At company year end, it’s time for limited companies to file corporate tax returns with HM Revenue & Customs (HMRC) and provide annual accounts to Companies House. Whilst small and micro companies don’t have to provide full accounts reports to Companies House, they are still required to provide simplified accounts reports as a statutory requirement. Since corporation tax is calculated by HMRC based upon the financial position of your company at year end it’s vital to have everything in order. There are steps you can take to make this process as smooth as possible. At HB Accountants, we can provide as much or as little support as you need at year end. Here are our top tips to prepare for company year end.
Sales Ledger: seek payment on unpaid invoices
Check your records of sales made during the financial year and ensure everything has been invoiced. Then verify whether invoices have been settled, if not chase payment. Make sure that all receipts can be tied to the correct job or project. For most businesses which use accounting software this can be done by checking the Sales Ledger. Look for unmatched receipts and outstanding balances. The automated systems can be used for chasing and tracking payment of outstanding balances. In most cases, payment is eventually made, albeit late. But sometimes there are circumstances which mean that a non-payment is a bad debt. Identify these if they occur, so they can be handled in your year-end accounts.
Purchase Ledger: check the status of supplier bills
Do you records correctly show what is owed to your suppliers and what has already been paid? With many transactions going on, sometimes payments get out of step. Often what appears at first sight as outstanding supplier bills is simply an error in the records where supplier bills are entered into your system twice or payments made aren’t linked to the supplier’s bill. Check your Purchase Ledger for any anomalies such as duplicate invoice entries. Where these occur then fix the issue by removing duplicate entries, stopping duplicate bank payments and correcting your records.
Bank Reconciliation: does cash in the bank match your records?
It’s wise to check your bank statements at least monthly and more often for high-volume businesses or those at greater risk of fraud. It’s definitely an area to review when it comes to company year end. Often apparent discrepancies between your internal accounts records and the cash situation in your bank account can be easily explained due to timing issues, such as a payment made a day late which then falls into the following month. However, this check will help you to prevent fraud since you’ll know if payments were properly authorised and transfers were agreed. It can also highlight any accounting issues, for example did any customer cheques or electronic payments fail and require follow-up or was cash in the bank maintained at a sufficient level to avoid bank fees or do you need to change credit arrangements.
Inventory: review stock or work in progress
Check the stock you have against your records. Were the price paid and quantities received accurate, in particular for high ticket items. Stock often has a big impact on the profitability of your business and therefore the corporation tax that will be due. Perhaps missing stock needs to be written off as a loss, if it can’t be accounted for? Do you have goods in stock which you’ve not yet been invoiced for by the supplier? Has stock been sold but the customer not yet invoiced?
Wages: ensure data is accurate
Ensure wages are paid and payroll records including net wages, NICs and PAYE are reconciled. As the employer you are liable for any errors in NICs or income tax. Wages can also have a big impact on the profitability of your business and the corporation tax that will be due.
VAT: a vital part of transactions
Most likely your VAT records are up to date already, ensure that this remains the case at year end.
Accruals and Prepayments: future costs and early payments
If you keep records of these check that they are accurate. If you don’t keep formal records, consider what payments have been made which relate to the following year. Likewise think about what financial commitments have been entered into which will fall due in the following year.
Capital: Fixed assets and depreciation
Check that assets are recorded as assets in your records. For example, check in the profit and loss account that assets haven’t been recorded in error as running costs. Check the correct amount of depreciation has been recorded if this is something that you do yourself, otherwise your accountant can help.
What should I do next?
If you are in any doubt what to do your accountant can help. Some of our clients at HB Accountants like us to review their records and advise of any anomalies which they can look into further before reports and returns are drawn up. Whilst other clients provide their finalised records to us so that we can verify them and prepare all the year end documents required by HMRC and Companies House in line with regulations.
Contact our team for advice on 01992 444466 or you can email