We’re officially enjoying warm temperatures and summer festivities, so thinking about year-end business planning might not be top of mind. However, proactive, early planning will ease the end-of-year planning rush and position your business for success and growth. As you attend to the immediate demands of the season, we’re sharing five steps you can take now to plan; your future self will thank you. But first, let’s talk about why midyear planning is critical for a smooth and successful year-end.

Why Proactive End-of-Year Planning is Critical

Regularly checking in on your business’s performance and goal attainment can ensure it is well-positioned for the future. End-of-year planning, in particular, focuses on critical areas, such as your financial standing, tax strategy, seasonal needs, and upcoming objectives. Here are some key advantages of looking ahead with intention:

  • Less Year-End Stress: The end of the year and holiday rush can already be stressful, adding pressure to business owners preparing for the new fiscal year. By starting early, you can lighten your load and reduce stress.
  • Optimized Tax Strategy: Early planning can help you identify tax-saving opportunities or mitigate liabilities, prioritize spending or deferrals, and implement strategies that maximize your benefits.
  • Improved Financial Health: Periodic reviews and understanding your financial standing are crucial to managing your cash flow effectively and cutting unnecessary expenses.
  • Strategic Decision-Making: A comprehensive understanding of your business’s financials will help inform better decision-making, allowing you to leverage opportunities or manage risks effectively.

What is Your Business’s Fiscal Year?

Your year-end may not align with the calendar year. A fiscal year in business is a one-year accounting period, typically beginning in January and ending in December. However, some businesses may shift their fiscal year to a different 12-month period to align with their revenue cycles. When planning your “end-of-year” activities and reporting, consider your business’s fiscal year.

Now here are those five planning steps we promised.

#1 Perform a Financial Records Audit

Organizing your financial records early in the year is key for smooth year-end reporting and tax filing, helping you avoid penalties and headaches later. In addition to ensuring accurate year-end records, this preparation gives you a clear picture of your business’s financial health and if securing additional capital is necessary. Here’s what you can do:

  • Collect and review your income, profit and loss, and cash flow statements to ensure transactions are correct and match your bank records.
  • Confirm all your accounts receivable and payable are up to date, ensuring invoices have been sent and payments have been collected.
  • Categorize your expense report to make it easier to identify deductions and credits later.
  • If your review finds your income isn’t as consistent as you’d like to pay your bills and fulfill payroll every month, consider tweaking your accounts receivable process, adjusting extended customer payment terms, or identifying capital sources such as alternative lending solutions to address any expected or unexpected cash flow gaps.

#2 Evaluate Your Tax Strategy

Among the many responsibilities of a small business owner, efficient and accurate tax planning and filing are among the most important ones that impact your financial health. Organizing and implementing tax strategies can help you save more, reduce your taxes, and avoid unnecessary stress come tax season. Here’s what to do:

  • Gather and review essential tax documents, such as your expense reports, profit and loss statements, and charitable donations.
  • Identify eligible deductions and consider strategies to reduce your taxable income. This may include timing your business purchases, delaying payment collections, or increasing your charitable donations before year-end. Alternative lending options may provide the flexibility and necessary capital to make advantageous purchases or investments to reduce your taxable income. 
  • Consider partnering with a professional. An accountant or tax professional can help you identify savings opportunities, stay current with tax laws, and implement effective recordkeeping and accounting systems.

#3 Check Your Inventory Levels

Too many products on the shelves can constrain your cash flow and tie up valuable resources. Checking your inventory will help manage your stock levels, reduce excess products, and cut costs. Here’s how you can manage your inventory levels:

  • Ensure your physical counts match your records and adjust your buying plan based on your current levels and future demand. If you’re consistently running low and lack the capital to order more, consider alternative lending solutions like factoring or an asset-based loan to bridge the gap until you establish consistency. 
  • Implement strategies to reduce or remove excess, less popular, or obsolete inventory. Offering discounts and promotions can help clear those items and free up cash.
  • Develop a plan to reinvest the money you’ve freed up. Focus on top-selling products, building an emergency fund, or investing in other areas that will increase profitability.

#4 Identify and Prepare for Cash Flow Fluctuations

Managing cash flow by identifying patterns in your revenue and adjusting your plans accordingly is crucial for maintaining stability, whether you have a seasonal business or operate steadily year-round. Here’s how you can prepare for the dips and spikes in your revenue:

  • Look at your past financial statements to identify trends and patterns to better understand, anticipate, and plan for future fluctuations. 
  • Forecast your cash flow, including expenses and projected income, for the rest of the year. Monitor your cash flow regularly and reassess as needed.
  • Have a contingency in place for potential cash shortages. Consider options such as a short-term loan or factoring agreement to help you overcome temporary cash crunches.

#5 Assess Your Goals

Setting and regularly assessing your goals is essential for creating a clear roadmap and strategically directing your business efforts. Here’s how you can get started:

  • Reflect on what’s working well and identify areas needing improvement within your business.
  • Set SMART and subjective goals. Outline “specific, measurable, achievable, relevant, and time-based” goals, such as aiming to generate $450,000 in revenue by the end of Q2. Subjective goals are not numbers or performance-based but focus instead on effort, such as having more fun at work or trying to find more work-life balance. 
  • Break down large goals into smaller, actionable steps to more easily track progress and avoid overwhelm.
  • Explore strategic goals such as hiring more staff, launching a new product, or entering a new market. Your goals can also include partnerships with professionals or securing non-dilutive capital sources, such as invoice factoring, to ensure you always have a reliable, healthy cash stream when needed.

Planning ahead ensures you’re well-prepared to navigate year-end activities and confidently handle unexpected challenges, setting the stage for your future success. If you find additional capital can help achieve these initiatives, please contact our team to explore how alternative lending can support your business.