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Mid-year reviews account for several elements, such as your business’ performance, targets, and sales. However, there are some areas that require additional planning, such as strategy and goal setting. Mid-year reviews are crucial if you want to avoid unpleasant surprises at the end of the year. Keep in mind that a mid-year review may also be attended by the Board of Directors and investors who hold a stake in your business.
Mid-year reviews exist as an optimal time to revisit your objectives, especially financial business plans. The most decisive factor for a business is the way in which it manages its finances.
Some common red flags raised in mid-year reviews are:
Discrepancies in small business income
If you are operating a small business, you need to know that all income needs to be substantiated. Large recorded deposits without qualifying the work that accompanied it can raise a flag as to the ongoing viability of the business. Conversely, all income for work performed also needs to be recorded as taxes are due on those earnings. Most small businesses are prone to audits, and any misrepresentation can cause unnecessary grief.
Inaccurate expense reporting
Technically speaking, this indicates a failure of your accounting practices. However, the IRS may not discriminate between intentional misrepresentations and a flaw in your practices, which may result in your business dissolving. The best way to ensure accurate expense reporting is to implement accurate bookkeeping and accounting practices. Fortunately, catching this during a mid-year review allows time for business owners to correct any errors.
Substantial deduction claims
Are your deductions disproportionate to your income? While this is unusual, if you have saved the necessary receipts and documents, you may still be exempt at tax time. When claiming deductions, make sure you are on the right track. Do not propose generalized claims or claims that show indiscriminate use of personal assets for business use. Fortunately, if you implement a mid-year review you have time to either invest in hiring a dedicated resource or to buy the relevant software that will help your accounting get back on track.
Actualized income greater than projected
Although revenue growth greater than expected is a positive indicator of the company’s health, it can have a detrimental impact on taxes. If at your mid-year review your revenue and income are substantially ahead of your projections, this is a red flag for taxes owed. Revisit any accounts set aside for tax payments or tax estimates and increase any contributions accordingly to cover your new tax payments.
Although hiring additional resources and purchasing the correct financial software may appear to be all that is needed to resolve these issues, this may be oversimplified. Hiring and training a resource can be an expensive option, and software programs require training and dedicated maintenance. Instead, consider outsourcing the function. The advantages you gain from outsourcing outweigh the risks of not being prepared for tax time.
The Analytix web portal
Analytix Solutions offers a web portal to its accounting and bookkeeping clients that tracks and records financials efficiently and effectively. In addition, using this portal eliminates the need for worrying about documentation and receipt recording. Clients can access the secure web portal 24/7 from any location with internet access. You can also supervise transactions, ensuring that transactions are being recorded correctly.
At Analytix, we perform your accounting and bookkeeping functions in much the same way as an in-house partner would perform them. The Analytix web portal is a secure, dedicated interface for you to view and access your information. The security we invest in our work means you can restrict access or limit authorization at your discretion
For more information on our services, please visit us at https://www.analytixaccounting.com or email us at email@example.com.
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