A good fourth quarter just might be the most important win of your business year, because it demonstrates that you know how to implement the right strategies to succeed when and where it counts.
Reviewing this year’s financial records, as well as the goals you made at the start of the year, is a great place to begin gathering the information you need to build the right strategy for the end of the fourth quarter.
Do you hope to show profitability or growth? Do you have investors or stakeholders who are expecting you to hit certain metrics? Did you have a challenging first quarter and do you want to balance it with a big final quarter, or do you want to save those sales for a strong Q1 in 2022? What insights can you pull out of the past year to strategize setting new goals next year? Depending on your situation, here are our tips for making the most of your final weeks of the year.
No matter your situation, there are a few things you should double check and remember.
- If you have a single member LLC but have elected as an S corp, make sure to check with your CPA to make sure you have taken the appropriate salary for the year. If not, you can still change your salary over the next few weeks as needed.
- The holidays is a great time to be generous:
- If you are in the position to do, charitable donations can make a big difference in your community, and they will reduce your taxable income, helping reduce the tax bill you’ll have to pay come April
- Also, it can be a great time to be generous with your team. Whether $50 or $500, a holiday bonus can go a long way to keep your team happy, especially critical in this competitive labor market. But, remember, you must record these bonuses or gifts as income as part of your payroll system. Christmas gifts mean withholding taxes for both the employee and employer – so make sure you pay these through your payroll system, and not via cash!
Strategies for when you’re ending the year with strong profits.
So, you’ve had a great year, and your profits reflect it. What strategies can you implement to reduce potential liabilities and secure conservative metrics before the next tax season?
Take the time to go back through your books and make sure you’ve taken advantage of tax-deductible expenses throughout the year. This is where detailed bookkeeping and implementing accounting technology throughout the year will pay off. Make sure you haven’t missed any valuable write-offs!
If you’ve accounted for all your tax write-offs, this may be the perfect time to purchase new equipment or restock inventory. Significant expenses will reduce your overall taxable income for the year, giving you much-needed new equipment or increased inventory, and importantly, relief on your forthcoming tax bill. Don’t buy equipment just to reduce your taxable income, however – these purchases should be purchases you are going to take on, regardless of timing. But, if you are going to spend the money, spending it in December 2021 vs. January 2022 means you’ll help reduce taxes you must pay come April 2022.
On the flip side, if you are experiencing high demand from your customers in this final quarter, can you defer some of that demand into Q1 2022? Having those customers purchase in Q1 2022 will help reduce your 2021 tax liabilities by reducing your income in 2021. Of course, you’ll still pay income tax on those sales, but by having a customer purchase occur in January 2022, vs. December 2021, you don’t owe Federal Income tax until April 2023 for that sale vs. April 2022 if that sale had occurred just a few weeks earlier in December.
Of course, pulling forward expenses and pushing out demand also impacts what your 2021 P&L looks like. So make sure your actions aren’t going to cause you to miss important revenue or profit goals.
Strategies for when you’re ending the year behind in profits.
What if you’ve reached the fourth quarter and your profit/loss balances don’t match the goals you set for your business at the beginning of the year? What strategies can you implement in the remaining weeks of this year to bring your profits up?
Before panicking, start by critically evaluating your annual numbers. How does this year’s fourth-quarter profit and loss statement compare with last year’s? How much more do you need to earn to meet your goals before the new year? Were the goals you set maybe unrealistic?
Once you have concrete numbers to work with, you can strategize ways to bring up your fourth-quarter profits much more efficiently.
Obviously, how you bring up profits at the end of the year will differ widely depending on the type of business you have, but some helpful questions to consider may be:
- Are there unsold customers from earlier in the year you can follow back up with?
- Are there ways to improve or change up your marketing strategies this holiday season? Would a sale drive a big increase in volume?
- Do you have any stock surplus that you can strategically market and sell?
- Are their proposals in the pipeline that you can push through before the end of the year?
Don’t forget to use the information you gather during this time to help you set the appropriate goals for the coming year. Take a moment to recognize sales trends in your industry, particularly if you have historically strong months or quarters. This can help you balance your annual budget and build sales strategies accordingly.
We may only have a handful of weeks left this year, but there are a lot of things you can do in a relatively short amount of time to finish this year well. Do you have questions about getting a fourth-quarter strategy in place? We can help.