If your small business runs on a calendar year rather than a fiscal year, then the time to wrap up and process all your account information is rapidly approaching. The calendar business year usually runs from 1 January to 31 December, so as well as dealing with the holiday period, you also need to be gathering data, sorting receipts and processing all your yearly financial information.
As a small business, it’s unlikely that you have a dedicated in-house accounts team to take care of this, which means taking charge of it yourself. And at this busy time of year, remembering all the processes and finding the time to sit down and trawl through a year’s worth of receipts and invoices can be a real burden.
However, the year end is not just about going over your books. You also need to use this time to assess whether or not you have met goals from last year, look at the general health of the business, and put plans and targets in place for the next financial year.
With that in mind, we’ve created this guide to doing your year-end accounts with a minimum of fuss and disruption.
Block the time
We know how it goes running a small business. You’re constantly doing a dozen different things at any one time, overseeing every aspect of the business and making sure things run smoothly. So, it can seem almost impossible to find some time to sit down and concentrate on one job at a time. But with accounts, you can’t do it in small chunks because you risk losing yourself in the confusion.
You need to block book some time, as far in advance as possible, and make sure that nothing interrupts this allotted period. Make sure it is on all staff and office calendars and rearrange anything that falls in this period. You need to try and remain distraction-free for as long as possible in order to ensure accuracy in your books.
Get your materials in order
Ideally you need to have all your receipts and invoices in order and neatly filed. This will make doing your accounts a much simpler process. In an ideal world, this would always be the case, but we also know that many small businesses and sole traders aren’t always able to be that organised. But, even if your receipts are all stuffed in a shoebox, you need to get them in order before you can proceed.
Evaluate your position
Besides the legal requirements of taxes, the most important goal of your year-end accounts is to assess the current position and condition of the business. You need to examine your financial documents and make an analysis of your ratios. There are several ways of doing this.
Balance sheet – this is a summary of how well your business is doing at a particular point in. time. It shows all your assets, liabilities and equities and gives a clear picture of the current health.
Income statement – this lets you see quickly whether or not the business is in profit at any particular point. It is an up-to-date item-by-item analysis of your revenue and expenses.
Cash flow statement – this shows you where the cash has gone and summarises your inflows and outflows over a specific period. This covers cash flow from operating activities, investing activities and financial activities.
Once you have examined all these statements, you can make an assessment of your important ratios, including the total debt ratio and profit margin.
Goals
At the end of each financial year you should be making goals for the next. Try and make these specific with set targets. This will then let you assess where you are in relation to your predictions, and help you assess how you got there. Look closely at your goals from the last end of year period. How are the books measuring up? Have you achieved everything you set out to? And if not, where did it go wrong?
Based on a combination of last year’s goals and this year’s performance, you can then set your targets for the next financial year.
Taxes
One of the key reasons for doing your accounts is to assess your tax situation and work out how much you owe. However, not all taxation is rigid, and you can put in place strategies to make sure you are only paying what you owe according to the tax laws. You can do this by using methods such as income splitting and maximising depreciation claims. You can also assess whether any previous tax strategies have been working.
Of course, tax law is very complicated and you may require expert assistance in these areas. That’s why many small businesses turn to outside accounting specialists to help them make the most of their tax situation. You also need to prepare all the necessary tax documents to send off to the relevant authorities.
How to achieve all of this easily
Of course, all the above sounds easy on paper, but the reality of finding the time and gaining the expertise makes it more difficult. But there are certain ways you can make life much easier for yourself.
First, invest in some accounting software for small businesses and use this to keep accurate, up-to-date records throughout the year. There is a good choice of software out there, available at very reasonable rates and scalable to the size of your business. This means that when the time comes to do your year-end accounts, all the information is already in place. This includes things like your balance sheet, cash flow and more – all updated in real time, so you can have an ongoing sense of how things are going throughout the year. This takes the pressure off doing everything in a mad rush before deadline day.
Second, get outside help from professional accountants to ease the strain and stress of having to do it all yourself.
