Reasons You Should Take A Look Your Finance In The End Of The Year

Whether you have a startup, a small business or a large enterprise, chances are the year has passed at the speed of light for you. You were designing your marketing campaigns, availing opportunities of growth and looking through reports when the year-end arrived. While people dedicate this time of the year to holiday delights and festivities, this also happens to be the perfect time to do a review of your finances whether you are just an individual with a 9 to 5 job or a small business. Why should you spend your end of the year for a financial review? Here are the top reasons.

A Strong Visual of Your Financial Standing

The most important thing about a year-end financial review is that it gives you a complete visual of where your business is standing at the moment. Everything that has happened throughout the year is now on the reports before your eyes. You can look at the reports and see what has performed and what has not performed. You must have put a lot of money into marketing your products, services and the brand as a whole. You can now see which of those campaigns have yielded good results and which of them have proved to be futile.

Same goes for your account receivables. Compare your account receivables with those from the previous years and see if there has been any increase or decrease. If there is an abnormal increase, it is a telltale sign that you might need to change your payment plan or push more to receive your pending payments faster. Every activity you have done in the past year has painted a picture, which is now in front of you. Whether you grew as a business, stagnated or receded is clear at the end of the year.

The Best Time to Set New Goals

Based on how you performed in the preceding year and whether or not you have achieved your set targets and goals, you can set goals for the coming year. Your previous year’s performance should clarify how you have to set your targets for the coming year. Keep them realistic yet motivating and challenging enough to leave room for hard work, struggle and progress. Not only should you be looking at how successful you were in achieving previous year’s goals, you should also pay attention to your current financial standing.

Best Time to Apply for Loans and Credit Processing Services

Regardless of how long you have been in business for, when you go and apply for certain services, the service providers take a look at your previous year’s performance. Let’s say, for example, that you want to apply for a merchant account (maybe a high-risk one) so you can start processing credit card requests for your customers. When you approach a merchant account provider, they will ask for some history of your business activities-at least 3 months. By the end of the year, you have enough data to show to lenders and credit processing services to convince them to do business with you.
Of course, a financial review will give you a good look at whether you have done enough to impress these service providers or not. You can apply for these services with a quarterly credit history as well, but in most cases it will not be considered sufficient.

Best Time to Get Your Tax Files in Sync

Yes, you have been extra careful about your tax filing and preparation the whole year, but the overall integrity of your records still has a question mark on it. It is extremely important for you to prepare your tax files at the end of the year and calculate your liability with utmost accuracy. While tax preparation softwares have made the job much easier, complex tax files still need attention from your personal accountants to get everything in sync. Now, the important thing here is that a review does not only help you escape penalties that you might attract by putting wrong information on your file. You want to update your information at the end of the year because you want to accurately calculate your own benefits too e.g. tax credits, exemptions, standard deductions, itemized deductions, etc.

Time to Start Afresh

Your business might not have been a very successful venture. In fact, many businesses don’t make the best start and it seems in the beginning that it would be difficult for the business to survive. However, small changes in strategies and cuts in costs can prove to be greatly benefitting for businesses. The best time to start afresh and renew all your reports and files is the end of the year. While you can change your strategies and plans midway too, it is natural for most humans to feel the need for a new start at the start of a new year. For example, people can decide to lose weight at any time of the year, but it seems it makes most sense to them when they do it at the start of a new year.

If you think your business has not performed really well, but you still want to give it a shot, the end of year financial review can clear the path for you by telling you if you can afford to give it another shot or not.

Signs Of Fraud Business

Business fraud can have a monumental impact on an organization. There are many types of fraud that go by different names, such as financial statement fraud, bribery and corruption and asset misappropriation. It is often the case that fraud instigated by an employee will involve more than one type of fraud. Also, business fraud is not always easy to detect because it does not always show up in a company’s official accounts system. In general, the most typical way to detect this type of fraud is by receiving a tip from an employee, a customer, or an outside vendor.

Here is an overview of the different financial fraud in business:

Asset misappropriation

Asset misappropriation is the type of fraud that involves a member of staff who uses their position to take from their employers. This fraud is often committed by those trusted to manage the interests and assets of a company, which can include board members, employees or directors.

This type of fraud activity can include theft of company formulas, patents, or sensitive data, theft of credit notes or vouchers, inventory theft, theft of money or check forgery.

Any company that suffers from asset misappropriation will experience cash flow issues in some form. Plus, it can also have a negative impact on staff morale and the company’s reputation. It is believed that over 90% of business fraud is related to asset misappropriation which makes it by far the most common issue. On average, the lost from this type of fraud is in the region of $150,000 per case.

Bribery and corruption

Bribery and corruption is the next most common issue related to fraud in a business environment. Even though this type of fraud is less common than asset misappropriation, the average cost of a bribery scheme is significantly higher, and likely to exceed over half a million dollars per case.

The type of schemes involved in this area are quite broad and can include substitution of inferior goods, manipulation of contracts, bribes to influence decision-making, shell company schemes and kickbacks.

Financial statement fraud

Financial statement fraud takes place less frequently, but is almost certainly to be the most experience per case. On average, this type of fraud can lead to a company losing up to $2 million per case. This fraud involves an entity or individual falsifying earnings or income statements in an attempt to make a financial gain for them.

This type of fraud can include manipulating a company’s records in relation to more favorable loan terms, an improvement in year-end bonuses, or influencing the stock price.

The Ethic Seeing Your Employee Social Media Account

Recently, I’ve noticed more and more that small businesses and groups are “asking” their employees to change their cover or profile photos to the brand of the organization where they work. And, while some managers understand that this is a fine line, others have pressured their teams to help them promote the brand of the group.

You know how that happens, don’t you?

First, a request is giving by the manager of the team that goes something like this: “Hey, wouldn’t it be great if we helped promote our business and all of us changed our cover photos to the brand’s image? I just so happen to have some artwork we made up and it would be terrific if each of you went ahead and uploaded it on your social media accounts. It’s a team effort! You don’t have to do it, but… ”

And then you have the first person on the team who goes ahead and changes their profile photo or cover, and next thing you hear is the manager making it a distinct point to acknowledge that team member. I’ve even seen some situations where managers have repeatedly asked, always qualifying it by saying it’s not “required,” to see if a team member who hasn’t changed their private social media settings intends to do it. You know, not so subtle pressure.

Here’s my suggestion to you if you’re a leader or manager of a team and would like to have a little esprit de corps for the team.

  • Ask once and once only and provide the artwork, if any team member ever wants to help your group get the word out.
  • Or, you can do what I do and not ask at all. Period.

Candidly, my marketing team has said to me, “Wayne, let’s ask the team to promote one of our social enterprises or companies on social media!”I’ve never warmed up to the idea, and am not sure I ever will.

I think that we should have a separation between work and personal, as much as we can. I know that some people think that it’s “old school” but the reality is that as a leader I understand that if my team has a personal life and the business world does not encroach into it all of the time, they will be happier, and the productivity will be higher.

There are also some practical and not to mention legal reasons for not asking your team to promote your business or group on social media. It’s particularly true when managers are asking them with the “subtle” pressures that can sometimes happen when they want their team members to support the organization.

  • Employers have a right to ask their employees not to be on their personal social media accounts during work hours. That’s a legitimate request to make of employees (but not contract workers, freelancers or consultants who are not salaried staff).
  • Can you require–even subtly–to have your employees support your organization? The short answer is NO. Don’t do it. Social media accounts are the personal and private property of the owners, in this instance, each of your employees. So, just like you can’t require them to give you the keys to their homes, you can’t ask (read, “expect”) them to promote the business on their accounts.

But, what if you want to make it at least an option for your team to promote your business or group on their social media accounts if they so choose. Yes, you can make social media art and images available to them, let them know it’s a resource for them if they ever would like to use it on their accounts, but that’s it. In some instances, you may even be placing yourself or employee in legal jeopardy because promoting your business on their social media accounts for commercial gain can violate social media terms.The bottom line in the age of social media is that if you want to build team spirit or have an amazing product launch and you want your team involved, you can provide the resources. But you cannot require or pressure them, or do anything other than allow it to each person to do whatever he or she would like to do, if anything, on their personal social media accounts.

How To Read Financial Statement

Audit, Review, Compilation: You know the difference. With bonding companies, you need certain financial statements (FSs) at specific times. But there is one FS you don’t know about, and it can be very helpful!

Audit: This is the highest level of CPA (Certified Public Accountant) presentation. The CPA provides a cover letter stating they have checked over the numbers and believe they are accurate.

Review: This is the middle level. The CPA does some checking, but less than an audit.

Compilation: This report has a disclaimer letter. It says the FS is the presentation of management – meaning the CPA does not vouch for the numbers.

Other than CPA prepared statements, you could run into one by a Public Accountant, or a bookkeeper.

There are also Internally Prepared statements produced directly by the customer, such as with QuickBooks.

Then there is this Secret One you probably don’t know about. It can be a strategic help and will not be suggested by the accountant. It’s up to you to ask for it! We call it a “Confirmed Internal FS.”

This document is an internal FS, such as QuickBooks, but with an important upgrade. When obtaining a Confirmed Internal Report, the president or company owner is required to sign and date the company Balance Sheet (or maybe every page of the document) and write “Confirmed.” This is an affirmative statement that the FS has been scrutinized. It is a document with greater credibility, because someone is taking responsibility for it. (Read Secret #5 about the role confidence plays in bonding.)

Here is a real life example of how beneficial the Confirmed Internal FS can be. This week we are issuing a P&P bond in excess of $8 million for an applicant with a 12/31 fiscal year-end. Obviously, the CPA report is not available yet. However, before issuing the bond, we must get a read on their financial picture. How did the year turn out?

We can’t get the CPA report yet, but an internal FS is available. Can the underwriter base a decision on this document? That depends on whether the surety has the flexibility to give an approval in the absence of a CPA Audit or Review (Many underwriters are bound by strict rules that tie their hands.)

Fortunately, we were able to proceed based on the confidence that the business owner reviewed and Confirmed the financial statement. He signed his name and went on record, “You can rely on these numbers.” To us, that makes a big difference!