Your financial year-end is probably the most consequential date in your business's compliance and tax calendar. It determines your taxable income for the year, it sets the opening position your next year will build on, and it's when most errors — in coding, in debtors, in fixed assets — get discovered. Some of them can be corrected. Some can't, not after the year has closed.
Most business owners think of year-end as something their accountant handles. That's partly true. But there are decisions that have to be made before year-end that only you can make — and once the year closes, the planning opportunities that existed inside it are gone.
Here are 8 things to work through before your financial year closes, regardless of which month that is.
1. Reconcile all bank accounts
Start here because everything else depends on it. Every bank account the business holds — the main cheque account, a savings account, a credit card account, a petty cash float — needs to reconcile to its statement balance on the last day of the year.
If your books are on Xero, this means running the bank reconciliation for each account so the Xero balance and the actual bank balance match exactly. If you're not on accounting software, it means physically ticking off your bank statement against your records.
An unreconciled bank account at year-end delays your financial statements and complicates your tax return. Your accountant will have to find the difference, which takes time and therefore costs money. Do it before the year closes.
2. Clear your debtors book
Go through your outstanding invoices and make a decision on each one that is old or unlikely to be collected. If a client owes you money that you know you will never receive — they've disappeared, they've disputed the invoice indefinitely, they're insolvent — write it off before your year-end.
This matters for two reasons. First, a bad debt write-off is a tax-deductible expense in the year it's recognised, provided you can demonstrate that you took reasonable steps to collect it. If you write it off in the following year, you lose the deduction in this year's tax return.
Second, carrying phantom debtors — balances that look like assets on your balance sheet but have no real prospect of being collected — inflates your reported assets and distorts your financial picture.
3. Review stock on hand
If your business carries inventory — physical goods you buy and resell, or raw materials you use in production — you need to count it and value it correctly at year-end.
Physically count your stock. Compare it to what your records say you should have. Investigate any significant discrepancies. Write off stock that is damaged, obsolete, or unsellable — these write-downs are deductible expenses.
If you're using Xero with inventory tracking enabled, your stock balances should reflect current quantities. But Xero only knows what you've told it — if there are unrecorded losses, breakages, or theft, a physical count will surface them in a way the system cannot.
4. Check your creditors — accrue what belongs to this year
If your suppliers send invoices for work or goods that were delivered before your year-end but you haven't received the invoice yet, that expense belongs in this financial year — not the next one.
This is the accruals concept: expenses are matched to the period in which they were incurred, regardless of when the invoice arrives or when you pay. Your accountant will typically post accruals for known but unrecorded expenses at year-end, but they need your input to know what those are.
Think about services rendered in the final weeks of the year: professional fees, contractor work, maintenance, deliveries. If the work happened before your year-end and you haven't yet received an invoice, flag it to your accountant so the accrual is made.
5. Review fixed assets
Fixed assets — vehicles, computers, machinery, office furniture, equipment — need to be correctly recorded and depreciated at year-end.
Ask yourself: did we buy any new assets this year that aren't on the fixed asset register? If assets were purchased and not recorded, your depreciation is understated and your tax deductions may be missed.
Equally: did we dispose of or scrap any assets? Assets that are no longer in use but remain on the register will continue to generate depreciation entries and potentially distort your balance sheet. Remove them, and record any proceeds from sale as income.
6. Director loan accounts
If you are a director of your own company and you've been drawing money from the company — either as salary, as advances, or as informal drawings — your director loan account records the cumulative position between you and the company.
A director loan account in credit (you owe the company money) has tax implications. SARS applies a rule known as the deemed dividend provision: if a director or connected person owes a company money and the loan is not at a qualifying interest rate, the company may be deemed to have paid dividends tax on the outstanding balance.
If your loan account balance is unexpected or unclear, the time to understand it is now, while there is still time to address it before the year closes.
7. Confirm your VAT position
If your business is registered for VAT, your year-end presents a good opportunity to reconcile your VAT accounts and ensure everything is in order before you submit the final return of the year.
Reconcile your total output VAT (the VAT you charged on sales during the year) and your total input VAT (the VAT you claimed on purchases and expenses) against your VAT returns for the year. The sum of your monthly or bi-monthly returns should equal the year's totals in your accounting records.
Getting your VAT position clean at year-end avoids the problem of discoveries during a SARS VAT audit that relate to a period that's now closed.
8. Talk to your accountant before year-end — not after
This one is the most important and the most commonly missed. The conversation you have with your accountant in the week after your year-end is largely a recording exercise — documenting what happened. The conversation you have in the weeks before year-end can actually change what happens.
Several tax planning opportunities are available only inside the current financial year. Retirement annuity contributions made before year-end are deductible in this year's tax return — contributions made the day after year-end are deductions in the next year. If you are considering a large capital purchase and it qualifies for an accelerated depreciation allowance, the timing of the purchase relative to your year-end determines which year's tax it affects.
A 30-minute call with your accountant four to six weeks before your year-end is worth more than any amount of post-year-end planning. It's the difference between knowing what's possible and discovering you missed it.