13 min read
The end of the financial year is a busy and critical time for any limited company as they get their books of accounts in good shape. It also coincides with monthly and quarterly reporting, so workloads tend to pile up – as do stress levels.
While the work itself cannot be avoided, one can make the hours easier on their finance team, or themselves, by planning ahead on what exactly you need to file and what accounting best practices to keep in mind. In this piece, we give you tips to get started with that.
But first, let us get the basics out of the way:
What is the year-end close?
Why is it so hard to sort out year-end accounts?
As you can imagine, completing the year-end close is a laborious process. Even the most organised and experienced finance and accounts teams can get bogged down by everything that has to be completed. Cloud accounting and the various softwares available make this process a lot easier but if you are not yet in that brave new world, here are some of the most common challenges you may face:
1. Manual entry
While many businesses have adopted accounting software, some still rely on manual data entry and spreadsheets, making year-end reckoning time-consuming and exhausting.
2. Human error
When handling large volumes of paperwork and large columns of data, a few mistakes are likely to slip in, leading to significant inaccuracies in the final statements.
3. Poor communication
Coordination between accountants and the other departments is usually ad hoc, leading to countless mail trails and text threads that make it hard to pinpoint where a conversation is going and when to expect certain inputs.
4. Disorganised paperwork
Quite often, businesses do not keep track of paper receipts and invoices as tidily as they should, which can lead to a lot of stress and delays when hunting them down at year-end.
The ultimate year-end accounting checklist: Essential areas to cover
If you know exactly what you need to prepare and when it needs to be filed, you can plan for it in advance and take some of the stress off your accountants’ shoulders. Here, we do a deep-dive into what to cover under year-end accounts for a limited company:
- You need to submit annual accounts along with the company’s tax return, usually payable around nine months after the close of the fiscal year.
- All submitted company accounts become available to the public.
- Depending on company turnover, number of employees and balance sheet assets, the contents of company accounts can be reduced for medium, small or micro-entity companies.
- The responsibility for filing accurate company accounts falls on the directors, even if a third-party accounting service is used.
- The statutory accounts must include a profit and loss account, a balance sheet showing the company’s position on the last day of the financial year, a director’s statement giving an overview of the company’s performance and clarifying notes about the information recorded in the profit and loss account and the balance sheet.
- The directors are responsible for ensuring that the information in the statutory accounts offers a “true and fair” representation of the company’s performance over the last fiscal year.
- Statutory accounts must be prepared in line with UK accounting standards, which lay down rules for how certain transactions need to be recorded.
- All companies are legally required to keep full records of incomes, expenses, assets, liabilities, goods bought and sold, and stock and stocktaking.
- Records include documentation such as receipts and invoices, bank records, cheque slips, and cash receipts. Documentation can be electronic or in hard copy.
- Annual tax returns need to be completed online through the designated portal.
- Have a register with complete details of all assets you own, including a description, a purchase date, how much you paid for it and where it is located.
- Keep a record of annual depreciation on each asset. You can claim a capital allowance against depreciation for certain types of assets.
- Keep a record of whatever asset items you have bought, sold or scrapped during the year.
- Note that if you’re a small company, you can get 100% relief up to the Annual Investment Allowance on most plant and machinery purchases.
- Keep track of all expenses claimed – an easy way is to use claim forms where employees just attach the claim receipts or invest in some expense management software.
- If you are paying benefits in kind, you need to register with HMRC and add the cash equivalent of the benefit to the payroll for tax purposes.
- While you do not have to complete P11Ds, you need to submit P11D(b)s for National Insurance (NI) contributions.
Over to you
- Make sure to create a calendar with target dates to avoid missing any crucial deadlines.
- Gather outstanding invoices and receipts and assign ample time for this job. Expect delays.
- Review and reconcile all transactions, from credit card statements and invoices to bank statements and invoices.
- Ensure that all money records coming in or going out of the business match what occurred.