Year End Accounting Mistakes, and How to Avoid Them

Here are the positions people get wrong, and when to decide them.

1. Deciding cut-off after the year has closed

Cut-off is which period a transaction belongs to. A sale invoiced on 2 January for work finished on 28 December. A supplier invoice dated after year end for goods received before it.

Decided during the year, this is bookkeeping. Decided in month 13, it becomes a judgment about a result you can already see, which is a different thing and your auditor knows it.

Set the rule before the year ends, and apply it both ways. Revenue and costs.

2. Accruals and prepayments treated as optional

Costs incurred but not yet invoiced are still costs of the year.

Businesses that skip accruals report a profit that is too high, then absorb the cost next year, which distorts both.

Since your Corporate Tax computation starts from accounting profit, this is no longer only a reporting question.

3. Depreciation nobody has reviewed

Useful lives set when the software was installed and never revisited.

Assets fully depreciated but still in use. Assets on the register that no longer exist. Both are common and both are found by walking around and looking, which almost nobody does.

4. Receivables carried at full value out of optimism

The receivable from 2023 that will not be collected is still sitting there because writing it off feels like admitting something.

It overstates your assets and your profit. Your auditor will raise it, and you will write it off then anyway, just later and with less control over the presentation.

Review the ledger before year end and take the decisions yourself.

5. The director's account nobody wants to look at

Personal spending through company accounts, accumulated over years, sitting in one balance nobody can explain.

This needs resolving rather than carrying, and it now carries a tax dimension if the balance behaves like a loan.

6. Related party arrangements that exist only as an understanding

Management charges between companies you own. Rent between related entities. Loans with no terms.

If it is not written down, your auditor cannot test it, and under Article 34 of the Corporate Tax Law these transactions now have to meet the arm's length standard.

Write them down before year end, not after.

7. Stock counted late, or not at all

Closing stock moves your profit directly, and a count after the year end is not a count of the year end position.

Set the date, arrange for someone to attend, and keep the sheets.

The pattern

Every one of these is cheap during the year and expensive at the end of it.

The reason is not effort. It is that after the year closes you can see the result, so every decision becomes a decision about the result. That is a worse position to be in, professionally and in front of a tax authority.

The year end checklist

1. Cut-off rule set and applied to both revenue and costs.
2. Accruals and prepayments identified.
3. Fixed asset register walked and agreed to reality.
4. Receivables reviewed and bad ones written off.
5. Director's account explained.
6. Related party arrangements documented.
7. Stock counted on the right date.

Where we fit

Send us your trial balance two months before your year end rather than two months after. Every item above is still a choice at that point.