It’s common to set goals for the new year and one of the most popular goals is to become physically fit. But if you’re a business owner, it’s just as important to become financially fit to keep your business in good health.
If you’d like your company to get in shape this year, here are 10 strategies you may want to implement:
1. Optimize your bookkeeping. It’s critical to have a reliable method to track incoming and outgoing funds for your small business. Depending on your skill sets and the needs of your business, you may need to hire a CFO or outsource your bookkeeping.
2. Analyze your financial statements. Your statements will reveal how your sales and expense trends compare to your budget or historical performance. This will help you reduce costs and focus on the activities that create the greatest value for your business.
3. Evaluate your financial needs with your banker before crunch time. If your financial statements indicate you’ll need additional capital this year, don’t hesitate to meet with your banker. Your business is more likely to meet its goals if you’ve lined up funding when you need it.
4. If your business is qualified, consider SBA loans. If your business needs capital this year, the SBA 7(a) loan program can be a great option for your business. Because this program is guaranteed by the U.S. Small Business Administration, more businesses can qualify. SBA loans are valuable because they can provide reasonable interest rates, low down payments and long repayment terms.
5. Audit your accounts receivable, inventory and other assets. If there are too many overdue accounts, you may improve your cashflow by changing your collections process. Auditing your inventory and assets will help you make accurate, cost-effective business decisions.
6. Prepare for tax planning in advance. Having a robust filing system for receipts and paperwork will facilitate your preparation for tax season. After you’ve marked your calendar with tax deadlines, it’s valuable to work with your CPA to determine your tax strategy.
7. Review pricing and evaluate your customers. If your expenses are rising, a price increase may be justified. A price increase can be implemented without disrupting your customers — provided it’s executed properly. On that note, you may want to consider breaking up with unprofitable customers that require a disproportionate investment of resources.
8. Benchmark to exceed industry standards. Benchmarking is when you compare your performance metrics to what’s considered the industry standard. Through measuring your performance, you can more easily evaluate what you can improve in your business. Research reports and other publications are available for free through your public library.
9. Develop effective cybersecurity policies to help reduce financial risk. Because small businesses typically have a lean IT staff, they are prime targets for cybercriminals. One industry study revealed that the average small business data breach in the U.S. costs between $400,000 to $500,000 and 60 percent of small businesses go under within 18 months of the breach. Developing a robust cybersecurity policy is a critical investment every small business should make.
10. Take steps to improve your personal credit score. When you apply for a business or personal loan, your credit score is one of the factors that lenders will consider. By improving your score, you may gain terms that are more favorable to your business.
If you feel intimidated by any of these strategies, you don’t need to take your fitness journey alone. People who are serious about their fitness goals find a gym buddy, while business owners serious about their financial goals find the right banker. All business owners can take steps to improve the health of their business, which will position them for success in the years to come.
R. Jay Henderson is the Business Banking relationship manager for Zions Bank’s Pocatello Yellowstone branch. He can be reached at 208-244-3468 or RJay.Henderson@zionsbank.com.