Whether you’re a new entrepreneur or a seasoned business owner, taking some fundamental steps at the end of the year can help you evaluate how your business performed and identify gaps and opportunities for the future. Here are five steps to take before flipping the calendar to 2022.
1) Do a Financial Roundup: Getting your financials in order
The end of the year is the ultimate time to take stock of your finances – and gathering your financial statements is the first step to gaining a clear view of where your business stands financially. Your income statement, cash flow statement and balance sheet can help you understand your current financial standing, help you forecast the year ahead and make things easier for tax season.
Tip: Gather your bank and loan statements early so that you can identify any gaps that need filling and have your documents on hand for when you’re ready to do your review. Should you require bank confirmation of account balances, it’s best to initiate your request as soon as possible, especially if your year end is Dec 31st.
This is also a good time to assess your accounts receivable and accounts payable terms to see if there are any opportunities to positively affect your cash flow. For instance, are there any potential early payment discounts available? Alternatively, could you extend payment terms with your long-term vendors to ease any cash flow pressures? Either way, it’s smart to clear up your accounts payable and accounts receivable so you’re squared up by year-end.
2) Get Ready for Tax Season
While you’re not required to file your taxes for several months yet, there are some steps you can take now to prepare yourself for tax season. For example, are there any activities you can take on now that will relieve your 2021 tax burden? Can you maximize tax credits, such as research and development or marketing incentives? If it makes sense for your business, are there any major purchases you can make and claim for this year?
Tip: It’s a good idea to chat with your accountant about possible things you can do in 2021 to minimize your taxes come the spring. It’s also smart to start organizing your receipts now!
3) Do Some Administrative Housekeeping
When you’re caught up in the day-to-day running of your business, it can be easy for some of the maintenance activities to slip through the cracks. The end of the year is a great time to check that some key elements of your business are functioning as they should.
- Check that all your software is up-to-date and that your cyber security measures continue to align to your business needs. Learn how to become cyber ready.
- Check your marketing channels to ensure your website, social media and google listing are all up to date.
- Clean up your customer, vendor and supplier databases – add, remove and update as needed!
- Review your insurance policies to ensure they line up with the size and scope of your business today.
4) Take Stock of Your Wins – And Share Them!
By the time December rolls around, it can be tough to remember everything that happened earlier in the year. Take some time to go through your wins and accomplishments of 2021, beginning January 1. By itemizing all the great work you and your team did this year, you can see how your business grew, adapted and evolved – and it gives you a great opportunity to share a positive recap with employees, vendors and clients.
Tip: Email valued clients, suppliers, and vendors thanking them for their contribution to helping you make it through 2021 along with highlighting your business successes and any new plans for 2022.
5) Start your 2022 Business Plan
When was the last time you looked at your Business Plan? Whether it was a decade ago or this time last year, now is the right time to review your plan and make necessary adjustments to align with your current goals, circumstances and opportunities. Many business owners take this opportunity to review compensation packages at year-end to remain competitive – and this year more than ever, attracting and retaining employees may be a top priority. Evaluating and refreshing your 2022 Diversity, Equity and Inclusion goals – and embedding them into your Business Plan – is also a good exercise at this time of year.
Tip: Try the free RBC Business Planning Tool to help you get started on your 2022 plan.
Taking stock of your financials, operations, accomplishments and future goals can help you set your business up for a strong 2022 – and beyond!
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.