You don’t know where to start with your year-end planning. You want to know in advance what your profit will be at the end of the year. More importantly, you want to know if there is anything you can do to change your net profit at the end of the year.
A big part of year-end planning is estimating what your net profit will be at the end of the year. Planning ahead is needed. But planning on its own is not enough. In order for your plan to work, you need to set a realistic goal.
Calculate your estimated net profit
To start calculating your estimated net profit you will need to determine your current year-to-date net profit. You will also need reasonable estimates of the income and expenses for the rest of your fiscal year.
To calculate your estimated net profit you need to:
- Review your year-to-date bookkeeping to determine the year-to-date net profit
- Estimate your additional revenue for the remainder of the year
- Estimate required expenses for the remainder of the year
Estimate your available cash
How much cash you have available can affect your options. To calculate your estimated available cash you need to:
- Calculate your current cash balance
- Add the estimated additional revenue for the remainder of the year
- Subtract the estimated additional expenses for the remainder of the year
Set a realistic goal
You need to work with facts, not a fictionalized story you might be tempted to tell yourself. Your net profit to-date and how much cash (and/or credit) you have available will help you determine a realistic goal.
Your actuals and estimates will continue to change up until the very end of the year. Exploring different scenarios and updating your plan will help you to determine if your year-end goal is realistic.
Knowing where to start with your year-end planning can seem overwhelming. But implementing the tips above will help you build an effective plan that can help you make good decisions.
How can you take control of your net profit so that it does not control you? Working with a bookkeeper that offers advisory services can help. Read about the Going Beyond Advisory Services we offer.