Create your Very Helpful Year End Business Review (plus two essential year end steps)

The full blog post is coming soon.

For now, here’s the sketch:

How to perform you year end financial review for your business

Sit down after carving out quiet time in your schedule and do the following.

1. Assemble your numbers if you don’t have an Income Statement (aka Profit & Loss) handy. Ie. gather your total gross income, and total business expenses.

2. Review your income and ask:

How much of my income came from where? Look at clients, look at kinds of work or products, look at the variety, look if over 70% comes just from one source

3. Take some time to review your expenses in detail and ask yourself the following questions:

  • What fixed expenses are no longer necessary?
  • What were the most worth it expenses in my business?
  • Is there an area of spending I need to pay better attention to next year?
  • What are my big expected expenses for next year based on this year’s spending?
  • Where did I do really well with spending?
  • Where can I do better?
  • Do I need help with business spending in any way?

Essential year end step #1

Make any business purchases that make sense before year end. What once make sense? Purchase you anyway would be making in the next few months. Purchases that you have the CASH for right now, without making things tight for yourself.

And remember, always keep receipts!

Essential year end step #2

Send an email to your accountant, including the following:

Outline any major changes in your personal life that have financial implications, such as

  • Moving
  • Buying/selling vehicle
  • Buying/selling property
  • Change in marital status
  • Change in health insurance status

You’ll also want to update them on major business events:

  • Large increase/decrease in income
  • Any business asset purchases valued at over $600 (equipment, furniture, anything you could resell in the future)
  • Any new loans you’ve taken out (especially anything related to the CARES Act this year, such a EID and PPP loans)
  • The expected date you’ll have your numbers to them, if they don’t have direct access via your bookkeeping software

You don’t need to include a huge amount of detail, which will be in the numbers you send them when ready to prepare taxes. But you want to give them the outline and ask if there are any last minute steps you should take before December 31st.

Next steps?

Prep your numbers for the accountant, or for using in software

Pull your categorized expenses from your Profit and Loss

Review all your personal expenses for those that can be deducted as business expenses. Some things to look out for:

If you work from home in a dedicated office space

  • calculate the rent paid on just that office space.
  • calculate utilities and the estimated percentage relative to business activity (eg. 50% of internet usage at home is for business)
  • cleaning fees for office space (let’s say you run a massage office out of your home)

If you drive for work, gather those details (to see clients, to get supplies, to events, commuting to out-of-home office)