This is for all the small business owners and self-employed:
As you wrap up 2020 and start moving into 2021, make sure you remember to do the following (if you have not done so already):
– prepare your 2021 budget
– set up your 2021 cash forecast (based on your 2021 budget)
– review your 2020 balance sheet and income statement (aka: profit and loss statement) and research anything that looks a little “off”
– reconcile accounts, especially prepaids and receivables, for accuracy
– take a look at your general ledger and make sure items were charged to the correct accounts and that they are consistent (it is amazing how many times something looks good in the moment, but changes when you look at the complete picture!)
– prepare tax documents for employees and vendors who require them (here in the USA, that is your W-2s and 1099s for vendors you spent over $600 with during the year)
The year-end rituals for your business are a lot like the New Year’s resolutions for your personal life. They are a chance to start new (your expenses and revenue are starting with $0 balances), to reflect on what worked last year, and to set your expectations for the new year.
If you use an accountant or CPA, this person should be helping you with this process. If they are not, it may be time to find a new professional. I know a lot of proactive accountants if you need a referral.
If you do not use an accountant or CPA, it is important that you do not just skip over these things. If you do not know how to run or read these reports or set up a budget, you can check out the posts and videos here.
Here’s to closing out a successful 2020 and ushering in a prosperous 2021!