler statutory record.
Lastly, if you have any significant transactions in the last financial year, you are classified as a Dormant company. In such cases, you need to report such transactions as well.
Here is a detailed picture of the list of things to include in your statutory accounts.
This is the report produced by the company director stating the performance of your venture. It also has insights for the forthcoming years, explanations of the current situation, and past financial performance evaluation.
It is the statement that shows how much your company is worth. It also denotes how much you owe or owed at the year end accounting period. A balance sheet is typically signed by the responsible director and contains the director’s name attached to it.
The income statement provides a precise overview of the net profit or loss that has a company earns or incurs at the time of year end accounting. It is important for keeping the health of your business. It is the indicator of business success and is also called an income statement.
What are the accounting records that are necessary for year end accounting?
If you spend a sizeable time on your accounting records, it is time to reconsider your decision by hiring an accounting solution. As you are a small business entity, here is a detailed list of accounting records for completing year end accounting.
1. Revenue and expenditure record
The end of a financial year is the perfect time to evaluate your scalability and financial performance. You can analyse your current situation and compare it to your past positions.
To do this, collect the receipts from your checkbooks, sales, purchase, and bank statements. Despite this, you also need to gather information on your debts.
By checking the invoices that haven’t been paid and identifying the potential debts, you can calculate the sum unpaid. There are certain allowed expenses, so you have to mention any doubtful debts especially.
You also have to list all the creditors each day. This will help you to develop an overall picture of whom you need to pay first.
2. Records on unsold stock and floating assets
If your business is dealing with physical goods, you need to do a physical stocktake for year end accounting. As it is a daunting thing to organise, you can start the preparation when no new stock of goods is coming into the business. Once you complete this part, the next step is to calculate the value of your stock.
If there are damaged goods involved, then don’t forget to record the depreciation value as well. In the case of unfinished products, use proper estimations to measure the value. If it is 30% finished, mention the remaining 70% value of the project as work in progress.
3. A record of fixed assets
List all your fixed assets, as if tangible properties like vehicles or equipment. The list should also have descriptions, location of the items, purchase date, price of these items, and when it was sold before the year end accounting period. Similarly, you can keep a record of items that have experienced depreciation in the past year.
4. Keep a register for maintaining company liabilities
Keep an on all your investments and debts to ensure they are well maintained and updated. As year end accounting can be intricate, adhere to the standards and sustain accuracy. The company liabilities occur when you try to raise surplus cash for meeting your business needs like convertible bonds.
Any debts that go beyond the current financial year comes under long-term liabilities. At the same time, operational liabilities are liabilities that happened during the time of common business operations—for example, capital lease requirements or employee pension.
5. Record on Employee Payroll
When it comes to managing payroll, HMRC always looks into the efficiency of handling it. If you have missed out on any receipts, the ultimate responsibility shall fall on the business owner. You can hire special payroll accounting experts to support the overall year end accounting process.
Manage the year end accounting hassle with Initor Global UK!
We know closing year end accounting may be exhausting for many accounting firms and CAs! Nevertheless, following such year end accounting checklist will extend some backing during this busy time of the year.
We at Initor Global UK make such tasks a seamless experience for small businesses. We have a team that has the know-how to prioritize time efficiency and accuracy while doing year end accounting. Our experienced professionals adhere to a holistic approach in managing the annual accounts. Contact our team now.