It's that time of year.

Christmas lights.
Presents under the tree.
‍​Baby Jesus​ lying in a manger.
And last minute cash crunches because your customers quit paying.

Amiright?

Today we're going to talk about things you should be doing between now and December 31.

Buckle up!

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Your End of Year SMB Checklist

The end of the year is always a crazy time, as you have to juggle both work and personal commitments. I always envy those businesses who are slow during this time, because it has never been my experience in accounting.

Over the years, I had to find ways to cope with this craziness, and ultimately that turned into year end checklists.

These work in accounting, but also work for the business as a whole, because it helps ensure things don’t drop through the cracks when they’re most likely to.

We’re going to split this into four categories:

1. Reduce Revenue
2. Increase Expenses
3. Hunt Deductions
4. Prepare

REDUCE REVENUE

Your ability to delay revenue is dependent on how your taxes are filed: accrual or cash. This can be different from how you run your business books, so check with your CPA to make sure you understand it (you can also check the return).

Delaying revenue is counterintuitive from what we usually want and not something you’d typically see recommended. But people do weird things when trying to avoid taxes. I try and avoid these games as much as possible, but if you must, here are a few options.

1. Delay Invoicing: if you already have enough income for the year, consider delaying an invoicing period until after year end. If on accrual financials, this isn’t right, but if on cash basis financials for your tax return, this can reduce cash collected.
2. Hold deposits (maybe): If you’re still getting paper checks, not checking the mail for a few days can absolutely create a gold mine of revenue in the new year. But I’ve seen businesses go way overboard with this, so just don’t do that. I struggle to even suggest this because of that.
3. Slow projects: I’m not recommending it (again), but I’ve certainly seen people do it. If you don’t have a deadline, consider letting your staff have some time off and finishing up in January. It’s a great way to get on the good side of staff and help your tax bill. If January is slow too, this can help.

INCREASE EXPENSES

Again, just like with Revenue, your ability to take expenses early is dependent on if you’re an accrual basis or cash basis tax filer.

I also want to be clear here: don’t spend money you weren’t already going to spend. Spending only to get a deduction is throwing away money.

If your tax rate is 40%, you’re spending $100 to save $40. YOU STILL SPENT $60. Only spend money that you were already going to spend. If your tax rate is set to be 40% this year but you can foresee it being 30% next year, you’ll save $10 paying something early.

But don’t overdo this, because cash flow still matters.

1. Prepay Expenses: Prepaying business expenses allows you to reduce taxable income now, freeing up cash in the future. Consider big items that you were planning on purchasing in Q1 and look for ways to bump up the payment.
2. Buy Equipment: sometimes this is not an expense (and instead a depreciable asset), so you have to be careful. But, bonus depreciation, or Section 179 depreciation, is still active. So it might still make sense.
3. Pay bonuses: As an employee you thought you got your bonus in December because they loved you, right? No, it’s because it’s allowing them to reduce that income this year instead of next.
4. Accelerate repairs and maintenance: Have you been deferring fixing that toilet? Well, go ahead and fix the toilet.

HUNT DEDUCTIONS

These strategies are dependent on your specific situation, so please make sure you consult your preparer and ask them what’s best for your situation. There are a number of levers you can pull, but it all depends on current tax exposure and plans for the next year.

Every situation is different, so please treat it as such.

1. Maximize Retirement Contributions: It may be too late to open new retirement accounts if they aren’t already open, but consider a Solo 401(k) if on your own. For those with company plans, make sure you review your personal situation and maximize your contributions before year end.
2. Review Depreciation Options: Consider Section 179 or bonus depreciation for new equipment purchases. If you’re looking to reduce income, bonus depreciation allows you to take more of a deduction in year 1 and save more today. Don’t spend on something you don’t need, though (I’m talking to you buying the brand new SUV).
3. Reassess Charitable Giving: Similar to depreciation, you want to max out your donations before year end if you need more deductions to reduce income. If you don’t know where to donate the money, consider opening a DAF (donor advised fund). This allows you to get the donation deduction today but choose where to donate it later.
4. Start gathering your tax documents: look at your documents from last year and ensure you have all your log-ins and addresses updated. Also, reflect if you’ve opened any new accounts that could impact your tax situation.
5. Ask your CPA about an S-Corp Election for your LLC: if you have an LLC, ask about an S-Corp election. It’s not best for all, but can save taxes if it’s right for you.
6. Consider gifting money to family or friends: this won’t “save” you on taxes, but there is an annual gift limit per person ($18,000 for 2024). If you gift more than this, it becomes taxable, so you want to stay below this. Also consider lifetime gift tax limits. Work with your CPA to make sure everything is above board and documented.
7. Investment Tax Loss Harvesting: Review your portfolio and look for ways to capture gains and losses. Offset short-term losses with short-term gains. There are a lot of rules with this, so if this is applicable to you, hire a pro and don’t listen to me.

PREPARE

The list of accounting items could go on and on, so for now we’re going to stick to high level ones that matter for you as a business owner.

1. Clean up your chart of accounts: this may seem small, but it’s always good to do a once over of your accounts before year end. This ensures you go into the new year with only the accounts you need. There is nothing worse than using one for two months then having it stick on your financials for an extra year.
2. Review & write-off old Accounts Receivable: whether you’re in the habit or not, reviewing overdue receivables and writing-off those you’re unlikely to collect is good practice.
3. Review accruals & deferrals: ask your accountant to give you a list of the recurring entries they’re making here and review them with them. These should be adjusted to more closely match actuals periodically and by actively seeking this out you’re more likely to catch if this is not being done.
4. Review Fixed Asset & Depreciation Schedules: you’ll have to provide this for the CPA doing taxes, so best to get a head start. Review what’s on the schedule and let your accountant know if anything needs to be removed.
5. Count, Adjust, & Value Inventory: lots of inventory counts go on around year end and it’s important you understand the process. Help the teams doing it, if not you, and make sure physical counts are being done, discrepancies cleared up, obsolete inventory is written off, and shrinkage is recorded.
6. Review Debt Schedules & Loan Interest: review what’s on the books and that all interest has been recorded properly. This has to be done for taxes, so again, best to get a head start.
7. Ensure W-9s are collected from vendors: W-9s are the records needed for 1099 contractors here in the US. If you wait to January to collect this information, you could be pushed up against the deadline. Best to review these records now and go ahead and request updated W-9s when needed.
8. Estimate Tax Payments: Tax planning should start in late Q3/early Q4, so we’re already behind. But if you haven’t done so, review your estimated payments and actual financial results to this point with your CPA and get a good idea what taxes you might owe on April 15. It’s important you have this money set aside and aren’t scrambling.
9. Review Payroll Records: Confirm W-2s, bonuses, and year-end payroll adjustments are accurate. It can be hard to make corrections once in January, so make sure your HR/Accounting is in the practice of reviewing these records as year end nears.
10. BOI Reporting: BOI stands for Beneficial Ownership Information and is a reporting requirement recently put in place under the Corporate Transparency Act. If you own a business, they want to know who runs or controls it. There are (were) big fines for non-compliance starting in January 2025, but the whole thing was recently put on hold by a judge out of Texas. I considered removing this, but wanted to leave it, because you can still report if you like. It’s not hard, though can be confusing. Don’t use services to do this and either hire your CPA firm or ​go directly to the website​.

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Is there anything you’d add? Reply and let me know. I’m creating a running list and will be turning it into a document/checklist.

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