Year-end accounts checklist for small businesses
Whether you use spreadsheets or accounting software never assume you can rely on the numbers for your year-end accounts without doing some last checks.
Here are our top 10 tips
1. Bank Reconciliation
You may think you have entered every bank transaction on your system so everything must be up to date. There are thousands of accounting professionals who update bank data on their systems as a living but upon bank reconciliation they are will find errors or omissions.
Start with comparing your bank statement balance with your system’s bank account balance on the year-end date. If there is a difference which is not easily recognisable, then match balances for each of the 12 months. For example:
Let’s say the difference between your bank statement and your books is £330 on the 31st Dec 2013. It could be coming from transactions in different months so a quick check like below will save a lot of time:
| Dates | Balance as per bank statement | Balance as per Accounting system | Difference |
|---|---|---|---|
| 31-Jan-13 | 1,000.00 | 1,000.00 | – |
| 28-Feb-13 | 3,000.00 | 3,000.00 | – |
| 31-Mar-13 | 8,000.00 | 7,900.00 | 100.00 |
| 30-Apr-13 | 19,000.00 | 19,000.00 | – |
| 31-May-13 | 5,000.00 | 5,000.00 | – |
| 30-Jun-13 | 25,000.00 | 24,800.00 | 200.00 |
| 31-Jul-13 | 30,000.00 | 30,000.00 | – |
| 31-Aug-13 | 12,000.00 | 12,000.00 | – |
| 30-Sep-13 | 7,000.00 | 7,000.00 | – |
| 31-Oct-13 | 6,000.00 | 6,000.00 | – |
| 30-Nov-13 | 2,000.00 | 2,000.00 | – |
| 31-Dec-13 | 20,000.00 | 19,970.00 | 30.00 |
| 330.00 |
You can then check the statement to find which transactions were not recorded.
If you use cheques for payments in your business and differences are arising due to cheques issued to suppliers, then that’s fine as it’s only a time difference.
2. Confirming Creditors
Another important check is to make sure you are not just recording supplier invoices when they get paid but also when they are still outstanding.
3. Accrued Expenses
If during the year a cost was committed or incurred but the invoice was not issued yet, or was dated after the year-end then that cost can be included in the Accounts as well.
Just remember to adjust it in the New Year to avoid doubling the costs.
4. Prepayments
If you have paid annual subscription for something during the year or made advance payment for rent or any other expense, make sure you have adjusted the costs in the right periods.
5. Confirming Aged Debtors
Make sure the record of Sales Invoices is correct without errors e.g. duplicate invoices or missing credit notes. Where doubts customers activity can be checked with bank receipts and you can check with other work-flow system or contact client.
6. VAT returns and payments to/from HMRC
If you are VAT registered, double-check if that record is kept properly and returns were prepared accurately. If the bookkeeping system you use doesn’t have a system of flagging the transactions once they are included in a return. It is likely that late entered transactions may have been missed out of previous VAT return which can be costly and you could also be penalised by VAT inspector should HMRC conduct a VAT inspection.
7. PAYE returns and payments to/from HMRC
If you run payroll you are required to make PAYE payment on the 19th /21st of the following month. Employer’s miss payments frequently so it’s worth checking the records at the year-end as well.
8. Depreciation of Fixed Assets
Make sure you have depreciated Assets (office equipment, furniture etc.) as per your depreciation policy e.g. 20% straight line.
9. Loans
If you took out a loan, make sure proper recording is done for interest expense and repayment. Reconciliation should be carried out using the statement from your loan provider.
10. Capital
If there were changes to share capital value, this should be updated on the Accounts.
This is a small checklist for small businesses and depending on your own business circumstances you should develop a more comprehensive list. If unsure please consult a qualified accountant.