By James Chittenden
As a business owner, New Year 2024 can be the day that starts your best year yet. New year business preparation is all about setting goals, and if you are willing to stretch to an uncomfortable number, you just might get there. That will make your year-end 2024 more comfortable.
Price uncertainty is constant, and that applies to “fixed” costs. Fixed costs are expenses that do not change, regardless of whether the business earns revenue. Examples include insurance, salaries, rent, or property taxes.
Fixed costs have a way of creeping up. A five percent rent increase here, a 22 percent increase in your insurance premiums there, and your fixed costs will look markedly different on December 31 than it did on January 1.
Your 2024 business prep plan should include quarterly reviews of costs vs. the prices you charge. Don’t wait until 2024 end-of-year planning 2024 to see the effect that fixed cost increases had on your profits.
Whether you use a bookkeeper, accountant, have a chief financial officer (CFO), or are doing it yourself, take a look at your profit/loss at the end of each quarter and compare your fixed costs.
The numbers will give you the honest story, not your hunch.
Businesses that run on data are more lucrative than businesses that run on a hunch.
Insurance is a great example. If you missed those notices from your insurance company where they slipped in some premium increases, then simply watch your profit/loss each month. You have options, so start shopping for some better insurance.
This quarterly review must include prices as well. Watch the prices set by your competitors and adjust your prices as appropriate.
Taxes will be a part of your new year business preparation. It is not uncommon to arrive at the end of the year with a larger than expected tax bill. That is a primary reason that a business pays bonuses to employees at the end of the year.
You may find yourself with a sudden urgency to spend money on tax-deductible expenses in December. If you do, use this guide for ideas.
It is better to track this throughout the year to avoid large transactions with the IRS.
Tony Morales is a CPA at Miami area-based FinTax . In over a decade of small business accounting, Morales has found a few trends of what business owners do correctly as well as common mistakes. Morales offers this tip:
TM: “Leverage your accounting system to work for you by forecasting your financial activity to get a glimpse of the potential future. By performing tax projections, you can budget and plan for tax saving events, like big purchases and their tax impact.”
As another one of the crucial things your business should do at mid-year, Morales recommends estimating, or projecting, your taxes midway through the year. His clients usually do this around July; others do it throughout the year. Others don’t do it at all. You can send quarterly payments or withhold enough to send them while depositing that money into an interest-bearing account.
TM: “You wouldn’t believe how disorganized people are with their finances. Not properly tracking your business financial activity often leads to missing out on precious tax deductions come tax time.”
Recommendation: Financial organizing software such as Quickbooks is a good start. Hire whatever personnel necessary such as a bookkeeper, accountant or CPA to handle these duties if you are unable to do it yourself.
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