Is it too soon to talk about year-end planning? Undoubtedly some of us won’t be sorry to contemplate the end of 2020, for various reasons. But aside from that, truly it is not too early, because tax considerations and budgeting for 2021 are going to be critical.
Consider just a couple of factors that are unique to this past year:
- It’s likely that you received a PPP loan. Some businesses are currently working through their loan forgiveness calculations with their banks. But remember, as it stands right now, the IRS intends to disallow tax deductions on those expenses (payroll, rents, utilities) that you paid with PPP funds. That tax impact could be significant.
- Your financial results to-date may not look like a normal year. Will November and December be any less “abnormal”? You need a strong projection of your net income and cash flow headed into the final months of 2020 and the new year. Some businesses are relying on a strong start to the new year, to recover lost ground and possibly capitalize on pent-up demand created by the 2020 lockdowns and COVID fears.
- Business owners who have wrestled with employee layoffs, the interplay between offering a return to work versus expanded unemployment benefits, and a re-evaluation of their internal office needs. Technology is a huge factor – will your forced “work-from-home” practices become permanent, out of necessity, employee preference, or your own preference? What does this mean to your technology budget? What does it mean to your office culture, and what are you doing to prepare?
That’s just three quick thoughts. There are more – you can probably think of more. Who will you consult for help on these matters? Now is the time to get close to your trusted advisory team, and start your move into 2021. You’ll need, to quote a well-known movie scene, a “particular set of skills” to do so: critical and detailed financial analysis for forecasting, economic insight across industries, tax expertise, and strong internal control (of budgets, process, and data management. Availing yourself of those advisory skills is your top priority right now.