Get in touch!
We’ve reached the final few weeks of 2022 and whether December is a busy time or a quieter period for your small business, there’s still time to complete a crucial year end review. 2022 was no doubt a challenge for business owners in more ways than one but spending some time reflecting on the successes of the year, as well as those areas that can be learned from, is key to success in 2023 and beyond.
We know that many businesses will be impacted by the economic downturn as we head into 2023 and there are specific strategies you can use to mitigate against recession, however a comprehensive review of business will include more than just financials. On this note, our three key areas to concentrate on are general housekeeping, financial review and tax planning (we know, we know, it’s too early!).
This is one of those jobs that tends to be neglected throughout the year as you concentrate on business but a lull in December could be the perfect time to refresh your socials. You don’t have to be on every channel available (it would be pretty impossible to keep up with the management) but select two or three social sites that best fit your business, optimize them and most importantly, use them consistently. You could also dedicate a few hours to making sure the content on your website is up-to-date and reflects your business accurately to potential customers.
Go through your contact lists for suppliers, customers and prospects and make sure that you have the correct details. The holiday season could be a good excuse to reach out and make sure that prospect hasn’t moved companies or changed numbers. You can also delete any suppliers you no longer use and start the new year organized.
Make sure that you have a plan for staff coverage over the holiday season and make sure to communicate any closures or changes in process to your customers as early as possible.
If you haven’t been doing so already, back up all the company technology including computers and mobile devices. It might be that you have automated backups to the cloud but it’s recommended to have a few different backup methods to mitigate risk and December could be a good time to get a manual backup to a local server or hard drive in addition to your usual methods.
When you’re in the midst of day-to-day business it’s easy to forget where you’ve achieved big during the year and had some really great successes, likewise, without pausing for a moment to think about what could be done differently, you’ve likely missed opportunities to identify what’s limited the business from achieving during the year and how it might be fixed.
Take a little time to write a list of successes and a list of any pitfalls you ran into; successes can then be celebrated first and foremost and if you realize where the pitfalls were, you can work on a list of solutions to eliminate them and improve in the coming year.
On the back of successes and learnings, revisit your goals from the previous year and determine whether you were able to accomplish them. Setting financial goals is a given, but what goals did you have for yourself as a business owner, leader and manager and were you able to achieve them?
Once you’ve had a chance to revisit and have all the necessary financial documents collated, write down a few high-level goals for the forthcoming year along with some actions that will help you get there.
There are three key documents that you will have to prepare or have your accountant prepare for you – balance sheet, income statement and cash flow statement.
The balance sheet is a financial statement that shows details of a company’s assets or liabilities at a given point in time; in this case, how things stand at year-end. Investors, financial institutions and other stakeholders will use the balance sheet to assess liquidity and may compare one balance sheet to another to ascertain past growth. If the balance sheet shows more assets than liabilities, it may indicate to a lender that the business will be able to repay on a loan commitment so it’s an important document should you be seeking funding in the new year.
Source: Zoho.com. Accessed: 02.12.2022.
The income statement which is also commonly referred to as Profit and Loss Statement (P&L) or earnings statement, is a summary of the company’s revenues minus its costs and expenses. This document details net income or net profit for a specific period and is a vital indicator of financial health in regards to a business’ ability or inability to impact profit by increasing revenues or decreasing costs.
A cash flow statement tells you how much cash is entering and leaving the business in any given period. The three main types of cash flow that you will see on a cash flow statement are financing, investing and operating.
Financing cash flow is the cash that flows to and from the business and its owners and creditors, investment cash flow may be expenditure on equipment, vehicles or buildings and operating cash flow records those activities that either generate revenue or incur a cost in producing the product or service. The cash flow statement is typically a good short-term indicator of a business’ ability to cover its operational expenses and make debt repayments; however it must be used in conjunction with an income statement and balance sheet to determine longer-term trends. Most small businesses experience negative cash flow at times and this can be a sign of rapid growth too if it doesn’t go on for a sustained period.
These three documents in combination will give a good overall picture of the business’ financial standing and enable strategic planning for next year.
Once you’ve completed a thorough financial review, the start of a new year might be an appropriate and natural time to raise your prices but it will need to be tactfully communicated in advance to customers. Prices are increasing for the majority of SMEs and if you’ve not passed on these increases to your customers or made savings in another area, you could find your cash flow isn’t what it used to be.
Armed with an accurate picture of the years’ performance, you’ll need to speak with your accountant about perhaps making some last minute tweaks to improve your tax position before the year is out.
There are many ways this can be achieved and ultimately it depends on the business but strategies might include expediting expenses into December, delaying receivables until January or making incremental payments to retirement funds and donations to charity.
Double-check that all your employee information is accurate and up-to-date. You’ll need to account for any year-end bonuses that you decide to give or the cost of staff parties and gifts, all of which will impact on 2022 liability.
You’ll also need to conduct a thorough review of your staffing needs for the coming year and work out if you need to recruit to achieve the business’ goals in 2023. If there are positions to be filled to support growth, the additional salary and benefits costs need to be factored in but you could also consider hiring temporary contractors or freelancers to keep costs down.
You may have been thinking about incorporating your sole proprietorship or becoming an LLC. If this is the case, it would be sensible to file paperwork before the end of the year so that you can start 2023 fresh from a tax perspective. Freshbooks offer some tips on working out the best business structure for US businesses and international law firm Gowling WLG shares some comprehensive advice on business structures for Canadian business owners.
Make an appointment to meet with your accountant or advisor to discuss all the items above plus they’ll be able to cover off any changes to tax law that might affect you and put in place a tax strategy for next year. There have been many changes in business taxation policy, particularly over the past few years; the ‘Employee Retention Tax Credit’ for example
and without speaking to a tax professional you may be missing out on valuable deductions and credits.
With a little bit of review and planning before the holiday season commences, you can head into the new year confident in where you’re taking your business. We’re always happy to chat with business owners about their plans for growth so if you’ve got big ambitions for 2023, feel free to reach out and discuss your financial needs with a partner who understands what it takes to get you there.
$7,000,000 in accounts receivable and $9,000,000 in machinery and equipment finance make up a bespoke package for a recycled plastics…
A $1,500,000 factoring facility will enable this Canadian dessert manufacturer to get their products into more major chains across the…
Trade credit insurance or accounts receivable insurance is a type of corporate insurance policy within the Property and Casualty business…
If you haven’t started to prepare your business for recession yet, you’re not alone. With all the uncertainty globally and…
Sallyport commercial finance’s Annual Holiday Music Video!
AG Machining Client Testimonial