Adjusting Your Business Financial Plan for Market Conditions

Taking Stock and Starting Off Right for a New Year

by Bruce Tannas

The end of a calendar year is often a good time to take stock of what happened during the past twelve months and to look to the year ahead. Even if the end of the calendar year isn’t your fiscal year end, it’s a good time to review your progress on your business financial plan to date. With 2020 being such a challenging year for small business and the first part of 2021 looking similar it’s even more important to take stock financially and see where you might need to adjust your operations plan going forward.

Review Your Results:

The key to good management decision making throughout the year is to ensure that your business’ accounting is up to date. That way you have a good understanding that the information that your management accounting system is providing you. Renita Jackson, a CPA who specializes in managerial accounting for small businesses recommends that businesses should review their results and make adjustments throughout the year. According to Renita “the more obvious key metrics, which are so important to any business owner, are sales, net earnings (or loss) and cash balance. You should already be paying close attention to these and you need to remember that ‘cash is king’ – the more you have in your bank, the better.”

In addition to monthly or quarterly reviews of key metrics, you need to periodically review other areas as well. Renita recommends that two “other important things to keep a close eye on are receivables and inventory levels. Have a look at how old your receivables are; the older they get, the harder they are to collect. And as for inventory, if it’s getting old and not selling, you may want to think about adjusting your pricing in order to sell it and turn idle inventory into cash.”

Reflect and Adjust Plans:

For many businesses, such as proprietorships, December 31st is also their yearend. For other businesses it may be a slower time providing an opportunity to review how the business year is progressing. “Not only does this help you see what went well and maybe not so well, it helps you set up for a new year with a clean slate and new goals, targets, and possibly some new procedures to help improve your business” according to Renita.

Taking the time to review at the end of the calendar year allows you “to compare your actual results to your budget to see if you’re on target. If not, it will help you make adjustments well before the end of the next fiscal year while you still have time.” says Renita. And for those owners whose year-end is December 31st “it’s the perfect time to do a budget for the coming year, which is essentially your plan or roadmap of where you want to go with your business in the next year.”

If you’re not able to get the information you need to review your financial metrics in a timely manner then it may be time to make a New Year’s resolution to ensure that you can get timely business financial information. If you have the information, take the time at the end of this year or early in January to review the information and make adjustments to your business financial plan so that 2021 will be a better year for your business than the last.

Be sure to check out further articles in our Business Blog for additional small business resources. In addition, Connect4Commerce has business to business service providers that can provide you with the small business help you need.

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