How To Prepare Your Business Financially For 2021

Order cannot come out of disorder and yet we cross our fingers at the end of each year in hopes that next year will be better.

2020 punched us all in the mouth forcing us to play our cards and either set processes aligned with the vision, or plunge deeper into chaos and disorder.

For many of our clients, this has been a year quietly spying on their financial resources and being more aware of where it is all being allocated.  This goes beyond simply pulling an Aging Report from Quickbooks or running a Profit and Loss Statement and staring at the Net Income number to determine success.

We had a client who started the year with a dangerously low amount of cash and a dangerously high amount of payables.  We began tracking their cash accounts, receivables, and payables every single week on a single, simple spreadsheet.

No fancy apps or software, just a simple spreadsheet.

In August of 2020, after nearly running aground just 10 months prior, this owner exclaimed in a meeting, “I feel like we are printing money.”

What he was really saying was, “before we tracked it through a simple process we spent whenever we wanted to”.  It’s as if untracked bank accounts have holes in them and money leaks out.  Pay attention to the leaks and you’ll begin to plug them and it will soon feel like your business is growing at a pace you have not experienced before.

As the year is winding down, we have walked each of our heroic business owner clients through a two part “2021 Readiness Plan”.

Part One is the readiness of the owners’ vision, mission, values, systems, and structure.  We go through and re-read the existing vision, mission, values and make updates and tweaks, or in some cases wholesale changes so there is massive clarity for the next steps.  

We then take that vision and open up the organizational chart and master process roadmap to ensure that the “vehicle” or structure of the business is aligned with the ultimate destination for where the owner desires to go.  

Part Two of the “2021 Readiness Plan” is to focus your attention on the simple financials of the business.

We ask each of our clients to subdivide their bank accounts so they can partition resources into various buckets; profit, taxes, owner’s compensation, operating expenses, and others where it makes sense.

Then we make sure that each business owner is simply documenting those cash accounts each week in a spreadsheet; we call it a dashboard.  Add to that their receivables and payables each week and you have an ongoing snapshot throughout the year.

We then work through simple revenue projections and a matching budget that align with the vision worked out during Part One.

From there it is asking them to think through where they are at with estate planning (wills, trusts, power of attorney, etc.) and insurance.

Finally, we ask each owner to write an annual letter to celebrate and reflect back on the prior year, while also offering a vision for the upcoming year.  These annual letters are encouraging and allow the team to mobilize around the words of the visionary.  For the owners that have written annual letters each year, it has become a hallmark of their leadership and is an incredibly powerful history lesson for each business.

You may think, “but I don’t have time to do all of this!”

Order cannot come out of disorder, but you can choose to stop disorder and create a new environment of order for you, your team, your customers, and your family.

I challenge you to do it.  Make the time, create order, and you will begin to be liberated from chaos!

Scott Beebe is the founder of Business On Purpose, author of Let Your Business Burn: Stop Putting Out Fires, Discover Purpose, And Build A Business That Matters.  Scott also hosts The Business On Purpose Podcast and can be found at mybusinessonpurpose.com.