Five Fall Projects to Refresh Your Financial Results

As we move into the fall season and the final quarter of the year, it’s a perfect time to commit to a project in your business that will help you reach the year’s end in better shape.  Here are five ideas:

 1.      Back-to-School Time

If payroll expenses are one of the higher costs in your business, then it makes sense to boost your team’s productivity and maybe also your own.   Fall is back-to-school time anyway, so it’s a natural time of the year to take on a course, read a business book, or hire an organizer to help you get more from your workspace.

If you spend a lot of time doing email, consider taking a course on Microsoft Outlook® or even Windows; learning a few new keystrokes could save you tons of time.  If you need more time, look for a book or course on time management.  Look for classes at your local community college or adult education center.

2.      A Garage Sale for Your Business

Do you have inventory in your business?  If so, take a look at which items are slower-moving and clear them out in a big sale.  We can help you figure out what’s moving slowly, and you might even save on taxes too.

3.      Celebrate Your Results

Take a checkpoint to see how your revenue and income are running compared to last year at this time.  Is it time for a celebration, or is it time to hunker down and bring in some more sales before winter?  With one more quarter to go, you have time to make any strategy corrections you need to at this time.  Let us know if we can pull a report that shows your year-on-year financial comparison.

4.      Get Ready for Year’s End

Avoid the time pressure of year’s end by getting ready early.  Review your balance sheet to make sure your account balances are correct for all transactions entered to date.  You will be ahead of the game by getting the bulk of the year reviewed and out of the way early.

Also make sure you have the required documentation you need from vendors and customers.  One example is contract labor that you will need to issue a 1099 for; make sure you have a W-9 on file for them.  If we can help you get ready for year-end, let us know.

5.      Margin Mastery

If your business has multiple products and services, there may be some that are far more profitable than others.  Breaking these numbers out to calculate your profit margins or contribution margins by product or service line can help you see the areas that are adding the most income to your bottom line.  Correspondingly, you can determine if you have any items that are losing money; knowing will help you take the right action in your business.

Refresh your financials this fall with your favorite idea of these five, or come up with your own fall project to rejuvenate your business.

The Best Things in Life

 The best things in life are free?

The one thing I remember from my high school Economics class is that nothing is free. It is either “at no additional cost” or “at no cost to you.”

Which led to some very high-school-wisecracky commentary including “sugar-at-no-additional-cost gum” and “at-no-cost-to-you-dom of speech.”

Adam Smith. Wealth of Nations. Every product represents labor.

Look around you. Right now. Every product represents labor.

Let’s extend this to services. Even if no money or materials are involved, what is being given up because the service provider is engaging in this activity? This is the essence of the term “opportunity cost” used in finance.

What am I not engaged in because I am engaged in my current activity? What are you not doing because you are spending your time on x? Is it worth it?

How does that context change your thinking?

Here’s how it changed ours.

We get that we aren’t doing business in a vacuum. We are part of a business ecosystem. When our customers flourish, we flourish. When we flourish, our vendors and employees flourish. And in a strong ecosystem, our employees and vendors are customers of companies who are in turn customers of our company, or customers of our customers. It’s a marvelous circle with a momentum all its own. There are economic leakages that can weaken an ecosystem and economic injections that can strengthen one.

If you remember that every product and service represents labor, you have in mind the fluidity between energy and dollars, the E=mc2 of business. You can ride this fluidity by turning credit into dollars with a bank loan, turning persuasiveness into an equity investment in your company, or outbound referrals into inbound referrals.

Nothing is “free.” everything is going to take some combination of time, talent, or treasure. Our ability to cultivate a business ecosystem that directs its energy inward will turn into a financial impact for the health of our company.

Who are the members of your business ecosystem? Are your vendors also your customers? Where are the opportunities to turn intangibles into dollars?

Special thanks to those whose ideas formed the foundation of this post:
Marion Reinson, To The Point
Cheryl Pliskin, Jest Notes and Baskets
University of Pennsylvania, Wharton School of Business
Mr. Bass from Nova High School

Five Fun Things to Add to Your Invoices

When it comes to marketing, the company invoice might be the last thing you’d think about.  But think again:  it’s a great place to make every attempt to get paid faster and have your customer coming back for more services and products.  Here are five fun easy-to-implement ideas to add to your invoices:

 1.      A Thank-You

A simple “Thank you for your business” or a “We appreciate your business” is a nice added touch on the bottom of every invoice.

QuickBooks invoices include a comment line where you can choose your comment or write one for yourself.  You can also customize the form so that it appears on every invoice.

2.      Your Current Special Offer

A customer that just purchased from you now trusts you; it’s the perfect time to let them know what else you have available that they could benefit from.  Your offer could be a small amount off their invoice for referrals they send you, your monthly special, a sale item, or an item related to what they purchased.

Just add a quick text line to your invoice letting them know the special and where to call for more information.  If you haven’t ever tried this, you will be surprised and delighted at the results.

3.      A Prominent Due Date

Most invoices include terms, but you can make it even easier on your client by computing their specific due date.  If at all possible, include the due date on your invoice so the customer can see clearly when they need to pay you.

Make the due date stand out, too.  Bold it, print it in a different color, increase the font, or do all of the above.  You want it to be really clear when that payment is due in your office.

 4.       A Payment Link

Can you take payments online?  If so, include the web link that customers can use to pay you online.  This might be to a shopping cart, PayPal®, or another online payment system.  If it’s convenient for your client to pay, you’ll get paid faster.

5.      A Friendly Warning for Overdue Invoices: “Does your mother know you haven’t paid this invoice?”

If all the above fails and the customer does not pay you by the invoice’s due date, you’ll want to have a process for re-sending the invoice and/or statement until the customer pays or until you’re ready to turn it over to a collections agency.  Here are some sample sentences you can choose from:

“We hope you’ve just overlooked this bill and can send your payment right away.”

“We’re re-sending this invoice in case it got lost.  Please send payment right away.”

“Could you check on the status of this payment for us? Our records show it’s past due.”

“Please contact us if you have questions or issues with this invoice. Payment is now past due; please remit immediately.”

“Hey, we need to pay the rent!  Please send your payment as soon as possible.”

When the invoice gets older, sometimes it helps to add a little humor:

“Does your mother know you haven’t paid this invoice?”

Marketing to Get Paid

With these five low-cost ideas, you’re sort of “marketing” to get the payment sooner.   They are easy to implement, cost very little, and will improve your cash flow.   Try them and let us know how they are working.

Do You Know Your Small Business Vitals?

On a doctor’s visit, the first thing the nurse does is take your vitals:  your temperature, blood pressure, pulse rate, and respiration rate.  These basic measurements are the first place doctors look to see if something is wrong with our health.

Knowing your vital signs, and especially when they are out of whack, is good for your health.  In the same way, knowing your business’s vital signs, and especially when they are out of whack, is good for the financial health of your business.

Vital Measures

If you’ve been in business a while, you might already know the “vitals” you like to track.  Here are some common ones for a small or new business:

  • Checking account balance(s)
  • Amounts owed (bills, payroll, and loans)
  • Revenue for the month and year-to-date
  • Sales by customer so you can see the top five to ten largest customers

As time goes on and your business grows, you may want to add some of the following:

  • Revenue for the month and year-to-date compared to last year
  • Net income for the month and year-to-date compared to last year
  • Days Sales Outstanding which is a measure of how long it take to collect on an invoice from a client
  • Revenue by service or product line in a pie chart

These are just a handful of the many options there are when it comes to measuring the results of your business, and it would be difficult for us to list all of them here.  The point is to decide proactively what you’d like to track on a monthly basis.  Then you can set up the process it takes to get those numbers delivered to you in the format you prefer.

Once you decide on the numbers you need to run your business, you’ll be able to take your “vitals” whenever you want.  But you can take this to the next level with one more idea:  exception reporting.

Being Exceptional

It’s great to glance at your numbers periodically, but there can be a lot of data to wade through.  How about getting a report that tells you only when the numbers go out of range?  This is called exception reporting, and requires that you set ranges for each measure you want to follow.  If the measure stays within range, you do not have to be alerted.  However, if it falls out of range, then you can get a report to tell you what’s going on so you can take the right business action.

Exception reporting is not all that common in small business, but can save a busy owner a lot of time.

A Clean Bill of Health

By determining the vitals you want to watch for your business and putting a process in place to monitor that information, you will be helping your business stay healthy.  If we can help, please reach out and let us know.  The doctor is IN.

Five Ways to Rev Up Your Referrals

In the vast majority of industries, referrals are the most cost-effective way to gain new clients and grow your business.  When you attract new clients through referrals, your marketing costs are lower, your selling process is easier and more effective, and the referral usually makes for an excellent client.  It’s just good business sense to look at how we can proactively increase our referrals.   Here are five ideas.

1.      Your Email Signature

We know it can be embarrassing or uncomfortable to ask your clients and friends directly for referrals.  A great compromise is to add a line to your email signature that takes care of it for you.  Here are a couple of wording options:

Your referral is our greatest compliment!

Referrals are the lifeblood of our business. We thank you for yours.

We appreciate your referrals.

Adding one of these lines to your email signature file is a subtle notice to everyone you email that you are open to taking referrals.  It’s indirect enough to where no one feels put on the spot, and it takes all of five minutes to implement.

2.  Acknowledge Your Referral Sources

When you find out someone has sent you a referral, be sure to acknowledge that person with a thank you note or a gift.  (Be sure to check any licenses you hold so you know what restrictions you are under concerning gifts to clients; some industries disallow it.)

You might want to reward your top referral sources with more than a thank you note.  If you are not sure who your top referral sources are, we can help you create a report in your accounting system so you can track that information on a regular basis.

3.  Set Up a Referral Program

Creating a formal referral program generates several benefits:

  • It formalizes the process of asking for referrals.  This lets clients know you’re serious and interested in referrals.
  • It gets the word out to everyone without anyone feeling pressured.
  • It is cost-effective and still far lower cost than using other marketing channels.
  • It is not too time-consuming and produces results.

To set up your referral program, decide how you want to reward your referral sources.  It could be as fun as awarding prizes such as Kindles and tablets to clients who send the most referrals to you.  The cost of the prize is a small price to pay for the lifetime revenue of several new high-quality clients.  Send a letter or email out announcing the program, and then set up a process for tracking.

If you’re in an industry where prizes and programs are simply not done, then a simple letter requesting referrals will work too.  Be sure to include a description of the specific type of client you are looking for; you are far more likely to get referrals when clients know who to look for.

4.  Develop Referral Sources

One way to truly quantum-leap your business is to find new sources of referrals.  Your clients are a great source, but they each know so many people.  If your clients have been with you for a while, your referrals could stagnate because your clients have referred just about everybody they are going to.

Keep your referrals growing by tapping into power partners.  These are small business owners that have the same type of client you do, but are not competitive at all.  The best way to reach out to them is to send them a referral!

5.  Set Up Referral Processes

There’s a lot your back office can automatically do when it comes to referral processes.

  • You can remember to ask how a new lead heard about you when they first call.  Then you can record and track that, so that you will know where your top referral sources are.
  • You can systematize the thank you notes and gifts so they go out timely and automatically.
  • You can regularly schedule times with power partner to keep them up to date on your business changes and opportunities.
  • You can systematize a referral program or related communications to keep everyone informed.

Once you set up these processes and delegate the tasks, you will grow your referrals and subsequently your revenues.

Oh, and by the way, we appreciate your referrals!

What Does Popeye Have to Do with Accounting?

You might have heard the terms “cash basis accounting” or “accrual accounting.”  Your net income number can change depending on which method your books are set up for.  Here’s a simple explanation of the difference, with a little help from one of the most famous cartoon characters in history.

Popeye and Wimpy

You might recognize Popeye the Sailor Man from the television cartoons or other media.  His sidekick, Wimpy, was the one who was always hungry and always out of cash.  One of his favorite sayings was, “I’ll gladly pay your Tuesday for a hamburger today.”

It’s All in the Timing

Let’s make today Thursday.  If Wimpy wants to pay us Tuesday for a hamburger today, here’s how it would be done for a restaurant on cash basis:

Cash basis recording Wimpy’s hamburger purchase

Both the sale and the receipt of cash would be recorded on Tuesday.  Companies on cash basis only record the transaction when the cash is received.

But, if the restaurant’s books were on the accrual basis, it would be a different story:

Accrual basis recording Wimpy’s hamburger purchase

Wimpy’s hamburger sale would be recorded on Thursday, the day he ate the hamburger.  The receipt would then be recorded on Tuesday, assuming Wimpy made good on his promise to pay.

You might be asking why a few days is such a big deal.  Outside of cartoon life, a couple of extra twists can happen.  It can be far more than a few days from the time you do the work to the time you get paid for it.  And often, these dates span different months and even years, affecting the amount you have to pay in taxes to various agencies.  Manipulating these dates (legally, of course) is one of many tax planning strategies that we can help you with.

Choosing for Your Business

In many cases, the government has chosen which method you must use when it comes to sales tax, payroll taxes, and income tax.  That’s part of the reason we make the required adjustments to your books at year end.

To help you run your business in a forward-thinking way, the accrual method is best.  You can record invoices for work you’ve done even though you haven’t received payment yet.  You can enter bills you need to pay before you pay them to forecast cash requirements.  Using accrual accounting, you can budget for cash flow needs as well as see more accurately what your revenue and income is looking like.

For clients who remain behind in their bookkeeping and just want to catch everything up once a year, the cash basis is adequate.  However they lose out on all the good information they could have had throughout the year to run their business better.

For other businesses, a hybrid approach between cash and accrual accounting can be the most cost effective.

A Little Help from Popeye the Sailor

What would Popeye say about all this accounting talk?

“That’s all I can stands, cuz I can’t stands n’more!”

Make Your Cash Register Ring With LinkedIn / Part 3: The KPIs

So you are clear about the future of your organization, what you want for your future, and who you want to attract to your business to make it all happen. Your profile reflects your goals, language, and style and your portfolio of groups is primed to showcase what you’re up to in life. You’re contributing to your groups, making connections, and posting updates. Until your cash register starts ringing, how do you know you’re on the right track?

“What you can measure you can manage.”

Trust a CPA to bring up numbers in a blog about LinkedIn. But unless you want to go back to the good old days of spatzeering through cyberspace wondering if you’re actually adding anything to your pipeline>, then memorize this phrase.

There are several places to go on LinkedIn to establish pre-cash milestones. Some of them are quantitative, but all of them are specific and observable. Thus we shall observe:

* Top Influencer of the Week
There are two ways to achieve this coveted status in a LinkedIn group: (1) when you post a discussion and enough other people publicly respond to your post, and (2) when enough other people click “Like” on your discussion or your comment on someone else’s discussion. The art here is in utilizing techniques to dependably help you be a top influencer on LinkedIn with very little time commitment. (Think I’m going to give those away in my blog? That’s what my awesome workshop series is for!)

Extra Credit: When you make it into the Top Influencer list for a certain group, click on the “Members” link inside that group and look near the top of the page – you’ll see how many group members there are. Then you will have an idea of the extent of your influence!

* Profile views
On your Home page, check out the right-hand margin. There is a link indicating how many people have viewed your profile in the last x number of days. Get a baseline and start noticing which types of LinkedIn activities generate interest in who you are and what you’re up to.

Extra Credit: Use a spreadsheet to divide number of views by the number of days to normalize the numbers whenever you check them and figure out if you’re getting more hits per day.

* The “How often people viewed you” graph
When you click the link to see who has viewed your profile, you will also see a graph indicating how many people have viewed your profile over a much longer period of time. Notice any patterns? Correlations?

* Keywords that led to you
If you have the paid version of LinkedIn, then on the same screen as above, check out this statistic. You’ll see a series of keywords followed by a series of percentages. How relevant are the top keywords? If they are not relevant, take another look at the language you use in your profile to make sure that the words will help your profile come up in the search results when someone types in those keywords.

Get a baseline. Contribute to the community. And measure the results to see if you’re on track to making a difference even before the connection requests and phone calls start coming in. Know yourself as a person of influence!

Mobile Accounting

If you are the type of person who loves mobile apps, texting, and getting your email on your phone, then you’re in for a treat: accounting has finally come around to your smartphone.  Here are a couple of great developments you can try so you can stay on top of your numbers.

Accounting Apps

For users of QuickBooks desktop and QuickBooks Online, an app is available to help you stay on top of your accounts receivables.  You can send invoices, view and update customer information, mark an invoice paid, and check up on customers’ balances.

If you are on the Xero cloud accounting system, the Xero Touch app is comprehensive, showing a dashboard of all of your major cash account balances and allowing you to perform numerous accounting functions on your phone.   On the accounts receivable side, you can view and re-send invoices, check customer information, and view account balances.

In the Xero app, you can snap a picture of a receipt and upload it right on the spot.  This helps avoid lost receipts and decreases paper handling, plus the cool factor is high!

These apps work on the iPhone, iPad, and Android.  With QuickBooks, there is a small monthly charge after a free trial, and with Xero, the app is free with your Xero subscription.

Bank Apps

If you’re banking with a major bank, chances are “there’s an app for that.”  Downloading your banking mobile app will allow you to stay on top of balances, receive alerts, and manage your cash flow more effectively.

Payment Apps

More and more businesses are collecting customer payments via their smartphones.  You don’t even need a merchant account for some of these payment apps, like Square, PayPal, or Intuit Mobile GoPayment, but it is cheaper if you do.  If you’re not already taking credit cards, it’s an effective way to get started; your customers can pay via Visa, American Express, MasterCard, and Discover.

With many of these payment apps, you download the app, receive a reader in the mail, and are then able to swipe or key in a client’s credit card information.  You are charged by the transaction, or monthly, if you sign up for a merchant account.  Plus, you can often customize the receipts the client receives with your logo to make them look professional.

Add-on Apps

There are many other mobile apps that can increase your accounting capabilities.  Both ADP and Paychex have payroll apps for their clients.  There are numerous apps to extend many of your accounting functions, such as expense management, document management, invoicing, time-tracking, bill payment, and even work order management.

Accounting to Go

Now you have a choice with your accounting:  you can “eat here” or take it “to go.”  If we can help get you equipped as an accounting road warrior, give us a shout.

Budgeting Breakthrough

When you hear the word “budget,” what do you think about?  Most people would say something similar to “Ugghh!” If you would rather do just about anything besides create a budget, you’re not alone.  The word “budget” brings up connotations of endless numbers, constraints, the opposite of freedom and creativity, and hard work, none of which are very desirable.

Yet, the benefits of a budget are huge.  Budgets can help you with cash flow improvements, keep you on track for higher profits, and alert you to items that need further action.

From “Budget” to “Profit Plan”

To be successful with budgeting, we need to get rid of all of the connotations that go with the word.  Perhaps it might work if we rename “budgeting” to “profit planning.” And then, rather than focus on how little we should spend, let’s start with how much revenue we’re going to make.

Revenue Clarity

It’s simple to create a revenue plan if you go backwards.  What revenue goal would you like to hit this year?  Just like we would never get in a car without a final destination, a revenue plan gives us a number to aim for in our businesses.

Once you know your number, then we can use averages to come up how many sales or clients we need to generate in order to meet our revenue goal.  Here’s a quick example:  Let’s say you want to reach $5 million in revenue this year.  If you average order is $10,000, then you need 500 sales.  If you have multiple products and services, then you’ll need to sum the product of the average sale times the needed number of sales for each line.

From there, you can make marketing and production plans based on the number of sales or clients you need.

Protecting Your Profit

Think of the expense side of your “profit plan” as protecting your profit margins so that you can ensure financial gain from all the hard work you do.  Setting budget limits on spending will allow you to control overhead and other items so you can keep more of what you make.

Exceptional Reporting

A great “profit plan” report will provide several things.  You can compare budget to actual, or better yet, just be alerted to the accounts showing exceptions.  You can also get an income statement that compares the current period with the prior year period so you can see how far you’ve come.  One last option is a benchmark report which provides industry averages so you can measure how you fare compared to other companies in your industry.

A “profit plan” is a great tool for your business.  If we can help you with the process or provide you with custom reporting, please give us a call.

Make Your Cash Register Ring With LinkedIn / Part 2: The Clicks

So you’re clear on your long-term vision for yourself and your business as well as and who you want to attract to your business. Now…how do the answers to the questions posed in the previous blog translate to clicks in LinkedIn?

(1) Who am I and what do I want for my life?
Your answer to this question will show up everywhere in LinkedIn. By way of example:

Photo: Casual, professional, company logo, or no photo?
Tagline: Title, tasks, benefits, or goal?
Profile: What sections to include or exclude?
Connections: Quantity or quality?
Groups: What does my portfolio of groups say about me?
Posts: Engaging? Informative? Advisory? Advertisements? Humorous? Enticing? Jargon or vernacular?

(2) Why am I in business?
The answer to this question will evidence will be in your posts, so you’d better be honest with yourself about this or you will waste your time on LinkedIn. This will determine the content, tone, frequency, and purpose of your contributions. Someone whose underlying reason for being in business is self-expression will post differently than someone whose purpose is to be independent, or to experience connectedness.

(3) What is my exit strategy?
If your exit strategy is to be acquired, then build the business in such a way as to make the business look and be desirable. Using LinkedIn to strengthen your personal brand as opposed to the company brand will work against you. So in your updates, announce things that your company is up to and accolades for members of your team. In your posts, mention the way your company conducts its affairs.

(4) What is my long-term vision for this business?
Consider your portfolio of groups. If your vision includes being a leader in your industry, join industry groups and trade groups. If your vision includes moving into a different market, join groups in which members of that population – and their trusted partners – congregate.

(5) Who are the types of players needed to make that happen?
Make sure the profiles of you and your key people authentically reflect who they are, so when you use the Groups and Jobs features to attract employees and they do a little reconnoitering online, a filtering process will occur automatically and the best-fit possibilities will make themselves known to you, either by posting a response to your comment or by direct contact.

(6) Which of my stories are compelling to key people in face-to-face conversations?
Consider sharing these stories by including them in discussions, activity updates, and your profile as well as private messages.

(7) In what ways is my company’s offering unique to the marketplace?
When you create a post in a group or activity update, and when you create your profile, mention these offerings as opposed to the run-of-the-mill aspects of your business. You don’t want to “push” your services with every sentence, but when you contextually speak of these in the places that make sense for them, i.e. the right groups, they will attract the interest of the right parties.

(8) What are the key experiences that touch the people most important to my business?
Consider all of the channels within LinkedIn which you may use to communicate information. Including multimedia presentations through add-ons and links gives you latitude and freedom to convey essential content in a way that makes an impact.