-- December is always a hectic month, but it's an important one for your small business.
A few easy steps now will save you money and help you be more successful in 2012. I've whittled your December end-of-year to-do list down to three critical areas.
1. Reduce your taxes. You can pay Uncle Sam less in April by being smart in December.
First, call your tax adviser. I do. Every December, I call my CPA — Steve Thielmann in Campbell, Calif. — and we go over year-end tax planning. We go over my profits and losses and examine certain types of business expenses. He gives me guidance on how to legally lower my tax bill now if possible.
The basic rule is accelerate expenses, delay income. In other words, you want to do whatever you legally can to lower your total profits for the 2011 taxable year.
Let's look at the first part of that equation: accelerate expenses.
One thing I do is to make sure my independent contractors — and I use a lot — get all of their invoices to me by Dec. 20 for work done this year. Prepay January rent and some January expenses if possible. Pay your registration or exhibit fees for upcoming conferences. Print your brochures now. Make charitable donations. And here's a fun part: Go shopping. Now's a good time to replenish your office supplies, furniture and equipment.
For the second part, delay income, don't send your invoices til after Jan. 1 if you can. Of course, if you need that money to pay your bills or a customer might flake if you delay, get those invoices in the mail.
This all assumes that your fiscal year is your calendar year and that you operate on a cash, rather than accrual basis, as most small businesses do.
2. Set up a qualified retirement account. If you don't already have a retirement plan for you and your employees, ask your tax adviser about one now.
Many plans need to be established by Dec. 31 though you don't have to put money in them until April 15.
Many entrepreneurs neglect to put money away for retirement, optimistically relying on the sale of their businesses to take care of them in their golden years. That's risky at best, unrealistic at worst.
It puts all your eggs in one nest, and that nest is out on a limb. What this recent recession proved was even great companies can suffer through no fault of their own.
So it's critical for small-business owners to diversify their assets. Yes, that means investing a bit less in your business and a bit more in yourself. Whether you're 30 or 50, it's important to have a retirement account. You'll save on taxes, too.
3. Update systems. The beginning of a year is a natural, and ideal, time to put new back-office operating systems in place. It's great to start fresh on Jan. 1, and it also makes record keeping far easier if you change when the calendar year changes.
For instance, if you're still using Excel spreadsheets to take care of your bookkeeping, Jan. 1 is the perfect time to switch to accounting software or cloud-based accounting programs. That way you'll have all of 2011 records in Excel and all of 2012 records in your new program rather than splitting a year between two systems.
The same is true for updating systems for such key operations as payroll, backup and document storage, merchant accounts, even email, customer relationship management, or collaboration tools.
December is the perfect time to examine and choose new systems, so you'll be ready to go Jan. 1. Remember to evaluate cloud-based options — I'm a fan — because these are often especially designed for small businesses and provide greater power and ease of use.
So take time for these three important steps during your very busy December, and you'll be ready to start fresh on New Year's Day.
Rhonda Abrams is president of The Planning Shop and publisher of books for entrepreneurs. Her newest is the 5th edition of The Successful Business Plan: Secrets and Strategies. Register for Rhonda's free newsletter at www.PlanningShop.com and "like" The Planning Shop on Facebook for updates. For an index of her columns, go to smallbiz.usatoday.com. Twitter: twitter.com/RhondaAbrams. Copyright Rhonda Abrams 2011.