Preparing for year-end accounts: A checklist for SMEs

Preparing for year-end accounts is rarely anyone’s favourite task, yet it is one of the most important pieces of housekeeping an SME will do all year. Timely, accurate figures support lending decisions, keep HMRC happy and help owners sleep better at night. With the current VAT-registration threshold set at £90,000 for 2025/26, and private companies facing automatic penalties if they file later than nine months after their financial year ends, getting organised early matters. Below is a practical checklist to keep you on track.

Why start early?

Last-minute accounting scrambles often lead to missed reliefs, avoidable penalties and a distorted view of profitability. They also create needless stress when you could be focusing on growth and cashflow. According to the Office for National Statistics, the UK had 2.72m VAT – or PAYE-registered businesses as of March 2024 – most of them small. Your business is competing with all of them for attention from banks, investors and suppliers, so well presented, punctual accounts are a competitive edge.

Preparing for year-end accounts – your essential checklist

1. Reconcile every bank and loan account
   Download statements up to the period end and agree them to your ledger. Investigate unreconciled items over 30 days. Clear suspense postings while the detail is still fresh.
2. Review expenses and capital additions
   • Check that expense claims are supported by VAT invoices.
   • Separate capital items (such as computers or machinery) so they qualify for the 100% full-expensing allowance or the £1m annual investment allowance.
   • Journal any staff entertaining that fails the “wholly and exclusively” test.
3. Chase unpaid invoices
   Good housekeeping, not bravado, keeps debtor days down. Run an aged receivables report, mark anything over agreed terms and send statements before your financial year closes to improve collection prospects and cut bad-debt provisions.
4. Count and value stock
   Physical stocktakes close to the year-end reduce estimation errors. Identify obsolete or slow-moving items and consider writing them down. This gives a realistic gross margin and a corporation tax saving.
5. Check payroll and pension records
   • Reconcile PAYE and national insurance to HMRC’s online account.
   • Ensure any benefits in kind are captured for P11D or payrolled benefits.
   • Confirm pension contributions have cleared the scheme bank account before the year-end to secure tax relief.
6. Verify accruals and prepayments
   Create a schedule of regular costs (rent, utilities, software subscriptions) and split them over the correct months. Likewise, accrue for professional fees, holiday pay and bonuses earned but not yet billed or approved.
7. Assess director’s loans and dividends
   • If the director’s loan account is overdrawn by more than £10,000, consider charging interest or repaying within nine months to avoid a Section 455 tax charge.
   • Confirm distributable profits before voting dividends, otherwise you risk unlawful distributions.
8. Document significant events
   Minutes of decisions and signed board resolutions support audit trails and satisfy banks. Record Covid loans settled, asset disposals and share transactions in the statutory registers.
9. Final review of VAT, CIS and other ledgers
   Make sure VAT returns up to your year-end have been filed and paid. Construction firms should reconcile CIS suffered and deducted to avoid overstated costs.

Common mistakes – and how to steer clear of them

• Forgetting cut-off: Recording the next year’s sales in the current period inflates turnover and corporation tax.
• Ignoring small unreconciled items: These can snowball. Clear them monthly.
• Mismatching payroll journals: Always post the net salary and HMRC liability separately to prevent double counting.
• Assuming software alone is enough: Cloud platforms reduce data entry, but still need human review. Build checkpoints into your month-end routine.
• Missing filing deadlines: Submitting accounts even one day late triggers an automatic £150 penalty that doubles after a month. The fines escalated to a record £34.4m in 2023/24 – a needless cost for any SME.

Let us support your year-end process

Our specialist team works with hundreds of owner-managed businesses, from micro-companies to multi-site groups. We use secure cloud tools, proactive reminders and industry benchmarks to make preparing for year-end accounts straightforward and stress-free. If you need help implementing the checklist – or if you’d simply like a fresh pair of eyes on your trial balance – visit our website. 

Key takeaways

Preparing for year-end accounts can feel like another full-time job, especially when sales targets, staffing issues and day-to-day cashflow already fill the calendar. Yet the discipline of closing your books on time repays the effort many times over: accurate numbers strengthen funding applications, reduce tax surprises and give you the confidence to plan for growth instead of merely coping. By following the checklist above – and by documenting each step as you go – you are not just ticking a compliance box, you are creating a living financial map of your business that informs every strategic decision you will make in the coming year.

If you would like an experienced partner to review your working papers, automate parts of the close or challenge the assumptions behind key estimates, we are ready to help.

Speak to our team about preparing for year-end accounts the smart way. A short conversation today could save you days of rework and thousands of pounds in penalties tomorrow.