Because you’re not doing anything else at this time of year (insert laughter here…), it’s time to review your end-of-year business checklist so that you can set some goals for next year as soon as 2010 kicks off. Here are a few things to consider, and feel free to add your own end-of-year action items in the comments!
- Log your business expenses. I prefer to just enter all of my business receipts for the year in one swoop, normally in late December. I log my income as every payment comes in, but I just find it easier to get into the expense-entering mindset and handle all of my expenses at once. This is much easier if you have separate business bank account (put that on the to-do list if you don’t have one!).
- Issue 1099s to anyone who did more than $600 of work for you in 2009. Make sure to do this promptly so that you don’t muck up your subcontractors’ tax preparation processes as well as your own.
- Decide how you are going to prepare your taxes. If you’re considering using an accountant for the first time, switching accountants, etc., the time to do your research is now, not on April 10. If you’re looking for an accountant, solicit recommendations from other freelancers or small businesses in your area.
- Purchase some durable goods if you have extra money. If you a) have money in your business account and b) need some items such as a new computer or monitors, pricey computer software (i.e. speech recognition, OCR, CAT), a desk, etc., now is a good time to buy and take the tax deduction for 2009. This applies especially if the item you want/need might go on sale after Christmas and you can purchase it at a discount just before the year ends.
- Review your clients. If you use accounting software, it’s easy to sort your clients by how much you earned from them in 2009. The results may surprise you! Use these results to decide who needs more of your attention next year, who you need to re-connect with and what clients can serve as models of ideal clients (so that you can find more of them in 2010!).
- Review and renew your professional association memberships. Whether to renew just before or just after the first of the year depends on how much money you have and which year you’d like to take the deduction for. Whichever option you choose, take a look at how much you are paying for professional association memberships and whether you need to weed out any associations or add some new ones. If you belong to an association and did not attend/participate in any of their events in 2009, consider dropping your membership.
- Contribute to your retirement plan(s). Here again, if you’re not saving for retirement, put that on the list too. Freelancers can use various retirement savings strategies; I have an Individual 401K (also called a Solo 401K or Super-Simplified 401K) and follow a pretty basic savings strategy. Whenever I receive a payment from a client, I immediately transfer 40% of the money into my business savings account. I use that money to pay my taxes and then deposit the rest into my 401K, investing mostly in index funds. Regardless of your retirement savings strategy, make sure to save something!
As retirement fund, I use a SEP. Deending on how much money you make, you may be able to put in a lot more than an IRA or Roth. See this link I found that gives some info small business retirement fund options: http://www.smsmallbiz.com/Tax-Free_Retirement_Accounts_for_the_Self-Employed.html
I do a “performance appraisal” at the end of the year where I print out reports from my database on how many words I have translated, how much money I have made etc. and then compare them to the business plan that I wrote at the beginning of the year to see whether I have met (or hopefully exceeded) the goals I set for myself. These reports provide a good basis for setting ambitious but realistic goals for next year.
I also try to get my business plan for 2010 written up before the end of the year. Nothing fancy, just a list of this year’s achievements and measurable goals for next year.
Thanks for reminding me that the new year sales will be a good time to purchase a new office chair!
Corinne,
Thanks for the reminder, those are great tips.
Since last year, I started doing something before the end of the year that I’ll add to this list.
It’s kind of my business planning event for the year. For example, I really wanted to become ATA-certified last year, so a couple of days before the end of the year I looked for a certification exam in my area (as it hadn’t made the ATA calendar yet, I went ahead and called ATA and they told me when it was going to be offered). Then, I started backtracking the date, gathering the pre-qual papers, faxing them to ATA and putting milestones in my calendar.
Perhaps it’s too trivial to many, but it just helped me stay on track. I have a colleague that establishes monthly milestones for the business related stuff. So, for example, January is Intense Marketing to New Clients, April is Taxes Tune-up, November is Follow-Up on ATA Leads, etc. Again, perhaps trivial, but sometimes I have the feeling that I get so sucked into working “in” the business that I don’t work “on” the business.
Cheers,
Cris Silva
Good stuff. I rolled my old 401 K from my in-house translator days into a new account, where it is now in holding mode because of the current market situation. I haven’t contributed in the last year until things settle down, preferring to have cash savings for now (I contributed quite aggressively for years). Next year, I will probably move to a SEP!
End of the year is also a good time to clean out our desk, shred old files, create a more streamlined translation/work space, and start the new year with a bang.
Inspired by your post, I just registered for the first step in becoming a court interpreter in Nevada. Payment was due this week, which works perfectly with my end-of-year plan.