As a business owner, you're probably not looking forward to getting caught up on your end-of-year bookkeeping. But with a simple change of attitude and approach, you can transform that process into something positive. Don't think of it as filing your financials. Think of it as tapping into a valuable source of business intelligence.
You Have to Do It Anyway — Make It Work for You
Okay, we get it. No matter how you dress it up, bookkeeping sounds like a chore. This is particularly true if the year hasn't gone as well as you'd hoped.
Actually, that's all the more reason to immerse yourself in those numbers. End-of-year bookkeeping can be an insightful process that reveals not only where things went off track, but also what you can do to set them straight again. Here are some of the important questions it can help answer …
- How Is Your Budget Trending? The simplest starting point for this process is to look back at your budget forecast at the start of the year and see how that compares to your actuals. Ask your bookkeeper to do a variance analysis on any account that differs significantly from those projections, and see if you can pinpoint the reasons. Did you spend more than you anticipated, or were sales below those projected in the budget?
Determining that answer alone could tell you if you might need to consider a shift in your business plan.
- Is Your Tax-Planning Strategy Sound? Once you have your actuals and a reasonable projection, meet with your tax preparer to discuss strategic tax planning. There are many variables to consider, including short-term factors such as seasonal fluctuations in revenue vs. expenses and big-picture considerations like retirement planning.
This is an important exercise for putting numbers in context. Should you accelerate capital equipment purchases, for instance, or stick to your current path? Would it make sense to implement a tax-deferred employee benefit plan? That could help you not just with your financial outlook but also employee retention.
- What's Your Long-Range Financial Plan? Reviewing your end-of-year financials is also a good opportunity to look back at your original business plan and see how your progress tracks with your projections. Are you where you thought you'd be, or at least close to it? What have you learned along the way? Use that knowledge to project where your business could go in the next three to five years. Based on that projection, what steps can you take to get there?
Get Ready to Tackle That Year-End Bookkeeping
You already understood how important it is to maintain accurate and up-to-date numbers throughout the year. Now you see that those numbers can also provide the financial insight you need to think strategically about the future of your business.