Prepping for financial year end

Prepping for the end of the financial year is about as mundane a task as a business can perform. Or, at least, the old way was.

Having to complete a series of entirely necessary but ultimately dull tasks before the end of the financial year is something that accounting software providers such as Xero, have made a thing of the past for many businesses.

Cloud accounting software sends all your basic financial information straight to the accountant’s office in real-time: the basic tax and compliance aspect of an accountant's job is being streamlined by artificial intelligence (AI) and automation.


Financial year end checklist

Where does that leave you with preparing for the end of the financial year then? In today’s digital landscape, businesses with sound processing and reconciliation systems should reap the benefits come this time of year. With bank feeds automated, the traditional client/accountant dance of sourcing missing documents is often a thing of the past. However, if you are still working on refining these processes within your practice or are looking to streamline the end of the financial year process even further, there remains a basic checklist of tasks businesses would benefit from:

  • Bank statements or a screenshot of closing bank balances at balance date
  • Confirmation your bank feeds are reconciled up to balance date
  • Confirmation you've reviewed your debtors' ledger and all are still recoverable
  • Invoices and/or confirmation of period of any insurance payments
  • Invoices and/or nature of any legal expenses incurred
  • Details of any transactions you were unsure of how to treat during the year, including the invoice, if available
  • Reconcile and analyse your credit cards, if not already done via your accounting software (which they should be!)
  • Details of any business funds or assets used or appropriated privately during the year
  • Notification of any new investments or borrowings


The above tasks should be done more regularly than just at year end. They should simply be business as usual, if not a daily then certainly a monthly occurrence. After all, cloud accounting software makes this easy - it's supplying real-time information on the state of your business now, not where it was a year ago. This accurate data available throughout the year is a revolutionary resource for business owners.

There are also specific tax-related tasks you can complete to ensure your business is maximising any tax opportunities as well as making the most of your accountant’s time and attention:

  • Trading stock - trading stock on hand at year end must be valued. Provisions for obsolete stock or stock write downs are not generally allowed as tax deductions. Therefore prior to year end, it is important to perform a stock take and to ensure that all obsolete stock is physically disposed of or is valued using one of the prescribed methods.
  • Bad debts - have you written off all debts that you consider ‘bad’? Individual trade debts should be reviewed and written off in your debtor ledger prior to balance date for them to be allowed as a deduction in the financial year. A debt is considered bad if a reasonable and prudent business person would be of the view it is unlikely the debt will be paid.
  • Employee wages and leave – employee-related expenses (leave and bonus provisions). An employer can obtain a deduction for employee-related expenses that are owing at year-end (eg. holiday pay, bonuses, long-service leave), providing payment is made within 63 days after year-end. Therefore, if you have a 31 March balance date, a deduction is permitted if the payment is made on or before 2 June.
  • Interest payments - have you paid more than $5,000 in interest to someone other than a bank? If you have, you may be required to withhold resident withholding tax.
  • Higher income - is your income significantly higher than the previous year? If so, you should consider whether an additional voluntary provisional tax payment may be appropriate or, alternatively, it may be beneficial to align your tax payments with turnover. Discuss this with your adviser before balance date. If you have underpaid your provisional tax for the year, then it may be possible to use a provisional tax intermediary to save Inland Revenue use-of-money interest costs.


Fixed assets

For tax purposes an asset can be written off when it is no longer in use by the business and is not intended to be used in the future, and the cost of disposing of the asset would be more than its disposal value.

We recommend assets be reviewed for use to determine whether a deduction would be available.

  • Purchases and sales - a full month’s depreciation can be claimed for any part-month an asset is owned and used. It may be worth buying replacement assets on or just before balance date to obtain one month’s worth of depreciation deduction. If you expect to make a loss on sale, consider selling prior to balance date. If you expect to make a gain on sale, consider deferring the sale until after balance date. This will accelerate any available deduction or decelerate the requirement to return taxable income.
  • Commercial fit-out - the rate of depreciation on buildings for tax purposes is 0%. To maximise depreciation deductions, it is important to separately identify, where possible, commercial fit-out (depreciation deductions can be claimed) from the building proper.
  • Shareholder loan accounts and current accounts - if your company has loan accounts which have debit balances, including overdrawn current accounts, there could be undesirable tax consequences.


So why do I still need an accountant?

It won't be long before all businesses, no matter the size, are demanding more than traditional advice from their accountants. The accountant's role is now to bring those figures to life. They need to help businesses see beyond the numbers, into the better, more informed, business decisions that lie beneath them. Accountants will no longer be accountants in the traditional sense - instead, they will become business advisers and active members of your team who can offer you insight and guidance throughout the year, not just at year end!


David Pearson is managing partner of chartered accountants and business advisors BDO Central and has a special interest in advisory services to the optometry sector. Contact David at or visit  

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