Five Year-End Financial Planning Tips That Can Help Your Business Thrive in the New Year
The year is quickly coming to an end. While you may be excited for the fresh start that a new year brings, it's as important to plan as it is to hope. As a business owner, this is the perfect time to sit down and do a quick recap on your finances while also making some plans and changes for the new year. But where do you start? Here are five year-end financial planning tips that will bring your business into the new year with confidence and success.
1. Analyze Your Financial Statements
There are three main statements that make up a financial report: a profit-and-loss statement, a balance sheet, and a cash flow statement. Run these reports (or ask your accountant for copies if you use an accountant) and give them a good look-over. You'll see one of two things – either you'll have excess profits, which means you'll need to devise a strategy to spend them responsibly in the new year, or you'll have less profit than expected, which means you'll need to focus on cutting back on spending and earning more in the new year.
2. Write Down Three Ways You Can Improve
Once you have looked over your financial statements, immediately sit down and brainstorm, perhaps with your partners or managers. Write down three ways you can improve in the new year, either by bringing in more profit or reducing spending. These strategies could be as simple as "charge more for late accounts" or "buy packaging from supplier x because they're cheaper." This gets you into the right mindset as the year begins.
3. Get Your Tax Documents Done Early
Preparing tax documents is not anyone's favorite thing to do, but the sooner you do it, the sooner you can mentally move on to the new year's finances. Generally, you need to have all of these forms filed by January 31st:
- W-2s for all employees
- 1099s for all contractors and freelancers
- 940s reporting unemployment tax
- 941s reporting quarterly taxes
Preparing these documents gives you insight that helps you plan for the new year. For example, maybe you'll notice that you paid out too much to contractors and need to focus on having your employees take on more work. The earlier you make these realizations, the more time you have to implement them.
4. Plan Employee Bonuses Beforehand
If you have employees, now is the time to plan for any bonuses you plan to give out. This way, your business can start saving the funds to give out ahead of time. If you do year-end performance reviews for employees, that's a good time to think about their performance and make a list of who deserves a bonus. You don't have to tell employees yet that they will be getting a bonus; you just have this information for business planning purposes.
5. List Your Large Investments
Where will your business invest money this year? Maybe you need to hire a new employee to grow, or perhaps it is time to invest some of your profits into new equipment. You will continue to have smaller, everyday-type purchases, but listing the large investments separately will help ensure you spend lots of time planning and researching them — and setting aside the cash or taking out the loans needed to make them. This sort of responsible business planning makes sure the money is spent in the right ways.
With these new-year business planning tips, you'll be set up for success as the calendar changes.
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