What to Do About The Beginning of the Year to Set Yourself Up for Success

With a new year on the horizon, it’s the perfect time to reflect on the last 12 months and the goals you’d like to achieve in the coming year.

A little planning can go a long way in helping you achieve your goals and steer your business in the right direction. But where do you start? We’re going to share five beginning-of-the-year strategies that you can use to set yourself up for success in the coming year.

1. Review and Reflect on the Past Year

To prepare for the year ahead, start by reviewing and reflecting on the last 12 months. Take the time to ensure that you have a good foundation to build off of as you move forward.

Start by reviewing your accounting process.

  • Are you using accounting software? If not, it’s time to make the switch from Excel to a solution that will streamline your accounting and save you time.
  • Are your books up to date? If not, work on them. Clarify issues that need to be clarified. For example, if you know your tax preparer will have questions about certain transactions, define them now.

Once your books are up to date, you can start evaluating your business’s financial performance over the past year. Analyze your income, expenses, investments, and other major financial decisions.

When reviewing your finances, identify:

  • What worked well
  • Where there were shortfalls
  • Missed opportunities

These insights will prove to be valuable when planning for the new year. Knowing your strengths and weaknesses will help you make strategic improvements. 

2. Plan for the Year Ahead

Now that you’ve reflected on the last year, it’s time to set your sights on the future. If you haven’t already, start making plans for the new year.

Begin by setting clear, SMART financial goals. SMART goals are:

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Time-bound

Whatever your financial goals may be – to invest in specific areas, reduce debt, etc. – make sure that you set a deadline to achieve them to ensure you stay on track.

When setting bigger goals, take the time to break them down into smaller and more manageable milestones. Tackling smaller goals will give you a sense of achievement and help you stay motivated to keep going and, ultimately, achieve your big goal at the end of the year.

Setting financial goals is important, but make sure that you’re also looking beyond finances. For example, where do you want to market geographically? Venturing into new markets may have compliance and tax implications (even on a state-to-state level).

Creating a plan to achieve these types of goals will help you stay on track and avoid unplanned surprises and challenges that may otherwise arise.

3. Create or Update Your Budget

Your financial goals and budget need to align. Develop a plan that’s based on your current financial situation and focuses on your future objectives. You’ll want to outline your:

  • Income sources
  • Fixed and variable expenses
  • Investments
  • Savings

A strong budget considers every penny in and out of your business. However, you also want to add unexpected expenses into your budget because, as you know, they will pop up throughout the year.

Additional things you don’t want to forget in your budget are:

  • Capacity planning – Who will you need to hire to reach your goals? When will you need to hire them?
  • Equipment – What equipment will you need to buy this year? When should you purchase this equipment?
  • Supplies – If you hire someone, what office supplies or equipment are necessary for them to perform their duties?

Working with a tax planning professional can help you pinpoint the right time to buy equipment or supplies to lower your tax burden. In fact, you should work on optimizing your tax strategy next.

4. Optimize Your Tax Strategy

No one wants to pay taxes. Business owners should take advantage of every deduction or credit possible, and this means that you’ll need to optimize your tax strategy. Work with your accountant to discuss:

  • Tax savings
  • Deductions
  • Credits
  • Tax-advantaged investments

Our tax planning service helps business owners do the above and also understand how new tax laws will impact their business & when the best time of year is to:

  • Buy equipment
  • Make investments
  • Etc.

If you pay $1 more than you have to when paying taxes, it’s too much. Tax strategies can be implemented throughout the year to reduce your tax burden and keep more money in your business.

Owners should also take this time to review their own tax burden. You may be able to funnel more money into retirement accounts through catch-up contributions, convert traditional to Roth accounts and leverage QCDs to satisfy RMD requirements.

Every situation is different, and working with a tax professional can help you unlock savings that you may have otherwise overlooked. You always need to plan for the future to keep more money in your bank account and less out of the hands of the IRS.

5. Plan for the Future

You might be past your five-year plan, but that doesn’t mean that you shouldn’t think beyond your business. There will be a time when you want to step back from your business or retire fully. Long-term financial planning should include:

  • Retirement savings: Do you have enough in retirement savings to live the life you want after retiring? Retirement planning can help you fully understand your assets and liabilities and create a budget to meet your retirement goals. You may want to wait to take Social Security benefits, review your sources of income and how they impact your tax burden and even reconsider lump-sum distributions.
  • Estate planning: From tax planning to business succession planning, it’s never too early to begin estate planning. If you start early, you can integrate tax strategies to save you and your heirs money when transferring assets.
  • Emergency fund: If you have a financial emergency, can you cover the bill without a loan? You should start building up your emergency fund to cover 3 – 6 months of expenses.
  • Investment options: Risk tolerance and portfolio rebalancing are crucial parts of retirement planning. Diversify your portfolio to balance high-reward vs high-risk investment so that even if some of your holdings lose value, you have more than enough in low-risk options that you’re not struggling to pay the bills.

Starting the year off with a review of your business’s operations and financial health will allow you to set up the rest of the year’s success. You’ll have an easier time budgeting to reach your goals this year when you have a complete picture of what worked and didn’t last year and make strategic changes.

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