As a service-based business, now is the time to make preparations for year-end financial and tax planning. Careful planning now can help you to avoid any nasty surprises come tax time. Here are some issues to consider in planning for your small business.
Having all your financial documentation, including invoices and receipts in a central location will save your time and headache when it’s time to prepare your taxes. This can include accounting or bookkeeping software, spreadsheets, cloud storage, or other locations to help you to stay organized.
CONSIDER THE TIMING OF INCOME AND EXPENSES
If you are a cash basis taxpayer, income e is taxed in the year that it is received, and expenses are typically deductible in the year that they are incurred. At year-end, you may choose to accelerate or defer income and expenses based on your current financial situation.
For example, if there are upcoming expenses that can be paid prior to December 31st, you may consider paying those before the close of the calendar year to take advantage of the additional deduction.
Having timely bookkeeping allows you to evaluate your financial data and make the most appropriate decision for your circumstance.
DON’T FORGET ESTIMATED TAXES
The IRS required taxpayers to make estimated tax payments quarterly based on income earned throughout the year. The due date for Federal estimated tax payments is April 15th, June 15th, September 15th, and January 15th following the close of the calendar year.
Keeping good accounting records is crucial in determining the amount of estimated taxes owed and helps avoid interest and penalties associated with the underpayment or nonpayment of estimated taxes.
As a self-employed individual, the amount that you can contribute to a retirement plan is directly related to how your business has performed throughout the year. Having good financial records allows you to accurately calculate the amount that you can contribute to your retirement plan. Talk to a Financial Adviser or a Tax Professional.
MAXIMIZE YOUR BUSINESS DEDUCTIONS
Be sure that you are taking advantage of all the business deductions that are available to you This includes expenditures such as home office expenses, rent (if you have a physical location), office supplies, insurance costs, professional fees, and bank charges, just to name a few.
We can help you with you bookkeeping to identify potential expenses that you may have otherwise overlooked.
PREPARE YOUR BUDGET
It’s hard to know where you’re going unless you know where you’ve been. This is advice that you’ve probably heard before but is especially applicable to your business.
Keeping good financial records helps you to create a projection for the direction your business will take during the upcoming year. You can make decisions that will help you to grow your business including determining whether you should take on additional clients, or if you should increase or decrease your marketing budget. Keeping accurate bookkeeping allows you to make these crucial financial decisions that directly impact the future of your business.
HONE IN ON YOUR BUSINESS OFFERINGS
In reviewing your financial information, you may find that certain aspects of your service offerings are not profitable. You can also identify clients that are contributing the most to your bottom line in addition to clients who may not be a good fit for your business.
SET GOALS FOR THE UPCOMING YEAR
Doing a year-end review of your financial statements allows you to set goals and plan for the upcoming year. How much did your business grow during the year? How much do you anticipate you can grow in the upcoming year? Do you have new revenue goals for the upcoming year? How many new clients would you like to serve? Will you be able to hire employees to help your business grow?
Having timely financial data will help you to establish smart business goals and continue to build your business.
In addition, you will be able to rest easier knowing that your financial data is organized and ready to go when tax time rolls around.
If you have any questions regarding year-end planning for your business or you would like to learn more about my services, please feel free to contact us for more information.