Can you believe it’s already the end of the 2016 3rd quarter? I can’t! As we move into the 4th quarter, now is a perfect time to start preparing for a smooth year end. Reviewing your books on (at least) a quarterly basis is always good practice but is even more important this time of year. If you have any questions, your CPA or bookkeeper will be more readily available this time of year to answer them. Take advantage of this!
Let’s talk about some bookkeeping items for the 3rd quarter. This is a good time to review how your year is going and assess your projections and cash flow. Compare your revenue numbers against your projected numbers and look at your cash. Do you have more on hand then you thought you would? Think about using it for marketing or think of other areas to put it to good use? If you don’t have enough cash on hand in case of an emergency, assess areas where expenses could be dialed back in order to get those cash reserves needed for ‘just in case’. How much cash should you have on hand? A good number is 3-6 month’s worth of cash for necessary expenses. Of course this varies depending on the business and industry so be sure to talk to a professional, if needed.
Assessing your cash on hand and determining if you have enough is also a good time to review your Accounts Receivable. If you have some accounts past due, now is the time to take a more aggressive approach on collections. This should help increase your cash on hand.
Also, start thinking about those beginning of the year expenses. Do you hold memberships, certifications, or subscriptions that renew annually at the beginning of the year? Will you need to file for a 2017 business license or renew with the Secretary of State in January? Those seemingly small $50 here, $100 there expenses can add up! Be sure you’re thinking of those when looking at your cash reserves.
Let’s say you have a healthy amount of cash reserves….good for you! Holding onto it, in most cases, doesn’t make much sense. Talk to your CPA about ways the money can be invested in the business and deductible on your tax return. Investing a surplus in your business can be anything from purchasing capital assets to new equipment to hiring more employees. This time of year is also a good time to think about charitable contributions!
You’ll also want to make sure your data is backed up! If you don’t back up on a regular basis do it now before the end of the year. Just in case anything happens, most of your annual data will be safe! Also, if you’ve been slack about entering expenses or tracking mileage make sure you catch up before the year ends. The 4th quarter can get hectic and you don’t want things falling through the cracks!
Take advantage of this pre-holiday, pre-tax season now! A little preparation ahead of time can save you, your bookkeeper, and CPA time and headaches….which can equate to saving money! It can also help your financials if you haven’t been routinely watching them all year.
Jordan Ilderton, CPA