Checkups for Small Businesses
Like individuals, businesses might want to tackle these finance-related projects early in 2015:
1. Renegotiate your lease.
You may be overpaying rent if you signed your lease five (or more) years ago. If your current landlord isn’t willing to renegotiate the lease terms, consider switching to another location with lower rent, more usable space or superior amenities. In many areas, it’s still a renter’s market.
2. Write (and update) formal job descriptions.
These help new and existing employees better understand their responsibilities and management’s expectations. Job descriptions also provide a paper trail if an employee is fired for subpar performance or tax authorities audit owners’ compensation levels.
3. Inventory fixed assets.
Physically tag and record identification numbers for all fixed assets. Missing or damaged items will likely be revealed when you compare your physical inventory to the computerized fixed asset ledger obtained from your accounting records.
4. Write off uncollectible accounts and obsolete equipment.
Chances are your balance sheet contains assets that are unlikely to be converted into cash. Some customers simply won’t pay and some equipment is broken or stolen. Write these items off now, and you’ll have a cleaner, more meaningful balance sheet going forward.
5. Perform a physical inventory count.
This is part of a CPA’s required audit procedures. But if your financial statements are reviewed, compiled or prepared in-house, you might have more confidence in the inventory accounting records if an outside firm oversees your in-house inventory counting procedures. You can also ask your CPA to perform its own independent count.
6. Conduct an energy audit. Determine where, when, why and how your company uses water and energy. Then, identify opportunities to improve efficiency, decrease usage and reduce waste and emissions.
7. Evaluate business insurance coverage.
The types of coverage that worked last year may be insufficient today. Values may have changed, assets may have been added (or retired), or risks may have shifted or emerged, for example.
Important Note: The Terrorism Risk Insurance Act (TRIA) expires at midnight on December 31, 2014. This means that all insurance policies offering TRIA terrorism coverage will automatically revert to exclusion of terrorism on January 1, 2015. Companies in industries that are especially vulnerable to terrorism risks — such as construction, real estate, hospitality, recreation and major sports leagues — may want to reassess their coverage and consider purchasing standalone private terrorism coverage until Congress addresses the issue in 2015.
8. Obtain a business appraisal.
Knowing what your business is worth can guide short- and long-term business strategy decisions, such as accepting a purchase offer, buying out minority shareholders, modifying insurance coverage, filing for bankruptcy or requesting credit lines.
9. Plan an exit strategy.
Every business eventually sells (or liquidates). Exit strategies outline how owners will someday get cash out of the business. Examples include gifts (or sales) to family members, mergers with competitors or public offerings.
10. Consult with professional advisers. Accountants and lawyers know the latest developments that affect your local market and industry niche. They can customize a more comprehensive list of administrative tasks to prepare your company for success in 2015 and beyond.