Business owners often juggle a plateful of responsibilities, but the end of December and early January can benefit from some extra time spent getting caught up on the year’s financial history. This is an opportunity to review your business’s performance and revamp your revenue goals, especially if your sales volume fell short of expectations over the past few quarters.
This year’s first three quarters can provide a credible overview of where your business is heading as you enter the new year. Before the fourth quarter wraps up, you can take advantage of some of the year’s accumulated hindsight and be better prepared to hit the ground running in January. Sales income may be a contender for the most attention, but the new year’s tax planning, cost of goods, and operational expenses are all worthy of careful review when plotting the next year’s course.
Financial Statements Go Beyond Preparing for Tax Season
Your balance sheet and your cash-flow and profit-and-loss statements provide the figures you need to focus on as tax season approaches, but don’t stop there. The numbers can help you steer your business toward next year’s bottom-line targets. Reviewing the costs of your upstream and downstream supply and distribution links, for example, can lead to more cost-effective and reliable partnerships.
A review of payroll costs can help project how much you could allocate toward human resource enhancements. Even if you have no intention of increasing your staffing, you could evaluate the return on investment from third-party workforce training. Developing your employees’ behavioral or technical skills could make a significant difference in your bottom line. You may also benefit from investing in a bonus-based employee incentive program.
Your end-of-year reconciliation process may also show that you need to streamline your invoicing. If you benefit from receiving payments from your customers faster, your financial reports can quantify the associated financial return and compare it to the expected investment cost. Consider upgrading to an invoicing method that transfers funds directly from your customers into your bank account. You may also find there’s much to be gained from investing in improved accounting and client-tracking software.
Letting Your Financial Statements Guide Change
Your quarterly and year-end statements tell a story about how the engine of your business is running. By reviewing what’s “underneath the hood,” you can determine what areas need a tune-up or repair. If, for example, your most significant or hard-to-cover expenses reflect paying a high price for raw materials, your financial statements are telling you it’s time to change suppliers. When the shipping rate increases and you also have an asset-rich balance sheet, you could consider leveraging the positive cash to implement a less expensive system for delivering goods to your customers.
If a business normally shows a slowdown in sales at the end of the year or the beginning of the first quarter, this could be an opportune time to fine-tune its operations.
Equipment, software, and systems upgrades may require training your employees to use a new process or technology. Based on a review of previous quarterly statements, planning can help you determine the most accommodating time to fund, implement, and train for new operational upgrades.
Forecasting and Communicating the Value of Your Business
Even if your past year’s revenue could have been better, it’s not an indication of poor future performance. When the possibilities for improvement are available, the key to reaching your goals may revolve around how you can turn financial resources toward growth strategies.
Your business’s inventory management, customer base, and internal cost controls generally indicate the strength of your future growth potential and where you’re headed in the marketplace.
Tightening up your company’s financial reporting and connecting your figures to a compelling evaluation of your business’s potential can clarify and define your growth strategy. Consider presenting your plans for the new year in a format that includes graphs, charts, and other display elements that portray your expectations alongside operational costs, market conditions, and labor factors.
Funding Your Growth Plans
Your financial strategy for the new year may require outside funding to reach your business’s goals. When your cash assets are short of the level needed to implement new systems, purchase additional equipment, or hire and train an expanded workforce, your business may qualify for growth or working capital loan. By separating your working capital from your growth funding, you can achieve a much greater degree of flexibility. You won’t be restrained by a need to hold back your expansion funds to cover regular or unexpected operating expenses.
LQD Business Finance can be the key to obtaining the capital you need to bring your enterprise to the profitability level it deserves. LQD Business Finance’s faster loan processing times and a wide variety of growth and working capital lending plans provide opportunities to make a transformative difference in your business strategy. You can get started or have your questions answered by submitting a quick online contact form to our finance team.