December 2012 is behind us, and 2013 is here. Can you believe it? No really, can you believe it? If you answered “No” to this question, it is likely that 2013 sneaked up on you and your small business, and there may be a few, or many, things that remain unattended to relating to your business that should have been wrapped up by now. It is too late to plan ahead for 2012, but you can make sure that this does not happen to you and your business next year.
Now is a great time to make a resolution for 2013 – Be Prepared for the Year’s End Before the Year Ends.
The following is a checklist of some accounting, human resources and legal obligations you should perform before your small business rings in the New Year, and how to prepare for the year’s end over the course of the year.
Stay Current on Accounting (Beginning of the Year): Tax preparation should take place long before year’s end. Preparing for the upcoming tax season requires a lot of effort. Instead of scrambling to find old receipts, bank statements, invoices, etc., it’s best to be organized from the start. Be sure to:
1. Organize all your bank statements;
2. Check inventory regularly; and
3. Have your accounts receivable and accounts payable accurate and up to date.
4. Have back up (invoices, receipts, etc.) easily accessible. Being diligent early makes tax preparation accurate and prepares you for an unexpected audit.
Generate 10-MONTH FINANCIAL STATEMENT (October): Prepare your 10-month financial statement with your accountant. Review where your company stands financially by the end of October. What are your projected revenues for the rest of the year? If your cash flow looks good, you should aim to pay down bills, buy new equipment, etc. so that you can bring down your tax burden.
Wrap Up Accounting (December): Use your 10-month financial statement as your guide to wrap up the accounting for the company. Remember to:
1. Reconcile all your bank accounts with the general ledger;
2. Count inventory at the end of the year;
3. Check sales, cost, and expense accounts and assets to ensure accuracy; and
4. Consider what can be written off such as worthless account receivables, depreciated or defective inventory, etc.
*Confer with your accountant before the end of year to decide if any adjustments need to be made. Remember: The more expenses you generate, the lower your tax burden.
Change Business Structure: There are often tax and legal incentives to changing your business structure. A common switch is from a partnership or sole proprietorship to a corporation. Generally, this lowers your personal financial and legal risks and offers more tax flexibility. An S-Corp may consider the tax benefits of changing over to a C-Corp or LLC.
Hold Annual Corporate Meeting: A corporation must hold an annual meeting and generate minutes to be signed by the shareholders or members (depending on the entity type). Be sure you have this meeting before the end of the year and discuss important company issues. Discuss how the current year has gone and what direction the company will take in the New Year.
File Articles of Amendment: If you made changes to your corporation, you must file “Articles of Amendment” with your state of incorporation. This keeps your corporation in good standing so your personal assets continue to be protected. Most changes, including changing a business address or changing the board, require filing.
Complete Bureaucratic Obligations: Complete obligations you have to the city, county, and state. Most cities require you to renew your business permit before the end of the year. Schedule all necessary inspections promptly to avoid future penalties. Double-check that your reseller’s permit is in good standing. Be sure your DBA is up-to-date or file one if you need to.
HUMAN RESOURCES (DECEMBER):
Conduct Employee Evaluations: Even if you already have regular performance reviews for your employees, doing a year-end one is important. It gives employees an opportunity to know where they stand in the company and what they need to improve upon for the year ahead.
Keep Company Morale High: It is important to keep company morale high as you move into the New Year. Consider:
1. Holiday Bonuses: Offer an amount that is fair and that the company can afford. It may be a good idea to give everyone at the company who is performing well some sort of bonus to show your appreciation and commitment to his or her success within the company.
2. Holiday Parties/Gift Giving: Having a small holiday party and/or giving a gift reinforces your appreciation towards your employees. Good employees reciprocate with loyalty and better performance in the future.
Order Mandatory Labor Postings: Be sure to order the mandatory federal and state labor postings for the following year.
Image courtesy of digitalart at FreeDigitalPhotos.net.