Get Your Business Finances in Order for 2024

Finances are the foundation of any business. Irrespective of the quality of the operational plan, marketing plan or human capital, the success of the company always depends on the financial structure that supports these plans. Just like the spine supports the human body, a company’s finances support the entire organization. To operate a business without a finance department or financial support is analogous to the body trying to function without a spine. Companies who are unable to implement an effective internal finance department should employ outside financial support in order to properly address their overarching financial needs.

Getting a company’s financial house in order is a tremendous task that must be implemented over time. Here are a few basic tips to help get the process started.

Accuracy Matters

When building your financial house from the ground up, begin by maintaining an accurate accounting system. If a system doesn’t already exist, set one up immediately. A strong accounting system in a non- negotiable business tool, and is a must-have for any business. When the system is organized in a way that tracks the relevant metrics to reflect a company’s strategic plan, it results in garnering information that is invaluable to the success of the business.

To make informed decisions, the company’s leadership requires many pieces of financial information, such as: revenue growth, cost of goods sold, gross and net profit margins, inventory turnover, operational efficiency, and debt ratio, to name just a few.

Track Changes

It has always been my opinion that companies exist to solve a need and/or a specific problem for their target audience. For that reason, ensuring the products and services provided by a company meet the needs of the clients is a critical part of the company’s success. Changes in the demographics of the target market, cost of production, modes of distribution, and pricing must be constantly tracked, evaluated, and revised if necessary. In the current inflationary environment, where the costs of supplies change from one week to another, tracking becomes a critical activity.

The pricing strategy must begin with the costs of the products or services. Once costs are calculated, the pricing should reflect the company’s overall strategic plan. It is our recommendation to place the adjustment of the prices of the products and cost of services as a high priority. This will set the tone for the entire year and the future of the company.

Plan Your Work - Work Your Plan

All that said, it is now time to focus on creating a strategic plan for 2024. Simply put, identify your desired goals for the year, and then create specific plans to achieve them. Include all the resources that will be needed to accomplish each goal.

This will guide the company’s activities and increase the chances of success. Begin with the historical data by focusing on the information from the previous year. The outcomes of the decisions made over the last 12 months should be analyzed to determine their past success, and potential to build on that success in the new year. If there were any decisions made that adversely affected the company, those should generally be discarded; although you might consider repurposing or revising some past ideas if an appropriate situation presents itself.

While success is not always measured in financial terms or immediate financial gain, there should be enough successes measured by financial gain to ensure the company can meet its current expenses with the overall goal of course being to make the company as profitable as possible.

Manage Your Cash Flow

The adage “cash is king” has been proven time and time again. Cash flow management is one of the reports/tools used to manage liquidity, which is the company’s ability to meet its current financial obligation. The report usually covers a period of one year, in monthly intervals, and it clearly delineates in which months there were cash shortfalls, as well as when there were overages. Management can plan ahead, especially to address the months where cash shortfalls are projected, preventing any disruptions in operations. The accounting system will assist with the company’s cash flow management.

As companies become increasingly more profitable, so does the probability of increased tax liability. No matter the size of your company, or what business you are engaged in, it’s essential to create a solid tax plan to identify ways to take advantage of current tax laws that can minimize tax liability. Consult and engage a tax professional to create a solid tax plan that is appropriate for your business model. Implementing and improving financial controls allows companies to avoid losses and increase profitability. As the new year begins, take stock of your company’s financial department and/or outsourced financial support, and assess how well the system functioned in 2023. Then make an informed decision to make the financial health of your business a top priority in 2024.

Founder and CEO of LEK Management Inc., Lynn Karam has two decades of experience in finance, operations, and strategic planning. Karam is an Enrolled Agent authorized by the United States Department of the Treasury to represent clients who are undergoing an audit and to negotiate with the IRS on her clients’ behalf. Her success rate in resolving even the most challenging of IRS scenarios has become the cornerstone of her success. As CEO, Karam uses her financial expertise to establish sustainable strategies that result in significant business growth for her clients.