Year-end close is experienced by many SMEs as something that happens in April or May, when the accountant asks for documents and questions about transactions from six months earlier. By then almost nothing is still decidable: it was all set on 31 December.
December is the last month where there are still choices to make.
What to review before year end
- Pending invoicing. Everything delivered but not yet invoiced. Issuing it or not by 31 December changes which financial year the revenue is recognised in — and it should be a decision, not an oversight.
- Old client debts. Receivables that won't be collected get their own tax treatment, but require proof of collection effort. That proof is built over the course of the year, not in December.
- Inventory. Anyone carrying stock needs a physical count as of 31 December. It's not a formality: it's what supports the balance-sheet value.
- Planned investments. Bringing forward or delaying a purchase changes the year depreciation starts in.
- Untaken holiday balances, which represent a liability to record.
- Reconciling account balances with major clients and suppliers, so discrepancies surface now instead of in April.
The calendar that follows
It's worth keeping in mind what comes next, because it directly affects first-half cash flow:
- By 31 May: filing the Modelo 22 corporate tax return, with a possible corporate-tax payment attached.
- By 15 July: filing the annual IES return.
- July, September and December: advance payments on account, where applicable.
These figures should go into the cash flow forecast as an estimate right in January. Discovering them in May is what makes May a hard month at so many companies.
The conversation worth having in December
A meeting with your accountant before year end, with provisional figures in hand, is among the best-spent hours of the year. It lets you anticipate the expected result, understand the tax impact, and decide with time what, by April, can no longer be decided.
For that conversation to be useful, November's numbers need to be closed — which only happens if monthly close has been running properly all year.
What to do in January
Two simple things that save the entire year: archive and close the previous year in an organised way, and set up the new year's folder structure with the same convention. It's trivial, and it stops a situation in October where nobody knows where the contract signed in February went.