Benjamin Franklin said “By failing to plan, you are preparing to fail”, and nowhere is this more evident than in preparing to exit your company. If you own a business and have NOT thought about how you’ll exit, now is a good time to create a plan. Whether you intend to sell your business in 3 – 5 years or plan to stay in it for the long haul, the best way to grow intentionally, quickly, and profitably is to grow with an eye to sale or acquisition. 


You didn’t start your business without a plan – why would you sell it without one? 


Many mid-market business owners are unclear about their business value, how they can maximize their business value, and how they can determine their business valuation. As you create a plan for your business, your CFO will likely highlight the importance of well-structured debt, access to the right kinds of investment (VC, PE), and the importance of GAAP accounting and the kind of well-run finance and accounting department an acquiring company is looking for. If you do not have a finance executive on your team, getting those and other areas of your company’s Finance & Accounting (F&A) department in order will be essential to getting the maximum valuation for your business. 

Timing is yet another factor that must be taken into account in order to maximize the value of your business for a sale. We often see owners reacting to a buyer who makes an unsolicited offer; this puts the buyer in the driver’s seat, not the owner. Being proactive in the process will yield substantially better sale prices than letting a buyer dictate the offer price. Additionally, proactively improving the areas of your business that drive value and eliminate risk in your company will be beneficial regardless of your decision to sell. Finally, understanding the marketplace will help set your expectations and give you a basis to manage toward the value you want.

Whether you plan to sell or just want to work toward having the kind of company someone would want to buy, you can be sure that your value is going to be higher if your company’s financials are in order. Having accurate, timely, and relevant financial data supports better business valuations and ultimately higher profits upon exit. 

When should I start to plan to sell my business? 


Exit planning ideally needs to begin 3 – 5 years before you plan to pass over the keys to the kingdom. The considerations that dictate this timeline range from tax planning and middle management leadership development, to timing markets and working with investors. Whatever your plan for exit, any potential acquiring entity will certainly do their due diligence, starting with your company’s financials. 

Over 40% of owners plan to exit their business in the next 5 years. However, a majority of business owners do not have a formal exit strategy established. 

If you’re thinking about timing the sale of your business, get started now in order to maximize the value of your business.

Start with why. 

Understanding why you want to sell will help you get focused on the timeline and the asking price you will be aiming for. Whether you want to retire, are seeking a better work-life balance, are interested in starting a new career, or searching for a new purpose, the choice to sell a business you have built should not be taken lightly or executed hastily. 

Questions you may want to consider:

  • Is the business ready to be sold?
  • Who do I want to sell the business to?
  • Am I ready to sell the business (emotionally)?
  • What will I do with the proceeds of the sale?
  • Am I prepared from a legal standpoint?
  • Do I have/need a wealth manager or other advisor?
  • How much could I sell the business for?
  • What will I do after I sell the business?
  • Am I willing to work for the new owner for a period of time?
  • When is the right time to sell the business?


How do you get the highest valuation for your business?

No one wants to sell to the lowest bidder. So what can you do to attract the right buyers willing to pay the highest price? 

Understanding revenue streams and having underlying clean data is essential to maximizing your business value. Quality of earnings and/or financial statement audits are important pieces when a buyer does their due diligence for a deal. Think of ways you can create visibility into the profitability of your business for a buyer.

Business valuation is typically tied to the type of industry your company is in.  As you work to maximize your business valuation, consulting with an expert in Mergers & Acquisitions (M&A) will be an asset to your process.  They understand the value drivers from an acquiring entity’s perspective and can highlight areas of strength and weakness for you to address pre-listing.  They also are experts in marketing your business to a broader range of potential acquirers.

Minimize risk to maximize value

Buyers value limited risk in the businesses they buy. There are business structures and revenue opportunities that can be addressed before the listing of the business to reduce risky business structures. 

Reduce the concentration of earnings:

Don’t put all your eggs in one (or 3) baskets. If your revenue is high but it is largely from a small number of customers, the risk is that on sale of the business those customers leave and the revenue that was core to the valuation is no longer coming in.  Spreading revenue among many customers ensures that no one account’s loss can negatively affect your company or your valuation. Better to have 50 mid-sized clients than 3 massive ones from a concentration of earnings perspective. 

Implement Reliable Financial Reporting

When a buyer is looking to purchase a business, they want to know how it is performing. The price is often based on the trailing twelve months’ financial results and GAAP-based reporting. For a buyer, seeing clean financials builds trust, allows them to make decisions decisively and quickly, and provides insights into opportunities for growth that may increase their offer based on their plans for the future of the company. 

Build a recurring revenue model

Subscription-based companies (where customers sign up and pay monthly) like Spotify, Blue Apron, and Dollar Shave Club have very high multiples and valuations because businesses with recurring revenue are more stable.

With this ongoing recurring revenue, these businesses have consistent income to rely upon and forecast against. Project-based businesses face more risk because as projects end, that revenue must be replaced. This typically requires more sales effort and expenses to grow overall revenue.

If your revenue is project-based or retail sales, you can develop a recurring model. For project companies, are there ongoing consulting engagements or other services that can be offered to develop a recurring model that can be offered to your client base? Building stable recurring income is positive for the business, whether you choose ultimately to sell or to hold on for the long term. 

Bolster middle management and reduce reliance on the owner

If an entire business is based on the owner, e.g., the owner is running everything, has all of the relationships with the clients, and makes all of the sales then there is far less appeal for a potential buyer.

As an owner, it can be hard to disconnect from the day-to-day of running the business.  One way to put structures in place to support the slow extraction of the owner from the daily running of a business is to build up the management team. By building a team that can run the business without you, you create business value that can transfer once you, the owner, are no longer involved.  

A multi-level succession roadmap allows the company to fill gaps in skills and competencies for the entire company. There are several other ways a buyer may limit their risk on this issue, including requiring that the owner stays on board for another 3-5 years, paying a lower price, or reducing the upfront payment and creating an earn-out clause that pays out over a period of time -based on the business’ performance post-acquisition.

Build structures that scale

A business’ infrastructure includes such things as people, processes, tools, equipment, technology, approach, and culture that enable the business to service its customers. An owner who’s built a solid infrastructure that supports growth and scalability with efficient, repeatable, and consistent processes will find that their business has a higher value. 

Benchmark your performance

Companies that generate stable, above-industry-average earnings are more valuable. To measure that, you need to understand the industry standards and measure yourself against them. If multiples in your industry are typically based on revenue, a higher net income supports a higher revenue multiple. If your industry valuations are typically off of EBITDA, then a higher EBITDA will be worth more under the same multiple and many times can even attract a higher multiple.

Regardless of the valuation methodology, there is always a strong case to improve your bottom-line margins. This can be done through active management, good key performance indicators (KPIs), accurate, relevant, and timely (ART) financial reporting, creating efficiencies in your business, outsourcing non-critical tasks, and building to sell.


Who Will Buy Your Company?


When you’re looking to sell, there are a number of potential buyers: strategic (competitors), private equity/venture capital, outside 3rd parties, insider (employee), or even having an employee stock ownership plan (ESOP).

Strategic Buyer (Competitor): 

Selling to a strategic buyer may land you the highest potential sale as they might see value in a new geographic market, customer base, etc. When selling to a strategic buyer a consequence may be that your business becomes a part of a bigger whole. Often, the acquirer will look to cut the costs of your business by combining back-office support (accounting, HR, etc.), which may lead to some of your employees losing their jobs.

Private Equity / Venture Capital: 

This may give you an opportunity to cash out and accelerate your business’ growth; however, as the owner, you may not only lose control, but you will also likely remain involved in the business for a specified period of time. This option may also give you the chance to “have a second bite at the apple.” Meaning you only sell a part of your business and help the financial buyer grow it. When the business is sold in the future, you get to reap the benefits from the growth in the second sale.

Outside 3rd Party: 

Selling to an outside 3rd party can result in a high sale price; however, because the buyer may not know the industry, they will likely have the owner remain involved in the business in some capacity.

Insider (Employee): 

Selling your business to an employee is typically the most painless transition; however, employees usually do not have significant resources to purchase the business, and this could result in the lowest sale price.

Employee Stock Ownership Plan (ESOP): 

This option allows an owner to cash out, and the employees of the business become owners. This option typically works for steady, cash-producing businesses. There are unique challenges with ESOPs, and they are highly regulated.

Before choosing a buyer, it’s important to understand what you want to achieve. What do you, as a business owner, want to do with your life or your career? 

Your personal objectives should help define how much you need from the sale, along with the timeline of when you would like to sell the business. Four million dollars now may meet your goals. Or working hard, improving your business, and taking on the risk of time may lead to a future valuation of a larger, more attractive business worth $10 million. Neither answer is right or wrong. It depends on you.

What’s Next?


According to a survey by Exit Planning Institute, Failing to plan for considerations beyond those of finance when planning to sell your business is the cause for 76% of business owners who exit regretting the choice a year after the sale: 

Life doesn’t end after exit.  Being clear on your personal and family goals and what comes after your sale is just as important as being clear on the steps needed to maximize the value of your business before a successful exit. 

For more information about how we support business owners as they create business value, contact us.

As a business owner, if you are asking yourself, “when is the best time to prepare my business for a negative economic impact?” the answer is now.

The coronavirus pandemic has made an incredible impact across our world over the last few months and has caused many U.S. business leaders to wonder this very question. Once the second quarter of economic decline is reported, our country will technically be inside of a recession.

The good news is that you can take steps now as a business leader that will make a positive impact on where to lead your company and weather the storm ahead.

If you sell products like hand sanitizer, toilet paper, and various other home goods, you may be experiencing a record quarter in sales. If your company books travel experiences, however, you might be concerned about paying your bills. No matter which camp you find yourself in, know that almost every company can find a way to be successful and maybe even thrive inside a recession—it just might take some creativity and critical thinking.

Where Do I Start?

When considering what your next steps should be, start asking questions. Consider how your business could benefit from the current market based on the services or products you sell.

The best place to start this process is to review the expert tips below so that you can confidently make decisions that will affect your company.

Mind Over Matter

This saying might be a bit cliche, but having the right mindset when it comes to challenging and difficult times is an essential starting place. It allows you to see the good in situations, find the best in people, and put trust in the decisions you make.

The power of positive thinking isn’t entirely new; Norman Vincent Peale wrote a book about it in the 1950s, and it’s a message that is frequently circulated today. The idea is that by thinking positively, you can achieve a permanent and optimistic attitude.

With this positive attitude, you can be forward-thinking and envision how you want to come out on the other side of the recession. The mindset that you cultivate for yourself today will very likely be adopted by your employees who will take actions to define your company’s future.

Leading your staff with a positive focus on the future can help you make decisions to keep your business alive and maybe even turn a profit.

If you think that your staff is struggling with the work and personal life adjustment COVID-19 is requiring of us, consider establishing an internal mentorship team. Ask for a volunteer to head up this kind of team and try out check-in conversations, productivity task lists, and a lightened workload for those who are struggling. You can read more ideas here.


After you have mentally armed yourself for the road ahead, the first place to look inside of your business is at your finances.

Without cash, it will be impossible to run your business. During a crisis, access to cash will be the most critical aspect of not only surviving but thriving through the recession.

Read More: Part 1: Why Cash Flow Is More Important Than Ever Before

After reviewing your savings and cash flow, you will need to determine if you have enough savings on hand for the next several months. If not, do not shy away from liquidating some of your assets. You can speak with an expert from the Signature Analytics team if you need advice here, but the key will be ensuring you have enough accessible funds to make payments on the unexpected.

There are plenty of other tangible ways to free up cash, such as:

  • building up cash reserves
  • refinancing loans or lease terms
  • looking into private equity or outside investment

If you’d like to dive deeper into this area, be sure to read our blog which covers a variety of liquidity options for your business and do your research to ensure you understand the terms before signing any contracts.

Read More: 10 Liquidity Options for Businesses During COVID-19 Outbreak

Break Into New Markets

It may be that your financials and cash flow are already in a great position. If that is the case, our experts recommend looking to other markets to break into as a next tangible step.

Host a Zoom meeting with your team to discuss any product or service expansion areas. If you already have a concrete understanding of your current market, why not expand your visionary thinking? Once you have a list of ideas, go through the following questions to gain a better understanding of the right opportunities for your business:

  • Where does it make sense for your business to head to next?
  • Is there a need for those products and services in a recession?
  • Will it be something customers will want to spend their money on?
  • Who are the direct and indirect competitors?
  • What advantages do you have over them?
  • Could you potentially acquire a company already doing this idea?

These are just a handful of questions to use as a starting place. We encourage you to conduct as much market research as possible during this exploratory phase to see what makes the most sense for the future of your business.

If you have mentors, you can reach out to those who have weathered an economic storm before, ask them for advice based on their knowledge of your business.

Who Is On Your Team?

If you don’t have anyone to reach out to bounce ideas off of or ask questions to, the team of experts at Signature Analytics is here. Every day we are helping our clients make critical business decisions like these.

While you may have an internal team working diligently to review your finances and accounting, we can work alongside them and aid in supporting your business to flush out any inconsistencies and help drive strategy beyond the numbers. .

This is also an excellent opportunity to look to leadership within your company and ask them to weigh in on the direction you are considering. They will have much insight into if the decision not only makes sense for the future of the company, but if prospective clients will utilize and pay for this service or product.

Read More: When Should You Consider Outsourcing Your Accounting Operations?

Final Thoughts

Remember, the goal isn’t just to get through this time, but to come out the other side with something to show for it. We are looking forward to hearing about how your company not only survived the coming recession, the lessons you learned along the way, and how you hopefully thrived through it.

Read More: How to Recession-Proof Your Business: 7 Tips to Thrive in an Economic Downturn

At Signature Analytics, our company promise is to go beyond the numbers to improve business strategy and help you reach your goals. We encourage you to reach out to us with any questions you have as you navigate this challenging process.

Are you running a business that is earning a profit this year? If this sounds like you, you’re likely pretty happy with the financials of your company. After all, being profitable means you have created a thriving entity and are doing well. But don’t kid yourself if you think you are the only one excited about the performance of your business.

Enter in, the IRS. Owning and operating a profitable business means that you must pay taxes. And no one likes your tax dollars more than the IRS—no one except you.

So unless you like the idea of the IRS doing a Scrooge McDuck dive into the tax dollars you have to pay out, it’s in your financial interest to take advantage of the tax breaks that are available to reduce the amount of taxes your business owes.


This Is How Tax Credits And Tax Deductions Are Different

While both tax credits and tax deductions can help minimize a company’s income tax liability, there are differences between the two. Tax credits are 1:1 reduction of taxes, whereas tax deductions are a percentage of dollars spent based on the tax rates and cut down your taxable income.

There are many tax credits your businesses may be able to take advantage of, below we have selected a handful you might not know about:

1. Federal Research and Design Tax Credit

Your business may be performing research and design (R&D) qualifying activities without you realizing it. The R&D tax credit (not to be mistaken with the R&D Tax Deduction) is a 1:1 reduction against taxes owed or paid.

Nearly every state also has its own R&D credit programs, most resemble federal rules and come in varying incentive amounts. So if your company is developing new or improved products or technologies, you could qualify for substantial tax savings.

Common industries we see qualify for these types of credits include manufacturing, engineering, IT, medical device, biotechnology, software development, and more. Reach out to us if you want to know if your business qualifies.

2. Alternative Motor Vehicle Credit

If your business has purchased vehicles with fuel cells (e.g., electric cars that use fuel cells with, or instead of, a battery), you could qualify for this tax credit. Many of these credits have been reduced since their initial rollout, with phase-out rules based upon the vehicle’s model and year. So even if your business has purchased alternative fuel vehicles, automatic eligibility for this credit is not guaranteed. Keep in mind, there are a many other benefits to driving clean in CA.

3. Employer-Provided Child Care Facilities and Services

Did your company acquire, construct, rehabilitate, or expand property that is used as part of a qualified childcare facility for your employees? Or maybe you chose to begin a scholarship program or provide employees with higher levels of childcare training some kind of compensation. If any of these circumstances sound like something your business was part of this year, be sure to check out the Form 8882 or ask your tax advisor about the rules for claiming this credit.

Read More: Tax Planning Strategies: What You Need To Know For 2020


What Deductions Are Right For My Business?

Like tax credits, there are various tax deductions available for small and midsize businesses to claim. The key is to research which ones your company is eligible for to ensure you take full advantage of them.

Tax deductions help to lower your taxable income and then can reduce your taxable liability. These activities can be anything from purchasing new assets or having various benefits to offer employees. The amount of the tax deduction will be taken from your income, therefore lowering your taxable income, and in turn, lowering your tax bill.

Tax deductions your business could be able to take advantage of:


Employee benefit programs and retirement contributions

Setting up your employees with retirement accounts is a great way to maximize tax savings for your company. Other qualifying employee benefits include education assistance and dependent care assistance programs.


Make charitable contributions

Any individual or company can make a charitable contribution, but there may be limitations on these deductions under the Tax Cuts and Jobs Act (TCJA). Your business can still deduct cash contributions and gifts, but can no longer deduct the time spent volunteering.


Hire contract (or fractional) employees

If your company hires contract labor (1099 employees), this cost could be deductible for your business.

Not only can contract, or fractional employees, reduce your tax liability, it can also reduce overhead costs for things like payroll, benefits, training, and other additional employee expenses. Hiring fractional employees also offers your company flexibility and greater cost control during slow months or ramping up staff during times of growth.

Read More: What Your Business Needs to Know About Fractional Hiring


Save by spending

The cost of business-related supplies such as new equipment, software, and technologies, or furniture for the office, are deductible expenses that can reduce your company’s tax liability.


Business interest expenses

If your business makes a profit, there are expenses you may be able to write off. For an expense to qualify as a deductible, your business expenses must be ordinary and necessary, as defined by the IRS. Meaning, if the expense applies directly to running your business, it may be ordinary and necessary. In any case, it’s best to save your receipts for every expense you deduct on your taxes.

As a business owner, it benefits you to see what you can do to reduce your potential tax liability now instead of waiting until the end of the year when it may be too late to do anything. For instance, how much money will your company bring in at the beginning of the year? Forecasting can help your company develop a tentative plan to maximize your expenses, which can be adjusted as the year progresses.

Read More: How To Organize Your Finances To Grow Your Business

Your taxes can have a severe financial impact on your business – but with some proactive planning – they shouldn’t. Contact us today to find out how our services can help your team reduce your tax liability for your business.

It’s been over 7,000 miles since your last oil change, so you drive to the mechanic for a service. You’re a few pages through a magazine when the mechanic informs you that your car is on its last legs unless you permit them to fix one specific part.

The good news: they can replace the part for you today. The bad news? It’s going to cost $2,000. While the last thing you want is for your car to fall apart, you can’t help but wonder: are they manipulating the situation to their monetary advantage?

For the average person, knowledge of auto mechanics doesn’t exceed our gas tank, so we make the assumption and leap of faith that the mechanic has our best interests at heart. Without expertise in a given industry, we lack the competency to ask the right questions to ensure we get the best service and keep us from being deceived.

Your tax advisor shouldn’t be an exception.

Whether you have been working with the same tax advisor for years or if this is your first year with a new CPA firm, there are a few key things to expect from your tax accountant to ensure your company is getting the best service.

Your CPA is good if they do this

Working with a CPA who is proactive will prevent problems way before they happen. Most clients assume their tax advisor will not only be proactive but is comprehensive in their knowledge of the client’s business. Unfortunately, it’s more common for the tax accountant to wait until the end of the year to get involved and before asking for all your information and processing it.

So how do you know if you’re working with a proactive tax firm? One sign is they maintain contact with clients quarterly to inquire about the health of the business. With more frequent contact, proactive advisors can make adjustments to payments to ensure accuracy throughout the year, rather than surprising clients with a large and unexpected tax bill at year-end.

What makes a tax firm a good fit for your business? It is helpful if the CPA working with your company has had experience working with other clients within the same industry since they have most likely learned from working with those clients. For instance, if a similar client qualified for something like the domestic production deduction, the CPA will be more apt to see if their other clients qualify as well.

Essential qualities to look for in a CPA firm

It’s a good idea to start by identifying the qualities of the CPA firm you are working with or are planning to work with in the future. Here are a few things to be on the lookout for:

  • The integrity of the firm

The integrity of a CPA firm is critical. It doesn’t matter whether the firm is large or small; what matters is the individual working on your account. You may choose a well-known firm with an excellent reputation, but if the accountant working on your stuff isn’t attentive, or overloaded with clients, you’re more likely to endure poor service.

  • The sophistication of the firm

Some firms specialize in certain things. If your business is involved in a particular industry, work with a CPA with that specific knowledge and who has clients in the same field. It’s essential to find a CPA firm that fits the level of what your business is doing.

  • The competency of the firm

The time may come when a client outgrows the skill set of their CPA firm and are unaware of it. It’s important to work with a firm that can handle your growth and the complexities that come with it, as well as one that can provide the level of service you need.

Is it time to find a new firm?

How do you know if a CPA firm is delivering exceptional service or if it’s time to move on? Here are three red flags to consider:

  • Response time

If your CPA doesn’t get back to you within an appropriate response time (most would agree within 24 hours), responds abruptly, or is just not helpful, these are all signs of a bad relationship.

  • Poor working relationship

A CPA who only corresponds via email, despite you asking to speak with them over the phone, is another bad sign. Whether the CPA is is overworked, too busy, or has too many clients, they are not acting in the client’s best interest and will not serve their clients well.

  • Avoidance

You will inevitably have questions for your CPA firm. Those questions may revolve around everything from the paperwork that needs to complete to deductions for your business. If your tax CPA is avoiding or unwilling to answer your questions, or answers your questions in a way that you don’t understand, this could mean the CPA is getting away with doing as little or as much as they want without you knowing.

Read More: Filing 1099s: Best Practices and Mistakes to Avoid

How to avoid the wrong advice

Even if your tax CPA is proactive and is well-versed in your industry, it may be beneficial for your company to partner with a business advisor. A good business advisor has the expertise to advise clients based on their strategic partnerships, ensuring that your tax accountant is working in your best interest and avoiding any bad advice that may lead you down a costly path.

Read More: Accountability Partners and Why You Need One

If you’re overwhelmed or unsure where to start, contact us today. Signature Analytics has a history of vetting and partnering with several CPA firms in a variety of industries. In doing so, we can help your tax CPA focus on getting more done by adding more value this season.

Have you ever wondered how to create a business budget? An annual budget is an essential financial plan for a company’s expenditure for the coming fiscal year. Company owners can use this plan not only to calculate their yearly budget, but also to determine when to file tax forms, get audited, and close the books. Creating a business budget involves balancing your company’s revenue with its expenses using past trends and realistic revenue expectations so that you can predict your needs for the next fiscal year.

Why Does a Business Need an Annual Budget?

A company needs to know how to make a business budget for many reasons. Most importantly, it acts as a roadmap to where your business is going in the next year. Once you establish how much money you have, you can determine how much money you can spend and how much cash you need to meet the goals of your business. Curious how to prepare a budget for a company? This process is vital for several reasons:

  • It sharpens your understanding of company goals
  • It allows you to portray the real picture of what is happening in your company
  • It provides effective ways of dealing with money issues
  • It fills the need for required information
  • It facilitates discussion of the finances
  • It enables you to avoid surprises and gives you full control

This is How to Prepare a Business Budget

Before you begin your forecast for revenue and expenditure, you will need to gather income and expense data from previous fiscal periods. Collecting this information will help you estimate the future budgeting process based on past trends. For example, if you are creating a quarterly budget, then look back at your previous two or three quarterly financial statements. This way, you can create a custom budget based on your desired timeframe. Once you have the trend data, you can use it to create a baseline projection for future revenue and expenditure. For example, if your revenue has increased at an average of 25 percent each quarter, for the past six quarters, increase your baseline projection for the next quarter by 25 percent.

What Are the Elements of an Annual Budget?

For your budget to be adequate, you should break down income and anticipated expenses either by month or by quarter. Which one you choose will depend on the size of your company. The budget should incorporate separate accounts for each of your business’ departments. These departmental mini-budgets should also be broken down by month or quarter. There are many factors that you need to consider when putting together your company’s yearly budget. These components are essential if you want to create an accurate and up-to-date annual budget and maintain control over finances. The budget needs to include:

  • Projected expenses: the amount of money which you expect to spend during the fiscal year. Projected expenses can be broken down into categories such as salaries, office expenses, etc. There are several steps to make a correct estimate of your projected expenses. The first step is to make a list of your company’s necessities for the fiscal year. You can look back at trends from past years to help you stay accurate. Next, make a list of expenses you will require to conduct typical business activities. It would help if you also listed any of your company’s fiscal obligations. Finally, list the items you would like to purchase for your company but may not be able to afford during the upcoming year. Add up all these expenses to provide a guideline for your budget.
  • Projected income: the amount of money you expect your company to make during the coming fiscal year. Projected income includes revenue and any income which may be coming from grants, contracts, funding sources, memberships, and sales. There are several steps you will need to take to reach your projected income. The first step is to estimate the amount you expect to accrue from sales revenue. Next, determine the amount you expect from fees that you charge for services. Finally, estimate the figures you expect from fundraising, investments, and memberships. Adding up these figures will give you your projected income for the year.
  • Interaction of expenses and income: This aspect of the annual budget entails keeping track of the money that was given for a specific activity, item, or position by a funder. It is important to build in any restrictions that might come with the money so that nothing comes as a surprise later.
  • Adjustments to reflect reality: You must remember to factor in funds for emergencies and unexpected necessary purchases. Also, don’t forget that your annual budget will begin as an estimate, so you will need to adjust it throughout the year to make it more accurate. To do so, layout your figures in a useful format so you can easily compare the total expenses with the total income. Stick to your expenditure budget as much as possible because a budget surplus may not show up until the end of the fiscal year.

This is What Should Non-profit Organizations Should Know

Typically, non-profit organizations are required to undergo an annual audit. The audit must be conducted by a Certified Public Accountant (CPA) that will examine your organization’s financial records to ensure that they are accurate. The CPA will also work with you to solve any problems or correct any mistakes. Providing that the records are in good order, and there is nothing illegal found, the CPA will prepare a financial statement for the organization based on the documents examined. The statement certifies that the non-profit’s accounts are in order and that professional accounting practices (or as we recommend, GAAP) have been followed.

This is How You Trim Your Company Budget

In certain circumstances, you may wish to cut your company’s budget. If so, it’s crucial that you do it in an organized way. Here are some considerations to help you decide on what you can and can’t cut:

  • Make sure you don’t cut services or items that are necessary for running your business.
  • Are you able to reduce the number of physical items you need to run a department?
  • Do you need to consider making staff cutbacks? If this is the case, could you reduce staff hours, ask members of staff to increase their share of their fringe benefits, or is it necessary to lay off some members of the staff?

Do Not Disregard an Annual Budget

Annual budgets are essential for evaluating your company’s performance over the course of a fiscal year. Because you will be comparing and raking revenues and expenditure and comparing these aspects to what was budgeted, you can make sure that your company is sticking to its original plans. Budgeting also presents an excellent opportunity for you to identify issues and opportunities. For example, if sales in the first quarter turn out to be lower than projected, you will be able to see where you can cut expenses late in the financial year to remain profitable. Equally, if you introduce a new product that turns out to be more valuable than you anticipated, you will be able to see exactly where you have additional revenue, and you can revise your budget and perhaps use the extra money to increase production.

Looking for some small business budget templates to help get started? Check out the link or contact us. It’s clear to see why annual budgeting is important for your business. You can make sure that you are utilizing your entire annual budget optimally by employing the best budget management practices. This is the only way your company will truly grow and continue to be successful.


Make your strategic budget a priority

Crafting an annual budget is one of the most important financial aspects of a business, but often gets overlooked.

Business budget planning is an essential task that is frequently neglected at small and mid-size companies. So why is it so important? Well, mostly because it is a process that prepares your company to answer critical questions about what the next 12 months will look like:

  • What are you projecting sales to be next year?
  • Are you expecting margins to improve next year?
  • Do you plan to hire additional employees?
  • Will you have any significant capital expenditures soon?

These questions (and many others) are typical of investors, financial institutions, potential strategic partners, and financial buyers. Every business, regardless of size, should have the answers to these questions to be able to plan the annual operating budget accordingly.

Having a chief financial officer, or CFO, as part of your company’s C-Suite executive team can be an asset in this process.

A CFO will have access to and be up to date on the most recent financial data pertaining to the company. These resources can help the company craft its budget, as well as short and long-term financial goals. Strategic budgeting is a skill that any good CFO will have in their arsenal. It’s just a matter of working as a team to bring all the relevant information together to plan for the future.

Read more: What CEOs Need From Their CFO

If you are overwhelmed by company budgeting planning, don’t have a CFO, or don’t know where to begin, below are some tips to help you get started:

1. Consult All Departments

The annual budgeting process should not be completed behind closed doors by one member of the accounting or finance team. Instead, all the departments within the company should be part of the conversation and provide feedback, insights, and expectations for the following fiscal year.

Who should contribute to the conversation? Be sure to loop in:

  • The sales team: they can assist with realistic revenue assessments
  • The manufacturing or service team: they can advise on costs of delivery and any large purchases required to update machinery
  • The research and development team: they can discuss expected expenses as well as the timing on any new products anticipated
  • Any other departments who can add value to the conversation

It is encouraged to incorporate feedback from each department as the results are much more likely to be accurate. Therefore, project completions are possible for the upcoming fiscal year. Too often, companies that do complete the annual budget planning process estimate an overall percentage increase over the prior year’s actual income – this is something that should be avoided.

2. Estimate Revenues

Expected sales have a significant influence on costs, including employee headcount, but it can be very challenging to make projections accurately. Here are some ways to come up with the best estimate:

  • Consider the recent monthly growth rate experienced by the company and decide if it can be continued.
  • Review industry guides and other expert publications that focus on your industry.
  • Review financial information from a number of your competitors, if available.
  • Communicate with your current customers to better understand their expected needs of your product or service.
  • Discuss the expected sales with your sales department and set expectations to help determine compensation for this team.

3. Determine Expenses

Once the expected revenue figures are estimated, the focus can shift towards expenses. Here are some considerations:

  • Some costs relate directly to revenue, whether they be inventory or employee services. Typically, the gross margin of a business does not fluctuate substantially unless new products are developed, inventory prices change, or inefficiencies are identified within the manufacturing process. Use this time to challenge your employees to identify cost savings related to the delivery of products or services.
  • Other expenses are fixed costs such as rent, insurance, equipment leases, and certain other services purchased. These expenses may be easier to estimate; however, you should consider reviewing the policies in place, especially around insurance. Use this time to determine if better insurance rates are available or if different coverages would be more advantageous.
  • Employee compensation should always be established to be in line with revenues and related growth in the coming year. Many companies believe that all employees require annual raises, but if the results show a contraction in the business, then it may not be reasonable. Consider tying aspects of compensation to the growth of the company. With today’s inflationary trends, make sure you include cost of living wage increases for your employees in your budget and projections as well.
  • Along with compensation, estimating employee headcount is a critical aspect of the budgeting process. It is important to identify when you will need to hire, how long that hiring process takes, and what experience level would optimize the operations.

4. Identify Capital Expenditures

Often not considered in the budgeting process are those large or expensive purchases which are vital to the continued success of the business. These may include new computers, systems, machinery, vehicles, furniture, etc. It is essential to keep in mind that each new employee hired will likely require a certain amount of capital expenditure.

Investments in equipment or processes that are directly related to your product or service should also be considered. Will you need to purchase any new materials next year? Is there old equipment that needs to be updated? Avoiding investment in equipment can impact your output, quality, or delivery timing, which can directly impact your revenues.

5. Calculate Cash Flow

While putting together a projected income statement can feel great, it is just as important to calculate the expected cash flow of the business.

Your company may pay bills faster than customers pay theirs. You may need to purchase inventory well in advance of sales if acquisition time is significant. In cases such as these, a cash flow statement should be created using the income statement as well as AR/AP turnover rates and other metrics from the balance sheet.

Read more: These Are the Four Financial Statements You Need to Grow Your Business

6. Be Conservative

While it may seem advantageous to show investors that the company will significantly grow, it’s a possibility that results may disappoint. Even worse, business decisions may have been made using such projections (aka best guess scenarios). When in doubt, it is a good idea to be more conservative and leave some room in the projections in case of emergency, unforeseeable large expenses, or a drop in revenue and sales.

7. Start Early

Businesses should begin the annual budgeting process three to four months before the start of their fiscal year to allow sufficient time to craft a detailed estimate before the year ends. However, the annual business budget should be monitored and updated on an ongoing basis. For this reason, it’s never too late to get started.

8. Monitor, Evaluate & Reforecast

Once you complete the budgeting process, the biggest mistake you could make is to file it away only to pull it out again at the end of the following year.

A budget should be monitored monthly, or sometimes weekly for smaller companies. Budgets should be edited if circumstances change, like bringing in more fruitful accounts or losing critical customers.

If you have a CFO on your team, they can help facilitate a strategic forecasting process that extends beyond the annual budget and encompasses more of a three-year plan. This can help push your company to think about future business decisions and goals.

Furthermore, budgets should always be compared to actual results to understand why there are differences. Doing this will help monitor spending money throughout the year and help management make important decisions in relation to the business. Put these tips into action and learn how to prepare an annual budget with our in-depth guide.

We Can Help

Signature Analytics will help guide your company through the annual budgeting process. We will work with your management team to create a budget for your business and monitor that budget throughout the year.

This would include analyzing the budgeted versus actual results quarterly and helping forecast accordingly. We can also perform industry and economy reviews to assist with the forecasting process and provide benchmarking data.

If you want assistance creating (or improving) an annual budget for your business, contact us today for a free consultation.


Chances are, as a business owner or decision-maker, you are always running from point A to point B. You have a call with a prospect at 7:15, need to drop the kids at school, and somehow get in the office for a meeting at 8:00, and when you get there your secretary needs a signature on a check, your VP is asking about the phone call, and you still haven’t had a cup of coffee. At this moment, the last thing on your mind is how to do a budget for your business. You are not alone. So many companies fail to create a good budgeting plan to help them head down a path full steam ahead.

However, a budget is essentially a roadmap of the business, and without one, that path you are headed down could have a dead end.

While most business executives understand the value of having a formal budget, it’s one of those tools that often gets overlooked or de-prioritized when you’re busy running the day-to-day. Without it, the business you are making so many sacrifices for may very well fail.

We don’t want to see that happen, so we have crafted the top factors that decision-makers often overlook when they create their business budgets. That way, despite the chaos of your daily schedule, you don’t have to remember these often missed budget categories.

1. Goals Don’t Align With Strategic Priorities

Let’s start by simplifying the difference between a goal and a strategy. A goal is what a company wants to achieve over a specific period of time. Goals are typically outlined in a business plan and could pertain to the entire business, specific departments, or certain employees or customers. A strategy is a long-term plan of action designed to achieve a goal. See the difference? A list of goals is not a strategy; they are merely a light along a strategic path, indicating your business is headed in the right direction.

One of the biggest mistakes you can make when building your budget is to list goals that don’t align or support the business’ strategic priorities.

Often we see many companies confusing strategies with goals. It is crucial to remember that goals are what you want your company to achieve, like increasing growth and profitability, expanding into new markets, and more. When setting goals, remember to be specific and realistic. Then, do not fail to prioritize goals and be sure to create strategies that help accomplish them.

Identify critical priorities (tasks that need to be accomplished immediately), followed by important priorities, and so on. Then determine the goals that support these strategies and put them into action.

2. Cash Flow Analysis Is Missing From The Budget

How do you know you are fit to run a marathon? Likely, you have trained, bought the right pair of shoes, and done a health check-up with your doctor. In this scenario, a cash flow analysis is the clean bill of health your doctor provides. It is a way to check the financial health of your business.
Often, a good budget is the first step in your company’s financial forecasting. So, if you lack standard, consistent processes to track the cash flowing in and out of the company, your business is setting itself up to fail.

Monthly revenue forecasting can help you make important decisions about your business. Since fixed expenses are generally unchanging and recurring month-to-month, these should be forecasted. Similar to your fixed expenses, variable expenses are the costs you pay every month but can change over time.

Proactive cash flow management ensures that your forecasts of when cash should be paid and received, giving you a better insight into whether your company is at risk of running out of money.

Read more: What CEOs Need From Their CFO

3. You Have Failed To Cut Costs

Fast-growing companies are often cash-strapped, but there are many ways to reduce the amount of money flowing out of your business. One of the fastest ways to do this is by cutting costs.
Cutting costs can have a significant effect on your budget. For instance, one of the most essential expenses for companies is payroll. Are there any roles within your organization that can be performed part-time? Hiring part-time, or even fractional employees, will save the company money in the long-run. Not having to provide other expenses such as employee benefits and paid holidays can really pay off, literally!

If your company leases or owns its equipment, selling or returning unused equipment will also help cut costs. Another idea is to consider what employee perks your company offers, like company cars, gas cards, gym memberships, or other wellness programs. Consider asking employees what they appreciate most and whatever doesn’t make the list can get cut from your budget.

Getting lean gives you greater flexibility and wiggle room in the instance that any unexpected or unforeseen costs arise without decimating your budget.

4. You Are Focused On The Wrong KPIs

KPIs, key performance indicators, are the measurable data that demonstrates the performance of various processes. So it’s important to understand the difference between vanity metrics (which give you a false sense of success) and the metrics that show the true health of your business. These metrics will often include active users, revenues, and profits.
Businesses must track and measure industry-specific KPIs. For example, professional service businesses should be monitoring employee utilization, new monthly leads/prospects, cost per lead, cost per conversion, and others. A manufacturing company may focus on labor as a percentage of cost, maintenance cost per unit, or on-time orders and shipping.

Having a budget that includes both long and short-term objectives allows your business to create a focus for the future direction of the company. Without it, you could be leading your company down an unclear path that could ultimately lead to the demise of the business.

Remember, Signature Analytics is here to help guide you through the budgeting plan, which includes setting and tracking the right metrics and KPIs. If you need assistance creating a strategic budget for your business, contact us today.

A budget isn’t just a piece of paper; it’s a tool for your business.

The majority of businesses out there don’t have a formal, written budget or plan. Maybe the business owner has put one together and then put it away in a drawer and hasn’t revisited it since. Perhaps the business doesn’t have anyone who can put one together. Or maybe the owner just doesn’t know where to start.

As the owner of your business, having a budget is critical because it allows you to define your goals and make the strategic decisions that are imperative to the survival of your business. By using your budget as a tool, you can not only track performance but identify risks and opportunities.

Budgets that fail are often the ones that were unrealistic. Just because you had a great Q1 doesn’t mean that Q2 will be as strong. Past revenue does not guarantee future revenue.

What steps should you take to ensure you create a strategic budget that sticks versus one that fails?


Your department heads should have a general grasp on what they are want to accomplish within their department including plans on how to get there, areas within the department where they may be able to cut costs, or other valuable input that can help make for more precise budget planning.

There are usually at least 2-4 people from your company who you’re going to need significant input from when creating your budget. When you begin your budget planning, be sure you are soliciting input from all of your critical departments.


What are the goals of your business?

Whether you are looking to launch a new product, increase your market share, reduce expenses, increase productivity, or have better cash flow management, your budget acts as a path to accomplishing these goals.

Well-defined goals (that can be measured) can improve every aspect of your business. Have a process in place to help you measure these goals and hold your department heads accountable for hitting those goals.


What are the factors in your business that incur costs?

Determining your cost drivers will help you make more accurate expense projections. Cost drivers are dependent on the type of business it is. For example, if you own a manufacturing business where machines need to be set up, your cost drivers could include setup time as well as direct labor hours. Identifying those that impact your business will improve your budget.


Your budget can work as an accountability tool for both you and your department heads and can be monitored with performance reports. Benchmarking helps improve performance, allowing you to analyze past performance against current performance or even assess how your business is performing against industry averages. This ongoing practice helps to determine whether the business is falling behind your plan (and help you get back on track), or allow you to see what you are doing right so you can replicate those activities and continue to grow.


The goal is really to understand how to control the business, which can be extremely difficult. Going through this disciplined approach of planning your budget and sticking to it will help you get there. Signature Analytics can help guide your company through the budgeting process. If you want assistance creating a strategic budget for your business, contact us today.

What would your business like to achieve this year?

We’re a month into the new year and you’re still finding excuses to put off that budget. This month’s culprit? The Big Game. Or maybe it was school vacation or holiday break. Either way, you see the pattern.

You would be hellbent on finding a team that shows up to the Big Game without a strategy and a plan; why should ensuring your business is set-up for a successful year be any different? So before the keg is tapped and the coin tossed, here are a few budget planning tips to get you started:

1. Create a realistic budget
Your company may have ended 2017 with an unprecedented Q4, which makes this year’s goal a clear one: continue to trend that way for 2018. One of the biggest mistakes you can make is to create this year’s budget solely using information from one strong quarter. Be sure to investigate any sudden increases or decreases throughout the prior year.

Building a realistic budget requires determining revenue earned from all streams including fixed and variable costs and any one-time payments that may be coming up. Avoid setting an unrealistic budget by looking for industry trends. Also, look at historical financials and average increases, then use those findings to implement a budget that aligns with your business objectives.

2. Calculate expenses
What is the minimum revenue your company must generate to cover your expenses? Before creating a budget, take a look at your weekly, monthly, or yearly expenses associated with running your business including common overhead costs (e.g. rent, office supplies, insurance, and HR). What expenses can your company stand to cut from the budget? This could include negotiating with vendors for lower prices or paying invoices early especially if the vendor offers discounts to reliable customers.

Take a look back at each month and see where your business is coming in at, then make adjustments as needed to find the budgeting technique that fits your business.

3. Take a look at your cash flow statement
Is it costing more to run your business then what is currently coming in? Do you know how much actual cash your company has generated? Since a cash flow statement is the lifeblood of your business, it’s essential to know what your cash inflows (receipts) and outflows (payments or disbursements) are when creating a budget. If no one is tracking the cash flowing in and out of the company, your business is setting itself up for failure down the line.

4. Have long-term goals in mind
Are you looking at the big picture? Whether you’re budgeting to expand, looking to double revenue by the end of the fiscal year, or planning to sell the company, focusing on long-term goals will work as a roadmap to ensure your business continues down the right track. After determining long-term goals for the company, ensure your team understands those goals and then identify what first steps are needed to support and put those goals into action.

If you need assistance planning, improving, or building your budget for the new year, contact us today for a free consultation.

It seems like Q4 flew by! Isn’t it like that every year, though? Now the glitter on the floor from New Year’s has been cleaned up, and the fancy champagne glasses are away. Those items you swore you’d get to before the year was out are still left unchecked on your to-do list, and your business budget is no exception.

You thought you had plenty of time to build, examine, and implement a solid plan of business resolutions to kick-off the new year, but the celebrations came and went, and the work didn’t get done.

You now have two choices. Say “oh well” and hope Q4 this year is more efficient. Or, kick it into high gear, inspire your team, focus them, and roll up your sleeves to get to work. (If you’re wondering, we are urging scenario two in this case.)

Creating a plan to organize your business objectives is essential to the growth of your company. While it may take a few days or even weeks to tackle, you shouldn’t wait to put those goals into action.

Below are seven goals to get you started just in time for February:

1. First Set Your Budget, Then Lower It

Take a look at the budget you created in the last year with your team. Now is the time to review it and see if the budget in place was realistic and in aligns with your business objectives. Building and setting a budget requires determining revenue earned from all streams, fixed costs, variable costs, and any one-time payments that may be coming up.

Once a budget is set, look for ways to cut costs or expenses. This process can include paying invoices early (many vendors will offer discounts to reliable clients/customers) or negotiating lower prices with vendors. Lowering payroll will also cut expenses. Try hiring interns or outsourcing in areas where you may not currently need seasoned or full-time professionals. Find a budgeting technique that best fits your business.

Free Download: Discover how outsourced accounting can provide more visibility into your business

2. Better Manage Your Cash Flow And Financial Records

“Making more money will not solve your problems if cash flow management is your problem.” -Robert Kiyosaki

The last thought that should ever cross your mind is: “what happened to my money?” Does your business have a cash flow forecast created? Are you tracking your performance against the forecast?

Since cash flow is the lifeblood of the company, monitoring it is critical. Whether for future endeavors and purchases or if you know you will need to start looking for financing options soon, you want to be able to see what cash available. If you aren’t considering different scenarios for the forecast, it’s time to start before it’s too late.

3. Plan And Prepare For The Future

Can you predict the future? Unless you have psychic powers, you will likely need to rely on other means to understand how to plan for the future. While predictive analytics can be a relatively inaccurate source of information, financial metrics tracking past performance (and are relative to your business) can be used to prepare for future expenses. Past expenses can also be used to create a forecast/budget. A budget could also include any new costs the business is expecting to take on or account for increases at any expense.

Read more: Planning For What If’s 

4. Make A Plan To Reduce Debt

While some debt is suitable for a business, more often than not, it can cripple, and even bankrupt, a company. Businesses accrue debt in countless ways. It could be due to expanding too quickly, financing new projects too early, or even something as simple as being unaware of company spending habits.

Creating a plan is an excellent way to reduce, and ultimately, eliminate debt. A debt-reduction plan could include actions such as cutting expenses, speeding up collections, or contacting creditors to consolidate or renegotiate the debt. A business should also pay off high-interest debt first.

No matter what’s on the plan, the end goal is universal- creating strategies that can be implemented long term and eradicate bad debt.

5. Do Your Taxes Throughout The Year

Making quarterly tax payments isn’t for every business, but could be beneficial, especially if you’re focused on your statement of cash flows. Making quarterly tax payments spreads out cash payments instead of taking what feels like a big hit all at once. Contact your tax CPA to find out whether paying quarterly fees will be beneficial to your business. Don’t have a good CPA, contact us for a referral.

Free Download: Discover how outsourced accounting can provide more visibility into your business

6. Save For A Rainy Day

“All days are not the same. Save for a rainy day. When you don’t work, savings will work for you.” -M.K. Soni

The American market has historically turned volatile on a dime, every company, regardless of size or revenue, should have access to a cash supply in the event of an emergency. Cash flow forecasting and management can also help prepare your business for a rainy day. Planning and monitoring cash inflow and outflow will help you see your expenses and what you can cut, yet still operate, while slowing down cash burn.

Read more: Importance Of Cash Flow Management

7. Stick To The Plan

With a defined roadmap in place, the final step is consistency. Without consistency, there is more room for ambiguity, which can create a chain reaction of inefficiencies throughout the business. These inefficiencies may affect operations and employees or spread to clients and customers.

Establishing and maintaining consistent policies can improve the organization with the company, employee turnover, and customer retention. Strategies like this can also help to reduce churn and aid in the growth and expansion of your business.

It is easy to go down a rabbit hole, and before you know it, the end of the year is here, and the work we wanted to get done got put on the backburner. We encourage you to take control of your finances as quickly as you can so you can be more organized and effective in the new year.

Signature Analytics can work with your team to create a budget for your business and monitor that budget throughout the year. If you need assistance building or improving, a plan to organize your finances and grow your business, contact us today for a free consultation.

Discover how outsourced accounting can provide more visibility into your business

As we enter the fourth quarter, the successful entrepreneurs and business owners are starting to work on their strategic budgeting plans and goals. Here is your year-end checklist:

  1. Budgeting and Forecasting
  • Did you create a 2016 budget and subsequent forecasts and are you comparing the budgets and forecasts to your 9-month actuals?
  • Is this occurring on a routine, timely basis? 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 to make real time decisions to improve business performance.
  1. Cash Flow Management
  • Have you established a plan to meet and exceed cash flow expectations? This can be done through setting revenue and profitability expectations, debt and financing relationships, establishing terms with customers and vendors, etc.
  1. Proactive Tax Planning
  • Do you have a proactive tax plan? When are you meeting with your Tax Advisor to review / update 2016 tax strategy? This meeting should be happening before Thanksgiving.
  • Thousands can be saved in tax liabilities or current cash flows by developing an appropriate tax planning strategy PRIOR to year-end.  
  1. Employee Compensation Plans
  • Are your employee compensation plans aligned with the overall goals of the company? Are there ways to incentivize employees to improve efficiencies to help achieve business goals for 2017?
  • Profit-sharing and educating key employees to understand the importance of maintaining or growing gross margins are a couple of examples. Do you know the difference between gross margin and operating margin?
  1. Open Enrollment
  • Open Enrollment through the Health Insurance Marketplace begins on November 1.
  • Are you able to renew your health care plan early and save? The Affordable Care Act continues to change and drive up health benefits and proactively talking to your broker of record is step one.

We Can Help

Signature Analytics is a resource that can assist. Signature Analytics provides ongoing fractional finance and accounting support which includes: financial analysis, outsourced CFO services, and business advisory services that help grow and scale businesses. Contact us today to schedule a free consultation.

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.

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.

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.

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