This week, we are going to be focusing on the year end. It is coming up faster than you think, since it is already the middle of October! I have four tips for you to be thinking about as you plan your year end. Well, I actually have five, but the last one is a bonus and it definitely won’t apply to everyone.
I think it is best to dive right in and talk about the things you can be doing right now. Basically, how you can prepare your finances for year end.
4 Tips for Preparing for Your Year End Plus a Bonus Tip
I know a lot of you have been putting this off. You’ve had a lot of other seemingly more important things to do this year. And I agree, I probably told you before that I don’t always do my bookkeeping every month or all of my financial tasks every month. They sometimes fall behind! But NOW is the time to get those caught up!
The way I would recommend you getting caught up right now is to actually start doing September’s bookkeeping. Just start there and then you can stay current. Then in November, you do October and December, you do November. In the beginning of January, you do December.
I’ve also done a little calculation for you. There are 11 weeks left in the year now. Let’s say you haven’t done any bookkeeping yet in 2020. So, you basically have January through August to do. If you do one month per week, you can take almost all of December off, because you will be all caught up by then. Or since there are holidays in there like Thanksgiving, Christmas, and New Year’s, you might want to plan to get your bookkeeping completed in the weeks around those holiday weeks.
So, figure out the weeks you are going to do bookkeeping. It is super important that you get it done before the end of the year. If you don’t do it before the end of the year, you are going to pay your tax preparer more to get your taxes done.
You can reach out to us to learn more about us doing this for you. We are currently doing a lot more historical transaction work right now. People want to be caught up before they get to their tax preparers and tax return.
This is something you need to be doing right now if you haven’t done it already! We always recommend our clients and every business owner, myself included, talk to their tax preparer at the end of the third quarter or the beginning of the fourth quarter. Do this when your bookkeeping is up to date, so they can look at your financial statements and give you a projection of what your tax bill is going to be. They can also tell you if you will be getting a tax refund. That would be really good news to have right now. The earlier you know this information the better. After all, if you’re going to owe money, you have the rest of the year to save that money up.
If you haven’t already been saving, or you haven’t been saving enough, we can make adjustments and get you on track.
When your tax preparer gives you an estimate in April or when they do your taxes, that’s based off of what they think is going to happen. Well, we all know that 2020 has not given any of us what we thought was going to happen!
So, take your financial records to your tax preparer and have a conversation with them about what they really think your tax bill is going to be based off of the actual results you have had in 2020.
This is also a good time to talk to your tax preparer if your revenue has significantly increased this year. That has happened with some of our clients. If that happened to you, now is the time to consider becoming an S Corp. It can be beneficial to change from an LLC or sole proprietor, depending on the numbers.
The bonus tip applies here, but only if you are already an S Corp. This designation requires you to pay yourself via payroll. (You cannot pay yourself via payroll if you are in a partnership, an LLC, or a sole proprietor.) If you haven’t been doing this yet in 2020, now’s the time to start and talk with us or your tax preparer. You might need to do some catchup payments as well.
The IRS is starting to crack down on that and they need to see reasonable compensation to you as the owner.
We all definitely need to be setting 2021 revenue goals right now. I think we all had revenue goals for 2020 and we’ve had to readjust those. This is the time to look at what 2020 was actually like and make whatever predictions are reasonable for 2021. Set those revenue goals and then start to reverse engineer all of the things you need to do to hit those revenue goals.
I always start with the revenue as my goal and then say, “Okay, that means I can pay myself this.” Or maybe you start with your pay as your goal and reverse engineer it into your revenue.
Either one of those options is okay since they are interchangeable. It depends where your pay is currently, but then how many new clients does that mean you need and how many new leads does that mean you need? How much marketing should you then be doing to generate those leads?
Hopefully you have data to back it up. Say you want to get 48 new clients in 2021. That’s 4 new clients a month. So, how many leads do you need to sign up 4 new clients? It may be 8 or it may be more. Hopefully, the data you shows you exactly how many leads you have needed in the past to obtain the number of clients you want. Use that data to back up your goals for 2021.
Take the time in the fourth quarter of 2020 to be the CEO of your business and set those goals. Then reverse engineer to get all of those quarterly and monthly goals for 2021.
Finding an accountability partner is probably the most important thing on this list. Once you have your goals for 2021, you can report them to your accountability partner or group. If you don’t have an accountability partner or group yet, find one. They are the only thing that’s going to make sure you hit those goals. I have a blog post that shares how to find accountability partners, so give it a read if you need a little help finding your accountability partner.
These are the four things you must be doing in the rest of 2020 to end the year on a positive note and to make sure 2021 is as close to what you plan for as possible. Obviously, we have to readjust when things happen, as 2020 has taught us. But we can only adjust if we have a plan in the first place. If you don’t have a plan, you are only flying by the seat of your pants all of the time and that won’t be very helpful.
If you are struggling with ways to end your year in a good way and start 2021 strong, contact us today. We can catch up on your bookkeeping for you, so you never have these struggles again in the future.
Shannon has been consulting with small businesses for over 10 years. After 2 years in public accounting she saw a need to work for small business owners to teach them how to grow financially healthy businesses. She has built on her Master of Accountancy degree from Manchester University by becoming a Certified Profit First Professional and a Certified QuickBooks ProAdvisor. When she’s not meeting with entrepreneurs or assessing their businesses, she enjoys time with her husband and 2 children serving in their community, playing and watching sports, marveling at nature or reading a good book.
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