Seven Year-End Business Review Tips for Repair Shop Owners
By the start of the fourth fiscal quarter, most companies know, with a high degree of accuracy, how their year will turn out. It is also the perfect time for company leaders to review and evaluate the current year. This end-of-year review is an essential component in creating new strategies. It positions your business to move forward. Remember, success is not a destination from point A to point B, but rather a continuous journey comprised of small incremental improvements.
A systematic review at the end of the year will give you and your team a clearer picture of what worked, and what did not work and help you to find ways to improve your business in the coming year.
In this article, I will share with you seven end-of-year best practices that will better prepare your company for the new year, and beyond.
Understanding ARO and Its Significance
An end-of-year assessment begins with a detailed review of your financial reports. Start with the reports you normally use from your business management system. From these reports, you can project your current year’s total sales, labor and part margins, and other important key performance indicators (KPIs). Compare these projections to the KPI goals you set for the year. Did you achieve your desired goals, or are adjustments needed?
Financial Account Reports:
Two financial accounting reports should be reviewed: The profit and loss statement, and the balance sheet. If you have access to these financial reports, and understand them, perform an analysis to spot any red flags, discrepancies, or inconsistencies. If you are not familiar with these reports, then schedule a meeting with your bookkeeper, accountant, or business coach to review them. Little things, such as not correctly reporting interest on loans, or contributions to charities, will impact your income tax liability.
You will also need to review your account receivables. Hopefully, your receivables are not excessive. If you have any uncollectable debt, this needs to be documented and given to your accountant. Don’t worry if the person(s) who owe you money finally pays you in the new year, it will just be added back into your overall sales.
Make sure that all your payroll records are up to date and that all employee information is correct. If you are planning to pay yourself or your employees any end-of-year commissions or bonuses, contact your accountant for advice on how to distribute those additional earnings.
Regarding Human Resources (HR), review all policies, employee manuals, and current HR laws and regulations. Review your workers’ compensation records to ensure that all employee classifications are correct. You may need to get advice and help from an HR company, but it’s well worth the cost.
You also need to ensure that your inventory is up to date, both with physical counts and pricing. One tip, maintaining inventory and current pricing is a continuous process throughout the year. Don’t wait until the end of December to perform a physical count and price updates.
If you purchased any major equipment or made capital improvements or leasehold improvements, make sure that you have all the proper documentation, along with cost details. Again, these will be needed to complete your tax return.
Cash Flow and Budgets
Regarding your bank accounts, perform a review of cash outflows and inflows for each month in the current year. Reviewing your bank accounts will also determine your current cash reserve, which should be three to six months of operating expenses. Having a healthy cash reserve and a positive cash flow each month is crucial to your company’s financial health.
Reviewing cash flows will also help to verify that you stayed within your established budgets, or the need to adjust those budgets. After completing this review, you will now be ready to establish your budgets for the new year.
Perform an End-of-Year Tax Planning
As mentioned earlier, by the beginning of the fourth quarter, businesses know how the year will end financially. For this reason, the best time to start preparing for your tax return is before the year ends. This is especially important If your company is projecting an increase in profits over last year.
Schedule a meeting with your accountant before the year ends. Your accountant will give you advice on ways to minimize your income tax liability. In addition, a financial advisor can also give you valuable tax savings tips.
Banking Information, Insurance, and Other Essential Business Documents
With the increasing need for security, part of the year-end assessment must include a review of all bank account credentials, credit cards, insurance coverage, and all other essential business documents. Make sure that all passwords and credentials are secured and backed up. Additionally, make sure that your spouse, family members, and a trusted advisor, such as an attorney, have copies of banking records, insurance policies, select passwords, and essential business documents.
Refine and Update Your Goals and Your Business Plans
Another essential component of your year-end assessment is to review your long-term goals and your business plans. These plans include your marketing plan, strategic growth plan, continuity, and contingency plans. Life and business are ever-changing, and the details of all your essential plans and documents need to be updated at least once a year. It may also be a good time to sit down with your attorney and financial advisor to ensure that you have your estate in order and up to date.
Remember, leaders have a vision of what they want to attain in their lives and business. Having long-term goals provides you with a roadmap to achieve those objectives.
Review All Standard Operating Procedures, Policies
The best-run companies have a set of written operating procedures and policies. However, even the best SOP manual needs to be updated periodically. Schedule a meeting with your managers and/or key people in your company and perform a detailed review of all your SOPs. This process will identify procedures and policies that need updating or eliminating. It will also reveal the need to add new procedures and policies to your SOP manual.
Schedule a Company-Wide Power Meeting
Bringing your team together for a special power meeting can be a powerful brainstorming session and morale booster. At this meeting, try to avoid anything negative. Focus on what went right, and the accomplishments of the company. Include everyone in your presentation and highlight specific employee achievements and milestones.
This strategy will set the right tone and stimulate constructive, positive conversation. Have everyone prepare their assessment for the current year, and strategies and ideas moving forward. Allow everyone to speak and share their comments. When done properly, this power meeting will become the foundation for fresh and innovative ideas.
It’s okay to discuss what goals what not met, and what didn’t go right. Just communicate it in a way that doesn’t undermine or discourage the team’s effort to discuss the future in a positive tone.
I realize that this is a comprehensive list, and it may overwhelm some of you. Here are a few things that will help you organize your end-of-year review:
- A lot of the best practices listed above can be performed on an ongoing basis, reducing the work needed at the end of the year.
- Don’t wait until a few weeks before the end of the year. This process should start no later than the beginning of the fourth quarter.
- Delegate to your team any of the tasks that you feel they can manage; you don’t have to do it all.
- Prioritize what is most important and do those tasks first.
- Lastly, working on your end-of-year process is a proactive approach to your business, and you will realize the benefits not only in the new year but in years to come.
If you are an auto shop owner looking for innovative ways to enhance and grow your business, Elite Worldwide can help. At Elite, we have world-class, experienced coaches who understand your business. Our coaches have lived in the trenches and built amazing, successful companies. Elite also has sales, management training, and peer groups that can take you and your business right to the top. No matter where you are in your business career; startup, growth mode, or looking to retire, Elite can guide you and help you achieve your goals, and build a more profitable and successful business.
About the author – Joe Marconi – With over four decades of industry expertise, Joe is a seasoned professional whose accomplishments include owning and operating one of America’s most successful auto repair companies. A graduate of the Automotive Management Institute, Joe is a recipient of the CARQUEST Excellence Award, served on industry panels, and played a role in developing the ASE Engine Performance Certification test. As a former columnist for Ratchet & Wrench Magazine and co-founder of AutoShopOwner.com, Joe has been a keynote speaker at the Ratchet and Wrench Conference. After selling his automotive company in 2021, Joe now dedicates his time to giving back to the industry as a Top Shop 360 Business Development Coach with Elite Worldwide and serves on the board of directors for the Service Stations Dealers of Great New York. Joe, a Bronx native now residing in Patterson, New York, enjoys family time, community involvement, and pursuits such as tennis, golf, and woodworking.