Business tips

11 Steps to your Annual Business Financial Check-up.

By Ryan on
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Any physician will tell you the importance of going in for a full physical examination once a year. By doing so, you can obtain a comprehensive idea of your overall health and have the opportunity to make preemptive changes in your lifestyle before major problems arise. In much the same way, you should give your company’s finances a once-a-year checkup. Doing so will help you keep your finger on the pulse of your store so that you can grow your operation.

Step 1. Assess your current situation and the needs of your business.

It is impossible to set realistic goals without an accurate snapshot of your present situation. In order to do this, take a look at the amount of money you estimated you would be making last year at this time. If the amount is significantly lower than you had projected, now is the perfect time to examine why and make necessary changes. Possible trouble spots may be found in poor inventory management, cost overruns in the equipment and products you have bought, insufficient sales, surplus staff, and many other factors.

If, on the other hand, you have more funds than you had anticipated, recognize that this is a problem that many entrepreneurs would love to be experiencing. Take some time to plan intelligent ways to allocate your profits: needed repairs or upgrades, inventory expansion, etc.

Step 2. Identify your goals.

Although everyone balks at the prospect of resolutions, they perform a valuable function, acting as benchmarks that you can use to gauge your progress after a set period of time. For the most part, the goals you set should be attainable and realistic, taking practical factors into consideration. By structuring your projections in this way, you are more likely to work toward meeting them. To that end, make them specific. For example, instead of saying, “I want to make more money every month,” come up with an exact figure that you have a chance of achieving.

Step 3. Review all income.

This step may appear to be self-explanatory, but it can be trickier than it seems at first glance. Review all of your records, adding up your profits for the entire year. This is what is known as your gross income, though the number does not reflect the money you actually have on hand. To get your net income, you must subtract all costs you incurred during the year, including overhead expenses, inventory, salaries, insurance, consultant fees, etc. Only then will you have a dollar amount that truly reflects your current financial reality.

Step 4. Review all spending.

Whether in your work or personal life, money seems to flow away much faster than it comes in — to the extent that you may have a hard time figuring out where it all went. As an entrepreneur, it is vital that you monitor and track all of your business expenses, even the most minuscule. Fortunately, online financial programs and/or the tools built into your point-of-sale solution can be highly effective partners as you keep track of your costs and make future sales projections. Use the last three to six months of bank statements as your foundation, keeping a careful eye on any costs that can be eliminated. If you find that no one is drinking coffee, for instance, why not cancel that monthly java subscription?

Step 5. Use a profit and loss sheet.

This important document reflects the revenue and expenses your company made during a particular period of time. When you are diligent about keeping this report current, it can assist you in many ways. A profit and loss sheet enables you to see how your expenses and profits ebb and flow, and it is critical when preparing to file your business taxes. Furthermore, you can show it to potential investors, who will refer to the information it contains to determine the level of risk your company represents. Although a profit and loss statement can be done by hand, many online accounting software packages are available to make the project easier.

Step 6. Schedule a standing order for tax savings.

Procrastination is your worst enemy when it comes to paying taxes. Maintaining thorough records is key, and so is preparing in advance financially. When you put 33 percent of your profits aside for Uncle Sam each week, it cushions the pain of writing that unavoidable tax check.

Step 7. Switch bank accounts.

Just because you may have had your business-related funds in a particular bank for several years, doesn’t mean they should remain there. Each year, you should take a look at your account to see how well it’s working for you. Ask yourself the following questions:

  • Is my bank in a convenient location, particularly if I need to make regular deposits?
  • Does it have a high minimum balance or charge elevated fees?
  • Does my bank account offer other benefits such as online bill pay and free transfers?
  • Does my bank have low cash deposit limits that may be inconvenient for my cash-heavy business?

Keep in mind that there are many banks vying for your business, so be sure that you are getting the best arrangement for your company both now and in the future.

Step 8. Use an app for logging your expenses.

You don’t need a fancy, expensive program to help you keep track of sales, transactions, and inventory. If your point-of-sale system does not already have this capability, look no further than your own smartphone’s app store to find a solution that is intuitive and easy to use multiple times per day.

Step 9. Set up automatic email filing for business bills and receipts.

Now that most records are electronic, it makes sense to take advantage of technology to streamline your record-keeping. Filing digital bills and receipts in folders labeled for each month can be a godsend when tax time is approaching. Furthermore, this practice drastically reduces the potential for human data entry errors.

Step 10. Set up automatic payment reminders for late-paying clients.

If you’re like most business owners, one of your least favorite activities involves nagging people who have failed to pay their bills on time. While setting up automated reminders that are sent to these clients will not totally solve this ongoing problem, most customers do not deliberately set out to deprive you of what they owe. Instead, they simply forget. Receiving a friendly reminder email is often all that is necessary to jog their recollection and get them to put that check in the mail or file their payment online.

Step 11. Remember your personal and family goals.

In the end, the success of your physical or online store can be measured by answering one question: Is your business giving you the financial resources you need to meet your goals? If the answer is yes, you are doing something right, and you are entitled to a big pat on the back for all of your hard work. 

However, if things just are not measuring up, take this opportunity to evaluate. Change practices that are not economical and brainstorm new ways to boost your profit margin. Think about how your business can do better at meeting the needs of your customers, and adjust your products and services accordingly. Consider using social media and other marketing strategies to increase awareness of what you have to offer, and never forget that the most important element in your business plan should be your valued customers.

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