Before we know it, the new year will arrive. Rather than make resolutions, use the last few days of the year to take action on tax opportunities and business planning — bringing real benefits and results for your business.
Just to make it fun, we have come up with 12 days of year-end planning for your business. These tips may remind you to take action on business items you have ignored or delayed. Add these to your list, or contact LvHJ for guidance from our business advisory services and tax groups.
1. Consider paying bonuses before the new year.
If you are uncertain about whether or not your estimated tax payments will be enough to offset taxes owed in 2019, you can offset some difference by paying bonuses prior to year-end and taking a deduction for “payments to employees.” If your business is a C Corp, bonuses paid to employee/owners are also deductible expenses.
2. Purchase needed equipment.
The Section 179 Deduction is a permanent deduction on new and used equipment purchased and placed into service by midnight on the last day of the calendar year. Businesses will receive a full 100 percent deduction up to $1 million with a “total equipment purchased for the year” threshold of $2.5 million. Small and mid-sized businesses should definitely see if they purchased qualified property during the year.
3. Forecast revenue before budgeting.
Too often, businesses look at last year’s budget and plug in the same numbers for the next year. Sometimes, there are other factors that will influence revenue and impact budgeting. Consider work already in play and use your forecasting tools to set a realistic budget.
4. Assess staffing.
Will your business need to scale up staff, or will you experience some cost savings on payroll? Take a look at current staffing needs, critical positions to fill and anticipated retirements to identify new ways of managing staff capacity.
5. Rethink debt and cash flow.
Some debt is ok, but ongoing debt and high interest on lines of credit or other short-term lending should be considered for refinancing at lower rates. Refinancing can lower payments and improve cash flow.
6. Shop insurance.
Most business owners review their health insurance packages and providers toward the end of the year, but there are other types of insurance expenses to consider.
7. Identify technology needs.
Talk with staff about some of the ways that technology could make their workload easier, faster or lighter. Review current solutions for necessary updates and renewed subscriptions. If you need to purchase new hardware, consider the purchase before year-end if it makes sense for the expense election pursuant to the Section 179 tax laws.
8. Touch base with clients/customers.
Review contracts and credit terms for any needed changes or communications before calendar year-end. Negotiate new terms if necessary to match planned pricing or fee increases. Discuss new business opportunities, too!
9. Update your exit plan/owner agreements.
Review exit planning and partner or shareholder agreements annually. Consult with your CPA and attorney about any anticipated changes to ownership, changes in business structure or considerations for retired owners.
10. Manage your estate plan or start one.
If you have not discussed estate planning yet with regard to your business, or you are closer to retirement, keep tabs on the next steps for estate planning — whether it’s annual gifting, setting up a trust or thinking about your philanthropic interests.
11. Apply market research.
Read industry outlooks for your business and customer industries. Many of these reports come out during the fourth quarter. Follow economists online. Compare projections with your business goals to support realistic investments and budgeting.
12. Celebrate lessons learned.
Take some time to reflect on lessons learned about your business in the past year. Are there improvements you’ve made that should benefit your margins? Are you tracking a new key performance indicator? Did you cut costs in significant ways? Learn from mistakes and celebrate your smart decisions. You are going into a new year of business ownership!
Proper implementation of business strategies is supported by a knowledgeable CPA. LvHJ’s business advisors and tax team are happy to help. Talk to us to help you plan ahead.
