Introduction
The end of a financial year is an important period for businesses.
It is a time to review financial records, reconcile accounts, organize documents and prepare information required for financial reporting and applicable compliance activities.
Businesses that maintain their accounts regularly throughout the year will generally have a much easier year-end process.
However, even well-maintained books should go through a structured year-end review.
1. Review All Sales Transactions
Start by confirming that sales for the financial year have been properly recorded.
Review:
- Sales invoices
- Customer receipts
- Credit notes
- Debit notes
- Other business income
Check for missing or duplicate transactions.
2. Review Purchase Transactions
Review supplier invoices and purchase records.
Ensure relevant purchases have been properly recorded.
Look for:
- Missing invoices
- Duplicate invoices
- Incorrect amounts
- Unrecorded purchases
3. Complete Bank Reconciliation
All relevant business bank accounts should be reconciled.
Review:
- Deposits
- Withdrawals
- Bank charges
- Transfers
- Unidentified transactions
- Outstanding items
Unresolved differences should be investigated.
4. Review Cash Transactions
Businesses that handle cash should review cash records.
Compare recorded cash transactions with available supporting information.
Large or unusual differences should be investigated.
5. Review Accounts Receivable
Prepare an outstanding customer report.
Identify:
- Unpaid invoices
- Overdue invoices
- Long-pending balances
- Customer disputes
Review whether balances are correctly recorded.
6. Review Accounts Payable
Review outstanding supplier balances.
Check whether:
- All supplier invoices are recorded
- Payments are correctly allocated
- Duplicate invoices exist
- Old balances need investigation
7. Review Business Expenses
Review major expense categories.
Examples include:
- Salaries
- Rent
- Advertising
- Technology
- Travel
- Professional fees
- Utilities
Compare expenses with previous periods where useful.
8. Review Fixed Assets
Check records for assets purchased, sold or disposed of during the year.
Examples include:
- Computers
- Machinery
- Furniture
- Vehicles
- Office equipment
Maintain appropriate supporting records.
9. Review Loans and Liabilities
Businesses with loans should review:
- Outstanding principal
- Interest
- Repayments
- Bank charges
Other liabilities should also be reviewed.
10. Review GST-Related Records
Where GST applies, review relevant accounting records.
Check sales, purchases, invoices and adjustments.
Any differences identified should be investigated.
Businesses should follow the GST requirements applicable to their circumstances.
11. Review TDS-Related Transactions
Review transactions where TDS provisions may apply.
Check that relevant deductions and accounting entries have been appropriately recorded.
12. Organize Supporting Documents
Collect and organize:
- Sales invoices
- Purchase invoices
- Expense receipts
- Bank statements
- Contracts
- Loan documents
- Tax-related records
- Payroll records
Good document management can simplify future reviews.
13. Review Profit and Loss
Prepare or review the annual profit and loss statement.
Look at:
- Revenue
- Direct costs
- Gross profit
- Operating expenses
- Net profit or loss
Compare the results with previous periods.
14. Review Balance Sheet
Review:
- Cash
- Bank balances
- Receivables
- Inventory
- Fixed assets
- Payables
- Loans
- Other liabilities
- Equity
Unusual balances should be investigated.
15. Review Unusual Transactions
Identify transactions that appear unusual.
For example:
- Significant one-time expenses
- Large customer receipts
- Unusual supplier payments
- Major asset purchases
Supporting documentation should be available for relevant transactions.
16. Review Suspense or Unidentified Transactions
Any transactions recorded temporarily under unclear categories should be investigated and appropriately classified where possible.
Leaving unidentified transactions unresolved can affect financial reporting.
17. Backup Accounting Data
Businesses should ensure important accounting data is securely backed up.
This can include:
- Accounting databases
- Financial reports
- Invoices
- Bank records
- Supporting documents
18. Review Compliance Records
Depending on the business, review applicable records related to:
- GST
- TDS
- Income tax
- Payroll
- Other statutory requirements
The specific obligations vary according to the business.
19. Prepare for Professional Review
If the business uses an accountant, auditor or tax professional, organize the information they may require.
A clean year-end file can make the review more efficient.
20. Plan for the New Financial Year
Year-end is also a good time to improve accounting processes.
Consider:
- Better document organization
- Monthly reconciliation
- Improved invoice procedures
- Expense approval processes
- Receivables follow-up
- Payables tracking
Conclusion
A structured year-end accounting process can help businesses begin the next financial year with cleaner and more reliable financial records.
Rather than waiting until the last moment, businesses should maintain their books throughout the year and use the year-end period for a detailed review.
Professional accounting support can make this process easier, especially for businesses with complex transactions or multiple compliance responsibilities.
