EA - Year End Tips for Small Businesses

9 Year-End Tips for Small Businesses

December is here, which means that the end of the year is just a few weeks away. Depending on your industry, it might be the busiest or slowest time of year for your business. Those companies in the retail space are often busy keeping up with customer demands as families are shopping for gifts to put under the tree. On the other hand, some service providers slow down during this last month, giving them a lull to enjoy the holiday season.

Regardless of your workload this month, don’t overlook the importance of preparing your business for the essential year-end tasks that need to be addressed. Most businesses are run based on the calendar year, which means that there are a few details you will need to wrap up to bring the year to a close.

It’s hard to keep track of all of the required paperwork and year-end tasks that need to be addressed. Today, we are going to share some tips to help you get started. One of the best solutions is to talk to an accountant about your situation to get personalized tips based on the unique aspects of your company.

Here are a few year-end tips you might consider adding to your to-do list:

Tip #1: Review Annual Reports

Even though the year hasn’t come to a close yet, these reports can give insight into how things went for your business in 2019. If you were consistent about keeping up with accounting and bookkeeping tasks throughout the year, then it is simple to run a report and get a snapshot of your standing for the year.

Not only will this information provide insight as you are going into the New Year, but it can also help you see if your books are accurate and up-to-date. Having an accountant can be helpful as you are running these reports and analyzing the data.

Tip #2: Set Goals for 2020

Now that you’ve had a chance to look at the numbers, December is the perfect opportunity to evaluate how you are going to improve your success in 2020. It is common for individuals to set New Year’s goals for weight loss or habits they want to develop. In the same way, you should look for potential areas of improvement within your company.

Your accounting reports will show where your business came up short. These weak points could be where you choose to place your focus for the annual goals in 2020. Additionally, look at the things that were working well in 2019. It’s smart to put more resources into the things that were already working so you can maximize the proven systems.

For example, if you can see that most of your new business came through customer referrals, then it might make sense to budget more of your market money to reach out and build stronger relationships with your current customers. Determine your ROI on these investments to find the optimal ways that you can help your business move forward.

Tip #3: Income Deferment

Every penny you receive by December 31st counts as income for 2019. If you have payments that are delayed into January, then that money will be counted as income in 2020. Depending on your earnings this year, it could make sense to push some of those payments into the New Year so that you can manage tax brackets and other factors that affect your tax burden.

Various factors should influence your tax bill, and it isn’t always the right choice to delay payments for tax purposes. If you are considering this strategy, talk to an accountant about your options and how income deferment will play a role in the amount that needs to be paid in taxes. Additionally, be ready to have conversations with customers about their payment timelines if you need to delay the income a bit.

Tip #4: Charity Donations

It’s no surprise that the holiday season is a time of year when people tend to be more charitable with their donations. If you are looking for ways to help other people during this time of year, then it might be a good time to reach out to your favorite charity or donation center.

Yes, it’s a kind thing to help others during the holidays. At the same time, there is also something in it for your business: this money can be used as a deduction on your taxes. You can donate money if that is your preferred donation of choice. Or, you can donate other goods, such as toys and clothing, with the deduction based on the fair market value of those items. Make sure to get a receipt for the items that were donated.

Tip #5: Retirement Contributions

Whether you already have a retirement plan, or you are considering your options to set up a new account, certain retirement strategies can help manage your taxable income each year. This account should be set up by December 31, although certain strategies will allow you to make 2019 deposits up until the tax deadline in April 2020.

Don’t overlook the benefits that come from maximizing your contributions. With the right type of account and a smart retirement strategy, this money can be added to the retirement plan tax-free. Talk to your accountant, as well as a financial advisor, for more information about the strategy that is a good fit for your needs.

Tip #6: Save for Upcoming Tax Payments

It is easy to procrastinate your tax preparation for the year. But, the sooner you know how the numbers are going to play out, the better prepared you will be to make the payments that will be required. When tax payments are due, it can cause cash flow challenges for many small businesses.  Even though you know that taxes roll around every year, it’s easy to forget about the necessary money until the last moment.

Dedicate time right now to ensure that you have the cash flow available for the money you are going to need for your payments. Not only do you have the annual balances that need to be paid, but you should also consider the quarterly payments due in January and April. Set aside the estimated amount of cash that will be needed so you won’t be stress about the cash flow when the payment time rolls around in April.

Tip #7: Year-End Purchases

Another tax strategy that might be considered is getting in a few big purchases before the year is over. Not only can you find great holiday prices on furniture, electronics, and office equipment, but this spending might be needed to boost your write-offs for the yar.

Don’t spend money for the sake of spending money. Instead, be strategic with your approach. If you have equipment that needs to be upgraded or office supplies that need to be restocked, then it might be a good strategy to purchase these items no later than December 31.

Tip #8: Inventory Evaluation

Two factors need to be considered for your inventory. First, if your inventory has experienced a drop in market value, then you might be able to claim the difference as a deduction on your taxes. This strategy varies depending on the type of inventory that you carry and the current/previous value of the items.

Also, consider the amount of inventory that is currently in stock, compared to what will be needed in the New Year. For example, if you are in the retail industry, then you might need to restock the shelves because of the increased sales during the holiday season. But it is common that you won’t require as much inventory in January and February since these months tend to be times when customers spend less.

On the other hand, if your business specializes in health products or weight loss services, then January might be your busiest time of year. People are motivated to maintain their goals in the New Year, which means that customers are often ready to spend money on products and services. Make sure that your inventory shelves are stocked, so you are prepared to maximize the profits as the sales start rolling in.

Tip #9: Line Up Bookkeeping and Accounting Services

Do you already have a good accounting and bookkeeping service you are using to help your small business? If you aren’t leveraging these services, then right now is an optimal time to get started. An accountant can offer year-end advice to help with your strategy as you are wrapping up in 2019. At the same time, you can leverage these services into the New Year to ensure that you are prepared for the things that are coming in 2020.

The start of a calendar year can be an ideal time to make this transition. For example, if you need to implement a new accounting software program, then it can be simple to make a move at the beginning of the year. Even though these changes can be implemented at any time, it can simplify the process when you have a clean break with a new month or year starting on the calendar.

If you need assistance with accounting and bookkeeping, then you are invited to contact us at Easier Accounting. We specialize in small business accounting services. Call today: (888) 620-0770.

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