By Analytix Editorial Team
The business year end, or fiscal year, may not always overlap with the calendar year, which is why it is vital to plan for year-end financials early to prevent slipping into a false sense of being on schedule. One of the most important steps to be taken for better year-end financials would be to gain clarity on tax and financial obligations of the business before the actual year-end date approaches.
Even so, not everything related to year-end financials is tax-bound. There are some business practices that can better help year-end financials as well. Here is a look at some steps that may be taken by businesses towards ensuring better planned financials at year-end:
Review payments due; check obligations
Businesses need to review tax obligations, which differ by business structure. Payouts such as vendor bills, any payments to be made to employees or staff, etc. must be reviewed. Bookkeeping software is an effective way to track and review payments due, such as vendor payments.
A quick reminder here: if a small business has employees and is paying out bonuses, there will be a tax payment to made by the business, and not the employee receiving the bonus.
Analyze the balance sheet
Assets and liabilities provide an accurate snapshot of the business’ yearly performance. This is also revealed by the balance sheet and profit and loss statement. This analysis can help outline deficits in performance and areas with scope for improvement in the coming year.
Assess business profitability
This can be done by looking at the income statement of the business, alongside the entries that list out revenue-generating factors or items. Income statements also carry tax-deductible expenses which helps provide a clearer look at the profits and losses accrued in the year.
Scrutinize cash flow to review liquidity
Sustainability is defined by the liquid cash available to a business. The year-end is an ideal time to review the cash flow statement and determine available cash. Businesses using an accounting software can generate such a statement to get an accurate idea of the business’ capital.
Check total tax payment outflow
Small businesses can also make quarterly tax payments across the year. For a fast growing business, including startups, it can be incredibly easy to lose track of the payouts made. At fiscal year-end, these payments can be added to help provide the management with an estimation of the tax payment due.
Reaching out to professionals
Tax deadlines vary according to business structures. It is best to schedule an appointment with a professional financial advisor to understand what is applicable to a business before the deadline rolls around. It is important to choose a vendor who can:
A proactive approach towards taxation and year-end financials allows businesses to focus better on the vital task of business building instead of getting tangled in the essential but time-consuming work of financial operations. This also applies to professionals engaged in accounting and bookkeeping services themselves. Choosing an established CPA partner can take off the excess load during critical times, including year-end financials.
For non-accounting businesses, a financial operations professional is also better suited to calculate taxes more accurately, taking into account tax credits and other benefits available while ensuring the tax deadline is not missed. If such a deadline is missed due to certain unavoidable reasons, this does happen, businesses can file for an extension. Planning in advance helps ensure a streamlined year-end, fewer crises and penalties, if any, and most importantly, a business management that can focus on promotional and business building activities without any loss of momentum.
Analytix Solutions offers customized solutions for businesses ranging from reliable accounting and bookkeeping solutions to ensuring hassle-free year-end financial operations. For more information on how we can assist your startup, call us at 781-503-9004 or email us at [email protected].