Tag: business

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4 Rules of Thumb for Fiscally Fit Business

4 Rules of Thumb for Fiscally Fit Business

4-rules-of-thumbMost folks who start a new business go in to it with a rather naïve belief that a good idea, product, service and/or group of people can be successful just because their idea, product, service or people are good.  Unfortunately, that isn’t’t the reality of starting up and running a business.  Regardless of how great and innovative the idea is, the business only works if it is sustainable and profitable.  Otherwise, it was just a great idea.  For many entrepreneurs, developing an understanding of the financial underpinnings of running a company isn’t the most exciting of ideas.  The compulsion is to outsource the responsibility to someone else like an accountant or financial advisor. While I completely and utterly agree that every business owner should work closely with their accounting professional and financial advisor, I also know that those very same business owners will get more value from their advisors if they have a common language to speak (business finance) and are working toward a common goal.  The goal is fiscal fitness – the creation of a sustainable and profitable business. Just as physical fitness supports a healthy body, fiscal fitness supports a healthy business.

The successful business operating in this economy adheres closely to 4 main beliefs, rules of thumb perhaps, relating to fiscal management and fitness and which are generally communicated in detail using the language of business finance.

Rule 1. Plan before you start.  Then plan some more.  Starting a business isn’t like going to college; you’re supposed to know what you’re going to do BEFORE you start up rather than paying to explore the options.  It is also very important to recognize that the plan may require some adjustments as you go along (“No plan survives contact with the enemy”), taking care to not equate focus with intractability.  This plan should also include the “exit strategy”, which is really a plan for what the owner wants to ultimately get out of the effort.  It could be a plan to sell out for gobs of money, to leave a legacy for the children, or maybe just to have an awesome quality of life and do what they love at the same time.  Knowing what it will take to get in, get it done, and get out the way you want is all part of the plan.

Rule 2. Keep a close eye on the numbers.  No, not all of them, but the really important ones.  Some of these numbers have to do with the relationships between price, volume and cost.  This is the stuff a business owner needs to know like the back of their hand – hairs and all.  Not every business will focus on the same key numbers (mostly, but there are certainly variations), but every business owner should know what to look for.  And they should be looking very frequently so things don’t get out of whack before corrections can be made.

Rule 3. Manage the cash, manage the growth, and know how one impacts the other. Cash flow and growth are priorities number 1 and 1 in business but they aren’t the same thing.  Consider that reducing prices (and profits) to get more sales may work as long as the volume of sales supports the effort and generates the cash.  Without the extra sales revenue to rely on, reducing profits could result in devastation (maybe sticking with the prices the way they are and not pushing for fast growth is a better idea).

Rule 4.  If you must borrow, be informed and do it smartly.  There are a lot of different options for borrowing money for the business, just as there are a lot of different reasons to do it.  There is a great deal of research available which describes the benefits of borrowers being educated in basic financial literacy, with better financial decision-making being among those benefits.  Looking for financing is kind of like choosing between the apple and the candy bar: one may promote the fitness you’re looking for while the other does not (but it looks sweet!).  It’s nice to have the foundation to support knowing which one you should choose.

Building and maintaining a fit business requires an understanding of how the business works – how and why it makes and spends money, what makes it profitable and what it takes to create and support growth.  While outside advisors may be available to help, the best performance is achieved when the business owner masters the essential skills required to run and grow a fiscally fit and sustainable business.

Joanie Mann Bunny Feet

Make Sense?

J

Measure, Manage and Succeed.  It’s all about knowing how to speak the language of finance

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4 Rules of Thumb Regarding Workers Compensation Insurance for Employers

In two previous “4 Rules of Thumb” articles, I discussed a few things that businesses can do to create the best possible environment for engaging new customers and providing quality service (4 Rules of Thumb for Business Success) and provided additional tidbits for service businesses – things the company can do to make sure that the work is done completely and correctly the first time, which is what leads to happy and loyal customers (4 Rules for Building Service Customer Loyalty).

This article is focused a bit more internally to the business, discussing a few of the risks and considerations surrounding those dreaded tax burden issues: Unemployment Insurance, Worker Classification and Workers Compensation Insurance. 

Unemployment insurance is one of those items that most businesses pay attention to, because rates are impacted based on unemployment claims made and paid. The cost of unemployment insurance is usually calculated just like workers’ compensation, using standardized arithmetic formulas based on the profile and past record of the company.

Workers Compensation insurance is sort of the “elephant in the room” of compliance – it’s a big problem that is frequently the last item of consideration in business compliance and reporting. It is also an item that frequently goes without scrutiny at the state level, so little attention is generally given it by accounting and human resource professionals.

Workers Comp is one of those payroll reports where you select from a broad list of categories relating (hopefully fairly closely) to the work your people do, you calculate the cost, and you pay the fees.

Ideally you’re classifying workers properly in terms of their being employees versus independent contractors – this being the big focus of most workers comp audits and where many advisors say to pay attention. If you use a company to perform some of the work of your business, also pay close attention to the concept of joint-employer status (see article on joint employer status).

An equally big issue – the issue that impacts the business owner perhaps more than the employee – is classifying worker activities too broadly, potentially costing the business hundreds (if not thousands) of dollars in annual workers comp premiums. Improper classification of worker activities can lead not just to increased premium costs, but heavy penalties in the event of a claim finding the worker was not properly covered.

Most workers compensation policies issue blanket risk classifications, yet how these classifications are used in different industries is where the secrets of cost savings exist.  In the moving and storage industry, for example, the risk is in the warehouse. If a clerk or administrative worker enters the warehouse, that employee is now actually working under a different classification. However, if the worker often checks warehouse inventory or sells items from the warehouse as part of their sales job, they may operate under yet another classification.

There is a balance required when seeking to reduce premiums while keeping the company compliant.  Many companies consider caution to be more affordable than keeping highly detailed activity and work classification records, finding that reporting workers in higher cost work categories is more cost effective than paying for the labor intensive effort of capturing, analyzing and reporting in more detail. That is, until a worker is injured and the risk wasn’t disclosed through accurate workers compensation reporting.

When it comes to workers compensation insurance for the business, give these 4 compliance rules of thumb some strong consideration.

Rule 1: Get informed and get help.

It’s OK for a business owner to not be the expert in all facets of compliance and reporting – – you have accountants and tax advisers that can gain this knowledge from their annual CPE (continuing professional education). The potential costs of mis-handling workers compensation and other aspects of having employees are too great to risk being uninformed and unprepared.

Rule 2: Call an employee an employee

Classifying workers will turn out better for all parties in the long run even if it seems like the more expensive way to go. Misclassification of employee workers as contractors hurts everyone, eventually. There is a big problem with businesses misclassifying workers as contractors rather than as employees, sometimes to avoid paying taxes and benefits, but sometimes not just for that reason. When classified as contractors, workers are generally not covered by the various protections and do not get the benefits that employees do.

Some business owners who are unsure of the state administrative rules may pay workers compensation premiums for workers that are truly independent contractors. Other businesses may require workers to have a workers compensation account as a condition of employment. Either way it is being done improperly and one party or the other ends up bearing unnecessary cost and/or risk.

The unfortunate result is that employers are bearing larger than necessary burdens of supporting injured workers and the unemployed.

Deliberate mis-classification can save dishonest contractors upwards of 30 percent in payroll and other taxes, but for workers, taxpayers and honest employers, the practice amounts to millions in lost wages and revenue. – See more at:

http://www.ibew.org/articles/13ElectricalWorker/EW1305/Misclassification.0513.html#sthash.7u1vtjW

Rule 3: Details Details Details.

Worker classification done properly can save businesses a lot of money simply by being more accurate. Yes, there may be tradeoffs in terms of labor to perform the calculations and reporting, but it can prove to be well worth the effort.

Particularly in businesses where workers may perform multiple duties or work in a variety of locations and conditions, there is value in delving into the details of time, location and work performed to make sure the business is adequately covering itself. Filling out the report by simply selecting the broad category that “seems most likely” is not the best way to go. There are details in the rules, and the smart business takes advantage rather than being surprised by them.

A home installation satellite company did not keep sufficient records for their most hazardous business classification: tower work. During the audit, all their hours were assessed in this one classification that was six times the reported amount. – See more at:http://cath235lni.wordpress.com/

Rule 4: If there is a worker injury claim, pay attention and deal with it right away.

While it seems somewhat like getting car insurance after the wreck, there may be some risk mitigation that can occur if the issue is dealt with directly and in a timely manner – possibly avoiding a claims nightmare.

The last item is more of a suggestion than a rule, which is to be fair and truthful. Treating employees well is part of growing a successful team that will propel the business towards success.

Surprisingly enough, the benefits to the business may not only be a more productive and happier workforce, but lower risk exposure and lower workers comp premiums due to more detailed use of classifications in reporting.Tell employees and independent contractors what workers’ comp does for them – it’s essentially a medical and lost wage policy to protect them and those close to them.

Explaining to employees that keeping the boss informed about what is happening in the plant or in the field is simply part of helping ensure their proper protection.

Joanie Mann Bunny FeetMake Sense?

J

Many thanks to my friend Ted Carlson, Certified Fraud Examiner (retired), a veteran of the Department of Labor and Industries (L&I) in Washington State – responsible for Tax Discovery and Fraud Prevention field Audits. 

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Lawyer Immunity from Delivering Customer Value is No More

Lawyer Immunity from Delivering Customer Value is No More

All indications are that business and revenue growth for law firms is no longer a function of head count.  As with other professional service providers, lawyers are experiencing increased competition from a variety of new sources, and client demands and needs are changing as society adopts and embraces technology, social computing, and self-service solutions.  The problem is that many partners and firm leaders don’t really know what do to about it, and are attempting to fuel continued growth of revenues and profitability while essentially maintaining status quo.

Looking to reduce costs and pushing for more billable hours is standard fare among firm managers, yet the results to be gained from these efforts have pretty much reached their maximum potential.  You can only cut so much, and you can only work your people so hard.  Unfortunately, many partners and managers simply look away from the problem and continue along the path that has been successful in the past.  But growth has slowed, revenues have not grown as expected, and firms are literally being forced to adjust to market forces or go out of business.  It’s just too competitive and the pace of change is too rapid.  There is no immunity for lawyers in this changing market – service quality and value must improve.

Instead of taking the legacy approach of hiring more people so they can bill for more hours, successful firms are taking a few queues from other professional service providers and are recognizing that individualized client service, consistently high-quality and timely service, and service priced commensurate with the value delivered are at least parts of the solution.

There is quite a lot that law firms and accounting firms have in common, particularly when it comes to the fact that most of these entities are viewed – perhaps rightly so – as being “old school”, with a managing partner or board with intractable views and grey hair.  Lawyers, like accountants, are inherently wary of new-fangled concepts and wild ideas.  They’re a cautious bunch, and tend to be resistant to change.  Yet accounting professionals are beginning to embrace new tools and new ideas when it comes to delivering service and value, and forward-thinking law firms are following suit.

For successful firms, the focus is on the client and the value delivered – on internal process improvements and a better value proposition for the customer – not on the billable hour.  Yes, there are investments required.  The firm must invest time most of all.  It takes time to get everyone educated about issues the firm is facing in the changing marketplace.  Unless everyone knows what they’re up against, there will be continued resistance to new ideas and concepts.  It also takes time with clients to understand their needs, which is the essential element to delivering service valuable to them.  And it takes time to develop and nurture a long-term vision, recognizing that the vision may change as conditions change, and that regular monitoring and adjustment may be necessary.

Investing time and consideration in these areas is the key to delivering customer (and shareholder) value.  The result is satisfied and loyal clients, repeat business and increased growth and profitability.  Rather than viewing this brave new world as a challenge to the firm’s traditional model, it should be viewed as the opportunity to deliver new and greater value to the firm’s customers.

Make Sense?

J

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New York or Las Vegas? It doesn’t matter if you can work online.

New York or Las Vegas?  It doesn’t matter if you can work online.

Skyline
Skyline

The 10th annual Accounting Solutions Conference, held by The Sleeter Group, is being held in Las Vegas on November 3-6.  By all accounts, it’s looking like the conference will again bring together some of the best and brightest in accounting and business technologies.

The annual “Sleeter Conference” event is among the best opportunities accounting and bookkeeping professionals have to explore and learn about the technologies, service models, client management tools and other elements involved in delivering accounting, bookkeeping and consulting services to small business clients.  With the introduction of so many new ideas and solutions designed for small businesses and their accountants, it is no wonder that professionals look to this conference to help make sense of it all.

With the right strategy and through the innovative and efficient use of technology, people and processes, even the smallest of organizations can compete with the big boys.  Accounting professionals, pro bookkeepers, and small business consultants and advisors are not simply participants in the financial processes of these small organizations – they are the influencers and implementors of the solutions and methodologies which will generate the positive impact in the client business.  Information technology -mobile access solutions and innovative tools for working together – makes it possible to deliver these benefits to clients, whether they’re in Vegas or the Big Apple.  Come to the conference and hear all about it.

While you’re there, stop by the Uni-Data Skyline Cloud Services booth and check out some of the new stuff that’s going on in the QuickBooks and general application hosting world.  It’s pretty cool!  I give it 5 bunnies.

J

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4 Rules of Thumb for Business Success

4-rules-of-thumbThe business environment is becoming increasingly competitive, with global opinions influencing customers of even the smallest local businesses.  The best method of competing in a world where customer perception is reality – at least when it comes to the impact of social and other media – is to create a company that people simply want to do business with.

Here are a few things which every business can do in order to create the best possible environment for engaging new customers and providing quality service. Regardless of industry or business orientation, these 4 simple considerations will go a long way towards creating a sustainable, high quality operation which recognizes the value of a customer relationship – whether it’s an internal or external customer.

Teach everyone in the company that they’re part of sales and customer service.

Each and every member of the organization should be in a position to help customers get what they need, and to help guide the customer towards the various products, services or solutions the company offers.  This means that internal training is essential, and all employees should be fully informed in the offerings of the company.  Business owners will find that one of the best ways to reach and retain the best workers is to provide ongoing skills development and training programs.  The result is a more confident and productive workforce and workers who feel more satisfied with their jobs.  It’s also important to recognize that employees are another form of ‘customer’ of the company, and surveying them to understand how satisfied they are with the work is a really good idea.  When employees lack satisfaction in their jobs or with the company they work for, it will be revealed in their interactions with customers and other workers, which is not good for business.

Remember that first impressions count – a lot.

You only have one chance at the first impression, and it takes a lot more work to overcome a bad impression than it does to leave a good one in the first place.  This means that the company should promote a quality, clean and professional image.  When speaking to customers on the phone, speak clearly, professionally and politely.  Make sure that all workers arrive at their jobs in clean uniforms and in clean, branded trucks.  Customers should not only know who’s parked outside, but a good-looking branded vehicle is a mobile advertisement for the company and can deliver a lot of good impressions.  On the other hand, not maintaining or caring properly for vehicles and equipment can deliver the opposite type of impression you want to leave.

Do company business with the company voice.

Communication is essential in building a successful business, and it is important that the messages be what the company wants the customers and market to hear.  When communicating on company business, always use the company email address and contact information rather than personal email addresses or generic domains.  Just like with uniforms and trucks, communications from the company should be branded and professional so that the right type of impression is created.  The business website (which should support mobile devices!) is available to help communicate your values, brand and services, and should serve to present your business as someone a customer would want to do business with.  Posting case studies and testimonials can be very useful in this regard as they help to build credibility in your company and convey the trust others have in your services.  Apply social media and listing services, too, so that customers and prospects can find information on your company and read good things others have said.  It’s important, however, to remember that social media can go both ways.  While being a great way to reach new customers as well as reminding current customers of the other products and services you offer, it could also turn negative.  If there is negative feedback, be honest and reasonable, but address it quickly.

Work beyond corporate walls.

The business exists in a community, and workers in the company live in neighborhoods and have lives beyond the business they work for.  Community service is a way to develop a more cohesive and productive team while developing closer community relations and enhancing the image of the company and ownership. Volunteering and creating an environment where service to others is promoted helps build a team atmosphere in the company, and expresses the understanding that businesses will thrive when the communities around them thrive.  

Joanie Mann Bunny FeetMake Sense?

J

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Accounting Professional Value is Insight and Advice, Not Just a Hosted Server

Accounting Professional Value is Insight and Advice, Not Just a Hosted Server

Back in the late 90’s, when the application service provider model was first established, a number of providers recognized how beneficial it would be for public accountants to use hosted applications to work more closely with their accounting and bookkeeping clients.  Seeking markets which would rapidly adopt a hosted application model, these providers focused on hosting small business accounting solutions such as Intuit QuickBooks desktop products, and then sought participation by the largest addressable communities of users working with those products – QuickBooks ProAdvisors, bookkeepers and accountants.  The idea was that the community of QuickBooks professionals would benefit by bringing their clients onto the hosting platform, and service providers could sell to one professional and gain a bunch of small business users.  It made sense, too, as it allowed the professional to have a single service and login that allowed them to access all their client QuickBooks company files.  The client could log in to the system, too, delivering remote access and managed service benefits to the client, as well.  But there was a catch, and it didn’t fully reveal itself until recently as cloud-based applications and true SaaS applications began to gain market adoption.

The problem actually started to reveal itself as more businesses elected to adopt hosting services.  There’s a saying amongst the QuickBooks hosting providers that “nobody uses just QuickBooks”.  Saying “nobody” uses just QuickBooks is a bit of a stretch, but the reality is that numerous businesses use other applications and software solutions in addition to their QuickBooks product.  Sometimes these products integrate with QuickBooks and sometimes they don’t, but it is not often that a business utilizes just the one software solution.  At minimum, there are likely email or productivity tools in use, too.  The point is that the QuickBooks hosting providers – those hosts focusing on providing service to QuickBooks accountants and small business clients – realized that the number and variety of applications desired by their customers would grow very quickly, as would the variety of needed implementation models.  The unfortunate solution of the time was to just put it all on the same environment.

The original selling message to the QuickBooks consultant and accountant markets was that they should get all their clients on to the hosting service, and then the accountant could benefit from an “economy of scale”, making the cost of the overall delivery lower.  Further, by grouping the firm and the clients into a single hosting environment, it would make application and data sharing easier.  Both of these messages are true, but putting the firm and its clients into a single environment – with the firm as the “sponsor” and front line promoter of the service – began to have impacts which were not clearly foreseen.

  1. Accounting professionals and consultants changed the nature of their relationship with the client, going from trusted advisors to technology and solution vendors.
  2. Client business technology needs were placed as secondary to “enabling” the working relationship between the accountant and the small business client.
  3. Attempts to fully satisfy client technology requirements overburdened and impacted the environment, reducing overall service quality and satisfaction and diminishing the value of the scale economy (as well as the clients’ perception of their accounting professional).
  4. Firms structured their processes to support a single technology and operating model, and found difficulties in adopting new strategies or solutions.

In concept, having accounting professionals and their clients all working seamlessly together in the same systems sounds great.  For some firms, a cloud server packed with all the firm and client applications and data enables an entirely new business and service model, which is very cool and it actually works (for some firms and their clients).  But the problem – a problem which may not be fully revealed in the short term – is that the various businesses involved, from the accounting practice to each and every client, has different business needs and operates as a unique organization.  While there may be fundamental similarities, “the devil is in the details” as they say, and a single platform or hosting solution is unlikely to really work well for all.  Even more potentially damaging, the perception of the trusted advisor who is now viewed as a vendor of IT services or software erodes the value of the client engagement and the potential for the firm to deliver greater benefit through their core offerings.  A business owner is more likely to change vendors of IT service than they are their trusted accounting or finance professional.   And they’re also more likely to change IT service providers if the provider cannot deliver exactly the application or service desired.  When the accounting professional is perceived to be the IT service provider, the lines are blurred and the client ends up attaching their loyalty to a software product or business solution instead of the accountant advisor OR the IT provider.

With SaaS and native web-based applications being broadly adopted by small businesses, the opportunity for firms to engage with clients in different ways and with different solutions started to break the one-size-fits-all hosting approach.  Professionals found that empowering their clients by supporting properly fitted solutions which work for the client business delivered the opportunity to become more operationally and strategically involved with the client business.  Deeper operational and strategic involvement with the client became the means to drive increased value in the engagement and services offered and delivered.  The client business was able to benefit from the involvement of their trusted advisor, regardless of what platforms or systems might be in place.

Accountants and bookkeepers are recognizing that the previous model of aligning the practice with a particular software product or delivery system may not be the best approach to building and retaining the customer base.  With new business accounting and bookkeeping solutions emerging regularly – and gaining broad market adoption – and as more and more varied cloud based services and solutions are applied to various business problems – professionals will further recognize that their value is not tied to a cloud server, a single small business accounting solution, or to any particular technology.  The value of the accounting professional is not in the software they support or the server it runs on.  The value of the accounting professional is in the insight gathered and advice provided – services offered which help support better business management, growth and profitability.

Make Sense?

J

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