With 2019 looming on the horizon, CEOs and CFOs need to start planning for the coming year right now. According to research from Clutch, over 60% of small businesses didn’t create a budget in 2018, which is a recipe for financial disaster or, at the least, mismanagement. Here are three things you should do to set your business up for success in the next fiscal year.

1. Review last year’s budget

On the revenue side, how did your sales force perform? Did they meet their revenue & profitability targets? Did you have goals for partners and re-sellers, and if so, did they achieve them? If you sell online, how did your sales perform, and if there were gaps, what caused them?

On the expense side of the equation, ask yourself the following:

  • How did each department perform?
    • Could Marketing have been optimized to put more money toward more profitable campaigns or product lines? Are there more efficient ways to promote the company’s products or services?
    • Did Sales keep their expense claims in check? Did they meet their numbers?
    • How did IT expenses stack up? Were there any unexpected service fees that ate away at the budget? Service fees are a common complaint among CFOs, because they tend to be applied to multiple IT expenses, and they increase every year.
    • Were there any unexpected labor additions from product teams in the past year? Why was that the case, and will the trend be expected to continue in the coming year?
  • What do labor costs look like for the year? How many hours did employees work, and are there adjustments that can be made there?
  • Are there any opportunities to reduce travel expenses in the coming year? After labor costs, this is the second-most controllable expense in most companies, according to this article from FinancialExecutives.org. Most travel is undertaken by employees who are not spending their own money; in these situations, employees are inclined to look after their own interests and comfort before the company’s, which can create a significant and unnecessary drain on company resources.

2. Create your business strategy for the upcoming year

It’s easy to equate a business strategy to a list of action items or to-dos, but nothing could be further from the truth. A proper business strategy answers three questions:

  1. Where is our battlefield? In which arena will we choose to win? Remember: choosing a battlefield is as much about deciding where not to focus your effort as it is about where to dedicate resources.
  • Having an understanding of profitability on a per-person, per-client or per-project basis will help inform which battlefield you choose to focus on. It is also important to have an eye on broader trends in the industry and economy, to identify potential threats and opportunities.
  1. Who is the enemy there, and what are their strengths and weaknesses?
  2. How will we win against that enemy?

3. Create next year’s budget

Look at last year’s budget results. Did any departments or projects vary widely from their plan? If so, why was that the case? Sometimes the data is simply unreliable, or a momentary spike on the radar; other times the variation signals a need for realignment somewhere in the organization.

Use last year’s budget results as a starting point for the coming year’s budget, and be sure to factor in any new projects that weren’t accounted for in the previous year’s figures.

Creating a realistic and profitable budget for the coming fiscal year can seem like a daunting task, but it doesn’t have to be. If you take a thoughtful and informed approach to budget planning by following the steps outlined in this post, you’ll be well on your way to setting your company up for success in the coming fiscal year.