15 Essential Year-End Financial Planning Tips for Entrepreneurs and Business Owners

As the year comes to a close, it's the perfect time for entrepreneurs and business owners to get ahead of their financial game. Effective year-end financial planning can not only save you money on taxes but also set your business up for success in the coming year. Whether you're running an LLC, partnership, or S corporation, there are strategic steps you can take now to optimize your financial health and minimize your tax liability.

In this blog, we’ll walk through 15 key year-end financial planning tips designed specifically for business owners. These practical strategies focus on balancing diversification, liquidity, and tax planning to help you wrap up 2024 on a positive note and build a strong foundation for 2025.

1. File Required Reports and Stay Compliant

For most businesses, there are critical year-end filings that need to be completed to ensure compliance. If your business is registered as an LLC, S Corporation, or other state-registered entity, be sure to file the FinCEN Beneficial Ownership Report if required. Missing the December 31 deadline could lead to substantial penalties—over $500 per day, so don’t delay! Additionally, check for any state-required annual or biennial reports that must be filed before the year ends to maintain good standing.

2. Ensure Payroll is Up to Date

For business owners who have employees—or even themselves on payroll—it’s crucial to make sure all payroll is processed by year-end. For S Corporations, owners must pay themselves a reasonable salary. Ensuring that’s done before December 31 will help avoid IRS penalties. You can also use this time to boost contributions to 401(k) retirement accounts, which can reduce taxable income. Don’t forget to consider any bonuses or extra paychecks that may need to be issued.

3. Invest in Business Equipment or Supplies

If your business needs new equipment or supplies, now is the time to make those purchases. Under Section 179, you can deduct the entire cost of qualifying assets like computers, software, and tools in the year they’re purchased. This helps reduce your taxable income for 2024 and boosts your business operations. If you’re considering buying a business vehicle, there are specific strategies for maximizing deductions, so take a look at those before you make any purchases.

4. Show Appreciation to Clients, Customers, and Referrers

It's always a good idea to show your clients and referrers that you appreciate their business. Sending a thoughtful gift or gift card is a great way to build relationships while also benefiting your bottom line. For tax purposes, gifts under $25 per individual and $75 per business are deductible. This simple gesture can go a long way in fostering goodwill and encouraging repeat business in the new year.

5. Make Pass-Through Entity Tax Payments

If your business has elected to be taxed as a pass-through entity (PTE) like an LLC or S Corporation, be sure to send in your PTE tax payments before the year ends. This allows you to claim the deduction for the current tax year. For many entrepreneurs, these payments can significantly reduce the overall tax liability of their business, making it a critical year-end task.

6. Pay Estimated Personal Taxes

For many business owners, especially those with pass-through income, taxes aren’t automatically withheld. This means you might need to make estimated personal tax payments. To avoid penalties, estimate your net income for 2024 and apply your 2023 tax rate to it. Make sure to send payments to the IRS and your state tax authorities by the end of the year. This will keep you on track and prevent any tax surprises in the spring.

7. Review and Update Insurance Policies

The end of the year is an excellent time to review your business’s insurance policies. Ensure that your life insurance, workers' compensation, and liability coverage accurately reflect the current state of your business, including revenue, staffing, and operational risks. This proactive review will help you avoid any gaps in coverage and ensure your business is properly protected.

8. Review Business Financials and Get Your Books in Order

Before you wrap up the year, it’s important to reconcile your business books and review financial records. This includes going over bank accounts, credit cards, and accounts payable/receivable to identify any discrepancies. Make sure to collect W-9 forms from contractors or vendors in preparation for sending out 1099 forms in January. This is also the perfect time to assess if you want to change your business structure—switching to an S corporation, for example, could offer potential tax benefits.

9. Maximize Retirement Contributions

Don’t forget about your own retirement planning. Max out 401(k) contributions for yourself and your employees by December 31 to take full advantage of tax-deferred savings. If you're considering a Roth 401(k), now’s a great time to set one up. This strategy allows you to contribute post-tax dollars and withdraw funds tax-free in retirement, which could be beneficial for your long-term financial goals.

10. Adjust Income and Expenses for Tax Efficiency

If your business is having a particularly strong year, you might want to consider deferring income or accelerating expenses to reduce your taxable income for 2024. Alternatively, if you expect a better financial year in 2025, you can shift some income into the new year. Review outstanding invoices and decide whether to collect some payments before the end of the year or push them into January for tax purposes.

11. Take Stock of Inventory and Write Off Bad Debts

As the year ends, take inventory of your business’s assets, including any obsolete or unsellable inventory. You may be able to write off the cost of these goods to reduce taxable income. Similarly, if you have any bad debts from customers that will never be collected, consider writing them off as well. This strategy can help lower your business’s overall tax liability and streamline your financial records.

12. Manage Cash Flow and Loan Repayments

Review your business’s cash flow and assess whether you have enough liquidity to meet any upcoming expenses or debts. If you have high-interest loans or outstanding debts, consider paying them down before the year ends to save on interest. Creating a cash flow projection for 2025 will also help you plan for potential financial needs and ensure that you’re not caught off guard by upcoming obligations.

13. Set Goals and Plan for the New Year

Financial planning isn’t just about managing the current year; it’s about setting your business up for success in the future. Take some time to define your financial goals for 2025, whether that includes expanding your team, investing in new technology, or increasing revenue. A solid plan can guide your spending decisions and help you focus on long-term growth, while a budget can help you keep track of your finances and avoid overspending.

14. Organize and Digitize Your Financial Records

A crucial, but often overlooked, step in year-end planning is ensuring that your financial records are properly organized. Scan and file all your receipts, tax documents, and any other important records in a digital format. This not only ensures that you’re ready for tax season but also helps you stay organized and compliant. Proper documentation will also make it easier to file taxes and defend against any potential IRS audits.

15. Hold a Board of Directors or Advisory Meeting

If your business has a Board of Directors, now is the time to hold your mandatory annual meeting. Document the meeting minutes and keep them on file for compliance purposes. These meetings also offer an opportunity to review the business’s financial performance and strategize for the coming year. If your business doesn’t have a formal board, consider setting up an advisory board. This can provide valuable feedback and potentially unlock tax-saving opportunities.

A Closing Thought

The end of the year is an ideal time to implement strategic financial planning. By focusing on tax savings, managing liquidity, diversifying investments, and setting clear goals for the new year, you can ensure your business is positioned for continued success in 2025.

Don’t wait until January to make these important decisions—acting now will allow you to optimize your tax strategy and create a stable financial foundation for the year ahead. Consider meeting with your CPA, reviewing your year-end financial strategy, and taking action before the calendar turns. By doing so, you’ll enter 2025 with confidence, ready to tackle any challenges that come your way.

Looking for a strategic partner to help you implement these financial planning strategies? Schedule a free 45-minute Discovery Call today and take the first step toward maximizing your financial future.