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5 Tips for Year-End Planning

When the end of the year approaches, there are many loose ends to tie up. You may be reviewing the goals you established for the year, those financial objectives, and trying to squeeze in your holiday shopping too. Alongside all of this, it is also time to start year end planning.

While you might read this and think, “yawn,” we encourage you to see this as an opportunity for a fresh start. Planning for a new year is crucial to the future success of your company.

From our experience, companies that have a documented strategy in place are much more successful at realizing their goals than those that do not. So, what should business owners be focusing on as they head into a new year?

1. Develop Practical Goals Based On This Year

Unless you are a new business, you likely set goals for your company at the end of the last year.

Now is the time to review those goals and see what your company was able to accomplish and where you fell short. These goals may have been short-term or long-term. No matter what kind of timeline the goal has, it’s time to do a health check-in.

Did you meet your goals? Did you exceed the goals? Did you fall short? Being honest throughout this process is essential to growing your business in the coming year.

Here is a sample of questions you may want to consider during this process:

  1. What is my ultimate exit plan from my business? Do I want to grow and sell the company in 3 to 5 years? Do I want to hold the business for several years and transition to an employee or family member? If I sell, what compensation do I “need” to be satisfied?
  2. What are revenue and profitability expectations for the new year? How do these expectations impact the cash flows of the business? How do they affect the ability to pay employees and owners?
  3. Will I be introducing new product lines or services from my business? What is the investment needed to make this successful?
  4. Will I need to take on debt or equity investors to meet my goals? Do I have an established banking relationship? Will they require audited financial statements?
  5. Do I have a plan for taxes or the tax implications of the execution of my goals? Do I have an established relationship with a tax advisor that is proactive in year end planning?
  6. Do I understand the metrics that drive the success of my goals, and can I track them?

Once you are able to answer these questions, you will have a realistic foundation to take with you into the new year.

2. Ensure Accurate Financials Before The End Of The Year

Ensuring that a business has timely, accurate, and relevant financial information and accounting reports is crucial to the success of meeting the established goals. Without this information, the company is running blind and not able to track progress against its objectives. A business must start the process NOW to update their financial information so that at year-end, it can focus on future goals, once established.

3. Be Sure To Create A Budget

Successful businesses develop an annual budget before the start of the year. They then track this budget throughout the year and develop a rolling forecast to provide operational and cash flow visibility at a minimum of two to three months out. Tracking actual performance against a budget will assist business owners in understanding why the business is either exceeding or not meeting the expectations set in place, thus allowing them to make real-time decisions to improve business performance.

Read More: Creating the Perfect Annual Budget

4. Research Industry Metrics That Are Informative

For business owners to hit their goals, they must establish metrics to track that when improved and confirm that the goal is met. Examples would be understanding and monitoring the metrics that drive profitability to the business (margins), metrics that drive cash flow to the business (AR and AP turn, inventory turn, other operational efficiency metrics), metrics to become “bankable” (metrics that the bank will look at to meet established banking guidelines), metrics to drive value to the business (EBITDA percentage, revenue growth).

These are just a few examples, and there are many others. Each company must identify these metrics immediately to allow them to make the decisions to improve their business.

Read More: Understanding Key Performance Indicators

5. Meet With A Tax Expert And Develop A Plan

The appropriate tax planning strategy is another crucial component of year end planning and success. Business owners must meet with their tax advisors before year-end at a minimum to discuss opportunities to minimize potential tax liabilities. Thousands of dollars can be saved in tax liabilities or current cash flows by developing an appropriate tax planning strategy.

Read More: Tax Planning Guide

We Can Help

At Signature Analytics, we support and drive the year-end planning process for our clients. Allowing our clients to have visibility now and throughout the year to make the right decisions to be successful and to meet their established goals. Contact us to schedule a free consultation and get on track for a successful new year! Signature Analytics can serve as your financial consulting company or outsourced accounting solutions.

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