As the end of the financial year approaches, businesses of all sizes are attempting to get their accounts in order. With the right approach, year-end doesn’t have to be a chaotic, stress-filled ordeal. Here’s a survival guide to help you close your books smoothly and set yourself up for success in the new financial year.
1. Plan Ahead with a Closing Schedule
The best way to avoid a last-minute panic is to plan ahead. A well-structured closing schedule will help you break tasks down into manageable deadlines. Ideally, give yourself at least two months to complete everything, including:
- Backing up key financial data
- Closing payroll
- Verifying outstanding transactions
- Ensuring reporting deadlines are met
This structured approach prevents a last-minute crunch and reduces the risk of errors.
2. Chase Unpaid Invoices
Unpaid invoices can wreak havoc on your cash flow and make reconciling your accounts a real challenge. Now is the perfect time to chase outstanding payments. Most businesses are in the same boat, so clients may be more receptive to settling their balances before the year-end.
Proactively sending reminders and highlighting the impending tax deadline can nudge tricky invoices over the line. You can also explore invoice financing, where a lender advances cash against your unpaid invoices. Just keep in mind that this comes with interest charges and a monthly fee from your bank.
3. Conduct a Stock Inventory Review
If your business holds stock, now’s the time to conduct a full inventory check. Holding too much stock can cause cash flow issues, especially if items are slow-moving or obsolete. If stock is sitting on your balance sheet without moving, consider ways to shift it. Can you find someone to fund your stock? Effectively, this works like a business loan, freeing up cash, though it does come with interest and arrangement fees.
Log any discrepancies between physical stock and recorded numbers. If anything is missing, you have two options:
- Investigate with staff and suppliers
- Write it off as a loss
4. Get Your Expenses in Order
Every business expense you claim reduces your taxable profit – and that means paying less Corporation Tax. To avoid a last-minute scramble, get all receipts and expense records in order.
Using an expense tracking app can save your finance team hours of work and ensure no deductible expenses slip through the cracks.
5. Organise Your Paperwork
Even if you’ve gone digital, keeping clear and accessible records is essential. Gather and organise:
- Bank statements
- Supplier account summaries
- Business expenses documentation
- Any other financial paperwork that HMRC may need for verification
Having these in order will save you time and stress if an audit ever comes your way.
6. Review Your Asset Accounts
Reconcile all cash accounts, compare inventory records, and review prepaid expenses. This will give you a clear picture of the value of assets owned by your business. If you’ve taken something from your profit and loss accounts and added it to your balance sheet, your balance will increase, but it also means there’s more tax to pay. However, it’s important to show that you’re investing in your business.
This step is particularly crucial if you’ve taken out asset finance.
7. Check Payroll and Employee Data
Payroll errors can be a major headache. Now is the time to double-check that all employee data, tax, and National Insurance contributions are correct.
It’s also a great opportunity to introduce tax-efficient benefits like:
- Cycle to Work Scheme
- Childcare vouchers
- Health and wellbeing perks like gym memberships or private healthcare
- Professional development or training expenses (which may be tax-deductible)
8. Close and Accrue Accounts
Your balance sheet needs to accurately reflect:
- All outstanding receivables and payables
- Any unpaid debts listed as liabilities or accruals
- The correct recording of income and expenses for the financial year
Ensuring everything matches what actually occurred will make tax filing much smoother.
9. Maximise Your Allowances
There are plenty of tax reliefs available for businesses, from R&D tax credits to deductions for charitable donations. Reviewing what you’re eligible for can help save you money. A tax adviser or accountant can help identify opportunities you may have missed.
If you’re claiming R&D tax credits, ensure everything is legitimate. It’s worth applying for advanced assurance, where you provide a business plan and explain why your work is innovative. This can help prevent any issues with HMRC later on.
10. Review Pension Contributions
Making pension contributions before year-end can be a smart tax move. Directors can fund their pensions from their own company, with private pension contributions of up to £60,000 per year. If they haven’t done this for the previous three tax years, they can bring this forward to release unused allowances. This can help reduce Corporation Tax while securing retirement savings.
Final Thought: Don’t Panic!
Year-end can be overwhelming, but staying organised and planning ahead makes a world of difference. March year end accounts have to be filed nine months after the accounting date so changes can be made. If you need expert guidance, our team at Richard Riley and Associates is here to help.
Get in touch today to make your year-end process as smooth and stress-free as possible!