The year-end checklist for freelancers

Year end is only painful when it is the first time you have looked at the year. Spread across a couple of sessions in December, the whole thing is an afternoon. Here is the checklist, in the order that makes each step easier than the last.

Close the books

• Reconcile every month. Every bank line matched to an invoice, a receipt, or a transfer. Unmatched items are where errors hide.
• Chase everything outstanding. An invoice paid in December counts in this year on a cash basis. One in January does not. Send the reminders now.
• Record every payment received, including partial ones, so balances are correct.
• Cancel rather than delete any invoice that will never be paid, so the number sequence stays explainable.
• Capture the missing receipts. Search your email for the word receipt, check app store subscriptions, and go through the last 13 months of card statements for anything never filed.

Review the expense side

• Categorise everything. Uncategorised expenses are usually unclaimed expenses.
• Check the big categories for gaps. Software, home office, travel, professional development, equipment, bank and processing fees.
• Apportion mixed use costs consistently: phone, internet, vehicle, home.
• Separate assets from expenses. Larger equipment purchases may need depreciating rather than expensing in full.
• Confirm currency conversions were made at a consistent, documented rate.

Decide the year end timing questions

There are usually a handful of legitimate decisions available before the year closes. On a cash basis:

• Buying equipment you were going to buy anyway in December rather than January moves the deduction forward a year.
• Paying an annual subscription before year end can do the same, subject to the rules on prepayments.
• Delaying an invoice to January, or accelerating collection into December, shifts income between years.

None of this is aggressive. It is timing, and it only matters when your income differs significantly between the two years. Ask your accountant which of these apply to you before acting.

Produce the pack

What an accountant actually wants:

• Income summary for the year, per invoice, with payment dates.
• Expense summary grouped by category, with the receipts attached or exportable.
• Bank statements for every business account.
• Asset purchases with dates and amounts.
• Mileage and travel logs.
• Last year's return, and any correspondence from the tax authority.

Producing this from a tool that already holds the data takes a few minutes. Producing it from a folder of PDFs takes days, which is the entire case for capturing as you go.

Look at the business, not just the tax

While the year is fresh, spend fifteen minutes on the questions that change next year:

• Revenue by client. What proportion came from your largest client? Above 50 percent is a risk, not a success.
• Effective hourly rate by project type. Which work should you do more of, and which should you price differently or stop?
• Utilisation. How many hours were billable, and what did the rest go to?
• Which clients generated unbilled scope creep, and how much?

Set up next year in the same session

• Roll the invoice numbering to the new year prefix.
• Update your rates, and note the date you will tell existing clients.
• Recalculate your tax set aside percentage from this year's actual effective rate.
• Diarise the quarterly review dates now.

TL;DR

• Reconcile, chase, and capture missing receipts before anything else.
• Categorise expenses fully, apportion mixed use, and separate assets from expenses.
• Ask your accountant which year end timing moves apply before shifting income or purchases.
• Produce the pack, then spend fifteen minutes on revenue concentration, effective rate, and utilisation.