What is your financial year-end?
The first accounting period in a company begins as soon as the company is incorporated and it ends no later than 18 months after incorporation. The second and subsequent accounting periods are every 12 months. The financial year end is the date in which the accounting period ends.
At the end of each financial year-end, accounts/financial statements need to be prepared. These accounts usually include a profit and loss account, balance sheet, Directors report and if required, an auditor’s report. If you have an accountant, they will look after the preparation of these accounts for you.
Can you change a financial year-end?
Company Directors may wish to alter their financial year end to match a parent company or other deadlines that require financial statements, such as the Annual Return. You can change the year-end by at least 7 days and up to 12 months ahead.
Many companies choose to have a December year-end as it may be more convenient to follow the calendar year. Speak to your accountant if you want to change your financial year-end as there is certain paperwork (form B83) that needs to be filed out before you can do so.
Here are 10 things you should check before your financial year-end...
You need to provide your accountant with bank statements, invoices and expenses so they can complete professional financial statements for your company. During the process of gathering your books and records, you may uncover opportunities that arose during the year. These things could help you save on your tax libaility or just simply make your company more efficient.
It’s a good time to check your salary when your financial year-end is approaching. If your personal situation has changed, for example, you’ve gotten married, this will affect your tax credits. Make sure you’re using all the credits and reliefs available to you so you can save on your tax liability.
Directors of Limited Companies are also entitled to avail of a tax-free vouchers of up to €500 once a year. This may be a nice bonus for you and your colleagues whilst also saving on your tax bill. If you’re unsure about your tax situation, speaking to an accountant will help with any confusion.
It is also a great time to check if your company should contribute to a pension on your behalf. If your accounting period end is 31 December any pension contribution you intend to pay must be paid before 31 December to get a deduction in your accounts. If you employ your spouse in your business, you can make an employer contribution for him/her. There are also great tax benefits to contributing to a pension.
Businesses can use the cost of their expenses to bring down their tax liability. The expenses incurred must be wholly and exclusively for the purpose of the business for them to be deemed as allowable business expenses. It’s important to make sure you have good records of all your receipts and bank statements so you can clearly prove your purchases. Stationery, petrol, and accounting fees are some examples of allowable expenses. Talk to us if you’re unsure about what you can claim.
If you’re VAT registered, you’ll need to check that VAT is being claimed correctly and you have been charging the correct amount of VAT.
If you’re not VAT registered, this is a good time to check your turnover for the last 12 months. You will need to register for VAT if you have reached the turnover threshold for VAT. The two main thresholds for VAT are; €37,500 for the sale of services and €75,000 for the sale of goods. You can register for VAT at any time you estimate the company nearing this threshold but your financial year-end could be a good time to revisit it.
5. Stock and work in progress
You should take inventory of any physical stock, goods or loose parts you are carrying. These are important to keep note of for your company’s balance sheet. Don’t worry if you’re not sure what to include here, our Chartered Accountants will help you determine what information they need to prepare the accounts for your company.
From time to time, your employees may incur business expenses such as business travel, where your employee is temporarily away from their normal place of work. Any costs your employee incurs will need to be reimbursed and then you can also claim their expense as an allowable business expense to Revenue. It’s important that the employee gives you the receipts for the transactions occured and there is a clear process to say that this was an employee expense and the date it was reimbursed to the employee.
This may also be a good time to check if you need to hire employees or check the efficiency of their work.
7. Books and records
Check that you have all the correct and up to date books and records for your company before its year-end. If you have an accountant, they will be looking for these as early as possible to prepare your accounts.
An invoice tells your clients how much they need to pay you and the payment terms. It's important to keep records of all invoices sent because they will be recorded in your accounts as debits and credits.
Make sure you have all your business expense receipts so you can claim them to reduce your tax bill. If you have an accountant, they will look for proof of business purchases before they calculate the total amount of expenses.
In general, all Limited Companies should have a separate bank account as you are setting up a new legal entity. It also helps keep your business expenses separate from your personal expenses. This will make it easier for you to keep track of your money in and money out throughout the year.
8. Outstanding debtors and creditors
Going through your invoices and bank statements will help you note any outstanding debtors, creditors, cash on hand and bad debts at the year-end. You or your accountant should write off any bad debts that aren’t likely to be paid. If you need help preparing accounts for your company, we have a team of Chartered Accountants that will help you stay compliant with Revenue and the Companies Registration Office. Find out if how much it costs to have an accountant in Ireland.
9. Accounting software
As a new company, you may not think you need to use online accounting software straight away but there are huge benefits for you and your accountant if you do use it. Any books and records can be maintained using accounting software and you can give your accountant access to your software so they can prepare your company’s accounts.
Accounting software will save you time and money in the long run. It’ll give you more time to focus on the parts of business you’re good at. Our accountants can work with any online accounting software so we’re always happy to help if you need our advice on which one you should use.
10. Your accountant
Finally, check in with your accountant so you can gather any missing information or ask them any questions you have about your financial year-end. By scheduling time with your accountant to discuss the year ahead and your plans for the future will help them give you the right advice and support you need.
If you don’t have an accountant yet, don’t worry, we’re always happy to talk you through any services you may need. If you have deadlines coming up, it’s very important to get in touch with a professional as soon as possible to avoid any fines or penalties.