As the New Year approaches, small business owners should be examining their operations in 2017 and devising a list of things they can do better in 2018. Resolutions help us improve on the shortcomings of the year prior. For instance, entrepreneurs should now be thinking about how to improve their marketing efforts in the coming year.
Small business owners who may have struggled in 2017 should use the looming New Year to address things that went wrong. Entrepreneurs are inherently optimistic and tend to focus on the positive. The dawn of a new year brings promise and, hopefully, greater success. I see the optimism when I meet with entrepreneurs who tell me about their growth plans for the coming year.
For any small business owners, improvements may help manage cash flow better and lead to increased profitability. The American economy was strong during the past 12 months. With excitement about the new tax bill, a robust holiday season, and relative optimism, business owners now can take time to determine how best to increase profits or possibly expand operations in 2018.
One of the biggest challenges in any year is securing small business financing. Small business loan approvals in November were higher at banks than they have been at any other time since the Great Recession. Gone are the days of less than 10 percent loan approval rates during the "credit crunch" of 2009-11.
However, companies still must be financially prepared to apply for loans if they plan to expand in the coming year. Trimming excess weight is one of the first things a small business owner can vow to do, and the beginning of the year is a good time for any entrepreneur to get his or her company's finances in better shape. These resolutions can help.
1. Lose Weight
No surprise here. Fat firms should trim the excesses -- whether it's overstaffing or excess inventory. Even successful companies find that they have room for improvement. Examining expenditures during the past year enables a small business owner to truly understand whether or not the firm has been successful over the past 12 months.
Some tips for "losing weight" include examining staffing, particularly during slow periods of the day and during slow seasons of the year. Reducing the hours of underutilized part-time staff can cut costs in a hurry. Another good practice it to rid the organization of slow moving product. Selling it at reduced prices still generates revenue (and maybe even profit) while freeing up space for new inventory that might create more income. Even if the cost reduction amounts to just a few dollars each day, the number grows during each month and, naturally, over the course of the year.
2. Improve Your Record-Keeping
Sloppy bookkeeping can lead to losses. Be sure to record all of the income your company has generated and monitor expenses. It's the unexpected and unrecorded costs, such as lost petty cash receipts, that eat into profitability. Until a company keeps accurate financial records of what happened in the prior year, it will struggle to assess its profitability.
Having good records of operations and financial performance during the previous year can dramatically impact what happens in 2018. For those who have been doing their own accounting, perhaps hiring a CPA or other experienced tax accountant will help find areas of in need of improvement. Many small business owners try to tackle the task on their own. However, hiring a professional to handle the accounting function may lead to savings that outweigh the cost of the accountant's fees.
3. File Tax Returns Early
While this suggestion may elicit groans, filing the previous year's returns early can be of benefit. In the best case scenario - when the government owes you money - submitting tax forms in January or February means that you can get your refund back quicker. That money can then be put to good use, such as paying off debts, building greater dividends, or stashing away some cash for a time when cash flow might be tight.
Waiting and filing on April 15 or applying for an extension when your company owes money is simply delaying the inevitable. Finding out that you owe the IRS a lot of money on April 15 can be demoralizing. Knowing what the situation is in advance, helps to ease the burden and enables a business owner to prepare for a possible cash flow disruption.
While New Year's resolutions may strike some people as a tired chore. Many of us make vows that stick for a few weeks and then we inevitably slip back into regular practices. The challenge is to transform your resolutions into habits that stay around for the long hall. The best case scenario is if one year from this point, your company finds itself in better shape because the financial resolutions made at the start of the year continued from January into December.