It happens every year. When January 1 comes, business owners examine what happened during the past 12 months and decide to start anew by making business financial resolutions. Resolutions are often easier said than done, however. Psychologists tell us that it takes at least three weeks for a habit to start to become a permanent change. Many of us have forgotten or dropped our individual New Year’s resolutions by Groundhog Day.
Small business owners often vow to examine their operations during the past year and find ways to improve them. Once the holidays end and things start running as before, many of us fall back into our same routines and the vows to change become unfulfilled.
According to Psychology Today, New Year’s resolutions fail when goals are unrealistic and when we place time bounds on changing behavior. Instead, create an area of focus and keep at it, rather than specific goals with time constraints that you may not be able to reach (and then become disappointed because of failure to meet the deadlines).
Recommended Financial Resolutions for Your Small Business
When small business owners seek my advice for securing capital, I tell them that they must become financially prepared to apply for loans. Consider the following to be business financial resolutions that any small business can carry out:
Trim Your Budget
Before you expand, you may need to trim. Entrepreneurs often seek funding because they plan to expand their operations in the coming year. Cutting excess weight is a good first step. Review expenses with your accountant to find areas where costs can be reduced, thus improving cash flow. Monitor inventory; unless there is significant financial incentive (in the form of a price reduction) to buy more, use what’s already on hand before ordering more inventory. Examine staffing. Businesses with seasonality should be the most vigilant. Cutting the hours of underutilized staff – especially part-timers – can result in significant cost reductions and improved cash flow. The better your financials look when applying for a loan, the better your chances of securing funding.
Shoddy record-keeping can easily lead to losses. Keep track of all of the revenue your company has generated and all of its expenses. Be sure to hang onto petty cash slips and keep records of anyone you may have paid cash. After all, you can’t become profitable without having a firm grasp on revenue and expenses. If you do your own accounting but don’t feel like you’re an expert in it, hire an accountant who specializes in small business. The benefits will likely outweigh the costs.
Be the Early Bird
If you plan to apply for a small business loan, you will need to provide tax returns for the past two to three years. By getting your 2017 forms into IRS in January or February, rather than April 15, you will be able to provide the required documentation more quickly. It’s an added bonus if you are expecting a refund because you will get it sooner. However, even if you wind up owing money to the Uncle Sam, paying it off sooner rather than later will put you in a stronger position to ask for a loan a little bit down the road.
3 Tips for Keeping Your Small Business Financial Resolutions
So now that you have some advice, here are 3 tips for keeping your small business financial resolutions:
- Focus on one goal at a time. If cutting expenses is you main goal, once a week schedule time to sit down and analyze expenditures and find out where the excess is. Then get rid of the excess. Once you find success, move onto the next goal.
- Celebrate the small victories. If you found a way to reduce staff hours by 10 percent, be proud – even if your goal was a 25 percent reduction. Keep track of your progress and keep working towards your goal.
- Stick with it. Keeping resolutions should be a year-long effort. Don’t wait until Dec. 31 to try it again.
The beginning of the year gives everyone a chance to turn the page and start anew. Making financial New Year’s resolutions and sticking to them will take a lot of effort. By striving continuously to achieve goals – and accepting that there will be setbacks from time to time – will put you in the right frame of mind to achieve them in the long run. The ultimate measure of success will be whether your business is in better financial shape in December 2018 than it is at the beginning of January.