What is critical now is that there are only six weeks to structure your year-end activities, so we will focus on what is most important beyond getting out the W2’s for everyone!
We will discuss three significant items:taxes, developing and reviewing critical year-end reports, and putting together some key elements of your 2021 business planning document.
First, the good news. One of the best things about planning for this particular year-end is that it will continually remind you that 2020 is ending! So, when we celebrate the new year on January 1, 2021, we can also celebrate the end of 2020. Hooray!
On January 1, 2021it will have been eleven awfully long and extremely hard months since the pandemic tragedy began.But real hope is on the way.
But back to the business of this article. First,we should make the point that planning for the “year-end” can have two meanings for some businesses depending on when their “fiscal year ends” compared to the “calendar year”.
For simplicity,let us assume that everyone’s fiscal year coincides with the calendar year. If what we say about planning for January year-end does not apply to your company, it will very soon.
Taxes: Even though the staffing industry has been hit hard, not all have suffered equally.According to one May/June 2020 survey of staffing industry professionals by Haley Marketing, more than 50% of staffing companies had not laid off any internal staff. Much of this was probably due to the federal “Paycheck Protection Program” (PPP) which was intended as a virtual grant and therefore a great help for many companies. The above survey reports that 71% of staffing companies received PPP loans/grants.
It is significant that staffing agencies (as with other companies) did not have to show any need for the PPP assistance. They only needed to demonstrate that the money would be spent on payroll, medical insurance, rent, business mortgage payments or even certain utilities.
The point here is that the many who needed little or no assistance might be in a profitable tax bracket and may therefore need to plan on avoiding taxes. Should bonuses be paid, investments in equipment and services, advance charitable giving? It maybe a good time to talk with your accountant and/or tax consultant.
We all should know that tax avoidance is perfectly legal, but tax evasion is a crime. Tax planning, even at this late date, can save many staffing agencies some real money.
If you expect losses in 2020, you could get ready to file early in the year for a substantial refund using the 5-year carry back provision. The Work Opportunity Tax Credit (WOTC) ends Dec 31, 2020 so if hiring makes sense for the several areas of an applicant’s eligibility, before year end, would be a good time.
A final note about taxes. As the year ends, especially if you are a new company, make sure your business registration and/or type corporate structure is right for you. Now is the time to consult with your accountant to make sure you are in the right structure for the coming year. It could save you a lot of money.
For more on these tax planning items (and others) see “accounting today” article dated October 27, 2020 titled “New Twists in Year-end Tax planning”.
Year-End Reports: you should review these reports in detail. All client, employee,payroll and expense reports. This should probably be done on a month-by-month basis plus year to date totals. Your staffing software can be a great help in generating such reports. Many of these will be standard but many software products allow for the creation of customized reports. Use them to get the information you want.
If needed, get advice from your staffing software supplier on how to create standard and customized reporting.If you have not done so already, set up an auto-schedule to generate and email monthly reports to yourself and key staff for the coming year. This will keep everyone “on-top” of the numbers and have them instantly available for staff meetings.
By reviewing these reports you will know exactly what happened in 2020, where expenses spiked and when, what clients increased or reduced staffing, contract employee’s performance, sales, cost of sales, aging of accounts receivable, etc. etc.
Speaking of staffing software, make sure you are optimally using important features like your applicant tracking system (ATS) that automates critical areas like online applications, on boarding procedures and documentation,and medical insurance.These (and other features)will make things a lot easier and more efficient especially at busy times.
Some of these features will also keep you more compliant with government regulations and client work requirements.(See also my previous article:“The Critical Role of Staffing Software for Management and Profitability”.
2021 Business Plan: Your year-end planning should include establishing some key elements for your 2021 business plan. There is no better time to make note of critical information than while you are reviewing the previous year in detail. Those year-end reports will most likely point out areas of concern where changes are needed. These will become part of your 2021 business plan.
For example, your client activity reports will have pointed out which clients and which job orders continued to do well even during the high points of the pandemic. This will indicate where to focus attention in the first two quarters of 2021 where COVID-19 will most likely be a continuing issue.
Employee reports with hours worked, stability in job placements, complaints, or compliments during 2020 may indicate where changes may be advisable including changes in recruitment procedures, training, and screening.
Your review very well may note areas of cost increases and,therefore, implications for your overall pricing structure. Are increases in order or can increased efficiencies get you covered well enough to maintain current pricing if otherwise indicated?
Client retention issues can also show up in your year-end reports. What clients stopped or greatly reduced their business with you? Was it Covid-19 or something else? Never lose contact; if just a courtesy phone to say “hello” or to ask how they are surviving. One businessman (or woman) to another. And,year-end reports will easily show how well you reached your sales goals or in this last year how well you were able to limit losses.
A final note: I cannot help but mention, in regard to this year’s losses, what the reality is and has been for far too many businesses.
The hospitality and entertainment industries were probably hit the hardest, and the staffing companies who relied on them.If you are in one of those industries or were otherwise hit hard, survival is the goal. I do not just wish you well, I also urge our government to help. (I have personally called congressmen, Senators and even the White House to advocate for an additional round of PPP and other assistance where needed.
Without being at all political, I applaud what Secretary of the Treasury, Steve Mnuch in said during recent stimulus negotiations:“We are not concerned about the deficits right now. This is “war” and like war, failure is not an option” Let’s win!