4 Tips to Get Your Business Ready for Year-End
Business owners must be extra vigilant as the year ends for one simple reason: Being smart and planning carefully at this time can give you a huge head start on your competition and could make the difference between you succeeding in the new year or failing.
1. Plan for the Next Year
Prior Planning Prevents Poor Performance. The military swears by this idea and there’s no reason that businesses shouldn’t internalize this concept too. The better you plan, the lesser the chances of your strategies failing or not yielding positive results.
A great way to start this planning process is to look at the current year and analyze if the goals you set at the start of it have been met or not. If not, then why? Investigate and try to find cues on what you should have done better. The more you research and dig, the better you’ll understand your failures and successes.
Customer testimonials, financial reports, employee feedback, are all ways that can help you better discern your business operations and the next steps you need to take to improve on them. It’s important to be very honest and proactive here. Making a wrong call or miscalculating a strategic step could result in a catastrophically bad new year for you.
Use all this information to get your business organized and create new goals for the next year while updating and modifying existing ones.
2. Sort Out Your Accounts and Finances
While easily the least glamorous part of owning a business, finances are the lifeblood of your day-to-day operations. The end of the year is a great time to sort of the essential tasks every business owner has on their to do list. Whether you do these yourself or delegate to an accounting professional, it’s super important that you make certain statements a priority to better understand your business’s financial performance.
The following reports should be emphasized:
- Profit and Loss Statement – P and L’s, also known as income statements, document your businesses’ revenues, expenses, and overall costs during a particular period of time; the end of year income statement would obviously consist of that entire year’s finances.
- Cash Flow Statement – This useful analysis tool reveals how a business manages its funds. It includes information on how changes in the company’s assets and liabilities affect cash flow and cash equivalents.
- Balance Sheet – An overview of a company’s assets and liabilities which includes any amounts owed to investors or lenders.
These reports must be the basis of most of your decision making and you should plan according to the positive or negative results they reveal.
3. File Your Taxes and Take Advantage of IRS Section 179
Just like sorting out your finances at the end of the year, taxes are another important, yet tedious task business owners have to do. No matter how annoying, filing taxes on time is important if you want to avoid late filing fees.
Besides just getting your tax documents in order, this is also a good time to finance your equipment upgrades by taking advantage of IRS Section 179 tax deduction. This law allows businesses the opportunity to deduct the cost of qualified equipment purchases during that tax year as a business expense.
Lower taxes lessen the burden of the upgrade allowing more businesses who might not be able to afford expensive equipment, the opportunity to update their processes. Some important things you should know about IRS Section 179:
- There are spending caps ($1,04,000 deduction limit and a $2,590,000 spending limit), so it might not be a viable solution if your scale of production or operation is quite large. However, Bonus Depreciation is likely to take care of purchases over the Section 179 limits.
- Only qualified equipment can take advantage of IRS Section 179. If your upgrades are related to renovating buildings or property, then you might not be able to take advantage of the tax deductions.
- Your upgrade MUST be bought and put into action by midnight of December 31st, 2020.
The last point is particularly important as you have to act fast if you want tax free equipment upgrades for your business especially now that 2020 is drawing to a close.
4. Focus on Improving Employee Performance
Employees are the backbone of any good business and while analyzing your finances and tax impacts are important, your staff performance also requires some introspection. Talk to your staff and ask for their feedback on their grievances and the things they want to change or improve upon.
Likewise, take this time to give your own feedback to them on what they should do to improve their performance. This allows every team member to know exactly where they stand and what they need to work on in the coming year. A company that wants to constantly improve can never leave out their workforce as they are the ones who will be carrying your company name forward.
Keep everyone on the same page and you will avoid employment disputes and quarrels in the coming year. As a bonus, this is also a great time to plan some morale-boosting events like Christmas parties but due to the Coronavirus pandemic, this particular strategy should be postponed for 2021.
We hope these tips give you some ideas on what to implement or look into at the end of the 2020 business year. It’s not how you start but how you finish that impacts your longevity in this game, and with 2021 just around the corner, your business has a great chance of reaching the success you aspire towards.
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