Small businesses are the lifeblood of our community, and their success directly benefits all of us. In fact, 97% of Houston businesses have fewer than 100 employees.
If you’re reading this right now, you’re probably a small business owner or an employee passionate about the company you work for. And, despite all the craziness that 2020 has brought to your front door, it’s time to finish strong and prepare for a brighter tomorrow.
Houston ranks among the top 20 cities where small-business owners are thriving — which is why we do everything we can to help you learn from the past year and put your best foot forward in 2021. Here are a host of best practices and business tips that will help you wrap up your end-of-year to-do list:
As 2020 draws to a close, it’s important to review your finances. In most cases, you will want to look at three different reports: your balance sheet, an income statement (or profit and loss report), and a cash-flow statement.
Regardless of whether you run the reports or have them generated by an accountant, these three reports will help you gain real insight into your small business:
● A balance sheet provides insights on what your business owns (its assets), what your business owes (its liabilities), and how much your business is worth.
● Your income statement is the best way to see where your business stands financially and what your outlook is like for the new year.
○ If your profits are lower than expected, you might need to make some changes as you plan for 2021.
○ If your profits are higher than expected, it might be a good time to make some larger purchases for which you can record future depreciation.
● A cash flow statement records how your money was spent throughout the year. Cash inflows equate to income, and examining your cash flow statement now can help you identify cash flow trends throughout the year.
Next, separate your cash flows into three types:
● Cash flow from operating activities (revenue and expenses)
● Cash flow from investing activities (assets purchased and sold)
● Cash flow from financial activities (loans and repayments)
Finally, determine your cash flow. The cash flow statement formula adds a beginning cash balance with net changes in each activity to determine the ending cash balance:
Beginning balance in cash + net changes in operating, investing, and financing
activities = ending cash balance
For new business owners, these reports will help you see how your year went (vs. your initial projections), while long-time small business owners can use them to compare 2020’s numbers to those from previous years.
Passion and hard work aside, data and information are the keys to the success of your small business. Above all else, it should drive your day-to-day strategy, define your execution, and influence your future plans.
As a business owner, you probably rely on your computers for accounting, point-of-sale systems, employee records, or other business-critical information. This means your data is invaluable, so take the time to back up your computer system often.
● These days, cloud-based and physical backup drive options can simplify the process and automate it for you. Just be sure to name your files in a way that’s easy to understand (and find later!)
● Don’t forget your cell phones and tablets, either — our guess is that you’ve probably got a lot of contact info and other important details stored there (and nowhere else).
Proper data analysis and implementation are essential for setting up your Houston small business for more success with each new year. Think about it this way: as a best practice, make and store copies of everything. So, download any essential digital files stored in the cloud, and scan or take pictures of important paper documents — even sticky notes — to upload to your backup drive.