During the final six weeks of the year, small business owners face many competing priorities. Those in the retail or restaurant sectors are likely in the midst of their busiest season. Those in construction and contracting may be in their quiet season. Regardless of whether this is a busy or quiet time for your business, one thing is for sure: It is also a critical time to prepare for your taxes — and to get things in shape for a strong start in the New Year.
Here are five essential steps you can take to make this time of year one to celebrate, even with your accountant:
Step One: Get it together.
The first thing every small business owner should do at this time of year is begin getting things organized for taxes. This includes financial statements such as your income statement, balance sheet and cash flow (all of which can be produced by accounting software, if you’re using it). Payroll information is added to that list, as are details of all business expenses including travel, marketing, advertising, rent and utilities, office supplies, etc. Also make sure you’re up-to-date with expense reports/reimbursements and your asset depreciation schedule.
Step Two: Prep for taxes.
Of course, preparing for taxes is something you should be doing year-round, especially for the purpose of ensuring that your quarterly payments are in-line with your probable tax liability determined at year-end. The last thing you want is to have a sudden tax liability to address. The best thing to do is meet with your accountant now, before the rush of tax season begins after January 1st.
Step Three: Defer, purchase & contribute.
Speaking of taxes, since most small businesses run on a cash basis and use the calendar year as their tax year, this is also an ideal time to make some key decisions that can help reduce your tax liabilities. First, consider deferring any income that comes in in these final weeks until January to reduce this year’s taxable income (before you do this, check with your accountant). Second, if you have purchases that need to be made, make them now — better to consume this year’s funds against this year’s earnings and increase the value of your deductions. And third, this is an ideal time to make or maximize contributions to your retirement plan.
Step Four: Contribute some more.
After you’ve taken these steps, consider contributing some more — to charity. Remember that your business can make donations of cash or it can also make both hard asset and in-kind contributions as well, as long as you claim a deduction for the fair market value and back it up with appropriate documentation.
Step Five: Plan to apply.
Finally, remember that interest rates are going up and are predicted to go up further in 2019 as the Federal Reserve looks to prevent the economy from overheating, and as we recover from the long binge of quantitative easing that rescued us from the last economic recession.
As a result, the cost of business borrowing is most likely going to go up, so this is an ideal time to meet with your small business banker and discuss your expansion funding requirements for the new year.
These five key steps will help you make the most of the year-end period as you position your small business for success with finances, accounting, taxes and future growth as well.