Every business owner should be actively involved in making important end-of-the-year decisions for their business and making preparations for continued success in the coming year.
In fact, at this point in the year, you should have already started. If not, this is your wake-up call. Any suggestions you don’t have time to implement for this year, be sure to add these to your calendar for next year.
Year-End Financial Considerations for Your Business
Take Advantage of Last-Minute Deductions
The first consideration is to take advantage of the tax laws and capture any last-minute deductions. Now is time to stock up on office supplies and paper, tax software, or printed forms needed for tax preparation. If you procrastinate until the first of the year, you can’t take those deductions until next year.
Spending Considerations
Think of any major purchases you know about for the coming year. You can make those purchases before January and reduce your tax liability significantly. Is your computer out of date and in need of an update? Take advantage of “Black Friday” and “Cyber Monday” deals to stretch your business’ money and get the latest technology.
Consider any additional training you and your staff will need for the coming year. It may make sense to purchase courses or materials this year, even if the training is scheduled for a time during the next year.
However, let me issue a word of caution. Depending on your tax bracket, a deduction will be worth between 25% and 40% of the purchase price, but you will still pay 100% of that price. It is not a good idea to purchase things you don’t need just to get a portion of the price as a deduction. It is better to leave the money in the bank for cash reserves and future capital investments than to spend the money just for a tax deduction.
Selling and Marketing Considerations
People and businesses open their wallets wider at the end of the year than at any other time. It is wise to take advantage of these spending habits and add revenues to your business. The holidays are a great time for restaurants to promote their gift cards. (If you plan to entertain clients or have business lunches in the coming year, take advantage of those gift card promotions yourself.) If you sell digital products, consider promoting your own Black Friday sale.
If your business sells to other businesses, December is the perfect time to promote those B2B sales. Just like you, other businesses want to buy before the New Year to get those tax deductions, so they are ready to spend. Even service businesses can hold pre-order sales for work that will be completed later.
Taxes and Savings
If you anticipate a large tax bill in April, plan ahead and put money aside now instead of trying to scrape it together when it’s due. A little bit of preparation will minimize the hand wringing and the 15th of April will be just another beautiful Spring day.
Every successful person pays taxes. Consider taxes to simply be an indication of your business acumen and the inevitable results of your profits. Taxes are the dividends we pay to live in a country that affords such great business opportunities.
No one wants to pay more taxes than they are legally obligated to pay, but attempting to create unfair loopholes and evasion is unethical. Tax avoidance is greed, pure and simple.
Planning for the Future
The end of the year is the perfect time to make plans for the next year. As business owners, we are prone to be reactive, instead of proactive.
You should set income goals. If you think your business should earn 20% more in the coming year, consider what you need to do to make that happen. You won’t achieve more in the coming year by doing the same things you did this year. If your profits are to change, there will need to be changes in your business, too.
You must also make plans for the long term. Remember to plan for the day when you can’t or don’t want to work every day. If you survive long enough, you will eventually grow too old to work like you’re working now. You need to set money aside to take care of your expenses when you are producing less.
Remember, this doesn’t just apply to you, it also applies to those who work for you too. If they have contributed to your success, you should reward their contributions by caring for them when their working days are past. A just compensation plan and benefits package is the sign of a professional that values people above profits.
The Bottom Line
The end of the year provides many opportunities for business owners to maximize their income and tax deductions, and plan for the future. If you take advantage of these opportunities, your business will prosper and as a result, you will too.
