3 Ways to Improve Finances for Q1
Preparing for the start of a new year can be daunting. Long-term and short-term planning and clean financials will give your business the springboard it needs to launch into its best year yet.
As we approach the end of a year and the beginning of the next, there are several things that you can be doing to prepare your business for the best year yet. Here are 3 suggestions to improve finances for Q1.
To make the most out of the new year, prepare your business to start strong in Q1. Your strategic plan is your guide to continued and healthy growth. This plan should be specific, identifying key levers in the business and when to leverage them. Your plan should also identify Key Performance Indicators that are perfectly aligned with the near-term goals of your strategic plan, and allow you to check in on your progress periodically. For startups, a “long-term” plan could be as short as 3-6 months, depending on the stage of the business. For a more established business, shoot for at least 2-3 years.
Your long-term financial plan should also reflect your strategy. If you are planning to grow by 20% in the coming year, how will you increase revenue? Your strategy should be evident in the financials. For example, to increase revenue, you may need to allocate additional resources to Sales and Marketing in order to see the growth you’re looking for. You may also need to hire additional employees in order to accommodate the additional sales. And you’ll need to understand how much you can reasonably expect from each sale rep. This level of detail creates a long-term plan that reflects your growth strategy and is a plan you can operationalize.
A good long-term plan also explores possibilities like changes in the economy, capital needs (human and financial), and unexpected growth. Prepare a plan for an economic storm. What does your business need to do to survive? If necessary, create a plan for raising capital. Think about how, when, and from whom to raise funds. Or conversely, determining what options can you take to reduce spending to help weather the storm will help give you the confidence to move forward.
Short Term Planning
Short-term planning is essential throughout the year, but particularly as your business prepares for another Q1. You should create a short-term cash forecast to know how you’re doing and if you’re on track to reach your long-term goals. Be sure to consider any foreseeable potential cash shortages related to accounts receivable and accounts payable. You should also have a short-term plan should disaster strike — think of unforeseen legal fees, natural disasters, economic downturn, etc. Startups, in particular, should have a plan in the event that the money dries up and they can’t raise capital.
Clean Up Your Financials
One common issue for many businesses is that the financials are a mess — balance sheets aren’t balanced, and reporting isn’t timely or accurate. With inaccurate information as its baseline, forecasting and planning are misinformed and worthless. Year-end is the best time to perform financial cleanups so that the messes don’t carry into the new year. Too frequently companies overlook the status of their balance sheet, but an inaccurate balance sheet almost guarantees an inaccurate income statement. You should begin with your balance sheet.
If you’re worried about the integrity of your financials, it may be a good time to review your processes and controls to ensure you’re getting timely, accurate information. You might consider bringing in a professional to help ensure that you’re getting the information you need when you need it.
Overall, when prepping for a new year, make sure your long-term and short-term plans are laid out and that your financials are accurate. Doing these 3 simple things can help you hold your people accountable and ensure sustainable growth for your company.