Have you been asking yourself “How do I get organised leading up to my year-end?”

Part 2

Year-End Bookkeeping, Stock Taking and Systemising

At your Year-end

Here are the essential tasks for you to complete at your year-end:

At EOG Accountants, we carry out the bookkeeping for most of our customers; however, for those who do their own, at year-end, we ask that they have:

• Fully Reconciled Bank Accounts in Xero
• Bank Reconciliation reports that are clear at the year-end
• A complete bank stream to Xero, with the balance in Xero matching the actual bank account at your year-end date
• Records of Debtors kept up to date within Aged Receivables in Xero (we do not expect our customers to write off bad debts)
• Records of Creditors kept up to date within Aged Payables in Xero
• Any cash payments made or received recorded within your cash account in Xero

Having the above complete is likely to reduce your Accountancy fees and assuming you’ve been doing your bookkeeping regularly, shouldn’t take too long.

Stock Taking

As Accountants, we often ask our customers for their end of year stock figures and get a blank look from them. This isn’t surprising; I was never taught stock-taking in school either!

Here’s our simple guide to what, why, when and how to conduct a stock take.

What

A stocktake is a process of checking your inventory (stock), that is, how much you have in stock, checking what sort of condition the stock is in, and then recording the results in a report. Inventory or stock are the items that your business has bought, with the intention of on-selling to customers. The items may be resold without change, or they could be combined into a new product. For garages this would be cars, for builders, this would be building materials and for day nurseries this would be food and drink.

Why

There are several reasons as to why stock-taking is good practice, here are just a few:

• To keep track of inventory
• To see if your ordering process is efficient
• To reduce over-stocking, or stockouts and manage re-order levels
• To uncover problems – for example, substandard goods or theft i.e we started with x, we sold y therefore we should have z left (see below)
• To track profits accurately – this is particularly relevant at year-end!

How

Get counting and recording!

How to record your results depends on how many lines of stock you have. If you only sell a few products then a simple spreadsheet may do. The key sets of data you need to record are quantities, costs and conditions. For example:

However, if you assemble products from items you buy in, a more complex stock system might be needed.

Note: If you are VAT registered on the standard VAT scheme then the cost will be Net of VAT, however, if you are not VAT registered then the cost will be Gross of VAT.

That’s it… almost.

Perpetual inventory system

Under a perpetual inventory system, you update records as each item of stock is purchased or sold.

There are loads of perpetual inventory systems to pick from, Xero has perpetual inventory management systems built-in, so does Zettle.

These systems are great for businesses where stock is critical to the business and where you need to see stock levels at a glance.

You will however still need to do physical stock takes to compare actual figures against what your inventory management systems tell you you should have.

It’s best to ask your accountant before you decide upon your system.

Outsourcing Stock Takers

When stock is an integral part of your business you shouldn’t overlook the use of professional stock takers. There are lots of firms out there offering amazing services, we recommend that you use someone with prior experience in your industry.

When

Well, definitely do a physical stock take at your year-end. Your accountant needs to know exactly the value of stock that you have at your year-end and HM Revenue and Customs will expect you to have a report to hand in case of an inspection.

But why stop there? If stock is critical to your business, you need to develop a system, potentially using a Perpetual Inventory system such as Xero and take regular physical stock takes to ensure accurate stock figures and to gain from the benefits that we’ve listed above.

Systemise

After you’ve come up with your pre-year-end and year-end tasks for Bookkeeping, Tax Planning and Stock Taking, turn that task into a streamlined go-to checklist. Then set a reminder in your calendar to go through that list every year. Will it be perfect in your first year? No, but you will have a starting point? Yes! One of EOG’s motos is version one is better than version none!

If you want to discuss anything in this blog, give us a call on 01766 522224, we’d love to talk.

In the coming weeks, we will be writing a blog around ‘starting your new year on the front foot’, stay tuned.

This information is subject to change and is not professional advice. Refer to our disclaimer for more details.