Let’s talk Business: Year End Checklist for Small Businesses
… with Ndungutse Robert
What do we think of when we think of fiscal year end? Taxes! That's why for businesses, year end is the perfect time to do your business planning for the following year. You're already dealing with the books so why not do some analysis and make some decisions to ensure that your business prospers over the coming year?
This year end checklist for small businesses will help you get your income taxes in order and get your business planning off to a good start.
1) Get your financial books in order.
For some small businesses, this is really difficult, while for others, it's a breeze. But whether you're one of those solo entrepreneurs with a glove box full of receipts that haven't even been entered yet or a small business person who has a bookkeeper on your payroll, you have to get this step done before you can do anything else.
2) Determine your position.
The next step on the year end checklist is to figure out where your business is now. There are three areas you need to examine:
a) Finances - Examine your financial documents and analyze ratios.
First, you need to prepare (or have prepared for you) the standard three business financial documents that will be the basis of your decisions.
The Balance Sheet is a summary of how your business is doing financially at a particular point in time. It shows all your business's assets, liabilities and equity.
The Income Statement lets you see at a glance whether or not your business is profitable at a particular point in time by itemizing your revenue and expenses, resulting in a profit or loss.
The Cash Flow Statement reconciles your opening cash with your closing cash for a particular period, showing you where the money has gone.
Once you've examined your balance sheet, income statement and cash flow statement, dig a little deeper by checking your business's current ratio, total debt ratio and profit margin. It won't take long with your balance sheet in front of you.
b) Goals - Evaluate your goals from last year.
Now that you know where your business is, it's time to take a look at how it got here. Pull out your business plan and any other planning documents such as last year's action plan and review last year's goals.
Did your business accomplish what you set out to do? Why or why not? Make some notes on your thoughts about your successful accomplishment of your goals (or lack of it). These will be handy when you do your business planning for the current year.
c) Taxes - Evaluate your current tax strategies.
Sole proprietorships and partnerships can to reduce the amount of income tax they pay, such as income splitting and maximizing your business's Capital Cost Allowance claim, simply by following a few Tax strategies.
Investigate different tax strategies that you haven't used, such as changing your business structure to a corporation. Talk to a professional such as an accountant and/or tax lawyer to get advice about which tax strategies would be best for your personal and business circumstances.
3) Plan for the coming year.
All right. You’ve done all the groundwork and you're ready to do some business planning. That means that you are going to:
Set next year's goals.
Prepare an action plan or plans.
Start implementing your action plans.
4) Get your tax documents prepared.
You can turn over the required documents to an accountant or prepare your income tax yourself.
Hopefully this year end checklist has inspired you to get to it and made your business planning easier.
The author works with Maisha Consults Ltd.