At the end of the financial year you need to close the current year’s account. In this article, we’ll provide you with an essential checklist to guide you through the process.
When the financial year starts and ends depends on what country your business operates in. In some countries, the UK for example, the financial year starts on the 1st of April. In countries like the US, the financial year starts on the 1st of January.
Regardless, an organized approach can help you avoid last-minute stress and ensure that your financial records are accurate and up-to-date.
1. Update and organize your records
Ensure all your financial records are up-to-date. Make sure that you’ve invoiced your clients for this financial year, and registered all receipts and incoming invoices in your accounts. This also includes payroll expenses. You need to document your expenses to claim tax deductions and reduce your taxable income.
See also: How to manage and keep track of business expenses
Do you need invoice software?
Conta is a free invoice software where you can send an unlimited amount of invoices. Keep track of all your invoices in one place, and get notified when you need to follow up with a client.
2. Review and reconcile financial statements
Once you have made sure that everything is registered, you can start reviewing your financial statements. This includes the profit and loss statement, balance sheet, and cash flow statement. You will find all the reports you need in your accounting software.
Reconcile these statements with your bank accounts, credit card statements, and loans and ensure there are no discrepancies. If there are discrepancies you should look into them and resolve them before moving forward. This is also something you can do throughout the year, for example every month, to lessen your workload at the end of the financial year.
3. Conduct a stocktake
If your business has inventory, conduct a thorough stocktake to account for all goods on hand. Adjust your inventory records to reflect the current quantities and write off any obsolete or damaged stock. This ensures your cost of goods sold (COGS) and inventory valuations are accurate.
4. Prepare for tax filing
Gather all necessary documents and information required for filing taxes. This includes income statements, expense receipts, bank statements, loan records, and any other relevant financial data.
Review your tax deduction to ensure you’re claiming all the relevant tax deductions. If you have questions about tax or tax deductions, talk to an account to avoid potential issues.
See also: Understanding tax deductions for small businesses
5. Superannuation and payroll obligations
If you have employees, it’s important to ensure that all payroll obligations are met before the end of the financial year. This means finalizing payroll and paying any outstanding superannuation contributions.
All employees should be provided with a payment summary at the end of the financial year. If the financial year ends on the 31st of December, the employee should get a summary in January.
Also, make sure to review your payroll records to ensure that you’re compliant with relevant regulations.
6. Review business performance
Take this opportunity to evaluate your business’s overall performance during the financial year. Compare your actual results with your budget and financial forecasts. Has your business performed better than expected? How did you achieve a good result? Taking a step back can help you ensure a good result next year as well.
You should also look for areas where you can improve. This analysis will help you make informed decisions for the upcoming financial year.
7. Plan for the next financial year
Once you have closed a financial year, you should look to the next: Set new goals and create new budgets based on last year’s performance. Maybe you also need to change your business model?
Check in with, for example an accountant or a marketing consultant or do some research yourself to see if there are new tax laws, economic conditions, or market trends, that you need to take into account. A well-thought-out plan will help you navigate the year ahead with confidence.
Also, if you didn’t reach your goals last year, you should adjust your goals or make new plans for how to achieve them. Remember though, that it’s not unusual for finances to vary from year to year. Factors such as industry variations or economic decline will affect your business.
8. Meet with your accountant or financial advisor
Finally, if you feel like you need some help or advice you can schedule a meeting with an accountant or a financial advisor. You can discuss finances and challenges with an accountant or financial advisor. Maybe they can give you a new point of view? It’s important to ask for help when you need it. Many small businesses invoice on their own and do some bookkeeping, but get help from an accountant to file taxes. You should find a solution that works for you!
See also: How to write an invoice in 5 simple steps
