By: Kevin Reynolds
Waiting to plan for taxes until December is almost as risky as not planning at all. The resulting time crunch can be a high-stress experience for any business, but procrastination can expose business owners to a range of risks, including:
- Missed Timing Opportunities: Failure to consider the timing of recognizing income and deductions, or even missing deductions or credits.
- Late Tax Payments: The IRS assesses penalties for late quarterly estimated tax payments. Failing to plan can cause future payment delays, with accrued interest in addition to the taxes and penalties.
- Strained Resources: Leaving things until the last minute can strain your internal resources and interfere with the holiday season. Staff may be pulled away from their day-to-day operational tasks or family time to gather documents or produce financial reports.
The key to avoiding the panic of late tax planning consistent financial management. By implementing these straightforward processes and leveraging the right tools and resources, businesses can proactively stay ahead:
- Monthly Bookkeeping: Keep records organized and updated with a standardized month-end process. By recording information closer to the time that transactions occurred, you can ensure accurate and timely financial statements, without the year-end scramble.
- Financial Dashboards and Analytics: Make more informed decisions throughout the year with tools that produce real-time reports profit margins, expenses and cash flows.
- Accounting Software: Cloud-based accounting software platforms that help automate tasks to record transactions, track income, expenses, and payroll, all in real-time.
- Expense Management Apps: Apps that allow employees to easily record receipts, categorize expenses, and sync with your accounting software.
- Cloud Storage: Services that allow you to access information anywhere, making it easy to retrieve documents when working with your accountant.
- Quarterly Tax Estimates: Pay estimated taxes quarterly to minimize the risk of penalties and more importantly to manage cash flow throughout the year.
- Work with a Tax Professional Year-Round: Establish a relationship with a tax advisor who works with you regularly to help review financial statements, adjust strategies, and coordinate a structured timeline for compliance.
For 2024, it’s still not too late to start! Assess your current use of the above strategies and tools and if there is room for improvement, make a 2025 New Year’s Resolution to more proactively manage your tax situation throughout the year.
