The first week of January, newspapers and magazines offer a flurry of tips on creating and sticking to New Year’s Resolutions. By the first week in February, most have been tossed out the window. Whether you blame lack of will-power, or good old-fashioned procrastination, resolutions rarely become habits.
But there’s good news! A recent article in the New York Times suggests that procrastination boosts creative thinking and problem solving. The premise: between the time you start thinking about doing something and actually doing something, your subconscious starts processing the task and from that comes more creativity.
You probably had a gut instinct about last year’s performance; and the procrastination gave you a chance to kick around a few ideas to improve operations in 2016. From a practical standpoint, all those straggling little invoices and receipts just made it into your bookkeeping system (technically, perhaps, they were entered in 2016, but they were still 2015); and you now have all the tax filing forms you need. It’s still early on in 2016 to make adjustments to your upcoming plans.
Here are 3 reports you can run in QuickBooks to analyze the past year, with thought-provoking questions to help you think of ways to improve profitability and plan for the year ahead. For all reports, be sure to select the date range of 1/1/15 – 12/31/15
1. Review Profitability by Month
Run a Profit and Loss Standard Report. Customize the report to display columns by month across the top, and add a subcolumn percentage of income. Some questions to ask yourself:
- Did you earn as much money in each month as you had hoped and planned for?
- In which month did you have a negative net income? Is that what you expected? What would you do differently?
- How did your sales mix change throughout the year?
- In looking at the year as a whole (the last column), do any expenses jump out at you as being too high? Look at both the dollar amount and the percentages. Pay particular attention to expenses that are above 5% of total revenue. Do you have an explanation for why they are high? What can you do to bring them down?
2. Review Profitability by Class
Run a Profit and Loss Statement Standard report. Customize the report to display columns by class across the top, and add a subcolumn for percentage of income. Some questions to ask yourself:
- Which was your most profitable class as a percentage? As a dollar amount?
- What are there opportunities to grow the more profitable areas? How much can you increase production and not flood the market?
- Which was the least profitable class? What can you do to improve its profitability?
- Must you retain these products or services to stay attractive to your customers?
3. How has your business grown?
Run a Balance Sheet Standard. Customize the report to Add subcolumns for previous year
- Is your equity in the business increasing?
- Do you have more equity than liabilities?
- If liabilities are increasing, what can you do to manage and reduce them?
4. Create a Cash Flow Budget for this year
- Review your income statement from last year. Create a Profit and Loss Standard for the previous year. Click Modify Report, Select Display Columns by Month across the top. Also check the box for % of income
- Consider how each number will change for the coming year. Do you expect your sales numbers to increase? If so, by how much? Do you expect your expenses to increase? Will they increase as a percentage of sales or as a fixed percentage?
- What big purchases do you want to make in the coming year? Will you need to take out a loan or otherwise get financing?
- Use the Quick and Dirty Cash Flow template to project out the coming year.