As the year dwindles down and the holiday cheer is among us, it’s easy to push business matters to the side. However, the final quarter is a critical time to set yourself and your company up for success in the New Year. If you’re a business owner, here are 5 critical steps you can’t miss before reaching the finish line with the year end.
1. Closing your Financials: Why it Matters
If you’re operating a company, you likely already have financials and work with a professional that will properly prepare them to be compliant with US law and regulations.
Closing your financials in a timely manner is imperative. Of course, December cannot be complete until the month has finished, however remaining up to date is crucial at this time of year. Closing your financials means reconciling all company bank and credit card accounts, recording all assets, resolving all remaining questions, and ensuring company financials are ready for tax preparation.
Once you’re in the later half of the year (the 4th quarter), it is a critical time to examine your books. This will allow you to make strategic decisions prior to the year end.
Strategic Decisions:
2. Tax Planning: Plan Now, Save Later
a. You cannot plan for taxes without having up-to-date financials and tentative projections for what the year end looks like.
b. Planning for taxes needs to be done in the current year because if you can make some decisions that can lower your tax liability, those decisions must be done in the tax year. Once the year ends, it is too late to go backwards in time. (Unless you have a time machine.)
c. You may explore options to defer revenue or accelerate your deductions.
3. Issuing bonuses: A Win for You and Your Employees
a. If you see your bottom line is very high and you will be liable for taxes, you may consider issuing bonuses to your employees. This is common practice for larger companies, however small businesses often times don’t consider or forget this simple trick.
b. These bonuses will increase your payroll expenses and in turn decrease your bottom line.
4. Asset Acquisitions: Smart Purchases, Smarter Savings
a. You may want to decrease your tax liability with asset acquisitions. Perhaps your company may find it beneficial to acquire vehicles, machinery, computers and equipment to provide significant tax benefits.
b. Large purchases can be strategically acquired before January 1st, in order to help decrease your tax liability. To estimate how much, we advise you to speak to your tax preparer.
5. Paying Estimated Taxes: Proactive Planning
a. This one is not always a preferred method, however for companies that truly will incur a large tax liability once they file, it may be in their best interest to pay estimates up front to help with your company’s cash flow, avoid large tax liabilities in the future, and ultimately mitigate tax season stress.
b. Your tax preparer will be able to work with you to determine how much in estimates you should pay and how to make the payments.
Don’t let the year pass without taking these critical steps! Your future self will thank you. Speak to your accountant today or contact us if you are seeking help!