Business

How to successfully close out the fiscal year as a freelancer in France

March 15, 2022 by Panama Harris

As a freelancer, you know that you’re beholden to several financial and administrative obligations.

One of these requirements is closing out your company’s fiscal year.

This accounting formality is mandatory for the large majority of businesses. No ifs, ands or buts about it. At the end of each calendar year, you have to send a summary of the year’s accounting to the relevant tax authorities.

But between balance sheets, profit and loss reports and annexes, it’s hard to see where you stand. That’s to be expected. It’s a complex and demanding task, considering accounting isn’t usually part of your wheelhouse.

This article outlines all the necessary details you need to consider when you’re putting together your year-end closure of accounts.

This will be the year you make closing out your fiscal year a breeze.

What is a year-end close ?

A year-end close, or “closing the books”, consists of submitting your annual accounting to the tax authorities at the end of each financial year.

In practice, this annual accounting is made up of three very specific accounting documents:

  • a profit and loss statement;
  • a balance sheet;
  • an annex.

These documents serve to provide a clear and accurate portrayal of your company’s financial situation.

But it doesn’t end there. Preparing these documents can also allow you to reframe your financial goals and grasp how your sales revenue is evolving.

Closing out your fiscal year involves two primary steps.

  • First, you want to finish registering your accounting entries for the past financial year.
  • Then, you need to gather all the supporting documentation you’ll need to put your annual accounting together.

But it doesn’t end there. Preparing these documents can also allow you to reframe your financial goals and grasp how your sales revenue is evolving.

Closing out your fiscal year involves two primary steps.

  • First, you want to finish registering your accounting entries for the past financial year.
  • Then, you need to gather all the supporting documentation you’ll need to put your annual accounting together.

Year-end closures: are you concerned as a freelancer?

As a freelancer you must abide by the usual accounting requirements, but this varies from one legal status to another.

An exception for micro-entrepreneurs (formerly auto-entrepreneurs)

Good news: if you chose the micro-enterprise regime (formerly auto-enterprise), you have the benefit of having super simplified accounting obligations. That means you are not required to close out your fiscal year.

Reduced administrative formalities for freelancers under the controlled declaration regime

The controlled declaration regime is a tax regime that relates exclusively to freelancers with non-commercial profits (Bénéfices Non Commerciaux or BNC). This is the case with freelancers exercising a liberal activity, a regulated profession or an advisory activity.

💡 A quick vocab refresher: there are two types of profits that differ according to the type of work activity:

  • Commercial Industrial Profits (Bénéfices Industriels Commerciaux, or BIC), for commercial and industrial activity;
  • Non-Commercial Profits (Bénéfices Non Commerciaux, or BNC) for liberal activity, intellectual activity, and any other activity that doesn’t fall under the BIC category.

Freelancers who follow the controlled declaration regime have to close out their fiscal year. However, they do not need to submit the usual annual accounting. They just need to submit the 2035 declaration to the URSSAF (the administrative body responsible for collecting social charges contributions).

💡 Good to know: by definition, freelancers propose intellectual services to businesses - which means by default they have non-commercial profits. This means they can decide between the micro-enterprise or controlled declaration regime.

All other freelancers required to close out the year

If you’re neither a micro-entrepreneur nor concerned by the controlled declaration regime, you need to close out your fiscal year just as any other company would.

How to perform a year-end close

How should you prepare for a year-end close?

As tempting as it may be to delay getting started on your year-end accounting, it would be a mistake to leave it to the last moment.

It’s not a strong strategy. You’re more likely to make mistakes and forget key documentation. Not to mention that you’re also likely to spend far more time on it than is needed.

The key to a seamless, successful year-end close is preparation and anticipation of what’s to come.

It’s crucial to be well-organized and to handle your accounting as things come along so the work doesn’t become overwhelming.

Have you hired an accountant to handle your accounting? (If this doesn’t apply to you, we strongly encourage you to do so). Get in the habit of sending them receipts and documentation once a month, namely:

  • receipts for purchases;
  • sales receipts;
  • bank statements.

Noticed you might be missing some documents and/or receipts? Don’t wait for your paperwork to get backed up - track them down as soon as you can. Better to take a moment once a month to get your paperwork in order and save yourself the brain power for when you actually close out the books.

To help you navigate closing out the fiscal year with ease, Qonto offers two features that can simplify the process:

  • Accountant access: this way your accountant has access to your Qonto account dashboard and can directly export all your business’ transactions and receipts for processing.
  • Digitizing receipts: simply take a picture of your receipt, or forward it to a dedicated Qonto email address and have a certified “paper trail” online. And you can assign receipts to transactions in a click.

When do you need to close out your fiscal year?

As a general rule, your year-end accounting needs to be done by the 31 December.

That said, self-employed workers with BIC (industrial and commercial) profits can choose an alternative date for finishing their year-end close. This is the case for merchants and independent contractors.

Those with BNC (non-commercial) profits - like freelancers - must respect the deadline of 31 December, no matter the date they launched their business.

For example, if you’re a freelancer and you created a company (SASU ou EURL) in July, you still have to close out your fiscal year by the end of the calendar year, even if your business hasn’t been operational for 12 months.

Once you finish closing out the year, you have 7 months to settle, approve and submit your annual accounting to the tax authorities.

What documents do you need to provide to close out your business’ accounts for the fiscal year?

You don’t necessarily need to put together documentation to perform a year-end closure in and of itself. You simply need to stop registering accounting entries for the past fiscal year.

However, as mentioned above, you must submit your year-end accounting to the tax authorities within 7 months of closing out the fiscal year.

Your year-end accounting should include three key documents:

A balance sheet

Your balance sheet essentially sums up all your business’ activity, both active (your accounts receivable, treasury, stocks) and passive (your debt, for example). Some say that your balance sheet is a snapshot of your company’s finances at a given moment.

A profit and loss

If the balance sheet is a snapshot of company finances, then the profit and loss sheet is the film. It contains:

  • your company’s income, such as sales revenue, or any other incoming funds;
  • your company’s expenses, meaning the costs of running your business.

What this document does is follow the progression and evolution of your company’s finances over the course of the fiscal year. It also allows you to calculate its net worth.

💡 A quick vocab refresher: the net worth of a company is the difference between its assets (income) and its liabilities (costs). It helps determine whether or not your company is running at a profit or a loss.

An accounting annex

Your accounting annex helps explain your balance sheet and your profit and loss statement to those who examine them. It’s like the user’s guide to your year-end accounting. More specifically, it outlines the rules and methods you (or your accountant) used to put together the year-end accounting.

Good news: as a freelancer, you are not legally obligated to write out an annex, provided you don’t surpass more than two of the three following thresholds:

  • your annual turnover is €700,000 or less;
  • your balance sheet is €350,000 or less;
  • you have no more than 10 employees.

Do you need to hire a certified accountant for a year-end close?

In theory, no. It’s not mandatory.

With that being said, as you well know, closing out the fiscal year and performing the necessary accounting that goes with it is a consuming, complex task. It demands a certain level of discipline as well as some technical accounting knowledge to do it well. And, being self-employed, you don’t have a CFO to share the demands of this accounting exercise.

This is why it is generally recommended to hire a professional accountant to outsource this kind of work, if only to avoid entry mistakes and accidental omissions.

If despite everything you still want to manage your year-end close yourself, we strongly recommend that you use one of the templates that you can find on the Finances Publiques website.

Are you a freelancer looking to open a professional account for your business? Discover Qonto, the business account that simplifies your everyday finances.

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