Join Entrepreneur’s The Goal Standard Challenge and make 2017 yours.
Learn more »
As 2016 winds down, it’s time to start planning for 2017. For business owners this means getting financially prepared for the new year by following 25 ways in order to keep your business up-and-running for the long haul.
1. Revisit your business plan.
If you’re already a business owner then you probably have a detailed business plan that covers;
- A summary of your business.
- A description of your company.
- A market analysis of your competitors.
- The structure of your organization.
- A description of the products/services you sell.
- How you’re marketing your business.
- Financial projections.
This information is needed to not only guide you when making business decisions, but also if you need to borrow money from a lender. Even though most well-thought-out business plans are good for three to five years, it wouldn’t hurt to make sure that your original plan still fits your current business situation.
2. Gather necessary information for a business loan.
Speaking of loans, lenders will also require the following information;
- Business licenses, if applicable
- Personal and business tax information
- Personal and business bank statements
- Income statement and revenue information
- Detailed financial projections
Even if you’re not currently looking for a loan, it’s better to have this information handy so that you’re not scrambling to put it together when you do need to borrow money.
Related Book: Finance Your Business by The Staff of Entrepreneur Media
3. Focus on profitability.
One of the most common mistakes that business owners make so that when they put money back into their company it’s only to grow. Instead, companies should be focusing on how to become more profitable. That’s because they grow too quickly and end-up having cash flow problems by doing things like hiring too many people but not enough revenue to pay them.
Either revisit or create a financial model by paying close attention to your expenses, assessing your marketing plan, building your projections from the bottom-up, checking results from the top down, and finding your breaking point. It may not be perfect, but those steps can guide you in boosting profits.
4. Set a savings goal.
By Jan. 1, 2017 you should have a savings goal in place. Remember, this goal should be measurable, achievable, realistic and timely. For instance, it could be establishing an emergency fund that can keep your business operational for three to six months if need be.
5. Evaluate your business processes.
Take a couple of moments to evaluate your business processes. This will let you see which areas are effective and running smoothly and which ones aren’t. For example, if you’re still using a paper-based invoicing system you should make the switch to a cloud-based system so that you can send invoices electronically and receive payments immediately.
6. Review your all of you insurance policies.
At the very least business owners should have the following insurance policies; personal liability, property, workers compensation, home-based, product liability, vehicle, and interruption. And, we don’t want to leave out health insurance as well.
Reviews these policies before the start of the new year. You may be paying for unnecessary coverage or there may be more favorable policies available from competitors. Also, depending on your business and its size, you may be required to purchase new policies that you weren’t aware of. If you get caught, you may be penalized.
7. Keep up on new tax rules and regulations.
There may not be major changes every year, but it’s important to pay attention to any new federal, state, and local tax rules and regulations. It could be anything from filing dates, increasing or decreasing tax rates, what can or can’t be deducted, and how much you can contribute into your 401(k) or Roth IRA.
IRS.gov does a decent job of keeping people notified of any changes, but it’s in your best interest to speak with a tax specialist before they get swamped.
Related Book: The Tax and Legal Playbook by Mark J. Kohler
8. Be aware of salaries in your industry.
Every year Robert Half publishes a salary guide that provides comprehensive data on average starting salaries. This will vary depending on where your business is located, but it’s an excellent resource. Use it to offer employees a competitive salary and plan your finances accordingly.
9. Take advantage of cash accounting.
It’s not uncommon for small businesses to employ a cash accounting method. As QuickBooks explains, “cash accounting focuses on when money is deposited and cash is received.”
Furthermore, “cash accounting records your expenses when cash is paid out to suppliers, vendors and other third parties irrespective of when those expenses were incurred. So if your contracting business purchased tools on credit in October, but actually paid cash or check for those tools in November, you would record the payment as a November expense.”
The benefits of cash accounting is that it’s simple, straight-forward, doesn’t require a large staff, represents cash flow, and has tax benefits like not paying tax income until you receive it.
This means that you may want to accelerate certain purchases before the end-of-the-year or ask a customer if they can wait until January to pay their invoice in order to take advantage of the tax perks.
10. Declutter and get tax deductions.
There’s no better time than at the end-of-the-year to start decluttering your life — and your business. The main advantage of decluttering your life is that it forces you to get organized, which will end-up saving your time and money. Also, you may be able to donate some of the things that you’re no longer using in your office. Not only does this make you feel good, you may be able to deduct from your taxes.
11. Research financial institutions.
As mentioned earlier, you never know when you’re going to need to borrow money. During your holiday travels, take the time to start researching and comparing possible lenders that fit you exact business needs. This way you can apply for a loan as soon as you need to without having to do the legwork.
12. Draw on your bank credit line.
Again, you never know when you’re going to need to inject cash into your business. To be on the safe side, if you have a credit line use at least a little of it. The reason? Banks prefer to issue credit lines to companies that use it.
13. Evaluate your product lines.
The end-of-year is the perfect time to review all your product and service lines. Doing so gives you the ability to get rid of any of those under-performing products or services and adapt your business to fit the needs of an ever-changing market.
14. Look for ways to generate recurring revenue.
If you haven’t noticed, recurring monthly revenue is all the rage. That’s because it creates a predictable cash flow, decreases missed or late payment, and saves your business a lot of time and money. Find ways within your business to start generating recurring revenue for 2017. For instance, you could provide educational or training materials to your customer’s for a monthly fee. Remember to setup you billing to automatically invoice your clients. Here are some of the top ways to invoice your clients.
15. Make saving automatic.
Just like with your personal savings account, you can make saving automatic by withdrawing a portion of your paycheck, 5 percent for example, and directly depositing it into a savings account. You can also set it up so that throughout the month a certain amount of money is transferred into your business’s savings account. This prevents you from spending that money.
16. Challenge the status quo.
Don’t be complacent! That’s one of likeliest ways to kill your business. Start thinking of how you can boost gross margins, how to leverage your most profitable products or services, and how to target high-profile customers.
17. Have collateral ready.
If you need to borrow a large sum of money, you may have to provide something for collateral. If you’re a new business, you probably don’t have assets like equipment or real estate. Start thinking of what you can use as collateral, such as your home or vehicle. Even if you don’t have use it, it’s better to be prepared in advance.
18. Ask your customers to purchase higher priced items or services.
While you want to be more concerned with value over price, your customers will inevitably think with their wallets. So, how can you convince them to purchase your more more expensive products or services?
At Due we decided to let people enjoy our products for free. However, we make money on our services, especially on our enterprise services. While the free plan works for plenty of people, the paid plan comes with expert advice that are tailored to your needs, current issues, and future growth plans. It’s a unique approach that some of our competitors don’t offer.
Related Book: No B.S. Marketing to the Affluent by Dan S. Kennedy
19. Start monitoring your monthly expenses.
If you haven’t done so yet, start tracking your monthly expenses. You want to track every single purchase and expense your business has made from month-to-month. This lets you know how much you’re spending on your expenses and where to start trimming the fat if you’re overspending.
Also, this lets you know if any of your accounts have been jeopardized to cyber-attacks if you spot any unauthorized purchases. This not only gives your total control of your money, it’s one of the most important steps when creating a budget.
20. Create a budget and stick it.
Speaking of budgets, it’s time to sit-down and create one for your business. I know it’s not exciting, but after you create a realistic budget you can get your finances in order by getting rid of any frivolous spending. Budgets also help you keep you’re spending in-check so that you can reach any savings goals that you’ve set.
There are actually different budgeting methods, like incremental budgeting, zero-based budgeting, and top down budgeting. Review and try out each method to find the one that works best for you.
21. Cut costs, even if revenue is solid.
Cutting expenses it tough, especially if revenue is good and you aren’t have any cash flow struggles. But, why wait to start making those costs? If there are expenses that you feel are unnecessary or just make you cringe, then get rid if them instead of wasting your money.
22. Shop around.
Whether if it’s a new insurance policy, credit card, bank, supplier, or vendor, start comparing prices. You may discover that you can find a better deal. And, if you do find a better bargain, but don’t want to make a switch, then negotiate a price that’s in your favor.
23. Evaluate the ROI of your sales and marketing efforts.
Track your leads and see where and how you’re reaching customers. If that’s through Facebook ads, then keep going with that method. If not, then dedicate that money to a channel that is getting results.
24. Stay organized.
I can’t stress this enough. You have to a system in place so that all of your records are organized. Take your invoices, for example. When they’re organized you can see which invoices have been paid and which are pending. You can also have them handy in case you get audited. Thanks to the cloud, most of this information is started in one convenient dashboard automatically.
25. Meet with an accountant or tax advisor.
This is probably the most important move that you should make. These professionals know how to prepare your finances, whether if it’s taxes, planning, or budgeting, the correct and legal way. I would suggest that you make an appointment before the tax-season gets in full-swing because they’re going to be extremely busy.