Year-End Accounting Checklist for 2022
What is year-end for limited companies?
Before you delve into our year-end accounting checklist, it’s important to understand what year-end actually refers to.
For limited companies, year-end (which is also known as the ARD or accounting reference date) is the completion of an accounting period. It doesn’t necessarily correlate with the calendar or fiscal year, but rather is usually set according to when the company was incorporated.
For example, if a company began on 26th October, their year-end date would be the 31st October and their financial year will run from 1st November to 31st October.
This means your company may not be bound by the April-April tax year rules if you’re a limited company rather than a sole trader or otherwise. However, if you are and your business year-end fits into the standard April to April financial year format, you will need to have your year-end documents filed by April 5th in time for the 2022 financial year to commence on April 6th.
Regardless of what type of company you have, the goal for the year-end is always the same: to balance and close your books so you can start the new year in good stead. You’ll have accurate data surrounding your finances and you’ll immediately be able to spot any previous errors in your bookkeeping and amend them as necessary, whilst also highlighting any potential issues you may have with it.
When does the accounting year finish?
We’ve briefly touched upon this point, but it’s important to know exactly what is meant by the term ‘year-end’ because this is different for every company. For example, we’ve already touched upon the fact that for some limited companies, their year-end will coincide with when their business was incorporated, which could be at any point in the calendar year.
Some businesses choose to move their year-end to a quiet time of the year so they can focus on the task at hand and not have the day to day running of their business impeded by an additional burden on top of an already business period. For example, businesses in the retail sector may find that the December-January time of the year is exceptionally busy with sales, therefore they might not be best placed to handle the influx of customers on top of the demands of closing and balancing the books.
With this in mind, some retail and hospitality businesses may choose to do their year-end accounting in the middle of summer when it’s quieter.
The time at which you choose to do your year-end will depend heavily on your business sector and your busy sales periods, but it’s important that you choose a time that works best for your company and a time at which you can pay due care and attention to your books.
Year-end accounting checklist 2022
So, now you have a better idea of what a year-end is and when it happens, it’s time to move on to the 2022 year-end accounting checklist. Knowing where to begin with your year-end accounting can be tricky, especially if you’re new to running a limited company and don’t have much experience in finalising your books.
With this in mind, we’ve put together this handy checklist that you can follow to get your finances in order without the risk of missing anything important.
Prepare your expenses
The first step in the accounting checklist is to get your expenses in order. If you make sure to claim everything that you can, you will reduce your overall company profit figure, meaning that you will pay less Corporation Tax.
The main rule when it comes to expenses is “wholly and exclusively”, meaning that an expense can only be claimed if it is solely for business use. For this reason, it’s important to separate your personal expenses from your business expenses.
If you fail to do this, you risk being audited as this is an offence. Accounting software can help you split your personal expenses from your business ones with minimal hassle, making it all the more necessary for accurate year-end reporting.
Update mileage logs
An expense that is commonly forgotten about when it comes to year-end calculations is mileage. You can claim business mileage back on your tax, so it’s important to factor this into your year-end calculations so you can recoup as much money as possible.
Like with other expenses, specific accounting software can help you keep track of this, but in its absence, you can always make a written note of where your mileage was at the start of the year and where it is at the end of the year. You may need to include the reasons why you travelled in order to validate your tax relief, but this is made easy when you get into the habit of it over the course of the year.
Chase unpaid invoices
Unpaid invoices can provide a skewed figure at your company year-end. It’s important that all of your accounts are as accurate and up-to-date as possible, so the year-end is a key time to round up your debts owed. Tracking invoices is much easier with dedicated accounting software.
Accounting software can allow you to send invoice reminders which is a handy way of keeping on top of any outstanding invoices, both on your part and on behalf of your clients.
Match up bank statements
When you’re recording expenses, it’s important to ensure your bank statements and expenses match up. If not, there must be a discrepancy somewhere that needs to be addressed. This is a good method for spotting errors in your books before they become an issue further on.
Update fixed assets
Every company will have fixed assets which are assets that last longer than a year, for example, computers. If you’ve accrued new fixed assets during the financial year, make sure you update them. These are also assets that may depreciate in value, so it’s a good idea to keep track of this in addition to any new items so that you can gain a better understanding of the true value of the assets that you hold.
It’s common practice in some companies for employee bonuses to be given out at the end of the year, and it’s important that you account for these before you complete your year-end accounting.
If any employees have received a pay rise over the course of the last year, it’s important that you check that this has been logged across all your accounting and payroll systems, otherwise you may find you have another discrepancy later on in the year-end process.
You also need to ensure your employee’s details are all up to date before your year-end, so this may mean asking employees to verify their personal details so that you can be sure your systems are up to date. To this end, year-end accounting can act as general housekeeping, helping you to get other aspects of your business in good shape ready for the start of a new year.
Want to learn more about how to avoid year-end mistakes at the end of the financial year?
Record your inventory
One of the most important aspects of your year-end is taking stock of your inventory. Depending on your business, this may be time-consuming, but it’s essential for figuring out how much money you have in assets (not counting fixed as talked above). For example, a SaaS startup may find taking inventory far easier than a retail company, but every company will likely have assets that will contribute to their overall inventory value, fixed or not, so it’s vital to take note of them.
Make a note of important deadlines
The deadline for filing your Company Tax Return (CT600) with HMRC is typically 12 months after the end of the accounting period it covers. However, it’s best to submit it as early as possible as you’ll have to pay a penalty if you miss the deadline.
Although the deadline for filing your tax return is 12 months after the year-end, the deadline for paying your Corporation Tax (or telling HMRC that you don’t owe any) is 9 months and 1 day after your year-end.
The deadline for Companies House is slightly different, and it’s important that you file your annual accounts before the deadline to avoid a fine. If it’s your first account filed with Companies House, this will be due 21 months after the day you register with them. For your regular annual accounts, these will be due 9 months after your company’s year-end.
File the relevant documents with HMRC
The next step in your year-end accounting checklist is to actually file the following documents with HMRC:
Company Tax Return
HMRC will issue a “notice to deliver a tax return” shortly after your year-end. The Company Tax Return (CT600) is filed online with HMRC and contains details of your company’s income, minus allowable expenses and tax allowances. HMRC uses your profit to calculate the Corporation Tax you must pay.
Statutory accounts - also referred to as annual accounts - are prepared from your company’s financial records at the year-end.
The accounts must include:
· A profit and loss account.
· A balance sheet - this shows everything the company owns, owes and is owed at the year-end. It must have the name of the director printed on it and be signed by the director.
· Footnotes on the accounts (information about the transactions between your company and its directors).
· A director’s report.
· File the relevant documents with Companies House.
Your statutory accounts must also be submitted to Companies House and most companies can submit these together when filing with HMRC. If you are a small company or micro-entity, you may be able to send ‘abridged’ accounts to Companies House. This will contain a simplified balance sheet with footnotes, and you can choose whether or not to send the director’s report and profit and loss account.
We know that company directors can feel extremely overwhelmed at the year-end, especially when you’re trying to focus on running your business day-to-day. Hopefully this year-end accounting checklist has provided you with the necessary information!
How Accountancy Cloud can help
As mentioned, completing your year-end accounting can be time consuming, and without the help of a certified accountant, you may struggle to get on top of everything, especially if this is your first year-end and you don’t have any set processes or procedures in place.
One thing that massively aids the year-end process is online accounting. It adds a level of autonomy to the process that means you can accurately record and keep track of data, therefore removing the risk of human error and any financial penalisations that may be incurred from such.
At Accountancy Cloud, we take pride in our industry-leading online accounting services. Our team of financial experts and accounting software make it simple to track invoices, manage cash flow and automate payroll.
With Accountancy Cloud your 2022 accounting year-end is a breeze! If you need more guidance on year-end, please contact us to learn more about how our accounting software can help make your year-end easier.