As the year winds down, small and medium-sized businesses (SMBs) are at a pivotal crossroads: it’s time to finish strong while setting the stage for even greater success in 2025. This is your opportunity to assess whether your financial performance hit your goals, tackle any remaining obstacles, and lay out a bold strategy for the future.
To help you navigate this critical transition, I’ve created a comprehensive checklist to ensure you close out the year with confidence and kick off the new one with a solid financial foundation. I’m here to help you close out 2024 on a high note and set the stage for a prosperous year ahead!
1. Reconcile Accounts and Review Financial Data.
To set a strong foundation for the year ahead, begin by ensuring your financial records are both accurate and up to date:
- Reconcile all accounts: Reconcile bank accounts, credit cards, and loan balances to ensure they match your records. This helps avoid discrepancies that could affect decision-making.
- Review key financial statements: Analyze your profit and loss statement, balance sheet, and cash flow to identify any trends, areas for improvement, and any potential red flags. This offers valuable insights into your business’s financial health.
- Resolve outstanding invoices and bills: Address any unpaid invoices or overdue bills to ensure your cash flow remains steady.
Tip: Having accurate financial data is crucial for making well-informed decisions as you close out 2024 and prepare for a successful 2025.
2. Set Your Financial Baseline for 2025.
Building a strong financial plan for the upcoming year starts with a thorough analysis of your performance in 2024. This will help you set clear, achievable goals for 2025:
- Assess profitability: Dive deep into the performance of individual products, services, or business units to understand what’s driving success and where improvements are needed. This breakdown will guide you in prioritizing the most profitable areas.
- Evaluate expenses: Review your spending and identify areas where cost-control measures can be introduced in 2025. Look for patterns in overspending or inefficiencies that can be streamlined.
- Analyze cash flow trends: Examine your cash flow over the past year to pinpoint when inflows and outflows peak. Understanding these patterns will help you plan more effectively for liquidity management in the year ahead.
Example: Use this analysis to set goals for key financial metrics, such as gross margins, asset turnover, and working capital.
3. Solidify Your 2025 Financial Plan.
Kick off the new year with a clear, actionable roadmap that positions your business for success:
- Create a sales forecast: Analyze current trends, market conditions, and upcoming opportunities to project your sales for 2025. Use this forecast to set realistic revenue targets and align resources accordingly.
- Develop a cash flow projection: Use tools like my 13-week Cash Flow Forecast to map out expected cash inflows and outflows. This will ensure you have the liquidity needed for both daily operations and growth initiatives throughout the year.
- Outline a budget: Build a budget that balances strategic investments with cost-saving measures. Prioritize spending that drives growth while maintaining a focus on efficiency and profitability.
Pro Tip: Build in flexibility within your financial plan to quickly pivot in response to unexpected challenges or emerging opportunities in 2025.
4. Streamline Year-End Processes
Efficient year-end processes are key to saving time and reducing stress. Make sure you finish the year strong with these actionable steps:
- Finalize all 2024 transactions: Reconcile accounts, close out any pending invoices, and ensure all customer payments are received before December 31.
- Follow up on overdue receivables: Act now to collect any outstanding payments and improve your cash flow before the year closes.
- Prepare for tax season: Double-check that all deductible expenses are well-documented and ready for tax filing.
Action Step: Automate routine tasks, such as setting up reminders for accounts receivable and payable, to ensure smooth year-end operations and free up time for strategic tasks.
5. Align Your Team for Success
Your team is essential to closing the year on a high note and hitting your 2025 goals. Get them on the same page with these strategies:
- Set clear expectations: Make sure your team knows exactly what’s expected in the final stretch—whether it’s wrapping up client projects or clearing out inventory.
- Review your 2025 financial plan: Share your financial strategy with key team members to ensure everyone is aligned on priorities and performance targets.
- Evaluate compensation plans and incentives: Assess how bonuses or incentives can drive your team’s motivation and performance as you enter the new year.
Consider: Boost morale by offering year-end bonuses or hosting team celebrations to celebrate your collective success and inspire energy for the year ahead.
6. Optimize Your Tax Position
Take advantage of your final opportunity to make strategic moves that can reduce your tax burden:
- Accelerate expenses: Purchasing equipment or supplies before year-end can increase your deductions for 2024.
- Defer income: Push back invoicing or payments until January to shift income into 2025 and potentially lower your tax liability this year.
- Consult your tax advisor: Review available tax credits or deductions to ensure you take full advantage of every opportunity.
Remember: Having a solid relationship with financial professionals gives you another layer of wisdom and resources.
7. Evaluate and Improve Financial Systems
The end of the year is the perfect time to assess whether your current financial systems are meeting your needs and setting you up for success in the coming year:
- Identify bottlenecks: Review your processes, from reporting to cash flow management, and pinpoint any areas that need improvement.
- Invest in better tools: Consider upgrading your financial software or tools to improve efficiency, accuracy, and decision-making in the new year. Hiring a fractional CFO is another possibility.
- Set clear KPIs: Establish key performance indicators to track your financial health and ensure you meet your targets throughout 2025.
Think About: Ask the staff that use the tools the most to give you feedback.
Key Takeaway
Closing 2024 with a solid financial position and a clear strategy for 2025 is essential for SMBs aiming for sustained growth and profitability. You’ll enter the new year with confidence and clarity by streamlining your year-end processes, aligning your team, optimizing your tax position, and improving your financial systems.
Need help navigating year-end challenges or building a strategic financial plan for 2025?
Reach out to Verbeck Associates for expert guidance from a Fractional CFO. Let’s set your business up for success in the new year!