Mastering Year End Prep Part 1
“The way to get started is to quit talking and begin doing.” - Walt Disney
Mastering Year-End Prep:
A Stress-Free Guide for Small Business Owners, Part 1
As the year comes to a close, many small business owners feel the stress of year-end preparations creeping in. Staying organized all year is ideal, but let’s be real—that doesn’t always happen.
The good news? You can use December to get ahead of the chaos. With a little planning, you can tackle year-end prep, simplify tax season, and keep your focus on growing your business.
This post kicks off a four-part series, with each month featuring a simple, actionable strategy to get you ready for tax season without the headaches.
December: Laying the Groundwork
December is the time to gather, review, and prep. If your business slows down this month, now’s the perfect time to dig in and organize. Here’s what to do to set yourself up for success in the new year:
1. Organize Financial Records
What to Do: Collect receipts, invoices, and statements from the entire year—bank accounts, credit cards, you name it. You can do this electronically and/or physically.
How to Do It: Create an efficient organization system—digital software like QuickBooks or Excel work well, depending on your needs. The information can be input, and the invoices, receipts, and statements can be uploaded to your bookkeeping software or a cloud storage service.
If you’re a paper person, you can use physical folders or envelopes.
Regardless of the system you use, you might consider breaking them out by month. Do whatever is easiest for you!
Why It Matters: Orgnaized records are critical for accurate tax filing and ensuring you've got proper back up for your deductions. The ability to provide all this to your accountant or tax professional easily is an added bonus.
#PennysProTip: Aim to have your records sorted by December 31.
2. Review Business Expenses
What to Do: Go through your expenses and identify tax-deductible items, such as office supplies, mileage, or advertising.
Documentation Tip: Make sure every deductible expense has back-up (matching documentation.) Use apps like Expensify or an Excel sheet to ensure every deductible expense has matching documentation. If you use bookkeeping software, upload your expense receipts to the entry in the software.
Important Deadlines: Most expenses need to be paid by December 31 to count for the current tax year. Check with your accountant, CPA, or Tax Professional if in doubt.
#PennysProTip: If you are on a payment plan for something that will cross into the next year, look into paying it off early, if it makes sense financially. Many business owners do this so that they can take the full expense in one calendar year.
3. Estimate Year-End Income
Why: Understanding your year-end income helps you plan for taxes. You can make strategic adjustments, like deferring income or prepaying expenses, to optimize your tax liability.
How: Review your profit-and-loss reports and year-end estimates from your accounting software.
#PennysProTip: Always know what money is coming in and going out. Comparing your anticipated income to actual figures keeps your finances on track. Whether you’re using software or a spreadsheet, keeping it updated is key to your financial success.
4. Review Your Employee and Contractor Records
Why: W2s and 1099s must be sent out by January 31. Checking your records now helps you avoid mistakes and reduces last-minute panic.
How: For employees, make sure that all paychecks and bonuses are accounted for. For contractors, review the records to ensure that reimbursable expenses are coded to a different account than compensation.
#PennysProTip: Touch base with whoever handles your payroll or tax filings. Let them know when you’ve completed your review and ask about their timeline for issuing forms.
In Conclusion
Year-end prep doesn’t have to be overwhelming. Take December to organize your financial records, review expenses, and ensure all your ducks are in a row. Tackle one task a week—or two if you’re feeling ambitious—and you’ll roll into the new year ready to conquer tax season with minimal stress.
Here's a sneak peak to what's coming in January, February, and March:
January: Tax Planning & Record Keeping
February: Finalizing Records and Preparing for Filing
March: Filing Your Tax Return
Stay tuned for Part 2 next month, where we’ll dive into what you should focus on in January to keep the momentum going. Let’s make this your smoothest year-end yet!
December Checklist
click to download the checklist
Start by setting up file folders in the cloud (you can also do this with paper folders, envelopes, or file boxes.)
Set up a folder called Taxes 2024 (if you don't have one.)
Inside that folder, set up one folder for each month.
Inside those folders, set up a folder for receipts, invoices, bank statements, credit card statements, and tax deductions.
Collect and organize your receipts.
Collect and organize your invoices.
Collect and organize your bank statements.
Review expenses and move anything tax-deductible to the tax deductions folder.
Review your year-end income and make any necessary adjustments.
Review your employee payroll entries and make any necessary adjustments so W-2s can be filed in January.
Review your 1099 contractor entries and make any necessary adjustments so 1099s can be filed in January.
Ensure you have someone identified to run your W-2s and 1099s in advance so you don't miss the January 31 deadline.
