Accounting year end is when you have to put all your business sales, expenditure, capital, and liabilities into Profit and Loss and Balance Sheet statements, calculate Corporation tax, and present reports to Companies House and HMRC.
The key here is for the reports to show a clear, ‘true and fair’ view of the business’s performance during the year and its final results.
It’s a meticulous process that requires a keen eye for detail. Checking numbers in the books (accounting software, for example) with the actual state of business, such as the balance of money in the bank accounts, outstanding sales invoices and purchase bills, physical inventory, loans, creditors, debtors, taxes, etc. The numbers should match.
To head-on with the year-end, we would recommend the following steps:
- If your business has stock, count it physically. It will help identify any old, damaged, or slow-selling stock you might need to write off.
- Check outstanding and follow up on overdue invoices. If some have been there for a while and you believe they are bad debts, it is time to write them off.
- Go through the Fixed Assets register, ensuring all equipment and property values are up to date.
- Keep the statements and agreements of any loans or arrangements. Your accountant will need them to match the figures with the accounting records.
- If you use a Director’s Loan account, ensure the records are accurate. The money you gave to the business personally or took away from the company should be recorded here.
- If working from home, it might be a good idea to charge your company a fair proportion of home expenses. HMRC has guidance on which household bills and at what proportion can be expensed.
- Bear in mind that if the Director’s Loan Account is overdrawn (you owe money to the company) at the year-end, this needs to be reported on the accounts. HMRC would expect you to pay the overdrawn amount back to the company within nine months after the year-end; otherwise, additional tax will be due.
- Be prepared for Corporation tax. For limited companies, the payment due date is 9 months and 1 day after the end of the financial year. You will know the exact tax figure due only after the annual accounts reports are ready. Prepare for it in advance by simply putting aside the Corporation Tax proportion from your sales.
- If you employ staff, check payroll calculations and fix any over or underpayments or anything that’s not quite right.
- Keep any letters and information received from HMRC and Companies House. They form part of your business records and might be needed to complete the year-end reports.
- File all required submissions and reports on time. Remember that each limited company has its own deadlines.
- Finally, get all your records, invoices, and supporting documents nice and organised. It will make your life a whole lot easier down the line when you need to reference something.
