The end of the financial year is approaching and it’s time to get your business finances and related paperwork in order. As a small business owner, you have a number of financial obligations you need to fulfill. If you don’t handle these responsibilities, your business can be in trouble.
If you’re new to this and don’t know what your responsibilities are it’s a good idea to hire an accountant and ask them to explain your obligations and benefits to you. An experienced accountant will also help you set up a good system so you have less to do at the end of the financial year. For example, a tech-savvy accountant will recommend accounting software or services along with a methodology to enter the information to ensure your data is organized and ready for the year’s end.
Pay the vendors and contractors and clear the bills
You should start your upcoming year with a clean slate and you can do that only if you clear all your pending payments and dues before the end of the current financial year. Compile a list of all your dues and pending payments and determine how you can repay them before the end of the financial year. It will help you close your accounts and any open invoices and help your vendors and contractors settle their accounts as well.
Determine bonuses and withhold the required tax cut
Bonuses, like salaries and payments, are also subject to tax withholding. Before you decide to reward your employees for their hard work, calculate how much money you intend to pay and how much tax you need to hold on that. If you don’t know how to calculate the tax for bonuses, you can consult with a financial advisor or check the tax office website for more details.
Prepare your records for payroll
You’re required by law to keep track of what you pay your employees and how many employees you maintain. You will need to provide this information along with other financial documentation to your local government at the end of the year. You can use accounting software to prepare the payroll and ensure all employees are paid and their taxes are covered before the financial year’s end.
Check the balance sheet and profit and loss statements
Profit and loss statements along with your balance sheets showcase important financial information about your company. They show how much money comes in and how much goes out. You determine how much taxes you need to pay based on this information, so it should be accurate. Any inaccuracies and mistakes can lead to an audit and penalties, so you need to check your balance sheet carefully before you file the paperwork. This information will also help you understand where your business stands and help you identify areas that need improving.
Assess your income reports
Your income report is a detailed assessment of all your income sources as well as your tax-deductible expenses. These files give you an accurate idea of just how much profit you generate from every revenue stream. You can assess your expenses and identify what you can claim as tax deductible. A portion of expenses that are required to run your business is tax deductible. If you run a restaurant, the food and produce you order to make meals for customers can be considered tax deductible. It’s a good idea to discuss all your expenses with an experienced accountant and get an accurate idea of what can be deducted as essential business expenses.
Check your cash flow
Cash flow is one of the most important factors to consider because it helps your business stay afloat. If you have good cash flow you can pay your employees, cover raw material expenses, pay your vendors, utility bills and other such expenses. Without cash flow you won’t be able to cover your essential expenses and that will cause your business to fail. It’s important to check your cash flow and create a report about it.
Determine how much tax you’ve already paid
Most small business owners pay taxes on a quarterly basis to reduce the financial burden. It’s important to determine how much you have already paid to ensure you don’t make any mistakes during your year-end filing.
Study your insurance policies and determine if they need to be changed
Businesses are required to maintain some insurance cover to protect them from liabilities. Insurance companies change and upgrade their policies often, so you never know when they might introduce a better product. Study your current policies and speak with an experienced financial expert about any changes in the policy. You should also make sure that you have all statutory and recommended insurance policies required by the government.
Ensure your payroll is up-to-date
Update your payroll information regularly to ensure it has the most current information. Your payroll shouldn’t consist of any past employees and should have all the latest salary information included in it. Check it thoroughly and make sure there are no errors before you file the paperwork at the end of the year.
Know all tax deadlines
All the taxes and documentation must be filed before the deadlines at the end of the year. You can find all the information you need to know online from government websites or through a simple Google search. It’s a good idea to consult with your tax accountant prior to the deadlines.
Determine whether you need a tax payment extension
You can apply for a tax payment extension if you’re in a financial bind and can’t meet your obligations. Make sure you file the request early in order to avoid any penalties.
As the financial year comes to a close, organise all your paperwork and ensure everything is filed properly. If you make mistakes you might incur penalties and face a loss of reputation. Small businesses need to be particularly diligent with regards to their end of financial year obligations. One you’ve compiled and filed all the paperwork, take some time off and enjoy the year end. This will recharge you for the upcoming year.