How to Prepare for Financial Year End

The purpose of this article is to assist clients in getting ready for the company’s financial year end, focusing on the preparation of statutory accounts.

What is a financial year?

A financial year, also known as a fiscal year or an Accounting Reference Period, is a 12-month period used for reporting a business’s financial performance.

When does a company’s financial year start and end?

The start and end of a company’s financial year can vary. In its initial year, the financial year begins on the date the company was incorporated and continues until the last day of the same month the following year. This concluding date is referred to as the Accounting Reference Date or ‘Year End’.

As the year end period can vary,  and this is the time where balances are relooked at in detail and adjustments are made to ensure figures are reconciled and are correct.

The best way is to ensure financial accuracy is to review monthly or quarterly management accounts or annual figures and reconcile all main control accounts. This will help to reduce the level of work required at the year end and associated costs.

When should you start thinking about your financial year end?

When considering financial year end, it really is essential to plan ahead and starting now is the perfect time for preparing for financial year end. Whilst the end of the financial year may seem like a long way off, giving yourself time to plan will make your goals more manageable and efficient, taking the pressure and stress away from your team and avoid errors.

What do you need to consider for financial year end?

Below is a list of tips you should consider to help with preparing for the year end. It’s important to allow time for planning the financial year end, and allocate a clearly defined list of task and timetable to ensure a timely completion.

Prepare a reporting timetable

List out all important dates so that data processing data deadlines can be set for the team members. This timetable should be tracked as time moves on, to ensure that everything that is required is completed.

Balance Sheets – Check opening balances

Each year, your accountants may have raised various adjustments when preparing the statutory accounts, ensure that any provided to you have been processed onto your accounting system properly. One check is to see if the retained reserves brought forward, agree to last year’s statutory accounts.

Chase slow suppliers for invoices and receipts

Where possible use software automation that can capture digital receipts and slow paying suppliers can also be chased for invoices on a timely basis, so that they can be processed on time and are always up to date.

Reconcile trade creditors & review supplier statements

Ensure that you review the transactions and that you have obtained all relevant invoices or have discussed any disputed items. All items should be processed and where there are payment on account, chase for related invoices or treat as part of prepaid items.

Reconcile trade debtors

Ensure that receipts clear each related invoice or batch of invoices. Any balance outstanding must be reconciled to the last issued invoices.

Reconcile year end balances

For PAYE, VAT, and other major balances, check that the nominal ledger balance agrees to the last prepared return or that the reconciliation accounts for any manual adjustments or timing differences.

Accrue for any income not invoiced

Sometimes work is being undertaken but not yet invoiced at the year end, consider estimating the value of work done and account for as part of accrued income.

Provide for accrued costs

There may be invoices received after the year end for costs which cover a period just before the year end. In such cases an estimate should be made for the amount covering the period to the year end. Such estimates must be compared to the invoice which may have been received after the year end.

Provide for prepayments

There may be expenses incurred which straddle the financial period, in such cases, the period after the year end should be noted and used as a basis for calculating the amount of costs to be carried forward as prepayments.

Review fixed assets

Compare the fixed asset register to physical assets, so that any that may have been scrapped are adjusted for, and all depreciation calculations are correctly calculated.

Carry out an analytical review

For major P&L items, compare the current year results to last years and review those which show a large variance. This should help you to identify items that may have been mis-posted.

Why should you be planning for financial year end – What are the benefits?

Management accounts

As the company begins to accurately maintain their accounting, management accounts can be prepared which will provide vital information about the business on a monthly or quarterly basis.

Compliance

Meet compliance obligations

By making the processes as smooth as possible, it will help to ensure all compliance matters are met and that your business is keeping up with the latest legislative changes, for example accounts submitted at Companies House and VAT return submitted to HMRC on a timely basis.

Calculation of corporation tax liabilities

Corporation tax liabilities will be calculated using these accounts therefore it is important to have an accurate set of accounts so that incorrect liabilities are not calculated and to avoid costly errors.

Tax planning opportunities

As accurate information is being maintained as the year progresses, this will allow to plan for say capital expenditure and take advantage of tax opportunities and  capital allowances. This will also help to budget for expected corporation tax liabilities.

Cash flow forecasting

By ensuring accurate information is maintained, this will allow the company to plan its cashflows and working capital requirements.

Business strategies

The company directors will be able to look at their business strategies and decide what changes they may wish to make, once reviewing the results and whether a change in strategic direction is required. Undertaking continuous reviews and ensuring the financial accounts are up to date and accurate, will provide you with reliable business’ performance results, therefore enabling you to reassess business goals, review the bigger picture, manage your business more effectively and look at new business strategies to maximize growth.

When is the deadline for submitting year end accounts?

The submission deadline for year-end accounts to Companies House and HMRC varies by company type. Private limited companies usually have nine months after their accounting period ends to file their accounts, while public limited companies have a shorter window of only six months. It’s important to know your deadline submission date as delays in submitting to Companies House can incur penalties.

Get in Touch

Taking note of the above will help you have a comprehensive view of your company’s financial status and performance at any given time. The above should help you to exercise better control of your internal accounting providing reliable information that is vital in meeting your regulatory obligations, but will also serve as a helpful tool enabling you to assess your company’s financial health, and allow you lower external accountancy costs due to less errors and last minute adjustments.. enabling you to make informed decisions relating to your business at any given time.

For further assistance and advice with managing your year-end accounts and creating a simplified and efficient process, or assistance with compliance and legislative changes relating to your financial year-end please contact our Accounting Services team who will be happy to assist you further.

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