Year-end clean up
As the end of the year approaches, businessmen should take stock of their company situation and make the necessary decisions or actions to close the year with assets and liabilities “squared.” This will provide the right foundation for the company to move forward in the coming year.
The businessman should look at all the company receivables and ensure that these are collected. December is the most difficult month to get your clients to pay up as they will have usually more expenses (13th month pay, bonuses, etc.). It is therefore imperative to start collecting early and to be persistent in following up. You can also cite that you have the same expenditures to meet as they have. At the worst if they are unable to pay in cash, you can accept post-dated checks or even assets in kind.
You should review your inventories and decide which ones have been in your warehouse for too long. It may be better to sell them at a lower price or even at cost in order to generate cash. My view is that it is better to accept that you made a wrong decision in stocking up that product rather than to keep on waiting for it to be sold at a price that gives you a good margin. At least with the sale proceeds you have the funds to either buy or produce a better product.
Manpower is an important resource for the company. Staff that is not productive does not add value to your enterprise operations. December is a good time to evaluate human resources vis-a-vis manpower needs. Too many workers can be costly while too few staff can mean inability to take advantage of opportunities. Having the “right” level of human resources will bring benefits to the company. December is also the time to evaluate the performance of the staff. However, one must be careful that the “holiday spirit” does not influence one’s evaluation.
One’s cash position should be revisited. Is the cash level sufficient to meet the needs of the company? Does the enterprise have too much cash in savings deposits which would give better returns if shifted to other money instruments? Is it time to declare cash dividends so that the owners can better use the proceeds in other businesses where they will make better returns? Has bank reconciliation been done regularly and well to ensure that there have been no leakages?
Other assets of the company should undergo the same scrutiny. Vehicles may be left in the company garage which have not been used or are underutilized in the business. It may be time to dispose of them as well as those where it would be better for the company to buy new ones given the increasing maintenance costs of old vehicles. Furniture and equipment could be clogging one’s warehouse or even the spaces of the office. Again, it may be better to sell them than have all that clutter inconvenience your staff. The cardinal rule is to keep only those resources that are essential to the running of your business.
The business liabilities should be analysed and dealt with. Long standing payables should be settled. Otherwise, one’s credit standing may suffer and adversely affect your ability to raise funds when needed. It is important to maintain good relationship with creditors and other resource providers. Employees must be given their due. Payments to pension funds should be regularly updated. National and local taxes and fees should be attended to. It is good to start the year without any burden of payables. This could mean declaring less cash dividends for the owners but it could assure a better harvest in the future.
December is not just the month for merry making. It is the best time to clean up the company situation and be prepared so that one business will have a better year ahead.
melito.jr@gmail.com