We have stepped into the last quarter of the year. This period could be quite hectic, whether you are a sole trader or a limited company, as you have to report your business’s financial performance to HMRC. This is the time when you have to evaluate your entire-year performance and plan around to ensure that your business does not struggle with the same issues that it has had this year.
At the end of the year, you might be away from work for a couple of days. For this reason, you should set aside enough professional time to plan your business. Year-end planning includes tax compliance as well as brainstorming new methods of taking your business to the next level.
Essential actions for business owners during year-end planning in 2025
Here are the essential actions for business owners during year-end planning in 2025:
- Make sure your accounts are reconciled
First off, you should ensure that all financial accounts are reconciled. These accounts include bank accounts, accounts receivable and accounts payable. They must be up to date. If there is any difference in their add-up, make sure that you know the reason for it.
You should review them regularly, so they do not consume too much of your time if transactions are not reconciled. Regular review will help you spot an error and prevent it from snowballing.
- Review financial statements
Financial statements include a profit and loss statement and a statement of financial position. It is vital to have an accurate record of profit and loss statements, so you can analyse how you have performed in your current year. Do not forget to look at a cash flow statement. It reflects business health. Whether you have a cash surplus or a cash deficit can be known only by a cash flow statement.
All these statements should be up to date and accurate, so you can make the right financial decision. You can better understand what approach needs to be followed to increase your profits in the next year. You can also decide on ways to cut back on costs and grow your profit margins. Review of these statements is also intrinsic because it ensures business assets, debts and equity. You can easily frame a payment strategy for debts such as guarantor business loans.
- Year-end tax planning
Tax planning is a must, whether you are a sole proprietor or a limited liability company. This is necessary because it will help you understand how you can cut down your taxes to retain as many profits as possible. Talk to your accountant and discuss what could be done to reduce taxes. Sometimes, little efforts can help you save a lot of money.
For instance, you can take maximum advantage of depreciation. You can expedite some expenses. If something needs to be bought, you should buy it instead of putting it off. Expenses made within the same financial year will help reduce the burden of taxes. Try to have receipts for all expenses in order to take advantage of tax benefits.
If you can afford it, you can extend the billing cycle of invoices to be collected from your customers until the end of the financial year. If you choose this method, make sure that you always have enough money to pay your suppliers.
- Identify shortcomings and solutions
A year-end review is also paramount because it helps you take stock of your current performance. It is crucial to sit with your advisor and ponder over:
- How the entire year went?
- Did you meet your financial goals?
- In what ways do you think you were successful?
- Where did you go astray and why?
Looking into the real picture of your finances will help you make some crucial decisions. Of course, you would not want to repeat the same mistakes that you made in the past. Discuss with your financial advisor and accountant to understand what shortcomings you have faced and how you can overcome them in the next financial year.
For instance, if your business has been dealing with business debt, you should figure out how you can reduce it. If you are to take out a business loan down the line, you should try to consult a business loan broker. Their advice would help you explore options that best meet your financial needs.
- Consider employee needs in the future
Your employees play a paramount role in ensuring business growth. At the time of reviewing your business performance, you also need to ensure whether your business will need new employees. If your business scales up, you will certainly need more employees. You might have to open a new branch as well.
It is vital that you plan in advance about the positions you have to fill, so you do not waste your time. Determine whether you will have to train them or not. You may have to downsize your company based on your current financial condition. It is likely that you will have to let go of some of your employees.
Whether you are scaling up or down, in both circumstances, you need to ensure that your actions will not affect your profits. At the end of the year, if you find that your employees are costing you more than offering productivity, find out ways to incentivise them. Think of some methods to motivate them to boost productivity.
- Set goals and strategies
Small business owners usually have a hectic schedule, and therefore, they often miss setting crucial goals and tracking them. At the end of the year, you should carefully consider the performance of the whole year. Review goals and find out whether you have achieved them or not. You should try to find out the reasons why some of the goals you missed. What can you do about them now?
The next thing is to set new goals for your business. . You may have to hire new employees, or you may have to borrow money from lenders to achieve them. You should plan in advance, so you do not have to waste time and resources when you are in a race to achieve goals.
This is the time when you should envision what your business will look like in the next five years. This is the time when you make strategies to achieve those goals. Set short-term and long-term goals and ensure that they all help you achieve success. It is vital to ensure that all the people working for your business are aimed at achieving those goals.
Communicate with your employees, advisors, accountants and other important people who are directly or indirectly responsible for achieving your goals. This will help you all work in the same direction.
The bottom line
Year-end planning is a must in order to ensure that your business will not struggle to meet objectives in the next year. This is the time when you are supposed to evaluate your business performance and make strategies to improve it.
Advanced planning will help you avoid wasting your time when you are supposed to take a desired action. Whether you are a sole proprietor or a limited company, you should review your business at the end of the financial year and plan for the next year.