Preparing for year-end: getting the books in order

What does preparing year-end from the bookkeeping side mean?

Preparing year-end from the bookkeeping side means making the books for the financial year complete and supported enough for the annual accounts and tax returns to be based on them. Preparing the annual accounts themselves, with valuations, depreciation and tax choices, is the work of the accountant or compiler. The bookkeeping side makes sure the foundation is right: every transaction processed, every balance sheet item explained and every balance reconciled.

In practice that separation matters for planning. If the books are only brought up to date in January, all the investigative work shifts to the moment the accountant actually wants to start. Firms that close monthly during the year mainly have the year-specific steps left at the turn of the year. So treat year-end as an extended final month-end close, with a few extra checks on the balance sheet.

How do you make sure the books are complete and reconciled?

You make sure the books are complete and reconciled by comparing every balance sheet account with an external source or supporting evidence. For the bank that is the statement at 31 December, for payables the list of open invoices, for loans the lender's overview. Differences must be explained and corrected before the accountant starts, not during compilation.

Start with the documents: are all purchase and sales invoices for the year in, including December invoices that often only arrive in January? Then come bank, cash and suspense accounts. Do not forget current account relationships, for example with the director-major shareholder or between group companies: these must show the same balance on both sides. An order that works:

1. 1Check that all invoices and receipts up to and including 31 December are processed, and request missing documents from the client.
2. 2Reconcile all bank accounts and cash to the balance at 31 December.
3. 3Clear suspense and transfer accounts or explain the remaining balance.
4. 4Agree current account balances with the counterparty.
5. 5Compare loans, leases and other liabilities with the provider's statements.
6. 6Record for each balance sheet item what it was reconciled against.

How do you review open receivables and payables?

You review open receivables and payables by checking item by item whether the receivable or liability really still exists at year-end. An open item may already have been paid but not reconciled, may have been booked twice, or may be missing a credit note. So go through the list of open items and compare old items with the bank and the correspondence with the customer or supplier.

For receivables there is also the question of whether a debt is still collectable. Whether and how a provision for doubtful debts is made is a judgement for the accountant, but the bookkeeping supplies the facts: how old is the item, have reminders been sent, is there a payment plan? For payables, look out for invoices that have arrived but are not yet booked, and for work done in December that will only be invoiced in January. Points to watch:

• Paid but unreconciled items: link them to the payment after all.
• Duplicate items and missing credit notes: correct them before year-end.
• Old receivables: note age, reminders and arrangements for the accountant.
• Suppliers with a debit balance: find out whether a credit note or refund is missing.

Which accruals and corrections belong to the year-end?

At year-end you book accruals and prepayments for all costs and revenue that belong to one year but are paid or invoiced in the other. Take an insurance premium of €1,200 paid on 1 October for twelve months. Of that, €300 belongs to this year and €900 to next year. With a journal entry you put €900 on the balance sheet as a prepaid expense: €900 debit prepaid expenses, €900 credit insurance expense.

The same applies the other way round: an energy bill for December that arrives in February, or work done in December but invoiced in January, belongs in this year as accrued expenses or revenue not yet invoiced. Agree with the accountant which items are material enough to book. Also agree beforehand which corrections the bookkeeping makes and which the accountant processes in the annual accounts, so nothing is done twice.

How do you check VAT for the year and when must you file a correction?

You check VAT for the year by comparing the total of the returns filed with the VAT accounts and the revenue and costs in the books. Differences often arise from invoices booked into a closed period after the return was filed, from wrong VAT codes or from private use that still needs correcting. Such an annual reconciliation reveals errors that went unnoticed quarter by quarter.

If an earlier return turns out to be wrong, the size of the difference determines what you do. The Belastingdienst's rule is that a difference of up to €1,000 is processed in the next return. For more than €1,000 a correction (suppletie) is mandatory, as soon as possible and in any case within 8 weeks of discovering the error. According to the Belastingdienst, a business that under-declared VAT and files the correction within 3 months after the end of the year pays no tax interest. Check the current rules on belastingdienst.nl, as deadlines can change.

What documentation and audit trail does the accountant need?

The accountant needs a file in which every balance sheet item is supported and in which it is possible to follow how entries came about. Think of bank statements at year-end, lists of open items, specifications of accruals, reconciliations of VAT and current accounts, and an overview of open questions to the client. The source document must also be traceable for every entry; according to the Belastingdienst, the basic records, such as the general ledger and the receivables and payables ledgers, must be kept for 7 years.

Autoboeker does not prepare annual accounts, but it does help with the foundation. Every entry has a confidence score and an explanation, and every action by people and AI is recorded in the audit logs, so you can trace who or what created or changed an entry. Client questions and their answers remain traceable in the question history. With Exact Online, Twinfield and SnelStart, bank matching makes unmatched transactions visible per administration, so you can query them before year-end.