Five Reminders to Start the Year
The new year brings a reset of the clock, a fresh start and the ability to naturally reset on many fronts. With all the moving parts and limited resources, small businesses can also feel behind the eight ball already once the calendar turns. We have already seen examples of businesses getting caught. You may have a number of these nailed already, but have you touched on them all? Here are five reminders to avoid common pitfalls and help get the year off to the right start.
Tax payment considerations
Have you reviewed your estimated year end results with your CPA? Tax outlays and their impact on cash can be significant. Do you need to adjust your January estimated payments accordingly? What are the implications for March/April? Do you need to accumulate more cash or is your tax liability lower than expected? Many businesses who have seen results decline are finding estimated payments can be trimmed materially. Do you know the answer for your business?
Cash considerations
Have you looked closely at your forecasted cash flow? Just as with taxes, there can be big outlays at the start of the year and other one-time payments/renewals, etc. It an also be a time when customers are a little slower with paying invoices due to the holidays and getting caught up. Are you unknowingly setting yourself up for a cash crunch? How do you know?
Reporting requirements
What reporting requirements do you have in your business? Almost all lenders require annual financial statements. Do you know your deadline and what covenants you have in place? They may be different at year end. Insurance carriers, strategic partners and key customers and vendors may also require info on the prior year. If you are audited or reviewed, what deadlines has the CPA firm set? And of course, you want to get financials off to your tax CPA to get out ahead of annual tax deadlines. Does your team have a list of all these deadlines and what is required. Are you on track to meet them?
Sensible budget
Your budget may not be done, and that is okay. We see so often that the budget process is stressful for business owners, and even something that keeps getting avoided. Many also rush through it to meet an arbitrary deadline. What we firmly believe is most critical is that the budget makes sense, is a guide and learning tool for the business and is still meaningful 90 days into the year. What is still open? What information needs to be obtained and how can you get it? It is not too late to finish the budget. Get it done right, not necessarily lightning fast. Address the remaining open questions, and finish it with confidence.
Reaffirm policy changes
The start of the year often includes changes in policies within your company and those you work with. You may have instituted pricing changes and/or changes in terms with customers. Are those changes being reflected and enforced? Might follow up be needed or at least vigilance in case they are not being observed? For example, we saw a professional services firm make pricing changes 1/1, but many of their customers were making recurring payments and did not update amounts for 60 days. Did any businesses you buy from change their policies? Too often these fall through the cracks on both sides. Especially for those that are material to your business, stay on top of this to encourage good behavior from your customers out of the gate, and make sure you don’t get a surprise from a vendor or partner you rely on.
The new year is an exciting time. By not losing sight of some of the little things, you can prevent problems down the road that will trip many businesses up. The pressure is not all on you – ask questions of your team. Make sure you are a 5 out of 5, and you can then execute more confidently. Go boldly into the new year.
