Can you believe it’s December already? The end of the year is always a busy time for any small business owner. Not only is it the holiday season, which means a big push for sales during the busiest shopping time of the year, but it’s also the close of another tax year, meaning you need to get all your financial affairs in order before you start working on your taxes in the early portion of the new year.
With this in mind, here’s a quick checklist of items for you to take care of so you can close the year on a strong note and enter 2021 with plenty of confidence in your business’s financial standing.
•Clean up your books: If you’ve been putting off getting your financial books in order, you should take the plunge now and make sure everything is in order. It can help to work with an outsourced bookkeeping professional rather than trying to take this task on yourself amidst all the other tasks you have on your plate.
•Assess your financial position: Spend some time analyzing your various statements and documents to determine where your business stands financially. How does your cash flow look? What are your figures like for the year in terms of revenue and profits compared to previous years? What outstanding debts do you have? Did you meet your goals for the year? If not, why?
•Determine tax strategies: There are certain tax strategies you can implement at the end of the year that can reduce the amount of income tax you pay. You might, for example, defer some income to 2021 if you wish to reduce your 2020 taxable income. You can also max out your depreciation claims, or make large purchases to invest in your business before the end of the year, which may provide you with some tax benefits. Here again, a tax planning professional can help you determine effective ways of minimizing your tax burden.
•Gather your tax documents: You might not get some of your tax documents until the new year, but you can at least get a head start on preparing your tax return by gathering allthe necessary documents you have now and get them to your tax prep professional early. Your tax prep pro will be able to provide you with a full list of all the information they’ll need. The earlier you get on top of that, the earlier you’ll be able to take care of your tax return and eliminate that from your to-do list in the new year.
•Set goals for the new year: It’s time to start thinking about what you can accomplish in 2021! Now’s a good time to set some financial goals for the new year based on what you accomplished this year. Obviously, 2020 was something of an anomaly for many reasons for most businesses, but your data from this year can still be useful in helping you determine what you can feasibly accomplish in the next calendar year.
For more tips and information about getting your finances in order at the end of the year, contact our team of bookkeeping and tax prep professionals today at MCG Solutions.