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5 Tips for Year-End Planning

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.

Ask These Questions Before Building Your Next Business Budget

Ask These Questions Before Building Your Next Business Budget

Hint: And get the answers…

We have said it before, and we will repeat it, having an annual budget for your company is like having a map on a road trip. Without one, you will be lost and taken down paths that won’t help you reach your destination or goal.

The process of creating a budget must begin somewhere. You cannot merely build an important document like this without understanding some key elements of your company and its financials.

In this article, we are going to review some of the top questions that you should be asking your accounting team or financial advisor before building out your business budget.

These are the kinds of questions that will help to understand revenue, expenses, future projections, where you can cut back, and more. Having all of these details will help to discern the financial ins-and-outs of your business better.

These are the top budget questions to ask throughout this process.

What Is Our Current Operating Plan?

One of the most crucial questions you can ask at the beginning of this process is what is our current operating plan and what is the breakdown of our monthly expenses. (If you don’t yet have an operating plan, there is no better time to create one then right now.)

Identify all of your monthly operational costs, as well as the costs that repeat quarterly or yearly. Once you have it all organized, you can obtain reports from your accounting system, total the expenses to determine the final numbers.

Not sure what should be included in your operating expenses? Think of rent, utilities, employee costs, office supplies, equipment, etc.
Does gathering all of this information sound like too much effort? You can always contact our team to help you get an accurate number and keep track of your operational expenses month-to-month.

The details within the operating plan should also help outline the vision for the year, set goals, and determine KPIs. If you need to raise capital, bring in new investors, or hire new managers, this will all be items to take into consideration when formulating your operating plan.

Read More: 8 Things to Consider When Planning An Annual Budget for your Business

What Revenue Is Expected For The Coming Year?

To be able to put this operating plan in motion or have it continue on course, you will need money (this isn’t rocket science). Therefore, it will be important to determine a dollar value for each line item in your operating plan.

Where are you going to get the money to cover these planned expenses, or where is it currently coming from? Does your revenue bring in enough money to cover these costs, or are you short and relying on company credit cards to cover the rest? Do you need to land new accounts or gain new customers? How much more revenue do you need to hit all of the goals you have for the coming year?

Determining cash on hand is a crucial part of this process as it will set the bar for where you are at compared to where you would like your company to be. Once you have your number for expected revenue for the year, your budget can be based on these numbers.

Read More: Managing Your Revenue Cycle: 6 Accounts Receivable Best Practices

What Does Company Cash Flow Look Like?

If your company reports yearly earnings of $5 million, how likely is it that $5 million is sitting in your company bank account? The answer is slim to none. Financial statements that offer this kind of reporting will always include non-cash items, which is why it is critical to understand company cash flow.

When your company pays employees, pays utilities, pays vendors, or makes other payments, this is considered an outflow of cash (the cash is leaving your company). When your company received payments from customers, investors, settlements, or accepts other kinds of money, this is called an inflow of cash (cash is being brought into the company).

Never do you want your company’s outflow of cash to be larger than the inflow. Once you create your annual business budget, you can break it down even more into months or weeks to help ensure payments can always be made while keeping your company still in positive health.

Read More: 10 Tips to Help Improve Your Company’s Cash Flow

What Upcoming Projects May Impact Our Financials?

At this point, you have the majority of your costs documented, but here is where you can take this process one step further. Making predictions based on company expansion plans can help you better plan for your company’s financial future.

    • Consider any plans that may have been put in motion, such as:
    • Moving to a larger (more expensive) office space
    • Investing in a new piece of equipment
    • A significant expense of upcoming travel

These expenses can be anything beyond the typical day-to-day or monthly planned expenses. Taking these into account will help you to ensure your business will be kept running smoothly and no costs sneak up on you.

Beyond the next few months, take into consideration big plans for the next three years. Determine if your company can feasibly save some revenue from this year and roll it into savings for the year or two after that. If you are able to create some financial buffer, it will only help the future of your business.

Where Can My Company Spend More Money?

Wait…what? Spend more money? Yes, you read that right. Here’s the good news: If your company is financially healthy, you can start looking for opportunities to spread that money around.

For every company, this will look different. Maybe it means you can hire a new employee to help with your marketing department. Or, perhaps you need a new contractor to help build a new company website or mobile app. If you are able to, consider what these opportunities might be and how they can be implemented to help carry your business to the next level.

Where Can Expenses Get Cut?

As you are carefully reviewing all of the company numbers, you might find your business is not as healthy as you’d hoped. Or, you might be delighted with the numbers, but want to start creating more of a financial buffer mentioned earlier.

If you are looking for opportunities to cut down on expenses, keep in mind that no savings are too small. If you saw a quarter on the ground, would you pick it up? If you picked up a quarter every day for a year, you’d have a little over $90 in savings.

While finding a quarter every day might be unrealistic, you can take another look at your bills, rental space agreement, vendors, and more. Can you get a discount, cut back on certain software programs that aren’t being used, or get cash back for paying for expenses upfront rather than month to month? Taking a creative look at ways to cut back can total to more savings by the end of the year.

Once you are able to sit down and get a handle on all of these numbers, you will be well on your way towards creating an accurate annual budget. This document is crucial for all businesses and can help to create a framework that will be reliable for making financial decisions on in the coming months and year.

If there is any part of this process that seems confusing or that you think you would like help with creating, please know that the team we have at Signature Analytics is ready to help you and your company. Our financial experts can act as a second pair of eyes to look through your financials and ensure there was nothing critical missed throughout the process. Or they can start from the very beginning by gathering the documents and statements needed to build the annual budget. Please contact us today to speak with someone from our team.

How to Develop a Strategic Financial Plan for Your Business

How to Develop a Strategic Financial Plan for Your Business

It is difficult to accomplish goals without a plan. Think of the last time you wanted to lose 10 pounds. You likely planned out your meals, picked which days you would go to the gym, and got yourself into bed early, so you were rested each day. All of this encompasses a plan; without one, you likely wouldn’t have been able to achieve your goal.

Just like you, your business also needs a plan. Strategic financial planning is required for any company to be successful. It’s a roadmap to understand what direction your business is heading and why. It can also help you plan for some of life’s unexpected happenings, like a recession.

Read More: Why You Need Financial Scenario Planning for “What Ifs”

Financial planning strategies for your business can help you determine where to spend money, time, and other resources. It should include specific goals to help you reach your dream. To help identify each unique point within the strategy, you should utilize various tools such as forecasting, budgeting, cash flow analysis, and key performance indicators. Let’s break down exactly what should and should not be included.

What Valuable Questions Should I Consider First?

First, let’s start by answering some common questions that can help guide your direction:

  • What are the goals of ownership? Do they want to sell the company in 3-5 years or hold and operate for 20 years?
  • What are the key metrics that drive profitability to the business?
  • What are the key metrics that drive value to the business?
  • Do they understand the profit margins of the business in total and by revenue stream?
  • What is the cash conversion cycle of the business? (How long it takes for cash outflows to turn into cash inflows, i.e., cash paid for product to cash received from the sale of product.)

It’s essential to take the time and consider the answer to each of these questions. These responses can give you a clue as to where to begin in the process. To help guide you on the strategic and financial planning process, we have broken down tangible steps to help get you there.

    1. Figure out where you are: Use your resources to conduct internal and external audits to help better understand the marketplace. Are you at the top of your industry or floating somewhere in the middle? Maybe you are at the bottom, and that is ok too, so long as you know where your business stands currently. This process can help you reach the next step. Have a clear understanding of what you are great at and what your competitors are doing too.
    2. Focus on what’s important: What is it about the business that will get you to the next rung on the ladder? What do your customers come to you for and praise you for doing? What is your company’s mission? Once you identify these main points, you will understand what your team and financial business plan should ultimately be focusing on right now.
    3. Define your objectives: Now that you know what you should be focusing on, also consider areas that your company has been “distracted.” What teams or committees are taking away from the main objectives? Zero in your attention on what is most important and focus all your efforts there.
    4. Put people in charge: How many times has a project fell through because no one was championing it? Use your team to your advantage and make people accountable for their projects that focus on your company’s objectives. Accountability is a true key to success in your company reaching its goals.
    5. Circle back: This plan, if done correctly, will work for now, but not forever. It is vital to set up a timeline to check back in with your team on their projects to ensure your company is hitting its goals and objectives. Maybe a quarterly check-in is what is best for your business or, perhaps, it’s yearly. Whatever cadence you set up is based on your companies needs; just don’t forget to review the strategic plan every so often.

Once a financial plan development has been made for your company, an annual budget should be created. When creating a budget, it is important to look at the income statement, but also the flow of activity driving the balance sheet, and then ultimately the timing and flows of cash.

Read More: Top Questions to Ask Before Building Your Business Budget

For many of our clients, in addition to the budget, we use a rolling forecast model, which is updated monthly based on the most recent company information available. This allows us to have clear visibility into our clients’ cash position for a minimum of 90 days in advance at all times. This way, we can help ensure there is appropriate cash and business planning can be made proactively in advance.

Key Performance Indicators (KPIs) can then be developed to focus on driving profitability, value, or both to the company. Examples of KPIs may include tracking the average days outstanding in Accounts Receivable in which continued improvement over time will increase cash flows of the business. Another simple KPI to track would be gross margin by product or service line. By knowing this information, the management of the company can make decisions to improve these metrics over time.

KPIs should be included as part of an ongoing scorecard and reporting package (monthly at a minimum) that management reviews. Management must develop KPIs that can be translated into actionable insight and ultimately to action. An action plan should be established at each meeting based on the movement in the KPIs, continuously focused on improving the KPIs over time. The action items should then be reviewed at the next meeting for progress, at which time new action items are then created.

In short, know your goals, develop a plan, budget, and forecast out your plan, develop trackable metrics, and then execute on your plan. Want to break down the process even more? Read our blog on planning a strategic budget that sticks.

We Can Help

Contact us to see how Signature Analytics can assist in identifying your goals, developing a plan, and developing metrics to execute your plan. Our talented, experienced accountants and financial analysts can complement your existing accounting employees, or act as your entire accounting department (CFO to staff accountant).

We provide the ongoing accounting support and financial analysis necessary to more effectively run your company, analyze operations, and guide business decisions to help you grow.

Top 10 IRS Tax Issues

This is a guest post by John D. Milikowsky, an experienced tax attorney in San Diego.

1. When are officers, directors, and employees liable for taxes owed by a business?

Short Answer: Individuals may be liable for certain taxes owed by a business, such as federal and state payroll taxes and state sales taxes. These can be assessed against non-owners when they are in a position of financial authority and they pay vendors and not the IRS or the State of California.

2. Is there a procedure to assess business taxes against an individual who is an officer or a lower level employee?

Short Answer: Yes. Both the IRS and State of California must provide notice to the individual and give them time to oppose the assessment. Specifically, the IRS normally starts by interviewing company employees and then sending letters proposing an assessment on individuals who had the requisite authority in the company. They will then have 60 days to respond to the IRS’ letter. In cases we’ve recently seen, the IRS has typically sent letters proposing this penalty on officers regardless of their job function. We aggressively challenge IRS’ proposed assessments where the facts simply do not support the IRS’ position. In cases where the individual was responsible (i.e. the personal was the only one managing the day-to-day business operations), there are various options to resolve the expected tax liability.

3. Can you tell us about other new related developments under California law?

Short answer: California is focused on what they call the “underground economy” where businesses are negligently or intentionally avoiding paying taxes. For instance, there is an epidemic of workers who are employees but the company they work for mis-classifies them as independent contractors. A mis-classified worker can have devastating consequences for business owners and officers and directors who are involved in the payroll process and in accounts receivable, etc., as we just discussed. On January 1, 2012, California passed a new law that imposes a $5,000 minimum penalty per violation for anyone who advised a company to incorrectly characterize a worker as an independent contractor. The penalty can apply to lower level employees and even outside consultants such as bookkeepers and CPAs.

Currently, California’s government agencies are forming a task force to share information across agencies such as between the Board of Equalization and DMV or BOE and FTB to identify under reporting of income taxes, i.e., where gross taxable sales reported on a sales tax return does not match the gross revenue reported on a company’s income tax return.

4. What options does a business or individual who owes a large amount to the IRS have to stay in business and protect his or her assets?

Short answer: The IRS cares about two things – your compliance in filing your returns and paying your taxes. The IRS is more concerned about a taxpayer’s who fail to file a return than those who owe a balance. A taxpayer who has not filed a return is in a sense off the grid. The failure to pay is also important, but, we can work with the IRS to set up an installment plan.

So the first thing we do is to make sure any missing returns are filed. We then thoroughly analyze the company’s financials and cash flow to create a plan to resolve the debt.

5. Does an individual who owes, or thinks they owe, the IRS money have to worry about a criminal investigation?

Short answer: Possibly. One scenario would be when a business owes a significant sum in taxes and closes the business while the IRS is attempting to collect taxes or the individual opens a new corporation and conducts a substantially similar business. The IRS will likely assert “transferee liability” as a legal theory to attempt to hold the new business liable for the prior company’s tax debts. The IRS also identified “Badges of fraud,” which are indications of fraud that allow the IRS to draw an inference that the taxpayer committed fraud. These include understating income, having inadequate and/or contradictory business records, failing to file a tax return, concealing assets, failing to cooperate with an IRS investigation, and engaging in illegal activities.

6. What facts make a person or company more likely to be audited?

Short answer: The IRS developed an algorithm called a Discriminate Function Score (or “DIF”) that it uses to score a tax return and determine which return to pull for an audit; however, the chances of being audited increases with various factors, which include the person’s income level, types of deductions taken on a return, and the type of business engaged in.

7. Does a person who owes the IRS money have to worry about being stopped when they travel in and out of the country?

Short answer: The IRS and Department of Homeland Security share a database. Taxpayers who owe taxes and where the IRS has filed a lien against the balance owed, may be flagged by TSA when travelling through the airport. Individuals who are not citizens should know that the United States Supreme Court held last year that a failure to report foreign bank accounts and income can be a deportable offense. Kawashima v. Holder, 56 US ____(2012), decided February 21, 2012.

8. What are some facts most people do not know about the IRS?

Short answer:

  • The IRS can run a credit report for taxpayers who owe the government money;
  • The IRS can summons bank records (including bank statements, checks you wrote, and checks you deposited) without a court order.
  • The IRS requires taxpayers to report income from illegal activities.
  • There is no time limit for the IRS to audit a fraudulent return or if no return has been filed.
  • The IRS has a department called Taxpayer Advocate Service to assist taxpayers to resolve disputes with the IRS where the taxpayer is not being treated fairly. (This is not a substitute for legal representation but to resolve an internal issue with the IRS)
  • Fraud penalties and payroll taxes are not dischargeable in a bankruptcy.

9. What options does a person or business have to resolve a tax balance with the IRS and State of California?

Short Answer: A business or individual may request an offer in compromise, which is a settlement offer to the IRS to accept a lower amount than what is owed to the IRS. This application is very extensive and should be prepared by an experienced person. Other options include an installment agreement. For the State of California, an offer in compromise is not available unless the business is closed and dissolved.

10. Can you tell us a little bit about yourself and your law firm?

Short answer: Sure. I am a tax attorney representing individuals and businesses in audits and collection matters before the IRS and California tax agencies. We resolve both civil and criminal tax cases mainly involving income tax and payroll tax matters.

We frequently work with CPAs to defend their clients and provide the legal support to get a case resolved or minimize the criminal exposure.

We are opening a new office in Israel to handle clients who have unreported foreign bank accounts and undeclared income.

In 2009, we presented a tax proposal to the US Treasury, IRS, and Congressional subcommittee staff members related to “Qualified Amended Returns.” We are preparing a new tax proposal and hope to present that proposal next year to the same agencies.

About the Author

John D. Milikowsky, J.D., L.L.M. is an experienced tax attorney in San Diego, California representing U.S. and foreign businesses in IRS investigations and California state tax audits involving all business tax matters. Mr. Milikowsky also represents companies being acquired in a corporate reorganization to resolve existing corporate tax debt and relentlessly defends clients in criminal tax matters. 

For additional information, you can reach Mr. Milikowsky at (858) 450-1040 or You can also find the Law Offices of John D. Milikowsky online at

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