Reviewing the profit and loss and cash flow statements during the holidays or before year-end can help get the business ready for the upcoming year.
For example, if the company has good cash flow and significant profits, buying new business equipment before the end of the year can reduce the company’s tax bill. Reviewing the year-end balance sheet of the company’s assets and liabilities is also good practice to ensure errors are corrected before beginning a new year.
Checking financial statements also helps with future budgeting and forecasting. If your business already has a budget, comparing the business’s actual costs with budgeted costs helps identify areas where costs were above or below the budgeted amount.
Similarly, comparing forecasted revenues with actual revenues helps the company adjust revenue expectations for the upcoming year. If the company does not have a budget or does not produce a forecast, using year-end results as a baseline for the next year is a great way to track costs and revenues.
Performance reviews are an opportunity for management to discuss each employee’s strengths and potential areas for improvement. This is also a great opportunity to get employee input on new projects, employee satisfaction, and any ideas that will help the business be more successful. Keeping an open line of communication between employees and ownership can help improve employee satisfaction and productivity.
Many service-based businesses use contractors, and ensuring 1099 forms are sent on time may be overlooked. It is good practice to make sure the business has a W9 on file for each contractor before January. Regularly updating business records and contact information for contractors will save time and reduce the chances of a fine for sending out 1099 forms late.
As a busy business owner, it’s unlikely you have enough time to go over your books as thoroughly as you would like. The holidays are a great time to make an appointment with your accountant or tax professional to ensure the books are accurate and up to date.
Tax laws have changed significantly over the past few years, especially with the COVID-19 pandemic. There may be tax credits or deductions available to the business that you might have overlooked. If you make quarterly tax payments, this is a good time to make sure payments are up to date. Meeting well before the tax deadline can save time and reduce stress once April comes around.
It’s no secret that the pandemic has made things tougher for many businesses. Recognizing successes such as adding new clients, beating sales forecasts, receiving great customer reviews, or having a happier workforce can go a long way to setting up a successful new year.
Many businesses organize team outings or holiday parties to recognize achievements and build camaraderie. If your business does not have employees or contractors, consider an outing with clients to build on the business relationship and strengthen loyalty.
Creating goals for the next year gives everyone involved with the business a roadmap to continued success. Goals need not be overly ambitious or complicated but should be concrete and achievable. Common goals can also strengthen bonds between members of the company.
The end of the year is a great time to get a jump start on how the business will market in the upcoming year. Common questions to ask are:
What marketing efforts were effective over the past year?
Does the marketing budget need to be changed?
Will the business add new marketing strategies, such as social media?
Are there new services the company can market?
Should the company hire an outside company to market?
If your business has a website, conducting a review to make sure it is up to date and accurate is beneficial. Maintaining a business website and keeping a presence on social media platforms such as Facebook and Twitter can help the business reach an audience that it may not through traditional advertising.
As your business grows, regularly reviewing staffing needs is good practice. Were there times when you had to turn down a project because of a labor shortage? If so, adding a new employee may help boost revenues and grow the business. If your business is seasonal, bringing on a seasonal employee or student intern can keep costs low while you determine whether to hire a full-time employee.
Reviewing training practices and procedures can improve efficiency and reduce costs. Asking employees for suggestions on improvements is also helpful and can increase employee engagement and productivity.
If your business offers multiple services, reviewing the profitability of each would be helpful as a part of the year-end financial review.
For example, were weekend service calls more profitable than weekdays? How did service calls to businesses compare with residential calls? Breaking down services into separate categories allows the business to determine where to expand and possibly reduce services to maximize revenue.
The end of the year is busy for everyone but especially for business owners. To help you end the year strong, we provide services to business owners that expedite these processes so you can focus on the most important points. Getting you back to your family during the holidays and planning your business for next year.
This publication is designed to provide information on federal tax and accounting laws and/or regulations. It is presented with the understanding that the author is not rendering legal or accounting services.
This text is not intended to address every situation that arises or provide specific, strategic tax and/or accounting planning advice. This text should not be used solely to answer tax and/or accounting questions and you should consult additional sources of information, as needed, to determine the solution to tax and/or accounting questions.
This text has been prepared with due diligence. However, the possibility of mechanical or human error does exist and the author accepts no responsibility or liability regarding this material and its use. This text is not intended or written by the practitioner to be used and cannot be used by a taxpayer or tax return preparer, for the purpose of avoiding penalties that may be imposed.