Well, it’s that time of year again – the end of the year! I hope this year was fruitful for you and your business, despite the many obstacle you may of been faced with during these crazy Covid-times we live in. If you are reading this post, you are likely a business-owner, and wanting to learn a few good tips on how to maximize your year-end. If you are a sole-propriatorship or partnership, you follow the calendar and your year-end is Dec 31st. If you are a corporation, then your year-end date may not follow the calendar year, but that’s OK. There are some good tips here for you as well. Here are 5 tips for any small-bussiness year-end:
- Take a picture of your vehicle’s odometer on Dec 31st. On every business tax return, there’s a space that asks 2 questions in respect to vehicle mileage; The first is “How many total km’s were driven in the tax year to earn business income?” The other question is “How many total km’s were driven in the tax year?” It’s a good idea to get into the habit of pulling out your phone and snapping a picture of your car’s odometer once a year to make at least the 2nd part of this calculation easier. The first part (how many km’s to earn business income), should be an on-going activity throughout the year, either recording each business-related trip into a dollar-store notepad you keep in the vehicle, or entering the destination you drove to on your phone’s built-in calendar. At the end of the year, you can easily Google Map each location from your home to calculate total km’s driven there and back.
- Determine the need to purchase inventory, furniture & equipment, vehicles, etc and buy “before Dec 31st” (or your fiscal year-end) to lower your current tax-bill. This is a pretty simple one, but you’d be surprised how many business-owners don’t think about it until it’s too late. Common scenerio: You had a good year, and there’s still “money in the kitty” after you’ve paid everyone and your bills. Your equipment is in desperate need of replacement, and the calendar rolls over into Jan 1st. Now, it’s too late and you can’t deduct the cost until the following year! Think and plan ahead for tomorrow, and you may save some money today.
- Start to prepare your numbers. It’s a good idea to think about getting your year-end numbers together before the scramble into your accountant’s office just days before the filing deadline. Trust me, everyone will be happier! It may seem like a daunting task, but if you kept good records along the way, this job shoudn’t take you too long. First, add up total sales (all calculations before tax(es) obviously), then look at any inventory purchases. Maybe you are a service-based business, think about all the expenses you incurred to run your business. Maybe you had staff, maybe you hired subcontractors, etc. What about rent, office supplies, advertising? Anything that was instrumental in your business earning revenue can be considered (all or in part) a ligitimate business expense. If you can’t handle this task yourself, consult with a knowledgable bookkeeper. I happen to know a good one – LOL!
- Determine sales tax(es) payable. If you are a small business, you may be a annual filer of GST/HST. Perhaps you file quarterly? Maybe you collected PST (if you sold a product or some services)? Whatever the case, it’s time to know how much tax(es) was/were collected. In the case of GST/HST, it’s also important to calculate your ITC’s (input tax credits). This is the total amount of GST/HST you paid out for items like (equipment, inventory, rent, utilities, office supplies, etc.) This total will be deducted from the amount you collected, so be sure to go through all your bills, receipts, statements, etc. You don’t want to miss one penny that you are entitled to claim back!
- Set Your Goals for the New Year! Remember, everything resets to zero on Jan 1st, so it’s a good time to think about the year ahead. What revenue number are you trying to achieve next year? Are you looking at expanding? What new products and/or services are you wanting to add? Is there a new target market you want to reach? Maybe your goals are more material or financial; you want to have a nest egg of 50k in the bank account? You want to drive a new Mercedes or a Tesla? You will know better than I. Funny story – I remember when I started my business in 2010, I had a simple goal at the time; It was “I don’t want to have to park this really embarrassing crappy car” 3 blocks away from my meeting with a new client incase they see me get out of it!