Tuesday

16

October 2018

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COMMENTS

Creating a Year-End Checklist for Your Business

Written by , Posted in Business, Entrepreneur

Yes, it’s here: the end of the year and the end of the financial year is an essential time for your businesses. Preparing your year-end financial statements ahead is something I tell all my clients to make their tax filing and form submission easier and get their business working smarter in the year forward. Remember, you do not have to wait until the last quarter of the financial year to start organizing your year-end financial statements.

So here are some significant tasks according to Xero.com for your year-end to-do list:

  1. Decide on employee bonus payments and withhold the required tax

Bonuses are considered supplemental wages and therefore are subject to income tax withholding, FICA, and FUTA taxes. You must withhold the same taxes on supplemental wages that you withhold on regular wages. But bonuses are treated differently than ordinary wage or salary income when it comes to taxes withheld at payout.

  1. Pay your vendors and contractors in full by year end

For vendors this is straightforward, but for an independent contractor that has documented for payment this year although may have received the payment on January should include the payment as it is reported on this year’s Form 1099-MISC, but deduct the payment and attach an explanation with the return. The independent contractor must then include the payment on next year’s return, even though no 1099 will be issued for next year.

  1. Prepare your records for local, state and federal payroll

It is your obligation to make federal payroll tax payments and to file the proper reporting and informational returns to the government. You must also provide your employees and contractors with W-2 and 1099 reports to support the compensation paid and withholding amounts. Ask your bookkeeper or accountant if you have any issues. There may be state requirements as well.

  1. Scrutinize your balance sheet and Profit and Loss report for what you did well – and what you didn’t

A P&L can show a company’s ability to increase its profit, either by reducing costs and expenses or by increasing its sales. A balance sheet, on the other hand, provides a snapshot of what a company owns and owes. Together, these documents make up your financial statements. Examine where your business did well, and what you didn’t.

  1. Check out your income statement to see your profitability

To determine whether your business is profitable, check out your sales revenue, merchandise expense, operating charges, and net income. All these elements are part of an income statement, also known as a statement of profit and loss. If your expenses surpass your income, then your business is ailing and you need to either cut some expenses or increase your sales to sustain a profitable business.

  1. Use your cash reports to understand how much cash you have on hand

The statement of cash flow shows how your business raised money (cash) and how it spent those funds during a given period. Generally, your business is considered to be in “good shape” if it consistently brings in more cash than it spends.

  1. Add up your quarterly estimated tax payments for the year

If you are a sole proprietor, a partnership, S corporation shareholder, a self-employed individual, generally you will need to make estimated quarterly tax payments if you will owe taxes of $1,000 or more, and $500 or more in tax for a corporation. To compute your estimated quarterly tax payments, you may use your last year data as a guide or first estimate your expected adjusted gross income, taxable income, deductions, and credits for the year. Then keep track of what you’ve paid to help you estimate what you’ll have to pay after year end.

  1. Review all information about current and past employees in your payroll system

Make sure that your list of employees is current, and all their information is correct. Safeguard also your information by ensuring that only current employees have access to your business systems, and granted only an appropriate level of access according to their tasks being performed.

  1. Review insurance policies, cover, and rates

An insurance review every one to three years is essential for ensuring you have appropriate coverage. This can help you identify areas where you may have duplicate coverage, too much coverage, or areas where you are under-insured. Be sure you have all statutory and recommended insurance cover. It is a good idea to compare insurance quotes between companies at least once a year to get a better deal.

  1. Confirm your tax deadlines – these vary depending on the structure of your business

Take a look at lists of tax dates online and subscribe to the IRS SMB calendar.

  1. Arrange a meeting with your bookkeeper, accountant and/or financial advisor

Each of them will have work to do for your business at year end. A bookkeeper does the day-to-day work so that the accountant can concentrate on strategic financial operations. Financial advisor provides a more comprehensive picture of how your business fits into your life overall — both from a logistical perspective as well as an emotional one. Communicate with them, and outline lists of tasks that they need to carry out.

  1. Use accounting software to accurately estimate how much tax you will have to pay

Use a reliable and secured accounting software to accurately estimate your tax payments and keep all finance related activities accurate and efficient. Make sure you don’t forget to include state and federal taxes.

  1. Think about whether you’ll need to request a tax payment extension

Talk to the IRS and check out their website for information on how to apply. Do this as early as you can, to lessen if not to avoid penalties for late payment.

  1. Review your client list, and make sure all contact information is up-to-date

The client information within your database must be up to date, clean and relevant, and warrant that you are ready to communicate in a meaningful way. Send them also an email thanking them for their business this year.

  1. Review your goals for the year – and make some new ones for next year

Take some time during the last quarter of the year to consider what you achieved in 2018 and what you want to accomplish in 2019. Think about a quarterly review to stay on track and to adapt your goals as you go along.

That’s it! You know the cliché; businesses that fail to plan, plan to fail. Hopefully, this year-end checklist will help you in having an easy close of your 2018. If there’s something I’ve missed, please feel free to share some of the year-end things you do to finish the year.

As a thank you for being one of my readers, I have a free gift for you! I believe you’ll get a lot out of it. If you haven’t claimed yours, go and grab it now for free! See you inside – I can’t wait to start working with you! We’re better together!

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