Small Business Tips for an Annual Checkup
Some Important Small Business Tips for an Annual Checkup
There are many challenges that an entrepreneur faces daily, and one of the major ones is improving cash flow. Practically every small business owner looks for ways to cut expenses and to collect money that is owed to them. Working capital is needed no matter if it happens to be in a slow period or a time of expansion. Here are a few small business tips for your annual checkup.
Getting all of your financial records together for your accountant to file your annual business tax return takes some time, but it will give you the information needed for a review. This is a good time to take stock of your business operations for the past year. You have what you need to make sure that it is operating as efficiently as it can.
Your accountant can be a big help in pointing out areas that need to be reviewed. If certain expenses appear to be out of line, he can steer you in that direction to see why. In conjunction with the preparation of the business tax returns, we offer the following small business tips that may help you increase your cash flow for the new year.
Review your business plan – You do have one, don’t you? Many sole proprietors just starting out are anxious to put their ideas and plans on paper. If financing is required at start-up, banks will usually require a business plan as well as proforma statements for the first year of operations.
However, as soon as daily pressure occurs, especially with rapid growth, the business plan is the last item you think about. I know from experience its easy to say, but reviewing the plan on a regular basis to make sure you’re on track, is very important.
As a matter of fact, you may have new ideas or plans now that you survived the first year. It’s a good idea to incorporate these into your business plan. After you update the plan, you need to set a schedule to review it to be sure that you’re on track with the projections.
What’s your credit score – This number is very important for any small business owner that may have to arrange financing. It may be for improvements, equipment, or even working capital, but for any new business, the bank will look to the owner for a guaranty or to co-sign.
If there are any questionable items on your credit report, or if your credit score is a bit low, try to get them cleared up a few months before you apply for a loan. There are various sources on the internet where you can find out your credit score, and what you can do to improve it.
Generally, a higher credit score will determine the rate of interest that you will pay.
Setup a tax plan – In December 2017, Congress passed a new tax plan that will help business owners. In certain types of business, there will be a 20% deduction off the top for the year 2018.
There are also other changes such as a tax rate cut, that need to be considered. When you get near the end of the year, you need to meet with your accountant to review them. If you’re planning on buying equipment, as an example, is it better to buy in 2018 or wait until 2019?
If possible, pay off debt – If you happen to get a good tax break windfall, use it to pay lines of credit or other types of unsecured debt. Just make sure that you don’t deplete your cash to the point where you will have problems meeting your expenses.
Review your accounts receivable – This is one area that can make or break a new business owner. It’s a known fact that larger suppliers and other vendors will make the small new business carry them longer than the regular terms granted.
As a result, the cash flow of the small business is curtailed and problems can develop. It’s very important to do a thorough credit check on anyone that you extend terms to. Let your customers know that you are on top of this, and you’ll generally get paid faster.
You need to be aware that things can change very quickly in business, oftentimes overnight. Don’t let some of your larger customers say, “oh, don’t worry, we’re good for it”. Don’t allow yourself to be mesmerized by past performance. Follow the small business tips for your annual review.