Financial Year-End Checklist for Business Owners and Accountants

Once the month of March hits the calendar, businesses start panicking as to what to do in terms of accounting and compliance. This is the reason why we are coming up with this full guide on what you must do before the financial year-end to stay compliant with the latest rules and regulations.

#1 Reconcile Your Books of Accounts

Book reconciliation means verifying that each accounting entry matches with the actual transactions taken place in a bank account, cash register or ledger. Businesses should reconcile their books of accounts to ensure that the accounting records reflect the actual transactions.

Discrepancies in accounting records can also lead to problems when preparing tax returns.

What should you do:

• Bank reconciliation: Does the accounting record of bank transactions tally with the bank statements?
• ​Vendor accounts: Are all vendor bills properly recorded?
• ​Customer accounts: Are all sales invoices properly recorded, and their payment status?
• ​Cash book: Is the end-of-year cash balance correct?

Accounting software such as Munim Accounting and Billing Software, provides a built-in bank reconciliation tool that simplifies the reconciliation process. Utilize this feature and make your financial-year end smoother.

#2 Conduct a Complete Inventory Count

For businesses dealing in goods (retailers, wholesalers, manufacturers), conducting an inventory count and valuation assessment prior to year-end is highly recommended.

The closing inventory levels (as of March 31st) directly affect the profit reported for the fiscal year. If the closing inventory is misvalued, the net income for the year will also be misreported.

What to do:

• Conduct a physical count of all inventory items and compare this to the system records.
• Determine if any inventory items are damaged or obsolete, and write down these items.
• Ensure HSN codes are applied to all products (this is required for GST purposes)
• Compare the physical count of inventory to the records kept in the system to identify any discrepancies.

#3 Verify All Pending Vendor Payments and Vendor Bills

Businesses have vendors to whom they owe money for the products purchased or services rendered. These are known as accounts payable, or outstanding payables.

Prior to year-end, businesses should:

• Verify all vendor accounts to determine if there are any unpaid bills.
• Enter all vendor bills received during the year into the system.
• Pay all critical vendor obligations to keep relationships intact and avoid potential late fees.

#4 Review and Close All Payment Receivables

Payment receivables means the money owed by customers to a business. Every business has some of these. If the receivables are very old (say 6 months or more), March is the time to take aggressive follow-up or decide whether they are collectable or not.

Why does this matter for year-end?

Case 1: If a business decides to give up on collection,> record it as a loss in the books

Case 2: If the customer makes a full payment,> improves cash flow for the next quarter.

#5 List and review fixed assets and calculate depreciation

Is your business utilising computers, machinery, vehicles, furniture, or other types of office equipment? These are referred to as fixed assets. Additionally, each year the value of these assets decreases due to wear and tear. This decrease in value is called depreciation.

Prior to March 31, businesses should:

• Create a list of all fixed assets currently in use
• ​Determine if any new or used fixed assets were acquired or disposed of during the year.
• ​Calculate and document the depreciation for the fiscal year based on Income Tax rules.
• ​Determine if any of the fixed assets have reached the end of their useful life and are still being utilised (if so, track these separately).
• Calculating depreciation reflects the asset’s decreasing value.
• Depreciation is used to reduce taxable income; failing to account for depreciation will result in higher taxes than necessary.

#6 Backup All Financial Data

Have you ever imagined what would happen if you lost financial data of your business for a full year due to either system failure, deleted records by accident or a ransomware attack? Most businesses are not prepared for any such event.

Businesses should do the following before closing the financial year:

• Backup completely all of your accounting data.
• Store sales invoices, purchase bills and bank statements securely either in the cloud or on an external drive.
• Ensure that the backup is recoverable and can be restored.
• If you are using cloud accounting software such as Munim Accounting and Billing, the chances of data loss are less. However, for additional assurance, it is recommended to download the data for any contingency.

Over To You

The month of ​March always arrives sooner than expected. Each year, a considerable number of Indian businesses file GST/Income tax returns with errors, missed deductions, late fees and get into excessive stress. The better approach is to start early, follow the standard process and make use of online accounting software such as Munim Accounting and Billing software.

Frequently Asked Questions on Financial Year-End

1. What is the financial year start and end in India?

In India, the financial year starts from 1st April and ends on 31st March.

2. What should be included in an end-of-financial-year checklist for small business owners?

Before 31 March, ensure all sales, income, purchase bills, and expenses are properly recorded in the books. Reconcile bank statements and cash balances, review customer dues and vendor payments, and verify stock to fix any mismatches. Check GST sales and purchase data, correct missing invoices, review TDS and payroll if applicable, organize expense proofs, and estimate profit for effective tax planning.

3. What should be included in an end-of-financial-year accounting checklist?

An end-of-financial-year accounting checklist should include recording all March sales and purchase bills. It should also include reconciling bank statements with the books. Finally, confirm customer dues and vendor payments. Accountants should also verify cash and petty cash balances, review fixed assets and major business expenses, and check closing stock, particularly high-value inventory items, to ensure accurate financial reporting.

About the author

Mehul Jagwani

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Mehul is a seasoned content writer with a passion for simplifying complex accounting and GST topics. With a keen interest in entrepreneurship and business management, he specializes in creating informative and engaging content for themunim.com. His goal is to help businesses understand and implement accounting and GST software solutions effectively. When he's not crafting content, Mehul enjoys exploring new places and spending time with his Golden Retriever.