The Importance of a Mid-Fall Financial Review

For small business owners in the Twin Cities and across Minnesota, the year often feels like it speeds up the moment Halloween passes. Before you know it, you’re scrambling to tally income and deductions, often leading to a stressful and expensive surprise in the spring.

At Haworth & Company, we believe tax planning should never be a surprise. October and November are the most critical months for proactive financial decisions. By taking a few steps now, you can control your tax outcome, maximize your savings, and ensure you head into the holiday rush with a clear financial picture. We’re here to help you get out of reaction mode and into strategy mode.

1. Review Your Budget-to-Actual Spending

Most business owners know their revenue, but they often lose track of their **true profit margin** because they aren’t consistently comparing planned spending (budget) against actual spending. This is critical in the fall because it highlights where you may still have room for deductible investments before year-end.

Three Areas to Focus On Now:

• Capital Investments: If you need new office equipment, software, or machinery, purchasing it before December 31st allows you to take advantage of Section 179 deductions or bonus depreciation, immediately reducing your taxable income.
• Marketing & Training: Look for unspent budget in marketing, staff training, or professional development. These are immediate write-offs that improve your business for next year.
• Inventory: Clear out or sell off old inventory before year-end, as holding obsolete stock can negatively impact your reported profitability.

2. Forecast Your Estimated Tax Liability

The single biggest cause of year-end panic is not knowing how much you owe the $\text{IRS}$. If you haven’t reviewed your profitability since July, now is the time for a check-in. This is especially true if your business had an unexpectedly strong summer.

Why Forecasting Matters for MN Businesses:

• Avoid Penalties: The IRS and the State of Minnesota require estimated tax payments. If your business profit significantly increased in the second half of the year, you may be facing underpayment penalties if you don’t adjust your final quarterly payment.
• Optimize Retirement Contributions: Knowing your forecast helps determine the maximum tax-advantaged contribution you can make to your IRA or Solo 401k before the deadline, often resulting in thousands of dollars in immediate deductions.
• Cash Flow Management: By forecasting, you can set aside the required cash *now* instead of scrambling to pull money out of business operations in January.

Our team specializes in running these forecasts for small businesses. We give you a clear, precise estimate of your final tax payment so there are no surprises.

3. Clean Up Accounts Receivable AR and Payable AP

Cleaning up your balance sheet is crucial, particularly in accounts receivable and accounts payable. This directly impacts your taxable income for the current year. For **cash-basis** businesses, paying bills before year-end increases deductions, and for all businesses, writing off uncollectible debt now can generate a deduction.

End-of-Year Bookkeeping Checklist:

• Review Bad Debts: Identify any client invoices that are truly uncollectible. Write them off as bad debt now to take the deduction in the current year.
• Prepay Expenses: Consider prepaying certain operating expenses, such as the first month of rent or a renewal fee for an annual subscription, to claim the deduction this year.
• Verify Inventory: Perform a physical count or review of your inventory records to ensure accuracy. This is especially important for manufacturing and retail businesses.

Conclusion: Partner with an Expert for Peace of Mind

Don’t let tax planning become a source of stress. The time you spend on these three steps now is an investment that pays off directly in reduced taxes and improved peace of mind.

If you’re located in the Twin Cities or Rochester, MN, and need expert guidance to conduct a thorough year-end checkup, our team at Haworth & Company is here to help. We turn complex tax rules into clear, actionable plans so you can focus on what you do best—running your busines.