As the leaves begin to change and our focus shifts to Q4 goals, now is the perfect time to take a closer look at your business. Performing an end-of-summer business check-up can provide important insights into what you may want to change before the end of the year, or how to prepare for 2023.
When reviewing the areas of your business that can determine its overall health, there are a few places you can dig deeper:
Gather/Analyze Financial Statements
Review your profit and loss statement, income and cash flow statements, and balance sheets so you can gain a better understanding of your company’s financial status. When you review your profit and loss (P&L) statement, you may also want to consider the following:
If your business was profitable, determine if you have any needs for new equipment or upgrades, or improvements to property. Purchasing fixed assets and placing them in service prior to year-end may reduce your net income, which may reduce your tax liability. Bonus depreciation and Section 179 depreciation are tax incentives that allow you to claim a larger deprecation deduction in the year when a piece of equipment or certain improvements are placed in service. Talk with your accountant to see if bonus depreciation or Section 179 elective depreciation is available on potential equipment purchases or improvements.
To take advantage of this incentive, we recommend speaking with your accountant now. In most years, those decisions could be made later in the year, but with supply chain issues in recent years you will need to make equipment purchase decisions earlier in the year so that your vendors can deliver the item purchased. Remember, it is not enough to have paid for the equipment/improvement; it must be placed in service prior to year-end, meaning it must be available for use for its specifically assigned function prior to year-end.
Balance Sheet Reconciliation
Reconciling your balance sheet will help guide decisions about your cash reserves, inventory management, debt management, receivables, and payables. Looking at the balance sheet can highlight vulnerabilities in your finances that you can fix before the end of the year, such as collecting on open receivables, making sure you have paid all your outstanding invoices, or seeing if it makes sense to pay down some debt.
Project Revenue and Expenses
Review your revenue and expenses for the year and compare them to your estimated or projected revenue and expenses for the year. Based on that information, consider how you may need to adjust for the remainder of this year, and to more accurately project your revenue and expenses for 2023 to stay on target to reach your goals.
Organize Business Receipts
If you don’t already have a system in place for organizing your business receipts, let this be your gentle reminder that it takes time to gather and label all the receipts you collect as a business owner throughout the year. Having your receipts organized will help you prepare for filing your taxes, and it can provide insight into where you may be over or underspending.
Collect Past Due Invoices
If you want to wrap up your books prior to year-end, closing the loop on past-due invoices is a major part of that. As you take stock of your finances as a whole, remember to send out reminders to the clients who have yet to pay.
Account for Inventory
In order to get an accurate count of the materials and supplies left on hand, and to help you understand how much you spent on inventory during the year, having an accurate inventory count is necessary. When considering your projections for 2023, having an accurate inventory count from this year will inform those projections, and improve the overall health of the business.
If you have any questions about your business check-up, reach out to our team. We are happy to help review your financials and discuss cost-saving options and tax incentives before the end of the year.