While a yearend review may sound very formal and “corporate” to a smaller business, the reality is that an effective business review at the end of each year is a powerful tool for small businesses, delivering a range of benefits and advantages. If approached smartly, a comprehensive annual business review can be completed by even the busiest small business owners, setting them up for greater success in 2023.
In this article, we explain what a yearend review is and what it entails, as well as why it is so important for business success, and we also share top tips for an effective yearend review based on our team’s 12 years of experience in assisting businesses in all sectors and across industries to unlock their financial success.
As the festive season break and the end of the year approaches swiftly, businesses have an opportunity to look at the year that has passed and to plan ahead for the new year.
An effective yearend review, in which all the important factors are considered, will ensure that maximum benefits can be derived from this important business practice.
What is a yearend review?
At least once a year, every business should conduct an extensive review of its business operations, successes and challenges, the targets achieved and how it was done, and the reasons why where targets were not achieved.
Such a review will allow a business to evaluate current strategies, practices and operations, to determine what is working or not, and to track the resulting progress towards achieving the business’ goals.
It is an annual opportunity to unlock the many benefits provided by this simple but powerful business practice.
What are the benefits of a yearend review?
It is Albert Einstein who said that insanity is doing the same thing over and over again and expecting different results.
Instead of going into the new year ahead doing the same thing for another year, successful companies do a business review – at the least – annually.
This creates the opportunity to:
- gauge progress on goals, objectives, targets and KPIs (key performance Indicators);
- analyse business performance;
- identify trends;
- pick up issues before these turn into serious problems;
- celebrate successes and to build on what is already working;
- realign the team where progress is off track;
- change tactics where targets are not being achieved; and
- plot a well-informed course of action for the year ahead.
“The definition of insanity is doing the same thing over and over and expecting different results.” -Albert Einstein
What is the best way to do a yearend review?
The best way to do a yearend review is to involve your entire management team, including your financial team, whether inhouse or outsourced.
This is because to truly gauge your business’ performance over the last year, you need to review a multitude of factors, tracking numerous relevant metrics together for a big-picture understanding of the performance across the various business functions.
The process involves collating the information required and taking time to analyse and understand what the data and numbers are telling you about your business. You may need professional assistance in certain aspects of the review, for example, in the financial and tax matters.
What should be reviewed?
- Vision, mission and values
- Business plan
- Goals, objectives, targets and KPIs (key performance Indicators)
- Offering, quality and value proposition
- Financial reports, at a minimum:
- profit and loss (P&L) statement showing net profit or loss by comparing total income (total sales less costs of goods) to total expenses (operating costs, taxes, utilities, insurance and interest on loans)
- cash flow statement detailing cash inflows and outflows to reveal where the business generates and uses the most cash; enabling informed budgeting and spending decisions; and identifying potential cash flow problems
- debtors’ reports enabling current and overdue invoices to be tracked and proactively managed to ensure payment is received timeously for improved cash flow
- budget vs actual spend report allowing a comparison of actual spending against amounts budgeted to assess how well spending matches financial forecasting projections and identify areas that are over or under budget
- balance sheet summarising total assets and total liabilities, as well as shareholders’ equity, or investments and retained earnings
- Tax responsibilities, liabilities and options
- Sales, marketing and branding
- Fees, prices and rates
- Costs and expenses
- Major decisions made or changes implemented during the year
- Current and pipeline projects, new opportunities
- Market conditions, industry changes and competition
- Customer acquisition cost and lifetime value
- Client base, changing client needs and client satisfaction
- Human resources, mission-critical roles and employee satisfaction
- Equipment, tools and resources, and upgrades required
- Internal systems and processes
- Registrations and certifications
- Contracts and agreements, including insurance, leases, advertising, etc
- Statutory documents and recordkeeping
- Successes, with the aim of understanding what is working
- Mistakes and challenges, to understand what needs to change
Top tips for an effective annual review
- It is not just about whether goals or targets were met or not – the financial performance must be contextualised in terms of both the business’ short term targets and long term goals.
- The key to an effective annual review is to learn what is working and what is not, so the company can continue or increase what is working and can change what is not working to obtain different results.
- Involve your entire team – annual reviews create an opportunity for team members to understand their integral roles in achieving company business goals.
- An annual review becomes the basis of more frequent reviews, for example, quarterly reviews, enabling business owners to stay on top of the numbers and progress all throughout the year ahead.
- The knowledge and insights derived from a proper yearend review enable business owners to create a solid plan for the upcoming year, incorporating the changes necessary to get different results, and the enhancing or duplicating the process that are already generating good results.
- Whether your small business has an inhouse accountant or not, the best way to do an annual business review is to consider professional assistance, particularly with the financial aspects of your annual review, who will be able to provide a clearer picture of the year in review.
Unlocking the value of a yearend review in your company
We believe that a yearend review is an important growth driver for businesses in all sectors and across industries, and one that we unlock for our all clients at PSTM.
Out team will assist you to understand the data and numbers and what they say about your business, and help you uncover and implement the changes necessary to achieve the full financial potential of the business.
We are a team of progressive, smart and approachable consultants who offer insightful advice and robust solutions, responding to not only to your immediate business needs, but also supporting the long term growth needs of the business.
It is our unique combination of sound technical expertise, industry knowledge and experience, along with a shared commitment to effect positive change in all our interactions with our clients, regardless of organisational size, that makes us different.
If you would like to implement a yearend review to harness all the benefits thereof, we invite you to contact us on our website, Facebook or LinkedIn or on +27 (11) 656 0061.
