Monday, April 28, 2014

How to turn your business around Part III: Do you have the right personnel?

Another element which can hold a business back is not having the right personnel.  Every business has to sell and if the owner is unable or unwilling to sell, then a sales person must be hired.  The same is true for the bookkeeping/accounting.  It has to be done so the question is who is going to do the work?  The financial arena is one which is often neglected and is the frequent target of cutbacks.  While this area is not a profit generator, having accurate numbers is crucial for managing the business so the cost of maintaining the books for the company must be built into the budget. The decision as to whether to outsource certain tasks can be easier to make if the owner can see he/she is able to free up time for income generating tasks by hiring people to tackle non-income generating tasks.  

An important part of hiring the right personnel is to create an detailed job description with the tasks to be performed and the skills needed to perform the tasks.  Take time to determine what kind of personality the owner works best with is also important, especially if the business is a small one.  You don't want to have clashing personalities with your only employee!  If this is going to be your first hire, think about which family member you work the best with and what personality traits that individual has.  Also think about which people you have the most frequent conflicts with and determine what personality traits that person has.  

If this is your first hire, make sure you get some expert assistance in becoming an employer.  There are so many rules and regulations and paperwork involved so you will want help to get it right.  

Don't let you fear of being an employer hold your business back.  Do your homework, find the right person and get help with the paperwork and move your business to the next level of success.

Wednesday, April 16, 2014

How to turn your business around - Part II: Setting Goals

A successful turnaround plan can take a business from where you are to where you want to be.  To get to where you want to be, you need to determine what is working and what is not.  The ability to read financial statements is crucial to this task.  Every expense account needs to be reviewed and the spending levels questioned.  Can you save money by shopping around for a different vendor?  Have you done enough business with a vendor to ask for better terms or pricing? 
The key to the goal setting is to make them specific so having a budget is helpful at this stage as once you set your goals for spending levels, you can compare actual spending to your budget (goals.)   This comparison of actual to budget helps hold the business owner and staff accountable. 
You also want the goals to be reasonable, enough of a change to be a stretch but not so much that it is not achievable.  Cutting costs mindlessly does little good to a business as some spending is essential to the existence of the business.  Eliminating all marketing is not a good idea.  Paying for marketing and then not tracking the success of the various elements is not a good idea.  A good marketing plan requires the tracking of metrics to determine the success of each campaign.  Asking new customers how they came to the business is vital.  A business is throwing money away if it doesn’t track how customers find them or select them to buy from.
Revenue goals are also important and again should be specific and achievable.  Saying that you are going to double sales in the next year sounds far-fetched.  Saying you are going to increase sales 5% next month by initiating more cold calls to extend your sales area is much more reasonable. The key is to have specific steps to follow to achieve the sales growth.

Turning around a business successfully can be done with proper analysis and goal setting which includes the preparation of a budget and the determination of specific metrics to track, the comparing of actual results to the budget and the numbers of other metrics to determine the progress of the plan.

Friday, April 11, 2014

How to turn your business around

Turning a business around is a little like making a New Year's Resolution to get in shape.  You can't just make the resolution and expect to lose weight and build muscles.  You need a plan to achieve the goal and the drive to follow the plan.

The same is true for turning your business around.  If you're not achieving the sales and profits you hoped for, you need to determine what changes are needed to get the success your business should reap.  The first thing you need to do is learn to read your financials. Understanding where your money is being spent and where you can cut back is very important.

One area which is frequently overlooked by non-accountants is cash flow.  Understanding when the money comes into a business and when it goes out is even more important than how it occurs.  If your customers are paying you in 60 days, but you are paying your suppliers in 30 days, you are going to run out of money unless you have a line of credit or enough capital to keep the business afloat.

Hiring a consultant can be useful to provide an impartial, fresh perspective on your business.  One key to  the success of this relationship, is the owner's ability to take advise and implement it.  If you don't want to make the hard changes, don't waste your money on a consultant.

Experts on achieving New Year's resolutions are big on writing down your goals.  The same is true for business goals.  Write down specific goals for your business and make sure you also determine the steps needed to achieve the goals. We will get more specific next week.

Wednesday, April 2, 2014

How much detail do you need in your accounting system?

I can't tell you how often I hear people talk about how easy accounting is or should be.  The invention of accounting software certainly has improved the process.  It is not, however as easy as people think it is or should be.  What takes time and thought and experience is deciding what level of detail you need and how to best achieve this level of detail. More and more businesses use outside systems for sales, purchasing and payroll.  Full details on each of these areas reside in the systems so the question is what level of detail do you need in your accounting system?  If the systems don't integrate, you don't want to have to enter the information twice, once in the outside sales or invoicing system and again in the accounting program.  While it is nice when the systems do integrate, we often find that they don't so we have to figure out the best procedure to transfer the information.

I find that if the detail is in the outside system (your invoicing program has all the customer names, invoice details, contact information) then there is often no need to duplicate this level of detail in the accounting program.  What you want in your accounting program is the financial details-what were your sales in dollars, how much did you spend on advertising, what was your net profit for the month, what does your cash flow look like?  You can get this information without all the customer details or payroll details in the accounting program.

We are often called into a business when the process has become bogged down by trying to keep up with the work flow.  Working through where all the information comes from and creating a process to get the pertinent details into the accounting program while eliminating as much duplication of effort takes time, but it pays off almost immediately.  Doing research upfront into the various systems you will be using to run your business and making sure they play well together is always a good idea.