Accounting

A SMB Life Preserver in an Economic Storm

July 21, 2010 by Etha Walters Leave a Comment

The rebound of recovery efforts in today’s economy is crawling like a 35g download on a dial up connection. It seems politicians are playing tug o war and in the meantime small business owners are struggling to keep things balanced and seeking new ways to sell to a penny pinching market. Some business owners may even feel that they have no other choice but to hold on and wait out the storm. Although it can be discouraging, you are not stuck in a ditch spinning your tires, you can be proactive in building the kind of life preserver that will help keep your small business afloat.

1. Communication
– Keeping tabs on how everyone is doing from your partners, your venders and others on your team is vital. Also, return information to them as to where the company stands and problems that need to be addressed. Get everyone involved in trouble shooting and the anticipation of hot spots or potential problem areas.

– Resolve conflicts within the company through mediation and compromise.

– Survey areas that can be improved and what is needed to do so as well as simplify areas that are bogged down and non productive. The survival of the company is in everyone’s best interest and feedback from others can help clean up areas and prevent other problems.

2. Organization
– Put the mission statement and rules and regulations in writing so your team has a map of where they are going. Positions within the company should also have a written description of duties and responsibilities.

– Make sure that technology is working for you. Is it a good work-flow or is it creating traffic jams within the office or when you travel. For example: it might be helpful to rent technology to cover a big business trip rather than to drag everything with you through customs in the airport. It takes time to check everything in, time to set up and make sure everything is working correctly, and time to tear down and check it all in for the trip back and time is money!

3. Accountability
– Meet complaints head on and compensate for inconvenience. Accidents happen and going out of the way to make things right builds on the integrity of your business and that is going to keep people coming back and recommend your company to others.

4.The Internet
– Social networks and blogging are vital to any company to make connections and to keep your business in the limelight. Writing blogs is a good way to offer information about products and service and link back to your website. Take the time to get to know Facebook, Twitter and LinkedIn, they are the super highway to advertising and networking. Some companies have departments dedicated to just this alone!

– Don’t let your website go stale. Keep adding new information, and keep contact information updated. It is, after all, your company’s virtual business card.

5. Pricing
– While price increases across the board might not make a whole lot of sense, it is important to have a good blueprint of finances. Strategically placing small increases can give your company a competitive edge but it takes research and planning.

I hope these tips have offered you some inspiration into a plan to help your company not only stay afloat but to flourish under the pressure!

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How to get paid for the products you sell

April 2, 2010 by admin Leave a Comment

Many business owners bemoan the situation that they have made many sales but have little money to show for them. They then continue that it takes forever to be paid for their product. When this happens, it is good to question “are my invoices going out correctly, and do they match what is on the customers purchase order?”

Professional commercial credit people call this controlling the front end of the accounts receivable. This is how you can trouble shoot like a senior commercial credit analyst and get your small company paid in a timelier manner.

When you take on a new customer, you as the small business owner need to read the purchase order. Make special note of things like freight, terms of payment, billing address, part identification numbers, and purchase order numbers. Persons not directly involved with procurement in their companies might tell your company sales personnel a great many things (well meaning), but these practices will only slow your invoices from being paid, or may get the invoice sent back to your business for correction and clarification (this restarts the payment clock). If the practice continues, this makes your accounts receivable department work harder and eventually expand, making the business less profitable! Here are some simple ideas to help your business avoid the pitfalls:

1) On freight, always offer collect the customers carrier-not pre-paid and add (this can trip an audit from the customers freight department).
2) On terms of payment, make sure they match or call the buyer to get them changed if possible.
3) On part identification numbers, make sure they match.
4) On the billing address, if this does not say attention accounts payable begin to question sales and customer service people.
5) On the purchase order, check the number to make sure it’s correct. If it is a blanket purchase order number, It will need a unique release number.

Doing these small inspections can help your small business collect its receivable more quickly. It can make your invoices go through your customer’s accounts payable with a minimum of inspection, and your accounts receivable not have to collect it. This means more profit for your business!

Is your business behind the money curve?

March 31, 2010 by admin Leave a Comment

Does your business have a nice sized A/R but little money to show for it? Is your company accounting manager always ducking collection calls? You may be behind the money curve. Here’s how it happens:

You may have a few large customers that name their own credit terms or just pay slow. The key ratio that every business owner should know is days sales outstanding or DSO. DSO measures how long it takes for an invoice to be turned into cash. Your accounting manager can calculate this number for you or you can find the formula here:

http://www.investopedia.com/terms/d/dso.asp

The idea as the business owner is to turn your receivable into cash as fast as possible, the larger the DSO number the longer it takes. All business have creditors and suppliers and the problem is when your business pays out faster than your finance department can collect the receivable, in consumer terms, you’re upside down. How can you speed up the process?

1) Motivate the collection staff-If you really want to know where the problems are with your business, take a trip to the credit/collection department. Good credit people will usually have a solution as well. I know it’s not in vogue in these economic times, but offering a bonus for cash collected is not a bad idea. In fact, it’s a very good idea.
2) Offer a cash discount-This is giving some of your profit away but it motivates your slower paying customers to pay, it may be worth the 1 or 2 percent discount.
3) Factor your invoices-Selling your invoices to a factor also takes away profit, but you get your cash over night. Factors are great financial advisors since they are in “the money game” every day.
4) Transfer some of your risk to someone else-This strategy is probably for a medium business. Some business set up a dealership network to service certain accounts. They sell their product to a middle main who then deals with the slow paying account. The middle man then charges a premium for the product or service because he knows he’s going to wait to be paid.
5) Try to get some of your money upfront as a down payment (medium to large companies will resists this strategy so be prepared)
6) Take credit card payments-this is another strategy to get paid in a very short time, just make sure you read the agreement very carefully.

Why you should treat “the Temp” well or the $14, 465.63 postage stamp

March 29, 2010 by admin Leave a Comment

To borrow from an old TV show, the story you are about to read is true; the names were changed to protect the innocent (and guilty). As you hire people as your business progresses from small to medium, some times you make hiring mistakes. One of these can be the person who brings all their personnel baggage with them to work. Let me say, from the bottom of my heart, you can’t get rid of these people fast enough! They bother co-workers, whine at supervisors, bully subordinates, and treat temps or contractors with distain which leads us to the story of the “14,465.63 postage stamp.”

Many years ago (over 20) I worked (as a contractor) for a company we will call “Ramshead.” Ramshead had let its receivables run amuck for a while and when they were audited, the HQ gave them a marching order of “clean this up!” Ramshead contracted with a major accounting temporary firm to have 4 A/R specialists come out help them: Big D (me), Billy Bob, Steve, and Jill. We were escorted to a back office to tables (no desks), set up with phones and an aged trial balance, and told to collect all the past dues. We were in the same office as Tracy T (nicknamed tsetse fly-by the company’s founder-Mr. Jones)-the “A/P girl” whose goal seemed to be making everyone else’s life miserable by taking/ making many personal calls from the office and by bothering co-workers, whining at her boss, she had no subordinates, but she did treat the temps with obvious contempt.

Over the course of the 6 month project Jill was married and moved out west, and Steve became a cost accountant in Louisville, so for the last couple of months, it was just Billy Bob and I. Billy Bob had a great deal of experience with the auto industry and some good contacts. Billy Bob had taken on a special project to get about 15K of hopelessly messed up invoices paid. This was something that Ramshead personnel had little knowledge, but Billy Bob had succeeded in getting “buy off” to pay from a big 3 automaker. Our last day there, Billy Bob and I went to lunch and we when returned (and were going to pack up and leave early) there was Tracy T (TseTse) with a sour look on her face. “I understand that Anna in the mail room is letting you send in your time cards through the company postage meter,” she said flatly. We answered “yes,” she extended that courtesy to us. Tracy then proceeded to state that she was “revoking that courtesy,” and stomped off to “speak with Anna,” adding that if we were going to run our time cards through the postage meter, to “either leave 22cents, or go buy a stamp.”

Billy Bob and I stood there in stunned silence, but then Billy Bob spoke. “I had one thing left to do before we left here, mail the packet of big 3 invoices (there were about 20), but I am not going to do it now.” Instead Billy Bob flipped on the company’s paper shredder and proceeded with great delight to feed each corrected invoice into it. We then walked out the door; shook hands, and drove off. I never saw Billy Bob again; he had spoken of moving back to Atlanta.

About a month later, I received a call from the agency asking me if I had seen or heard from Billy Bob. I replied no, and related that he had spoken of moving back down south somewhere. I inquired why. Well, Ramshead was under the impression that they were going to get a large payment from an automaker and it never showed up. Snickering in my coffee, I said, “well, you will have to talk to Billy Bob, he was working it.”

The high maintenance employee had cost the company fifteen thousand dollars! I later heard from one of the sales people at Ramshead that it was rumored that Mr. Jones the company founder suggested to human resources that they find a reason to “swat the tsetse fly” and that she was finally terminated.

I know the in vogue thing in HR theory is to constantly rotate your bottom 20% employee, but for me if you have a high maintenance employee, get them on the express train out of your business, or your company too might buy a $14,463.65 postage stamp!

Accounting Tips For SMB Owners

January 8, 2009 by Andy Wendt Leave a Comment

Accounting Advice for SMB Owners When running an SMB there are lots of pitfalls one should watch out for, and accounting practices are one major concern. Many SMBs employ an outside accounting firm to “keep their books”, and this can be a very good idea. However, it is also wise to learn accounting basics or tips yourself. Here are a few accounting tid-bits that an SMB owner may want to know:

1. Protect your company from check fraud – Ask that your bank never cash a check made out to an individual, with the exception of payroll checks.

2 Keep up to date on all tax rules and changes in accounting rules – Government tax rules change on a regular basis. It is a good idea to keep track of these changes yourself. You should never blindly depend on your accountant.

3. Review all cost and expenses – You should review your invoices often. Don’t play catch up with your records; use them to find ways to cut costs and also to find better and cheaper suppliers. Doing this will save you money in the long run

4. Keep your business and personal accountants separated – Many business owners keep one account for personal and business finances. This can cause problems when tax time comes. Keep things separated, it will make things much more simple when it comes time to track your business finances, moreover it will make creating a personal budget less of a problem.

5. Double and triple check your numbers – Many company’s pay the same bill twice due to accounting errors, costing them large amounts of money and many hours of labor to correct. If you check, check and recheck your numbers you will catch errors before it’s too late.

6. Keep records of bills paid – Your financial records and invoices serve two purposes. One, they can be used for cost control. But two is much more important, they can also be used when tax time comes around.

7. Basic is a good thing – An accounting system should be simple and easy for you to use. Having more than one checking account when one will do can make things much harder. So keep it simple.

8. Accounting software – Accounting software is easy to use and most packages are affordable. Many of these programs, such as Quickbooks, will turn your receipts into financial reports, making it a great tool for any SMB.

9. Hire someone to help at the office – It is best to be well versed in accounting, but having someone to help you is often the best way to keep things in line. Accountants are an invaluable extra set of eyes helping to watch your money.

By: Randy Lewis