For many businesses, the end of December and the beginning of January represent a particularly challenging time of year. Employees typically take some much-deserved time off, and that leaves a thin crew to handle the end-of-year requirements, many of which take the form of telling reports and numbers.
But which numbers should you look at, and why? Though industry specifics may dictate the exact numbers that will play a role in your year review and new year plan, there are a few that are consistent across business of all shapes and sizes. So if you’re not sure where to begin (or end), here are six numbers you need to face at the end of the year.
1. Profit & Loss Statement
Your profit and loss statement, or your income statement, is one of the most important set of numbers of the year. Think of this number as the “big picture. It quantifies your level of success by adding up all the profits (a.k.a., revenue or income), and subtracting all your costs (a.k.a. expenses) to determine your total profit or net income.
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The format of this report may vary based on your products/service offerings and your costs, but, your sales or revenue numbers are just that, any money you received in exchange for a product or service. Costs, on the other hand, become a bit more detailed, as you’ll need to account for a variety of expenses, including labor, material, and operational costs.
2. Cash Flow
Where are you spending your money? Your cash flow report will answer that question and provide very useful insights for the budget that will take you through the next year. To do this, it’s best to break up your cash flow into three distinct activities financial, operational, and investments.
By reviewing this report, you can determine if there are any changes that will drastically impact the next year. Perhaps you paid off a loan, which can increase your available cash, or maybe your paying more for supplies than you have in the past, which could indicate the need to review supplier partnerships.
3. Accounts Receivable & Accounts Payable
It’s hard to really get a graph on the full financial picture if you don’t know what payments are accounted for and which still need to be obtained (accounts receivable). The same is true if you don’t know what payments you’re still on the hook for (accounts payable).
This information is also hand when preparing your final profit and loss statement, as it’s impossible to determine that number without knowing what’s currently outstanding. Aside from simply determining a “final number,” this will also shed some light on what customers or clients are reliable and what ones may need to be reigned in in the new year. Similarly, you may be able to make better purchasing decisions if you’re aware of any struggles you may have paying invoices.
4. Visits & Conversions
When we hear “numbers” and “end of year,” we typically think of finances, but that’s not those aren’t the only numbers that are important. Your online activity is equally important and can often old key insights into how those “financial” numbers came to be. Who is visiting your sites? How many of those visits are new and returning? What about your conversation rate? Is it up or down?
Looking at your YoY and MoM visits and conversions is essential if you want to understand how your customers are finding and interacting with your sites. They will also assist you in identifying ways to improve your business in the coming year.
5. Retention & Turnover Rates
I likely don’t need to tell you that hiring and training new talent can be expensive. It’s also likely that you know the indirect costs of losing or gaining employees (slower turnaround on project, stressed out staff, etc.). If you’re lucky, determining this number will be quick, painless, and say nothing more than “Great job! People love working for your company and don’t want to (or have to) leave!”
However, if that’s not the case, then your retention and turnover rates are worth analyzing. Why are employees leaving? Is it a specific department? How much have you spent in replacement and training efforts? Do you need to hire, and therefore budget for, more staff in the new year? The answers to those questions are essential to your new year planning.
6. Credit Score
You didn’t think you’d escape a year-end review without coming face-to-face with your credit score, did you? If you’re well aware of your credit score, then kudos! You’re done with this part. However, if you’re not, then now is a good time to become acquainted with it.
Small business owners that have had a fairly successful year and a credit score to match may not feel the any major impacts of a credit score check, though it’s good to have a plan in place to keep it that way. If however you had a less than stellar year or you have an equally unappealing credit score, now it the time to make a game plan.
If you have a low credit score, then you’ll need to plan on how to improve your credit score over the next year. If you have both a low credit score and you anticipate a need for additional cash, you’ll have to research the best ways to access loans or lines of credit with poor or bad credit. While these scenarios aren’t ideal, there are ways for you to move forward and upwards in the near year.
Having emergency cash on hand can be your key to managing cash flow.