Business cycles vary from one industry to the next, so each commercial organization fine-tunes operations to account for its unique flow and business demands. That means diverse small businesses aren’t always focused on the same things. Despite the differences distinguishing each business, commercial ventures are all tied to the calendar year, one way or another.
As year-end looms and businesses ride the wave of fourth-quarter spending, wise operators are already tackling year-end responsibilities and looking ahead to the New Year.
Looking Back to Move Forward
Year’s end is an exciting time for small business owners. Not only does the end of the year present opportunities to evaluate performance and compile financial figures from the prior twelve-month period, but it also provides a jumping-off point for the coming year.
Rolling up your sleeves as the year wraps can create competitive advantages in the coming months. And you’ll start the year on the right foot by getting your finances in order, before flipping the year’s final calendar page.
Where Do You Stand? – Assessing your status is a valuable year-end practice, providing insight you can use to tweak your direction for the coming year. Start your year-end review with a look at your progress toward big-picture business goals.
Did you reach anticipated revenue milestones for the year? Is expansion on pace with expectations? Do you have the infrastructure in place to achieve future goals? Brainstorming these and other pertinent concerns helps you resolve shortcomings and build upon past business successes. It’s not enough to simply answer such questions about your business; you must also get to the bottom of each matter and take appropriate action.
Your original business plan serves as a useful yardstick for evaluating your year-end position. The projections you made in the planning stages of your business now serve as helpful reference points, particularly when measuring progress toward long-range goals. Comparing your business plan forecasts to actual performance may also illustrate outcomes you didn’t expect, giving you the knowledge needed to adapt your approach for faster growth.
Are You on Firm Financial Ground? – You don’t want to kick-off the new year on shaky ground, so it pays to closely evaluate your finances as part of a comprehensive year-end review. Your cash flow statement, balance sheet, and income statement each provide unique insight into your small business finances. Examining these key financial reports is a good start, providing information you can use to plan your next moves.
A business balance sheet provides a still frame view of your business at a particular instant. Measuring the value of assets, liabilities, and business equity, your balance sheet can help you digest whether or not your business is healthy, and determine how much money is available to invest in growth and expansion projects. An accurate balance sheet can also provide early warning, when you’re headed for a financial shortfall – allowing time for you to arrange additional working capital, before running short.
Another important financial reference, your cash flow statement looks at business performance over a designated period, such as a single calendar year. The statement reconciles your opening cash with your closing cash at the end of the year, showing how your business inflows and outflows were distributed during prior months. The report is of particular value, because it not only illustrates how much money moves through your business, but it also identifies exactly where the cash is spent.
Detailed cash flow statements break down spending into three categories – separately accounting for money spent on operations, investing, and financial activities. The operations flow tracks revenue and business expenses, while the investment classification includes assets sold and purchased during the statement period.
Expenses from financial activities that are reflected in your cash flow statement include loans and loan repayment. Once you’ve established your total financing costs, you can use the information to compare alternative forms of funding, with an eye toward savings.
The health of your business and the amount of money you have to work with are instrumental, shaping your business plan. Reviewing your year creates a fresh set of financial data and renewed understanding of your position, relative to your goals. You can put this valuable information to work right away, planning for the new year.
Whether you need more capital, with which to expand your commercial capabilities, or a new marketing approach, to grow your customer base; starting the year with established goals puts you one step ahead of the competition.
If big changes are in store, crafting a precise action plan sets the stage for rapid results. Be prepared to retrain and reorient employees, but as you look ahead, don’t forget to share business success with staff. In addition to wrapping up financial matters and planning for the future, you should also use the end of the year to pay bonuses and distribute pats on the back.
As the year-end business cycle comes to a close, it’s time to evaluate your achievements. A careful review of your accomplishments and missteps provides clues you can use to make your business stronger next year. For results you can bank on, measure your financial health with a balance sheet and cash flow statement, before setting your new year plans in motion.