How To Prepare For Your Year-End - Part 2

Sanity Check your Management Reports

I print out a balance sheet, a profit and loss report, and a trial balance and compare the figures to previous years, then investigate if any look significantly different to what I expect. It may be that you've accidentally put a large purchase like a car into motor expenses instead of fixed assets or something just doesn't look correct.

Hopefully, if you are a business owner who keeps on top of your books you will know roughly what you expect to see, but have a look and drill down to see what is going on. With Xero and Sage50c you can produce reports which allow you to double click on any figure and see how the total is made up. You can then find any rogue transactions and edit them to more sensible places before you start.

Review Debtors and Creditors

You can produce debtors and creditors reports which show what you were owed and what you owe at the year-end. In Sage, change the date of the report to the year-end and click the 'exclude future transactions' tick box. Review debtors to check that you really are going to get paid for these items. Are there old ones which realistically you need to write off due to dispute or the business has gone bust?

You can write off any invoices which you are sure you won't have paid by adding a credit note dated on the year-end date and using the bad debts account code and matching the VAT of the invoice involved. You can reclaim the VAT on any bad debts older than 6-months on your VAT return and this will do this for you if you're on standard VAT. On cash accounting, the credit will just cancel the invoice out and no VAT will have been paid.

With creditors, check that the amounts owing really are owed. Sometimes you spot a duplicate invoice has been entered at some point in the year, or maybe you paid using cash or a personal card and just forgot to enter those details. Doing a review means you can make any corrections necessary.

Also compare your debtors control account figure on your balance sheet , which is a total of all the invoices you are owed for at year-end, with the debtors list of all the individual invoices. Sometimes the figures may not match if you have entered something since the year-end with a wrong date, or matched a payment in advance or a credit note with an invoice after the year-end and left the date on the matching screen as after the year-end.

It's hard to put this in words in a blog post, but if your list of debtors does not match your balance sheet total then do get in touch for some help as Sage have some optional reports you can download to help spot where your mistakes have been made. There are also instructions on how to fix it. With Xero you need to be careful to match payments to invoices accurately on the dates they are made rather than on the later date you enter them.

Check Bank Balances

Go back and check your bank balances on your accounts at the year-end to match the balances on your bank/credit card statements which you will hopefully have saved as instructed in my previous post about preparing your year-end! They may have matched when you did your bank reconciliation at the year-end, but it can be easy to type a wrong date so check this again before you send the accounts off.

Petty Cash/ Directors Loans

Check there is nothing odd in the cash accounts. Directors often use cash accounts to record when they have paid for things themselves and you may need to adjust a balance at year-end to the Directors Loan Account.

Just consolidate any accounts used by directors in this way into one Directors Loan Account at the year-end. If you do run petty cash in an office, check the amount on the accounts matches what was in your tin at the year-end.

Loans/HP/Leases

Double-check that any accounts recording loans and other agreements are correct. When these are established I see people often forget to add the annual charges etc to the accounts to ensure the balances show correctly in the liabilities area of the balance sheet. If you have the statements from the companies at the year-end then double check they are correct and make any adjustments needed to be dated at the year-end itself.

Fixed Assets

Often when you buy larger items for the business they are coded to the expenses are on the profit and loss in error. Equally, you may have bought a printer for 50 quid and there is no point in putting that in fixed assets and splitting the cost over 5 years. So these are good codes to review and adjust between the balance sheet codes or profit and loss codes as necessary.

With most of my clients, the accountant works out the depreciation and includes that in their year-end adjustments, but there is nothing stopping you adding an estimate for yourself if you know how to.

Stock/Work in progress

Hopefully back when it was really your year-end you will have reviewed your stock and done a stock take or worked out any work in progress values. Ensure these have been correctly entered into the accounts as a journal or make sure you have the figures so your accountant can do this for you.