Conducting a year-end review

How did you do financially this year? If you had a budget set up for the year, compare your predicted and actual revenue and expenses. Go through line by line and see how your predictions compared to your actual performance.  

If you didn’t maintain a budget, you can still examine your cash flow for the year. Review your bank account statements to see if you ended up ahead of where you started, and if you did, by how much. Consider if a budget would've been helpful, and if creating one now would be useful this time next year.  

Set aside some time to look at your records. Ask yourself the following questions:

• Were you profitable? 
• Were there differences between actual and planned figures? If you didn’t have a budget, did you spend how much you thought you would? If so, do you have a sense of how those differences impacted business operations? 
• What are the outcomes for the differences in planned versus actual revenue and expenses for this coming year? Are there any long-term impacts? 
• How does your knowledge of last year’s finances impact how you'll consider adjusting planned amounts for this coming year? If your revenue came in lower than planned, what amount should you aim to earn next year to make your business profitable? 
• If overspending occurred, what happened? Could overspending have been avoided by planning or spacing out expenditures? What can you learn from this to apply to how you plan and execute your finances next year? 
• Are there any expenses that you'd benefit from reducing for next year? Would those reductions help you stay within the limits of actual earned income?  

Finish this exercise by giving yourself a summary to look back on the following: 

• Financially, this went well for my business last year: 
• Financially, this didn't go well for my business last year: 
• As I did this exercise, I was most surprised by: 
• Financially, if my business ran exactly as I wanted it to, my numbers would be different in this way: 
• I want to take these steps to make my numbers more closely reflect where I want my business to be:  

Congratulations! You not only have performed a year-end review, but you have the laid the foundation for a short-term and mid-term strategy for your business. Before we take tangible steps on those ideas, let’s focus on the present and make sure we wrap up the prior year. 

Take these steps to ensure your child care business is on stable footing as you start new fiscal year:  

Back up computer files 

If your devices were to stop working tomorrow, would you have other, up-to-date copies of all your files? 

Backing up your files onto a cloud storage drive is the most common and efficient option. Cloud drives use the internet to store your documents on remote servers. Cloud drives vary in security, pricing, and storage capabilities.

If you're less comfortable with technology, external hard drives are an alternative. External hard drives are devices that connect to your computer using a USB port. You can copy all your business files from your PC to your external hard drive. Store the external hard drive in a safe place, like a fireproof safe. For your backup files to remain up to date, you'll need to continue to add copies of your files to the external hard drive on a regular basis. This is a disadvantage compared to cloud storage drives, which you can set to automatically back up your documents. 

When deciding between cloud storage drives and external hard drives, consider how many documents you want to store. Cloud drives begin charging a monthly fee when a certain amount of storage is reached. The monthly fee is usually only a few dollars a month, but it can add up over the years to cost more than an external hard drive. If you are storing basic documents from the past several years, you're probably within the limits of no-cost cloud-based storage options. However, if you take hundreds of pictures each year and store them for marketing purposes, you may want to weigh the costs and benefits to your document backup method.

Confirm financial documents are in order  

As you back up your files, make sure you have all the documents you (or your preparer) need to file taxes. Now's the time to identify them if you haven't already.  

If you have staff who file taxes as 1099 contractors, you'll need to review the services they provided during the year and how much you paid them so you can prepare the paperwork they need to file their taxes. Ensure you also verify the individual’s full legal name, current address, and taxpayer identification number (TIN). The individual’s TIN usually is their Social Security Number unless the individual’s tax residency status is Non-Resident or Resident Alien.