This article is for educational purposes and does not constitute legal or tax advice. For specific advice applicable to your business, please contact a professional.
A recent Fidelity study shows 68% of survey respondents were considering a financial resolution for 2022 with inflation, rising costs, and unexpected expenses as their top concerns. Of the financial resolutions set by surveyees, saving more money (43%), paying down debt (41%), and spending less money (31%) topped the list. As we head into 2023, here are some things you can do now to set yourself up for financial success in the year ahead.
Set financial goals
The end of the year can be a good time to take a look at your books and set financial goals for the year to come. Perhaps you’d like to pay off some debt, start a savings or emergency fund, or set up a plan for retirement. By checking the financial health of your business at the end of the year you can forecast what goals are possible and how long it may take to achieve them. Here are a few ways you can plan ahead:
- Assess your current financial situation: How is your cash flow right now? Do you have enough to reinvest into the business? To set aside for savings? What will it take to get there? Consider using a profit and loss statement, cash flow statement, or balance sheet template to take a quick look at your finances. If you are a Square seller, you can also pull reports from your Square Dashboard that give you insights into sales trends and more.
- Check your business credit score: If you plan on taking on debt in the next year, checking your business credit score is a good way to assess your creditworthiness. If you are not yet separating your business from your personal accounts, the new year can also be a good time to tackle this.
- Create a budget: Having a plan for your budget gives you the flexibility to move forward or make changes along the way. Consider creating a budget at the end of the year to better help you forecast what’s to come in the next year. You can work with a professional, budgeting software, or take an initial pass at it yourself. Keep in mind that you need to account for expenses like rent, utilities, and more as regular costs to your business.
Prep your business to take on funding (if you need it)
If you’re considering taking on funding or financing for the New Year, consider how much you can borrow and repay. In a 2022 Federal Reserve Small Business Credit Survey, 76% of respondents took on loans or lines of credit, followed by credit cards (29%), and trade credit (9%). Whether you’re taking out a loan, credit card, or outside investment, there are a few steps you can take to prepare your business beforehand.
- Separate your personal from business bank accounts. Some business owners leverage personal credit to take on business loans. However, separating your finances can help minimize risk to your personal assets and allow for more streamlined bookkeeping so that you can better manage your cash flow. Once you’re ready to take on funding this will also help separate you establish business credit.
- Consider what kind of credit you’ll take on. Whether you take on installment credit, revolving credit, or open credit, each type of credit will be borrowed and repaid differently. There could also be differences in how they affect your business credit score.
- Organize your documents. A prospective lender will want to get a sense of your business’s financial health and your creditworthiness to know if you can pay back a loan. Documents like a balance sheet, profit and loss or income statement, and cash flow statement are some of the documents that could be used to check this. If you don’t yet have a business plan, this might be a good time to put one together.
Plan ahead for big purchases
Whether you’re investing in new equipment or renovations, setting money aside for essential big-ticket items requires planning ahead. As you think about how you want to reinvest in your business, consider what might yield a strong return on your investment.
According to Forbes, here are a few steps to consider when investing in a large purchase for your business:
- Define the needs for the purchase. Think about how urgent that purchase is. Is this a piece of equipment or a renovation that you need to operate your business, or is this something, for example, that you can take your time saving up for and purchasing?
- Create a budget. Check your business’s cash flow and see how much cash is coming in and going out of your business. If your business has a healthy cash flow, consider the costs of the purchase and budget how much or little you can afford to spend on a large purchase this year.
- Consider all the costs. There may be additional costs included in a big purchase for your business. A renovation, for example, might unearth unexpected costs as work gets underway. Similarly, you might purchase a new oven or large piece of equipment for your business but it may require regular maintenance to keep it operating properly.
Think about hiring and expansion
If you’re looking to expand your business or grow your team in the New Year, begin planning now to make sure you have the funds to find, retain, and support those new staff members.
If you’re looking to hire new staff in the coming year, consider this checklist before building up your team.
- Define the roles of the jobs you are looking to fill.
- Find candidates and conduct interviews.
- Run background checks
- Report new hires to your state employment agency and obtain worker’s compensation insurance.
After adding new team members, look into any tax requirements related to hiring new staff. In addition, think about salary, benefits, and onboarding processes to support them as they start in their new roles.
Are you considering expanding your business to multiple locations? There are a few ways you can plan ahead and streamline the transition. If you are a Square seller, you can manage multiple locations from one Square account.