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.

Summertime Strategies For Your Business

Summer is a great time of year for most businesses to pause for just a little while to take stock, congratulate yourself on what you’ve accomplished so far this year, and make big plans for your future.  Here are five summertime strategies to help you regroup, reassess, and rejuvenate your business.

1.     Mid-Year Review

If your business runs by the calendar year, 2014 is already more than half over.  This is a perfect time to stop and reflect where you’ve been, what you’ve accomplished, and where you want to go next.  You can make this process as informal or formal as you want.  Some firms hold complex retreats; you may simply need some quiet time on a weekend where all your family is busy doing something else.

If you’ve never done any planning and feel like you need a guide, consider the book, The One-Page Business Plan written by Jim Horan.

2.     Take a Vacation

There’s nothing better to rekindle your creative juices than to get away from the business for a while.  Summertime is when most people take vacation, so if your business is not having its busy season, this might be a good time to go away for a while.

If you’re anxious about being away from your business, you’re not alone.  In your annual planning process, plan for and block out your vacation time way ahead of time.  Book the reservations with no refunds several months in advance so that you won’t chicken out at the last minute.  There is life beyond your business, and you will be a better business owner when you take regular breaks away.

3.     Celebrate

Take time to pat yourself on the back and congratulate the people around you for the goals you’ve reached and the efforts your team has made on your behalf.  We all could use more praise and more celebrations in our lives.  Perhaps you can organize a party, or if you are not the partying type, a quiet word individually with your team can go a long way, maybe more than you know.

4.     Prune Your Projects    

Is your plate too full?  Most of us would say “yes” to that question, so the next step is to ask yourself what you can afford to stop doing that doesn’t make sense.  Is there a project or two that can wait?  If so, decide to stop stressing about not getting it done and give yourself permission to put it on the back burner for now.

5.     Focus

Ask yourself what one thing you could do today that will make all the difference in your profits, revenues, goals, or simply peace of mind.  And get that thing done.

Try these five summertime tips to rejuvenate your business.

Does Your Small Business Need A CRM?

Have you ever stayed at a hotel and then returned, finding that they have stocked your room with everything you asked for the last time you were here?  Your special allergenic pillow was already waiting for you, you were asked if you would like a dinner reservation made just like you always do the first night, and there were even extra hangars because you always need extra hangars.  None of this would be possible for the hotel if it didn’t have a CRM, customer relationship management, system in place.

Would your clients be impressed if you remembered all of the details about your last conversation, their last purchase, or their preferences?  If so, your business might benefit from a CRM system.

Businesses that have more than 30 or so clients may benefit from a system that allows you and your employees to enter detailed information about each client interaction that they have.  It can work for both current and future clients, i.e., prospects.  A CRM is basically a great big customer database at its core.  It contains master file information on a customer or client, such as name, company, address, contact info, and custom fields.  It is also transaction-driven in that you can log activity such as calls, meetings, proposal dates, and more.

A good CRM system is also integrated with your other internal systems, such as your accounting or POS system or both.  In some CRM systems, you can see invoice and payment history, so that when a client calls in, you can also peek to see whether they owe you money or what goods they ordered that they may be calling about.

There are literally hundreds of CRM systems to choose from.  The gold standard for large companies is SalesForce.com; however, some small businesses use it as well.  SugarCRM is the largest open source CRM, meaning its programming code is available to the public.  ZohoCRM is one of the largest small business CRMs and offers a suite of products for small businesses.  And Act! is also very popular and plays well with social media.

Before choosing a CRM, decide what you want it to do and how you will be using it.  One of the most important aspects of profiting from a CRM is to make sure it gets used, and that takes some habit-changing from you and your staff.  Once you have your requirements, you can evaluate the software options available, and choose the one that works best for you.

When your clients start talking about how great your service is and how much attention you pay to the details they care about, you’ll know your CRM is paying off for you.

Oops: Do You Owe Sales Tax And Not Realize You Do?

One of the side effects of our last economic slowdown was in state government budgets; states searched hard for new income, and many of them found a great source by cracking down on sales tax collections.  Their new hot buzzword:  nexus.

Nexus means a connection that a business has with a state, and it has to do with a form of presence.  In the sales tax world, you owe sales tax to a state if you have nexus in that state and you are selling taxable items.  The scary part for small businesses is what makes up nexus.

A Small World

Globalization and technology together have produced dramatic shifts in the way businesses can look today.  Not only can we access a pool of local talent to staff and grow our businesses, we can employ almost anyone around the world to work for us. Hiring employees or contractors located in other states can stretch our nexus to include that state.

As an example, if your company is located in Illinois and you hire an employee that works from her home in Nevada, you might have nexus in Nevada and Illinois, and you might owe sales tax in both places.  Sales tax nexus is not the same as state income tax nexus, but the presence of a worker in another state is a possible trigger for sales tax nexus.

Taxable in One State, Not in Another

The taxability of services has grown rapidly as states look to balance their budgets after Federal cuts and other shortfalls.  Not all services are taxed equally across states.  Web design services are taxable in Texas, but not California, as one example.

Some states have smaller jurisdictions such as counties and municipalities, making for a total of 10,000 jurisdictions in the U.S., not just 50.  Alabama, Colorado and Arizona, for example, have statewide rules as well as taxability rules for localities within the states.

Innocuous Survey Can Trigger Audit

You might receive a form that looks like a survey and asks innocent-looking questions such as how many employees do you have and what state do they work in.  The surveys don’t look like they are from a state government but they might be.  It’s their way of getting you to admit nexus.    Please do not let a worker fill these out; it could expose you to a huge liability.

Minimizing Sales Tax Audit Risk

Because of the high dollar impact on the profitability of your business, it’s best to get a sales tax professional involved in helping you determine the taxability of your items as well as interpreting nexus.  Many states are hiring auditors and aggressively pursuing businesses, so due diligence in this area is prudent.

If we can help in any way, please reach out and let us know.

Seven Profit-Boosting Entrepreneurial Habits

As an entrepreneur, you are responsible for shaping your business success.  Any habits that sabotage your success in your personal life can often carry over to your business.  Becoming aware of these is the first step to success.

Here are seven success-boosting habits to double-check against your own.

1. Being able to say “No.”  

   Do you say “yes” to too many things that don’t serve your life purpose, help your family, or move your business forward?  If so, you’re not alone.  Saying “yes” in a weak moment when you feel like you can do it all can be a downfall for many entrepreneurs.  It can also distract you from success if you are not working on the right things for you.

   You may need to re-evaluate the value of your time and your priorities.  Practice making smart decisions by having a structure and a higher purpose that helps you decide what you should and shouldn’t do with your time, money, and life.   And if you tend to be one of those who says “yes” to everything, you may need to practice saying “no” in front of the mirror to break your habit.

2. Hiring fast and early. 

   The best time to hire is just before you need your new team member.  It can be easy to put off hiring if you fill with dread when you think about large stacks of resumes and endless phone calls.  Not hiring soon enough can cost your business in reduced service and sales.  The smartest entrepreneurs stay ahead of the game in this area.

3. Strategizing proactively.

   How much time do you spend in reactive mode versus proactive mode in your business?  Reactive mode includes answering emails, fighting fires, serving clients, and managing employees.  Proactive mode includes developing new products and services, creating and implementing your revenue plan, and training employees.

   Sometimes we have to really push ourselves to look beyond the daily fires.  One way to do that is to plan time every day for proactive activities and be ruthless about keeping that time slot on the calendar.

4. Setting tight scope and polite boundaries with customers.

   Successful entrepreneurs set clear boundaries when it comes to delivering their products and services to customers.  Especially in service companies, it’s not always clear to the client what’s included in a fixed fee contract unless it’s clearly spelled out.

   If you are asked to do something that’s not included in the contract, you now have a choice.  Do you give it away for free, or do you have a change order process where you can easily provide an estimate for that extra work?

5. Measuring results.   

   Only what can be measured can be improved, and smart entrepreneurs know this.  Track — in real time, not a year later — what’s important to you.  New customers, new leads, closed sales, revenue per day, sales per day, monthly net income, certain costs, profit margins, profit per customer, profit per job, and profit per location are just a few of the many metrics you can choose to track for your business.

   Once you measure it, you can now set goals to improve it.

6. Curbing irrational spending.   

   Invest in things that will last, such as your own education, great systems, team training, and assets that you really need.  Avoid spending on items that are used up quickly, such as elaborate entertainment expenses that don’t generate significant revenue, excessive utilities, and stopgap equipment.

   This area can be a tough one to evaluate objectively because there can be emotion and attachment involved in the spending.  Let us know if you need help in this area; we can help you look at your spending with fresh eyes and provide a new perspective.

7. Maintaining focus.

   Great entrepreneurs have clear focus.  If you have too many projects going on at once, you end up delaying all of your project completion dates, and nothing gets finished.   Ask yourself, what’s the most important thing I can do today?  And work on that until it’s done.  Then ask yourself the same question again, and wash, rinse, repeat your way to success.

Seven Habits

Which of the seven habits are you best at?   Celebrate your natural gifts while keeping an eye on the habits you need to work on.  That will move you to the success you deserve.

Five Essential Components Of An Entrepreneur's Compensation

The two major ways entrepreneurs can take money from their business is through draws or by receiving a paycheck.  The type of entity in which their business is set up will determine which method can be used. In either case, entrepreneurs need to be careful not to shortchange themselves.

Especially if you’re running a service business, it’s easy to initially think you can do well with a similar hourly rate that you earned as an employee.  Here’s a quick list of five elements that should be included in the compensation of every entrepreneur:

1. Competitive pay 

   If you were doing the same work for a company that hired you, what would your pay be?  Are you making at least market equivalent or better?  A lot of times, as entrepreneurs, we tend to focus only on this piece of our compensation when we set our pricing, and that’s a big mistake. It’s only 75 percent of what our total pay needs to be.

2. Profit.

   As an entrepreneur, you take extra risk when you own your own company, and you should be compensated accordingly.  Your capital is tied up in your business and should be earning a good return in addition to your reasonable compensation.

3. Benefits

   Employees get vacations, health insurance, and bonuses; and you should too.  This should be part of your compensation package as an entrepreneur.

4. Taxes.

   Although our individual taxes are not deductible as business expenses, we need to compensate for them so that we’ll have enough cash for our living expenses.  It’s a huge chunk too.  We work about three and a half months every year, just to pay for our taxes.

5. Retirement plan

   When you work for yourself, no one is going to fund your retirement for you.  Although the Social Security program helps a lot of seniors, it’s up to you to set additional money aside for a comfortable future.

Complete Compensation

Your compensation should include all of these components.  If it doesn’t and you feel like you can’t afford to pay yourself that much, then your pricing might not be reflecting all of these items correctly, you might have a volume problem, or your business model may need some adjusting.

It’s normal to take a smaller paycheck the first few years as we’re building our businesses, but if you’re still doing it after several years or constantly having cash flow issues, then something may be wrong.

If you’d like our help in this area of your business, please reach out and let us know.

Make sure your future is bright and financially secure by including all five components in your entrepreneur compensation.

Is It Time For Spring Cleaning Your Business Files?

How much time do you spend each day looking for information about orders, customers, vendors, or employees?  If it’s a lot, a little spring cleaning might pay off.  Here are five quick tips to assess and improve your information access.

Your Librarian

Large companies often have a librarian on staff that is in charge of stored documents, both physical and virtual.  It’s not a bad idea to have this function in your small business, although you certainly don’t want to devote an entire headcount to it.

Today, a company librarian might be in charge of the company’s document portal, which is a very secure area where company documents can be stored.  It might be on the company server or in a secure area of the cloud.  There are companies that offer secure file storage, accessible through document portals.

The librarian will also be in charge of creating recordkeeping policies and procedures.

What’s in a Name

One such procedure that brings order to chaos is setting naming conventions for client files and folders.  Set consistency by using a naming standard such as having a client file name always start with the last name of the client followed by a birth date, or something else unique.

It will save time each time you look up a file because you’ll always know where to look.  Even if it’s only seconds saved per lookup, that time will add up to minutes and hours saved over a year.  That will save you labor costs.  A naming standard will also look professional in front of the client.

Permanent vs. Transactional

Get uber-organized by separating your important long-term legal papers from your transactional documents.  Long-term papers such as your corporate by-laws and tax returns should have a special place away from your day-to-day invoices and receipts.  Also keep major purchases such as settlement documents from real estate transactions in a special file that you’ll keep for many years.

Your daily transactional files should be batched up by month or year and stored accordingly.  You’ll be able to delete these files after their retention period is up, while you’ll want to keep your long-term legal papers almost forever.  You still won’t be able to throw away your annual documents too soon – some agencies require you to keep transactional documents for as long as 11 years.

Paper or Paperless

What percentage of your business documents is scanned and stored online?  If you’d like to increase this percentage, then make a plan to convert your paper into scanned documents you can access online.  So that it’s not such an overwhelming task, break it down into smaller chunks:   start with one area of your business at a time or one vendor at a time.

Purchase a scanner for everyone in your office, and you’ll soon find your office getting more and more paperless by the week.  You can also have fun taking pictures of receipts on your cell phone and uploading the documents to your document portal.

A Backup Plan

So that you don’t lose your documents to a catastrophe, theft or any other disaster, make sure you have a backup of all of your documents so you are able to recover them.

This is where paperless shines over paper, because there is always risk of fire with the latter.  It’s also where a secure document portal beats your company server anytime because of the elaborate layers of security that are required for secure commercial data centers.

After you implement these five tips, you may not even need to do a spring cleaning.  You’ll be organized and efficient, and that’s good for business.

Nine Tips To Dazzle And Retain Your Top Customers

Your top customers are your most important customers in your business, and it’s important that you hang onto them if at all possible.  It’s much more cost-effective in most business models to retain repeat customers than it is to find new ones.   Here are nine tips you can use to dazzle and delight your top customers:

1. Know who they are by name.  
   Do you know which customers generated the highest sales for you last year?  If not, let us run a Sales by Customer Summary sorted by descending revenue for you to be sure.  Your top customers will be listed on the first lines of this report.  These are the customers you should be contacting at least once a month, having lunch with periodically, or doing a few extra things for.

2. Know who sent the most business to you.  
   Do you track referrals?  If not, you may want to consider adding a field to your accounting system if there’s room.  At the least, you can use the report generated above and add a column to it labeled referral source.  Drop in the person’s name that referred the customer to you.  Once you’ve completed the field, you can re-sort it to total up the dollar value of each referral source.

   You should be in monthly contact with these folks, just as if they were your top customers and even if they’re not a customer at all.  Make a plan to lunch with these individuals and/or do something extra for them periodically to let them know you appreciate their referrals.

3. Ask customers how they would like to be contacted.  

   Do your customers prefer to be contacted via email?  Phone? Text? In person?  If a customer hates being called on their cell phone, wouldn’t you want to know?

   Everyone is different, so find out by asking, and make a note in their file.  Also find out how often they’d like an update.  Some worriers might want to know daily, others prefer a short monthly email.  The best time to do this is during customer onboarding or at the time of the first sale.

4. Find out what customers need from you.

   At the end of each project, ask your customer two things:

   a. How could we have served you better?
   b. What else can we do for you?

   Then empty your mind and really listen.  Take copious notes, don’t defend yourself, and thank your customer.   Think about what they said, and implement what makes sense.

5. Provide a customer service contact and great support.  

   Does your customer know who to call when they need to talk with someone in your business?  If the customer has a follow up question on their purchase or service, let them know what to do ahead of time so they won’t feel lost.  This will make the customer feel at home and will have them coming back because of your great support experience.

6. Practice “consumption marketing.”  

   Consumption marketing is helping the customer fully consume their purchase from you.  The more likely they are to get benefits from your product or service, the more likely they are to come back for more.

   Help clients use your products and services to their fullest by creating a consumption marketing program that includes tips sheets, educational aids, how-to videos, instructional blog posts, and the like.

7. Develop multiple relationships.

   If your customers are from large companies, strengthen that business by meeting multiple buyers within the company.  If one employee leaves, it won’t be such a crisis to your account if you know multiple people in the company.

8. Say thanks promptly.  

   Send a thank you note to a new customer or referral source within a week of their purchase or referral.  Acknowledge their action quickly and generously so that you make a great personal impression.

9. Create and implement a client retention plan.

   Be proactive about customer retention by planning touch points throughout the year and systematizing the contact process with your top customers.  This can be as simple as taking your top 12 customers out to lunch, one each month, or as complex as planning some kind of touch point – a newsletter, email, or thank you note – once a month for each of your top clients and referral sources.

   Try any of these nine tips to dazzle your top customers and boost your customer retention for stronger sales.