Fiscal year for a business means the period which is used for the financial and tax purposes. It is also called financial year. The fiscal year is usually of 12 months. It begins from Shrawan 1 and ends on Ashadh end in Nepal.
In this article, we will provide the insights about the importance of the end of the fiscal year and the important tasks to be carried out by the accountants and businesses.
Annual Audit Preparation Checklist (Nepal | FY 2081/82)
Use this checklist to make sure your business is fully compliant with Nepal’s latest regulatory requirements. You can print this list and tick off each item as you complete it.
1. Taxpayer Identification and Records
[ ] PAN obtained for all wage-earning employees
[ ] PAN obtained for business if not already registered
[ ] KYT (Know Your Taxpayer) updated through IRD login by Shrawan 1, 2081
2. Invoicing and Sales Compliance
[ ] New invoice number started for FY 2081/82
[ ] Separate purchase and sales account created for the new fiscal year
[ ] Pre-numbered invoice books prepared (no overwriting or duplication)
[ ] HS Code included on all invoices for imported goods
[ ] Electronic invoicing system implemented if annual transaction exceeds Rs. 10 crores
[ ] CBMS registration completed if transaction exceeds Rs. 25 crores
3. Banking and Payment Compliance
[ ] Remuneration above Rs. 25,000 per person per month paid through bank transfer
[ ] No business transactions deposited into personal bank accounts
[ ] Business bank account used exclusively for business income and expenses
4. VAT and Excise Duty Compliance
[ ] VAT register self-verified for the fiscal year
[ ] Excise register verified at the Inland Revenue Office
[ ] VAT return submitted on time (within 4 months of due date)
[ ] VAT registration threshold reviewed (new limit: Rs. 30 lakhs)
[ ] Excise duty license renewed by Shrawan 32, 2081 (for alcohol/tobacco businesses)
[ ] Aware of penalties for excise renewal delays (50%, 100%, 200%)
5. Transport and Logistics Compliance
[ ] Vehicle and Consignment Tracking System (VCTS) used for all goods transactions
6. Tax Return and Fiscal Reporting
[ ] Income tax return filed for FY 2070/81 before Ashoj-end
[ ] Any taxes due for FY 2070/81 paid within the deadline to avoid penalties
[ ] Tax relief facilities under Finance Act 2081 utilized before Falgun-end
7. General Year-End Readiness
[ ] Financial statements reviewed and reconciled
[ ] All invoices and receipts organized digitally and physically
[ ] Cross-checked VAT filings with sales and purchase records
[ ] Conducted internal audit or consulted tax advisor
[ ] Backed up all financial and compliance records
Why Year-End Matters for Your Business
The end of the fiscal year is more than just balancing accounts—it's the moment to ensure your business meets all compliance requirements.
Planning Ahead for Financial Stability
Businesses in Nepal should analyze their performance and prepare their financial statements of the fiscal year at the end. This activity ensures not only compliance with legal requirements but also positions your business for financial growth and long-term sustainability.
Avoiding Last-Minute Rush: Start Early
Waiting until the final week of the fiscal year to complete essential tasks can lead to mistakes, missed deadlines, and financial penalties. Starting early allows time to review, adjust, and consult professionals if necessary, helping your business avoid unnecessary stress.
Review Your Financial Records
Check Accuracy of Income and Expenses
Begin your year-end preparations by thoroughly reviewing your income and expense records. Ensure that every transaction is accurately recorded and properly categorized to reflect the true financial picture of your business.
Reconcile Bank and Cash Accounts
Cross-check your recorded balances with actual bank statements and cash on hand. Regular reconciliation helps prevent errors or omissions that might cause issues during audits or tax filings.
Fix Mistakes Before Finalizing Reports
Identify and correct any discrepancies, duplicate entries, or missing records. Fixing these issues early saves time and ensures you don’t face last-minute financial surprises.
Settle Outstanding Payments
Clear Pending Supplier Invoices
Review all outstanding supplier bills and aim to clear as many as possible before closing the fiscal year. This ensures accurate expense reporting and maintains healthy business relationships.
Clear Installment of business Loans
Repay the EMI of the business loans and get relief of any fines and penalties of the bank. This will help to maintain the CIC records of the business.
Follow Up on Receivables from Customers
Chase any overdue payments from your clients or customers. Settling receivables not only improves your cash flow but also gives clarity on your actual financial position.
Adjust Advances or Prepaid Expenses
Make sure to properly record any prepaid expenses or advance payments made to suppliers or service providers. This helps accurately match your income with expenses for the year.
Conduct Stock/Inventory Audit
Verify Physical Stock with Records
Conduct a physical stock count and compare it with your inventory records. This helps identify any discrepancies and ensures that your inventory reports are correct.
Write-Off or Adjust Damaged/Unsold Stock
If you find damaged, expired, or unsold inventory during the audit, decide whether to write it off or make necessary adjustments. These actions can affect your final financial results.
Manage Inventory Valuation for Tax Benefits
Properly valuing your inventory helps in maximizing eligible tax deductions. Consult your accountant to apply suitable valuation methods in line with Nepal’s tax regulations.
Calculate and Pay Taxes
Confirm and Update VAT Returns
Ensure that your VAT filings for the fiscal year are submitted and that any outstanding amounts have been cleared. Late VAT payments can result in penalties and interest.
Review TDS Deductions and Filings
Check if you have deducted Tax Deducted at Source (TDS) correctly on applicable payments. Make sure that TDS returns are filed on time to avoid legal complications.
Prepare for Advance Income Tax Payments
Review your advance tax payments and estimate any final payments needed before closing the fiscal year. Make ensure that the advance taxes are paid on Poush end, Chaitra end and Ashadh end. Paying taxes early reduces the risk of penalties and improves compliance.
Incase you are stuck on How to apply for a tax clearance certificate?, here is our detailed guide.
Employee Payments and Bonus Planning
Clear Salary Dues Before Closing Books
Ensure that all employee salaries, overtime payments, and dues are paid before finalizing your financial statements. Delays can lead to discrepancies in reporting and employee dissatisfaction.
Allocate Budget for Staff Bonuses
If your business provides bonuses, start budgeting and calculating them now. Bonus payments often carry additional tax obligations, so early planning is essential.
Comply with Social Security Fund, Provident Fund and CIT Requirements
Make sure contributions to Social Security Fund, Provident Fund (PF) and Citizen Investment Trust (CIT) are made on time. These are mandatory payments, and missing deadlines can attract penalties.
Prepare Financial Statements
Generate Profit and Loss Statement
Prepare a detailed profit and loss statement to summarize your business’s financial performance over the year. This helps owners and investors to know profitability of the business.
Prepare Balance Sheet for the Year
Draft your business’s balance sheet, showing assets, liabilities, and equity. This document is crucial for understanding your financial position at year-end.
Draft Cash Flow Summary for Internal Use
Although not always required for filing, preparing a cash flow summary helps in managing liquidity and planning investments for the upcoming year.
Finalize Annual Audit and External Filings
Coordinate with Auditors for Year-End Audit
If your business is subject to mandatory audits, coordinate early with your auditor. Provide all necessary documents and explanations to streamline the auditing process.
Prepare Documentation for Tax Office Submission
Gather all the paperwork required for submission to the Inland Revenue Department (IRD) and other authorities. Missing documents can delay compliance processes.
Ensure Compliance with Nepal’s Company Registrar Requirements
Check your business registration status with the Office of the Company Registrar. Renew any licenses, registrations, or documents as needed before the fiscal year ends.
Ensure Compliance with Exim Code Renewal
Renew your EXIM Certificate before the end of fiscal year for import of goods from foreign countries.
Business Planning for the Next Fiscal Year
Set Revenue and Growth Targets
Based on the current year’s performance, set realistic revenue targets and growth objectives. This gives your team clear goals to work toward in the coming year.
Budget for Capital Investments
If you plan to expand operations, purchase equipment, or invest in new ventures, start budgeting now. Having a clear financial roadmap helps with prioritizing business activities.
Update Pricing and Marketing Plans
Evaluate your current pricing strategies and marketing campaigns. Adjust them to reflect market trends, inflation, or new competition in the upcoming fiscal year.
Bottom Line
The businesses should update all the accounting records and comply all the legal requirements to do business. This helps to avoid unwanted fines and penalties from the government authorities.
Need Help with Any Step?
If you need support preparing for your audit or managing any year-end compliance task, Estartup Nepal offers full assistance. From PAN registration to tax filing and VAT setup, we’re here to help you stay on track.