Your Essential End-of-Year Business Checklist
A new year is just around the corner and the last few months of 2018 are a critical time for year-end planning and preparation. Here are a few items you should include in your end-of-year business checklist.
Maximize Your Tax Deductions
Maximizing your tax deductions before January 1 should be top of mind and top of your list. Is there a piece of business equipment or new software that you’ve been eyeing? Now is the time to make that purchase. Charitable donations can also reduce your taxable income, and other qualifying deductions include team training, marketing and gifting and entertaining clients. When in doubt, refer to the IRS guidelines on what qualifies as a deductible business expense.
Focus on Record-Keeping
Hopefully, you’ve been reconciling your books and tracking your expenses and receipts each month, but year-end is still a good time to make sure everything has been captured accurately.
If you’re trying to maximize your deductions, you need to be able to back them up. The IRS requires that each expense is thoroughly recorded, including the amount, date, reason for the expense and tax category. You also need to provide documentary evidence like receipts or bills to support your expenses.
Review Your Legal Compliance
Year-end is also at times accompanied by legal compliance requirements. If you operate an LLC or corporation, now is the time to ensure your business is still in good standing with your state — in other words, you’re compliant with small business regulations. Several different factors that can jeopardize that good standing, including failure to file an annual report or filing the wrong paperwork if you changed your business structure during the year, added or changed lines of business or expanded into a new state.
Spend some time with legal counsel to understand which boxes you need to check before the year comes to a close. It may require an investment of time and money, but it’s worth it to avoid the potential consequences — falling out of good standing with your state can result in fees and penalties, and could jeopardize future access to financing.
The IRS requires that any retailer or product seller perform a physical year-end inventory count. Businesses operating on a calendar tax year should ideally do the count on December 31 and value inventory at cost, but it’s okay to do it earlier or later. If you take stock a few days before December 31, just reduce the count by any goods sold in the days leading up to year-end. Alternatively, do your count early in the new year and add to the totals any products sold since January 1 (and reduce by any goods added in 2019).
Keeping track of your inventory costs can reduce your tax bill, but remember that it’s not a tax deduction — rather, it reduces your gross receipts and decreases your taxable income. If you need help keeping track of the numbers, there are plenty of tools that can help you automate inventory management, including Fishbowl, Unleashed and Veeqo.
Plan Your Q1 Marketing
The last item to add to your end-of-year business checklist is marketing. Since the first quarter of the year is often the busiest marketing season for many businesses, you can save yourself a couple of months of chaos by writing your marketing plans now. Gather data and figure out what worked well the year before and what could be improved. Then work alongside your sales teams to find areas where marketing can support their efforts.
Prepare for the Future
An organized approach to your end-of-year tasks can help guarantee success moving forward. Once you’ve checked every item off your list, create a written plan that outlines your goals, tactics, budget and how you’ll measure success in 2019, and then use that as a road map to keep everyone on track in the new year.