There’s a whole lot of stuff that happens at the end of year. For some people the end of year means a rush to get all their records in place. They haven’t done it all year. We never suggest this because you don’t know what you’re making. You don’t know how well your business is doing. All you know is the cash that you have in your hand. This is not a true indicator of how well you’re doing. It’s one of the indicators, but is not the only indicator. That’s why end of year analysis is so important.
Keep Up to Date Records
We always suggest making sure that all of your records are up to date. Keeping things done on a regular basis throughout the year helps you have better memory of what’s happened. It also helps manage your business so you can see where the problems are, or where the successes are, and manage your business better.
I’ve seen people that have put things off. Then they forget what has happened. Or they aren’t really sure what is actually happening within their business, and it’s too late to make a change that’s going to be impactful. By keeping the books and records up to date as best you can, it gives you a better picture to make those changes more frequently, if they need to be. Or at least be aware of what is happening so that nothing is a surprise to you. There’s a lot of surprises when you’re running your own business, but there are ones that you can help mitigate.
If your records aren’t up to date, get them up to date as much as you can before year end as possible. That way you can help forecast for the rest of the year to plan what may need to be implemented for the rest of the year. You always want to forecast what’s going to happen in the future. Getting your finances in order to help forecast for the rest of the year can help you plan and then mitigate any issues.
Forecast the Rest of the Year
Forecasting can be done in multiple ways. You can look at what is actually in the works to be done for the rest of the year. You can also use some of your historical data to show, maybe, what has happened that same period of time in past years. That can give you a pretty good inclination as to what may happen in the upcoming period for that period of time.
For instance, maybe every month this year you’ve spent $5,000 on overhead expenses. You know that at least $5,000 a month is going to be an expense. But maybe you’re also looking at purchasing some new equipment before year end. So that is going to be an added expense that you didn’t necessarily have in your normal monthly budgeted numbers.
Forecasting is a mix of all kinds of things. It’s not a complete science, you have to kind of use your intuition, you have to use what knowledge you have about your business to help forecast out what the rest of that year looks like.
Set Some Goals with End of Year Analysis in Mind
So once we have kind of a projection of what the year is going to look like, we want to do something with that information. What are your business goals for the rest of the year to help you achieve or improve what you think the outlook is going to be? Is there something you need to put in place, whether that’s processes or equipment or hiring people? What can you do in the short term as far as goals to help you get where you need to be?
And how did you measure up against the goals that you set for yourself earlier in the year? You may have had a certain sales number goal or a certain customer goal. Have you been monitoring that throughout the year? And if you have, how do you anticipate the rest of the year is going to impact those numbers? Have you reached your goal? What things do you need to do even in the upcoming year because of either reaching or not reaching those goals? These are all important questions to ask.
Implement Those Goals
Some people are in a seasonal business. Seasonality does not necessarily revolve around a holiday. For instance, a pool company that has an extremely busy beginning of summer and extremely busy end of summer time period. They have maintenance in between, but very heavily concentrated in those seasonal times. So how are you investing into your business in that capacity? What has to be done before year end?
You may find that you may need to get lines of credit set up or other financial instruments set up to help you through maybe a slow time that’s coming up or to help you gear up for if your seasonality is at the end of the year, like holiday season. Do you need to front load a bunch of purchases to get your inventory stocked up to be able to meet that demand? If you need to borrow money you definitely have to have your finances in order because the lenders are going to want that information. And it is good to have that at your fingertips and not scrambling.
Prepare for Taxes
Then the last thing that people never want to discuss is taxes. Nobody likes to pay taxes. But if your business is doing really well, there’s a pretty good chance you’re gonna have some taxes due.
There could be some year end strategies to help reduce some of those taxes. But again, you have to know where you’re at up through the year and what are you projecting, and then you could maybe implement some of those tax saving strategies before the year ends. Once the year end happens, and the calendar ticks over, it’s really hard to do post year end tax planning. There’s not a lot that can be done after year end.
Conclusion – End of Year Analysis
End of year analysis is really important. If you struggle with your business finances, we have a masterclass to help you work through gathering and organizing some of your financial information.
