Last week on the Illumination Wealth Blog, we provided some year-end financial review and tax planning tips for individuals and families. [Click here to read full article.] In this article, we will turn our focus to business owners and entrepreneurs. You not only have your personal finances to worry about. You have a business to take care of, and the end of the year is a very important time for your company’s financial well-being. Below are some steps you can take and strategies to implement as you review your 2023 finances and start planning for 2024 and beyond.
The fourth quarter is the most important fiscal period for most businesses. It’s your final chance to clean up the books, take advantage of certain tax benefits, and have everything in order heading into the new year. It all starts with a thorough financial review. Then, you can shift your focus to financial planning for 2024.
One of the most important steps to take is making sure all of your business accounts are reconciled before the end of the year. We’re talking about bank accounts, accounts payable, accounts receivable, retirement plans, employee benefits and any other accounts related to your business operations). Ideally, everything should be up-to-date throughout the year. This makes the year-end financial review and reconciliation much easier. Unfortunately, this doesn’t always happen. That makes now the time to get all your books in order. You’ll have a clear view of profits and losses, business expenses, tax liabilities and everything else that should be completely balanced and up-to-date before the end of the year.
One very important step to take is to review your cash flow statements. Look for shortages and other challenges that happened throughout the year. Ideally, you can recognize patterns and pitfalls that will help you in your planning for next year’s budget and cash flow needs. Seeing where you might have gone wrong this year will help you do things right next year.
Obviously, one of the biggest reasons to have all your business finances in order is for tax reasons. You have to report the correct information. You need to track all your deductible expenses and losses. You need to understand the tax codes and where you can take advantage of specific tax benefits. There may be strategic steps you can take before the end of the year to reduce your tax liabilities for 2023 and/or set yourself up for a more successful 2024. Speaking of next year, use this time for critical tax planning. Research any tax code changes that could affect your business and your tax plan. Take steps now to optimize your tax plan for the upcoming year.
The end of the year is the best time to look at your staff. You can complete individual performance reviews if you haven’t already. Review your employee benefits plan for next year. Handle any financial issues when it comes to holiday bonuses, paid time off, profit sharing, retirement fund matching, etc. Understand your staffing needs for next year as related to your overall business goals. Take this time to celebrate successes with your team, or educate them on why certain failures may have happened. Involve them in your financial review and planning when appropriate. This can be a great way to improve company culture and get full “buy in” from your team as you implement new strategies and work toward a more successful future.
Speaking of the future, now is the time to plan for 2024 and beyond. Use all the data and insight you are gathering with your year-end financial review processes. Apply that when setting financial goals for next year and creating your overall budget and financial plan for the business.
If completing a proper year-end financial review or developing a new financial plan for next year is overwhelming, you don’t have to go it alone. Illumination Wealth is here to help you with all your individual and business financial planning needs. Our team can provide objective guidance and support for every aspect of your financial health. Contact us today to learn more and get started with an introductory consultation.