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Enhancing the Resolution

Year-end Is a Time for Businesses to Focus on Planning, Improving

Kevin Vann says that budgets are, by and large, discouraging, and they are especially so in times like these.

“Sometimes you look at it, and you think, ‘my God, another year of thinking about just trying to break even,’ or you wonder, ‘am I going to have to trim payroll?’” he explained. “You can be discouraged with a budget, and from my experience, that’s why a lot of clients put them away or don’t follow them.”

But putting together a solid budget is one of the key ingredients in successful business planning — short-term and long-term — and it’s one of the many management matters that business owners should be thinking about as they prepare to turn the calendar, said Vann, president of the Springfield-based Vann Group, a business-consulting firm.

Actually, things like budgets, retirement plans, tax planning, insurance packages, benefits programs, employee handbooks, and many more are topics that business owners should be thinking about all the time, said Vann, who owns or co-owns a number of ventures and practices what he preaches. But because people are busy — and now seemingly busier than ever — often they don’t, and thus year-end, as hectic as it is, can be an effective time to take action on such issues.

“People make resolutions every Jan. 1,” said Vann. “Well, businesses can and should do the same.”

Joe Messer agreed. A certified public accountant with the Holyoke-based accounting firm Meyers Brothers Kalicka, he said year-end is obviously a time to be thinking about, and executing, effective tax planning. But it’s also a good time to make commitments to address everything from evaluating technology needs to preparing a succession plan — something far too many business owners put off until they have to, or until it’s too late.

“A lot of business owners tend to think that they’re invincible and they’ll be around forever,” he said. “And that’s why they don’t think about succession, which puts them in a bad situation when the time comes and they have to confront it.”

There are myriad other issues that should be confronted on a regular basis, and year-end is a practical time to visit or re-visit them, said Sean Wandrei, a tax manager at Meyers Brothers Kalicka who listed matters ranging from retirement plans to cash-flow issues; from bank finance issues, such as covenants, to tax matters including income deferral and accelerating deductions.

In this, its final issue of 2009, BusinessWest takes a look at how business owners and managers can use the act of turning the calendar to help make their ventures run more efficiently and effectively plan for the long term.

Date with Destiny

Vann said that one of the things business owners and managers might want to do at year-end is look at their computer desktop.

“I have about 35 icons on mine, and I’ll bet I’m using three or four of them, just those things required to do my job,” he said, adding that, as part of an exercise in technology planning, individuals may want to examine why all those icons are there. “All those other things … someone either taught it to me or installed it for me, and I’m not utilizing it properly.

“Technology is a huge part of business management today,” he continued, “not just on the strategic side, but on the process side; we’re all waiting for that next wave of technology to drive our backroom processes and help us manage our time better.”

What business owners can, and should, be thinking about this time of year is taking their desktop review exercise and doing roughly the same thing with every aspect of their organization, said Vann, who outlines several types of planning that managers should be doing in a related story on page 23. And they should do so with an eye toward making their operation run more smoothly, while also prepping it for long-term success.

But they must do so with the understanding that effective planning, be it with technology, taxes, personnel, or succession, are truly year-round exercises.

“These are things that people have to be thinking about at all time, not just year-end,” said Messer, adding quickly that the start of a new year can indeed be an effective time to make what may amount to resolutions. And one area he says should be at or near the top of the list is succession planning.

“It’s one of the most important, but also one of the most overlooked, aspects of business,” he said. “Who are we going to transition the business to when we’re ready to retire and move on to sunnier days?”

To answer that question, business owners and managers have to identify who that ‘next generation’ is going to be, he continued, and revisit the issue of succession on a regular basis to make sure the right party or parties have been identified and that the transition process stays on the right track.

While succession planning is important, especially for those business owners who have preferred to put off the inevitable, there are other business-management and planning issues that should also be considered at year-end, said Messer, who listed everything from cash flow to disaster-recovery plans, or, to be more specific, the lack thereof.

As for cash flow, accounts receivable is an issue impacting virtually every company in these trying economic times. Business managers should wait for year-end to put firm policies and procedures in place for collecting payments that are due, but if they don’t have them, now would be a good time to put them in place.

“In these tough economic times, receivables tend to get dragged out on a longer period and can make it very difficult for businesses to keep a positive cash flow,” Messer explained. “So business owners need to be proactive and implement strict collection policies and processes to help the cash flow remain positive.”

And a key element in such policies must be consistency, he continued, adding that the best approach for businesses is to be proactive, not passive, when it comes to collecting bills.

Other matters to consider at year-end, said Messer, include health plan coverage and whether a better package is appropriate, the broad subject of inventory (how to reduce it and examination of why it’s not moving), and retirement plans — and perhaps the need to diversify offerings.

“One size doesn’t fit all with respect to retirement benefits and retirement options you can offer to your employees,” he said. “Business owners and managers really need to look to identify the target group they’re trying to benefit. Do they want to benefit the business owner and a few key employees, or do they want to provide a benefit across the board to all employees?

“Once you make those determinations and identify your key goals,” he continued, “then you can structure a plan and put it in place to meet those goals. There are so many variables out there.”

Another important item for business owners to consider is insurance, said Wandrei, noting that year-end might be an appropriate time to think about possible courses of action when existing policies expire.

John Dowd, fourth-generation principal, specifically executive vice president, of the James J. Dowd & Sons Insurance Agency, said there are a number of factors to consider when reviewing one’s insurance package and determining whether it is appropriate.

Businesses change and expand from year to year, he explained, and insurance coverage must be adjusted to meet those changes, a point that is often lost on business owners trying to meet the day-to-day requirements of running their venture.

“It happens all the time; people say, ‘we don’t need to meet and review things because nothing’s changed,’” he said. “But then you sit down and talk, and the business owner says, ‘yes, we sold that piece of equipment, and we bought that piece of equipment, and, by the way, we’re storing things in a different location.’ All those things are important because they impact the coverage you need.”

Overall, Dowd said business owners must consider the worst-case scenario when it comes to calamity and possible loss, but, unfortunately, many do not, and they pay the consequences when the worst happens in a fire, flood, or other disaster.

“I have to think of the worst-case scenario, because what if it happens?” said Dowd, speaking as a broker. “Granted, it’s not likely to happen, but if it does happen, you’ll be out of business if you’re not properly covered. Business owners have to think about what they’ll be faced with when they get that call in the middle of the night that their business has just burned down.”

Another matter to consider at year-end is staffing, said Vann, noting that this issue has taken on a heightened sense of priority in this economic downturn. Indeed, many companies have downsized in recent months, and a good number have concluded that the smaller size is the right size. For others, more analysis is needed to answer that question.

“A lot of people are looking at staffing right now and wondering if they can continue to make do without people who have been laid off,” he said. “It’s a critical issue right now, and a very big part of the budgeting process.”

The Bottom Line

That’s the often-discouraging budgeting process, as he described it, and one of those matters that business owners and managers let slide, for whatever reason.

Putting together a solid, realistic budget — and then sticking to it — is just one of many commitments that people should make as they approach the new year, said Vann, stressing, again, that such matters deserve year-round attention.

Let the resolution-making begin.

George O’Brien can be reached at[email protected]

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