As businesses are approaching the end of financial year they should be reviewing their strategic plans, management goals, budgets and operational processes for the incoming new financial year. While all of these elements are often reviewed periodically throughout the year, the fourth quarter is the time when you want to fully establish strong, tangible goals for the year ahead. By having a clear picture of what happened and what needs to be done, businesses can start the new financial year with a clear, goal orientated plan. With that in mind here are just some elements of your business that should be reviewed and assessed to help facilitate a strong start to the new financial year:
Creating/Modifying your Strategic Plan
The strategic plan should be constructed or updated by owners, management and key staff during this time of year once you have enough data to review your business practices. It should ideally be setting the broad strategic outlook for your company for up to the next three years, although that said it should be changed and updated annually to reflect changes in your market, business goals and practices. In order to create synergy between the company goals and the company owner’s goals the strategic plan should incorporate both the business and owner’s needs and desires. This dual approach to the plan will hopefully help to prevent any large paradigm shifts or directional conflict down the road.
While constructing this plan make sure to review your financial data, point of sales data, employment data and any other key metrics as this will help to create a plan that is current, and based in the realities of running your business. While there are many things to consider within a strategic plan, one specific consideration that should be looked at is what opportunities exist for selling or marketing your products and services online to increase market capture. Many plans will talk broadly about marketing or expansion opportunities but tangibly mapping a rough plan for where and how you want to expand and grow your business can be hugely beneficial and keep staff/management orientated on your goal. Growth and profit in business can be seen to directly correlate to effective planning.
Review Employment Contracts
It is important before the end of the year to make sure you have undertaken performance and conduct reviews for your staff which can be delegated to management and team leaders. This information will help give you influential data when reviewing your employee’s contracts. Make it a goal of your review process that employee reviews not only be formal in nature but also informal during their day to day duties, work place feedback should be ongoing and continuous. Relating directly to reviewing your feedback system is examining your incentive systems or commission system (if applicable). You as the owner along with your management should be developing incentive systems that are simple, quick to execute and are controlled by clear indicators of success from metric data.
This time of year is also great for reviewing your employment contracts as some may need to be amended or renewed due to changing staff circumstances or changing company policies and role allocations. It is important when reviewing your contracts to also consider any confidentiality, intellectual property or restraint of trade clauses that may need to be implemented or initiated for the new financial year. These should be reviewed by owners in concert with legal advice to ensure that your contracts are executed to compliance requirements.
Review Sales Contracts and Customers Terms of Trade
The end of the financial year is the time when owners and key management staff should be examining your sales contracts to determine whether these are advantageous and secure for your business going forward. Things that can be reviewed in this process are potentially shortening the terms of trade/leasing, implementing credit controls or seeking personal guarantees and security amendments.
Review Supplier Contracts and Terms of Trade
To help ensure and maintain the success of your business your supplier contracts and terms should be reviewed at least annually. Even if you have had a long term positive operating relationship with them, a new year brings new challenges and changes to the marketplace. Make sure that the contracts are doing right by you and your business. Here is a broad list of factors to consider:
- Negotiate lengthening terms of trade
- Reviewing early completion of contract requirements (liabilities)
- Review how goods are supplied to better fit your company’s needs
- Negotiate minimum quantity amounts to reduce excessive billing and excess stock
- Review whether discounts for early payment or types of payment schemes are actually beneficial to your business. Paying in lump sum or in monthly/quarterly invoicing may actually be causing non-obvious stress on your finances.
- Review bulk buying needs and inventory demands.
- Review ordering process and time schedule based off stocktake data and sales data. Do you really need weekly orders or would monthly or quarterly orders reduce storage costs and wastage?
- Review ‘key supplier risk’ scenarios and ensure to map alternative suppliers for critical items or services to prevent serious loss of supply.
Review Financial Obligations
There are a number of financial obligations that should be reviewed as companies near the end of financial year these include but are not limited to: office leases, equipment leases and securities over assets. In this review a cost to benefit analysis should be carried out on both your premise and equipment, if beneficial examining the viability of renewing or extending leasing should be investigated. If your analysis however yields a negative result then the steps and consequences for ending a lease or fulfilling your obligation should be investigated. That being said before ending a leasing agreement or financing situation your liability in relationship to ownership/payout arrangements on leases or debts should be considered and how changes may impact your tax.
Also when undertaking a review financial obligations or leases always determine what assets act as security for loans and act accordingly.
For more end of financial year strategic management review considerations see next month’s newsletter for Part 2 where we will discuss reviewing policy manuals, IT systems, insurance policies and resource use among others.