Year-end Tasklist for Small Business Owners
December 28, 2022
As 2022 is wrapping up, small business owners are preparing for the challenges that will emerge in 2023. However, in order to face the new year, analyzing the performance of the business in the current year is necessary. There are a few obvious and some not so obvious areas that need attention. Here are five different areas to cover in this analysis:
This refers to the process of reviewing, reconciling and verifying that all financial transactions of the business for 2022 have been accounted for. This involves gathering outstanding invoices, following up with customers that have not paid yet, compiling receipts to ensure all expenses are accounted for as well as the reconciliation of cash and inventory.
Once the year-end closing of the books is performed, financial statements will be ready. At this point, an examination of the business finances is possible and the following steps are taken in order to scan the financial health of the business.
– Generating a P&L statement:
First, a profit and loss statement constitutes the best tool to determine if the business has been profitable in the year. It allows investors and business owners to view your business’s total income, debt load, and financial stability.
– Cash Flow Analysis:
Second, a cash flow analysis using a cash flow statement enables the business owner to determine if the business has sufficient liquidities to sustain its operations and/or if any additional liquidities will be required.
– Calculating Ratios for Analysis:
Third, the use of ratios in comparison with industry standards can help the business owner assess weaknesses and areas. For example, a current ratio, calculated as the current assets divided by the current liabilities, can help determine if there are sufficient funds to support the operations of the business or if outside investments are necessary. Another useful ratio is the debt ratio, obtained by dividing the total debt by the total assets. The higher this ratio is, the more difficult it will be to obtain additional financing. Lastly, the gross profit margin ratio, calculated by dividing the profit by the total revenues, provides information on the percentage of income that is converted into actual profit.
Check out the Accountero Editorial team’s suggestions on Financial Ratios Entrepreneurs must know to have important financial data at thier finger tips.
The end of the year offers a great opportunity to reflect on whether the goals set for 2022 were achieved and to investigate the reasons behind successes and failures. Furthermore, it also enables the business owners to set specific goals for the business in 2023 in the upcoming year. Such goals may include an increase in sales, the launch of a new product and the hiring of new employees.
Business owners may find that the preparation of a detailed business plan, month by month, can enable them to focus on the next steps to grow their business. However, in the preparation of the business plan, it is important to consider the circumstances rising in the new year such as the impacts of the COVID-19 pandemic and the rise of interest rates that could have an impact on the performance of the business. Finally, as part of this plan, the business owner can also take a moment to create a calendar for promotions and to plan the marketing initiatives for the year.
While this point is often overlooked, the end of the year is the adequate moment to schedule an appointment with your accountant, whether it is to determine the amount to set in order to cover the business tax payable for the year or to discuss strategies to reduce the tax burden.
Finally, the last months of 2022 are the best moments to update employee and payroll information. It is, as well, an opportunity to assess employee needs for 2023 and to review the compensation and benefit structures to enable the business to remain competitive.
In short, running a business successfully involves planning ahead, analyzing the current situation and monitoring progress over the year. Accountero can help business owners begin 2023 on the right foot by providing them with bookkeeping, tax advisory and fractional CFO services.
Accountero is a “built for founders” financial hub for growth-focused startups. We simplify the accounting process for business owners. Get access to human-driven, tech-powered bookkeeping services, one-click access to advisors to help you save on taxes, and high-level reports to identify areas of growth potential. Talk to us today about your accounting needs.
Accountero is a tech-powered service provider offering bookkeeping, tax advisory and fractional CFO. Accountero is not a public accounting firm and does not offer services that require a public accounting practice license.