Small business owners have a huge misconception when it comes to year-end. Many businesses associate year-end with the period of January to April when taxes are due. We associate year-end with the last quarter or month of each tax year. We don't believe in the term year-end; and here is why.
If you wait until year end passes you are too late
Many business owners wait until after year-end passes and then work on finishing up the bookkeeping for the year. The problem is from a tax planning standpoint this is a terrible strategy. Any tax savings moves that you want to make need to be acted on prior to the passing of your year-end date. While there are a few minor things your accountant can do after the year-end date you will have much more flexibility before your year-end date. If your year end is December 31st like many businesses then you should be doing a tax review with your CPA in late November or early December with updated and accurate financial information for your business.
Year-end should be just another month
If you are staying on top of your bookkeeping then your year-end should be just another month of bookkeeping. You shouldn't be working on an entire year of books at year end. If you are staying on top of your bookkeeping you should only be closing out one month or perhaps even just a few weeks of transactions. There may be some year-end tasks like making sure your depreciation journal entries are done correctly and reviewing major purchases for proper account coding. However, if you have kept up on your bookkeeping closing out the books for the year should be as simple as closing out any other month of the year.
Year-end should be about analyzing and planning not catching up
If you keep your business bookkeeping updated regularly then your year-end should be more about analyzing and planning and less about general bookkeeping tasks. Year-end should be a time for making tax advantageous moves prior to the close of the year. You should be analyzing your budgets and sales goals to make sure you stayed on track. You should be using the final month of your year to plan the upcoming year's budget and sales goals. Year-end should not be about closing your books; it should be about planning for the future.
If you are constantly stressing about year-end you need to make some changes in your bookkeeping procedures. Year-end should not be a time for stress, it should be a time analyzing your financials and planning for the future.
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