With the fourth quarter well underway, it’s time to really hunker down on business planning to wrap up the year.
Breath a sigh of relief—2020 is finally coming to an end. Whether you were affected a lot or a little this year, it’s always a good idea to plan ahead and tie up any loose ends before December 31st. Here is your End-of-Year Playbook to help you get a running start as we head into a New (and hopefully better) Year.
1. Get Caught Up on Your Bookkeeping
You can’t make any sound financial or tax planning for the future if you don’t know where things stand—and that means understanding actually how much you’ve taken in and how much you’ve spent year-to-date.
If you are not working with an accountant, there are plenty of apps to help automate most of the work for you. For example, you can take a look at FreshBooks’ expense tracking. By getting caught up on your revenue and expenses now, you will have an easier time come tax season, and you’re in a better position to make sound financial decisions.
2. Revisit Your Pricing
Once you understand your business’ financial picture, it’s time to get honest about how things are going. Is your business model sustainable or do you feel like you’re working as hard as you can, but still treading water?
Many freelancers and small business owners make the mistake of undercharging their clients: Is your pricing adequately compensating you for your time, experience, and costs (which include taxes, retirement plans, health insurance, and more)?
The start of the New Year is a natural time to bump up your rates. And if you are billing clients by the hour, we also recommend reading FreshBooks’ eBook “Determine Your Rate & Earn Your Worth” to better understand the best way to put a fair price tag on your services.
3. Do Some End-of-Year Tax Planning
The majority of people think about taxes just once a year. As a result, they lose the chance to make any meaningful changes to help their tax situation.
This year is going to be especially strange for taxes, even more so if you received any government loans or assistance to support your business during the pandemic. It’s smart to set up a call with an accountant before the year comes to a close, so you can follow any additional tax advice while it still matters for 2020.
4. Change Your Business Structure
If you have been thinking about “upgrading” your business structure from a sole proprietorship to an LLC or corporation, now is the time. That’s because you can simplify your record-keeping and taxes by starting 2021 as the new structure.
In fact in the U.S., you can even have a document filing company complete the paperwork now, and then send it to the state office at the start of 2021. Read “How to Decide What Business Structure Is Right for You” to learn more about the various business structures, and their pros and cons.
5. Update Your Website and Social Media Profiles
Throughout the year you undoubtedly make time to help your clients prosper, but how much time do you dedicate to growing your own business? Is the content on your website and business social media profiles up to date?
Dedicate one day this month to touching up, revamping, or overhauling your digital presence. If you simply can’t spare a full day from billable work, then spend two hours per week for one month. You can even hire someone if needed… just don’t let your own business languish while you help everyone else move ahead.
6. Close an Inactive Business
Maybe you started a dog-walking business before you got serious about your design work. You haven’t walked a dog in ages, but various government agencies may still think that dog-walking business is active (and they’ll be expecting your tax return, annual fee, etc.).
By the end of the year, you should officially close any inactive business. This is particularly true if you incorporated (formed an LLC), filed for a reseller’s license, or any other kind of permit. The last thing you want is to find out that you owe three years’ worth of annual fees for a business you assumed was shuttered a long time ago.
7. Plan Your Holiday Schedule
Your clients will expect you to take time off around the end of the year; more than likely, they’ll be quiet around the holiday season, too. However, you should still give all clients ample notice of your plans and set their expectations for your availability. Planning ahead is the best way to ensure a smooth and stress-free vacation.
The post was updated in December 2020.