The start of the year is the best time to reflect on the past 12 months and prepare for the next. People often make new year’s resolutions to live a healthier life – exercise more often, improve their diet, or cut down on alcohol. You can make the same sort of new year’s resolution for your business, to help it stay in top shape for the upcoming year.
Since cash is the lifeblood of your business, it makes good sense to review the overall financial health and see where you can make improvements. Here are 9 useful tips that will help you understand what you’ve achieved in the past year and what you might be able to achieve this year. Some you can put into action right now. Others can become resolutions to help your business grow in the new year.
1. Review your financials
It may not be the financial year-end for your business yet. But it’s a good time to review your company’s financials. You are not doing this to make sure the numbers add up and reconcile. It doesn’t provide any value to the growth of your business. You are doing this so that you can use financial data to extract business insights and make better decisions. Remember, every business decision you make, either big or small, has a financial impact on your business.
The best practice is to review your financials at least once a month. This allows you to react quickly to the ever-changing business environment. If you put it aside for too long, the data becomes stale and the insights are not as meaningful. Avoid the common mistake of reviewing your financials only once at year-end.
To accomplish this, you’ll need to update your books first before you can review your financials. Set a time and commit to updating your books shortly after month-end. If you don’t have the time or the skills to do it, consider seeking external help so you can focus on running the business.
2. Review growth, revenue and sales goals
Take some time to reflect on the past year and ask yourself some important questions:
- Did your business grow?
- How did your revenues and profits compared with the previous year?
- Are sales trending up?
- Does your expenditure over the past 12 months give any cause for concern?
- If you made a list of goals last year, did you achieve them?
In short, try to understand how your business has changed since the end of the previous year. If it has grown, give yourself a pat on the back and keep going.
If business hasn’t improved, ask yourself why, and dig into the figures to find out more. Analyze the numbers in the context of your business. The annual financial statements is the company’s report card for the year. It is a result of all strategies and tactics that were deployed and it is a reflection of your business model. If you don’t understand how to read the company’s financials, discuss with your accountant to understand how the numbers were put together to help you interpret those key figures.
3. Stay informed on new tax regulations
Tax regulations change on a regular basis. Not all changes are relevant, but some of the changes will impact both the business and you as a business owner. The latest changes that may impact you include the passive income rules and TOSI. Talk to your accountant to make sure you’re up-to-date, so that you are not blind-sided by the impact of your business decisions.
4. Check the tax compliance status
You may have multiple accounts registered with the CRA – corporate income tax, GST/HST, payroll, etc. Review each account to ensure your business is in good standing. If there are overdue tax filings or outstanding balances, you should address them immediately because penalties and interest accrues on a daily basis.
If you are not familiar with your company’s tax compliance requirements, ask your accountant when you’ll need to file and pay taxes. Set up your calendar with appropriate alerts and reminders for the upcoming year.
Getting your taxes filed shouldn’t be a difficult task. If you find yourself dreading this process, it is usually a sign of poor record keeping and having to spend a lot of time retrieving messy data. You can easily overcome this by moving to cloud accounting.
5. Improve your internal accounting process
It’s hard to take a step back and evaluate your internal accounting process when you’re busy using it on a daily basis. So a quieter period of the year is a good time to consider whether it’s working for you.
If you’re using traditional desktop accounting software or Excel spreadsheets, think about the benefits of moving to cloud accounting. Cloud accounting makes it easy to access your company’s financial data from anywhere at any time, using a laptop, tablet or smartphone.
If you are keeping paper copies of receipts, ask yourself, is it time to switch and start keeping digital copies of receipts? Taking a photo of them means you can store records on the cloud in one central location.
You’ll also reduce your IT costs, because software maintenance and upgrades are handled for you. And cloud accounting is secure, with powerful encryption and remote backups. So there’s less chance of your vital business information being lost or stolen.
6. Review the payroll process
You may be comfortable with your current payroll process. But it’s worthwhile to review the process to see if you can improve its efficiency. Businesses normally pay their employees bi-weekly and remit payroll taxes to the CRA on a monthly basis. As a result, you are constantly checking to see if your employees are paid the right amount on time and that payroll taxes are remitted to the CRA by the remittance due date.
Saving a bit of time each step can yield significant time savings because payroll is a recurring process. Here are a few common areas that could be improved:
- Calculating payroll deductions. Are you calculating it manually? If so, it is inefficient and prone to error.
- Paying your employees. Are you paying your employees by cheque? Direct deposit is a more efficient way of paying.
- Generating pay stubs. Are you printing and issuing pay stubs to each employee? Having your employee access historical pay stubs online is more convenient.
- Posting payroll journals. Are you posting payroll journals manually to your accounting system? Establishing a connection between payroll and accounting system could facilitate this process.
- Remit payroll taxes. Are you setting calendar reminders to remit payroll taxes by the 15th of each month? Consider outsourcing payroll as this function can be handled for the business.
Review each step to see how you can free up more time so you can focus on running the business.
7. Put together your goals for this year
It’s important to wind down and give yourself a break from work at least once a year. Taking time off to spend with family and friends will help you recharge and be ready for this year.
It can also help you get a broader perspective on your business. When you’re not concentrating on day-to-day tasks, you’re freeing your mind to think outside the box. Some of the best business development ideas happen when you’re relaxed. So kick back, and switch out of work mode for awhile. You and your business will benefit.
Make a shortlist of your main business goals for the year and put them somewhere you can see them. These might include sales targets, revenue figures, opening new stores, taking on more staff, or improving business relationships with existing clients.
Try to set yourself some goals you know you can achieve. Work towards these during the year and check them each month to remind yourself where you’re going.
Once you’re done, translate the goals into numbers by creating a budget for the upcoming year. A budget helps control your finances, ensure you can continue to fund your current commitments, enable you to make confident financial decisions and meet your objectives, and ensure you have enough money for your future projects. It outlines what you will spend your money on and how that spending will be financed.
8. Check in with your customers
Getting feedback from your customers is a great way to improve your product or service. Here are some examples of questions you could ask them:
- What could we do better or differently?
- What are the three main things we do well?
- Why did you decide to use our services or product in the first place?
- Would you recommend our product or service?
Consider sharing your findings with your key customers, and tell them how you plan to improve your offerings.
Once you identify the factors that will bring business success, start creating key performance indicators (KPIs) based on the success factors. These are the metrics you should monitor consistently throughout the year.
9. Continue to develop your financial intelligence
The key to achieving lifelong financial success is by continually devoting time to improve your financial intelligence. You can’t make sound financial decisions if you are not equipped with the proper skills and knowledge. It’s easy to see the short-term financial impact of a business decision, but very often you may not be able to see the long-term trickling effect. It’s a skill that can be learnt overtime.
You can begin building your financial intelligence by consuming high quality contents. You can even talk to your accountant who is an expert with numbers and has a general understanding of your business to provide valuable advice.
If you only make one new year’s resolution for your business this year, make one that counts. If you can stick to this resolution, your business is likely to keep growing throughout the coming year.