Answer: Actually, you already have a year end if you pay income tax. If you have a sole proprietorship or are a single-member LLC, your business year end and your personal year end are one and the same. The year end for an incorporated business is also the end of the calendar year unless you opt to change it. If your work is seasonal you may want to change it to a less hectic time of year but consult your tax advisor first. There are tax forms to complete and there can be other financial reporting implications.
Your year end can be a useful benchmark to compare this year with last. Your plans for the coming year will be more focused and more likely to turn into reality--especially if you review them often.
· Keep your personal and business expenses separate. A separate business bank account, credit card, and line of credit will keep you organized.
· Code and date your expenses as they happen. Keep all your business-related receipts and code them to the appropriate expense category in your operating budget (e.g., office supplies, marketing). Legitimate business expenses can lower your tax burden. Remember to track your non-client-related business mileage as well.
· Keep all your business records in one place. Rather than the proverbial shoebox or bottom drawer, a separate set of file folders will do nicely. Save yourself time at the end of the year.
· Update your accounting program regularly. Be sure that all your revenues and expenses for the year have been entered.
· Get your tax documents ready and meet with your tax advisor. Once you are familiar with the process, you may do your taxes yourself.
· Review your year-end statements. See if you accomplished last year’s goals. Look for ways to reduce your taxes next year.
· Plan for the coming year. What do you want to accomplish? Set three goals—one for desired revenue, one for the type of client or work you want, and one for your professional development.
Originally published in the Independent Consulting TIG Newsletter, Volume 4, Issue 4. September 2013.
For more information on consulting topics see in Barrington, G. V. (2012). Consulting Start-up & Management: A Guide for Evaluators & Applied Researchers. Los Angeles: SAGE.