Five Modern Marketing Methods You May Not Know About

Older marketing methods like direct mail and cold calling just don’t work as effectively as they did a few decades ago.  There are two reasons for that:

1. The trust level between people has dropped more than 20 percentage points in the last few years; people are more skeptical and untrusting of each other than ever before.

2. The amount of marketing messages we receive on a daily basis has increased exponentially, to the point where most everything is simply treated as white noise.

What is there to do if you still need more clients?  Sharpen your marketing skills and try out these newer ideas from the 21st century:

Website Landing Pages

A landing page is a web page that is not listed in your website menu.   It’s a hidden page that advertises something very specific, such as a free report, a service, a niche, or a sale item. The landing page includes a description of an offer and a call to action, such as a Buy Now button, or a signup form where you enter your name, email, and possibly phone numbers.

You can drive traffic to your landing page through social media, online ads, or email notices.  Once someone has taken action, a sale team often follows up with a phone call or an email to encourage further action.

Free Trials or Samples

Although there is nothing new about free trials, they are certainly popular and they still work very well.  You might think they are only for magazines and software companies, but it doesn’t have to be that way.

You can offer free food samples or free servings if you own a restaurant, catering or other food service company.  If you own a training or consulting company, you can offer a free course or a free consulting hour.  Physicians often offer free pharmaceuticals, and dentists offer free toothbrushes.  Think about how free trials or samples can be used in your business to attract new clients.

Webinars 

The online equivalent of a class or lecture is a webinar.  If your company sells a product or service that requires a lot of client education, you can deliver this information via a webinar.  The benefits to offering a webinar are that people do not have to get dressed up to go anywhere, you can have people from all over the world attend, and people will be able to get to know you and how you think so they can make a decision about whether they want to do business with you.

To offer webinars, you’ll need webinar software such as Citrix GoToWebinar or WebEx.  You could also use Google Hangouts for free, but the number of people attending is limited.  Invite people you know via email announcements or social media.  You can make a sales offer during the webinar as well.

Email

Email is a great way to make sales offers to people, especially if you have a list of people who have given you permission to send emails to them.  If you send out a monthly newsletter, include a Product of the Month or a Deal of the Month.  It’s much less expensive than direct mail, and often there is a much better response rate.

Online Ads

If placing ads in newspapers and magazines is not working in your industry any more, then try placing online ads.  There are lots of choices.  You can go with Google AdWords and Facebook Ads.  Twitter and LinkedIn have ads as well.

You can also try banner ads.  There is a special type of banner ad called retargeting.  Have you ever been on a company’s website, then left it and started seeing advertisements for that company on the websites you visited later?  That’s called retargeting and it’s very popular.

Before you create your marketing plans for next quarter, give these ideas some consideration.  You may get more bang for your marketing dollar.

Cool Tech Tools: Google Drive

Google Drive, which used to be called Google Docs, is a great way to collaborate with team members and stakeholders that are in a different location than you are. Here’s a quick introduction (or refresher) on how to use this powerful collaboration tool.

Google Drive is a browser-based application that allows you to create documents, spreadsheets, presentations, and other documents that reside in the cloud. They can easily be shared with others, and both of you can see and edit the document at the same time.

Using Google Drive

To get started, you’ll need to have (or set up) a Google account. If you have a gmail account, you can use it. Log in to your gmail or Google account, and at the top right corner of your screen, you will see a square made up of nine small squares. You can click on it and select Google Drive.   Alternately, you can go to drive.google.com.

Time to Create

Once you’re on the Google Drive main page, you’ll see a large red CREATE button on the top left. Click it to create your first Google document. Select among the choices of spreadsheet, document, presentation, and more. Give the document a title, and start editing. The commands are very similar to Microsoft Office®, so there’s no learning curve.

Time to Share

When you are viewing a document, you’ll see a blue SHARE button on the top right side of your screen. Click it to enter the email address of a person you’d like to have see and/or edit the document.

You can tell who else is viewing the document at the same time you are because you’ll see a colored box and perhaps their picture on the top right side. You can also tell where their cursor is in the document; it will show up in another color.

As you create documents, you will see your list growing under My Drive. If someone else created the document and shared it with you, you’ll see it under Shared With Me.

So Many Uses

Here are a couple of ideas on how you can use Google Drive.

• As a bulletin board for your employees or customers

• For status reports on projects

• As a to-do list when multiple team members are involved – they can check off the items as they go

• As a collaborative note-taker when you’re brainstorming with another person

• With a client when you need to explain part of a document – you can copy and paste from Word or Excel to Google Drive (but check to make sure everything came over)

Google Drive is great for productivity and makes communications easier. Try it and let us know how you use it.

Does Your Accounting Department Have Holes In It?

Does Your Accounting Department Have Holes in It?

You’ve got someone to do your federal and state income tax returns, and you have a bookkeeper. So that’s all that a small business needs when it comes to having an accounting department, right?

Wrong.

Large companies have many functions in their accounting departments, and small and mid-sized businesses need many of the same functions as well. They just won’t need as many staff to handle them. Many of these functions will fall on the CEO, but a smart CEO will find a way to delegate some of the accounting duties to free their time up.

Here are just a few of the things you’ll want to make sure that you have covered in your small business accounting department:

Accounting Software Expertise

Who do you have on your team that can identify opportunities for making your accounting function run more efficiently? The solutions could include training on your current system or could be more comprehensive such as identifying a new accounting system that will save a tremendous amount of time and money.

Let your accountant get to know your processes because they may know of some software applications that can do what you need faster, better, and cheaper. Manual data entry is a hot spot of potential; today, you can find software, scanners, and even smartphones and tablets that can automate the data entry, even if all you have is paperwork to enter.

Business Performance Advice

Are you getting accounting reports that tie to the areas where you have challenges and issues? If not, let your accountant know where those areas are. They may be able to suggest some reports that will provide you with insight and enlightenment.

If you are receiving reports with lots of numbers that you’re not quite sure how to interpret, ask your accountant for help. They can not only help you interpret the numbers, but they can also put the report into a graphical format so that it’s more visual for you.

It’s All About the Revenue

The number one challenge of most small businesses is to attract more business and generate more revenue. Your accountant can help you study your revenue patterns by presenting “what if” tools that can help you see what happens when you change price, impact mix, or adjust volume.

Keeping the Cash Flowing 

If your business seems to stampede through cash, you’re not alone. A cash flow forecasting report is in order so you can plan ahead and be ready for the valleys and hills.

Beyond Compliance

If your accounting department focuses on compliance work alone, such as taxes and recordkeeping, you’ll miss out on allowing it to become a profit center of sorts. With these added functions, you’ll discover new actions to take in your business to drive profitability. You’ll have clarity about decisions like price changes, and you’ll know your accounting function is efficient and not wasting time and money.

Take a look at your accounting department, and let us know if we can help you plug any of the holes.

The Short And The Long Of It

The balance sheet is one of the main financial reports for any business. Among other things, it shows what a company owns, what they owe, and how much they and others have invested in the business. One of the characteristics of a balance sheet is how it separates what you own and what you owe into two categories based on timeframe.

Current and Long-Term

You may have seen the Assets section of your balance sheet divided into two sections: Current Assets and a list of long-term assets that might include Property, Plant, and Equipment, Intangibles, Long-Term Investments, and Other Assets.

Current Assets

Current Assets include all of the items the business owns that are liquid and can easily be converted to cash within a year’s time.   The most common types of current assets include the balances in the checking and savings accounts, receivables due from clients that haven’t paid their invoices, and inventory for sale.

Long-Term Assets

The remaining assets are long-term, or assets that cannot easily be converted to cash within a year. Property, Plant, and Equipment, also termed Fixed Assets, includes buildings, automobiles, and machinery that the business owns. You might also see an account called Accumulated Depreciation; it reflects the fact that fixed assets lose their value over time and adjusts the balance accordingly.

Intangible assets are assets that have value but no physical presence. The most common intangible assets are trademarks, patents, and Goodwill. Goodwill arises out of a company purchase. Investments that are not easily liquidated will also be listed under Long-Term Assets.

Current Liabilities

Similarly, liabilities are broken out into the two categories, current and long-term.

Current liabilities is made up of credit card balances, unpaid invoices due to vendors (also called accounts payable), and any unpaid wages and payroll taxes. If you have borrowed money from a bank or mortgage broker, the loan will show up in two places. The amount due within one year will show up in current liabilities and the amount due after one year will show up in long-term liabilities.

Long-Term Liabilities

The most common types of long-term liabilities are notes payable that are due after one year, lease obligations, mortgages, bonds payable, and pension obligations.

Why All the Fuss Over Current vs. Long Term?

Bankers and investors want to know how liquid a company is. Comparing current assets to current liabilities is a good indicator of that. Some small businesses have loan covenants requiring that they maintain a certain current ratio or their loan will be called. The current ratio of your business is equal to current assets divided by current liabilities. Bankers like this amount to meet or exceed 1.2 : 1, although this can vary by industry.

Next time you receive a balance sheet from your accountant, check out your current and long-term sections so that you’ll gain a better understanding of this report.

Influencing Your Word-Of-Mouth Results

Just about every business relies on “word-of-mouth” marketing to get the vast majority of its clients. If this is true for your business, then it just makes sense to figure out how to boost your referrals from all sources. Referrals are almost always easier to sell and they keep your marketing costs low. But how can you do that?

The first step is to make sure that you know who your best current referral sources are. If you’re not already asking the question to new clients “How did you find out about us?” then I’d recommend you implement that right away.

If you do know the answer to that question for each customer, then you can make a list of your referral sources. Take a look at the list, and see what these referral sources have in common. Here are some questions to ask:

• Are they all customers?

• Do they all have a profession in common? For example, are they all lawyers, massage therapists, plumbers, or pediatricians?

• Have you properly thanked each of these individuals? If not, you can send out a thank you card or take them to lunch with no other agenda.

The last question to ask yourself is “where can you find more of the same type of people that are referring you?” If you discovered that you get a lot of business from dog groomers, then you may want to consider visiting every grooming salon in your zip code. You may also want to present a speech to a dog groomers Meetup group that you find.

You really can be proactive about your referrals so that business comes to you more easily. Try these tips to boost your referral sources in your business.

Are Your Workers Contractors Or Employees?

If you have workers in your business, you likely made a decision when you hired them as to whether they should be an employee or a contractor. If all you hire are employees, then you have nothing to worry about. But if you hire contractors, there may be some financial risk you may be taking that you may not know about.

Any person that runs a business as a sole proprietor that you pay money to for services rendered is considered a contractor. One difference between an employee and a contractor is that an employee receives a W-2 and a contractor that you have paid more than $600 per year by check receives a 1099. There are many other paperwork differences, but that’s the major one.

One of the biggest mistakes when a business owner hires a worker is thinking that they can decide to classify the worker as a contractor if they simply want to. Unfortunately, it’s the IRS that decides on the classification, not the worker or the business owner.

What’s the Risk?

There is no risk from an IRS standpoint to classify a worker as an employee instead of a contractor. There is significant financial risk if you incorrectly classify a worker as a contractor when they should be classified as an employee. You may be liable for back employment taxes if the IRS re-classifies a worker from contractor to employee, and this can go back many years.

To calculate your risk, take roughly 20 percent of the payments you made to contractors. This amount plus late fees and penalties can add up to what you could owe the IRS if you are mis-classifying workers and the IRS finds out.

IRS’s Employee vs. Contractor Rules

The IRS focuses on three factors to determine whether a worker should be a contractor or an employee: behavioral control, financial control, and type of relationship.

If you control both what and how a task is to be done, you should probably classify your worker as an employee. If you can control only the results you want, you may be able to classify the worker as a contractor.

There are many other rules about this classification, so be sure to check with your tax accountant for more information. Also, for those of you that love tax research, here’s a link that gives the full details of the IRS rules: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee

Having a successful business is all about taking calculated risks; however, you may not have known the risk you’ve been taking with contractors that you’ve employed. For the IRS, misclassifying workers is a “red flag” area, meaning they are paying extra attention to it. If you feel like you might be taking a risk that you don’t want to, please reach out and let us know how we can help you with this.

The One Question To Ask Each Day

As a business owner, you’re likely torn in a hundred different directions every day. It can take up most of the work day just fighting fires, serving your customers, and answering employees’ questions. It’s super-easy to lose sight of what you can be doing to move your business forward the most.

That’s when “the one question” can come in handy. It’s something you can ask yourself at the very beginning of each day, even before you check your email.

The one question is, “What’s the highest payback thing I can do today that will boost my profits?”

It’s not fighting fires or answering routine employee questions or even serving current customers. Although those are all important and essential, none of them will take your business to the next level.

It could be meeting with a power partner or referral source that sends you a lot of business, designing the next campaign that will bring in a higher level customer, or researching new products to sell. It’s going to be a task that gets you working “on” your business instead of “in” it.

If you like this idea, consider writing the question on a sticky note and posting it to your bulletin board so that you can see it every day.

Try asking yourself this one question each day: “What’s the highest payback thing I can do today that will boost my profits?” Then do it, and watch your business grow.

Five Ways To Streamline Data Entry

Are you manually entering data into your accounting system? If so, there may be a way to enter that data that’s faster, cheaper, and better. Data entry automation has come a long way. Here are five common ways to automate data entry so that it no longer has to be manually entered.

1.  Bank feeds or online banking

• If you’re still entering your bank transactions, the good news is you have an opportunity to save a significant amount of time and money on your accounting. Almost all banks and many credit unions provide interfaces with your accounting system so that checking account, savings account, and credit card transactions can be automatically entered directly into your accounting system. There are two ways to do this:

  • a. The older way is through online banking which can be started by working with both your accounting system and the bank. The fee is usually $25 per month, with additional fees for bill pay.

    b. The brand new, more modern and completely free way is through bank feeds, which are available when you move to a cloud accounting system such as QuickBooks Online or Xero. Bank feeds are not available in desktop accounting systems.

2.  A smart scanner

• If a lot of paper flows across your desk, you can scan it in using a smart scanner that can parse the document and enter it straight into your accounting system. You will usually have a chance to edit and accept the data, which is far better than entering it from scratch.

3.  Import and export functions

• If you need to get data from one place to another, such as from a point of sale system to an accounting system, then using the export and import features of the software may be the most efficient method. There are also software apps that help you scrub the data and get it ready for the receiving system.

  If you ever convert from an old accounting system to a new accounting system, this method will come in handy to get you historical data moved.

4.  Interfaces and programmers

• If you have a high volume of transactions that need to move from one place to another on an ongoing basis, it may make the most sense to employ programmers who can build an interface. Alternately, some systems can talk to each other already; they just need to be plugged into each other correctly.

5.  Smartphones, tablets, and field service hardware and software

• If your sale occurs out in the field, don’t wait to get the data into your system when you get back to the office. You may be able to complete the sale right out in the field, so that when you get back to the office, you can call it a day instead of keying in the day’s work.

  Mobile accounting apps are where to look for this form of data entry automation.

No more manual data entry

In 2015, consider taking on the goal of no more manual data entry. If we can help, let us know.

Do You Have A Revenue Plan For 2015?

A great way to start the new year is to get clear on exactly how you can make your revenue goal number. A revenue plan is the perfect tool. You’ll need to be proficient in Excel, and if not, you can work with your accountant on this very important and enlightening spreadsheet.

Start by listing all of your products and services, listing one product or service in each row of a blank spreadsheet.  Enter the description in the first column and use the second column for price. You may be able to export an item list from your accounting system, which will save a lot of time if you have a lot of products and services that you sell.

Use column three to enter the number of items you want to sell for the year. Column four should contain formulas to multiply the price by the volume to get revenue for each service and product you sell.

You can then sum the numbers in column four to generate your projected revenue for the year.

Getting Industry-Specific

Depending on what industry you’re in, you may need to make some adjustments to the above simplified revenue plan. If you work in construction, you’ll need to list your projects instead of products and services, and you’ll need to make adjustments if your project will go longer than one year. You’ll need to add a couple of extra column to determine the percentage of the project that will be complete and billable in 2015.

If you bill by the hour, you’ll need to calculate how many hours of service you’ll be able to charge for and factor that into the equation.

If you have sales, you’ll need to figure a discounted price. I recommend you have an extra line for each product that sells at a discount and allocate the total amount you plan to sell at each price. If that’s too much work, you can calculate an overall discount rate and apply it to total revenue at the bottom of the worksheet.

Use the 80-20 Rule

If you sell a lot of products and services, consider bundling them into subgroups to keep your plan cleaner and at a higher level. Spend only the amount of time that’s worth the insights you’ll gain from doing an exercise like this.

A Prosperous New Year 

Once you’ve created the plan, you can now take action based on insights you’ve gained. Perhaps you’ve got a whole new set of revenue resolutions to accomplish in 2015. If you need help constructing or analyzing this plan, feel free to reach out to us and let us know how we can help.

Planning For A Fabulous 2015

The holiday month of December brings celebration as well as reflection for all the events that occurred in 2014.  It also gives us great hope for a new fabulous start in 2015.  Here are three ideas to start 2015 with a bang.

1. Find a focus for the year.

   Instead of getting into the rut of making and breaking resolutions, consider having a focus for the entire year.  Choose your focus from among things like:

   • Developing a department in your business, such as your sales, marketing, operations, HR, admin, or another.  The focus will be on building or expanding the department you’ve chosen to work on.

   • Changing your company culture to a trait or aspect you want to be known for.  Developing the trait will be your focus.

   • Building a relationship with an individual or a group of people related to your business.  The relationships are the focus.

2. Live by a theme for 2015.

   Your theme could be an emotion or expression such as gratitude or compassion.  It could be a color – purple – just for fun.  You might adopt a favorite quote or religious verse or even song.  Your goal for the year will be to embody your theme and/or bring it into other’s lives as well.

3. Do the one big thing.

   Are you holding back on a huge dream for yourself?  Then take steps in 2015 to move closer to it.  Make 2015 your year to do the one big thing that’s been weighing heavily on your mind.  Just think how you’d feel if you finally did it; your life would be forever altered.

Happy 2015… Write your focus, your theme, or your one big thing on dozens of sticky notes, and plaster them everywhere.  Mark your calendar and to do list with reminders and milestone checks.  Make art out of your sticky notes, and post them on the refrigerator door and your office walls.  That way, the reminder will be physically with you all year.

We wish you a happy and healthy new year to you and yours.

It's Bonus Time

Year-end is a great time to think about rewarding your staff for a job well done in 2014.  Here are a couple of quick tips to help you make the most of bonuses while protecting your business and cash flow.

1. Timing.  Would you be better off timing bonuses in this year to reduce 2014-year taxes or to wait until next year so they impact the 2015 tax year?  It’s something to consider before you dish them out.  Do what’s best for your business.

2. The pretty holiday envelope.  It might be tempting to hand out envelopes of cash but it’s oh-so illegal.  Making payroll in cash is illegal in most states, and bonuses are part of payroll.  Stick to the payroll system to generate your bonuses even if it’s boring, and you’ll stay out of trouble.

3. Pesky deductions.  Bonuses are subject to payroll deductions just like any other payroll check, so please don’t forget that.  If you write a check for $1,000 to an employee, you will be liable for taxes on the gross-up, and this ranges between 20% to 30%.  So that $1,000 bonus just turned into $1,200 or $1,300, which is quite generous but might not be what you really meant!

4. Sticking around.  Bonuses are a great motivator and can help keep employees from leaving, thereby reducing your turnover costs.  If possible, announce a bonus structure ahead of time so employees will have something to work toward and “earn.”

5. Invisible costs of bonuses.  Bonuses will drive up your workers compensation, state and federal unemployment costs, and any other costs that are related to gross wages, so do take all of that into consideration when issuing bonuses.

6. Beyond money.   Money is a great motivator, but you may want to provide non-cash bonuses to your employees for extra special memories.  If you do, your tax accountant can help you get the transaction recorded properly.         

Bonuses are fun for everyone, and we hope these tips will help you make the most out of them in your business.

Catching Up With Your Contractors Before 1099 Time

In a little over a month, it will be 2015 and time for year-end accounting chores.   One of those chores is getting your 1099s out, and now is a good time to tie up loose ends so the year-end process can go smoother.  Here are some tips to do just that:

1. Go through your vendor list and make sure each contractor that you are paying is marked in your accounting system as a contractor eligible for a 1099.

2. Obtain a W-9 form from each contractor if you haven’t already, and update the address and federal EIN for each contractor.  This will ensure that you have the most current information for each contractor and that they will receive their 1099 promptly.
   
   If you need to make any changes in the way you are paying them or withholding taxes, you’ll have a chance to update that information as well.

3. Ask your contractors for a worker’s compensation certificate.  If you don’t have one, you might need to add their payment totals to your payroll amounts on your worker’s compensation audit worksheet.

4. If your accounting system doesn’t break out payment type, you’ll need to do that on a separate spreadsheet before you input the 1099 amounts.  Contractors paid with a check will require 1099s.  Contractors paid via PayPal or credit card will not.   If you have paid them both ways, you will need to break it out.  You can do the bulk of the work now and post the remainder of the year after year-end.

5. Consider re-evaluating each contractor as to whether they meet the employee versus contractor tests from the IRS.  If you are accidentally misclassifying a contractor who the IRS defines as an employee, you will be responsible for social security, withholding, and other payroll taxes, which can add up to huge numbers for small businesses.
   
   This is a “red flag” area for the IRS, meaning they are looking to “bust” employers.  However, they also have a Voluntary Classification Settlement Program for people who have been misclassifying workers in the past and want to come clean.

Following these five steps will put you in great shape for year-end.  And if you need help catching up with your contractors or with any related issues, please let us know.

What Is Real-Time Accounting (And Why Should You Care)?

Real-time accounting is when your books are caught up to the present and you know exactly where you stand with your account balances, revenue, and profit.  It’s truly doing your accounting in real time.

The opposite of real-time accounting is getting your books done once a year (or worse, being years behind).  When you wait to do your books once a year, say at tax time, you lose the power of being able to monetize opportunities in real time.   Some examples are realizing your prices are too low and your profit margins need adjustment, seeing what’s selling well and restocking sooner than later, or discovering a worker is not productive based on your pay rates and prices.

Today’s cloud accounting systems and bank feeds allow you the potential for real-time accounting, where the benefits include:

• Better cash flow management

• Faster correction of pricing, hiring, stocking, and margin mistakes, saving money and increasing profits faster

• Faster identification of any tax liabilities as well as the ability to reduce or eliminate penalties from paying late or underestimating taxes due

• Ability to see whether you are making a profit or a loss

• Potential to catch fraud or identity theft much faster if you become a victim

• Lower accounting costs when errors snowball over time

• More peace of mind

• Ability to be more proactive in your business management, capitalizing on opportunities that show themselves in the numbers

Consider moving to real-time accounting if you haven’t already.  For example, if your books are done annually, moving to quarterly or monthly services will begin to provide the advantages listed above.

How Understanding Assets Vs. Expenses Can Make You Rich

Assets and expenses both have a “debit” balance on the financial statements, but that’s where their similarities end. Spending on one can make you rich and spending too much on the other can leave you broke.

An expense is money you may need to spend, but after a year, there is nothing lasting to show for it. An asset is a tangible resource that is still worth something after a year or more and that belongs to you or your business. The best assets grow in value over time, but some lose their value too. Real estate typically goes up in value, while a car loses value, or depreciates heavily, in its first few years.

The best example of an asset versus an expense is spending on a mortgage versus rent. When you pay a mortgage, you own more of the property than you did last month. One day, you can sell your ownership in the property and get cash or another asset in trade. When you pay rent, there’s nothing left at the end of the month. There’s no accumulated value.

Generally speaking, spending on an asset builds or at least better preserves your wealth. Spending on an expense drains your worth because you don’t own anything at the end.

The path to building your wealth is to spend on assets when you have a choice and minimize expenses when you can.

In the book “The Millionaire Next Door,” one of the top examples to build wealth is to avoid replacing your car as long as you dare. It used to be a habit for some families to replace their car every two years. With today’s reliable models, you can go between five to ten years without having to replace your car. Although a car lasts more than a year and is considered an asset, it still loses value every year.

Investing in assets and reducing expenses will build your business’s net worth and increase profits. Look for ways you can apply this to your business and watch your money grow. As always, reach out if you’d like to know more.

What's Your Hourly Worth?

Time is the most precious resource on the planet, but sometimes we don’t treat it that way. In our businesses, it’s important to get everything done, but we can also get overwhelmed with all the little things that need to be done to take care of customers. One of the big differences between highly successful entrepreneurs and less successful ones is how they manage their time: the more successful simply value it more and treat it as the scarce commodity it is.

A great exercise to bring this home is to track what you do in one day. You can write a diary as you go through the day or simply recall what you did at the end of the day. List the tasks you did; then write the hourly market rate of each task you did next to the task.

Did you spend time on low-level tasks such as email cleanup, filing, order-taking, order filling, or handling routine customer questions? Or did you spend time calling up power partners, dreaming up new products or services, or restyling your marketing message so that it’s more impactful and reaches more customers?

What was the average hourly rate of the tasks you did today? Multiply that by 2,000 hours and compare it your gross revenues. If your gross revenues were higher than the value of the tasks you did today, then your revenue might be stagnant. If your annualized day was worth more than your gross revenues, then congratulations; you’re moving up and giving yourself a raise. Your business is likely growing.

If you’d like a raise, then the first thing to do is to start delegating the lower level tasks that are eating up all your time. They might be a comfortable way for you to pass the time, but they could also be keeping you stuck, overwhelmed, and moving toward burnout.

We all have the same amount of time each day. If we can free up our time to focus on more powerful action items that move our business forward instead of the chores that clog our progress, then our success will accelerate.

Navigating Nanny Taxes And Household Payroll Compliance

Time is precious for most of us these days, and often, we need help at home so we can have more time to run our businesses or careers.  That may mean hiring help for personal tasks such as caregiving for the young, elderly, or special needs family member.  When you first hire a household worker, there’s a whole different set of rules to follow compared to hiring for business.

Underground Payroll

There is a whole industry of “underground” payments made to domestic workers.  Individuals such as housekeepers, regardless if they live with you full time or work once a month, are wrongly paid as contractors, and often in cash, most of the time.  According to the IRS, in court case after court case, these workers should be paid as household employees, even if they are part-time.

Cracking Down

One of the focus areas for the IRS is this area of household payroll.  The current and strong drive to bring this underground payment system to the light is caused by several new pieces of legislation.  A few states have recently passed a domestic workers bill of rights.  Changes in minimum wage and overtime requirements are going into effect in 2015.  And the health care act requires workers to document their wages before they can qualify for a subsidy, so this can bring more workers asking you to get them fully documented on your books.

Getting It Right

The need to hire household workers is rising due to the silver tsunami – a term describing the aging of the populous Baby Boomer generation and their growing need for health care, which will truly stretch our system based on their numbers.

Expert Guidance

When your family makes the decision to hire household workers, seek expert guidance so that you can get through the maze of compliance in this area.  You’ll want to be sure you learn about the risks and compliance issues in this area so that you can properly protect your personal wealth as well as your peace of mind.  And if we can help, please reach out and let us know.

How To Read Your Balance Sheet

The Balance Sheet is an important report in your business’s financial statements.  Most small business owners are unsure of what all of the numbers mean on this report, so let’s see if we can shed some light on what they mean.

A Summary of Balances

One big characteristic of a balance sheet is that it represents one date in time, for example, 12/31/2014.  The numbers represent balances, and since the balances change daily, a balance sheet only represents one point in time versus a range.

Three Parts

There are only three parts to a balance sheet, and the easiest part to understand is the assets, or what you own.  Most balance sheets start off with cash balances, and these typically represent what you have in the bank less any uncashed checks that could reduce your account once they come in.

If customers owe you money that you have invoiced but not collected, you might see an Accounts Receivable balance on your balance sheet.

If you sell products, the cost of all of them that you haven’t sold yet and that you may have stored in a warehouse is in the Inventory account.

If you own equipment, furniture, cars or trucks or something similar that lasts for years, you will have a balance in Fixed Assets for what you paid for these items.   If it’s been a while since you’ve owned them, you may have a Depreciation account, and when you net the two, your Fixed Asset values are reduced.

All of the above are assets and they are listed in the first section of a balance sheet.

What You Owe

If you owe money for taxes, to vendors, or to employees, then it will show in the Liabilities section which is the second of three major sections of a balance sheet.  Day to day unpaid bills are in an account called Accounts Payable.

If you have bank loans, they usually each have a separate account like a bank account does.   Each bank loan account represents the principal due on a loan (the interest you pay goes to another place).

Equity  

The final section of the balance sheet is Owner’s Equity.  It is the section that will vary the most depending on the type of entity your business is set up as.  For example, if your business is a corporation, then there will be a common stock account which will represent the original amount of money you put into the business; it will match the Articles of Incorporation that you drew up when you incorporated.  This amount will rarely ever change for the life of the business.

There is also usually an account called Paid-in Capital which is how much additional money you’ve put in or taken out of the company beyond the common stock balance.

A corporation will also have a Retained Earnings account.  This reflects accumulated profit (or loss) through the years of operation.

If your business is set up as a partnership, the equity section will include an account for each partner that represents their balance in the firm, which is the net amount of money they have put into the business over the years plus or minus the business income or loss through the years.

Keeping It Simple

These are the very basics of the numbers represented on your balance sheet.  If you have questions about any of the numbers, please feel free to reach out and ask.

Is There An App For That?

The technology side of the accounting industry is rapidly changing and expanding.  Literally hundreds, if not thousands of new companies and new software applications have sprung up to help small businesses automate their processes and save time and money.

The best way to profit from all of this innovation is to first identify where you can best use the technology in your business.  Here are three places to look:

1.     Paper Chase

What business tasks are you still using pen and paper for?   Look what’s on your desk or in your filing cabinet in the form of paper, and that will be your next opportunity for automation.  For example, are you still hand-writing checks?   There’s an app (or two) for that.

Sticky notes and to do lists have been replaced with Evernote.  Business cards you collect can go in a CRM (customer relationship manager).  All of your accounting invoices and bills can be digitized and stored online.

Make a list of all the manual and paper processes you do every day and look for an app that can make the task faster for you.

2.     Fill the Gap

Take stock of what systems you already have in place.  The opportunity to fill the gap is where you might have systems that should talk to each other but don’t.  If you need to enter data into two different places, there may be a chance to automate and/or integrate the systems or data.  For example, your point of sale or billing system should integrate well with your accounting system.  A few other examples include accounting and payroll, CRM and accounting, inventory and accounting, project management and time tracking, and time tracking and payroll.

The more your systems integrate and work as a suite, the better.

3.     Mismatched

It could be you have your systems automated, but the systems are not the best choice for your business requirements.  If your systems don’t meet many of your business requirements, it may be time to look for an upgrade or a replacement.

If you are performing a lot of data manipulation in Excel or Access, this might also signal that your systems are falling short of your current needs.  Look where that’s happening, and you will have identified an opportunity for improvement.

Look in these three areas in your business, and I bet you’ll not only find an app for that, you’ll also find some freed up time and money once you automate.

Shortcut Your Management Time With Exception Reporting

Do you spend a lot of time reviewing stacks of reports each month so you can get the information you need to make decisions?  Do you find out after the fact that something went wrong in your business and that if you had known about it sooner, you would have made different decisions?

If so, you might benefit from a special type of reporting called exception reporting.  Exception reporting highlights red flag areas that you need to take action on.  It contrasts with regular reporting, which lists lots of data that you may or may not need to take action on.

Here’s an example:  How often do you check your bank balance?  You probably check daily or even more, right?  Do you really need to?

Ask yourself when do you really need to know about your bank balance?  You need to know when it falls below a certain amount, or when you don’t have enough to cover imminent bills, right?  Why not stop checking your balance all the time and replace it with an alert that will send you an email under the conditions and criteria you set?  This will save you time.

Some exception reports are already built into some accounting systems.  A couple of good examples are the A/R aging report which shows past due invoices that have not been collected and the inventory re-order report that lists inventory items that reached their re-order points and need to be re-ordered.

There are many ideas to generate exception reports:

• Missed and upcoming deadline tracking such as project due dates, tax forms due, and payroll due

• Employees on vacation

• Bills overdue

• Expiration date tracking like end of lease and insurance policy renewal dates

• Large variances in budget to actual reports

To take advantage of exception reporting, here are a few steps:

1. Identify the reports you currently receive that you review but take no action no matter what.  Do you really need them?  If not, throw them out.  If so, ask yourself what trigger would have you taking action and change the regular report into an exception report that reports on that trigger.

2. Think about what data you access all day that is not in a report or easy to use format.  Can you create an exception report or alert out of it and save yourself time?

3. What information would you like to start receiving that you don’t have now?  It should be something that you would take action on if you knew about it.  Can you create an exception report for these new information needs?

Try exception reporting, or take it to the next level of implementation in your business, and watch your time free up and your management decisions sharpen.

Six Common Payroll Mistakes To Avoid

Getting payroll done has gotten so much easier than it used to be for small business owners.  But there are still some minefields when it comes to state and federal compliance.  We’ll take a look at six of them in today’s article.

1.     Business or Personal?

A great admin might want to help you in any way they can, including personal errands.  But time spent having your admin fetch your dry cleaning and drug store prescriptions is not deductible as a business expense, even if it makes you more productive at work.

Be sure you separate your business payroll from personal payroll to avoid tangling with the IRS on this issue.

2.     New Hire Report

It’s not every day that a small business needs to hire additional help, and the New Hire Report is easy to overlook.  It’s due to your state within a certain number of days of your new employee’s hire date.  Some payroll companies will file it for you, and some won’t, so it’s best to check so that you don’t make the common mistake of forgetting to file this report.

3.     Worker’s Compensation

When you have employees, you need worker’s compensation.  When you bring on your first employee, you’ll need to overcome this learning curve of figuring out what you need.

Even if you’re a veteran employer, you may have coverage holes in your worker’s compensation coverage.   Do you have employees who work at home?  Are you sure they are covered?    In some states, employees have to be specifically named in the policy before they are covered to work at home.

Be sure you ask the right questions so there’s not a risky gap in this essential protection for employers.

4.     Posters

There are both state and federal notices that must be posted for employees to be able to read.  California is especially zealous and liberal about issuing fines (up to $17,000 per location) for employers that do not have their posters, well, posted on workplace walls.

5.     Employee versus Contractor

The proper classification of a worker as a W-2 employee or a 1099 contractor has long been an area of scrutiny for the IRS.  The IRS has rules as well as court cases that have established the guidelines that exist in this area.

If you classify a worker incorrectly as a contractor when they should be an employee, then you can be held liable for paying employment taxes on that contractor.

6.     Bonuses

Bonuses can often be a spur of the moment thing or something that’s done at the very end of the year when we’re occupied with the busy holiday bustle.  It can be easy to forget that the bonuses need to be run through payroll like all other wages so that the proper deductions and taxes can be calculated.

Use these six items as a checklist to avoid these common mistakes as well as reduce your business risk in the payroll compliance area.