The main reason everybody does end of year accounts is so they can file their tax returns. We think they should actually be using them to monitor their business - how well it's performing and what the trends are. In fact, we think just doing this annually is inadequate - but the sad fact is that's all most people want.

 

There's actually a bit that comes from the accounts - such as taxes, ACC, etc. Other parties such as banks may also want them to monitor how safe their money is. If you trade through a company you also need to ensure as directors the accounts meet the requirements of the Companies Act. For example, many companies go through periods where they're technically insolvent, kept afloat by shareholders' money left in the company. Directors need to prepare a solvency certificate in this situation. Companies also have to return their imputation credit account. This is outside the normal accounts, but required to be kept positive or additional charges are imposed.

 

Of course, doing accounts may sound simple - but without sound systems in place may not be so simple. One of the biggest jobs is often reconciling the accounts with the GST returns repaired throughout the year. Because they come from the same raw data, these should always tie in, but more often than not there are differences. Sometimes these differences can be significant. And if they are allowed to build up, IRD may pick up on this at some stage.

 

So doing end of year accounts may sound simple - but there's often more to it than meets the eye. The more accurate the transactions are processed during the year, the simple the end of year tasks.