Are you ready for a year-end financial check-up for your business?

Alan Hill | November 24th, 2010

As the year comes to an end, now is the perfect time to bring all of your business advisors together for a year-end financial check up. Make it a point to set up a meeting with your accounting, legal, estate planning, investment and retirement planning advisors at the end of each year to get a check up of your business and personal financial health. If you have partners in the business, they should also be included in this meeting.

Among the items on the agenda for the meeting should be comparing your most current business financial statements against past records and benchmarks in your industry. The comparison will help you determine where you stand financially, and help you plan the goals you want to set for the coming year or longer term. This discussion is more important this year than ever before, because so many 2011 tax treatment issues have not yet been determined by Congress. By knowing your personal and business goals for the coming year, your team can help you determine contingency plans to help you reach your goals under various scenarios.

This meeting is also the perfect time to discuss any changes you anticipate will take place in the coming year. Are there rental or lease agreements expiring? Are large purchases or sales a potential? Are legislative or regulatory changes or even retirement or serious illness of key personnel or business partners on the horizon? Are you looking to expand your business by purchasing another, or selling the business to someone else? These are just a few of the questions that you might discuss.

Is your business a medical practice, law or architectural firm? If your business operates as a Professional Service Corporation, you’ll want to make sure you address the special tax obligations associated with this type of business as the year comes to an end. Any profit shown in a PSC will be taxed at 35 percent, so it is important to correctly estimate your profits for the year and determine how those profits might be distributed through bonuses, profit sharing, dividends, salaries, benefits or other purchases.

The year-end check up meeting is also a good time to discuss specific issues going on within the business, such as business procedures, routine office policies, personnel issues or even the potential hiring of additional staff members, to name a few.

Review your will and estate plan at this time also. You’ll want to make sure the beneficiaries reflect any life changes such as a divorce, death or changes in your relationships. Each partner in your business should do the same. If your company owns a life insurance policy on one or more key employees, review the policy to make sure it still reflects current employees or executives and an accurate value to the business.  Outdated life insurance policies can possibly be converted to revenue by selling them to a third party, known as a life settlement.

Just like preventive healthcare steps help keep your body healthy, examining the financial health of your business can provide you with additional tools to keep your business healthy too. Be sure to ask your accounting professional, if he or she doesn’t ask you first, to help you coordinate a complete year-end review with your business partners and advisors.

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