As a business owner, you know your company’s finances are like a pulse – you may not think about them constantly, but it is a good practice to check in on them regularly. Preparing for the end of the year lends itself as a great opportunity to do just that and you should really start thinking about this process come September.
You can utilize your year-end financial preparation and planning process to ensure:
- Accurate accounting and financial data
- Preparing for year-end financial review, audits, and tax preparation
- A meaningful budget for “next year”
We believe year-to-date assessments, last quarter predictions, tax planning, and the following year’s budget should be your year-end prep’s top priorities.
Start with your year-to-date (YTD) assessment; this will give you an opportunity to reflect on your business’s financial evolution over the last three quarters and predict what is likely to come in the final quarter. This is an excellent time to ensure accuracy in your bookkeeping and consistency in your financial reporting. YTD information is also helpful in analyzing business trends and performance, final quarter predictions, and setting the following year’s budget. YTD assessments can be done at any given point throughout the year, but for purposes of looking toward year end, August 31st or September 30th is a good line in the sand to draw and review.
With your YTD assessment complete, and your numbers accurate, you now have a solid baseline to look at how your last quarter is going to perform. These projections and this review will alert you to any upcoming financial issues and support your year-end tax planning process. It can feel daunting to predict your company’s financial future, but looking at the last three quarters, knowing of any changes to come in contracts, and being aware of upcoming expenses can help you make an accurate projection of your company’s profit or loss. Additionally, you can utilize this information to make any necessary changes to keep your company in a healthy financial state.
As you predict and plan for the future, it is also time to prepare for the upcoming tax season. With confidence in your YTD numbers and last quarter predictions, now is the time to ensure your tax bill is not unexpectedly burdensome. A Certified Public Accountant (CPA) can help with this. Engaging a CPA who is highly experienced in the tax law is a great investment for any business; they can ensure you don’t overpay your taxes by finding ways to reduce your taxable income while also ensuring that you stay compliant with the current tax laws and regulations. A CPA well versed in your industry knows where to find deductions, defer income, and accelerate expenses. Tax laws are continuously changing, and a CPA can help your business stay apprised of those changes.
With your year-end preparations almost done, creating the next year’s budget should be your next priority. The tools needed to prepare your budget for the following year should include:
• The company’s current year budget
• YTD financial information
• A comparison of your actual YTD financial results against your original budget
• An understanding of how your revenue and expenses may change in the following year
• Any goals and objectives for your business for the upcoming year
We recommend taking a deep dive into all your company’s expenses each year which means you are essentially reviewing and justifying all your company’s expenses. More often than not, you will find new ways to optimize your costs and increase your profit and also ensure that you are incurring costs that are essential to the health and growth of your company.
We know owning your own business is a labor of love and managing your company’s year-end financial preparation can feel daunting, but you don’t have to manage it alone. Visit our website to learn more about how we can help support you and your business.