Many small business surveys reveal that an attorney and an accountant are the two most trusted business advisors a small business owner has. Unfortunately many accountants miss a big opportunity to help their clients by not demanding that their client setup business projections, also known as a budget.
It isn’t that they most accountants don’t know how to create a realistic small business budget. Instead, many CPA’s and accountants I know of, fail to appreciate how much their client desperately needs this outside guidance. If accounting and bookkeeping is a history book, outlining where the small business has been, then the budget is a roadmap to where the business needs to be, and where it’s trying to end up (also known as the goal).
A respectable small business roadmap should include both short and long term goals, an expense budget, a cash flow forecast, and lots of knockdown, drag out debate as the business owner and accountant argue over what’s realistic. For instance, everyone knows that a goal should be specific and attainable. It’s the accountant’s job to make sure the economic drivers of the business can, through detailed analysis, produce sufficient momentum to reach the goals. In other words, this process should never be a one-sided discussion.
If your accountant has never suggested putting your 1-3 year projections down on paper, or if they have, but the process was more like a waitress taking your order, then it’s time to start looking for a new advisor.
There are many things you can (and should) do on a regular basis to speed up your QuickBooks data file, which will make your accounting and bookkeeping more hassle free. Here are three quick and easy solutions that you can try today.
Delete any forms that are waiting to be printed. Most Quickbooks data files I check have outdated paychecks, invoices, bill payment stubs, etc. You can find the various items that need to be printed by going to the File pull down menu, then to Print Forms. Make sure you select a starting date range for each item that is well into the past (e.g. 2004). This will help you find everything. TIP: Instead of printing to paper, select the Microsoft XPS Document writer as the printer. This will print everything as an electronic file, which you can then delete.
Save your QuickBooks data file as a portable backup. Next restore that portable backup. Then do this a few more time. This process has a way of reducing the overall size of the data file, without removing or damaging the data.
Resort your lists. There are many lists within a QuickBooks data file and over time they can get out of order, taking extra seconds to process a command. Start by opening the Lists pull down menu and select the Chart of Accounts. Under the Account button (near the bottom), choose the last option: Re-sort List. Now do the same with the other options under the List menu, finishing with the Memorized Transaction list.
Last week I ran a QuickBooks training session in Raleigh, North Carolina. I love conducting these because it’s a chance to work with small business owners to help resolve nagging issues.
After the four hour talk, a manager came up to me and wondered out loud how important it was to keep perfect track of accounting records. They felt that close should be good enough. I have two problems with this. First, the IRS requires exact and 100% accurate records. Secondly, if you begin going down a path of not demanding accurate and complete bookkeeping records, you will always have doubts about the integrity of your financial results.
QuickBooks is one solution to help and it really just a starting point. What you also need is a professional that can interpret the results; ideally someone who has lots of experience working with many other small business owners. Bookkeeping and accounting is where it all starts, as far as I’m concerned.
One of the best ways to improve cash flow is to collect the money owed to you, sooner. Many small businesses overlook the basics of accounting and bookkeeping principles. These ideas apply to all companies, whether you live in Raleigh North Carolina or Madison Wisconsin.
A wise person once told me that the first day you open your business should also be the first day you start thinking about how you’re going to sell it. If I did that, he guaranteed that I would run my business altogether differently.
Have you ever been given good business advice that has helped you throughout the years? If so, please enter our Best Business Advice Survey. We want to hear from you and share the knowledge.
There seems to be a very strong correlation between small businesses that are struggling to make ends meet, and are also spending too much money on meal & entertainment expense. In my casual observance, when I examine accounting records, I begin to notice declining sales, margins, and profit when meal and entertainment expense is greater than 0.5 – 1%. Excessive spending in this area, such as 3-5% of sales is typical for companies in deep trouble.
It’s not that spending on coffee or lunch in and of itself is draining away needed cash flow. Rather, I think it’s more a problem of not having enough discipline to carefully monitor and curb outgoing cash flow. This unusually falls under the guise of “business luncheon”, “networking”, and “prospecting”. Good bookkeeping records with software such as QuickBooks or Peachtree will help measure this expense, but you’ve also got to be prepared to change habits if you want to improve. I find changing habits to be the most difficult task.
There is no correlation to the industry or kind of business. I see the problem with professional service firms as much as I do with contractors and retail businesses. How does your business compare? Is my theory right or wrong?
The difference between attracting a satisfied customer instead of a loyal customer is the difference between single-digit growth verses double-digit growth, a modest advertising budget and no spending on advertising (because they spread the word for you). It’s the difference between liking something and falling in love.
How many restaurants do you like, and which ones do you love? I’ll bet with the establishments you love, you’re also spending more money, telling more friends, and forgiving more readily if something went wrong.
How do you know if your customers like you or LOVE you? A customer satisfaction survey will ask things like, “Were the bathrooms clean?”, “Was your hold time within reason?”, etc. Your customers could answer yes to all the above and just be satisfied.
A loyalty survey on the other hand asks only one question: “How likely are you to recommend our business to a friend or college?” The response is measured on a scale of 1-10, with 9 or 10 being a loyal customer, 5-8 being satisfied. Anything less than a five and that customer is detracting from your business. Send me an email, if you’d like a copy of the survey.
A client once told me that the best part of owning her business was when she prepared and sent the monthly invoices. I’d take it one step further and say it’s when you actually receive the money. There’s a considerable difference between the two. Enough in fact to kill “profitable” businesses, because they couldn’t or didn’t’ collect money fast enough. Next to crushing debt, this is arguably the second biggest reason so many small businesses have shut down in the past 2-3 years.
Understand what your average days outstanding are, for your accounts receivable. This is expressed in number of days. For example, electrical contractors are typically at 55 days, child care centers collect in 4-5 days, and commercial printers in 44 days. Then set a goal to become better than your industry benchmark, better than you were last year, better than last month.
There are very specific methods to improve your collections. The most overlooked strategy is by simply assessing a finance charge on overdue balances. I can’t tell you how many clients have tried this, only to see money start flowing in.