New year's resolutions are popular this time of year, but the harsh reality is that most of the resolutions you and I make won't fully happen. When it comes to your business, however, the payoff of sticking to, or not sticking to, your resolutions can have a much bigger impact than just a wasted gym membership. You want your business to grow and be successful in 2018, and you will do whatever it takes to make that happen.
So why not take some steps right now, and make some resolutions for your business to keep growing and developing into 2018?
This may sound easier said than done, especially when you are trying to juggle customer expectations, developing and reaching new customers, making sure you take care of taxes correctly, and fending off the competition. There is a lot you are already thinking about, but I'm going to focus on finance related resolutions for 2018.
At the end of the day, finance and financial fundamentals are what drive the majority of decisions, so why not focus on getting -- you need to know your cash numbers to pay your bills.
Let's take a look at some finance resolutions that will help your business next year:
1. Document and organize your cash flows.
This may seem like an obvious thing to do, but don't forget the majority of small businesses fail due to a lack of capital and financing. Tracking the cash coming in, and out of, your business is, I would argue, the single most important you can do to improve the financial health of your business.
Two things you can start doing right now to improve your cash flows are 1) collect and clean up your receivables, and 2) maybe consider discount to encourage customers to pay sooner.
2. Make a debt repayment plan.
Debt payments, and the interest payments that are associated with them, can drain the agility and flexibility from your business. Debt, in and of itself, is not a bad thing -- it can help you expand, grow, and develop your business, but you need to have a plan to pay it back.
Some things to consider when making this plan are 1) which debt has the highest associated interest, 2) what is your largest debt, and 3) is there any debt that is especially restrictive on your business via loan terms?
3. Formalize your pricing model.
You are surely aware that, in order to generate profits for your business, that your revenues have to exceed your costs, but how standardized are your prices? I know that, especially for a service business, that every client and project is different, but there are always some items that are the same.
The amount you charge per labor hour, any prices you pass along to customers, cost increases you assume, the rate of inflation, and how much your competition charges should be numbers you know off the top of your head.
4. Determine how you want to get paid.
Getting paid is always a great thing, but how you bill your customers, and how your customers pay you can make a big difference come tax time. As an entrepreneur, and especially if you are starting a new side hustle while holding down a fulltime job, you have several options for how you want to get paid.
Work with your CPA or tax professional to figure out if being paid as a 1099 employee, being classified as a freelancer, or doing work on a contract by contract basis will work best for you.
5. Do your taxes throughout the year.
As a CPA one of the top issues I see every year is when entrepreneurs get tripped up different kinds of taxes. Although taxes get a lot of coverage between March and April, if you run your own business you may very owe estimated taxes throughout the year. Adding on to this, your business might be impacted by the coming changes to the tax code depending on how your business is structured, where you do business, and what deductions you are currently taking.
Work with your CPA or tax professional to get a handle on what you may owe in 2018, what change might be coming, and what you can do to ease this transition -- your bottom line will thank you.
Making resolutions for the new year is something you and I both do for ourselves, but it's also something you should consider making for your business. Focusing on your finances, doing some research now, and drilling down to action items can make 2018 a financially fit year.