Ensure your cash position is clean at year-end — covering cut-off, bank reconciliations, restricted cash and cash flow statement presentation under IFRS and FRS 102.
1. Bank Reconciliations at Year-End
- All bank accounts reconciled to year-end statement balance Zero unreconciled items; every difference explained and resolved before sign-off.
- Timing differences listed and explained Outstanding cheques and uncleared deposits documented with expected clearance dates.
- Bank confirmation letters requested from all institutions Standard audit confirmation letters sent and responses received before audit fieldwork.
- Foreign currency bank balances revalued at closing exchange rate Exchange rate source documented; translation differences recognised in P&L or OCI as appropriate.
- Petty cash counted and reconciled to nominal ledger balance Physical count performed on or before year-end date; any shortages investigated.
- Intragroup loans: intercompany balances agreed Confirmed with subsidiary or parent; any differences resolved; intercompany eliminations prepared.
2. Cash Cut-Off
- Last payment runs of the year documented Exact value dates recorded; payments processed after year-end excluded from the closing balance.
- Year-end cut-off review: payments posted in correct period Confirm no payments have been accelerated or delayed to manipulate the closing cash position.
- Receipts: large year-end receipts correctly allocated to the right period Particularly for receipts received close to year-end; value date used not posting date.
- Dormant accounts identified Any accounts not used during the year identified; considered for closure or disclosed in notes.
- Restricted cash: any ring-fenced amounts separately classified Security deposits, safeguarded funds, and regulatory reserves excluded from free cash balance.
3. Restricted & Pledged Cash
- Safeguarded client funds segregated and excluded from company cash Applies to PIs and EMIs; relevant funds not presented as the company’s own cash in the balance sheet.
- Security deposits classified correctly Landlord, scheme membership, and licence deposits classified as non-current assets if release is more than 12 months away.
- Cash held as collateral against letters of credit or guarantees separately disclosed Amount, counterparty, and conditions for release noted in financial statements.
- Escrow accounts: balance confirmed and conditions for release understood Disclosed in notes; accounting treatment confirmed with legal counsel if release conditions are complex.
- Cash subject to legal hold or regulatory restriction identified and noted Any freeze orders, court holds, or regulatory ring-fences separately classified and disclosed.
4. Cash Flow Statement Preparation
- Cash flow statement prepared using the indirect method Standard approach under IFRS and FRS 102; starting with profit before tax.
- Operating activities: EBITDA to net cash reconciliation reviewed All non-cash items, working capital movements, and tax paid correctly identified and classified.
- Investing activities: all capex, disposal proceeds, and acquisition payments included Agree to fixed asset register movements and legal completion statements.
- Financing activities: drawdowns, repayments, equity raises, and dividends included Agree to loan schedules, Companies House filings, and board minutes.
- Cash and cash equivalents definition confirmed Only instruments with maturities of three months or less at acquisition and highly liquid qualify.
- Foreign exchange impact on cash balances shown separately Unrealised exchange gains and losses on cash balances presented as a separate reconciling line.
5. Year-End Disclosures
- Cash and cash equivalents note: components listed with breakdown Each account and balance disclosed; restricted vs unrestricted clearly separated.
- Restricted cash note: amounts, nature of restriction, and expected release date Sufficient detail for users to understand the company’s access to its cash resources.
- Liquidity risk note: maturity analysis of financial liabilities vs cash available IFRS 7 or equivalent disclosure; demonstrates ability to meet obligations as they fall due.
- Going concern assessment: cash position supports going concern for 12 months post sign-off Documented board assessment; severe downside scenario tested; auditor briefed on assumptions.
