The end of the financial year 2024-25 is almost here, so it’ll be a busy time as you get your finances in order. A financial or fiscal year is a continuous period of 12 months to track earnings and expenses and prepare financial statements. In India, a financial year starts from the 1st of April and ends on the 31st of March of the following year.
The year-end process involves auditing, reconciling, and verifying that all your financial transactions and every aspect of your company’s ledger from the past fiscal year add up. Postponing any financial calculations can complicate your tax filing process.
Filing TDS (Tax Deducted at Source) returns, closing account books of accounts, making tax adjustments, reviewing employee leaves, generating payroll reports, issuing Form 16 – these are some of the many pending tasks on your plate.
End of the financial year checklist
Here’s how you can streamline financial processes and set a strong foundation for the upcoming fiscal year:
1. Organize financial records
Ensure you have everything you need while filing taxes. This includes all the necessary documents, receipts, invoices, tax forms, credit card statements, and bank statements to streamline your accounting process. You can be eligible for tax deductions, provided you have all the documentation ready.
2. Reconcile accounts
With workload already soaring during the financial month-end, imagine if the numbers of your business’ finances don’t add up. To prevent this frenzy of a situation, ensure your business ledgers and bank statements are aligned and the financial records are correctly documented. Even a minute discrepancy in reconciling your accounts can lead to a tedious process of matching calculations and balancing books.
3. Filing TDS returns
TDS is a tax collection method where tax is deducted at the source of income. Employers or other entities making payments deduct TDS before disbursing funds to the recipients. When your tax is deducted at the source, it saves you the trouble of calculating and paying a lump sum amount at the end of a financial year. It reduces the room for last-minute calculation errors, which can otherwise lead to a hefty penalty, and makes space for better cash flow management.
4. Calculate the advanced tax payable to maximize savings
In India, the income tax adheres to the principle of ‘Pay As You Earn’. The Budget 2025 introduced a new tax regime, under which individuals earning up to Rs. 12 lakh can benefit from zero-tax liability due to an increased rebate under Section 87A. The old tax regime remains unchanged and offers more deductions and exemptions, such as House Rent Allowance (HRA) and Leave Travel Allowance (LTA) under section 80C. You can also invest in tax-saving options, such as Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS) or National Pension Scheme (NPS) to reduce your tax liability. You can make charitable donations before the year ends to benefit from potential tax deductions.
5. Assessing physical inventory
Before the year comes to an end, take stock of your stock – used raw materials, unfinished goods, finished products, spares, and work-in-progress materials. Mention their market value while assessing your inventory to ensure the costs of goods sold (COGS) and inventory valuation are accurate.
6. Review and process leave encashment
All companies provide standard planned, sick, and casual leaves to their employees so they can take some time off work. At the end of a fiscal year, these leaves are carried forward, encashed, or lapsed – it varies from one organization to the other. If a company has a leave encashment policy, it reflects in the first pay cycle of the new financial year.
7. Plan for the next financial year
As this financial year comes to a close, you can set your eyes on new goals for the new fiscal year. Economic market disruption or waves in the industry may affect your business and finances and can vary from year to year. Therefore, as you evaluate your individual and business performance analysis, you can compare actual results with your budget and make informed decisions.
Common challenges in the year-end closing process
The end of the year can be a nightmare for many stalwarts and experienced accounting and finance teams, as they may meet the following challenges:
- Manual processes: For organizations stuck with manual processes and data entry, recording, tracking, and analyzing every financial statement can be a tedious task. This process of documentation can cause complications, delays, and human errors.
- Inaccuracies: Missing documents or data, receipts, or invoices can lead to inaccurate accounting records, making it difficult to close the books on time. Minute typos or miscalculations can also cause the business to dedicate extra time and effort.
- Multiple operating entities: Integrating data across multiple systems can become an arduous task. So, ensure all your transactions are recorded and streamlined in a single place.
Benefits of an end of the financial year checklist
When you have a detailed checklist at the end of the financial year, you can streamline your processes to ensure your finances are in order. This guide would ensure:
- Data accuracy and reliability so your financial records are up-to-date.
- Enhanced productivity and efficiency, thereby reducing rework loops and guaranteeing accuracy.
- Catching financial inaccuracies early can keep penalties and overpayments at bay.
- You can make more strategic financial decisions to increase your profits the following year.
Keep this checklist handy for your year-end financial activities.
