As a business owner, it can be tempting to avoid spending excessive amounts of time digging into “the books” and analyzing the minute details of how your business, products or service and employees are faring. However, one of the best ways you can ensure your business reaches its full potential is by performing a self-audit at the end of your fiscal year. Yes, this also goes for self-employed individuals and entrepreneurs as well, not just small, medium and big business owners.
To help you out, our team here at HJR Global have come together with our best advice for performing a successful self-audit.
Analyze Cash Flows And Establish Trends For Your Expenses
Calculate the percentage of your revenues that are generated by each source of spending. Any significant increase in costs year-to-year can mean two things:
- Your business is growing.
- You’re paying more money for something than you should be.
If you suspect the latter is more likely, we suggest digging around a little more. By calculating the percentage of your revenue that each expense you’re undertaking generates, you can pinpoint exactly where you are overspending.
For example, we suggest taking a close look at your company credit cards. Nobody likes to think that their employees will misuse company resources, but as this story about an employee who racked up $20,000 in personal charges on their company credit card demonstrates, you can never be too sure.
Pay Close Attention To Shipping Costs And Service Contracts
These are the areas where businesses tend to overspend. Many shipping companies, particularly young companies looking to prove themselves, will offer price cuts or extra benefits for working with them.
The same principle applies to equipment. In many cases, replacing your equipment using a new vendor will cost less than continuing to maintain whatever current service contract you have. Shop around for new shipping companies and equipment vendors. Chances are you (and your budget) will be in for some pleasant surprises.
Review The Payments You Receive And Look For Trends
Can you identify the factors that contribute to the increase or decrease in sales? Compare the current fiscal year to the previous one, and evaluate the following information:
- Was there a quarter in the last fiscal year where you made significantly more than you did in the current fiscal year?
- If so, what factors contributed to that? For example, maybe you ran an ad campaign that was wildly successful in the previous fiscal year but were unable to replicate that success with any ad campaigns this year.
- Consider analyzing your most successful campaign and getting a copywriter to make a similar, more updated edition of that ad.
- You’ll also want to make sure you’re consistently taking care of the back end of your business by doing things like expanding your cash reserve to make it through slow months easily and paying your quarterly estimated taxes.
Spend some time with your banker and get into the nitty-gritty about payments and cash-flow trends.
Compare Expenses And Payments With Your Projections
In an ideal world, we would all like to make as much money as we project. In most cases, you’ll fall short of that goal. But, if your projections were wildly off-the-mark, it may be time to do something more than just making a new year’s resolution to work harder in 2019.
Ask yourself these questions:
- Did you take any risks that didn’t pay off?
- Are there any contracts you took on and realized you got the short stick of that, and you can renegotiate?
Considering these factors can not only help you shore up your losses but also give you invaluable experience concerning your future projections.
Take An Inventory Of Equipment And Software
Whether your company is based physically or digitally, sooner or later your infrastructure will become outdated, and things will start to break. The trick is getting ahead of the situation and making sure that you’re keeping a close eye on the state of your equipment and software at all times.
But if you can’t afford to micro-manage your infrastructure, then an end-of-year self-audit is a great place to start. Take an inventory of your current equipment and software. Talk with your IT and maintenance employees or outsource some to evaluate your infrastructure.
By getting an educated opinion on what equipment and software you’ll need to update in the near future, you can make budgeting and finding good prices for the upgrades you need easy.
Involve HR And Employees
You should find out about job satisfaction and performance levels in your company. At the end of the day, your employees are the heart and soul of your company. Here are some suggestions:
- When you’re performing a self-audit, don’t leave your employees out of it.
- Interview your HR team and find out what types of feedback they’ve been getting from employees about your business.
- Even better, sit down with your employees and encourage them to give you candid feedback about the business, with no repercussions for doing so.
It’s important to remember that ultimately your employees are the people who drive your business forward, and your self-audit should reflect that.
Your Audit Could Be An Opportunity To Rethink Your Pricing And Marketing Strategy
Don’t hesitate to tailor this process to your needs. Let us take the case of IBM during the 1980s.
- In 1984, IBM posted the then-largest loss in the history of America, losing a total of $8 billion that year as competitors ruthlessly undercut IBM’s pricey and powerful computers.
- Come 1985, IBM redefined itself and started selling low-margin computers and hardware, while simultaneously refocusing the company on providing IT and computing services to businesses.
- At the start of 2013, IBM was the number one seller of enterprise server solutions in the world.
If your business is falling behind or is simply not achieving the success you projected, a self-audit is a great time to figure out where you’re going wrong. Consider pioneering new ad campaigns, or even redesigning some of your flagship products or services if they’re starting to lag behind. After all, nobody ever said success was easy.
Do you want to perform a self-audit or reinvent your brand, but don’t quite know where to start? Let our team at HJR Global help you out! We perform a variety of revenue-growth services that help businesses achieve their true potential. To learn more about what HJR Global can do for you, click here.
To subscribe and read more blogs from HJR Global, click here.