Virtual Bookkeeping Tip of the Month: Year End Planning

As the year comes down to a close, you have been checking off your list, and checking it twice, right? In the midst of the packages and bows, does contacting your tax preparer come up on your list? Small and medium businesses often need to do some tax planning before the next year rolls around, but if your books are not up to date, your tax man can do little to help. If you find the New Year approaching with your finance records in less than desirable condition, it is time to take a little virtual bookkeeping advice.

Understanding Year End Planning

Why should you even consider year-end planning? Entrepreneurs have been using year-end planning for decades: it is a smart way to reduce your tax impact while maximizing cash flow. Your tax accountant can look at your current year income and determine whether you should purchase major equipment before the year ends or wait until next year. If you are going to make major purchases anyway, knowing the best time to do it can save you thousands of dollars. While this is a rather simplified explanation of year-end planning, it does bring out the crux of the issue: saving money in taxes by simply planning your income and spending wisely.

Facing the Problems

The problem many small and medium size businesses face is the lack of financial expertise to even get them to the tax preparer’s office with an accurate financial picture. Struggling to make ends meet in today’s economy, most businesses have a hard time setting aside funds to plan their spending wisely: they are too busy with pressing financial issues. Failure to provide a clear look at the current year’s income and expenses, as well as projected income and major expenses for the next year makes it difficult for even the best tax preparer to give accurate year-end planning advice.

Another issue many businesses face is lack of planning throughout the year. If spending is done on a crisis basis, there may be no money at the end of the year to do a major purchase, even if it makes smart business sense to do so. This is really not surprising, because most small corporations cannot afford the expert advice of a full-time financial advisor.

Virtual Bookkeeping Comes to Work

The problems small businesses face can be alleviated by accessing both excellent accounting services and expert financial advice, virtually. What this means for the small business is the ability to tap into great resources normally out of their reach for a fraction of the cost a full-time expert would cost them. Virtual bookkeeping does not mean that you “virtually” do bookkeeping, but it really never gets done, rather it represents the power of modern technology providing incredible financial savvy for the small to medium business.

Dealing with the Year-End

2013 has been a tough year for many businesses, and 2014 looms with a host of new tax laws and health care reform. If the thought of these changes overwhelm you, your best financial planning may be to prepare yourself by getting expert financial assistance on your side. Virtual bookkeeping services certainly do not take the place of your tax expert, but they can get you in the place where year-end planning is a reality, rather than a dream.