Dear M & M: What do I need to do before the year ends to evaluate financially how everything is going in my business? – Joseph
Hopefully you have some sort of bookkeeping system in place. Every business should be monitoring income and expenses all year long not once a year after you file your business taxes.
The number one tip or advice would be to get a CPA or qualified tax preparer familiar with business tax returns on board. Sit down with them at the beginning of the year and determine what reports they should run so you can start analyzing both sides of the balance sheet (income and expenses).
Remember any income received after December 31 is counted towards the next year. Shifting income sometimes can make a big difference on your tax bill. Take a look at things you will need.
Does any equipment, supplies or inventory need to be purchased or sold? What effect will a major purchase or additional income from a discounted sale of excessive inventory have on your bottom line earnings?
It might be better to incur an expense rather than paying additional taxes. Now is a good time to start or contribute to a retirement account. It might make sense for your business to make a charitable donation.
You can deduct fair market value if you donate inventory or equipment. Make sure you receive the proper documentation for your records. Get organized, make the process simpler, work with your accountant to generate forms to enable you to better track progress next year.
Did year-end inventory grow? Did payroll as a per cent of sales go up or down? How much did you spend on advertising? Did sales increase? What was your return on investment? Is it time to close down that warehouse storing things you don’t need?
Maybe a second location in another town offers some opportunities. Could you buy a building rather than shelling out money every month for rent? Set some goals for 2017. Study your financial statements. Set yourself up for a better year in 2017. Why not do a business plan?