Planning for Profitability in 2017 – Yes, There’s Still Time!

Although the fourth quarter is upon us, business owners still have time to make their  2017 plan and adjust for year-to-date fluctuations that may affect profit.

With a few measures in place and an understanding of the various components of your corporate finances, you can indeed plan for profits this year.

    1. 1. What are your expectations about yearly revenue or net income?
      Without a clear picture of what you want your year to look like, you can’t get there; you should have goals set every year for benchmarks you want to hit, like a specific revenue level or net income. These expectations will affect what you pay in taxes, just as your accounting methods will. Review your goals with your corporate accountant or CFO to fully understand how they will affect your tax bill and to ensure your business operation is meeting bank requirements.

2. Cash or accrual – which accounting method do you use?
These two approaches are all about when you recognize revenue (when the income appears on the books) vs. when you are making deposits (and the cash is actually in the bank).

● Cash accounting is based on the movement of cash in your business, plain and simple. Money in and money out, logged accordingly on those dates. When you operate on a cash basis you have more flexibility in terms of when you recognize revenue. Why? Because although your accounts receivables may flow in at a certain time (when you get the checks) you might not deposit them right away if you prefer to show the income at a later date.

● Accrual-based accounting takes a different look at timing of your revenue recognition, based on when it is earned (billed) as opposed to when the invoice was paid. There is no direct correlation with dates of the actual cash transaction. In this case, if you billed a client in December, but did not get paid until January, that income is still on your books for December.

  1. 3. When to pay corporate expenses.
    The timing of your expenses factors into profitability as well, since paying them offsets your gross income. This is also related to whether you are on a cash or accrual basis for your corporate accounting. For example, your staff accountant or chief financial officer may recommend that in order to lower your net profit, your company should pay expenses early or make sure all outstanding expenses are paid before December 31.

4. Keep good financial records.
Know what types of records you must keep in order to make the most informed decisions about your company’s financial health and to meet your profitability goals. These include (but are not limited to):

● Reconcile statements for corporate cash accounts and credit cards.

● Balance sheet

● Profit & loss statements

● A list of company expenses that you paid out of pocket or personally, and should be summarized somewhere for business (on QuickBooks or on an Excel sheet, for example).

5.Hire a virtual CFO.
If any of this sounds a little foreign or if you’re feeling like you’re behind the planning eight ball, don’t panic. CFO Your Way can help you make sense of your bookkeeping, put your corporate accounting on QuickBooks, and work with you to help you reach your profitability goals.

With CFO Your Way, you work with an accounting professional who provides financial management expertise for companies that need the guidance and hands-on assistance to make their fiscal year profitable and to align their financial operations with profitability goals. Contact Cheryl Mucha, CPA at to discuss your needs—and plan for many profitable years ahead.

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