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15-Step Yearly Checkup for Your Small Business – Are You on Track?


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You visit your doctor every year for a checkup, take your car in for regular maintenance, and schedule a service call in autumn before turning on your furnace, but when was the last time your business got a checkup?

Many business owners are so busy running their companies, they don’t take the time to check in on their businesses’ financial health. And that can be an expensive mistake.

Your business’s financial health is a critical part of its success. At least once a year, take the time to examine how your business is running and ensure you’re taking the steps necessary to achieve your goals.


Increase Revenue Arrow Growth Businessman

Revenue is the amount of money your business brings in or earns before any expenses are taken out. Without revenue, your company cannot make a profit and stay viable in the long run. Here’s how to ensure your revenues lead to profitability.

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Step 1: Compare Revenue Goals to Actual Revenue

Every business needs a budget that breaks down anticipated revenues and expenses. But keep in mind that a budget isn’t meant to collect dust once it’s drafted. It’s a living document that can help you make better decisions and identify areas of improvement throughout the year.

Pull up your current budget (or start one today through Quickbooks) and compare your financial goals to your actual results. Did you miss your target? If so, why? Part of your budgeting process may need to include adjusting your spending to make up for revenue shortfalls.

If you hit or exceed your revenue goals, what did you do right? Can you do more of it in the future? Use some of your revenue surplus to build up your emergency fund.

Step 2: Diversify

While you’re reviewing revenues, take a look at how much of your income comes from one client or one product. If a significant portion comes from one source, what would happen if that revenue stream dried up tomorrow? Would your business be in serious trouble

Diversifying into new products or markets can be risky, but it can also help you maintain a measure of stability.

Step 3: Outsource

How much of your time is spent on non-revenue-generating tasks such as social media, bookkeeping, website maintenance, or dealing with a seemingly bottomless email inbox?

If the time you’re spending on these tasks is hindering growth, it’s time to outsource those areas of the business so you can focus on growing your revenue. Websites like Fiverr or Upwork have freelancers looking to help you with these jobs you don’t have time to complete.

Step 4: Review Your Client List

Do you have any clients or customers who deplete your energy? Maybe they’re the ones who are always haggling over price or complaining no matter how hard you work to please them. Perhaps it’s time to cut those clients loose.

When starting a company, it’s common for business owners to take on any paying client, no matter how difficult they are. But at some point, those problem clients can cost you more in lost time and revenue than they’re worth.

If the time you’re spending on energy-draining clients cheats you out of working with clients you love, politely and professionally fire them.


Scissor Cutting Expenses Paper Blue Table

It’s important to focus on sales and growth, but if you’re not managing costs, revenues fly out the door as fast as they come in. Here’s how to become more aware of your business spending.

Step 5: Look at Year-Over-Year Trends

Take a look at your profit and loss reports for the past few years. How have your expenses changed from year to year? If your business is growing, some increase in costs is reasonable. After all, expenses often drive revenues.

However, if you aren’t paying close attention, some expenses can get out of hand. Take a close look at your spending and see if you can cut costs without negatively impacting quality.

Step 6: Review Recurring Expenses

The subscription-based business model is booming. Instead of buying products and services as needed, you pay a monthly or annual fee to receive them on a regular basis.

It’s convenient because you no longer need to worry about running out of a product or having your service suspended. But this convenience comes at a cost if you’re paying for subscriptions you’re not using.

Review your subscriptions and cancel any you’re no longer using. For those you decide to keep, consider whether the plan tier is still right for you. For example, you might be paying for premium features in your accounting or social media management software when a lower-tier version from a company like Quickbooks would meet your needs just as well.

Pro tip: If your business pays employees or contractors, having a reliable payroll company is a must. Quickbooks Payroll integrates right into your Quickbooks bookkeeping software making everything seamless and simple.


Accounts Receivable Accounting Balance Sheet

Accounts receivable is money that customers owe for goods or services you’ve already provided. Many a business has gone under because, although sales were strong, its revenue was sitting in accounts receivable instead of the bank.

Here’s how you can invest a few minutes of your time to keep your cash flow strong.

Step 7: Review Collection Procedures

Do you have outstanding receivables that are 30, 60, or 90 days past due or older? It’s time to review your collection procedures.

A study by Commercial Collection Agencies of America found that the probability of collecting on a delinquent account drops drastically the longer it goes unpaid. At 30 days past due, you have an 88.7% chance of collecting, but by 90 days past due, this chance drops to 68.9%.

So, how do you avoid having your hard-earned revenue tied up in your balance sheet?

  • Shorten Payment Terms. Mailing paper invoices and receiving checks used to be the norm. In that environment, giving customers 30 days to pay made sense as it allowed for mail delays. Today, most business email invoices and issue electronic payments. Change your payment terms from “net 30” to “payment due upon receipt” and follow up after two weeks.
  • Follow Up With Customers as Soon as Payments Become Past Due. Written collection letters and emails are easy to ignore. Pick up the phone and call customers when their payments are late. You’ll find out quickly if there’s a problem and can work to resolve it while maintaining a good customer relationship.
  • Give Customers an Incentive to Pay. Incentive clients to pay early or penalize those who pay late. A common incentive is a 10% discount if clients pay within 10 days. Late fees may be a flat fee or a percentage of the invoice amount. For example, you might charge 1.5% of the unpaid balance per month starting when an invoice is 30 days overdue.

Staying on top of receivables and calling past-due customers is an essential business task, but one for which many small business owners don’t have the time or inclination. If these tasks are always at the bottom of your to-do list, keep in mind they are excellent things to outsource.

Step 8: Review Terms in Contracts & Invoices

Your clients won’t pay on schedule if they don’t know what your schedule is. Make sure your client contracts and invoices set clear expectations for when payments are due and what happens when payments are late.

For example, will you suspend service? Will you require payment upfront for future services? Will you send them to collections? When terms are spelled out in your contracts and invoices, you have a bargaining chip in discussions with late payers.


Accounts Payable Calculator Tag

Accounts payable is money your business owes for things such as utilities, inventory, and supplies. Managing accounts payable is essential because if you don’t control your payables, you can quickly gain a reputation as a slow payer with your vendors and suppliers.

It can also cost you money in the form of late fees, increased interest charges, and even lost suppliers. Here’s how to ensure you’re responsibly managing your accounts payable.

Step 9: Review Late Fees

Did your business pay any late fees last year? It’s one thing to forget a payment now and then, but if you’re losing a chunk of your revenues to late fees on credit cards or past-due payables, you need to identify the reason.

Perhaps you have trouble paying your bills because your clients are slow to pay you. Or maybe your books are disorganized and you would benefit from a better bookkeeping system.

Again, bookkeeping and bill payment are easy areas to outsource if they’re something you struggle to handle on your own.


Assets Wooden Blocks Letters

Assets are items of value that your business owns. These include tangible items like cash, inventory, furniture, and equipment, as well as intangible assets like copyrights, patents, and your business’s reputation.

If you aren’t keeping track of your assets properly, you may not know how they’re being used, when they need to be repaired or replaced, or when a loss occurs. Here’s how to ensure you’re protecting your investments.

Step 10: Review Your Fixed Assets Schedule

What do you own? Every business needs a fixed assets schedule that includes a description of each asset as well as its purchase price and date. This can be a simple spreadsheet or a detailed depreciation schedule maintained by your accountant.

At least once a year, review this list to make sure new items have been added so you don’t miss out on any valuable depreciation income tax deductions on your tax return.

Also look for items you’ve disposed of that need to be removed from the list. Often, businesses replace an old piece of equipment or take it out of service but forget to remove it from their fixed assets register.

If you’re required to file a business personal property return with your state or local government, leaving old assets on the list can mean you’re overpaying this tax every year.

Step 11: Do a Repair & Replacement Check

Inspect your physical assets, such as vehicles, equipment, furniture, and computers. Do any of them need maintenance? Now is a good time to schedule that.

While you’re at it, consider whether any of your physical assets need to be replaced in the next year or two. If so, you might want to start setting aside funds to cover the replacement now.

Step 12: Monitor Your Online Reputation

Your business’s reputation isn’t a line item on a balance sheet, but make no mistake: In today’s Web-focused world, monitoring your online reputation is essential.

Google your business name to see what comes up. Check reviews on Yelp and other review sites. If you find negative reviews, respond to the constructive feedback in a way that shows customers you want to make things right. If you see information that’s inaccurate or inappropriate, look into getting it removed.

Pro tip: Yelp can be great for more than monitoring your online reputation. You can also use Yelp for Business to attract new customers. Right now they are offering $300 in free advertising. Sign up for Yelp for Business.

Other Areas

Business Dominoes Risk

Here are some additional steps to ensure your business is healthy and headed where you want it to go.

Step 13: Review Your Legal Structure

Is your business a sole proprietorship, partnership, LLC, S-corporation, or corporation? Does that legal structure still make sense?

If your business has grown substantially since you selected your entity type, talk to your CPA, accountant, or financial advisor about whether your current business structure is still the right one for you.

Tax reform made several changes to tax rules for businesses, especially corporations. You may be able to take advantage of new tax planning opportunities and lower your tax bill by changing your business structure.

Step 14: Check Your Business Insurance Coverage

How has your business changed over the past year? Changes to your business size, structure, and business model can impact the type and amount of insurance coverage needed to protect it. The insurance policies you started out with might not be a good fit anymore.

Schedule a meeting with your insurance agent to discuss whether you need to add coverage or increase your limits on general liability, property, professional liability, workers compensation, life insurance, or umbrella coverage.

While you’re at it, get competitive quotes from other companies. Shopping around may get you a better rate for the same coverage.

Step 15: Test Your Online Security

Keeping your information, and your clients’ information, safe and private is important. Follow these steps from the National Cyber Security Alliance to ensure your data is protected:

  • Make sure the security software on all of your devices is current to protect against viruses, malware, and other online threats.
  • Turn on automatic software updates if that’s an option.
  • Always use strong passwords and two-factor authentication whenever possible. Companies like 1Password can help you with password management.
  • Back up data in the cloud or on a separate hard drive on a regular basis.
  • Ensure access to data or critical systems is limited to employees who need it to perform their jobs.
  • Have a clear policy for what employees can keep and install on their work computers and devices.
  • Train employees to never open suspicious links in email or visit unknown websites.

Final Word

A healthy company isn’t just about profits. It’s also about reading between the lines and asking the right questions to see how you can improve your business.

The steps above take time, so if you can’t seem to set aside a few days to tackle everything once a year, set aside a few hours each month or quarter and break the list up into manageable chunks.

Whatever method you choose, your annual financial checkup can give you a good sense of what’s going on with your business and help you avoid any financial hiccups later on.


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Janet Berry-Johnson is a Certified Public Accountant. Before leaving the accounting world to focus on freelance writing, she specialized in income tax consulting and compliance for individuals and small businesses. She lives in Omaha, Nebraska with her husband and son and their rescue dog, Dexter.