Posted 02/01/2021

Tips to Avoid the Financial Year End Frenzy


Tips to Avoid the Financial Year End Frenzy

The financial year end (FYE), sometimes referred to as the fiscal year end, is according to Omni Accounts the closing off of a companies accounts for their business year. According to RSM Global, in South Africa the financial period usually runs from 1 March to 28 February the following year. 


FYE also grants business owners the opportunity to assess their annual profit, loss and the performance of a company during the past 12 months.


Importance of FYE 

  • Government can assess how much tax is payable by your company. 

  • Listed and public companies have to prepare their financial statements to be published publicly for investors and analysts to access.


Required Financial Records


1. The Balance Sheet, sometimes referred to as a statement of financial position, gives an overview of what the company is worth. According to Wolters Kluwer, a balance sheet is divided into three categories: assets, liabilities and shareholders equity. In the balance sheet, assets must equal the sum of liabilities and equities. 


2. The Income Statement, which is also referred to as a profit and loss statement, gives details of the company’s earnings and any expenses incurred during the operation period. Wolters Kluwer explains that the income statement gives a clear view of monthly expenses and revenue. 


3. Cash flow statements offer an overview of all cash that flowed in and out of the business during the accounting period. According to Wolters Kluwer, the cash flow statement measures the amount of cash the company has on hand. 


Three ways to prepare for the financial year end 


  1. Hire an Accountant, Bookkeeper or Financial Adviser

An accountant or bookkeeper can give advice on the financial position of the company. In an article by SME South Africa, Lauren du Plooy explains that accountants are no longer just number crunchers. "Now, they can make forecasts for the next financial year, help the client with the drawing up of budgets and point out where they might be overspending."


  1. Check stock/inventory

Do a stock take before the financial year ends to ensure that the stock on hand corresponds with the balance sheet. Omni Channel explains that doing this can in turn help you budget for the next financial year. 


  1. Look at your overdue accounts 

Accounts payable and receivable give you an indication of the debt you have to pay before the end of the year and how much money you can expect from your creditors. SME South Africa suggests that you should avoid the year end rush by getting your business financial documents in order and chasing clients with overdue accounts in time. 

 

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