Alisa A. Mitchell CPA PAA great entrepreneur will always be on the lookout for ways to improve their business. Efficiency is a goal everyone wants to achieve when it comes to business because it can translate into less work and more profits. Here are five ways you and/or your staff can become more efficient in your business.
1- Get software-savvy.
Do you use the same software apps day in and day out? If you do, ask yourself how well you really know them? Are you able to just get by or are you a whiz with deep knowledge? If you’re just getting by and spending a lot of time wandering around or undoing things, you may want to take a course in that software.
The deeper our knowledge is in the apps we use every day, the more proficient we can be. This is true of all of your staff as well.
2- Reward new suggestions.
Your staff will be the first to know where there are bottlenecks and hiccups in your processes. Encourage them to speak up when they find something that could be improved. Listen to their ideas and reward the good ones. Implementing ideas from your business’s “front line” will increase its overall efficiency.
3- Watch your time.
How do you spend the bulk of your day? Working on new strategic projects, fighting fires, or a little of both? An honest evaluation of how you spend your time can yield many ideas about what’s going right and what needs work in your business.
Allocate at least an hour a day to work “on” your business instead of in it. That time is the only way your can move your business to the next level. If you’re the CEO, the focus should be more external than internal, more proactive than reactive, and more strategic rather than operational.
4- Avoid “bright shiny object syndrome.”
Are you easily distracted by an email (that you didn’t realize waylaid you into an hour of unproductivity), a web link, or a conversation? It’s crazy-easy to get sidetracked right in the middle of a task these days. It’s also easy to purchase something that looks great without doing your homework.
One way to avoid unnecessary purchases is to get three bids from potential vendors on all major purchases for your business. Make it a procedure so that you’re not lured into fancy marketing and items you might not ever use once you see the fine print.
5- One person’s trash is another’s treasure.
When you start to look around your office, you might be surprised at all the things you haven’t used in a while. Laptops that have been replaced, office supplies that were accidentally double-ordered, those folders you were going to use two years ago for a marketing campaign, even extra desks and chairs that are now empty: all of these items could be recycled to not only free up space but also get you some cash.
Which idea do you like best? Try it next week to improve your business efficiency.
A quick glance is all you need to check your fuel gauge, speed limit, engine temperature, and RPM when you’re driving down the road. Your car’s dashboard is designed to focus you on what’s important and what you need to know to have a safe trip.
Your car’s dashboard items, if they applied to business, would be called key performance indicators or KPIs. Unlike a car’s, the KPIs of your business vary depending on your business goals and what’s important to you. Common ones might include your cash balance, how fast you get paid, how much revenue is coming in, and whether you’re making plan. There are literally hundreds of them to choose from, and many of them are not derivable from your financial statements, such as number of orders, client satisfaction levels, and employee turnover.
Would it be useful to have a dashboard of KPIs for your business so you can know what’s working and get alerted to what needs focus? Here are the steps to creating a dashboard for your business:
- Decide on the KPIs you want to track. Selecting 6-10 to create and track is a good place to start.
- Select a tool that will provide you with the KPIs in the format you desire. There are many great add-ons to your accounting software that will instantly crunch the financial KPIs for you and present them in insightful formats, including charts, graphs, dashboards, and reports.
- Create any new processes to calculate the new KPIs and get them entered into the dashboard app.
- Hold a review meeting to go over the KPIs and determine any action based on the review.
There are many great KPIs available right in your accounting system, which might be plenty to get started with. And there are some real gems outside your accounting system that will take a bit of work to calculate. In any case, we can help you through this process. Feel free to reach out to us any time to discuss the possibilities of having a dashboard in your business.
If you have employees, you have the distinct honor once per year of being part of a worker’s compensation audit. You likely receive a form in the mail, an email request, or a phone call that will ask you about your payroll numbers and employees for the prior year.
Worker’s compensation is an insurance program that covers employees in the case they get hurt on the job. Each employee receives a classification code that describes the type of work they do, and a rate is figured based on the classification and its risk factors.
If you’ve hired anyone throughout the year, you might need to get a new classification by contacting your provider. If you have employees working in different locations (especially different states), that matters too.
The audit form will typically ask for gross payroll numbers by employee or by category or location of employee. That’s easy enough, but seldom does the policy run along your fiscal year, so the payroll figure needs to be prorated to match the policy period.
Your numbers need to tie back to the numbers reported on your quarterly payroll reports for both state and federal. The provider may also want copies of your 941s and your state payroll reports.
Once you’ve submitted your numbers, the insurance provider will calculate whether they owe you or you owe them additional fees.
The worker’s compensation audit happens every year (even if you pay worker’s comp premiums each pay period, some companies still request an annual audit). It’s not difficult, but it is time-consuming. If this is something you’d like our help with, please feel free to reach out.
The products and services your business sells make it unique. The same thing is true of how these items are set up in your accounting software. Whether you’re using QuickBooks Online or something else, getting your products and services set up right can impact the quality of the information you can get out of your accounting system.
Here are the types of items you can set up in most systems.
Inventory item
Inventory items are used in retail and wholesale businesses. They are physical items that the system can keep count of for you. You can purchase or make the items, and the associated cost is usually tracked when a shipping receipt or bill is entered. They are sold when a sale is made and an invoice or sales receipt is entered.
Transactions using inventory items impact a lot of accounts on both the balance sheet (cash, accounts payable, accounts receivable, and inventory) as well as the income statement (cost of goods sold, sales, and returns). The inventory item can be tied to default sales and purchase accounts in most systems.
Non-inventory item
QuickBooks offers a type of item called a non-inventory item. There’s a big difference in that non-inventory items do not have quantities associated with them. They don’t increase or decrease the inventory account. But they are able to be tied to default sales and purchase accounts like inventory items above.
Examples of non-inventory items include items purchased for a specific jobs, such as a contractor purchasing appliances for a custom home, items you sell but do not buy, such as an ebook or other digital product, and items you purchase but do not sell, such as shopping bags.
Service item
A service item is a special type of non-inventory item. There are no quantities, which makes sense because services are not physical items. They also are only connected to a sales account and not a purchase account.
With service items, you could set up service packages or hourly rates.
Bundle
A bundled item is a group of items that were designed to be sold together. For example, if you sell a gift basket of coffee products, you would bundle the items used to create the basket.
Assembly Item
An assembly item is a special type of inventory item where the quantity is tracked, but it differs from an inventory item in that it can’t be sold separately because it is a component and not a whole item. Assembly items are available in larger accounting and inventory apps, such as QuickBooks Enterprise, and are used in conjunction with a Bill of Materials or other build feature.
An example is a set of shelves. The assembly components are the individual shelves and the frame pieces that you may want to keep counts of. An inventory item that contains the shelves, the frames, and other parts is “built” from the assembly items. The nuts and bolts could be non-inventory items or assembly items, depending on whether you wan to keep count of them or not.
Sales Tax
Sales tax is a very special type of item used on an invoice or sales receipt to calculate sales tax due on the order. In many accounting systems, it’s usually kept in a separate list from the other product and service items. Rates can be entered for each sales tax jurisdiction.
Other
Some systems have an “other” category to capture items such as freight, shipping, handling, and other add-ons to the sale.
Tracking Profitability
Setting up the right type of products and services is critical to matching costs and revenue for accurate insights into gross margin. This section of your accounting system is also the one that’s most different from industry to industry and company to company. Be sure you get professional help from experts who know both the software and your industry for best results.
Fixed assets are special kind of assets in your business. They include land, buildings, equipment, furniture, and vehicles that your company owns. While we frequently look at expenses to cut costs, fixed asset management is another place we can look to find ways to better utilize our resources and, in some cases, improve our profits.
Fixed asset management is a discipline that requires keeping good records of the assets a company owns. In the case of furniture and equipment, many businesses place an asset tag on the item and assign it a number that goes in a spreadsheet where data is kept about the item. There are also software apps more sophisticated than spreadsheets that track all of the fixed assets for a company, including original cost, depreciation method and history, and tax treatment.
You never know how many of an item you might have until you record and count them. How many computers (and computer parts) do you have lying around your office? Extra desks and chairs? Maybe you even have extra office space or extra land.
Part of being a great entrepreneur is fully utilizing all the resources you have at your disposal. Where can you put to better use the extra assets you have? Could you sell the surplus items? Or donate them for a write-off? Do you have extra room to rent out to a tenant, earning rent?
Sometimes we’re so focused on operating the core of our business that we don’t see what else is a money maker right in front of us. In addition to focusing on income and expenses from operations, consider the resources you have in your fixed assets.
At the very least, consider developing a spreadsheet that tracks the major items your business owns. Or reach out to us, and we’ll help you develop a fixed assets schedule and tracking process for your business.
And if you do sell some of your fixed assets, be sure to reach out to us so we can help you book the transactions properly.