After starting a new business, you've likely found yourself immersed in a variety of tasks and responsibilities. The hustle and bustle of daily operations may have made it easy to overlook how quickly time can pass. Now, as your first year as an entrepreneur comes to a close, it's a great time to review your company's performance and make sure you've completed all pending business-related tasks.
1. Review Your Financial Performance
It's important to review your company's financial performance before the year ends. If your business uses accounting software, use it to create key financial documents. Start with an income statement to get a clear overview of your revenues and expenses. Next, prepare a cash flow statement to understand cash inflows and outflows.
Also, prepare a balance sheet to show your company's financial position at a specific point in time, detailing your assets, liabilities and equity. With a complete view of your company's financial performance, you can compare it to the goals you set when you launched your startup this year. From there, you can establish realistic goals for the upcoming year.
2. Reconcile Your Accounts Receivable
Tracking the money customers owe your business, known as accounts receivable (AR), is an ongoing task, but it is especially important to address before the year ends. To do this, you should reconcile your accounts receivable. This process involves comparing the customer invoice and payment amounts recorded in your accounting system with the actual transactions you have on file.
Reconciling your accounts receivable is essential for understanding how quickly you collect revenue. It also helps you identify overdue invoices. If your accounting books don't reflect accurate balances, you may mistakenly report revenue on your tax return, putting you at risk of a tax audit.
3. Establish A Dedicated Business Bank Account
If you haven't opened a dedicated bank account for your new business yet, now is the ideal time. A business account separates personal finances from business expenses and income, making it easier to track performance. It simplifies accounting and tax preparation by keeping all your transactions in one place. A business account also enhances professionalism with clients and vendors, as payments to and from the account can build credibility.
At Ameris Bank, new business customers can earn up to $5,000 when you open a Business Essential Checking or Business Analysis Checking account and maintain an average balance of at least $10,000 for the first six months.1
4. Check Your Business Transactions
Using a personal credit or debit card for business expenses can occur in unexpected situations. This may happen if you need to cover urgent costs immediately or if you accidentally use the wrong card. However, using personal funds for business purposes can create discrepancies in financial statements and make it harder to calculate business deductions.
When reviewing your business expenses, pay close attention to the credit or debit card used for each transaction. If you notice any transactions where you used the wrong card—such as using a business credit card to buy groceries—remove those entries from the business expense category. This practice helps ensure accurate expense reporting and saves time when filing your taxes for the upcoming year.
5. Finalize Your Legal Tasks
If your business has pending legal tasks or obligations, finalize them before year-end. Essential legal tasks include choosing a business structure (e.g., corporation, partnership or LLC), getting an Employer Identification Number (EIN), obtaining a business permit and license, and registering your business with your state's Secretary of State office.
Completing these tasks can help reduce the risk of potential legal issues and ensure regulatory compliance. Plus, it can strengthen your industry reputation and build trust with clients and partners.
6. Evaluate Your Cash Flow Needs
The final months of the year can strain business cash flow, especially for startups in their first year of operation. This is often due to rising year-end expenses and fluctuating revenue streams caused by the holiday season or unpredictable weather. Year-end is also typically when businesses must pay certain one-time expenses such as annual software renewals and business insurance policy renewals.
Evaluate your company's cash flow needs by analyzing income, expenses and the available capital in your business bank account. If you see any shortages, consider strategies to address them. You can run a holiday sale or discount in-store and on your website, cut non-essential expenses and optimize your staff's holiday hours.
You can also ask vendors and suppliers to extend payment terms to keep cash in your bank account longer.
7. Verify Your Vendor Information
If you hired vendors this year, verify their information before you file year-end reports. By verifying vendor details such as name, address and Tax Identification Number (TIN), you can reduce the likelihood of errors on IRS Form 1099, avoid potential IRS penalties and maintain compliance with tax regulations.
Contact your vendors by phone or email to confirm their information and update your system as needed. If a vendor changed its business structure, legal name or Tax Identification Number (TIN), request a new W-9.
8. Prepare Your Taxes
Getting your business taxes ready before year-end can simplify tax filing and reduce the risk of mistakes. Start by collecting all relevant documents, including receipts, invoices and bank statements. Additionally, organize important financial documents such as your profit-and-loss (P&L) statement, balance sheet and general ledger.
Since it's your company's first year of operation, it is highly advisable to hire a certified accountant. This professional can guide you through the complexities of filing business taxes. They can identify the required forms based on your business structure and help you maximize your tax credits and deductions.
If you purchased or financed new or used equipment, machinery, technology or software for your company and put it into business use, it might be eligible for the Section 179 tax deduction. Consult your accountant to see whether your assets qualify for Section 179.
If you want a bank that can support your new business at every stage of growth, choose Ameris. We offer a comprehensive suite of banking, lending, treasury management and advisory services, all backed by exceptional customer service.
