Everyone knows that managing a small business is not an easy thing, and as another fiscal year approaches its end, there is a lot to be done to ensure everything is in order. Though at first sight it seems quite overwhelming, do not worry, we are here to assist.
Due to necessity, small business owners and startup founders have to balance a lot of duties and responsibilities. These duties frequently fall outside of their primary areas of experience and skill while also being crucial. Their company’s finances are arguably the most notable of these.
According to a recent report, just 30% of small businesses remain in operation ten years after they are founded, and 20% of them fail in their first year of operation. A better grasp of the company’s financial situation and the strategic decisions that knowledge facilitates might have frequently mitigated, if not completely avoided, the causes of these failures.
Year-End Closing in Accounting and Finance
The process of examining and balancing accounts, making any required adjustments to entries, and creating accounting records for the fiscal year is known as year-end close. “Closing the books” and “annual close” are other names for this procedure. In contrast to month-end closing, Year-end closing entails a comprehensive examination of all financial transactions and modifications performed during the year, including:
- Changes in income and costs
- Assets, liabilities, and equity
- Tax adjustments
- Bad debt provisions
- Depreciation
- Accruals
The aim of closing the books ensures your financial statements line up and appropriately depict your business’s financial operations for the accounting year.
8 Year-End Financial Pointers for Small Businesses
Following are 8 year-end financial points that you should keep in mind:
- Review your Business Plan.
Assess the areas that require additional focus. Every business must carry out these five essential tasks:
- Operations
- Finances
- Employee/Team
- Marketing & Sales
- Leadership
What is the weak point? – Nobody, not even large corporations, has everything running smoothly, and you risk neglecting one area while concentrating on enhancing another. The secret is to begin assigning routine tasks to part-time virtual or internal helpers so that you can increase marketing and sales to advance the company. If not, who will? It’s the entire concept and strategy, not simply a nice advertisement. Keep refining and see what sells!
- Assess your Expenditure Plan
Examine your spending from the previous year’s budget. You can better understand how well you performed with your spending plan by breaking down your expenditure by category if you use a budgeting tool. This feature is also provided by certain credit card companies.
Look for a better approach to monitor your spending if your existing tools and methods for budgeting aren’t working, and if you don’t have a budget yet, take the time to create one. Evaluate your earnings and outlays, search for areas where you may cut costs, and update your budget to account for any adjustments in the coming year.
3. Reduce and Repay your Debt/Loans
List all of your credit accounts, their balances, interest rates, monthly payments, and remaining time on their repayment terms to assess your debt condition.
Check to determine whether you’re still on schedule to reach your goal if you currently have a plan set up to pay off your debt rapidly. If not, think about coming up with a strategy to deal with your debt. Applying the debt avalanche or snowball methods to pay off debt are two possible options.
- Determining whether refinancing your house, auto loan, or student loan could result in financial savings.
- Investigating balance transfer credit cards and debt consolidation loans as ways to reduce high-interest credit card debt.
- Investigating balance transfer credit cards and debt consolidation loans as ways to reduce high-interest credit card debt.
- Go over your spending plan to see if you can cut back and use the extra money for credit card and loan payments.
- Accelerating your debt payoff strategy by taking on a second job or finding other ways to increase your income.
If you’re having trouble making your debt payments, think about getting in touch with a credit counseling organization to receive professional guidance and perhaps even start a debt management program.
4. Get Ready for Tax Season
Begin by compiling the tax returns from the previous year, receipts for any charitable contributions that may be applicable, company expenses, medical and child care costs, educational expenses, and other tax-deductible activities.
Additionally, during the first few months of the year, keep an eye out for tax forms from your bank, credit union, job, and other relevant organizations.
- Take any last-minute steps to reduce your tax liability by December 31st, including:
- Putting money into retirement accounts or charities.
- Depleting your account for flexible spending. Employers may have different deadlines for this.
- If your health plan has a high deductible, you should maximize your health savings account.
- Making last-minute, tax-deductible business expenditures.
Additionally, choose between using a professional tax preparer or a tax preparation service. If you anticipate receiving a refund, determine how you will spend the funds, and if you anticipate having debt, prepare to save enough cash to cover the balance.
5. Reconcile All the Accounts
Reconciling all of your accounts is the first step in ending your fiscal year. Be comprehensive because this includes your credit cards, bank accounts, and any additional accounts you may have. Make sure that all of your bookkeeping is correct and up to date by comparing the amounts due on your accounts with the balances on your statements. This is crucial for comprehending your company’s financial situation and making sure you don’t encounter any problems when it comes time for taxes.
6. Manage Inventory
Analyze your stock levels and note any slow-moving or out-of-date items. To speed up the removal of excess inventory, make room for new products, or increase the supply of high-performing items, think about putting strategic measures like discounts or promotions into place.
7. Make a Capital Expenditure Plan
A cautious approach is necessary when examining your company’s capital expenditures to ensure that you’re accomplishing operational efficiency and financial planning objectives for the upcoming year. Review the asset carefully before making a purchase. Make sure it adheres to industry trends and is current with the newest technology. Think about the potential effects on the company’s overall performance.
Another option is to perform a cost-benefit review, which enables you to balance the short-term costs of investments in projects and initiatives like global expansion or innovative product lines that may lead to growth, higher productivity, and enhanced competitiveness against the long-term benefits.
8. Plan for your Business’s Future
Go beyond the numbers and spend some time going over the highs and lows of the struggles and achievements of the last year. This will assist in creating a thorough and understandable company plan for the upcoming year. This strategy should include clear financial goals, complex growth and marketing plans, and a strong system for monitoring results.
Turning Financial Tips into Results
For small businesses to succeed and remain stable, financial management is essential. Make use of fresh charging strategies and keep a careful eye on your records. Be prepared to learn new things and adjust to changes in the work world at all times. Knowing your financial obligations is essential to closing a firm. Use tools like cash flow forecasting to maintain your financial stability. To ensure accuracy, compliance, and efficiency, consult an expert at Clearwealth. Our dedicated team of skilled accountants is here to help you with bookkeeping, tax planning, payroll management, budgeting, and more. Let’s set you up for growth and success in 2025! For more information,
call us today at (437) 290-5117
email us at info@clearwealth.tax.
