Ready to close the books on 2020? Don’t forget these essential finance to-dos!
Congratulations, you’ve almost made it through the longest year in history—or so it feels! We’re all ready to turn the page on 2020, but before you do, make time for a few simple steps to position your business for an even better 2021. These simple financial to-dos will put you on the right foot as you head into the new year.
1. Prepare Your Financial Statements
Three primary financial statements give a window into your financial health—your income statement, balance sheet, and statement of cash flows.
- Your balance sheet is a snapshot look at how your business is doing financially at a given moment in time. It lists all your assets, like cash and inventory; liabilities, like debt and accounts receivable; and equity, the amount shareholders would receive at a moment in time.
- Your income statement, also known as a statement of profit and loss, essentially shows how profitable your business was throughout a given period of time, usually a year. To put together your income statement, you will need to tally up all your revenues and subtract out your expenses to determine your overall profit or loss for the year.
- Your statement of cash flows breaks down the money coming in and out of your accounts into three key categories: investing, financing, and operating. For the period of time examined, this statement will show where your cash went and in what areas your expenses were most focused.
If you’re lucky enough to have an accountant or software create these reports for you, now would be a good time to check-in and ensure you’ve supplied all the information necessary to prepare these key financial statements for you.
2. Gather Your Tax Documents
The end of the year also comes with its own tax to-dos. If you’re thinking, “Wait, I thought tax season was in the spring?” you aren’t necessarily wrong. Still, next year’s taxes account for this year’s business activity. So, before you lose receipts or forget where you filed away that giving statement, why not spend a few minutes now gathering together what you can to make filing your taxes that much easier when the time comes. Now is also the perfect time to ensure you’ve made the most of tax deductions and exemptions before year-end. Plus, doing all this work now will give you a better sense of where you stand financially going into the new year. Again, talk to your accountant if you have one. You’re likely to receive a thank you for thinking ahead!
3. Reflect and Set New Goals for 2021
Now, for the fun part. Once you’ve done all the hard work of assessing your financial situation, you can pat yourself on the back and reflect on 2020 in all its glory. What went well? What hurt your business? What can you do to strengthen your position in the year ahead? When you have a clear picture of what happened in the past year, you’ll be better informed to set achievable and exciting goals for next year.
Whatever this year looked like, we wish you an even better and more exciting 2021! With these financial steps completed, you’re already off to a great start.