5 Ways to Avoid a Year-end Fright
As the Halloween costumes and candy fly off the shelves, early fall is the perfect time to review your accounting records to make sure you are ready for the new year. By devoting time now to analyzing your books, you’ll still have time in 2022 to implement plans to move your business forward.
Here are 5 things to consider this fall:
- Review accounts receivable aging listing. Take time to review in detail the listing of what your customers owe you for goods and services provided. For those with overdue balances, follow-up with calls to your customers’ Accounts Payable (AP) departments. With many companies relying on a three-way match and approval signoffs, your invoice may be lingering in cyberspace without all the requirements needed to pay you. When talking with AP departments, verify if your invoice is in the system, if all levels of approvals have signed off, and the date payment will be released.
- Review transaction lists by vendor. Look for your top vendors and see which accounts may be open to negotiating better deals. For vendors that require 1099-MISC or 1099-NEC forms, make sure you have a W-9 on file with their federal EIN and correct business address. Since many vendors are slow to provide their W-9, it’s best practice to get these forms prior to making payments, to incentivize them to send their W-9 your way.
- Review large purchases for capitalization thresholds and compare purchases against budgeted expenditures. All companies should have a capitalization policy in place to determine if assets can be expensed in the year purchased or depreciated over multiple years. Ensure this policy was followed consistently by reviewing not only your balance sheet assets, but also your Repairs, Maintenance, and Technology expense accounts. For capital assets planned, but not yet purchased, decide if now is the time to buy or lease these assets. You can oftentimes get discounts or financing incentives as sales consultants race to meet their year-end quotas.
- Call your banker. You may have a revolving line of credit, term debt, or no debt balances. Credit is always easier to get when you don’t need it, so reach out and build this relationship capital now and discuss options for ways to work together further in the future.
- Call your tax CPA. Tax planning is a year-long process that all too often, gets squeezed into a 2-week period at year-end. Unfortunately, that often means you are reacting to demands vs. steering your path forward. Your tax CPA can discuss many options that can lead to beneficial results and give you a heads-up about potential cash flow needs for upcoming tax payments.
By completing these steps now, hopefully the only fright you’ll have is from those trick-or-treaters on Halloween, and not a year-end tax surprise.