A happy fiscal new year?
If your new fiscal year was starting today, would it be a happy one? Corporations like Clearview can choose their fiscal year end, and for various reasons I have chosen June 30. That makes July 1 the first day of my new fiscal year. Happy fiscal new year to me!
I understand that not everyone looks forward to their fiscal year end the way I do. And that's OK. I also love T4 season, but I know I'm somewhat alone in that too. And I think that's OK.
If your business was starting a new fiscal year today, what would that mean for you? What steps could you take to see that your year end was handled properly, and that you started your new year on a good note?
Year end: If you've been keeping current with your company's books throughout the year, there's not too much extra to be done to prepare for your year end. Some of the things you'd want to look out for are:
- prepaid expenses: were any of your old year expenses for services/subscriptions that carry over into the new year?
- prepaid income: did you receive deposits or retainer fees in the old year that are for new year work/revenue?
- bank reconciliation: once all of your old year transactions have cleared your bank account you can check to see if there are any items from the old year that cleared in the new year, like a cheque.
New year: Your new year starts with a shiny, new, empty income statement like Clearview's shown above. This isn't a bad thing because income statement accounts like revenue and expenses don't carry over across fiscal years, they always start fresh for each month, quarter, and year (or call it a period and impress your accountant friends). Balance sheet accounts like assets, liabilities, etc., do carry over from year to year. Software like QuickBooks Online manages a good percentage of a company's balance sheet accounts at the same time that entries are made to income statement accounts. Balance sheets can be done manually, but they take a fair amount of time and know-how to do them correctly.
The best advice I can give business owners is to strongly consider adding an accountant to your team, even if you only need them at year end. I have accountants that I work with that I'd be happy to refer to anyone who is interested. The second best advice I can give is to also consider what difference a bookkeeper or other finance person could make for your business, even if it wasn't me! Don't leave your company's books to the end of the year to look at (or pass along to your accountant), or you'll have lost any chance to learn from your numbers throughout the year. They aren't the CRA's numbers, they're yours!
Happy fiscal new year to anyone else with a June 30 year end. Enjoy!
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This blog is intended for information purposes only, and is not meant to replace the services of a bookkeeper or an accountant.