Every business, whatever its size, must produce and file, company accounts . In that you have no choice – but you can choose WHEN you do it.
In most cases, a company can choose whatever year end is most convenient and makes sense both commercially and financially.
So how do you decide what year end is best for your business?
We spoke to Carol Cheesman of Cheesmans Accountants to get some pointers:
1) Stock levels: If you carry stock you will need to assess the level of stock that you are holding at the year end. This will probably mean counting it, valuing it, and considering whether it is of a fair value etc. It would therefore not seem sensible to choose a year end when your stock is at its maximum. Far easier would be a period when stocks are usually at their lowest.
2) Time resource: Consider the amount of time it takes, and the inconvenience caused, by having to prepare annual accounts and, if necessary, undergo an audit. You don’t want this to happen at your busiest time – so choose a year end that will avoid the work taking place during this period.
3) Commerciality. Does everybody else in your industry have a 31st October year end? Would that therefore be sensible if competitors are comparing results? Does the industry as a whole report on participants results and therefore do you always want to be out of sync?
4) Tax payment dates: For a corporate entity the tax has to be paid within nine months and one day of the year end – so choose a year end that works for your cash flow when it comes times to pay your tax.
5) Don’t necessarily settle for the default: With a corporate entity your year-end will automatically be the month in which you incorporated. However, the directors are able to change the year end by passing the relevant resolution and completing the relevant forms for filing with the Registrar of Companies.
6) VAT quarters: To make your life easier, consider when your VAT quarters are made up to (assuming you are VAT registered). It will save you time and be easier to manage if they tie-in with your year end. You can write to HM Revenue and Customs and ask them to bring your VAT quarter in line with your accounting period.
In conclusion, taking the time to consider the impact of your year-end date, and changing it if necessary, can save you time, resource and money.
We offer a number of courses to help you becoming more confident and skilled in how you manage your company financials and these can be viewed by following this link.