Check Your List and Check it Twice!
If you work for a law firm or own a successful business, chances are you love checklists! I was trained by some great attorneys in my early litigation career to continually check lists and make sure there was a tickler (a reminder for future tasks that need to be tracked or completed) for every item. When running a law firm or other business, it is important to have checklists to ensure your business is on track and all the loose ends are tied up at the end of your calendar or bookkeeping year.
One of my favorite examples to use in evaluations and discussions with my leadership team are setting up Rocks. We use this method to determine what is most or least important in our business. Setting your goals for the new year based on what you find a weak spot in your business is the best way to plan for success in the new year. Remember they need to be defined, assigned, and achievable. Without all three, they are worthless. https://www.forbes.com/sites/hillennevins/2020/01/21/what-are-your-big-rocks/?sh=41211385fae3
KPIs and PROJECTIONS FOR THE NEXT YEAR
Have you established your Key Performance Indicators (KPIs) for your business? Do you know what are the most important numbers to show the strengths and weaknesses of your business? If you have not, you are not alone. Many folks run their business riding on the hope times will be good and the bank account will be high. Is that how a successful business is run?
Determining your KPIs and setting your goals/projections for the upcoming year is one of the most important items the leadership team can do for a business. Having goals, which are identified and measured daily, weekly, and monthly by several eyes ensures everyone has an eye on the needle and making quick changes to get the train back on the track. Now’s the time to get and stay on top of the numbers.
ACCOUNTING, BUDGETING and PRICING
While it is important to check the P&L and Balance Sheet regularly, now is a great time to review this year’s expenses compared to last years to see if there are any unusual changes not recognized in the past. For instance, if your business has grown by 10% but your expenses grew by 18%, it means a price increase is in good order. Not only does the comparison help with potential price increases but it also helps budgeting for the new year.
Is the current accounting program and/or bookkeeper/CFO group doing a good job aligning your Chart of Accounts to the company tax return? Are they staying current on your accounting items, including AR and collections? There is never a good time to change your accounting program or bookkeeping/CFO, but it makes it easier to start the new year fresh and clean.
Occasionally decisions to grow your business will come along and when they do is there a plan in place for funding those opportunities? Every smart business owner has a Line of Credit (“LOC”) available for these or other costly purchases or items that arise. If you do not have a LOC or a solid relationship with a local banker, include this on your Rocks for the upcoming year. Murphy’s First Law: “Anything that can go wrong will go wrong.” Having a LOC will ensure you are prepared for the unforeseen.
One of my not so favorite topics is benefits. They are so very important for your ability to hire quality employees yet can be very complicated and hard to navigate without the proper support team in place to research and qualify for the next plan year. Ensure your employee stats and prior claim data is in order so you can determine costs for your future year’s plan. Start planning for your next year benefit plan at least three (3) months before the deadline. Don’t wait to the last minute as the brokers are busy with other clients (usually at the end of the calendar year). Consider making your benefit plan calendar different from the calendar year to ensure you get priority from your broker.
Also check your benefits coordinator and benefits provider are doing a good job in not only taking care of your plan but also keeping you informed of changes to the plan. Consider hiring new for either at least six months prior to any changes. Waiting to the last minute on this item causes lots of confusion and unnecessary stress.
Schedule a time to review your 401k Plan to see if any plan changes need to be made in the new year. Scheduling time with your Plan Administrator is the best option to ensure you get opportunities for improvement in your plan documents. Consider future bonus options through your Profit Sharing, if you have one set up. Who can participate and who are required to be included if you give a contribution to the Profit Sharing? Every plan is different so knowing your specific details can help you prepare for the upcoming year. They can include some great tax benefits not only for the company but also your employees.
HUMAN RESOURCES (HR)
Determine if any open employee claims or risks remain open before the end of year. Conduct an assessment of your current staff to see if any changes need to be made prior to the new year. While not always ideal to make staff changes right around the holidays, it is a great refresh time to start new for the upcoming year and usually there is a bit of slow time to sit and contemplate these necessary changes. Compare your current staff ability to your current service offerings. What are your weaknesses and where do you need to beef up your staff abilities? Do you need to include continuing education opportunities in the new year’s budget to train your team on future opportunities?
Sometimes in the rush of the day, we fail to realize our insurance coverage limits are no longer appropriate for our business. Rather than wait until it is too late, schedule a call with your broker to discuss the business policies you have in place. At a minimum, you should have the following policies:
- Worker’s Compensation Risk
- Key Man
- Business Property
- 401k Coverage
- Errors & Omissions; Malpractice
The amount of coverage should be accessed annually and adjusted according to the business income and risks.
Having excellent IT personnel, whether internally or externally, is highly recommended. They should be upgrading and monitoring server(s) life and capacity, desktop and laptop assignments, email server details and capacity, remote access controls, and administering knowledge tests to minimize spam risks to your business. I am amazing how many small firms still use common online email platforms for their firm emails instead of establishing a website through which emails can flow. Yes, you can still use Gmail as your background email while setting it to forward to your law firm domain name. It’s simple and gives the best image to your clients.
Should you choose not to hire an IT professional, be sure you are upgrading and monitoring the systems yourself and safeguarding your client’s data from an online evasion. Most insurance companies will not provide Cyber Security Insurance to a business who does not have a domain or security measures to keep them safe.
Are you at a point in your business where you need a proprietary program to monitor the progress of your services? Is the one you have now functioning optimally. These can be costly and need time to plan. Do your research and plan into your budget for upgrades or changes needed in the new year.
I have never met a business owner that loves paying taxes. My CPA keeps telling me, “If you are paying taxes, that means you are doing well.” I keep telling her to stop saying that as it doesn’t make it any more fun to pay taxes! At the end of each year, I search for the quarterly and annual tax deadlines for federal (IRS annual and quarterly), state (annual franchise), and local taxes (annual real property). I calendar every one of those deadlines to make sure my team and CPA are ahead of schedule. Yes, they should be responsible for the deadlines, but it isn’t worth missing or paying the penalties and fines. It also helps you to budget for those payments.
If you do not have a payroll service, I highly recommend you hire one so they can handle all your payroll taxes. The risk of missing one of those deadlines is not worth the costs of hiring a professional. Plus, it will make your life so much easier and less stressful to not worry about how to calculate the taxes, keep updating the portal for new/terminated employees, and file the quarterly reports. Some even offer benefits not otherwise affordable if you are a small firm.
I am happy to chat about any of your questions or comments. Every day is a new opportunity to learn in running a business. I hope these tips remind you of the important things in your business that sometimes get pushed to the back of the closet. May you have much success in your upcoming business year!