As we enter the new year, it is an exciting time to reflect on the past year and set new goals for the future. For family businesses, this is an especially crucial time to evaluate the financial health of the company and to set goals that will help it thrive in 2024.
Here are some financial-related best practices for family businesses to reflect upon:
Review your books
The first step to achieving any kind of financial goal is getting organized and finding out where you stand now and where you want to be. Set aside time to take inventory of your business’s financial life. This can help you prioritize your goals and understand how much money you may be able to put toward them. Here is what to look for:
• How much does your family business pay for essential expenses, like rent, utilities, and salaries?
• How much does your family business typically spend on nonessential expenses, like entertainment and travel?
• And if your family business has debt, what are your balances, interest rates, and minimum payments? Payments on debt should be considered part of your essential expenses.
Being able to visualize all of these facts and figures in one place will allow you to map out your approach, whether the goal is to reduce your expenses or pay off debt—both of which have the benefit of freeing up more of your income to invest or put in your pocket.
Review growth, revenue, and sales objectives
As a family business, it is important to have a clear understanding of your growth, revenue, and sales objectives. Reviewing these objectives regularly can help you stay on track and adjust as needed. Consider setting specific, measurable goals for each area and tracking your progress throughout the year.
Review HR and payroll processes
It is important to ensure that your HR and payroll processes are compliant with the latest regulations. To ensure that you are not only compliant, but also taking advantage of all the deductions, credits, and savings available to you, it’s recommended that you review your HR and payroll processes with your professional advisors, e.g. Retirement plan administrators, CPAs, employment attorneys. They can help you identify tax-saving opportunities, ensure that you are filing your taxes correctly, that you are following appropriate labor laws and make any amendments to your retirement plan documents taking advantage of the current changes. Additionally, it is crucial to keep track of important deadlines and verify that your employees are classified correctly. By implementing these best practices, you can stay compliant, avoid any potential penalties or fines, and attract the best workforce.
Collect unpaid customer invoices efficiently:
What’s worse than not having a customer? Having a customer that doesn’t pay. Collecting unpaid customer invoices is crucial for maintaining a healthy cash flow. Unfortunately, having a customer that doesn’t pay can be worse than not having a customer at all. Unpaid customer invoices can be a major drain on your cash flow, so it’s important to prioritize collecting them as quickly and efficiently as possible. One way to do this is by implementing an automated invoicing system that sends reminders to customers when payments are due.
Plan for significant business expenses
As a family business, you may have significant expenses coming up in the new year. These could include investments in new equipment, hiring new employees, or expanding your business. Make sure you have a plan in place to cover these expenses and that you are not caught off guard.
Seek professional tax planning advice
It is crucial to ensure that your business taxes are filed correctly, but tax laws can be complex and change frequently. That’s why it’s important to seek professional tax planning advice from a CPA firm. A tax professional can help you identify tax-saving opportunities and ensure that you are taking advantage of all the deductions and credits available to you. Raise the bar for your professional advisor. Ask them, “What would you do if you were in my shoes?” This question can help you gauge their expertise and ensure that they are providing you with the best possible advice.
The new year is an excellent opportunity for family businesses to set goals that will help you grow and thrive in the coming year. By implementing some or all these best practices, you will be well on your way to a successful 2024.
Ursula Scroggs, CPA, is managing director at DKSS CPAs + Advisors, with offices in Troy and St. Clair Shores, Michigan. Jean Stenger, CPA, is director of operations for DKSS.
