Running a small business requires a lot of planning and effort. While many small businesses focus their attention on the year-end, it is just as important to revisit your company’s financial plan mid-year. Financial planning is an ongoing process for small business owners and taking action now can help you prepare for future success.
Keep the following checklist in mind as you prepare to go over your company’s financial plans this summer:
1. Meet with a tax consultant.
Many small businesses make the mistake of waiting until tax time to begin thinking about their taxes. By then, it is too late to take action and reduce your tax payments. By meeting with a tax consultant earlier in the year, you will have plenty of time to go over your company’s financials and discuss your best options. More importantly, you will still have time to act on your tax consultant’s suggestions for the year.
2. Assess your estimated tax payments for the year prior.
Now that you’ve hit the mid-way point for the year, it is time to assess your estimated tax payments for the rest of the year. Review your business’ year to date financial earnings and forecast your earnings for the rest of the year. Once you have totaled your small business’ estimated earnings for the year, assess your estimated tax payments to avoid any underpayment penalties. Make sure you adjust your final two estimated tax payments as needed.
3. Re-evaluate your business entity.
Mid-year is the perfect time to re-evaluate your small business entity. Many small businesses start out as partnerships or sole proprietorships only to transition to another entity further down the road. If your small business is not incorporated, you may want to consider incorporating it (as a C Corp, S Corp, or LLC) to possibly save money on taxes and protect your company from some financial risk. Some companies are formed with one entity target in mind and may need to reassess the entity for a different revenue level. Whatever your situation, make sure that you adjust your entity before it’s too late. Failure to adjust your entity due to revenue can be a costly error.
Make sure you discuss your situation with your tax consultant prior to making any decisions. He or she will guide you through the process, determine the right entity for your situation, and let you know when to change it.
4. Assess your company’s recordkeeping process.
In order to run effectively and efficiently, your business needs to keep up accurate records. If your business could use some help in the recordkeeping department, mid-year is the perfect time to assess your current processes and procedures. If you have not been keeping track of your business expenses, now is the perfect time to catch up. If your employees are struggling to accomplish certain administrative tasks, look for an alternative solution (such as outsourcing, investing in a technology solution to accomplish the job more effectively, or dedicating a set amount of time each week to that specific task).
It may seem like a lot of work now, but you will be grateful for the updated books come tax-time.
As you can see, there are plenty of tasks your small business can perform mid-year to get ready for tax-time. Plan for any equipment maintenance that needs to be done on equipment still under warranty. Re-evaluate your small business budget for the year and redistribute expenses as needed. Do everything you can to ensure that your company’s financials are in tip-top shape come tax-time. While it may seem like you just filed your return for this year, it is never too early to start preparing for the next tax year.