What’s important for my Year End planning?
As another year end is coming close for lots of businesses, there are key actions that need to be part of your Year End planning to make sure you don’t miss opportunities to save tax, or to maximise your profits. What are they? Watch this to find out!
Hi and welcome to another episode of BaranovTV, designed to demystify the world of accounts and tax and to help your business grow.
As I’m recording this we’re just into the first week of February and for us it’s very much like the New Year. January kind of carries on so closely behind December and we’ve got the tax return deadline to consider and sort of that last minute rush. So the first of February for us very much seems to be the start of the new cycle of our year.
With that in mind I wanted to talk about year end planning because the majority of our clients and an awful lot of businesses are starting to get close to their next year end. Because they’re aligned with the financial year, an awful lot of businesses have a year end of the 31st of March.
We don’t actually have that long now until we hit that date!
But there are some things that you’ll want to consider prior to the 31st of March as part of your Year End planning that will make a difference to your profit figure or to your tax liability.
So now is the time really to be thinking about those things. We write out to all of our clients and warn them around about now of the things that they need to be thinking about that could make a difference to them.
But the first thing to really work out is what you’ll want your accounts to show.
Now, we’re not talking creative bookkeeping and creative accounting here! What we’re talking is whether you think over the next 12 months you’re going to want to apply for finance, look for an investor, potentially sell your business, or whether you just want to hang onto your cash and minimize your tax bill.
Depending on which of those categories or others that you fall into, will decide what you want to do between now and the end of March or your year end if you’re not a March year end. These are the things you want to do between now and then to make sure that you’re geared up to make it as easy as possible to get the result that you want.
So what am I considering in my Year End planning?
- Pensions – If you want to make an additional pension contribution, if the cash is in the business, you must do that before your year end. That can’t be a paper exercise, the actual cash has got to have moved.
- Purchases – Consider buying and bringing forward the purchase of any considerable investments on things like fixed assets that are going to be in the business for long-term. So we’re talking land, buildings, machinery, and equipment. These can utilize your Annual Investment Allowance and reduce your tax liability.
- Stock – If you carry stock, you need to do a stock take at your year end so that you know exactly the value at that point. But also before you get to that point you really want to be thinking about whether your stock is actually obsolete or whether it’s still salable. If it isn’t salable even at a reduced rate, you need to put a value on that and actually adjust for it too.
- Sales – To get the highest possible profit figure then you need to be thinking about maximising those sales. So if you have any contracts or projects in the pipeline, really push between now and that date to complete those to maximise your sales figure that you’ll be reflecting in the accounts.
- Defer Expenditure – It’s sounds obvious, but you might want to defer any significant expenditure because you might want to make your cash position look as strong as possible between now and the end of March. It’s not actually that long as we’ve said before, so there may be things that you could hold off spending on until after the 31st of March.
- Work in progress – If you have a long lead time on some of your projects and your contracts, you might want to think about either trying to get those completed, or considering the timing of the work in progress which is work completed but not yet invoiced. You may have some contracts that are coming up that you don’t think will be finished, where the client would consider being invoiced on an ongoing basis, and staged payments, etc.
- Debtors – It’s never good to have debtors in a business, but really work hard between now and the end of March, or your year end, to reduce your debtors figure as far as you can. If you need any help with that as part of your Year End planning, then do give us a shout. We can give you some ideas and help you to improve your debtor figure and to make sure that you’ve got a process within the business that routinely and automatically chips away at those. A lot of it can be automated, because a better cash position obviously will make the business look healthier as at the year end figures.
Why get your accounts completed promptly?
There are real benefits to both us and to the client business for your accounts to be created and completed really promptly after your year end.
- Obviously for us it enables us to diarise the work and to be able to crack on with that for you.
- It gives you the opportunity to identify areas of concern, or opportunities as quickly as possible so that you can make a significant change within the business early on in the next financial year.
- You’ll also know of any tax liability as early as possible, so you’ve got lots of time to put that money aside rather than at the last minute, which just creates another level of stress that no one really needs.
- We can also help you look at the figures that come out of the accounts to identify ways to improve the business, ways to improve your bookkeeping, all sorts of things. If we’ve got the time to consider them properly then we can really add some value to you, to the process.
That’s pretty much it! If you want to talk about anything that I’ve covered in more detail, I know it’s just a quick whistle stop tour, then please do get in touch.
The year end accounts that we produce aren’t just for statutory benefits, there are real benefits to them, and we can obviously make that easier for you. If you’re unsure what angle you might want to take with your accounts, again, please do get in touch. Make sure too that you let us know when we come to do the accounts whether you’ve got big plans coming out or whatever, and we can make sure that we take those into account too.
That’s pretty much it for this episode, so have a think about your year end planning, if you’re not a March year end then you might have longer to think about it. If you are a March year end and you’re a client of ours, then we will be putting this information in our normal year end reminder letter anyway.
So that’s it from me! Have a great week and I’ll see you all very soon.