4 Things You Need In Order To Financially & Confidently Prepare Your Business For Year End
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In the online business world, there’s a LONG list of moving parts that make up our to-do list. And it can feel overwhelming, especially when your zone of genius is the stuff you love doing — which makes it hard to find the energy to do all the other stuff.
But depending on where you’re at in business, some tasks could fall on your shoulders until you’re ready to hire someone to support you. Or if you ARE in a position to outsource, you’ll still want to be educated in exactly what you’re hiring someone to do so you feel confident in your decisions.
We work with so many incredible business owners in creative industries like social media management, photography, copywriting, ecommerce, coaching, and course creation. And most of them either:
Want absolutely nothing to do with their bookkeeping, financial reports, or managing money.
Want to understand what’s going on behind the scenes and inside the books, but don’t want to do it themselves.
Want to understand how to maintain their books, read the reports, and budget successfully themselves before they hire out.
It’s important to pick which one feels the best for you as a business owner, but there’s a handful of things you’ll want to brush up on at the end of each year no matter which one you are right now.
In this blog, we’ll tell you the 4 things you need to have ready to go by the end of the year, whether you’re working with a bookkeeper or not!
#1 Saving Up For Tax Season
Saving for taxes is something you should be doing all year! It can be tempting to dip into the tax savings account during the year if you’re feeling spicy – but don’t do it!
As far as how much to reserve for taxes each year, it depends on where your business is located and the local laws you’ll have to comply with when it comes time to file. If you hire a bookkeeper to support you, they should be able to help you decide how much is ideal to stash away.
In Q4, so many business owners experience an influx in cash because of Black Friday sales, holiday shopping, or new year prep. And it’s awesome to have so much fresh money coming into the business! But don’t forget to have a plan for what to DO with the money you get (aka don’t go spending it right away without a plan).
One thing you can do if you’re afraid you’ll spend your tax account before it’s time is open an account in a totally different bank than where you do your normal business banking! And just set up an automatic transfer to that account every time you get a deposit so you never even see the money in your checking account.
Or, just set up a savings account in your normal business bank account so you have a specific place to send your money and it can wait there patiently until you’re ready to file taxes the following year.
#2 Updating Your Books
It’s one of those things we could shout from the rooftops if we could: You need to keep your bookkeeping up to date throughout the year.
It’s totally okay if you aren’t number-savvy, too. You can always learn how to maintain your own books or hire someone to take over the whole enchilada for you. (Hint… we do alllllll of that and more!)
And if you’re rockin’ a simple spreadsheet at the moment, this rule still applies! Be as detailed as you can with your numbers, attaching your receipts wherever possible, and understanding your net profit.
These are the kinds of things your tax preparer or CPA will need to know in order to file during tax season! Putting it off until the last minute could ultimately cost you more, since bookkeepers and tax pros often increase their rates the closer they get to the tax deadline.
So you might end up paying rush fees, cleanup fees, and/or catch up fees if your let your books get too far behind. Again, if you don’t want to outsource your bookkeeping quite yet, that’s totally okay! Some bookkeepers (yes, including us) will offer a diagnostic review to point out errors in your books.
When you have clean and up-to-date books, you can confidently file without worrying that you’re getting charged for taxes you don’t actually need to pay — win!
#3 Cash Flow Projections
We’ve already shared a whole separate blog on how to understand your profitability and predict your cash flow, but let’s get into it here!
Because if you’re actually bringing in money to your business, you’re probably spending some money too. So you need to know how profitable your business is and how long the cash you bring in will LAST.
This helps you for a few reasons:
You know when you need to schedule launches throughout the year.
You know how much you can afford to spend on everything.
You know how much cash you’re starting with next year.
You know how to plan for future purchases or hires.
You know if you need to raise your prices.
And that’s just the beginning! Understanding your profits means understanding your buying power (or hiring power) which helps you sustainably scale your business.
#4 Getting Your Year-End Documents Ready
The end of the year brings up a lot of questions:
Do you need to send out 1099s to contractors?
Do you have your year-end financial reports ready?
Who’s going to file your tax returns?
Where are last year’s tax returns?
Did you have anyone on payroll?
Do you have any loans or credit cards?
So we highly recommend having a conversation with an expert to help you get all of your year-end documents in order. Most tax preparers will have a document request system or portal to keep track of the documents you need to submit, but it’s so much easier if you already have them prepared!
Some documents you’ll probably need to have on hand include:
Balance sheet
Profit + Loss report
Cash flow statement
Last year’s tax return
Bank statements
Credit card statements
Payroll reports (if applicable)
Inventory report (if applicable)
But of course, ask the person who’ll be filing your taxes for you to know exactly what you’re required to produce.
And if you need any support along the way, or if you don’t know what level of support is right for you, we’re here to help! Schedule a call with our team of experts today, we can't wait to meet you!
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