Overview
At the beginning of the fourth quarter, take steps to end the year well and prepare for the coming year. These steps are important to keep your business growing. Focus on five areas:
Financials
Customers
Strategic Goals
Human Resources
Next Year
1. Financials
Assess your financial results this year and prepare your financial records.
Budget: Compare your income YTD with this year’s budget. Estimate your projected income and expenses at year-end. Take into account bonuses and year-end expenses such as customer appreciation gifts and holiday parties. Are you on track to make budget? If not, can you step up your efforts in the final quarter?
Tax Planning: Determine how to best plan for deductions and incentives provided by federal and state governments. See the Tax Planning Topic of the Month (February) for an overview of best practices. Estimate taxes to be paid for the current year and set aside cash for these payments.[1]
Accounting: Confirm your process and timing for closing the books for the year. If applicable, schedule your external audit.
2. Customers
Show extra gratitude to your customers (and vendors) and evaluate your service to them.
Service: Consider the seasonal needs and interests of your customers and how you can meet them. Are there special year-end products or services you provide? Prepare inventory and staff for these services.
Appreciation: Send a year-end thank you note or holiday card to your customers and vendors. For top customers, send a handwritten note and a small gift (as your budget allows). Business gifts to individuals are deductible up to $25.[2]
Feedback: Ask top customers for constructive input on how well you are serving them and recommendations for improvement. This can be done informally in personal interactions, but you may also want to plan a survey of a larger segment of customers (which may be conducted at some point during the following year).
Aged Receivables: Review outstanding invoices and reach out to customers who have overdue payments. See the Cash Management Topic of the Month (June) on best practices for collection.
Prices: If you plan to raise prices, the new year is a natural time to do so. Manage expectations by communicating future increases before the end of the year and offering a prepay discount.
3. Strategic Goals
Look back at your strategic plan and non-financial goals for the year. Compare this with actual achievement YTD. Are you on track to meet these goals? If not, can you step up your efforts in the final quarter? Are there any transactions that must be completed before the end of the year?
4. Human Resources
Even during the year-end push, this is a time to make sure employees know they are valued and to equip the staff for success next year.
Performance Reviews: It is best to conduct company-wide performance reviews twice per year, typically mid-year and end-of-year. End-of-year reviews help determine bonuses as well as compensation for the next year. See the Career Path Topic of the Month (May) for best practices in performance reviews and compensation planning.
Bonuses: Based on performance reviews, make decisions about bonus amounts, then distribute the bonuses.
Position Changes/New Hires: Make decisions about promotions. If new hires are needed, begin the hiring process.
Celebrations: Hold an office party or lunch to celebrate the holidays as well as the accomplishments of the year. Make a point of publicly remembering the highlights of the year and acknowledging the team’s hard work that made these achievements possible.
Staffing: Communicate the holiday schedule and the company policy on vacation days. Coordinate vacation schedules to make sure you will have enough staff to meet customers’ needs as well as allow employees to take their vacation days. Use any slow days, such as the week between Christmas and New Year’s, to organize files or return to projects that have been postponed.
5. Next Year
In the final quarter, prepare for the next year by making a budget, goals, and a calendar.
Budget: Prepare a budget for the following year. See Budgeting Topic of the Month (November) for an overview of the budget process. Take into account this year’s actuals as well as your five-year plan/strategic plan. Be realistic but aim for growth. Don’t just replicate this year’s budget.
Goals: Prepare a written list of goals for the next year, both financial and nonfinancial. Again, use the strategic plan as a guide. For example, if your strategic plan says you want to create ten new positions in the next five years, aim to create and fill at least two new positions next year.
Calendar: Using the goals and budget you have now prepared, plan when key events will take place throughout next year. Add the deadlines you already know about and set targets for your new goals.
Summary
Be intentional about how your business closes the year. Set good precedents and stick to them so that staff and customers know what to expect. Consistency pays off. A business that keeps track of its budget, serves its customers, cultivates its employees, and plans for the future will end the year—and begin a new one—in a position of strength.
[1] M&A Consultants and Advisors, LLC does not provide tax advice or consultation. Please consult appropriate tax professionals.
[2] https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses-8
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