The end of the year marks a time of celebration and festivity. But for business owners, this time means the critical process of year-end planning. With just six weeks remaining before 2023 begins, now is the best time to set new goals and build momentum into the new year. Here are a few year-end tasks that will lay the foundation for success in the coming year.
1. Assess Progress & Performance
It’s often said that you can’t improve something if you don’t track or measure it. For business leaders, this often means conducting a holistic end-of-year review to assess the health of their companies. Once completed, these reviews can help you gauge progress and plot an applicable course of action for the year ahead. But how do you know which aspects of your business to look at? Consider spending time reviewing your year-to-date numbers on:
- Revenue
- Cash flow
- Gross Profit Percentage (GPP), which is gross profit expressed as a percentage of revenue
- Net Profit Percentage (NPP), which is net profit expressed as a percentage of revenue
Use your forecast plus your YTD actual numbers to predict where you anticipate ending your year. Then, compare your year-end projection with the plan you made for the year. Looking at projected YE revenue, GPP and NPP, how does your company’s performance stack up to previous years and your goals you set back in January?
2. Reconcile Accounts
Before the close of the year, be sure all of your bookkeeping records and accounts (bank accounts, accounts receivable, and accounts payable) are up-to-date and reconciled. This should be kept current and reviewed regularly throughout the year– so you always know the state of your business, and so you catch any issues before they snowball since you know your business best.
A thorough assessment of all accounts will help you determine if there are any unpaid receivables and any payables you may owe. Make sure you agree with all items that have been accounted for, recorded, purchased, and paid.
3. Create and Establish New Goals
Meet with your management team and department leaders to create plans for the coming year. Once you have an agreed-upon list of goals, it’s important to consider whether the goals are realistic. If you want to make your business the best it can be, you have to be willing to establish and track lofty goals. Without goals, you have no way to monitor your company’s progress or keep yourself or your team accountable. When determining your goals, make sure they are worth your time and effort. Think about what goals can really push your business forward within the next year. And, don’t just think about the big picture. Also figure out even smaller, achievable goals, they are equally as important.
We recommend our clients conduct a SWOT analysis that will tell you where your business is falling short, what new opportunities you should consider in 2023, and what areas within the company need improvement. Once you determine what areas need help, start coming up with the goals you believe you can achieve (or come close to achieving) in the next few months or years.
The most important step to creating any plan is knowing what the target is. Do you want to reach a target profit goal? A revenue goal? Expand to a new market? Launch a service? Once you have a clear vision of the objective, you’ll be able to create a strategy to reach your set goals.
4. Devise a Strategic Financial Roadmap
Strategic financial planning is required for any company to be successful. It’s a roadmap to understand what direction your business is heading and why. It can also help you plan for some of the unexpected, like skyrocketing inflation or a recession. To start with the building blocks of the financial plan, consider key questions that are critical in the process:
- What are the key metrics that drive profitability to the business?
- What are the key metrics that drive value to the business?
- Do you know the profit margins of the business in total and by revenue stream?
- What is the cash conversion cycle of the business?
Compile information about all of your typical and upcoming expenditures, including rent, salaries, insurance, supplies, new equipment, and advertising and marketing to start. Next, compile your data for all streams of revenue, including investments, sales, and assets. This information will provide a detailed overview of your profits, losses, and cash flow.
This information will provide you with a comprehensive financial roadmap to see the larger picture. When creating a financial strategy, you’ll want to look at both the short- and long-term possibilities. No matter what you want to achieve within your business, having a financial plan can keep you focused on those objectives and help you break down how to achieve them. If you’re not comfortable managing the process, seek help from a fractional CFO and business advisor.
5. Create A Budget
Successful businesses develop an annual budget before the start of the year. They then track this budget throughout the year and develop a rolling forecast to provide operational and cash flow visibility at a minimum of two to three months out. Tracking actual performance against a budget will assist business owners in understanding why the business is either exceeding or not meeting the expectations set in place, thus allowing them to make real-time decisions to improve business performance.
6. Assess Employee Retention
How are you evaluating and measuring the success of your employees? Do you have a performance management system in place? Do you follow best recruitment and retention best practices? While the job market in some industries and regions favors employers, candidates with in-demand skills likely won’t have to wait long to find a new opportunity. Many companies never stopped recruiting talent during the pandemic, and many others have picked up the pace of hiring in recent months.
If you sense your business is at risk of losing top talent, you need to move fast to shore up your employee retention strategies. From offering training, remote work, work-life-balance programs, competitive compensation programs and even effective onboarding and orientation programs you can improve your employee retention and lower turnover in the coming year. Make time now to consider how you will improve workplace culture and employee loyalty and make it a part of your company-wide goals in 2023.
7. Implement Strategies to Reduce your Tax Bill
As we enter the last weeks of the year, you should consider end-of-year tax-planning strategies and take advantage of possible tax breaks to lower your next tax bill. Review your current income and projecting future income for 2023.An income projection lets you know what tax bracket you will be in for the coming year. The ideal place to begin is by looking at your income and deduction information from your last tax return, and then you can adjust anything with new or current data. Based on what new information you have, you can calculate, or “project,” how much you will pay in taxes. Thousands of dollars can be saved in tax liabilities or current cash flows by developing an appropriate tax planning strategy.
Before closing your books at year-end, find out which tax deductions you’re eligible for. Know the deductions that apply to your business and how to correctly deduct them. Now is a good time to meet with your tax advisor to make crucial decisions.
8. Seek Expert Advice
At Norris CFO, we support and drive the year-end planning process for our clients. We work closely with our clients so they can make the right decisions to be successful and to meet their established goals. Shortly after engaging in our CFO services you will see improved revenues, profits, company value, and improved business performance. Your business will experience growth and efficiency gains through carefully controlled expenses and our innovative approaches to increasing revenues. End 2022 strong and plan for even great growth in the year ahead. Get in touch and schedule a free consultation to see how you can further improve your company processes and financial footing for a strong 2023.