The 2020 YEAR-END CLEANUP
Start A New Year Right
Year-end cleanup starts with taking a solid inventory count of what products you sell. During this count, you should also be looking at the quality and salability of each product. Keep in mind your customers are not going to accept scratch and dent material for your regular price.
There may be outdated, discounted, or seasonal inventory you need to put “ON SALE” to eliminate, if possible, before year-end. Therefore, if your inventory and situation work for this option, we suggest many companies do their inventory count in November at month’s end. Try to sell this inventory before the year-end.
In a retail clothing store, you may have odd sizes left or other items that have been on the rack for far too long. You can search www.google.com to see the average number of inventory days in your industry and see what everyone else does. Another item to check is the inventory ratio. On Google.com, you can find an obvious definition and how you should use this information to make you more profitable from now on. No, this is not as complicated as you think. Just Google it, and you will quickly see what I mean. INVENTORY MANAGEMENT
Pay Less Income Tax
Yes! Less tax is music for all business owners. The more inventory you have increases your profit so that you can pay more income tax. I know this is what we all want to do to start the New Year. This is a small sample of inventory items, but the concept is the same regardless of industry or product price. Let’s do the cleanup so we do not carry over the same problems to next year.
People Do Not Plan to Fail; They Fail to Plan. Do not let this happen to you. Therefore, start planning your budget for 2020 today.
Look at Your Financial Statements
If your company has Accounts Receivable, you need to look at the due dates. If they are paid monthly, that is great. However, if some are longer than 60 or 90 days plus past due, you should look at charging them off to lower your profit. Subsequently, this will reduce your income tax. Yes, we are big on reducing our profit at year-end to pay less tax.
Do not deceive yourself into thinking that charge offs are bad on your financial statement. If they loan your company money, your banker is looking at your past due accounts receivable and charge offs. When they see how prudent you are at money management, this is a strength, not a weakness.
Review Your Basic Rules for Record Retention
This is the best time of the year to look at what you should do regarding what records you must keep. https://www.usa.gov/federal-agencies/internal-revenue-service