The arrival of 2006 offers small business owners a chance for a fresh start in running their companies. For those who haven’t done financial planning or had a budget in the past, January is the time to start working in a more organized fashion.
It’s also an opportunity to deal with human resources issues such as creating a vacation policy or thinking seriously about your hiring plans for the coming year.
“Most small business owners work from the seat of their pants and don’t realize that a good plan will help them,” said Joseph P. Maloney, a certified public accountant with Maloney Reed Scarpitti &Co. LLP in Erie, Pa.
He suggests owners start by putting together a budget that, among other things, will allow them to set aside money for retirement plan contributions – something that often gets pushed back until the end of the year or is never dealt with at all.
It’s not just retirement plans that small businesses need to budget for. Bonuses, which many business owners also don’t think about until year’s end, will be much more affordable if they’re planned for in advance. Capital spending needs to be considered now, not impulsively a few months from now.
And Jeffrey Chazen, a tax partner at the accounting and consulting firm Richard A. Eisner &Co. LLP in New York, noted that companies that had a profitable 2005 should set aside money for taxes owed in April. If they also anticipate a good 2006, they should be planning for next year’s tax bill, too.
That kind of forward-looking strategy is absent at many small companies.
“What normally happens to a small business is when they did well, they took all their extra cash and put it back into the business,” Chazen said.
A lack of planning does more harm than leaving a company with not enough money at tax time or with a retirement plan that’s falling short of its earnings potential. It leaves a business vulnerable to failure.
“You can’t not do it, because it’s going to cost you in the long run,” Maloney said. “To be a good business owner, you have to control the administrative part of it.”
One way to keep a better handle on your company is to invest in software that will help you track your sales and expenses – or as Chazen put it, “getting your books into some short of shape so you can really look at it (the business) on an ongoing basis.”
There are also many employee issues that need your attention at the start of the year. For example, January is an excellent time to implement a vacation policy and avoid disputes over days off.
Bonnie Beirne, director of service operations for Administaff, a Houston-based human resources firm, suggested owners look at vacation policy as part of a comprehensive review of their benefit packages, and keep in mind that they need to be competitive to attract and retain good workers.
Beirne noted that employers are expected to find it harder to find the new hires they want in 2006, as many companies plan to expand their staffs, increasing the competition for a shrinking pool of job applicants. That means, if you’re planning to hire in the coming year, think now about where you’ll look for prospective employees, and what you’ll offer them.
Beirne’s advice: “A small business owner needs to be creative in their recruiting efforts and their strategies to drive their businesses.”
Along that line, you need to think about the staff you already have – whether you’re doing enough to retain them or whether you need to think about making some changes.
Beirne also suggested owners be sure that they’re in compliance with government labor regulations. Be aware that regulations often change or go into effect on Jan. 1.
And while you’re at it, think about other regulatory issues, such an environmental laws, that might affect your company. You need to consider regulations at all levels of government – federal, state and local.
You might also be facing price increases from your vendors and suppliers with the start of the new year. Be sure you’ve considered them when putting your budget together.
One that’s affecting all of us: New postal rates go into effect Jan. 8.
Building Small Business is a weekly column on the topic by the Associated Press.
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