Making a list and checking it twice isn’t only reserved for the jolly and white-bearded. Taking steps to get organized and plan for the year ahead is a great strategy for any entrepreneur.
Here’s a rundown of everything your small business needs to consider before wrapping up for the holidays.
Bookkeeping may not be the most exciting part of entrepreneurship, but it’s a practice that can make or break your small business. At the end of the year, gather paper or digital copies of all of the financial documents related to your business.
These can include:
Next on your list: creating financial statements.
There are three main types of financial statements that can help grow your small business. Essentially, these documents tell you how much money your business has generated, where it comes from, and where it’s going.
At the end of the year, make sure your accounts payable and accounts receivable are accurate and up to date by:
Feeling a little overwhelmed? Bench takes away the stress of bookkeeping and imports bank statements, categorizes transactions, and prepares financial statements for you—so you can get back to running your small business.
Further reading: Financial Statements 101.
Imagine waking up on January 1, knowing everything you need for tax season has already been wrapped up. Feels good, right? Now, let’s channel that feeling into your end-of-year tax preparation.
Different business entities require different tax filing support. Still, it’s a good idea to have your foundational financial documents at hand before starting the process.
Gather relevant business records like:
Tax filing will be different depending on your business structure. Here are the main considerations for each entity type.
Sole proprietors: Fill out Schedule C when you file your annual personal tax return.
Partnerships: File using Form 1065. Then, each partnership member needs to include a Schedule K-1 that shows their share of the profits and losses for the year.
Limited liability corporations (LLC): If you are the only member of your LLC, fill out Schedule C when you file your annual personal tax return. For LLCs with more than one member, file with Form 1065 and then each partnership member needs to include Schedule K-1 showing their share of the profits and losses for the year. Report this number on each LLC partner’s personal tax return.
C corporations: Prepare and file a separate corporate tax return by using Form 1120. This is on top of preparing your personal tax return.
S corporations: Your shareholders report their share of profit or loss with Schedule K-1 on their personal taxes. The corporation uses Form 1120S to file a corporate tax return.
Lastly, don’t forget about independent contractors. If you paid any contractors more than $600 in a year, you need to submit a Form 1099-MISC to the IRS.
The more complex your business entity, the harder it is to manage end-of-year tax filing. Bench handles all of your tax planning, prep, and filing needs to make sure you’re not leaving money on the table.
Further reading: How to file and Pay Small Business Taxes.
Not only will keeping track of every receipt and business expense please your accountant—it can save you a hefty chunk of change at tax time. Tax deductions are a way to significantly reduce your overall tax bill, so make sure you’re taking full advantage.
Common tax deductions include:
As a small business owner, knowing what you can and can’t write off takes time and research. Having an experienced bookkeeper (like Bench) to catch all deductions available to you will help you maximize your tax strategy.
Further reading: The Big List of Small Business Tax Deductions.
There are two things every small business owner should do at the end of the year: look back and plan ahead.
If you’ve never set business goals before, start by focusing on ‘the hows’, and ‘the whys’ of your small business. They tell you the real story of your business and help you uncover opportunities for improvement.
The hows: How much money did your small business bring in this year? How many hours did you and any employees or contractors spend to achieve that number?
The whys: Did you meet your revenue expectations? If not, why not? On the other hand, maybe you saw a spike in sales compared to previous years. Why do you think that is?
Let’s say you sell silk-screened t-shirts. This year you sold all of your inventory, but didn’t make as much as you expected. This might be a clue that you’re facing other expenses you hadn’t considered.
Knowing what went right (and wrong) in the last business year helps you develop business goals that are achievable, specific, and motivating.
If you know what your business made this year, and what you want your business to make next year, you’ve already started the planning process.
Set a business budget: A realistic budget that takes into account your income and expenses can help keep your monthly spending on track in the new year. Compare your budget against your real-life business to streamline your business operations and highlight inefficiencies.
Streamline low-value tasks: If you’ve got this far, it’s becoming clear that small tasks like bookkeeping and tax file preparation tend to add up over time. Spending those hours on other parts of your business could have a greater impact on your bottom line.
From bookkeeping to unlimited tax advisory support, Bench helps entrepreneurs streamline their small business finances. We do your bookkeeping each month, offer year-round advisory services, and customized tax planning for your business to ensure you get your taxes filed on time, every time.