Transition from Q4 to Q1 Effortlessly

Each year we’re presented with the rare opportunity to examine what worked well in our companies and change what didn’t. Start with looking at your company’s financials in the sweet spot between Q3 and Q4 so you have time to affect any changes you might want to make for the end of the current year and begin planning for the quickly approaching new year. 

Early in your career, you might not realize the importance of setting financial goals, adopting a “take whatever comes my way” approach. This might work for a short time, but it means that you don’t have clear sales goals for client interactions—and no idea of how much money you need to bring in to pay bills or yourself. Moral of the story? If you never set financial goals, then you never really know if you can spend money on a needed service or product, let alone paying yourself or your supporting staff.  

Taking the time to really understand your finances is a life and business saver. Make sure to set yearly financial goals to establish a baseline for your spending and decision making, which ultimately allows you to make company growth plans.  

Don’t get behind the eight ball, heed this advice: 

1. 1. Determine cash on hand and what will be necessary to end the current year. Is the company sustainable in day-to-day cash and in rainy day savings? If not, what’s needed to make sure taxes are covered, people are paid and savings for a rainy day are allocated? This process can also be used to know how much cash is needed to keep the business going.  
   2. Review expenses for the current year. This includes looking at every expense to determine if the same decision for the next year should be made. Many times, there’s a less expensive equivalent that will save money. Sometimes, the costs have gone up. Make note of the +/- of each area. Don’t forget to check the bank and credit card statements, along with the line items on your income statement. Cancel anything you haven’t used or will not use. 
   3. Review your strategic plan to see what additional funds are necessary for the next year. Does your current budget need to be increased or decreased to make it happen? Put hard dollars for everything. If your plans calls to hire, how much will the salary be and what’s the company carrying cost for that employee? Are you increasing your marketing or photographing for a magazine? What’s the cost associated above and beyond that which is in your current financial plan? \
   4. Create or update your financial goals for the next year with the information you’ve gathered on cost savings and updates for the strategic plan. Use the actuals that you have in your business up until this point and increase or decrease them to match your plans.  
   5. Create budgets (aggressive and conservative) for the next year with these financials so that percentages can be created to inform your metrics. Don’t let the term “budget” throw you—it’s simply a decision in advance that tells your money where to go and how it will be used. Make the hard calls now so that when the time comes to spend the money, you can do it and keep going without having to stop and reevaluate every single time. 
   6. Review all financial processes such as time tracking (yes, this is a financial process), client billing, payments and receivables, vendor payments and terms, tax reviews, sales tax along with nexus, Profit First, financial analysis, debt repayment, etc. If any process isn’t supporting the company, cash flow and growth, make changes. We can’t expect the money to just show up if our processes don’t work well together. Walk through your process from beginning to end to see where and how money moves through your company. 
   7. Review Profit First allocations and determine what needs to change (if anything). Then, ensure that the Profit First percentages align with the financial plan and budget you created. If you don’t currently use Profit First, consider adding it to your money management activities.
   8. Review employment numbers, such as number of employees, current pay compared to the industry standard for the role, raises and bonus structure. What needs to happen for the end of this year and into the next to support your team? Do you have cash on hand to make payments needed? Do you need to create a profit first account to hold the funds for bonuses going forward? 

Taking time to do this financial analysis will save you stress and time moving forward. Each month knowing what and how to check these values to see if you’re on or off track will assist you in quickly being aware of how money is or isn’t working in your company.  

Michele Williams is a serial entrepreneur and speaker on a mission to close the financial literacy gap for small businesses. Through her two companies, Scarlet Thread Consulting, a client-facing coaching program, and Metrique Solutions, a robust financial software platform, she supports entrepreneurs to understand their numbers confidently. She is also the host of the popular podcast “Profit is a Choice.”  
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