It’s the end of one year and the beginning of the next. Small Business owners have some discretion as to when they book revenues on the last day of the year.
First you have to ask, what are you trying to accomplish?
- Do revenues need to look super strong for investors?
- Are you trying to defer tax payments until next year to conserve cash?
If you need to impress investors, booking revenues sooner is always a better plan. That means, revenues and bottom line should look stronger in the earlier year.
Small Businesses Need to Conserve Cash
If you’re trying to conserve cash, then the strategy would be to prepay expenses, defer booking revenues (all done legally BTW) until the next year.
This reduces earnings before taxes and net income in the earlier year.
My bias is to conserve cash by reducing taxes now.
You’ll pay the taxes later but gives you access to invest the cash to help the business now.
My friend asked if she’d get “brownie points” if she booked her sales earlier; that her business would look stronger to a lender if she did.
I said the brownie points come when your working capital and quick ratios are in order. They are a better measure of risk in your portfolio.