By Christopher Neros
For The Bellingham Business Journal
The end of the year is a busy time. Between the holidays and travel plans, it’s easy to temporarily lose focus on your business finances.
That’s what the New Year is for, to take stock and set resolutions, right?
When it comes to your finances, the ideal time to review your plan, and create fresh targets and goals, is well before the year ends. Certain actions taken now can have a sizable impact on your tax obligations and overall financial success in the future.
As a commercial lender for many years, I’ve seen very successful businesses experience unwanted financial “surprises” because they put off this important step.
Instead, take steps to enhance your financial security by setting resolutions now.
Here are a few tips we give our clients at Peoples Bank.
Develop a plan: The most successful businesses we work with have a solid business and financial plan, and reference it often. Fall is a great time to review your plan and set goals for the New Year.
Keep in mind, a plan doesn’t need to be a strict doctrine; think of it instead as a roadmap, something that charts where you want to go in the next year and possibly beyond. If you don’t know where you want to go, you won’t know how to get there.
Expect the unexpected: As much as I wish I could predict the future, the only thing I know for sure is that change is inevitable. Though the political climate is typically tempestuous, it does appear we may see policy changes which will have an impact on financial planning in the next year.
Momentum appears to be gaining for tax reform, and there seems to be a bias toward deregulation. We need to be monitoring and preparing for these developments because they can have an impact on business.
Consult your triangle: Business owners must deal with a constant flow of variables. Between getting new clients, managing vendors, having the right technology in place, handling change, getting insurance in place, providing a place for people to work, and—oh yes, making a profit—it can be overwhelming.
To add to that list, business owners must also understand all the things that impact their taxes, finances, or legal situation.
That’s why I recommend successful business leaders have an advisory triangle in place consisting of an accountant, a banker, and an attorney.
An accountant will make sure from a tax perspective that you are managing capital expenditures and short-term assets and liabilities, along with ensuring you have accurate financial data with which to manage your business.
An attorney can help with estate planning, compliance in a regulated environment, and ensure you’re structured properly for legal and liability protection.
A banker can help you structure your debt, provide expertise with cash management, and ensure you’re complying with your business loan agreement if you’re a borrower.
All borrowers should request a copy of their spread financial statements from their bank, which show historical position and performance, display trends, and provide RMA averages for peer comparison. This presentation is very useful and we’re happy to provide it to our customers.
Plan for growth: A natural tendency as a new business owner or for a business in a growth stage is to focus too heavily on top-line revenue. Growth sucks up cash, and it’s easy for an otherwise successful business to grow too fast.
That’s when I tell my clients to slow down a little, because you can grow yourself out of business. Instead, focus on the sustainable growth rate of the business. Think ahead to how much growth your business can realistically handle within the next year to ensure stability for the long-term.
Know your business: Or, more appropriately, know the business of your business. Know how the cash flows and how all the pieces of the puzzle fit and interact.
Take the time to learn the business of your business and to assess your core competencies, as well as strengths, weaknesses, opportunities and threats so you can enter 2018 with a deep understanding of how you plan to operate and all the things that will or could impact your business.
Now is a perfect time to take stock of the financial picture of your business. With internal planning and the help of your advisory triangle, you can anticipate or adjust to any change that 2018 may bring. Then, as the ball drops, and we usher in a new year, you’ll know that your future is bright because you’ve taken the time to create a solid financial plan which will bring success in years to come.
Christopher Neros is executive vice president and chief commercial banking officer at Peoples Bank, where he oversees the Commercial Lending Division and all commercial production and relationship management.