Year-end is a time for self-reflection as a business owner to determine what has gone well during the year and what has not gone so well. It is a great opportunity to reset and recharge for the upcoming year. There are several areas a business owner should focus on at year-end. Here are just a few.
1. Bring your bookkeeping up to date
Bookkeeping is the act of recording the financial transactions that occurred in your business. This process should take place monthly, however, many small business owners fall behind on this activity. As part of your year-end checklist be sure to bring your bookkeeping up to date. You will not only need it for tax purposes, but it gives you as the business owner a clear snapshot of what is happening in your business and helps drive informed decision-making.
2. Estimate your tax liability based on net income
With up-to-date books, you can determine your total revenue, total expenses, and your net income. Working with your tax accountant, you should estimate your tax liability and determine if there are tax strategies you should implement before year-end to reduce your tax liability. Waiting until tax filing is not beneficial and could result in you overpaying on taxes. While this is an activity that should be done earlier in the year, be sure to go through this exercise at least as part of your year-end checklist.
3. Follow-up and collect any outstanding receivables and pay outstanding invoices
Another activity that should occur during your year-end process is ensuring that any outstanding receivables are collected. Again, following up on receivables should not just be a year-end process but at the very least at this time, you should be contacting your clients who have unpaid invoices to collect on those. Likewise, if you have any outstanding invoices, be sure to take care of those as well.
4. Compare projections to actuals
As with all the other steps noted above, this should be an ongoing activity in your business. However, at year-end, right before putting a plan in motion for the new year, you want to check for areas where you could create more financial efficiencies in your business. You should ask yourself and your team questions such as: Did we meet our revenue projections? Did we stay within our budget, or did we go over? What areas did we overspend? Did we receive an ROI (return on investment) on investments we made? What changes do we need to make in the coming year?
5. Plan for the upcoming year
As you reflect on and evaluate the goals that you set for your business in the current year, you not only want to determine if you met your goals, but you want to identify the ones you didn’t meet and why. For those you met, are you going to duplicate those goals for the upcoming year, and/or will you enhance those goals? For those you didn’t meet, are you abandoning those goals, or will you take those into the new year?
For your financial goals, how detailed are they? You should ensure that your financial goals are mapped out in a financial forecast so that they are measurable and can be easily tracked and evaluated monthly. Do you have a financial forecast set yet? If not, now’s the time. If you need support in this area, schedule a consultation here.