How to tackle your year-end accounts with confidence?
Preparing the year-end accounts is an essential part of the business calendar and can be a stressful time of year for business owners and their financial advisors. When done right, however, your year-end accounts can provide insight into sales and expenses, highlight any anomalies and identify opportunities for improvement and growth in the year ahead.
Whether you are a sole trader or a large company with a dedicated finance and accounts team, Mooncard can turn what may seem like one of the most stressful times of the year into an exciting opportunity to identify your strengths and weaknesses.
What are year-end accounts?
The end of the financial year is a crucial time for any business. Often referred to as “closing the books”, preparing the year-end accounts or “statutory accounts” involves recording, reviewing and checking all a company’s financial transactions over the course of the preceding twelve months. This is as extensive as it sounds covering business expenses, revenue, assets, equity, financial investments and much more.
All businesses in the UK have a legal requirement to file certain information at the end of the financial year, whether this be in the form of a self-assessment tax return, or in the form of full reports submitted to both HMRC and Companies House. Either way, it involves a fair amount of paperwork.
Regardless of the format, the primary purpose of this information is to ensure the company pays the correct amount of tax. However, it also aims to ensure that investors, shareholders, other stakeholders and, ultimately, the general public, have access to transparent and reliable information on the financial health of the company.
At a minimum, the year-end account contains information on everything the company owns and everything it owes, in other words, its assets and liabilities. Small companies (with fewer than 50 employees, a turnover of less than £10.2M or a balance sheet of less than £5.1 million), are eligible to file “abridged” accounts. Even smaller companies (fewer than 10 employees, turnover below £632,000, balance sheet below £316,000) can file “micro-entity” accounts.
Larger, limited companies have a further obligation to file a Directors’ Report, another measure designed to ensure that companies are as transparent as possible. As a minimum, this report must contain the names of all company directors, a summary of its trading activities and outlook for the future, recommendations for dividends, and information on any significant changes to the company’s fixed assets.
How to identify the year-end
All companies have what is referred to by Companies House as an “accounting reference date”. The deadline for companies to file their year-end accounts is calculated from this date. It should be recalled that the deadline for filing self-assessed tax returns are set by the government-imposed tax year, usually 31 January for online declarations. Most companies align their fiscal year with their accounting reference date to make it easier to have an overview of the company and a clear vision of their opening and closing balances.
Filing deadlines and penalties
The deadlines for filing year-end accounts with HMRC and Companies House are calculated based on the date upon which the company first registered with Companies House. The most important deadlines to be aware of are shown in the table below.
The penalties imposed by the HMRC for not complying with these deadlines range from £100 for being one day late to up to 20% of the unpaid tax for being 12 months late. Companies House also imposes its own penalties, ranging from £150 for being up to one month late, to £1,500 for being more than six months late filing the year-end accounts.
|Action to be taken||Deadline|
|First accounts filed with Companies House||21 months following the date company registered with Companies House|
|Annual accounts filed with Companies House||9 months following the company’s financial year-end|
|Corporate tax to be paid or HMRC informed company owes no tax||9 months and 1 day following the end of the accounting period for Corporation Tax|
|Company Tax return filed||12 months after the end of the accounting period for Corporation Tax.|
Key steps to making things easier
There are a number of steps you can take during the year to ensure your year-end does not cause unnecessary stress. As with so many aspects of business, Benjamin Franklin’s mantra “by failing to prepare, you are preparing to fail”, applies.
So, in practical terms, what can you do to prepare for this important time of year?
Set up rigorous bookkeeping procedures
Some of the most common problems that arise during year-end accounting are the result of weak, poorly designed, or poorly applied bookkeeping procedures throughout the year. Missing receipts, gaps in invoices, data entry errors, and lack of understanding among staff about the information required can easily lead to gaping holes in the company’s records, making the accountant’s end-of-year task much more difficult than it needs be.
The basis of all good accounting practices is a comprehensive policy which is understood by every employee and which sets out the steps to take regarding every financial transaction. Clear procedures make it much easier to collate the relevant information at the end of the year.
Digitalise and automate procedures
While in the past, crumpled paper receipts and hand-written IOUs may have formed the backbone of many company bookkeeping procedures, times have changed! Keeping digital receipts and enabling employees to record and file their expenses using mobile apps, fuel cards and other digital tools make the entire accounting procedure so much more streamlined.
Take a look at what Mooncard can offer in terms of helping you move forward and keep abreast of the latest tools to make your life easier.
Plan the year ahead
Prepare for the year ahead by drawing up a detailed calendar containing all relevant reporting deadlines. If you have an in-house or outsourced accountant or financial advisor, ask for their input. Perhaps they like to draw up preliminary reports every quarter, or twice a year. Identifying key benchmarks along the way can also help you avoid the feeling of being overwhelmed by having to complete everything at the same time.
One key top to ensure the year-end accounts can be closed without a hitch is to give yourself plenty of time to make sure everything is in order. No matter how easy your procedures are, you will still come across incomplete expenses claims and missing receipts. Give yourself and your employees plenty of time to file any paperwork and track down their documents.
How Mooncard can help
The key to closing your year-end accounts without stress is to be well-prepared and organised. With a few minor tweaks to your procedures, onerous reporting obligations can be turned into a valuable opportunity for your business to tackle the future with confidence.
Mooncard offers a range of automated features to make it easier for you to collate the information you need throughout the year and keep an eye on your accounts in real time. With automated procedures, configurable corporate spending cards and all-in-one spend management solutions to track your company’s financial health, Mooncard can help you look to the future with confidence.
To find out more about how Mooncard can help your business not only survive but thrive, get in touch to organise a free, no-obligation demonstration.