Whether you have a startup, a small business or a large business, chances are that the year has passed at the speed of light for you. You design your marketing campaigns, take advantage of opportunities for growth and look through reports when the end of the year came. While people dedicate this time of year to holiday joys and celebrations, this is also the perfect time to review your finances, whether you are just someone with a job from 9 to 5 or a small business. Why spend your end of the year on a financial review? Here are the main reasons.
A strong visual of your financial status
The most important thing about a financial audit at the end of the year is that it gives you a complete picture of where your business currently stands. Everything that has happened during the year is now in the reports before your eyes. You can look at the reports and see what worked and what didn’t. You must have put a lot of money into marketing your products, services and the brand as a whole. You can now see which of these campaigns have been successful and which of them have proved useless.
The same goes for your accounts receivable. Compare your accounts receivable to those of previous years and see if there has been an increase or decrease. If there is an abnormal increase, it is a clear sign that you may need to change your payment schedule or push more to receive your pending payments faster. Every activity you have done in the past year has painted a picture that is now in front of you. Whether you have grown as a business, stagnated or sunk, it is clear by the end of the year.
The best time to set new goals
Based on how you performed the previous year and whether you have achieved your set goals or not, you can set goals for the coming year. Your previous year’s performance should clarify how to set your goals for the coming year. Keep them realistic, yet motivating and challenging enough to leave room for hard work, struggle and progress. Not only do you need to look at how successful you were in reaching the previous year’s goals, but you also need to be aware of your current financial status.
Best time to apply for loans and credit management services
No matter how long you have been in business when you go and apply for certain services, service providers look at your previous year’s performance. Let’s say, for example, that you want to apply for a merchant account (perhaps a high-risk account) so that you can begin processing credit card requests for your customers. When contacting a merchant account provider, they will ask for some history of your business activities – at least 3 months. By the end of the year, you have enough data to show to lenders and credit management services to convince them to do business with you.
Of course, a financial review will give you a good look at whether you have done enough to impress these service providers or not. You can also apply for these services with a quarterly credit history, but in most cases they are not considered adequate.
Best time to get your tax files in sync
Yes, you have been extra careful about your tax filing and preparation throughout the year, but the overall integrity of your records still has a bearing on that. It is extremely important for you to prepare your tax documents at the end of the year and calculate your responsibilities with the greatest accuracy. Although tax preparation software has made the job a lot easier, complex tax records still need the attention of your personal accountants to get everything in sync. Now, the important thing here is that a review not only helps you escape sanctions that you may be attracting by putting incorrect information on your file. You want to update your information at the end of the year because you also want to accurately calculate your own benefits, e.g. tax deductions, exemptions, standard deductions, specified deductions, etc.
Time to start Afresh
Your business may not have been a particularly successful business. In fact, many businesses do not start the best start, and it seems at the beginning that it would be difficult for the company to survive. However, small changes in strategies and cost reductions can prove to be of great benefit to businesses. The best time to start over and renew all your reports and files is the end of the year. While you can also change your strategies and plans mid-way, it is natural for most people to feel the need for a fresh start at the start of a new year. For example, people may decide to lose weight at any time of the year, but it seems to make the most sense for them when they do so at the start of a new year.
If you think your business has not worked very well, but you still want to give it a shot, the financial audit at the end of the year can clear the way for you by telling you if you can afford it a new shot or not.
There is certainly no limit to when you want to make changes to yours business plans and strategies. However, people find it natural and more motivating to set new goals, learn from past mistakes and make new moves when a new year starts. Throughout the year, your main goal is to keep the ball rolling. However, at the end of the year, you have enough data collected from all your business operations and activities to know how fruitful your efforts were, what efforts you should consider in the future and spending has prevented you from moving forward. In short, a financial review at the end of the year helps you make new and important decisions for your business.