Make Time for an Annual Review

With years of experience behind you, your business should be running like a well-oiled machine, right? Actually, that's not always the case. As a business continues to grow, we sometimes get so tied up in the day-to-day activities that we forget to step back and conduct a high-level review of how our business is functioning.

Each year, you should be reviewing the contracts and processes that affect the vital areas of your business to assess where changes and improvements can be made. Not sure where to start? Here are seven key review areas you should address at least once a year.

1. Lease agreements. If you have lease agreements for property and equipment, review them to make sure the fine details are being handled properly.

2. Advertising agreements. Do you have advertising agreements that have been in place for years that you just keep renewing? If so, it's time to figure out what you're really paying for and what benefit your company is getting from those agreements. A prime example is yellow page advertising in your local phone books. Often these programs start out reasonably priced when your business is a startup but increase each year. Take the time to review your yellow page and other advertising agreements to ensure you are spending your advertising dollars wisely.

3. Insurance policies. Many businesses establish insurance policies during the startup phase and never think much about them afterward, even though insurance premiums grow each year and business needs change. Do some comparison shopping to confirm you have the right insurance coverage at a competitive price.

4. Taxes. Taxes are a necessary part of doing business, but are you being proactive with your company's tax situation? Create and maintain good communication with your tax professional so you're being proactive instead of reactive when it comes to taxes. See my column "10 Critical Tax Time Considerations" for a list of items you should be discussing with your tax accountant throughout the year to save time and money when filing.

5. Vendors. Vendor negotiations are part of doing business, and it's important to actively managing your cost of goods sold, especially if you are a high-inventory business or create a product for resale. Price increases are commonplace, but if you aren't keeping track of your rising costs, your profit margins may be dwindling.

6. Legal needs. Are the legal aspects of your business up-to-date? This includes making sure the proper documents are filed with the appropriate agencies, including those of the city, state and federal government.

7. Business plan. When was the last time you reviewed your business plan and your strategic goals? Business plans aren't just for outside parties; they should be the leading force of your internal operations. At a minimum of once a year, you and your top management should take part in a strategic planning process that includes reviewing your business plan.

Make sure you're conducting an annual review of these seven critical areas of your business. It may be something you're tempted to put off, but the time invested will pay off when your company continues to grow profitably.

Pam Newman is Entrepreneur.com's "Financial Management" columnist and president of RPPC Inc., which helps entrepreneurs succeed in their businesses through small-business training and consulting services in the areas of accounting and management.