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As the year winds down, it's time for business owners and startups in Canada to plan strategically for the upcoming year.
I know, I know—financials can feel a bit overwhelming, but taking the time to get organized now will set you up for a successful 2025.
Now let’s explore how you can plan effectively!
1. Review your financial statements with purpose
First things first: gather your financial statements—your income statement, balance sheet, and cash flow statement. These documents will give you a comprehensive view of your business’s performance in the past year.
Income statement: This shows your revenue and expenses. Did you hit your financial goals this year? Look for any surprises—good or bad!
Balance sheet: Here, you’ll find your assets (what you own) and liabilities (what you owe). It’s like a snapshot of your business's overall health.
Cash flow statement: This is all about the cash coming in and going out. You want to ensure you have enough to cover your expenses, so keep an eye on trends here.
What can you do now?
If you don't like using spreadsheets (like me), consider using accounting software to help you sort through this data more easily.
Review your budget and make adjustments
Now that you have a clear picture of your 2024 financials, evaluate your budget. Take a look at how your actual spending compares to what you had planned.
Identify Variances: Did you spend more in certain areas than expected? Maybe you had unexpected expenses or revenue surprises?
Update Your Forecasts: Based on what you learned, adjust your forecasts for next year. This is your chance to plan for growth and identify areas where you can tighten the belt. Incorporate market trends, seasonal changes, and your own business objectives.
What can you do now?
Involve your team in this process. Their perspective can provide valuable insights into your financial planning!
Embrace tax planning and optimize deductions
Navigating taxes can be complex, but proactive planning can make a significant difference.
Understanding your tax obligations and leveraging available deductions is key to optimizing your financial health.
Consult a tax pro: Find a tax advisor who understands the unique challenges we face as a BIPOC woman entrepreneur. They can help navigate tax obligations and ensure you’re not missing out on valuable deductions.
Maximize eligible deductions: Identify potential deductions, including expenses related to your business operations, equipment, and professional services. If you haven't heard of programs like the Scientific Research and Experimental Development (SR&ED) tax credit and Clean Technology (CT) Investment Tax Credit (ITC), definitely check them out!
What can you do now?
Keep track of all your expenses throughout the year to make tax time much less painful.
4. Plan for growth and invest wisely for startups in Canada
As you reflect on the past year, think about where you want to grow in 2025. Whether it’s investing in new tech or expanding your product line, this is your moment!
Allocate your budget: Set aside money in your budget for initiatives that align with your vision or business goals. Even small investments can pay off big time!
Explore funding opportunities: There are loads of grants and funding options available for BIPOC women entrepreneurs. Just last month, Kimesha Walters, founder of Oasis Integrated Communications, won a $10,000 grant at the 2024 Mantella Corporation BIPOC (Black, Indigenous & Other People of Colour) Entrepreneur Award—this could be you!
What can you do now?
Reach out to local business support organizations (like us!)—they (we) can help you find funding sources that fit your needs.
5. Master your cash flow management
Cash flow is crucial for keeping your business running smoothly. Assessing and improving your cash flow practices can safeguard against financial shortfalls.
Create cash flow projections: Start early and make a plan for your cash flow in the upcoming year. This way, you can anticipate needs and avoid surprises.
Optimize receivables: Review your invoicing processes. Consider offering discounts for early payments or setting clear payment terms to encourage prompt payments.
What can you do now?
Monitor your cash flow to maintain liquidity and ensure you can meet your obligations as they arise.
Prepare for uncertainties with a contingency fund
Running a business can throw some curveballs your way, especially for startups.
Being well-prepared is always a good idea.
Start an emergency fund: Aim to set aside three to six months’ worth of operating expenses. This cushion can help you navigate unexpected disruptions without jeopardizing your business.
Conduct a risk assessment: Identify potential risks that could impact your business and develop strategies to mitigate them. This may include diversifying your revenue streams or strengthening your supplier relationships.
What can you do now?
Review your risk management strategies and adjust them as needed. Stay ahead of any potential challenges!
As we wrap up 2024, take the time to celebrate your achievements, learn from your experiences, and set clear goals for 2025.
End-of-year financial planning is an essential practice for all startups in Canada. By following all these steps, you can create a strong and steady financial framework for the new year.
Here’s to your success!
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