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10 Tips to Close This Year’s Budget and Forecast the Next

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The fourth quarter will come to a close sooner than you think—are you prepared? Whether or not your company or clients are ready, you’ll have to reconcile their accounts, round up invoices and shore up a variety of inlays and outlays. What’s more, you’ll need to prepare a proper forecast that will help create a viable budget for the new year. To help you during this tumultuous time, here are 10 tips for year-end closing and forecasting.

1. Start early, stick to a schedule.

If you’re on time, you’re late; if you’re early, you’re on time. You’ll inevitably uncover variables that you couldn’t have predicted, but if you get a head start, even significant slow-downs don’t have to push you past your deadline. Plus, the earlier you start, the more resources you may be able to allocate to next year’s budget.

2. Account for common slip-ups.

It’s simple enough to account for payroll, regular expenses and incoming payments from clients. Matters become more complicated when you have to consider contractor payments, depreciation, prepaid expenses and the boss’s personal draws. Tax season will be just around the corner once the year comes to a close, so make sure you account for these variables.

3. Shore up invoices and supplier bills.

Even if you have an ironclad invoicing process, collections may be another matter. Likewise, suppliers with flexible terms and lax payment policies may not be badgering you—yet. If you’re going to start the new year with outstanding invoices and past-due payments (and what business doesn’t?), make sure your budget accounts for that cash flow.

4. Get everyone on board.

Whether you’re in-house or not, you need to consult with as many key players as possible to gather all relevant information. Executives, management and particularly sales team members may have a lot to contribute.

5. Stay flexible.

As an accountant, a Type A personality will serve you well when you close, but it may make the forecasting process an unnecessary burden. You might not be able to account for every predicted penny in the next year’s budget, and that’s OK. Nothing happens 100 percent according to plan, and you’ll need to make new decisions as the next year unfolds.

6. Consider several scenarios.

Likewise, a useful forecast includes several plausible scenarios. What if business is slow during one or two seasons? What if fuel costs increase your suppliers’ rates? What if your company grows so fast that profits actually take a temporary dive? A great accountant will consider these questions ahead of time.

7. Know your goals for next year.

Consult with key players to find out where the business is headed—not just in the next year, but in the next five to 10 years. There are never enough resources to do everything, but clear goals will allow you to prioritize. If your company is growing fast or diversifying, this year’s top expenses may become wastes of money—or vice versa.

8. Look to the past to move forward.

Similarly, you’ll need to understand this year’s finances and performance metrics to properly plan for next year. You may already have a clear view of how much money was spent on what, but how did those expenses translate into productivity, profits and other company goals? As usual, the more data the better.

9. Plan for profit and cash flow.

Cash is the lifeblood of a business, particularly smaller and less established businesses. Even a successful company can fizzle out fast if new expenses outpace revenue, and it’s critical to forecast and budget for a positive cash flow—not just increased profits.

10. Recruit help.

Depending on the size of your company or client companies, you may need to bring on outside help. A successful year-end close can be a daunting endeavor, particularly for well-funded startups and fast-growing businesses. With so many resources at play, it pays to hire qualified team.

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