How to Review Last Year’s Financials

by Denai Wolfe

At the end of every year, I notice entrepreneurs making goals for the coming 12 months.  We’re feeling ambitious, we want to hustle and set goals.

But what I notice is that very few of those goals are based on data. They’re mostly based on ego, gut instinct and feelings.

Our goals are based on milestones that we think we need to hit; “I want to own a million dollar business.” We aren’t intentional about why we are setting those goals. I want you setting intentional goals for 2022, and the simplest way to do that is to review what happened in 2021.

I absolutely want you to set stretched goals, for sure, but I DO NOT want you setting yourself up to fail. 

I am going to share the exact steps to follow to successfully review last year’s financials.

After all, you can’t get where you’re going if you don’t know where you’ve been…

Start by identifying your Revenue Trends

The logical place to start with reviewing your finances is to see what your revenue was for 2021, and compare that to 2020’s numbers*. We want to see exactly what the increase or decrease was.

This information is critical to determining a realistic revenue goal for 2022.

*I want to make a quick caveat – if your business was severely impacted by the events of 2020 and took a real hit, DO NOT USE THIS DATA. Compare 2021 to 2019 instead, or another ‘regular’ year in your business.

You need to determine the trends in your revenue increases or decreases year on year. The best way to predict future behaviour is to look to the past. If your revenue is steadily increasing by 20% year on year, guess what? 

It will increase by 20% this year, too!

Make sure to account for any outliers in the coming year – is your biggest client leaving, for example? Things like this will have a massive impact on revenue so need to be considered.

Compare Expenses Year on Year

After you’ve determined what’s likely to happen with your revenue, you need to look into business expenses. These are costs specifically related to business operations – not your mani-pedi…

Find out how much you spent on your business in 2021, and compare it to 2020 (or 2019 if your business was impacted in 2020). If you’re unsure how to start analyzing revenue and expenses, make sure to download my free Profit Plan tool,. It gives you all the steps you need. 

Like with revenue, the aim is to identify trends in how your expenses are increasing or decreasing each year. If you’re looking to cut your expenses, you need to know the data.

By the way, this is also a great time to check your expenses and see where you could be saving money. Are there any standing outgoings that you no longer use? Cut them!

Could you have made smarter spending decisions in 2021? And will you take that knowledge with you into 2022??

Know How Much Your Business Paid You!

I meet too many entrepreneurs who don’t know how much they’re getting paid. They just take money when they need to. 

But if you take the time to see how much money your business is able to pay you, you can set a regular pay schedule. Start getting paid monthly instead of sporadically. By looking at the numbers and finding a trend in what your business has paid you over the last few years, you can set payment goals for 2022.

We are in this entrepreneurial game to make money, after all. And you can’t get where you’re going if you don’t know where you’ve been!

Your financial data holds life-changing information. In an ideal world, I want you looking at your numbers daily, weekly, completely reviewing them monthly. But if that’s a lot – let’s at least settle for knowing what happened in 2021!

What was your Company’s Profit?

When you own a business, profits are the be all and end all. The profit of your company is the same as your gross paycheck, and Uncle Sam wants taxes paid on it!

Knowing your business profits is essential for two reasons:

  1. Determining whether your business was profitable
  2. Working out what you owe in taxes.

Your profits are the money made once you take your expenses off of your revenue, and again, my free Profit Plan tool has everything you need to calculate these figures!

Face Your Debt…

Debt is something that’s not talked about enough in the entrepreneurial community, almost like a dirty little secret. Or that it’s just expected as a business owner – that Business and Debt go hand in hand.

But I want you to look at your debt and find out whether it increased or decreased in 2021 compared to previous years.

Most of the time, entrepreneurs put bandaids on their problems. They try to solve any problem by throwing money at it. But money won’t solve the problem if your financial system is broken!

If you’re going into debt to support your business, then your business has a problem.

Your Numbers tell a Story

The entire story of your business, in fact. Your financial data for last year tells the story of everything that transpired within your  business in 2021. 

If you don’t know what’s happening in your bank account, then you don’t know what’s happening in your business. Continuing to simply put the hours into your business doesn’t even give you a glimpse into what’s happening inside it. 

Only by knowing your data can you truly get behind the scenes and start acting like the CEO of your company…

Finally, How did 2021 FEEL?

This might seem a little frou frou, but it’s important to not only know the data – you also need to consider how it felt.

As business owners, we’re never really clocked out. Even if we’re not physically working, we’re likely strategizing, planning, creating.  By analyzing your data and comparing it to how you felt, you’re in a place to really set intentional goals for 2022.

If you were bringing in a profit, and felt fantastic about it, then I am really, really pleased for you. But if you’re stressed because you weren’t making money, it’s time to use your data to see if you can solve the problem.

Money doesn’t buy happiness, it buys options. So it’s essential to understand both what the numbers are telling you, and how you feel. 

I am a CFO, and of course I will always talk about the importance of having a financial plan, but we always need to take into account our mental health. Having a successful, profitable business might be great, but is it worth it if you have no time to enjoy that money with the people you love?

Looking Ahead to 2022

When you’ve reviewed your financials from last year and identified trends, you know you’re going to be setting goals that are based on data. But just make sure to also keep check of how certain tasks within your business make you feel.

You are going to make great strides in 2022 because you now know how to set those intentional goals.

I hope this post has been helpful for you, and as always you can check out my training video on YouTube

But if you’re someone who knows you want to get on top of your business finances, but don’t have a clue where to start, reach out to me at thechiccfo.com; I would love to help you!

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My name is Denai Wolfe and I’m dedicated to helping big thinking entrepreneurs increase their profits and decrease their stress. I’m laser-focused on turning your passion into profits. When it comes to business I have one core truth – If it doesn’t make money, it doesn’t make sense.