The year is drawing to a close, setting the stage for a bright 2023. If you own or manage a business of any type or size, it is definitely time to prepare for the transition to the new year, if you haven't already.
One of the most important things you can do is create a checklist of items to complete before the year’s end to facilitate as smooth a transition as possible to 2023. Here’s a quick look at what should be on your year-end checklist.
Focus on the Annual Budget Accounting
Take a close look at your budget for the year and compare it to actual figures. Analyze existing reports that reveal current revenue and expenses up to the year’s end.
Now that you have all the numbers organized, analyze the revenue, expenses, and margins to get a sense of whether expectations align with reality. Such analysis provides an invaluable opportunity to gauge which are above or below actual figures.
Budget accounting analysis helps to figure out the “why” of the difference and make the necessary alterations. Zero in on budget accounting variances to determine whether they indicate a pattern is present or represent an aberration unique to the current year. The stage is now set to prepare accurate projections for the year ahead.
Try to Predict the Year Ahead
Seize the opportunity to forecast the revenue and expenses for the year ahead. Projections about the financial figures for the upcoming year and expectations are an important step in making your aims a reality.
Resist the temptation to be overly optimistic, and remain firmly rooted in the reality of your business’s financial situation including anticipated demand for your value offering.
Tally expected revenue and fixed costs. Add variable costs and factor in one-time expenses likely to arise in 2023. As an example, relocating the office, adding new office furniture, investing in new software or spending for another one-time improvement must be factored into the equation for a transparent look at your company’s financial future.
Create Multiple Budgets
There is a common misconception that a single budget is enough. Create a budget for the year ahead as described above then create a second budget for the worst possible scenario.
Carefully review the details of each budget with your team to create contingency plans that help your business achieve its potential in the event that the upcoming year proves tumultuous.
The moral of the story is to hope for the best and plan for the worst as rampant inflation, a potential recession, and geopolitical uncertainty loom going into 2023.
Recognize Your Contributors
The best business owners and managers are laser-focused on what matters most: personnel. Valued employees are the lifeblood of a business as these individuals do the heavy lifting necessary to keep the business moving forward.
Develop your budget accounting for the year ahead with employees in mind and you’ll heighten retention while also helping to attract new contributors to your enterprise. Keeping your most prized “rainmaker” employees in the fold facilitates upward and timely scaling in the year ahead.
Reconcile Accounts
The end of the year is a golden opportunity to reconcile accounts, be it bank accounts, accounts payable, accounts receivable, business credit cards, etc.
Ensure each of the end-of-month statements and appropriate documentation is in place. Obtain bank reconciliation statements, identify inaccuracies and correct them accordingly.
Prepare for Tax Season
The start of the new year represents a transition to tax season. If you are like most business owners, you are hyper-focused on your products and services as opposed to your tax obligations. Meet with your tax preparer and accountant, review the due dates for your taxes and get the wheels in motion for a timely filing by the due date.
Those who own their own business and work as independent contractors are required to submit estimated taxes on a quarterly basis unless willing to pay a penalty fee for waiting until the year’s end to transfer a lump sum tax payment. Estimate your taxes now and you’ll have a clear financial picture moving forward into the new year. Such financial clarity is essential for accurate budgeting accounting.
It's not too late to prepare for 2023, but doing it sooner than later will set you up for a smoother transition. into the new year. For information about outsourcing one or more of your accounting and bookkeeping functions, contact AccountingDepartment.com for assistance from a friendly, knowledgeable professional.
