As the tax year comes to an end, read our 10 top tips for managing this important paperwork period - stress-free.
The current tax year ends on 5th April 2022 - still plenty of time to get your books in order.
What is year end and how does this affect your business?
The tax (or financial) year runs until 5th Aprils 2022 and is the period when new government taxation often goes ‘live’ following March budget announcements.
It’s the time to look back and take stock of your previous year’s finances, before looking ahead to the upcoming 12-month period. This is particularly important in the current climate, with Covid-19 changing how and where employees work, and the investments needed to optimise home working.
To help you with your year-end review, we’ve put together 10 top tips that will ensure you have all bases covered.
Make sure your accounts are up to date
As well as being a legal necessity, accurate and timely reporting of your balance sheet is crucial to ensuring you optimise your year-end accounts. For example, make sure that you have reconciled all of your pension contributions, sales invoices, expenses and employee salaries with recorded transactions.
You should only ever pay dividends from profit earned and be sure to issues these after corporation tax has been accounted for.
Time is money
You will notice a theme appearing in this list – time is literally money. This is because there are penalties for not filing any legally required information, which you will eventually have to pay.
Think about it all nice and early, decide whether you’re going to go solo or hire an expert – but don’t procrastinate and put things off.
Find the right bookkeeper or accountant for your industry
Every industry has its own nuanced costs, benefits and tax reliefs, so employing an accountant who is familiar with, or ideally an expert in, your industry will help you make the best of your year-end review.
Safeguard cash balances
A higher cash balance will be viewed positively by credit agencies, so be sure to hold off paying suppliers or invoices until you absolutely have to during the year-end period. At the same time, make sure all monies owed are gathered and chased up to bolster your available cash.
Process employee bonuses and expenses
You’ll want to make sure that all employee bonuses and expenses are paid prior to year end, otherwise you’ll have outstanding payments moving into the next financial year. This could then affect your profit and dividends for the following year as you’ll have to account for them then, in addition to that year’s bonuses.
Organisation and timeliness are your friends in this process!
Contact existing clients to thank them
Year end is the perfect opportunity to contact your existing clients and engage with them. Give a round-up of business highlights and thank your clients for their custom. Use this as a chance to cross-sell by communicating your specialisms.
Using an eCRM will help you organise your contact database and send professional-looking emails too.
You can segment your clients, for example by interest, where the lead came from or countless demographic or geographic conditions. Automatically insert your clients’ names into email greetings and measure the subsequent click through rate (CTR) to your website.
The more personalised the message, the more your clients will feel engaged.
Otherwise, just give them a call or write a letter!
Set budgets for the following financial year
Depending on how long your business has been operational, you should have enough data to enable you to set budgets for the coming financial year.
Looking at your previous year balance sheet should allow you to plot high or low season, see how campaigns performed, comparing investment against outcomes and objectives.
For example, a chocolate maker would quickly see, when reviewing their previous year’s finances, that the summer months show higher revenue that when it gets colder.
Entertainment brands for example, might see peaks in sales at weekends when customers have more time to spend browsing. They may then choose to increase their advertising budget during these times to maximise exposure.
Review accounting software and GDPR compliance
If you’re not using an accountant and attempting to do your year-end accounts in full by yourself, you may wish to review your software and also take the opportunity to check your data is still GDPR compliant.
There is software that can automate a large amount of what is required for year-end reporting, pulling in in-goings and outgoings, calculating tax and making the year-end process a much less angst-inducing time.
GDPR mismanagement can also cause unnecessary headaches, so this is the time to check that all data is held securely and used only for the purpose that was intended.
Optimise your personal tax allowances
Tax allowances are there to be used so make sure you are aware of what is available based on your own personal circumstances. Maximise your pension contribution and consider any tax relief owned in terms of capital gains tax and ISAs.
Better still, choose a knowledgeable and helpful accountant who will help make sure you optimise your personal tax allowance and prepare correctly for the following year’s accounting.
Don’t miss the deadline!
It is essential to ensure that your year-end figures have been competed on time and are accurate and complete.
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