Happy End of Financial Year Preparing for the end of the financial year is something you should be working to do all year round by using good systems and streamlined reporting processes, and working closely with your accountant or financial advisor. As the end of the year approaches, there are further steps you can take that will not only save you time and effort going into the reporting season – they can also save you money. Finalising things such as reviewing your debtors ledger, conducting a stock take and bank reconciliation should be a priority. Writing off bad debts prior to 31 March is vital, in order to claim any tax benefits. If bad debts are not written off prior to balance date, you’ll lose the deduction until the following year. If you do collect them later, the collection can be coded to bad debts recovered. Similarly, not completing a stock take before the end of financial year can not only lead to misreported profits, but also tax penalties or implications. It is important to conduct a stock take on or around 31 March. It’s hard to retrospectively count stock,and getting an accurate assessment of your profit is highly significant in terms of tax benefits and to investigate any theft or shrinkage. One of the most common pitfalls when it comes to end of financial year is SME owners not being up to date with current laws and regulations. A wide range of regulations apply to business, and legislation can change frequently. That is why it is important to have regular contact with your financial advisor or accountant year-round. For example, business owners could consider making any necessary repairs and maintenance on assets prior to 31 March, remembering that due to new building depreciation rules some repairs may be deemed as capital improvements and thus non deductable. Thought should be put into whether repair expenditure is a capital cost and non deductible as part of the building structure, or indeed a deductible maintenance item. Another key task to ensure an easy transition at the end of financial year is reviewing the year’s fixed asset register and noting any new asset purchases. Sometimes assets get miscoded to repairs and maintenance sobe sure to review records before sending to your accountant. Purchasing low value assets prior to 31 March can be claimed as an expense in the year of purchase. It is also important to analyse the book value of assets to determine if they can be written off for taxation purposes, which can be done if the asset is no longer used by the business and there is no intention of using it in the future. This can provide good tax benefit. Some expenses can be prepaid in March and claimed as a tax deduction in the year to 31 March, regardless of the amount. These expenses include stationary, postage and courier charges, vehicle registration, rates, and subscriptions for papers or journals. Other expenses, including rent, consumables, insurance premiums, travel and accommodation, advertising, periodic charges and other services have limits. The rules surrounding prepayments are complex, so if you are planning this type of expenditure it is very important to talk to your accountant or financial advisor. The most basic, yet major, problem that SMEsface as they come to the end of the financial year is the failure to maintain simple bookkeeping process throughout the year. Often it’s the simple and organisational things like creating a record of cash expenses paid personally, or keeping payable and receivable documents up to date that make a significant difference at the end of the financial year.
Posted on: Sat, 29 Mar 2014 10:29:18 +0000