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• By Pretha Yasmin
• Nov 7, 2024
• 7 mins read

5 Purchases Every Small Business Should Make Before Year End

Updated on November 7, 2024

As the end of the year approaches, it’s not just holiday planning that should be on your mind. As a small business owner, it’s also crunch time to make sure you can maximize tax deductions, boost efficiency, and position yourself for growth in the coming year. Whether you’re trying to reduce your taxable income or just want to make smart investments, making the right purchases before December 31 can set your business up for success. Here are five end-of-year purchases that could benefit your small business.

1. Equipment Upgrades

Why It Matters: Equipment is one of the smartest end-of-year investments you can make. Whether you need new machinery, office tools, or even vehicles, upgrading your company’s equipment at the year’s end can give you two major benefits:

1. You’ll be able to capitalize on year-end sales.
2. You can unlock tax advantages.

Under Section 179, a tax law that allows businesses to deduct expenses on equipment, vehicles, and other qualifying purchases, you could deduct up to $1,220,000 on equipment costs (as of 2024). Additionally, business owners can claim a depreciation of up to 80% of the purchase price. But time is of the essence, as if you wait until next year, bonus depreciation drops to 60%, meaning you’ll save more by making qualifying purchases before December 31.

Equipment Upgrades to Consider:

• Laptops and Computers: If your current technology is outdated, upgrading will make your daily operations much smoother.
• Vehicles: End-of-year auto deals can be hard to beat as dealerships try to meet quotas and clear out old models to make way for the new ones. You can save on the cost of a new vehicle while also claiming a Section 179 deduction.
• Machinery: Upgrading heavy machinery now ensures you start the year off with high-functioning, efficient tools.

Pro Tip: To maximize your savings, consult your tax advisor to ensure your planned purchases qualify for the Section 179 deduction.

2. Major, Critical Expenses

Beyond equipment, there are essential expenses that every small business needs to cover. Some of these may be easy to delay paying due to their cost, but they may be critical for long-term success. Addressing these major expenses before the end of the year can help alleviate the financial burden for next year while also helping you secure valuable tax deductions.

Examples of Major Expenses

• Real Estate or Lease Payments: If you’re planning to expand or relocate your business, the end of the year is a great time to make down payments on commercial properties or pay ahead on leases. This could help you reduce your tax burden while securing your space for future growth.
• Debt Repayment: Paying down high-interest business loans or credit lines before the year ends not only reduces your financial obligations for the next year but could also allow you to deduct some of the interest paid, depending on your specific situation.
• Insurance Premiums: Paying your business insurance premiums in advance, whether its liability insurance, workers compensation, or property insurance, can be a significant expense. Doing so before the year ends may offer both discounts and tax benefits.

Pro Tip: Focus on expenses that contribute to long-term business growth or that address crucial needs, like legal compliance or risk management. These investments will pay off in the form of operational efficiency and reduced risk.

3. Business Services, Including Tech Subscriptions

Why It Matters: From cloud-based software to subscription-based business services, there are countless ways technology can help small businesses run more smoothly. Signing up for business services, or upgrading at the end of the year, allows you to deduct startup fees or annual subscription costs while taking advantage of potential year-end discounts. Whether it’s accounting software, project management platforms, or marketing automation tools, these services offer a quick and affordable way to streamline operations. Investing in the right tech can also help you stay ahead of competitors by increasing efficiency and improving the customer experience.

Business Services to Consider

• Cloud Apps: Platforms like QuickBooks, Slack, and Trello can help you stay organized and productive, and many vendors offer discounted rates near the end of the year as they aim to hit sales goals.
• Marketing Services: Need help scaling your online presence? Investing in content marketing services, SEO, or social media management tools can position your business for growth in the coming year.
• Cybersecurity Tools: With cyberattacks on the rise, securing your digital infrastructure is more important than ever. Consider upgrading your antivirus or firewall solutions to safeguard your business.

Pro Tip: Make sure to keep all your receipts and consult your accountant on how to categorize these deductions.

4. Employee Benefits & Training

Why It Matters: Investing in your employees is one of the most impactful decisions a small business owner can make. Research shows that businesses that offer comprehensive training and benefits packages see higher levels of employee satisfaction and retention, which can translate into better performance and long-term success.

By enhancing your benefits packages and investing in employee training at the end of the year, you’ll not only boost morale but also take advantage of tax deductions for these expenses. Plus, you’ll position your business as a great place to work.

Employee Investments to Consider:

• Professional Development: Sending your employees to workshops or investing in courses and certifications helps develop new skills.

• Ergonomic Furniture: Investing in ergonomic furniture, such as adjustable chairs or standing desks, promotes a healthier and more productive work environment. You can also claim these purchases when doing your tax deductions.

Pro Tip: If your team is working remotely, offering a stipend for home office equipment or technology upgrades can be a great way to ensure they’re working comfortably and efficiently.

5. Inventory Purchases or Prepaid Services

Why It Matters: If your business relies on reoccurring services or maintaining inventory, prepaying for services and stocking up on necessary materials before the year ends can be a smart move. Not only does this approach reduce your taxable income, but it also guarantees that you’re prepared to meet upcoming business needs without scrambling for resources. By making these purchases now, you can lock in current pricing, which can save your business money in the long run.

Benefits of Prepaying for Services and Stocking Up on Inventory:

• Tax Savings: Paying in advance for key services or purchasing inventory before the end of the fiscal year allows you to deduct these expenses, lowering your taxable income. This means you can reap immediate financial benefits while preparing for next year’s projects.
• Protection Against Price Increases: When you prepay for services like accounting, maintenance, or legal support, you shield yourself from potential cost spikes. Similarly, buying necessary inventory now means you won’t have to deal with rising costs or supply shortages down the line.
• Avoid Operational Disruptions: Having all your services lined up and adequate inventory on hand can provide peace of mind as you enter the new year. This proactive approach reduces the risk of disruption and allows you to focus on growing your business without worrying about logistical challenges.

Make Strategic Year-End Investments to Propel Your Business

Of course, you can only take advantage of these end-of-year small business opportunities if you have the cash on hand.  Custom, short-term financing from QuickBridge can help you get the capital you need to make strategic purchases now, putting your business in a stronger position for the upcoming year while keeping costs under control.

This information is not tax advice. Please consult your tax advisor or a professional for more information.