Take a Pre-Fall Review of Your Finances to Minimize 2014 Taxes
September can be a busy month for many companies. If you are usually busy in the fall, use the last months of summer to reassess the financial aspects of your business.
Review your financial statements. Compare your year-to-date profit and loss statement with the prior year’s period. This is easy to do if you use QuickBooks. Go to the reports section; select Company & Financial (from the pull-down menu; then select, Profit & Loss Previous Year Comparison
Do you see any significant changes? Is your revenue higher? Are your costs higher? How does the bottom line compare? Think about the next few months. Are you going to see higher sales or more expenses? Now is a good time to do an end-of-year projection. You can export your QuickBooks data into Excel and do some what-if scenarios.
Make any adjustments you think are necessary to minimize your year-end taxes (if you are on the calendar year). It is easier to do this a few months a head of December and avoid the mad dash to get it all done in one month.
If you project a high net revenue at year’s end,
- Purchase furniture and equipment in the next few months. Talk to your accountant and make sure your purchase will be eligible for a 179 Deduction. With this special deduction, you can expense a capital asset in the year you purchase it, rather than depreciating it over its useful life. For the tax year 2014, the 179 limit is $25,000.
- Start a retirement plan. If you are going to be ahead and you have not fully funded this year’s retirement plan, the coming quarter is good time to do that. You may have many options (SEP IRAs, SIMPLEs, 401k’s). Talk to your accountant or financial advisor to determine which option is best for you.
- Make sure your expense reports are in order. Double check your expense reporting system for you and your employees. Are you capturing all legitimate expenses?
- Could you hire a spouse or child to work for you during the fall? If you want to keep some of that extra money, pay your family and not the government (with extra taxes).
If you project a lower net revenue at year’s end or a loss,
- Think about changing terms for new clients. Rather than a standard net-30 term can you give new clients a net-15 term on your invoices?
- Can you spread-out purchases? If you need to make a large purchase, would the vendor allow you to make multiple payments over several months? By getting credit from a vendor, you can preserve your cash.
- Will your subcontractors work with you? If you hire subcontractors, see if they will agree to payments when your client pays. Again this can help preserve cash. If you have a good working relationship with your subcontractors, they will usually accommodate this request.
- Also, think about what you can do to boost revenue. If you have a pending sale, what can you do to sweeten the offer to get the sale to close? Try to close in time to get new revenue on this year’s books.