Professionals recommend that all businesses take stock of their operations at least once a year. This includes reviewing your business operations, financials, and assessing potential risks. The assessment is even more crucial for small businesses that may not have any other independent audit or review during the year.
The heart and soul of any business are the products or services which are provided and the core customer base to which they are sold. An annual review should, at a minimum, include:
(i) An assessment of products or services. Analyzing and determining which products or services are most profitable. Optimizing operations around the more successful offerings and determining how to increase the sales of the failing ones or whether to cut certain products or services altogether.
(ii) Review of customer relationships and contracts. Hopefully, customers are being contacted during the course of a year, but a once a year meeting with key customers is critical. A review of customer contracts is also important to get ahead of any that are about to expire or that may need to be modified.
(iii) Employee Reviews. Annual performance reviews with each employee are also invaluable, especially for employees that are crucial to the success of the business. Employees should also receive feedback on whether they have met performance standards and objectives, and know how they fit into your business’s overall objectives. This is also a great time to focus on any employee achievements of the past year and prepare them for the year ahead.
An annual review with the company’s financial team and an outside accounting firm can provide an important perspective on the business. A thorough financial review will allow management to identify where money is being made and spent, provide for a comparison of budgeted to actual financials, analyze cash flows and projections, and forecast potential problem areas. A financial review may also include a market analysis of the industry and the status of the company’s competitors.
Finally, a financial review should include an analysis of the company’s taxes to determine that taxes are being paid appropriately and that all available credits and deductions are being utilized. It is advisable to schedule these reviews well before tax returns are due so that both the inside and the outside professionals have enough time to implement any identified changes.
In today’s highly litigious society, a risk assessment and management strategy is key to ensuring your business has taken all precautions to avoid a costly incident.
The first line of defense in any risk management strategy is insurance. A growing business means a business that has more exposure to risk. Insurance should be increased if a company has expanded into new markets, signed up bigger customers, or increased its workforce. Conversely, if business is slow, the company may need to reduce its policies. Taking the time to review the insurance coverage is an important component of an annual review.
The end of the year is also a good time to make sure the business is maintaining the proper corporate formalities. Preparing and signing annual shareholders and director’s consents, updating corporate minute books and documenting any changes in ownership can help prevent disputes among management and owners in the future.
Taking annual stock of your business is essential to prepare for the year ahead and manage potential risks.
Annual business checkup should include:
Business Insights is hosted by the Law Firm of
Kumar, Prabhu, Patel & Banerjee, LLC (KPPB Law).
Hunter Street is of counsel to KPPB Law and is a business, real estate, and corporate lawyer.
Disclaimer: This article is for general information purposes only, and does not constitute legal, tax, or other professional advice.
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