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All You Need To Know About Year End

Ok, there's lots to say so we'll get right into it. Yeah, it's pretty wordy, but we did our best to say it like it is while keeping the essential info you need. As with all things, please contact us if you have any questions.
Here's what you need to know:

Debtors and creditors
To do your year end accounts we need to know if there were any debtors and/or creditors at balance date (31st March in most cases). Debtors = accounts receivable, ie money owed to you. These are invoices you have issued to customers which are dated 31st March and prior, but haven't been paid. Creditors = accounts payable, ie money you owe others. These are invoices issued to you that were not paid till after year end.

Bad debts must be reviewed before year end

A bad debt can only be claimed as a deductible expense in the same financial year it has been physically written off in your accounting system. There has to have been some effort spent on recovery of that debt.Businesses do not have the option of backdating a write off, even if you were aware that the debt was bad before year end. Although you may be able to enter a backdated journal in your accounting system, it is the time stamp that is set in the background that will be referred to in determining when the debt was actually written off.
You will want to review all of your debtors before the end of your financial year (again, 31st March in most cases) and write off any that have gone bad and proven to be non-collectable. This is important as the list of debtors that you provide us for preparing your accounts cannot be adjusted for any bad debts.

Cash count
If you carry cash in your business, please count this on the last day of your financial year. Cash includes any till floats, unbanked takings and petty cash held for expenses.

Annual stock-take
If you carry physical trading stock of any kind, you need to arrange for a stock take to be performed on or before the 31st of March (or whatever your year end date is). This stock take requires a count of the items on hand. This includes stock that is in a state ready for sale and raw materials that are yet to be incorporated into a final product. All stock then needs to be valued at actual cost or net realisable value - whichever is lower. Sometimes net realisable value can be lower than cost if an item has been damaged or can't be sold for what it cost.

Work in progress
If you have jobs on the go at year end but have not yet invoiced your clients, then we need to know what costs (both time and material) have been incurred prior to year end. This is simply the cost to you, not what you will eventually charge your client.
Fixed asset review
Your fixed asset schedule is part of the year end accounts we prepare for you. You will want to review last year's schedule for any assets that need to be removed. If there are any to be removed, we will need to know why (obsolete, broken, sold, stolen etc). If something has been sold please let us know when and for how much. If there is anything that is no longer used in the business but you have retained for personal use, please let us know when it changed use and what its market value was at that time. Sounds funny but we need that information because it needs to be treated as a "sale" to you.

If you would like another copy of your last asset schedule just click here.

Bank reconciliation
If you have a bank reconciliation feature in your accounting system please ensure that it is correctly completed for the last day of the financial year. This means that whatever your system calculates to be the statement balance must be the same amount that is on the paper statement from the bank.

Pre-balance date expenditure
If there are any large one-off expenses to be incurred in the short-term you may want to consider if it is prudent to bring these forward and make your purchases before balance date. This would include expenses such as buying business vehicles and equipment or needing to have more business stationery printed. There are timing advantages in some cases regarding GST and income tax. However, you also need to bear in mind the impact on your cash flow should you bring purchases forward. If you are unsure whether or not to adjust your timing please contact us for advice.

Lock your accounting software
As soon as you have finished entering all transactions in your accounting software for the year, please lock your file so that no changes can be made to the completed year. It is imperative you do this before you send us your file for annual processing. Any changes made after we have received your file will not be included in your final accounts and will not automatically be picked up the following year. The only exception would be if we have specifically requested that you make a change.

If you have cloud storage or back up you need to read this bit:

Important rules for storage of electronic records

The Tax Administration Act 1994 and the Goods and Services Tax Act 1985 require taxpayers to keep business and GST records in New Zealand and in the English language. However, the IRD can authorise the offshore storage of records and for records to be kept in another language.

This can present problems for the storage of electronic records which use a cloud based system because often, the service provider's servers are located in another country even though it is a New Zealand based company. The IRD has already approved offshore storage for the following service providers:
MYOB NZ LimitedActionStep NZ Ltd
Reckon New Zealand Pty LimitedCCH NZ Ltd
Xero LimitedCargoWise NZ Ltd
TaxLab LtdCommon Ledger Ltd
Farm IQ Systems LtdRevolution Softward Ltd
Thomson Reuters NZ Ltd (formerly Brookers)Technology One NZ Ltd

If you use a system that does not store records on your premises (such as your own computer or external hard drive) and is not listed above please contact your cloud service provider to confirm if their storage facilities are in New Zealand or overseas. If they are overseas then approval from the IRD will need to be sought either by the service provider for all their clients or by you for your own records.

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