A YEAR IN REVIEW – 10 ISSUES TO CONSIDER AT THE END OF THE YEAR
December 23, 2016
Twas the night before Christmas, when all through the house. Not a creature was stirring, because they were too busy panicking over the state of their business.
How can you avoid this unfortunate turn of events?
Use this time at the end of the year to review and evaluate several aspects of your business.
The following list includes some issues that you should consider as you wrap up 2016, take account of your successes and misses, and prepare for a successful 2017.
1. Review your minute book and update your corporate records.
You don’t need to review your corporate records on a weekly or monthly basis, depending on your business. But each year it’s a good practice to review your minute book and make sure it’s up to date. Are there any resolutions missing? Are your registers and ledgers up to date? Are all share certificates accounted for? Should you consider directors’ indemnity agreements or a shareholders’ agreement? All good questions to ask on an annual basis as your business evolves.
Each year the directors and shareholders of a company should each either hold an annual general meeting or adopt annual resolutions. These resolutions should be added to your company’s minute book.
In addition, on the anniversary of your company’s incorporation you should file your annual return with the Corporate Registry. The annual return can be filed online but if you have a paper copy or confirmation this should be added to your minute book. Make sure to file this document no less than two months after your anniversary date – otherwise your company will be dissolved by the Corporate Registry. (If this has happened to you – don’t panic, this can be undone.)
If you are thinking – ‘what’s a minute book?’ – it’s the binder in which you store your basic corporate records (like your Certificate and Articles of Incorporation, share certificates, directors and shareholders’ resolutions, amongst others). If you don’t have one - don’t panic. Get some legal advice (and fast) but don’t panic. It’s not uncommon for people to ignore their minute book, or even decline to keep one. This mistake can be fixed – but not without some costs and consequences.
2. Meet with your accountant.
You mean – meet with your lawyer, right? Well, you should meet with your lawyer, but also your accountant. Your accountant will help make sure that your accounting records are up to date, your governmental remittances have been paid, and ultimately as you prepare for your fiscal year you should find out whether your will be declaring extra dividends this year.
3. Review your tax plan.
If you are thinking ‘what’s a tax plan?’ that could mean that you don’t have one. Even if you have a tax plan, but if you don’t know what it is, you don’t understand it, it’s unwritten or if it’s kept in a secret file in your accountant’s or lawyer’s office, that’s not helpful.
You should have a tax plan for your business, as well as yourself personally. Ideally this tax plan should cover multiple years and provide you with a clear financial plan that maximizes the amount of earned in your bank account at the end of each year.
If you don’t have a tax plan, speak to your accountant or lawyer.
4. Evaluate policies and practices.
On an annual basis, it’s a good idea to look at all of the policies and practices adopted by your business and decide whether any of them need to be revised (or scrapped altogether). These policies and practices could apply to internal policies in dealing with customers or contracting, employment and workplace policies, privacy policies, governance practices (though less of an issue with companies managed by a single person), amongst others.
You may feel that these issues don’t merit much time, which is fine, but you should at least turn your mind to them on an annual basis. Are you losing time, efficiencies or costs to policies that were well-intended but slow down or somehow hamper the optimum performance of your business and its workers? If you can’t definitively say no (and with good reason) you should give this issue some thought.
5. Evaluate security arrangements.
I don’t mean add titanium-enforced doors to the lunch room or Kevlar vests for reception, but you should look at how your business stores information (in hard copy and electronic copy) and what measures are taken to keep that information secure. When it comes to electronic data, most security breaches of companies in North America are not discovered for almost a year after the breach. When thinking about security measures, list the types of information your business receives, stores and shares, and evaluate the sensitivity of each category of that information and as well as its value to your business. That should help you decide what steps and how much resources you should be putting into securing that information. Look to industry standards and best practices for your particular industry.
Security considerations aren’t just for Fortune 500 companies – small businesses should be aware of security risks and should take steps to protect their information. Your business may have appropriate security measures in place and if so that’s good news. But it is a good idea to review these measures from time to time.
6. Evaluate workforce.
Most businesses conduct an annual performance review of their employees. If your business does not – it’s a good idea to start. But more than this, consider reviews of directors and officers who are responsible for the management of the business. Even for a small family business, it’s a good idea to review how the managers performed over the past year, what were the wins, which challenges presented themselves, and identify areas for growth or improvement.
7. Review insurance coverage and needs.
I don’t think of myself as risk-averse, per se, but I consider myself in the “what if” business. Shortly after you start thinking about the different issues that could arise, costs, damages, law suits and other liabilities you start thinking about insurance. What insurance do you have in place? What is the limit of your coverage? What are the exclusions of your coverage? Does this insurance adequately cover the risks that your business may face? If you aren’t sure, then your lawyer and your insurance broker should be able to help.
Bear in mind that there are several different types of insurance that are available – directors’ and officers’ insurance (to make sure you personally aren’t liable for defending yourself in a dispute involving your business), general commercial liability insurance, life insurance (to help with succession issues), amongst others. I don’t mean to shill for topping up your insurance coverage, but I was a Boy Scout so I aim to encourage people to be prepared.
8. Evaluate standard contracts and key agreements.
You may be using the same bill of sale that you copied from a competitor, that you downloaded from the internet, or that was handed down from previous generations in your business. That bill of sale may work – but it may need updating or it may need to be completely redone, given the realities of your business. I use a bill of sale as an example, but you should ideally review all of your standard legal agreements.
Legal agreements should be tailored to meet your business’s needs. Most people don’t think of legal agreements as allocating risk – but that’s exactly what they do. If you are delivering widgets or providing a service, there will always be multiple risks in relation to the production and/or delivery of that widget or service, as well as the required payment and potential damages that could result from that widget or service going wrong. Do your agreements consider all of the relevant risks and allocate them appropriately?
Other key agreements could be your shareholders’ agreement, employment contracts, agreements your business signs with supplier or service providers, amongst others. You don’t need to spend an enormous amount of time reviewing all of these agreements line by line but you should be aware of exactly what is in your agreements and these terms and conditions should line up with your business objectives.
9. Evaluate banking arrangements.
Do you have a good banker? I don’t mean do you have a bank account, but do you have a commercial account manager that you know by name and that knows your name? If the answer is no, you may want to evaluate your banking arrangements. A good banker can help you avoid banking and financial problems, but can also help make sure that you have the account(s), credit card(s), lines of credit or other banking arrangements that best suit your business. Not all bankers are good bankers (the same as not all lawyers are good lawyers) but a good banker can be very helpful to your business.
Many people are intimidated in dealing with banks and they don’t always get the service they deserve. So, this year look at your banking arrangements and talk to your banker to review your goals and the services being provided.
10. Evaluate your legal counsel.
How do you evaluate your legal counsel? Good question.
Start by looking at the services provided by your legal counsel over the previous year. Were you happy with the quality of the work? Did your lawyer effectively solve your problem or otherwise efficiently help you deal with a problem? Were you happy with how your lawyer communicated with you? Was your lawyer responsive? Do you have confidence in your lawyer? Does your lawyer understand the details of your business? Does your lawyer anticipate issues or challenges facing your business? Do you like working with him or her? Did you consider the fees you paid reasonable for the work performed? These are some of the questions you can ask yourself.
Bear in mind that lawyers are service providers, and you should treat them as such. It’s a smart business practice to review yours service providers on a periodic basis and evaluate their performance and decide whether you want to retain their services going forward.
So try and find some downtime to give your business the health check it deserves. And best of luck in 2017.