How To Prepare For Your Year-End - Part 1
Pre-empting question from your accountant ...
Posted by Alison Mead on 19/10/2020 @ 8:00AM
When you are doing your own bookkeeping, there are some checks and balances you can do around your year-end to ensure that your accounts are correct, which enables you to pre-empt any questions you may get from your accountant ...
When preparing your year-end you can pre-empt questions from your accountant and avoid any nasty surprises!
copyright: nonwarit / 123rf
Going through and following my pointers will mean you could have a much better idea of how much profit (or loss) you have made sooner rather than later. This ensures you can prepare for your upcoming corporation or self-assessment tax and avoid any nasty surprises.
Ensure you have invoiced for all your work in the current financial year. If you have some projects still 'on the go' and not completed yet, you can allocate a figure to them and include these in your accounts to reflect the fact that you have done some work for the project across two financial years. This is called Work in Progress and can appear as a current asset in your balance sheet, as it is something of value to your business at the time of the year-end.
Ensure that the costs related to the sales in the year have also been accounted for. If you haven't been invoiced for something yet, but you have already made a sale relating to that cost, then again you can include a figure in the liabilities area of your balance sheet at the year-end. This will reflect the fact that your business does owe this money, you just haven't been billed yet.
If you have bought products in the year and been invoiced for them, but they are not sold yet, these are stock items, and these should be included as a closing stock figure at your year-end. Again, these are assets of the business and the value of them should be the lower of a) what you paid for them or b) what you can sell them for.
Remember, if you have old stock items that you are unlikely to sell, it might be an idea to revalue them to reflect this. With our business being IT we often have items which become obsolete so in our stock valuation at year-end we say they are not worth anything. Very occasionally, when fixing an old machine we can use them, but that is just a bonus!
At your year-end you should always do a stock take and double-check your stock figures are reasonable, then make any adjustments needed.
If you run a petty cash system, always do a double check on the balance in the petty cash tin at the year-end and compare to your records so they match. This is often missed with small businesses and is not often significant, but if you have a busy office with lots of milk and biscuits being bought it can all add up.
Bank Accounts and Loans
Download and keep your bank statement which covers the year-end on file ready to send to your accountant. Also, if you have loans or HP agreements and leases, it can be a good idea to ask for a statement to show what you owe at the year-end.
You need to make sure your assets and liabilities (ie what you are owed and what you owe) on your final accounts and any external sources of verification, like statements, will need to be checked against your figures in your accounts.
By downloading these at the time of the year-end and saving them in a file together you can save yourself a ton of problems in the 3, 6 or more months later when you finally get your figures sent to your accountant.
Large Purchases/Fixed Assets
If you have bought anything large in value in the year for your business (property and buildings, vehicles, computer equipment, maybe a refurbishment), keep copies of those invoices ready to pass to your accountant too.
Large purchases are treated in a different way to day-to-day overheads. You have the values in the top of your balance sheet in fixed assets, and put a proportion of the cost into your profit and loss in each year to reflect the lifespan of the items.
This is called depreciation and for a property, can be over 10 to 20 years, for furniture 5 to 10 years and for computer equipment often 2-5 years depending on your own companies policies.
So, those are my top tips of what to look at on or as near as possible to your actual year-end as you can. Often you don't send your accounts over to your accountant for a few weeks or months after your year-end, so I'll cover some checks to do in my next blog post.
Until next time ...
Would you like to know more?
If you are going to do your year-end soon and want some more help and advice, call me 01604 420057, leave a comment below or use the Messenger tool you can see in the bottom right of your screen to chat right now.
About Alison Mead ...
Alison loves bookkeeping and supporting bookkeepers. She has been helping clients to be better bookkeepers in Sage 50 for over 24 years and has been Xero Accredited in accounts and payroll for a number of years too.
She specialises in a very unique hand-holding method of training, helping bookkeepers and business owners to use their accounts software as and when they need support in setting up and producing their invoices, reports and financial information.
Alison combines her role at Silicon Bullet with her Forever Living network marketing businesses and is often to be seen at business networking meetings as she likes to keep busy.
You know what they say: if you want something done well ask a busy person!
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