The end of the year is a chance to reflect on the successes and failures of the last twelve months and an opportunity to think about what could be done better in the new year. However your company has performed over 2018, it’s essential to lay the groundwork for a great 2019 as soon as possible.
Align your actions to your strategic objectives and review your processes, and you’ll set the stage for a great year. Here are a few steps to take before 2019 hits.
Call your debtors
That’s right – call them. Emails are easily ignored or forgotten; phone calls, less so. Start by making a list of your debtors and what they owe your business. Call them to let them know in the friendliest possible terms that you are counting on their prompt payment to keep providing the excellent services they’re accustomed to.
Aim to close the financial year with a clean set of accounts, collecting all money owed for the financial year, while simultaneously paying all creditors. It’s important because most small businesses use the accrual method of accounting, where the expense is incurred or the revenue booked on the date of the transaction, instead of the cash method, where the transaction only takes effect when money leaves or enters the account. If you don’t manage your debtors, you might have to pay income tax and VAT before you receive your money.
Review your cash flow
As far as cash flow is concerned, December is the cruelest month – but it’s no less important in the final month of the year than it is in the preceding eleven.
“Cash is King” and cash constraints are amongst the main reasons for closing down a business. Without adequate financial management, you can’t pay suppliers and creditors on time.
More often than not, cash flow problems are a symptom of underlying structural and systemic issues. If growth is not adequately planned, you will find it hard to meet growing expenses. It’s necessary to take time to analyse your inflows and outflows per cycle – with the goal of ensuring adequate cash flow over the entire period.
Review your inventory
If you’re selling physical products or hold stock – an auto repair shop, for example, might sell oil and spare tires and more – count your inventory to ensure that everything’s in order. Particular attention should be paid to the quantity of each item on hand at year-end, the value of each item, and the cost of all inventory purchased during the year.
Stay up to date with tax laws and filing deadlines
Tax laws and regulations change frequently, and it’s worth keeping up to date with them from year to year. If you can understand how these laws affect your business, you’ll be better able to manage your financial affairs.
Work out when you need to file and pay taxes for the coming year and set up your 2019 calendar with appropriate alerts.
Set goals – and learn from your past mistakes
Learning from past mistakes and past inefficiencies is what the new year is all about. Even if you had a great 2018, you may not have achieved everything you intended at the beginning of the year. That’s fine as long as you find out where you fell short and figure out how you can do better. Setting goals is a good way to do just that.
Compare your performance against your predictions and your budgets. When you have final income statements, cash flow statements, and balance sheets, you’ll have a better idea of how you did over the course of the year. Then you’ll be able to set definite objectives for improving your financial processes – and hopefully you will have some notion of how to do so.
If 2018 didn’t meet your expectations, 2019 may be the right time to make a change. That might involve tightening up your existing accounting methodology, incorporating new technology to make data more accessible and up-to-date, or simply staying on top of things that you’d previously let slide.
New year, new business!
By Colin Timmis, General Country Manager, Xero SA