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A Simple Guide to Filing of Year-End Accounts for Small Businesses

Most small business owners have a lot on their plate, especially if their business is new. If it is your first-time filing year-end accounts it can be difficult, confusing and time-consuming. As a business owner, you have a legal duty to ensure that your annual company accounts are complete, up-to-date and accurate.

Unless you have a background or experience in accounting you really should not try to file your year-end accounts with Companies House or HMRC yourself. It is always best to engage the services of an accountant, but if you want to save yourself some money and cut down on the time that your accountant bills you, you need to provide them with the right information. The better your record keeping and understanding of the entire accounting process, as well as what is legally needed to meet the requirements of HMRC and Companies House, the quicker and easier it will be for an accountant to assist you with the filing of the year-end accounts for your business.

 

The Legal Requirements for Year-End Accounts

Along with your corporation tax return, you need to submit your year-end accounts online to HMRC. This needs to be done within 12 months of your company’s financial year-end. These accounts are used for your tax calculations and enable you to prove to the HMRC that you have calculated your tax correctly.

You are also required to keep detailed records of all accounts and file statutory accounts with Companies House. These must be submitted within nine months of your company’s financial year-end. If you qualify as a small business, you can submit abbreviated year end accounts to Companies House. To be considered a small business, you need to fulfil two of the following criteria; have under 50 employees, an annual turnover of less than £10.2m or less than £5.1m on your balance sheet.

 

Accounting Records That You Are Required To Keep

You are legally required by HMRC and Companies House to keep certain records and these include:

  • Business-related income and expenditure
  • Receipts for all sales and purchases - use unique invoice numbers to keep record of all your sales and purchases so that you can quickly access them in your records
  • Up-to-date bank statements
  • Stock on hand and floating assets- perform a stocktake and count all the stock held by your business at year end. If you have invoiced stock to a customer but have not delivered it yet, exclude the stock from your stocktake.
  • Register of fixed assets, including equipment and property owned by your company - includes a list of assets, purchase dates, proof of purchase, prices, descriptions, and locations of each item. You also need a record of assets disposed of or sold during the previous year, including invoices and proof of payment. Use an online calculator to calculate how much an asset has devalued over the past year and reduce the value accordingly.
  • Work in progress that cannot be counted as a fixed asset
  • List of company liabilities and creditors at year end - including the payment due date, supplier name and amount owed.
  • Journal of outstanding debts at year-end – money that is owed to you for sales or services needs to be recorded as debt. Create a list that includes a unique invoice number for each transaction. If you think invoice won’t be paid, mark it as potentially bad debt and your accountant may be able to write it off as an allowable business expense. List the oldest debts first as this will help you analyse which debts are most likely to go unpaid.
  • Investments made by the company
  • Staff payroll information - use up-to-date accounting software to ensure that your PAYE and NI contributions are correctly calculated.
  • Detailed records of expense claims with a claim form and receipts.

 

Preparation For Submitting Your Annual Accounts

You will at some stage need to engage the services of a qualified accountant but there is a lot of the preparation that you can do yourself with the help of good accounting software. Once you have done your initial preparation take your accounts to your accountant to look over so that they can tell you what additional information they will require to complete and file your year-end financial statements.

Once your accountant has had time to look over your accounts, you can book a closing meeting. Discuss how to reduce your tax bill by bringing forward some planned and necessary expenditure to make your profitless. Ask your accountant to identify any areas of improvement. They can also give you advice on accounting software updates, effective creditor, cost control and cash flow management.

 

What To Include In Your Statutory Year End Accounts

Year-end accounts are typically referred to as financial statement and should include;

  • A director’s report: This report needs to be written by the company directors and summarise the business’ performance for the preceding year, give an overview of the company’s current financial state and the predicted future performance.
  • A balance sheet: The balance sheet needs to contain details of the company’s assets and liabilities at the end of the accounting period. There needs to be a profit and loss account that summarises the company’s operating costs, including income and expenses, tax-related payments and the profit or loss made by the company over the accounting period.
  • Explanatory notes: These need to give details about the balance sheet and the profit and loss account.

If you qualify as a small business, you only need to submit abbreviated accounts to Companies House, i.e. a balance sheet signed by one named director. The abbreviated accounts exception doesn’t apply to the HMRC or your shareholders. They will still require full financial statements.

This may seem like a lot of work but keeping your accounts up-to-date and correct will be worth it in the long run. It will make it easier to file year-end accounts and save you money when your accountant compiles your financial statements, it will help you manage your cash flow and expenses and it could prevent legal trouble with HRMC and Companies House.

The Financial Management Centre in High Wycombe can provide you with the best financial management solutions for your business, including; bookkeeping services, VAT return services, management and accounting reporting, payroll services, business plans, budgeting and projections, year-end accounts and tax services, and credit control.