New Year Financial Resolutions for Small Businesses to Increase Profitability

New Year resolutions can fall by the wayside soon after they are made. However, those which involve adhering to financial best practices during the subsequent year should be followed with sincerity. For small businesses that often face inflexible budgets and the prospects of further cuts, this is even more important.

One trick to keeping your resolutions on target is to tackle them one step at a time. This rings true for maintaining financial resolutions, as well.

Resolve to abide by the books

In other words, maintain accurate books. Keep all expenses recorded and updated.

Resolve to record every transaction as it occurs or immediately afterwards. Write it on a piece of paper if required and then transcribe to your expense log. As a business owner, you need to ensure that all financial transactions are not verbal but are supported by written documentation.

One practical solution for ensuring diligent record-keeping for most small companies could be automation or turning to professional bookkeeping.

Improve financial reporting

Resolve for better and if possible, more detailed financial reporting. There are several software options available today that not just carry out detailed bookkeeping and data management, but also present users with accounting analysis and comparisons of other industry players by means of mathematical ratios. Tailoring the information you receive from your financial reports can be accomplished by customizing the setting parameters which you'd like compared and analyzed.

Keep an eye on short-term financial issues

Levers that impact business profitability can be short-term financial functions, not just long term improvements. Current and short-term goals such as close monitoring of cash flow, revenue and expenses, combined with meeting or surpassing customer expectations from your services/products/deliverables can help you increase profitability.

You can also implement accounting methods such as cost-volume-profit analysis and other cost calculations that will help you evaluate various parameters such as sales on costs, profits, etc.

Getting a clear handle on these factors will provide you with insight into helping you decide where your efforts are best leveraged and whether you should consider outsourcing certain functions to free up key resources for other profit-making efforts.

Continuously improve existing financial information systems

Look for information systems that help to standardize information and disseminate it in a timely and easy-to-use manner. Your financial applications should be easy to understand and use. Information systems should also be customized to provide the right kind of information that is detailed and aligned with your company's objectives.

Ensuring that information is updated assists decision makers to focus on areas of profitability, as they can confidently make financial adjustments knowing that the data is reliable. Proper categorizing and reporting of financial information empowers the entire decision-making process by providing a clear snapshot of the company’s health.

Make it a goal for your company this year to establish some financial New Year's resolutions…..and stick to them.

Analytix Solutions
The Company that CPAs Recommend
Analytix Solutions is a professional full-service business support solutions provider. The company offers comprehensive and scalable bookkeeping and accounting services while leveraging its expertise, experience, and state-of-the-art infrastructure. It offers multiple services in diverse packages for companies that are seeking a trustworthy and professional partner to give their business a head start.

Budgeting vs. Forecasting for Small Businesses

For many small to mid-sized businesses, the pending close to the calendar year parallels the close of the fiscal year. Businesses begin budgeting and forecasting for the subsequent annual period. "Budgets" and "forecasts" become forefront in everyone's minds. The terms often are applied interchangeably, yet both serve very distinct but essential functions. Budgets and forecasts work best when applied in conjunction with each other.

Budgets- A budget is a defined set of financial objectives that designate where a business needs to be. It guides a business in its financial decision making by acting as a control measure in maintaining financial solvency, as well as establishing growth objectives. Typically, a budget is created prior to the beginning of a company's fiscal year and is a static document.

The budget preparation process can be lengthy and complicated, as it must represent the overall financial objectives of the company, incorporate upper management's input, and include realistic, attainable, cross-departmental goals. It assists in holding departments and managers accountable by establishing clear corporate objectives.

Forecasts- A forecast is an ongoing assessment of "actuals" so that a business can evaluate where they stand based on their established budget. It allows companies to plan and account for fluctuations in their operations due to changing market conditions or unforeseen circumstances. A budget represents where a business needs to be, whereas a forecast represents where the business actually is.

Forecasts are performed frequently (often monthly) and should incorporate scenario planning to predict best case scenario, worst case scenario, and most likely scenario. Forecasting helps businesses make adjustments in their operations so that they are not caught off guard by a cash flow deficit, which could have huge, negative implications for a small business.

Both budgeting and forecasting are essential practices for any business. However, they are critical to small to mid-sized companies which can be impacted more dramatically than larger companies by seemingly minor fluctuations in expected revenue or expenses. Whereas a large corporation may be able to absorb some variance, small to mid-sized business are more sensitive to these fluctuations which could have a greater impact.

We are currently offering a free analysis of your business processes, including the budgeting and forecasting process. If you would like to learn more on how Analytix Solutions can help move your business forward, please call me directly at 781.503.9004 or email me at sales@aixsol.com

Satish Patel, CPA
President, Analytix Solutions
Satish Patel, Founder-CEO of Analytix Solutions, has more than two decades of experience as a CPA. He has also advised small and mid-sized businesses on diverse matters such as valuation, accounting, and finance. His experience extends to raising capital and arranging for finance from angel investors.