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The end of the year is a busy time for a host of reasons. Prepping for Christmas, making time for family, and planning for the new year keeps most of us busy through December and beyond. As a small business owner, you have an even longer list of things to think about at the end of the year, especially if your business year aligns with the calendar year. This list includes things like financial statements, taking stock of progress, and examining employee incentives.
It can be tricky to balance work and life toward the end of the year. But devoting some attention to your business not only helps you end the current year on a high note, but also sets you up for success in the new year.
Use the following checklist to ensure you take care of business tasks before year-end. With these tasks off your plate, you can turn your attention to the things that matter most.
Managing your financial records is critical throughout the entire year, but even more so in December. By maintaining accurate, clean records, you can more accurately predict what the new year has in store for your business. And you’ll be better prepared when tax season rolls around in the new year. Here are a few accounting tasks you should take care of before December 31.
1. Run standard financial reports
The end of the year is a great time to assess where you stand financially and how your current financial situation compares to previous years, especially where your business year aligns with the calendar year. Use your preferred accounting software or system to generate a financial report. This report typically includes an income statement, a balance sheet, and a cash flow statement.
Your income statement, also known as a profit and loss statement, is key when it comes to understanding your profits. This financial report is the best way to see, at a glance, where your business stands financially and what your outlook is like for the new year. If your profits are lower than expected, you may want to make some changes as you head into the new year.
If your profits are higher than expected, it might be a good time to make some larger purchases to invest in your business’s development in the new year.
A cash flow statement records how your money was spent throughout the year.
Cash inflows equate to income, while outflows are business expenses. Your goal is to generate more money than you’re spending.
Toward the end of the year, it’s a good idea to analyse your cash flow statement to identify cash flow trends throughout the year.
Cash flow problems happen for a variety of reasons. The faster you can identify the problem, the faster you can rectify it.
It’s important to note that net cash outflows don’t necessarily indicate that a business has a cash flow problem. Cash flow becomes a problem when outflows exceed inflows. To calculate cash flow, separate cash flows into three specific activities:
Cash flow from operating activities (revenue and expenses)
Cash flow from investing activities (assets purchased and assets sold)
Cash flow from financial activities (loans and repayments)
The cash flow formula adds a beginning cash balance with net changes in each activity to determine the ending cash balance.
QuickBooks’ cash flow forecasting tool can be a great way to predict cash flow over the upcoming year.
A lot has changed in your business this year, and the same goes for your vendors.
At the end of the year, verify that the contact information, including phone number, email address, and contact name, are still correct for each of your vendors. Purge the system of any inactive vendors or inaccurate information.
If time permits, evaluate your vendor relationships and look for opportunities to negotiate better deals in the new year.
Accounts receivable is the amount that your customers owe you after purchasing your goods or services on credit. It’s a running list of invoices still unpaid and clients that still owe money for work already completed.
If your list is longer than you’d like it to be, you’re not alone. U.S. business owners averaged over $78,000 in outstanding receivables in 2019, according to a QuickBooks Cash Flow survey. More than half of these business owners say not getting paid on time is their biggest cash flow pain point.
Calculating your accounts receivable turnover ratio can tell you how efficiently your business collects revenue. A higher ratio indicates that your customers pay their debts quickly. A lower ratio indicates that your collections procedures could use some work.
No matter what your ratio, if you have outstanding receivables, it’s a good idea to collect past-due payments before the end of the year. Reconciling accounts receivable boosts your cash flow and allows you to start the new year without outstanding invoices.
It’s better to stay on top of any issues or corrections that need to be made to your payroll before year’s end. Ensure that taxable fringe benefits, such as third-party sick pay or a company car, are accounted for. Other benefits that are easy to forget include educational reimbursement, health and life insurance, and transportation subsidies.
If your business year doesn’t align with the calendar year, you could wait until towards the close of your business year or the financial year to take stock of this.
No matter how much or how little you work with technology, it’s still a good idea to make sure your IT ducks are in a row by the end of the year. This means backing up your data, organising your paperwork, and making sure your systems are up to scratch. Here are a few IT-related tasks to think about as December 31 draws near.
It’s best practice to keep backups of important data.
Make sure that your important files, including accounting documents, client information, creative briefs, and valuable emails are backed up and secure. If your employees deal with important documents, be sure to provide them with external hard drives or access to a cloud-based storage system to ensure all data is stored safely and securely as you enter the new year.
Using cloud software can be a great way to minimise the worry about having to make backups, such as QuickBooks online.
Whether you do most of your business over the phone or via email, make sure to back up all of your contacts, even if that means writing them down in an old-fashioned Rolodex!
In the same way that you updated your vendor information, make sure you have the most up-to-date information for your most important business contacts.
It might seem counterintuitive, but if you keep important documents or reports on a cloud-based storage system like Dropbox or Box, it’s a good idea to download “hard” copies and back them up to an external hard drive.
The golden rule for data backup is 2:1. That is, create two separate digital copies, stored in two separate locations, plus one offline copy (preferably stored somewhere else).
If you don’t already have a company-wide file-naming system, consider implementing one.
For example, if you manually save receipts as Word documents, you might adopt a convention like “LastName-Date-InvoiceNumber.”
Adopting file-naming conventions across the company is especially important for businesses that share servers that can be accessed by multiple employees. When everyone follows the same naming conventions, your files stay organised and easily accessible. Even if you don’t share servers, it’s still a good idea to implement some naming conventions to keep your files organised as your business grows.
As you work to back up your documents and data, make sure you’ve named and organised your files appropriately. Change file names now so you’re not stuck searching for something come June.
Once the technical and financial tasks are out of the way, take a good, hard look at your team. After all, they’re the lifeblood of your business. Whether you work with a large team or you’re just getting started, there are a few “people” tasks you should take care of before the end of the year.
The end of the year is a great excuse to reward your team for the work they’ve done over the past 12 months. This reward could come in the form of business-wide paid time off, flexible schedules, and monetary incentives, or even a fantastic Christmas party!
A year-end reward in any form is a good way to boost morale and increase worker satisfaction as you head into the new year.
Remember to check and factor in the tax implications of Christmas parties when planning. They must meet certain criteria in order to be exempt from tax.
Take inventory of your team and determine whether or not you’ll need to hire more employees in the new year. You’ll want to be sure you’ve budgeted for any additional personnel you plan to hire within the first or second quarter.
On the flip side, your business needs may have changed throughout the year. If you’re overstaffed, think about creating new roles to reallocate your team’s talent. You might also consider reducing hours or rearranging schedules to better suit your business needs.
In addition, the end of the year is a good time to review your compensation and any benefits plans to ensure they’re still competitive.
As the end of the year approaches, don’t forget to take a look back at everything you and your team have accomplished. Document your wins and share them widely. Your employees will appreciate ending the year on a high note, and they’ll feel motivated to hit the ground running come January. This is also a great time to recognize any outstanding performers and create promotional paths for them to follow.
Finally, there are a few business odds and ends you should take a look at before you start the new year. This includes updating your goals, cleaning up your website, and double-checking your inventory. These back-office tasks keep your business running smoothly—and growing steadily.
Using your financial statements, customer feedback, and input from your team, assess your goals from the previous year and determine whether or not you accomplished them.
Did you achieve what you set out to do? Or did you find yourself taking an unexpected path to a different kind of success?
With the learnings from the previous year in mind, set goals for the coming year. Financial goals should be a given, but make room to evaluate management goals and client goals too.
Once you’ve written down a few goals for the new year, create a high-level action plan for each goal to help you achieve it.
In a world driven by e-commerce, it’s more important than ever to have a solid website for your business. First impressions matter, and for many of your customers, your website is the doorway to your business.
To start, go through your website and click on every single link. Try sending yourself an email or message from the “contact us” form. See if you can follow a customer’s journey through the website to making a purchase and if you come across any obstacles.
These may seem like mundane tasks, but these systems break all the time. As your digital calling card and first impression of your business, your website is an important commodity to keep in fine working order.
Our guide on ‘How to optimise your website for Christmas’ might be helpful.
Closing out the end of the year is a daunting task as a small business owner, but it is manageable if you keep and follow a checklist.
If you work with a trusted accountant, make an appointment with him or her as early as possible. And as always, the more you can plan for these tasks throughout the year, the easier your end of year will be.
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