Out with the old, in with the new! But before you get to making your new year’s resolutions, make sure this year ends with a good finish. We have 7 steps to get your business ready for a new year the best way possible: by finishing this one correctly!
- Step 1: Reconcile your Accounts
Reconciling is basically making sure your books say what the bank says. If you haven’t been doing it along the way, dig up or download the monthly statements that should be available for every bank account and credit card account. Look into and resolve any discrepancies between the two. Take a good look at accounts such as Accounts Payable, Accounts Receivable, Sales Tax Payable and Payroll Tax Liability accounts. Make sure the balances seem reasonable. These accounts have a knack for causing trouble.
- Step 2: Assess your Profitability and Taxability
Get your books ready for tax time and figure taxable income by putting your Profit and Loss statement into an order that allows it to flow easily into tax forms. I.e. rearrange your accounts to separately list or eliminate nondeductible items or personal expenses, meals and entertainment, etc.
- Step 3: Maximize your Section 179 Deduction
The section 179 deduction limits were raised for 2011! A section 179 deduction allows a business to expense now–instead of depreciate over time–certain business equipment purchases up to a (case specific) amount. To see what qualifies for the 179, see the Section179.org website.
- Step 4: Maximize your Retirement Deduction
When you contribute to a tax deferred retirement vehicle, such as a traditional IRA, you can stash cash for the future without having to pay taxes on it. It is not only wise now, it is responsible for tomorrow.
- Step 5: Make an Estimated Tax Payment
Estimate the year’s taxable income and make an appropriate estimated tax payment to the IRS. This will ease the financial burden when taxes come due, not to mention it is required by the IRS in most cases. See the IRS website to see if you are required to pay estimated taxes.
- Step 6: Plan for the Future: Develop a Budget for Next Year
Every business needs a written financial plan for the new year, aka, a budget. Develop a budget to meet your business goals for the new year. Using year to year comparisons is a good place to start.
- Step 7: Box Up and Label the Year’s Records
(“Goodbye! Thank you for the great working relationship!”)