Small business banking specialists share year-end planning tips for owners.

Year-end planning doesn’t need to wait until December.

In fact, small business owners who start the process in the summer or fall give themselves an edge that can set them up for stronger performance in the new year, said Hank Koehly, small business banking sales manager for Commerce Bank.

“Around this time of year,” Koehly said, “it’s good to sit down with both your CPA and your banker to say, ‘These are the goals we set early in the year. Where are we toward those goals? What can we change?’”

Koehly and Debi Enders, also a small business banking sales manager with Commerce Bank, shared their top eight year-end planning tips for small business owners. The pair have a combined 34 years of experience with the bank.

1. Review your financials and create a detailed plan covering at least the next 12 months.

Small business owners are often so busy with their core operations they don't have a clear picture of their financials. Koehly and Enders recommend a quarterly or semiannual financial review. Start by assessing the business’s current cash flow and identifying any opportunities to reduce accounts receivable. Then, conduct a thorough review of expenses to reveal any areas where costs can be decreased.

“It's important to know where you are from a cash flow standpoint, year to date, and what you have on the horizon,” Koehly said. "It's a work-in-progress report. Then, what does that look like for the rest of 2024?”

With current revenue and expenses in hand, business owners should develop a detailed revenue forecast and expense budget for the upcoming year. If borrowing money is part of that plan, meet with your CPA and banker as soon as possible to ensure the company’s financials will support the needed loan, Enders said.

“We often see businesses that don’t understand you are not positioned for borrowing if you’ve been writing everything off,” she said. “If you don't show any income on your tax returns, we have no repayment source.”

2. Apply tax planning strategies and understand applicable laws.

Businesses that intend to borrow money will need to show a healthy balance sheet and profitability, but that doesn’t mean they should overpay on taxes. As you review your business expenses, make sure you are maximizing your available tax deductions and working with your CPA to identify any potential tax credits for the business.

Koehly and Enders also encourage owners to work with their CPAs to stay informed about new tax laws and regulations that could impact their businesses.

3. Look for ways to enhance operational efficiency.

Conducting year-end inventory counts and reconciling discrepancies should be part of every business’s year-end inventory management plans. In addition, review contracts with vendors and suppliers to ensure the most favorable terms possible for the coming year. Frequently overlooked contract terms that could help small businesses can include options such as extending the invoice timelines to net 30 or beyond, or negotiating discounts based on early payments.

Upgrading or adding equipment or software are additional strategies for improving efficiency. With a financial forecast and tax plan in hand, it is much easier for owners to make good decisions about when to invest in equipment to support business growth. Timing and prioritization are key, Koehly said.

“Weigh those options and ask, ‘Do I need this piece of equipment? Am I going to be able to generate the revenue where it makes sense?’” he said. “Are you spending money on equipment this year that maybe you shouldn’t because you want to buy a building next year, or there’s a $200,000 piece of equipment you desperately need in 2025?”

4. Assess your staffing levels and payroll.

The end of the year is traditionally the time to conduct employee performance evaluations, offer raises, assess benefits packages and award bonuses.

Small business owners should also ensure all their payroll records are accurate and comply with the regulations governing their operation. Errors here can be devastating, Enders said.

“The fastest way to get the distrust of employees is when you as a small business owner mess up payroll,” she said. “We’ve seen it time and time again. Make sure you’ve got that under control.”

5. Make time for strategic planning.

In addition to recommending tactical steps, Koehly and Enders encourage small business owners to allocate time for strategy in their year-end planning. This can include establishing clear, measurable goals for the next year, conducting a SWOT analysis on the business and market, and creating or reviewing succession plans.

“Sometimes small business owners are so busy selling that before they know it, it’s over halfway through the year,” Koehly said. “If they don’t have those clear and measurable goals, sometimes they wonder, ‘How am I doing this year?’”

Having a strategic plan and reviewing it biannually gives them an opportunity to assess and make adjustments, he said.

6. Conduct a legal and compliance review.

Risk management is an important part of any year-end business plan. This step can include reviewing insurance policies and risk management strategies to protect the business and ensuring compliance with all relevant regulations and laws.

Having a trusted attorney and accountant as part of your team of business advisors is crucial, Koehly and Enders said.

7. Invest in improving customer and client relations.

A year-end planning process is a great time to gather and analyze customer feedback, allowing you to evaluate the effectiveness of your current sales strategies and make necessary improvements. The added economic uncertainty of a presidential election year also makes it an especially good time to review your client base, Koehly said.

“One thing we always look at is making sure all your eggs are not in one basket,” he said. “Right now, it is more important than ever to try to increase your customer base, even if it’s smaller wins. If something were to happen to one customer or industry, then you still have a larger base to pull from.”

8. Prioritize cybersecurity.

Cybersecurity is a critical but often overlooked area for small businesses. There was a 15 percentage point increase in payment fraud attempts in 2023 over 2022, with 80% of organizations reporting they had been targets in the Association for Financial Professionals 2024 Payments Fraud and Control Survey Report opens in a new window.

“Most small business owners accept credit card payments,” Enders said. “There’s a lot of liability out there if data is exposed on your watch.”

While it’s not possible to be 100% secure, she said, talking with your bank and merchant services provider on strategies to mitigate fraud is an important step in protecting customers. This is also a good time to review the business’s data backup and recovery procedures to safeguard critical information.