In a few short months, (almost) everyone on Planet Earth will share something in common: Everyone will say good bye to 2011 and ring in the 2012 New Year. For many people, that means a party, hangover and (new) unfulfilled New Year’s resolutions. This is seldom something most people need to plan and prepare for.
However, astute business owners and entrepreneurs will use this time to properly plan, and execute, for the 2012 New Year. Why? For many small businesses, their fiscal year (FY) ends on the calendar year, and therefore, preparing ahead of time for the new year gives such forward-looking business owners an opportunity to start the 2012 New Year off right. It also gives such forward-looking individuals an opportunity to end the previous FY properly.
Don’t wait until the 2012 New Year. Plan now and execute, so your plans are in place on January 1, 2012.
Now is the time to finish your research, prepare a list of 2012 business goals, and end 2011 on the right foot. While not everything in this list will apply to you, some of the items can surely help you to define your goals, resolutions and close your 2011 FY properly.
- Talk to your CPA. Three reasons: Proper categorization of 2011 expenses, year end profit distribution, and new tax rules for 2012. Only your CPA can help you identify tax-saving tips that apply uniquely to you and your business. Talk about them now, before the year ends, to make sure you, your financials and your business are positioned properly to take advantage of any tax-savings opportunities. Don’t have a good CPA to talk to? Contact us, and we’ll be happy to refer you to an outstanding CPA.
- Corporate entity change. While many businesses are fine as they are, if you are a sole proprietorship and want to incorporate (Read: Not Incorporating is Risky Business), or you are a limited liability company (LLC) and desire to change to a C-corp (for example), now is the time to do it, so your corporate change can take effect on January 1st, 2012, thereby saving you the necessity of keeping two sets of books for your changeover year and filing two sets of taxes. Give yourself plenty of time (at least a full month), to create the right corporate documents, obtain approval and support from your partners, and create the right paperwork and filings.
- Create a proforma and/or budget. Assuming you have financials for your business, use your 2011 monthly financials to create a month-by-month forecast for your revenue and expenses for 2012. Be realistic, given what you think you can earn from revenues, and what you can spend. And, if you don’t have monthly financials, find someone to help you generate them for you for 2011, so you can go into 2012 with a strong and accurate budget. If you don’t have monthly financials, you’re not managing your business effectively on a month-to-month basis, and you cannot do any form of budgeting. If you have financials, you can measure your cash-flow, revenues and expenses, which will allow you to fine-tune your business on a monthly basis to ensure cost-minimizing, revenue-maximization and that you can handle the occasional “bumps-in-the-road.”
- Time to switch accounting methods? Are you using a cash or accrual method of accounting? In general, you cannot switch in the middle of your FY, so now is the time to do it. Most small businesses operate on cash-basis accounting, but may reach a point where they are required switch to accrual accounting. Some businesses using cash-basis accounting have a difficult time managing their profits and losses, and would benefit by switching their accounting methods. Of course, this is an excellent topic to bring up with your CPA. Read more on this topic
- Review your detailed expenses. When is the last time you reviewed every dollar leaving your bank account? Are you really taking advantage of the bottle-water service? Do you really need that monthly “Internet service charge?” Is that $200/month subscription to some news service really being used? Zealously cut unknown expenses, and make it a goal to not carry these expenses into the 2012 New Year.
- Review your vendor contracts. Put a schedule or calendar together of ALL your vendor contracts, containing the dates of when they expire or are up for renewal. Give yourself alerts for at least 45-days prior to the renewal dates, so you have time to renegotiate or cancel your vendor contracts as needed. You will be surprised how much you can save by renegotiating your vendor agreements when it comes time for renewal. If you don’t have all your vendor contracts in one place to review, spend the time to get organized.
- Save thousands of dollars in 2012, by carefully reviewing your 2011 expenses.Review your telecom and/or Internet service provide invoices. When you combine the fact that most businesses over-buy their telecom, cell phone and Internet service, with the fact that the same services decrease in price year after year, you have a perfect storm of overspending for most American businesses. This may cause you to pull out your hair, but if you spend a good day examining your telecom (i.e. voice, data and cellular) invoices, you can potentially find significant savings. Are you really using all the circuits you are being charged? Are you really needing all the bandwidth you pay for? Are you still paying for cell phone service for employees no longer employed? Are you still paying for a POTTS line for your fax service, even though you have an Internet-based fax service? For some businesses, it pays to hire a dedicated person to manage these vendors and the invoices. For all other businesses, it pays to at least review your invoices once a year, to make sure it aligns properly with your needs.
- Conduct a intellectual property (IP) audit and review. IP is an important aspect of your business, and it helps define your goods and/or services against all others. For many companies, their IP becomes their most valuable asset. If you haven’t perfected your IP, now is a perfect time to do so. Finish an audit before the end of the 2011, and make it a New Year’s Resolution to formalize any IP available for your business. For a brief overview of IP, read our L4SB Service Page on IP. One word of caution: Don’t do this yourself. Hire a law firm or business lawyer that understands your business, and is experienced in all forms of IP.
- Conduct a contract template audit and review. Do you have standard contracts for your standard relationships? If not, you should make another 2012 New Year’s Resolution to do so. Do you hire contractors? If so, you need a standard contractor agreement. Do you hire employees? If so, you need a standard employment agreement. Same thing for customers or clients. By having standard contracts, you are assured you are applying the same standard, treatments and requirements on everyone, making it easier for you to administer and ensuring you are adequately protecting your intellectual property, security and liability.
- Use SMART Goals in 2012. SMART Goals are: Specific, Measurable, Attainable, Relevant and Time-bound. Read more about SMART Goals. Use the other goals above to help you establish your SMART Goals, and work towards achieving them. An example of a goal is “reduce expenses in 2012,” which isn’t very specific. Instead, turn it into a SMART Goal, such as “reduce IT expenses an average of at least 10% each month in 2012.” Defining SMART Goals is much harder than just defining goals, but once you do it, you have a much greater likelihood of success in achieving your SMART Goal, and adding value to your business.
Whether your company is consumer-facing, or a business-to-business business, now is the time to work on the things necessary to leave your 2011 FY, and enter the 2012 New Year on the right foot. We at L4SB wish you the best of luck to you and your business, and we hope you achieve all your SMART Goals in 2012!
Law 4 Small Business (L4SB). A little law now can save a lot later. The home of the flat-rate contract review, and your source for experienced and affordable business lawyers.