As the holiday season approaches, you may be stocking up on inventory or perfecting your offerings. However, did you know now’s also a great time to review your financials and tax strategies to achieve a strong year-end finish? In this overview, you’ll find a small business year-end checklist to set your small business growth up for success now and in the year ahead.
Why you need to plan for the end of the year now
If you have conversations now with your financial professionals – your certified public accountant (CPA), bookkeeper, or financial advisor – you’ll be better positioned to prepare for tax liabilities this year and to plan for growth in the new year. This is important because tax laws change frequently, so working with a knowledgeable CPA or tax advisor can help ensure you maximize savings, stay compliant, and plan for the long term.
It’s also important to discuss growth plans with your tax professional, because too many deductions may negatively impact your ability to qualify for financing. You want clear and accurate financials that reflect a healthy business capable of supporting loan payments.
How to finish the end of the year strong
The following strategies can help you optimize your financial position for the end of the year and beyond. It’s a good idea to review them with your tax professional or financial advisor – every business and owner’s situation is different, so what works for some may not be right for you.
1. Keep your business and personal accounts separate
Be sure your business and personal bank accounts are separate. This helps ensure that your business’s financials are accurate and makes it easier and less expensive for your accountant or bookkeeper to manage them. This will also better protect both your business and personal finances in the case of a tax audit. Then, ask your accountant to advise whether you should put yourself on payroll or take regular distributions.
2. Review recurring expenses from vendors and service providers
By reviewing recurring expenses, you stay on top of expenses that may be rising and can assess vendors or service providers to determine which are still a great fit and those that may not be working for you.
For example, merchant services for credit and debit card payments often offer new businesses low- or no-cost equipment in exchange for higher per-transaction fees. While this can have advantages early on, as your business grows, the per-transaction costs can add up to a point where this arrangement is no longer the best for your business.
3. Prepare your business’s projections for the next year
Whether you’re planning to grow, expand, or just be more profitable, financial projections can be a great tool. By using your current and previous years’ financial data, you can identify seasonal trends and prepare for cash flow shortfalls, project the cost of additional employees or equipment, and create a plan to budget for them. It’s better to plan ahead for financing or saving additional capital than to react to the need in real time.
4. Maximize retirement contributions
Contributing to a retirement plan can provide tax advantages for you and your employees. Along with your tax professional, review your retirement-plan options that help with future planning and may also reduce taxable income today.
If you don’t currently offer retirement benefits, check with your state, as many now offer low- or no-cost options for retirement savings for you and your employees. Some examples include Secure Choice in New York State and My CT Savings in Connecticut. Talk to your accountant and financial advisor to see what’s right for you.
5. Review health insurance and health-savings account (HSA) contributions
If you’re self-employed, you may be able to deduct health-insurance premiums for yourself and your family. Contributions to a health-savings account (HSA) can also be deductible if you’re enrolled in a high-deductible health plan. Now’s also the time to review pricing and offerings from competitors, as you may find additional savings or improved plans.
6. Ensure that all income and expenses are tracked and substantiated
Proper documentation is essential to support deductions and support IRS or state audits, if needed. Use accounting software, such as QuickBooks, or hire a bookkeeper to help you track and document income and expenses. Then, keep all receipts and digital records. Organizing them now makes it much easier when tax season rolls around and gives you sufficient time to track down any receipts, invoices, or other documents you may be missing before tax time.
Once you have these, be sure to store them safely – a cloud-based program can ensure that your information is safe from loss or hazards, but paper files are acceptable, too.
One of the best ways to prepare for success is to get ahead of tax liabilities by working with your accountant to set up quarterly estimated tax payments.
7. Prepare for profitability
If you expect to owe $1,000 or more in taxes for the year, you’re generally required to make quarterly estimated tax payments, and missing these can result in penalties, so planning ahead is essential. If you’re self-employed, you’ll need to account for both income tax and self-employment tax – that’s the portion of your income that goes toward Medicare and Social Security that would be deducted from your income if you were working for someone else.
Also, if your business has additional quarterly taxes due, such as sales tax, make sure you’re caught up on those before the holiday season is underway.
Pursuit offers financing to achieve year-end plans and long-term goals
Use this small business year-end checklist to help you get organized before the end of the year – and then, if you need financing to achieve your goals, take a look at the more than 15 loan options from Pursuit.
We offer loans from $10,000 to $5.5 million, with financing for working capital, the purchase or construction of commercial real estate, to refinance business debt, and more for businesses in New York, New Jersey, Pennsylvania, Connecticut, Nevada, Illinois, and Washington.
Contact us to learn more.