As 2016 draws to a close, you may be more focused on simply closing the books for the year than on making preparations for 2017. However, this is the perfect time to start thinking about preparing for growth during the coming year, and a major part of ensuring successful growth is making sure that all of your financial statements are — and remain — accurate, timely and informative.
This process is important and can seem complex. Business owners can leverage the following four points to guide the process as you take time to evaluate where you have been and plan for where you hope to take your business financially in 2017.
- Manage your cash flow. You need to know how much cash will be coming in and how much cash will be going out, and an accurate cash flow statement will provide you with this information. A business cannot survive for long without sufficient cash to pay employees, keep the utilities connected and cover other essential operating expenses. Accurate cash flow projections can help avoid money management mistakes such as overspending on inventory, but knowing precisely where you stand on cash can also help you take advantage of unexpected opportunities to expand your business.
- Make time to evaluate. The end of the year is also an ideal time to evaluate your current business plan and examine your business practices. Your business goals might be based on revenue, profit, market share, total assets or another metric. If you are failing to meet your goals, you need to determine whether your goals are unrealistic or whether your current practices are holding you back. Strategic financial planning involves examining your methods to determine whether it is possible to improve productivity, evaluating whether your current staffing levels are sufficient to support growth and analyzing your marketing strategies to determine the most effective way to deliver your message.
- Prioritize projections. Establish a plan to update your sales projections on at least a quarterly basis and to update your cash flow projections on at least a monthly basis. You must have current, accurate information to make the best decisions for your business, and this means that you must be proactive about keeping projections updated. To do this, you must also ensure that you receive accurate financial statements in a timely manner. Your income statements, balance sheets and cash flow statements are critical for your strategic financial planning, but they are also important if you need to secure a loan or other type of credit.
- Consider engaging the services of a finance professional. Assembling a strong team of financial professionals can offer valuable input on growing your business. An accountant can ensure that your financial statements are accurate and timely, handle the various tax returns you will need to file throughout the year and help you identify ways to cut your expenses. If you want to add employee benefits such as a retirement plan or flexible spending accounting, your accountant can help you set up plans that will comply with the complex regulations that must be met to be considered for quality plans. You should also cultivate a good working relationship with your banker; if you are dissatisfied with the services provided by your current banker, the end of the year is a good time to start searching for a new bank. A banker who is looking out for you can offer you a variety of products that can help you maximize your interest earned, manage your cash flow and finance needed expansions. Consider engaging the services of a chief financial officer as well. A CFO can help you with all of the tasks mentioned in the first three points, but CFO services encompass much more. CFOs are experts at forging strong relationships with banks and investors, so they know how to secure the best rates on loans or find the right investors. They are also skilled at increasing profit margins through improved efficiency, vendor negotiations, accurate cost-of-goods sold accounting and better management of accounts receivable. CFO services are also essential if you plan to take your business public, bring in an equity partner, offer employee stock options or secure funding from a venture capitalist.
To learn more ways that a CFO can help you achieve your business goals, please call (901) 277-6165 or complete the contact form.