We are just over a month away from the end of Daylight Savings Time. The adage to recall which way to set your clocks is “Spring Ahead, Fall Behind!” While that may work for resetting clocks, the notion of falling behind in business, especially in the last quarter of the year is just wrong. While fall may be the time to set clocks back, it is also the time to plan ahead; as we are now in the last quarter of the calendar year you should be reviewing your tax planning and determining what expenses to either accelerate or defer to minimize taxes.
A meeting with your accountant or tax advisor could save you a significant amount. Reviewing your business and personal situation against current tax law and laws taking effect next year will allow you to make strategic tax planning decisions. Depending on your age, income and business profitability, a determination of what level to fund your retirement plan at versus taking current salary and dividends could increase your long-term earnings.
For most businesses time is running out to order inventory for the holiday season and “Black Friday”. Black Friday’s “name originated in Philadelphia, where it originally was used to describe the heavy and disruptive pedestrian and vehicle traffic which would occur on the day after Thanksgiving. Use of the term started before 1961 and began to see broader use outside Philadelphia around 1975. Later an alternative explanation was made: that retailers traditionally operated at a financial loss (“in the red”) from January through November, and “Black Friday” indicates the point at which retailers begin to turn a profit, or “in the black”. [http://en.wikipedia.org/wiki/Black_Friday_(shopping)]
Determining what inventory and how much of it you should purchase requires planning ahead by analyzing sales and inventory trends for the year to date, considering market trends, coordinating with vendors, and arranging any required financing. If you are selling consumer items (as opposed to business-to-business), you should also check current news for the industry and websites like www.trendwatching.com in order to identify what is “hot.” A review of inventory on hand and its aging is also in order. You may be able to identify slow or “stale” inventory that you can convert to cash by discounting it for the holiday season.
A six month cash flow plan or update of your cash flow plan, if you have one, should also be part of the process. Cash flow is critical for most businesses at this time of year as they purchase inventory in advance of sales, and may have deferred payment programs on some of those sales. The purpose of making a six month plan is to ensure that if, like most businesses, you experience a post-holiday sales slump, you will have sufficient cash to cover expenses until sales recover in the Spring.
The last quarter of the year is also a good time to review the services you use. Check your insurance coverage to determine if it is still adequate for the manner and size of your business. Visit with your banker and review loan interest, lines of credit, merchant services fees, to see if they will meet your needs for next year. Your banker may be able to propose new or different services, increased credit limits, and loan restructuring to reduce your cost of doing business. Similarly, you should review other services you are using including Internet and website providers, telephone, advertising and media, and the like to determine if they are adequate for the next year as is, or if you need to make any adjustments.
This is also a good time of year to review or create a Business Continuity Plan that will ensure the viability and sustainability of your business should any disruption occur. Disruptions could range from a key supplier going out of business, to internal issues like theft of customer lists, to physical disruptions like a fire that damages the premises. Business Continuity Plan templates that you can use for this process are available at www.ready.gov/business/implementation/continuity.
Don’t consider the last quarter of 2014 as a time to “see how the year turns out.” Think of it as the precursor to 2015 and plan for sales growth and increased profits. In doing so, you will really be able to “Spring Ahead” next year!
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