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Closing the Fourth Quarter Strong

Ten Tips for a Successful Close

It’s that time of year again. Yes, the holidays are nearly upon us, but so is the closing of the fourth quarter. And while closing every quarter is important to the financial success of a business, closing the fourth quarter accurately is even more critical. Not only does it represent the final stretch of the fiscal year, but it also sets the tone for the year ahead. Further, as the fourth quarter encompasses the busy holiday shopping season, many companies (not limited to retail) see significant boosts in revenue during this time.

Throughout these decisive three months at the end of each year, companies assess their annual performance, report earnings, and make budgetary adjustments and decisions. This may seem daunting to some, but it’s imperative to start the next year with a clean financial bill of health. In an effort to help provide a roadmap, here are our top ten tips to help ensure a successful close to the fourth quarter … and to the year.

  1. Review Year-to-Date Performance
    There is simply no other way to understand where you are without understanding where you’ve been. This can include a number of elements. For example, as an outsourced CFO, when we review our clients’ year-to-date performance, we perform a thorough analysis of key metrics, including revenue, expenses, and profitability to better understand the intricacies of the business’s financial health.

  2. Perform Budget and Forecast Analysis
    Comparing actual performance with a previous budget and forecast is valuable not only to measure past performance, but also to set a forthcoming budget and forecast. This review will attempt to identify gaps and opportunities and make necessary adjustments going forward.

  3. Engage in Tax Planning
    It’s important to strategically think about the company’s tax situation now, not in the new year. Simply, if you wait until then, you’re too late. This could include reviewing applicable tax deadlines, considering if the business needs to (or should) file an extension, and determining the last day to make IRA contributions, as well as the last day for self-employment tax. We often advise our clients to take these steps, along with thinking about their deductions, credits, and deferred income, so that their tax accountant knows their overall vision to utilize the best tax strategies.

  4. Conduct Inventory Management
    Inventory management plays a pivotal role in a company’s fourth quarter performance. It impacts revenue, profitability, financial reporting, supply chain management, and customer satisfaction. In fact, it’s difficult to achieve a successful year-end result without balancing stock levels effectively. Further, by taking the time to do this now, it gives you time to optimize those levels, including offering clearance sales around the busy holiday season to reduce carrying costs.

  5. Assess Cashflow
    To evaluate cash flow, companies start by analyzing financial statements to compare this quarter to previous ones and identify trends. This analysis requires emphasis on three primary methods of cash generation—(1) operating activities, (2) investing and financing activities, and (3) seasonal variations, allowing for a projection of cash needs and obligations. Additionally, you can examine cash management efficiency, watch for external factors affecting cash flow, and develop cash flow projections for the upcoming year to help manage working capital and ensure liquidity.

  6. Strategize to Maximize Revenue and Minimize Expenses
    For many businesses, there is perhaps no better time to boost revenue than in the fourth quarter. This often includes holiday promotions and special marketing campaigns, but also provides opportunities for upselling, cross-selling, and engaging existing customers. It is also an opportune time to explore ways to control costs not just in the final quarter, but also going forward. This may involve monitoring and cutting unnecessary expenses.

  7. Remember Employees
    For many employees, the fourth quarter means year-end employee bonuses in their final paycheck or holiday party envelope. For you, these bonuses should be carefully considered and measured, taking into account payroll compliance and tax implications, as you close the quarter.

  8. Prepare Financial Statements
    As with all quarter closes, the preparation of balance sheets, income statements, and cash flow statements are imperative. With fourth quarter, these reports not only close out the quarter, but also the fiscal year in order to start the new year with corresponding new statements.

  9. Set Goals and Projections
    Businesses should remember to set realistic financial goals for the following year, even as they continue to reach for the stars. Projections provide a roadmap for revenue, expenses, and profitability, helping you set those goals and allocate resources accordingly. This type of effective planning enables adaptability in a dynamic market, helps with risk management, and supports long-term sustainability and growth.

  10. Collaborate with Accountant
    Accountants do more than prepare financial statements, assess tax implications, and reconcile accounts. When you collaborate with your accountant during the close of the quarter, they can offer insights for informed decision-making, help businesses meet regulatory requirements, and provide guidance on optimizing financial performance and reducing tax liabilities.

Closing out the fourth quarter encompasses more than just financial reconciliations. It serves as a valuable opportunity to gather data that mirrors the company’s performance, its progress in achieving quarterly and yearly goals, and prospective opportunities. Rather than regarding the above tips as a mere checklist, you may want to consider leveraging it as a strategic tool to help move your company forward.

If you’re struggling with your quarter-end close or reviewing your financials, we can help. At Agile Planners, we understand the many responsibilities that business owners have, and that their time is generally scarce. We can provide you with CFO, bookkeeping services, and training. As a one-stop shop to fill all types of accounting needs, we take over bookkeeping and accounting tasks, integrate technology systems for optimal performance, and provide consulting services to develop a strategic plan for your business to grow and reach its goals. We’ll take care of the nitty-gritty so that you can focus on the bigger picture: running your organization.

Contact us today to learn more about how we can help you with your month-end close process.

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