When I think about the holiday season, I think “calm before the storm.” That’s because in my profession, once mid-December hits, we’re scrambling to handle EOY matters. And then when the new year strikes, we’re holding our breath for a few weeks … and then tax season is upon us.
We are very “calendar-driven” in the accounting profession.
For “normal” Lake Norman business owners, this season can mean all different kinds of crazy. (But hey — we can still enjoy the smells, like turkeys roasting, cookies baking, and evergreen wreaths). And as you prepare to fill your houses with holiday cheer, and prepare for the crazy, I really am here to help.
In my opinion, you need to carve more than just the turkey … you need to carve out some time to examine where things are at in your business and what you still need to get done before the stroke of midnight on December 31st.
Of course, besides the helpful end of year checklist I’m bringing to you today, we can always sit down and do a once-over and find what to prioritize to lighten your tax burden and your other business burdens:
But, let’s start here. This is a good rundown of what you can still do over the next 6 weeks to get your business in shape and ready for a new year.
Our (Early) End of Year Checklist for Lake Norman Businesses
“It does not do to leave a live dragon out of your calculations if you live near one.” – J.R.R. Tolkien
The close of the year is a natural time to take stock of all things, and one of them should be your business. Your money – as well as your plans for it – should be top of the list.
From your people to your payroll taxes, budgets to your bank: Though financial assessment can seem to be a big basket, with proper planning you can tick off one item at a time and set yourself up for 2023.
So, let’s take a look at this end of year checklist I like to share with Lake Norman business owners.
End of Year Checklist Category #1: Financials
Give a once-over to your key financial documents, such as your balance sheet (assets, liabilities, and shareholder equity), income statement/P&L, and cash flow statement. What to look for:
Balance sheet: Are your receivables and debts in line with total assets? Higher inventories can reflect lower sales, and double-check for contingent liabilities and their due-dates.
Income statement: Unexplained drops in sales and marketing expenditures: Do they correlate? If not, look back to see what went wrong. Did operating costs ever rise occasionally without a corresponding rise in revenue? Again, what happened?
Cash flow statement: Operating activities should be your biggest category. Too many big but infrequent payments from just a few clients? Delayed receivables?
Prepare a budget for 2023. Go over your A/R past-dues and look ahead to factor in upcoming capital improvements in addition to regular operating expenses. Check your inventory and pre-pay if possible for items and services such as insurance, professional dues, or rent that you’ll need next year.
Use last year’s budget as a guide, but not as an ironclad roadmap: Every year is different. With inflation and ongoing supply-chain messes likely into 2023, it pays to plan and now.
End of Year Checklist Category #2: Third parties
Aside from suppliers, two of the biggest outside businesses impacting your company are your bank and your insurer.
Banking: Simply, are you getting all the services you need, such as employee company credit cards? Is your access to your bank sufficient (either through in-person branches or online)? Are fees too high? Are they meeting all your credit needs (including for Small Business Administration loans)? Can you get better support or perks elsewhere?
Insurance: Make sure your policy is renewed and up to date. Looking ahead to 2023 developments that you expect for your small business, do you have coverage for those changes? Need any policy riders? See if bundling coverage will save on premiums.
End of Year Checklist Category #3: Employees
Aside from making sure everybody checks the new calendar to slot vacations ASAP, perks and taxes are two big details to check before the new year.
Retirement plans. Review reporting requirements based on the size of your plan and its participant numbers. Some businesses give end-of-year bonuses or retirement contributions to employees, which can come with a tax break.
If you don’t have a retirement plan for workers, look at options for creating one in 2023 – even small companies (100 or fewer employees) can easily set up a SIMPLE (Savings Incentive Match PLan for Employees) IRA. We can help you do this.
Review payroll. Double check with us if you have questions in this area, which frequently changes. Starting next year, for instance, the base annual wage for computing Social Security tax will increase to 160,200 dollars, up from 2022. Did you get any pandemic relief for payroll in the past? Make sure that such credits and loans are wrapped up heading into 2023.
End of Year Checklist Category #4: Operations
Tax documents. It’s never too early. Start with the financials we mentioned before and check with us about having to fill out any additional forms: Examples might include W-2s or W-3s; quarterly, state, and federal returns; or IRS Form 1099-NEC – this year, the latter kicks in for just $600 in payments to most independent contractors. Assemble your paperwork for deductions; we’d like to look at it sooner rather than later to get you all the money back that we can.
Debt, income, and expenses. Generally, try to rattle debtors’ cages and get your outstanding A/R by the end of the year – cash in hand always makes bookkeeping easier. There may be times when deferring income into the new year makes tax sense. Ditto for deductible expenses: Taking a major business deduction (for capital equipment, say) can make a big difference for your company’s taxes in one year but a huge difference the next. Check with us if you need help with timing.
Marketing plan. Now’s the time to think about those new markets and niches that you’ve wanted to target, and about the marketing needed to do it. What kind of business do you want to be doing this time next year? Set your budget and start considering what media will get your message across best and how much it’ll cost you.
Now, figuring out where to start on all of this or even what’s most important can be the really difficult part of end-of-year moves. THAT is something I am more than happy to help get you started on for your Lake Norman business.
Guiding one step at a time,