Well, I think we can all say that we’re glad 2020 is finally coming into the home stretch: business owner or not. As the year finally ends there are a few things that you can do now to help you be prepared.
The fourth quarter of the year is an opportunity for every business owner to do a health check on your business, what went well, what went tragically wrong, and how can we do better next year.
1. Check-in on your Company’s Profit and Loss
Here we want to see if there are any apparent trends. We’re going to start by analyzing your incomes byline on your Profit and Loss (PnL). As a business owner you can start with the following:
Questions to ask about your income performance:
- Which performed the highest and the lowest, was that expected?
- Are any of these lines trending up or down? Or are they like waves throughout the year?
- Write down why do you think they are performing this way? What can we learn from our past performance?
Questions to ask about your expense performance:
- What is your high expense? It helps to look at these in buckets, like overall COGS or overall Personnel or overall Marketing. Which bucket cost you the most? Is that what you assumed it was, or is it different?
- As expenses in these groups increase, does your income increase along with it? Or, is this expense rather static and expected? If an expense increase directly correlates to an increase in sales, is the increase enough to warrant additional spending? Have you tested the limits of how long you can invest in that activity and still see the same return? Was it a one-off bump?
- When looking at these costs, are there anyways that you could find a way to spend less? Renegotiate contracts? Find a different vendor? Cut a superfluous expense?
2. Check-in on your Business’s Balance Sheet
The balance sheet tells the story of how financially healthy your business is. This is something that is confusing for most new business owners, or even overwhelming if you don’t know where to start interpreting these lines and numbers. This is a quick reference on what to check at the end of the year, but here’s a link to a great article by Investopedia on How to Read a Balance Sheet.
Questions to ask about your Balance Sheet:
- How is your cash reserve? The amount of cash on hand is always the first thing listed on your Balance Sheet, you are probably painfully aware of where these balances stand on a given day. During times of turbulence, it is wise to conserve your cash as much as possible. Is there anything that you can do to hold onto your cash longer?
- What is your balance of Accounts Receivable? Can you collect these funds any faster? Is there an opportunity to increase this line before the end of the year? The quicker that you are able to collect payment from your clients/customers, the sooner you can use those funds to pay your bills. Don’t be bashful about holding your customers accountable to your agreed-upon terms. If you need money fast can offer small discounts for paying early such as a 2% discount to pay in 5 days or 1% off to pay in 15 days.
- What is your balance of Accounts Payable? Are there any or many outstanding bills that are aging beyond a 30/60 payment timeline? Is there anything that you can do now, to decrease this balance before the end of the year? If you have very large bills that you are unsure of when the money is going to come into your business, call your vendors and negotiate payment terms to stretch the payments out over a longer period of time.
- Take a quick look at your Payroll Liabilities accounts. This is more of a cleanup task. Different taxes and payroll fees come out at different times, occasionally these lines get a little wonky. If you see negative balances or an account that has been the same for months, reach out to your accountant and ask for help cleaning these accounts up.
3. Get your company’s vendors & clients gifts!
Now that we accomplished a heavy lift of a project, let’s move on to something fun! What exactly are we going to do to let our clients and customers know that without them we wouldn’t be where we are!
Have fun with this, do something unique to you and the business you own. It doesn’t have to be expensive. If you’re a service-based business, hand made cards go a long way! Similarly B2C, anything with a personalized touch will send a message to your consumer that you value them.
If you don’t want your gifts to be associated with a religious holiday, you can always time them for early November or mid-January to avoid the holiday season.
4. Review those things you’ve got on Auto-pilot
This can be anything from all the apps you use for your company to your email subscriber list. It’s good to stop and review those things that are running in the background to make sure they are still relevant.
Are people in your company utilize all the licenses you are paying for? Have any of the monthly software fees become obsolete?
When was the last time you scrubbed your email list? Are your drip campaigns still relevant? Take this time to drop in and see if everything you’ve put into motion is still working for your business.
5. Take stock of your major accomplishments
Hey, every year your business survives and thrives is another point to look back at what you’ve done! It ain’t easy keeping a company moving forward, so take a moment with your management team to be grateful. Have everyone write down their top three accomplishments for the year.
This is especially important in a year like 2020. No one saw this year coming and through all the lows, look back and find those moments where you can appreciate the positive and good things that snuck through the chaos.
About the author: Jeanine Hall is the founder of Quant Solutions. As an entrepreneur herself, Jeanine is an active supporter of the startup/entrepreneur ecosystem and enjoys helping others manage and grow their business.
For assistance with your company’s year-end prep email firstname.lastname@example.org