Six Business Financial Housekeeping Tasks to Get Done Before Year End
There may be several weeks left in the year before you officially close the books and shift your focus to next year, but getting a head start on your financial housekeeping tasks can ensure you end this year on solid financial footing — and start the next one with a plan to succeed. Here are six business tasks to complete before you ring in 2019.
Check your retirement plans
If you don’t have a self-employed retirement plan, there’s still time to establish one, and make contributions to it. In turn, you may also find opportunities to reduce your tax burden. As Forbes explains, a sole proprietor who has a solo 401(k) in the 2018 tax year may be eligible to contribute up to $60,000 to it (based on net business income, and the business owner’s age).
If you prefer a retirement account with little costs and administrative burden, consider establishing a self-employed IRA (SEP IRA). Many providers allow you to complete account set up, funding and management entirely online. And, you may be eligible to contribute (the lesser of) 25% of your business income, or $55,000, in 2018.
Meet with your accountant (or find one)
If you don’t have consistent contact with your accountant, set aside time to discuss your business’s current financial reality. You should also discuss your business goals, future plans and anticipated challenges for the remainder of this year, and next. If possible, schedule the meeting to take place at least two months before year-end. Doing this will give you enough time to act on any recommendations for optimizing your finances before this year ends.
When you meet, let your accountant know of any additional financial moves you are considering that could have tax ramifications. Things that could fall into this category include buying or selling new equipment or assets. Beyond the numbers on your financial statements, ask your accountant for any recommendations to improve or optimize your business finances, based on the current and future plans you’ve shared.
Confirm your estimated payments are accurate.
If your business is a sole proprietorship, partnership or S corporation, the Internal Revenue Service says you may be required to make estimated tax payments if you expect to owe $1,000 or more when you file your annual tax return. Corporations have to make estimated tax payments if they expect to owe $500 or more when filing their tax return. (Depending on your business, you may also be responsible for payroll, sales, and excise taxes).
If you picked up new clients or sales were stronger than expected, you may owe more tax than originally estimated. Ideally, your quarterly estimated tax payments are made in equal increments. But the IRS does put the onus on taxpayers to estimate income as accurately as possible to avoid penalties. They also expect you to ensure it remains correct based on business or tax law changes that may impact it.
Confirm tax paperwork for independent contractors you’ve hired.
If you’ve hired independent contractors over the course of the year, the IRS requires that you have their completed Form W9 (and that you keep it on file for at least four years). Sites that make it easy to hire virtual help also make it simple to hire contract help. However, they can also make it difficult to keep in touch with contractors who are several states (or countries) away.
Regardless, the IRS also states that employers who pay an independent contractor $600 or more over the course of one year “may have to file Form 1099-MISC, Miscellaneous Income, to report payments for services performed for your trade or business.” Allow yourself the time to collect the paperwork you need from contractors so you’re prepared to issue the Form 1099-MISC tax forms. Note that you may be required to send them for payments by late January 2019.
Conduct an employee satisfaction survey.
Employee engagement may not seem financial in nature — until you consider the impact that disengaged employees have on business productivity, customer experience, and culture. Experts at Villanova University’s School of Business report that increasing your investment in employee engagement efforts by just 10% can yield $2,400 in profit (either directly or indirectly) from each employee, each year. Engaged employees are also 87% less likely to leave their jobs. And, having engaged employees may reduce costs associated with employee turnover, hiring and training.
Take a pulse on employee engagement in your company with a basic online survey tool and questions that address what consultancy firm Deloitte says are the five pillars of employee engagement: Whether employees feel their job provides opportunities to do meaningful work, involves hands-on management with positive coaching, guidance and support, a positive work environment and culture, and trust in leadership.
If you find that you have engagement issues, your survey can provide the insights you need to address issues. Once you know where problems may lie, you can work to improve employee productivity, engagement and satisfaction next year.
Organize your receipts and financial statements.
You have several months until tax season officially arrives. But, the earlier you compile the receipts, mileage logs and cancelled checks you’ll need to support business-related tax deductions and credits, the less you’ll have to scramble as tax season approaches. If you rely on a bookkeeper or accountant to prepare your business tax return, ask his preference for how you should organize and transfer tax-related documents, to streamline the process (and better manage the billable hours you’re charged for their tax preparation services).