What is Year-End Accounting
Year-end accounting is a set of procedures carried out to make sure that your financial transactions are current and accurately recorded. Year-end accounting enables you to identify and fix any bookkeeping problems.
You can be properly prepared for tax season if your books are closed and balanced at year’s end. Additionally, knowing that your financial records are in order will help you start the new year off well.
When does the fiscal year in accounting end?
Some people may find the phrase “year-end” a little puzzling because it doesn’t always refer to the chronological year that runs from January 1 to December 31. Many companies decide to employ a different 12-month term to better suit their objectives.
A fiscal year finish is any twelve-month stretch. Some companies decide to use a fiscal year that runs from January 1 to December 31. However, some people might select a different 12-month timeframe. For instance, some retailers could find it challenging to balance and close the books while dealing with the holiday rush. These companies can opt for an alternative timetable, such as one that has their fiscal year begin on April 1st and end on March 31st.
A Year-End Accounting Checklist
Are you prepared to learn how to shut the books for the year? Start by following these simple steps for accounting closing. By following these accounting year-end practices, you may start the new year with completely balanced books while also being ready to run year-end financial statements.
Step 1: Generate invoices
Making sure all income and spending are recorded and current is one of the most crucial steps in closing out your company’s financial year. Send any outstanding invoices right away if you have any. Get all unpaid orders and projects invoiced right away.
Step 2: Send reminders for invoices
In keeping with the above, contact any clients who haven’t paid their invoices yet right away. You can send email invoice reminders using the majority of accounting software. Utilise this function to have those invoices paid as quickly as you can.
As a last option, you can write off unpaid invoices as bad debt if a client refuses to pay you or is unable to do so (if you’ve made reasonable efforts to collect payment). Before you take this move, find out if it is the best course of action for your business by speaking with your accountant.
Step 3: Record your expenses
It’s time to catch up if you’ve fallen behind in categorising and recording your expenses. Ensure that all expenses are recorded in your accounting program. This is essential for maintaining correct records and will also assist your accountant in locating all of the tax deductions that apply to your company.
This process can be made simpler by keeping track of your expenses throughout the year.
Step 4: Separate business and personal expenses
You run the risk of an HMRC audit if they believe that your company deductions are actually personal expenses. It’s crucial to keep your personal and work costs separate for this reason.
Step 5: Update mileage logs
In order to maximise your business tax deductions before tax season, you’ll want to make sure your mileage log is current.
Software, like Sage lets you keep track of your mileage. However, a simple paper and pen travel journal with your start and end mileometer readings, the date, and the purpose of your trip would also work.
Step 6: Pay vendor invoices
You must settle any unpaid debts your business has accrued in addition to ensuring sure every customer pays you.
Step 7: Pay contractors
Before you close your books, make sure to pay all of your contractors. You should also go through a payroll year-end checklist.
Step 8: Reconcile your bank accounts
Reconcile all of the bank and credit card accounts for your business once all of your income and spending have been accurately recorded. Make sure the totals from your official bank statements match the income and cost entries in your accounting software. If they don’t, you’ll need to fix the error that exists.
Once a month account reconciliation can make this procedure go more quickly and smoothly.
Step 9: Update Fixed Assets
Make sure all of your fixed assets are current before you close the books. Any more fixed assets you might have missed should be included.
A long-term asset with a lifespan longer than a fiscal year is a fixed asset.
For instance, if your business bought new computers, they would be categorised as fixed assets as opposed to expenses. A computer is a fixed asset even though you purchased it as an expense because its lifespan is longer than a year.
Step 10: Run Depreciation
You’ll need to calculate depreciation for the entire year for all of your fixed assets. You can conduct depreciation with the help of your accountant or on your own using accounting tools like Sage Intacct.
Step 11: Employee bonuses
Choose whether or not your business will offer staff bonuses before the end of your fiscal year. If so, you must set aside the appropriate amount of withholding tax.
Step 12: Check payroll taxes
You should make sure that your payroll tax responsibilities and payroll returns match, advises. To resolve any issues before closing the books, speak with your accountant if there are any differences.
Step 13: Verify the employee information
Check to make sure the data you have on file is entirely accurate by going over all of the current and previous employee and contractor information for the year. Sending your team an email to see if there have been any adjustments would be worthwhile.
Step 14: Count your stock
The next step is to do a final inventory count. Do this count on the day you close your books. Since these totals are required on various tax forms, firms are expected to record their inventory at the beginning and end of each year.
Step 15: Run the reports
Step 16: Create a copy
See if you can export your data or store the information in the cloud separately from the accounting software. At least you know you have a back-up of it if it were ever needed.
Step 17: Close your books
You can formally shut your books if you’ve followed every instruction and checked off each item on your Year-End Checklist. Fortunately, accounting software streamlines the procedure.
Users won’t be able to add or change transactions that happened before the closing date if you close your books or set a lock date.
If you would like to see how Itas Solutions can help you and your organisation reap the benefits of BI technology in your accounting with the latest cloud solutions for your business accounting needs with powerful cloud accounting software such as Sage’s Intacct, we will only be too happy to show you the benefits and how we can help.
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