Finance and Tax Teams
What invoice compliance steps are required at financial year-end?
Financial year-end triggers specific invoice compliance obligations: ensuring all invoices for the year have been issued and received, reconciling invoice data against VAT returns, archiving the year's invoice records, and verifying that all outstanding credit notes and disputes are resolved. E-invoicing platforms generate year-end compliance reports that simplify these obligations compared to manual paper-based processes.
What is the year-end invoice compliance checklist?
Year-end invoice compliance procedures:
- Invoice numbering: Confirm all invoice numbers are sequential with no gaps; document any voids
- Open items: Resolve all invoices pending approval, matching, or dispute before year-end posting cutoff
- Credit notes: Issue credit notes for all known adjustments before year-end; reverse credit notes in new year if appropriate
- Archiving: Confirm year's invoices are archived in compliant format with integrity verification
- VAT reconciliation: Reconcile total invoice VAT against each quarterly/monthly VAT return for the year
- Supplier statements: Obtain and reconcile supplier statements to confirm no open invoices have been missed
- Accruals: Identify invoices expected but not yet received; raise accruals for goods/services received but not invoiced
Frequently Asked Questions
- How should organizations handle invoices received in the new year for the prior year?
- Invoices received in January for goods or services supplied in December must be accrued at year-end and posted when received. The VAT on these late invoices is recoverable in the period the invoice is received (January). For the P&L, the accrual ensures the cost is in the correct year. The tax point for VAT purposes is typically the invoice date or delivery date, so a December delivery with January invoice date creates a cross-period situation. Organizations should process these invoices promptly in January and reverse the accrual.
- What VAT reconciliation is required at financial year-end?
- Year-end VAT reconciliation verifies that all VAT obligations have been correctly reported and paid during the year. Key checks: total output VAT on all issued invoices matches sum of VAT on VAT returns for the year; total input VAT claimed matches sum of validated received invoices; any VAT adjustments (corrections, error corrections from prior periods) are documented; partial exemption annual adjustment has been calculated and submitted. This reconciliation provides the basis for the annual VAT position reported in the statutory financial statements.