Financial year end without the pain
Do you get bogged down with your financial year-end? Many business owners do. To help alleviate the pressure, being prepared, as well as consistently managing your financial records throughout the year will make life easier when the deadline comes around.
Your financial year-end (FYE), is the process of closing your financial records for the year. Businesses do this to prepare final financial statements for tax purposes, as well as to assess annual profits or losses, and the company’s overall performance. For public and listed companies, once financial statements are finalised they’re published to enable shareholders to review their investments.
While company founders can choose their year-end closing date (which doesn’t necessarily correspond with the calendar year), many opt to align their financial year-end with the SARS personal tax year dates – 1 March to 28 February. In other words, their FYE ends on the last day of February and the new one begins on 1 March.
It’s important to note that ending the financial year with accurate books is a legal requirement, so here are our tips for streamlining this process and remaining compliant:
Keep accounts up to date throughout the year
By keeping your financial records up to date throughout the year, you won’t need to spend time updating records, but rather ensuring reconciliations are accurate.
Keep track of important deadlines
Ensuring you don’t miss important deadlines will eliminate the need to pay penalties. Deadlines to note include first and second provisional tax, annual financial statements, income tax returns, PAYE, VAT, company tax, EMP501, dividend tax, and compensation fund return on earnings.
Reconcile accounts payable and receivable
Wherever possible, get all outstanding invoices (income from customers) paid and accounts payable (payments to suppliers) done to ensure your books are as accurate as possible.
To ensure your year-end financials are correctly calculated, you must take stock of any unsold inventory at the end of your financial year. If you don’t do this, unsold inventory will either create an inflated profit or loss on your report. You should also ensure unsold inventory is included when opening and closing inventory journals.
A key reason for the year-end financial reporting is to determine your tax liability for SARS. Therefore, before the end of the year, ensure you’ve submitted all the necessary documentation to SARS and that nothing’s outstanding. With the help of your accountant, tax planning will help your business become as tax efficient as possible. If you don’t have an accountant, the onus is on you to ensure you’re up to date with the latest tax laws to ensure you remain compliant.
An online, cloud-based accounting system such as Xero, will make managing your FYE so much easier because these systems are fully integrated and automatically update all connected accounts.
Annual financial report
Most annual reports provide an overview of the business for the past year. Besides being a legal requirement, it’s also the best source of information about your business’s performance and well-being. Various sections make up your FYE report, but the most important is your financial statement – your balance sheet, cash flow statement, income statement and, where applicable, a statement to shareholders.
Can we help you?
We offer accounting, financial reporting and tax services, as well as company secretarial and payroll services that ensure your financial management is pain-free all year.