Most people associate the end of the year with vacation planning, family gatherings, gift shopping, and Christmas parties. Small company owners, on the other hand, aren’t so fortunate. They frequently labour right up until the end of the calendar or fiscal year—and then leap right into the next year full steam ahead. It’s a lot of effort, but it’s well worth it.
Because this time of year is so hectic, even the most conscientious SMB owners sometimes overlook crucial end-of-year tasks. Unfortunately, neglecting to complete even the simplest activity might have a knock-on impact the following year, resulting in more effort or even unreasonable tax obligations.
With that in mind, we’ve put up a comprehensive checklist for small company owners to refer to as the year draws to a close. Before the end of the year, here are nine things that every small company owner should accomplish.
1. Run any financial reports that are required by law
You’ll need more than a gut sense to obtain a thorough picture of how well your company is performing financially. If you have an accountant, he or she can assist you in determining the health of your company. However, if you don’t yet have the financial means to hire an accountant, you might consider using accounting software to create comprehensive financial reports. Three important financial statements are usually included in these reports:
Profit-and-loss (P&L) statement: A profit-and-loss (P&L) statement, also known as an income statement, summarizes and details all of a company’s sales, expenditures, and expenses during a specific time period—in this example, the previous year.
A balance sheet is a picture of a company’s assets, liabilities, and the amount owing to investors at any one time.
The cash flow statement details the amount of cash (and its equivalents) that enters and leaves a firm. It demonstrates how successfully a company controls its cash flow.
You are able to utilize the data from these reports to help you make decisions at the end of the year. If your earnings are more than projected, it may be time to invest; if they are lower, it may be time to revise your budget for the coming year.
2. Get your tax paperwork ready
For most company owners, the end of the year signifies the start of tax preparations. This entails compiling any relevant financial papers, business records, receipts, and anything else relevant to your files.
Even if you have an accountant, you’ll need to gather financial statements, payroll information, company costs, asset acquisitions or disposals, and other vital data for them to evaluate. You’ll also need these documents if you’re filing your taxes on your own with accounting software like QuickBooks or Xero.
Most employers will be required to file certain documents by January 31 of the following year, so be prepared to send them out as soon as possible if they apply to you:
3. Balance your accounts payable and receivable
Do you owe any suppliers money for work done this year? Is there money owing to you for a project you completed? Generally recognized accounting rules require you to reconcile the work you’ve done or had done this fiscal year rather than leaving payments to be collected and taxed the next fiscal year. Insurance is a big fixed for most business’, regularly comparing your policy online to other business insurance policies can be a way to save money or get extra cover.
4. Make the most of your deductions to reduce your income
If you end up being a little more lucrative than you anticipated at the end of the year, you’ll have to make some judgments. Why not put that excess earnings to good use by purchasing essential equipment or products that you can then deduct from your taxes instead of carrying it over to the following year and exposing it to income tax or pushing yourself into a higher tax bracket?
You’ll not only increase your deductible costs, but you’ll also reduce your taxable income—all in the cause of growing your company.
5. Determine if and when incentives will be given out to employees
Your decision to give cash end-of-year bonuses or Christmas presents may be influenced by your company’s success as well as how profitable you were the previous year. However, if you believe your team has performed well enough to merit a bonus, plan how you’ll distribute the monies. Of course, giving them out in late December rather than early January will affect your tax bill, but it may not have a significant impact on your employees.
6. Check your pay stubs and perks
You can skip this stage if you’re a sole proprietor or don’t have any workers. If you do pay individuals and give them with salary and perks, make sure you’ve paid everyone what they’re entitled to and factored in any and all fringe benefits, such as a company car or transportation subsidies, into your compensation calculations for this year.
7. Make a backup of your information
Back up and safeguard any and all crucial documents, client information, emails, creative briefs, and so on. Even if you keep your crucial information on cloud-based services like Dropbox, you should consider downloading them and saving them locally on your own hard drives. You may also print and file paper copies of anything you wish to save in case of an emergency or system breakdown.
8. Examine your fixed assets and inventories
If you don’t utilize automated software to track the location and status of your inventory or fixed assets (which nearly half of small firms don’t), you may discover that what’s on the books doesn’t match what’s actually there. If you report that you have more merchandise on hand than you actually have, you’ll end up paying more in taxes than you should. The same may be said for your balance sheet’s fixed assets.
If you’re still keeping track of your assets manually, audit everything and make sure your ledgers are up to date before converting to a system that keeps track of your investments automatically for the coming year.
9. Make a plan for the following year
In the spirit of the coming fiscal year, it’s time to start planning your objectives and expectations for the coming fiscal year.
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What should you expect for 2022 given that you know how your firm fared in 2021? Make a strategy for any company investments you want to make, such as launching a new marketing campaign, asking for a business loan, developing new products, or expanding your store or office space.
As you can see, each of these stages helps your business become more successful, prepared, and ready for the difficulties that lie ahead in the coming year—and they all demand you to act before the end of the year. Don’t leave it till the last minute to complete essential end-of-year tasks. You could even have time to enjoy the holidays this year if you start today.