Start the New Year with a 2017 Profit Plan

planningAre you ready for 2017 to be even better than 2016? If so, take a few minutes to reflect on the questions below and take action to set your 2017 profit plan.

Question 1: What were the three best business things about 2016?

No need to re-invent the wheel. If you knocked it out of the park in 2016, can you wash, rinse and repeat these tasks in 2017?

If you’re having trouble thinking of three things, here are some hints:

  • What apps saved you time and money?
  • Did you make some good hires?
  • Did you let go of a bad hire or two?
  • Was there a marketing campaign that really worked?
  • Were there any events you went to that generated great ideas?
  • Did you add or remove products and/or services?
  • Did you buy new equipment or open a new location?

Summarize the three best things that happened in your business for 2016 and think about how you can repeat them to enhance your 2017.

Question 2: What were the three worst business things about 2016?

While we don’t want to dwell too much on our failures, we do want to learn from them. Think about the three things that are causing you to lose time, money or gain stress, and decide if you can make changes for 2017.

Question 3: What vision do you have for your business in 2017?

At the end of 2017, what has to have happened in order for you to have a successful year?   Think in terms of metrics as well as intangibles, such as peace of mind and happiness.

Once you know your destination, the fun is in creating a roadmap to get you there.

Your 2017 Profit Plan

If your vision includes financial goals, then creating a profit plan is one way to measure your progress throughout 2017. Start by deciding how much profit you want to make in 2017. From there, you can compute your revenue goal and make a plan. Then you can add expenses to complete the budget. Here’s an example:

Let’s say you want to make $50,000 in profit for 2017. You can do that in a number of ways:

  1. Generate $500,000 in revenue and $450,000 in expenses.
  2. Generate $2 million in revenue and $1,950,000 in expenses.
  3. Generate $150,000 in revenue and $100,000 in expenses.
  4. And so forth.

From your profit number, you can create a revenue plan. A revenue should include how many items you need to sell. Like this:

 

No. of units

Price

Revenue

Widget A

3,000

$200

$600,000

Part B

100

$2,000

$200,000

Service C

700

$1,000

$700,000

Total

 

 

$1,500,000

Once you have your revenue plan, you can fill in your estimated expenses.

You might be thinking that this sure sounds a lot like making a budget. And it is. But it’s far more fun to work on something called a profit plan than it is a budget. And if you need us to do the number-crunching part, please feel free to reach out any time.

Here’s to a very happy and prosperous 2017.

Five Money-Saving Things to Do Before Ringing Out 2016

accounting-binderHopefully you’re having a wonderful December with all of the holidays and parties this month. And if you’ve spent too much on gifts and decorations, never fear. Here are six ways to save on your accounting and taxes. But hurry, you only have until year-end to cash in a few of these tips.

1. Check your profits

After adjustments, are your books going to show a profit this year? If so, you may want to try to increase business spending before year-end so you won’t have to pay as much in taxes. Consider accelerating larger expenditures to reduce your profits and therefore, your 2016 taxes.

If you pay your business expenses with a credit card by 12/31/2016, you can deduct the expenditures in 2016 even if you don’t pay the credit card bill until 2017.

There are many tips on business deductions, so check with us to get the full benefit.

2. Eliminate payroll headaches

If your payroll system is causing you pain and suffering, consider switching. Year-end is the best time because switching costs are lower and year-to-date amounts don’t have to be entered. You’ll still want your old system to generate January’s W-2s, but if you start writing 2017 paychecks out of a new system, it will give you a clean break.

And if you’re not sure what system to move to, we have answers.

3. Make January smoother

January is typically a bookkeeper’s busiest month of the year. Many tasks can be done early, such as checking to make sure your W-9s are current and ordering W-2 forms if they are needed.   To avoid last-minute headaches, check with us to see what can be done early. It may help keep your accounting costs lower.

You may also want to consider automating more of your accounting system. Adding an app to your existing system may save you time and money in 2017.

4. Give to your favorite charity

Giving to your favorite charity may reduce your personal taxes if you plan to itemize your deductions on Schedule A of Form 1040.

There are many personal deductions that can help reduce your taxes, so check with us for options to minimize your tax payment.

5. Get ready for tax time

Start collecting the documents you need for tax time so they’ll be handy when you need them. You may be able to upload them to your accountant’s portal, or simply set them aside in a special drawer or folder.

Go through your receipts to be sure you communicate all your possible deductions. If you’ve had a major event, such as a move, new child, new marriage, or new job, be sure to mention it to us.

When all of the parties are over and the relatives have left, try these tips to save time and money on your taxes and your accounting in 2017. 

Budgeting Breakthrough

budgetWhen you hear the word “budget,” what do you think about? Most people would say something similar to “Ugghh!” If you would rather do just about anything besides create a budget, you’re not alone. The word “budget” brings up connotations of endless numbers, constraints, the opposite of freedom and creativity, and hard work, none of which are very desirable. 

Yet, the benefits of a budget are huge. Budgets can help you with cash flow improvements, keep you on track for higher profits, and alert you to items that need further action.

From “Budget” to “Profit Plan”

To be successful with budgeting, we need to get rid of all of the connotations that go with the word. Perhaps it might work if we rename “budgeting” to “profit planning.” And then, rather than focus on how little we should spend, let’s start with how much revenue we’re going to make.

Revenue Clarity

It’s simple to create a revenue plan if you go backwards. What revenue goal would you like to hit this year? Just like we would never get in a car without a final destination, a revenue plan gives us a number to aim for in our businesses.

Once you know your number, then we can use averages to come up how many sales or clients we need to generate in order to meet our revenue goal. Here’s a quick example: Let’s say you want to reach $5 million in revenue this year. If you average order is $10,000, then you need 500 sales. If you have multiple products and services, then you’ll need to sum the product of the average sale times the needed number of sales for each line.

From there, you can make marketing and production plans based on the number of sales or clients you need.

Protecting Your Profit

Think of the expense side of your “profit plan” as protecting your profit margins so that you can ensure financial gain from all the hard work you do. Setting budget limits on spending will allow you to control overhead and other items so you can keep more of what you make.

Exceptional Reporting

A great “profit plan” report will provide several things. You can compare budget to actual, or better yet, just be alerted to the accounts showing exceptions. You can also get an income statement that compares the current period with the prior year period so you can see how far you’ve come. One last option is a benchmark report which provides industry averages so you can measure how you fare compared to other companies in your industry.

A “profit plan” is a great tool for your business. If we can help you with the process or provide you with custom reporting, please give us a call.