Year-end financial tips may seem unnecessary. You work in your business all year so what changes at year-end?

But the reality is, we need the end of year to be a time to re-evaluate where the business stands, and look ahead to next year.

Now that we’ve fully entered Q4 of the year, it’s always a good idea to take some time to take a step back for perspective to take a look at the balance sheet — seeing what you can do to finish the year strong financially. 

2020 has been anything but typical, however, there are lessons we can learn from what’s happened so far and plenty we can do to finish strong. 

In this article, you’ll see 4 strategies you can implement to make sure your business ends the year with the best financials possible. 

1. Get ready for tax time early 

What’s the worst time to get ready for tax time? After-tax time. 

The second-worst time to get ready for tax time? During tax time. That makes Q4 the best time to work toward having the best tax season possible. 

Truly, the tax process is a year-round event. You should be in consistent communication with your CPA following your tax strategy. If you haven’t been in regular communication, the time to get started is now. 

Here are 3 ideas to make this tax season your most stress-free one yet.

Start collecting your tax paperwork

If collecting tax paperwork brings up memories of going through drawers full of crumpled up receipts and sorting through credit card statements from the past three years, this is a good area to focus on first. Having your paperwork in order is step one towards having a great tax season. Organize your paperwork with enough time and without the added pressure of tax day looming closer makes for a much better overall experience.   

Make your tax process more efficient

Wish you could make tax season easier? There’s plenty you can do toward this. You can go paperless, try out new accounting automation software, new forecasting apps and so on. Start the conversation with your accounting firm on what you can do and find the right solution for you. 

Set deadlines and goals

Unfortunately, it’s normal for urgent matters to take precedent over the important ones. This is what typically happens to a lot of businesses when it comes to taxes. A great way to not let this happen to you is by setting cold hard deadlines for everyone involved in the tax prep process. 

2. Get a head start on 2021’s projections and forecasts

Even though nobody could have had predicted 2020, many businesses were prepared for worst case scenarios to some extent. Forecasts are more than just wishful thinking, they’re a tool that will let you make quicker and more effective financial decisions. 

Focus on making your forecast more accurate

A great way to make your forecasts accurate is to look at your growth drivers. Instead of just plugging in a number, deep dive and look and what has been driving growth for your business and go with those numbers instead.

Create multiple scenarios that go from catastrophic to bad to OK to good

At this point, we still don’t know what the toll of 2020 was across every industry. So instead of going on historical data as you would typically do, it might prove useful to run your projections using multiple assumptions of market conditions. 

Take the time to review your forecasts periodically

Financial forecasts lose part of their usefulness if they are created and not reviewed periodically. A good practice is to take a look at them monthly and update them with any additional information that becomes available. 

3. Do an analysis of the first 3 quarters of 2020

2020 has changed what we thought was possible or that could happen on a world scale. Now that we’re in Q4, most places are working on recovering and getting back to normal. So it’s a good time to take a look back and see what we can learn. Why is this important? Because even though there’s a sense of optimism for 2021, no one knows if there’ll be another year like this one 2 or 3 years down the road. 

What had a negative impact on your business that you never anticipated?

Whether you had to shut down for an extended period of time or your industry had to drastically change, this is a good time to go over what happened. This year was full of unthinkable events, so keep track of them and start forming a plan in case they happen again. 

What helped you get through 2020 the most? 

Did you have extra cash saved up? Did you pivot quickly to a different segment? Did having a plan for remote work make the transition seamless? 

Whatever it was that that worked out for you during the tougher pandemic months will be useful to keep in mind so you can double down on those strengths that kept your business afloat. 

What were some opportunities you made the most out of and which ones did you miss? 

Even though it doesn’t always seem that way, history has shown us that in times of crisis and uncertainty there are always opportunities available. 

• During this pandemic crisis, did your business capitalize on any opportunities that showed up in your industry? 
• Did you miss out on any? 

Whichever the case, it’s great to keep an eye out on how the landscape of your industry changed so that next quarter you can be better prepared.

How can you be better prepared in case another crisis comes along?

Not to be negative, but the reality we’ve all been exposed to is that unthinkable crises can happen. The question now is, what can I do about it? What needs to get done so that, no matter what happens next, your business is prepared? How long will it take to prepare for another crisis? How can you mitigate risk in the meantime?   

Having an answer to these questions will guarantee that you are prepared for whatever the future has in store. 

4. Focus on your Customer Acquisition Cost (CAC)

If you want to finish 2020 in the strongest possible way, then it becomes necessary to know what your customer acquisition cost is. The CAC is a metric that lets you know how much money you have to invest to get a new client or customer. The CAC has become significantly easier to calculate in recent times due to the prevalence of online advertising, but even if you use traditional marketing methods, you can still get a figure.  

Know how much you need to invest to get the growth you’re aiming for

One of the main benefits of knowing your CAC is that it lets you know exactly how much cash you need to get the growth you’re after. In the scenario of an e-commerce company, if you know that your CAC is $20, you know you’ll need $500 in order to get 25 new customers. 

Figure out your average lifetime value (LTV)

The customer lifetime value metric is often the companion of the CAC. This is because it will let you know what will be the expected revenue growth for a certain period of time and how much you need to invest in order to reach said goals. The LTV is the sum of all the revenue that you will receive from a customer over the lifetime of your relationship with them. 

In conclusion

There’s plenty you can do to finish the year strong. Whether it’s by preparing earlier and better for next year, figuring out exactly how this year played out or investing in the growth of your customer base during this quarter, having a plan will help you reach the financial goals you set for your business.