Year-end Financial Planning for Business Owners

Dec 8, 2020Business, Business Tax

It is that time of the year again to start planning for the end of the year. As the person responsible for your company’s financial management, there are many year-end tasks that you need to oversee. And, on top of your regular responsibilities, you now have the added complexities of the ever-changing COVID-19 situation. The following is a list of some of the items you will want to address, including a detailed review of relevant tax planning opportunities.

Year-end Financial Planning Agenda Items

  • Prepare a budget for the next year
  • Review any banking covenants for compliance
  • Discuss audit planning with your CPA firm
  • Prepare for your year-end physical inventory count
  • Ensure your upcoming insurance policy has been renewed
  • Gather and plan for year-end payroll adjustments
  • Review your accounts receivable for past dues customers
  • Plan for any capital equipment needs
  • Review your income tax planning and any related deposits

5 Considerations When it Comes to Year-end Financial Planning

  • Tax Planning & Compliance

Concerning tax planning, this year is a little bit different than in years past. Have you considered how coronavirus legislation has impacted your situation? As a business owner, there are still plenty of things to take advantage of before year-end, and even some after that can significantly lower your tax burden. 

  • Accounting Method

Does your business average less than $26 million in receipts for the last three years? If so, it is now eligible to use the cash basis method of accounting and more tax-favored accounting for inventory. If your business typically has more accounts receivable than accounts payable, switching to the cash-based accounting method could save you significant taxes in the current year.

  • Retirement Plans

Have you reviewed your company’s retirement plan? Are you maximizing your retirement contributions? Have you reviewed the reporting requirements based on the size of your plan and its participant numbers? There are many things to consider depending on the size and anticipated growth of your business.

The standard 401K will allow you to contribute up to $26,000 if you are over 50 for 2020. If you want a more significant retirement contribution, you should consider adding a profit-sharing plan or a cash balance plan. This will allow you to contribute up to $336,000 for 2020, without incurring a significant increase in the amount required to be put into your employees accounts.    

  • Exiting Planning

Have you thought about selling or acquiring a business? Have you considered the tax implications of a sale/purchase? We encourage business owners to consider options at least five years before they intend to sell. The more time you have to plan for a sale adequately, the better price you likely will get.

  • Outsourcing

Have you evaluated whether now is the time to outsource your payroll and accounting services? Have you considered whether hiring an outsourced CFO partner could help you grow your business? There is a lot to consider when it comes to the financial portion of your business.

outsource accounting department blog header

Questions about Year-end Financial Planning?

There are many things to consider at year-end. Not only do you have a massive amount of paperwork in your 1099s and W-2s, you must consider tax planning, compliance, and the overall health of your business. Stepping back to review practices and asking the right questions can help you simplify the year-end planning process during a year where nothing has been simple. Smith Schafer is here to help. Contact us today to schedule a free 30-minute consultation.


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