The new year often prompts us to set new goals and it’s common for many people to resolve to become more physically fit. Although physical fitness is important, if you’re a small business owner, it’s equally important to be financially fit for the health of your business.
If you want to get your company in shape for the new year, here are 10 tips to consider:
1. Get your books in order. It’s important to have a consistent, reliable method to keep track of all funds that go in and out of your business. Because this is so critical, you may want to consider outsourcing your bookkeeping or hiring a CFO depending on the needs of your business and your skill sets.
2. Review your financial statements to better understand actual sales and expense trends compared to budgets or historical performance. Reviewing your statements can help you prioritize your spending, reduce costs and focus on the activities and revenue streams that drive the most profits to your business.
3. Conduct an audit of your accounts receivable, inventory and other assets. If you have too many overdue accounts, it’s important to modify your collections process to improve cash flow. Do your inventory and other assets match your records? Are these items being put to the best use in the business?
4. Prepare for tax planning and consider the future. If you haven’t already done so, develop an effective filing system for receipts and paperwork. Mark your calendar with upcoming tax deadlines. It’s also helpful to meet with your CPA to determine your tax strategy far ahead of tax season.
5. Get multiple quotes from vendors and negotiate more favorable terms. Evaluating different service providers can provide overlooked cost savings for your business. For example, business payment technology services are particularly important to review. One of my clients saved $2,000 a month just by switching web hosting companies—enough to hire a full-time employee.
6. Evaluate your pricing and customers. Many small businesses are reluctant to raise prices, but it’s important to offset any rising expenses. When executed properly, price increases can be managed without significantly impacting your customer base. It’s also important to evaluate your customers and consider ending relationships with those who are unprofitable and require a disproportionate investment in resources.
7. Benchmark against industry standards. Benchmarking is comparing your business processes and financial performance metrics to what is typical for companies in your industry. Your public library can provide free access to research reports and other publications for insight and ideas to improve profitability.
8. Help reduce financial risk through effective cybersecurity policies. According to one industry study, the average small business data breach in the U.S. costs between $400,000 to $500,000 and 60 percent of small businesses go under within 18 months of the breach. If you haven’t invested in robust cybersecurity, now is the time to reevaluate your policies.
9. Know your personal credit score and take steps to improve it. Because your credit score is considered by lenders when you apply for business or personal loans, you may gain more favorable terms by improving your score.
10. Meet with your banker and evaluate financing needs before crunch time. If your financial forecasting indicates you’ll need capital later this year, now is the time to meet with your banker. Having funding lined up at the appropriate time can make or break the growth of your business.
If any of these ideas seem daunting, you don’t need to go it alone. Just like having a gym buddy helps you meet your physical fitness goals, the Zions Bank Business Resource Center can help you meet your financial fitness goals. Our services are complimentary and offered to the public, regardless of banking affiliation. Although becoming financially fit takes time and effort, starting now will set your business up for success in 2020 and beyond.
Karen Appelgren is vice president and director of the Zions Bank Business Resource Center in Boise and can be reached at (208) 501-7449 or [email protected]