It happens more often than it should! You get to the end of your month, quarter or year. Close it off and think you are done -and suddenly up pops a late invoice you have forgotten about. Your supplier forgot to bill you or you found the invoice or receipt in a pile of paper or an old jacket pocket!
Should you process it? How do you process it?
It sounds like a really simple question, but actually…..it depends!!
There are a few variables you have to think of first – accounting treatment, tax treatment, whether the board formally approves management accounts or not – so can you go back and change prior months accounts? Whether the prior year accounts have been filed or not – so can you go back and change the accounts?. Whether it’s material or not!
So the answer will almost certainly be always YES, but HOW to account for them depends on the variables of that particular situation!
Have they already been accounted for?
If they are receipts relating to spend transactions that went through the company bank account last year – then they’ve probably already been accounted for at the time of the spend.
Probably as a direct spend.
Probably gross – since a receipt was not available to confirm that VAT was paid at the time of the spend.
Check that first. If you put them through again, you’ll have a duplicated cost, but no spend to offset against.
Have the year-end accounts been filed?
If the accounts have NOT been completed and filed – I would reverse the original direct spend and post the receipt, match the bank spend as if all the paperwork had been available at the time of the original transaction. Your historic management accounts might change but this is a more accurate reflection of the spend that was incurred at the time.
If the accounts have not been filed but the accountant is working on them – let them know of the new-found invoice and they’ll tell you how to deal with it. They will probably ask you to correct your accounts to include the cost or they will accrue the cost in their end of year workings. Adding the costs will reduce your reported profits, but on the upside they will also reduce your corporation tax liability.
We should make sure that all the missing costs are accounted for in the correct year before we file the accounts so they reflect a true and faor view of your trading activities in that year.
Are the costs material?
If the costs are material – significant in size – let the accountant know so they can consider the impact on last years accounts. Materials missed costs may trigger a refiling of your accounts at worst, or a prior period adjustment at best in your next accounts.
Posting Last Year Spends in the Current Year
If the accounts HAVE been filed – you can still account for the cost but account for it in the current year.
Say your year-end accounts are 31st March, they were filed in June and you became aware of the late invoice in July – I would put the invoice/receipt through with a date of 1st April 20xx. I would also add LATE INVOICE to the invoice number field in the accounting software which means that you and your accountant can pick up late invoices quickly and easily.
Have you missed a VAT claim on the purchase?
If you accounted for them last year gross and now you have the VAT receipt – you can adjust for the VAT now. You are still entitled to that VAT reclaim.
Is the receipt a missing cash spend or expense claim?
If these are cash spends or director personal spends – you can treat them as late claims. You can:
- Put them through the accounts in the previous year if it is not closed – so you get the cost in the correct year. the company either spent that cash in the year or owes the director/staff member that cash at year end – so that also needs to be reflected. In the accounts.
- Treat them as a late claim in the current year since the claim does not affect cash or bank – and repay the director or offset against their director’s loan account.
Late director expense claims are surprisingly common!! If that’s a factor in your business – this article might help you!