Financial year-end: Your checklist for a smoother preparation process

To help make things easier, we’ve put together a straightforward checklist covering everything from tax and payroll to financial planning and legal obligations. Let’s dive in!

Financial records & reporting

Having accurate financial records is essential for making strategic business decisions, ensuring compliance with Inland Revenue requirements, and for supporting an efficient year end compliance process. Here’s six key areas of focus for tidy records and reporting:

1. Reconcile accounts: Ensure that all bank accounts, credit cards, and loan accounts are reconciled between physical balances and your accounting software or manual cashbook.
2. Review accounts receivable & payable: Follow up outstanding invoices to improve cash flow and settle any overdue payments. To take a deduction for bad debts, these need to be written off from your receivables ledger by balance date.
3. Inter-entity accounts: If you have multiple entities, or advances between related parties, ensure inter-entity accounts reconcile and that transactions on each side have been recorded correctly.  
4. Stocktake (if applicable): Conduct a physical stocktake to assess inventory levels and write off any obsolete or damaged stock. This is also an important step to ensure your inventory software is accurate and functioning properly.
5. Fixed assets & depreciation: Review and update the fixed asset register where necessary, including scrapping or selling assets that are no longer in use.
6. Employee expense reimbursements: Process outstanding employee claims to ensure they are accounted for in the correct financial year.

Tax compliance matters

Tax obligations are a crucial part of year-end preparation, and taxpayers must ensure they are up to date with their filings. Key tasks include:

1. GST returns: Reconcile GST transactions and ensure GST returns have been filed accurately. Undertake a reconciliation of the GST balance in your ledger to the final GST return for the financial year. Ensure any adjustments from your accountant from the prior year have been actioned.
2. PAYE & payroll compliance: Confirm that PAYE, KiwiSaver contributions, student loan deductions, and ESCT are correct. 
3. Fringe benefit tax (FBT): Confirm what benefits employees are receiving and consider if benefits have been added or removed during the year. The potential implication this could have to your FBT requirements also needs to be addressed. Carry out compliance checks regarding motor vehicle usage. 
4. Provisional tax payments: Remember the final instalment of provisional tax for the year is due on 7 May 2025. If tax is required and cashflow is tight, tax pooling might be a good option for your business. 

Employer obligations

As an employer, ensuring compliance with payroll and employee entitlements is vital:

1. Leave entitlements & holiday pay: Review leave balances to ensure proper accruals are recorded and record any unused leave correctly. Take note of the holiday pay balance outstanding at year end and, of that balance, remember to track how much leave is taken and/or cashed in within 63 days of balance date, i.e. between 1 April 2025 and 2 June 2025.
2. Payroll records: Verify employee pay, bonuses, and deductions for accuracy before finalising year-end payroll. To take a tax deduction for a year end bonus accrual, this must be paid out to staff members within 63 days of balance date.
3. Employment agreements & contracts: Review and update employment agreements if necessary, ensuring compliance with legislation.

Financial planning & strategy

The end of the financial year is also an opportunity to review your business’s financial position and plan for the future:

1. Budget & cash flow forecast: Update cash flow projections and work to complete your budget for the 2026 financial year. If pockets of cashflow uncertainty or concern are identified, get in touch with the bank now to work on a plan and to put facilities in place. 
2. Review pricing & profit margins: Assess the profitability of your products or services and make necessary pricing adjustments.

Compliance & legal considerations

Business compliance obligations extend beyond tax filings, and businesses should review other key areas as part of an annual process:

1. Insurance policies: Review existing business insurance policies to ensure adequate coverage for risks and liabilities. When was the last time you spoke with your broker to discuss changes in your business or to understand if there are new products on the market that may better suit your business and unique circumstances?
2. Contracts & agreements: Evaluate supplier and customer contracts to identify opportunities for renegotiation or renewal.

Other considerations

To streamline operations and improve efficiency, businesses should also focus on digital systems and risk management:

1. Software & system updates: Ensure that accounting software is up to date and functioning properly.
2. Cybersecurity & data protection: Always remember to frequently back up financial data and ensure cybersecurity measures are in place to protect sensitive business information.
3. Plan for the new financial year: Set clear business goals, update business strategies, and prepare for the year ahead.

The end game

Preparing for the financial year-end doesn’t have to be stressful. By ticking off these key tasks now, you’ll save yourself a lot of last-minute scrambling. Plus, getting everything in order means you can start the new financial year fresh, with clear goals and a solid plan in place.

Here’s to a smooth year-end and an even better year ahead!