Accounting trigger points in your business

Hind sight is always twenty-twenty and if we could have seen these tough economic times coming, we all would have done things differently. I’ll pick on building contractors for a moment.

In May of 2006 I remember a contractor complaining that they couldn’t find any painters or landscapers to finish up a spec house they were building for a Parade of Homes tour. Within the same conversation they also complained that they had to sell their current home and move into the spec house because there were no buyers. Should this have triggered them to stop building at that point?

In the fall of 2007 we were called into examine the accounting records for a builder in Madison Wisconsin. For the first time in years, they were struggling to make payroll. Should this have been the trigger point for them to stop building?

In the summer of 2008 I was troubleshooting a QuickBooks file for a Raleigh builder of high-end homes. At the time, he was practically begging for any kind of home repairs, lawn mowing, anything. Was it time to get out yet?

When you’re caught up in the middle of it all, it can be extremely difficult to see the writing on the wall. What you should be doing, is setting up trigger points, ideally leading indicators, to alert you to significant shifts within your industry. These will of course be different for every business. Maybe it’s a significant increase in outstanding receivables. Similarly it could be a squeezing of your working capital requirements. Often, it’s external like in the case of home builders with their pool of buyers drying up. Interestingly enough it’s sometimes as subtle as finding that everyone is buying into an industry because of the easy money everyone seems to be making (think: briefcase contractors). If people are running in, you should probably be running out.

What kind of trigger points do you use in your business? Have they worked well or have they misled you?

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Improve cashflow with these three ideas.

This certainly isn’t an exhaustive list, nor are these ideas going to get your fledgling company in the black, but they will save you money without costing you anything, except a little time. The motive here is improving your business cash flow and these three ideas are based on services that are extremely negotiable, however I rarely see my small business clients question their rates after they signed the contract. This is found money my friends, you just need to ask the six magical words, “Is this the best you can do?”

First, get your business liability insurance re-quoted by at least three insurance brokers. This is a very soft market for business insurance and prices for coverage are shifting every six months. If you can’t get your premiums any lower, than ask for a lower deductable.

Second, if you accept credit cards for payment, get that re-quoted. For whatever reason, merchant service providers have been jacking up their rates, despite a slow economy. I suppose it has something to do with banks in general raising their fees. If you’re paying more that 2% in fees, you’re paying too much. My fees went from 1.9% in February to 4.2% this last month! Also, never sign a contract that locks you in for any amount of time with that merchant services vendor.

Third, if you’re using uniform and floor mat service providers such as Cintas or Aramark, request that you’re monthly charges be lowered. Although you probably signed a contract that requires 60-90 days notice before you cancel, you are not bound to the entire contract price, only a minimum. This is typically $20 per month. Your service rep will never admit that however. If they won’t lower your rates, then drop your contract to the minimum and shop around for another provider.

Again, in all the bookkeeping records I examine and small business accounting I do, I rarely find my clients shopping these service providers. If you have other ideas, please post them in the comments section. Thanks!

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More than accounting to radically change your business

When I think about what all of my small business clients have in common, there is one thing that really sticks out; it’s their ability and willingness to innovate. They all had ordinary businesses that struggled during this recession. As soon as they turned their business model on its side and expanded into a service that complimented their current business, and didn’t detract, they all struck gold. Listen to this quick video. It’s not about accounting, but rather about what you can and should do, to improve the financial results of your small business.


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Small business freedom

Pretty much every small business owner got into business for themselves because they craved freedom. Sure, some people will say it’s because the felt they could do a better job than their boss, others get tired of job insecurity, some do it because they’re certain they will make more money on their own, lots more.

The common denominator to each one of these reasons is still freedom. Trouble is, most newly born entrepreneurs don’t get very good advice on big financial and strategic decisions. Before you know it, the accounting records for the small business reveals loans and other debt, bloated payroll, along with the associated payroll taxes and benefits, otherwise known as labor burden. Next the cash flow is squeezed and before you know it, the small business owner has no freedom. It’s at about this time that frustration, or worse, indifference sets in.

Do yourself a favor, if you own a small business or are contemplating a fresh start in this direction, grow slowly, keep it simple and cheap, and get a great business accountant or advisor.

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QuickBooks Online Class

If you’re interested in learning more about how to use QuickBooks Online version, I’ll be teaching a class in a few weeks, in Cary, North Carolina. Intuit, the makers of QuickBooks have stepped up the online interface, making it a little more user friendly for small business owners. I still think they have a long way to go however.

During this two hour session, I’ll be guiding users through the various vendor, customer, and company menus, as well as blending in some business advice. If you’re new to QuickBooks online, or you are looking for the best practices for your small business, click over to the training tab of this website for more details.

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An accountant that cares

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.

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Quickbooks improved in three steps

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.

  1. 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.
  2. 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.
  3. 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.

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Bookkeeping must be accurate to start with

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.

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The best business advice

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.

The contest closes June 15th and you’re name will be entered into a drawing to win a $25 Starbucks card.

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