The short answer to this question is YES! Incidents of cybercrime have been problematic for a long time, but have soared exponentially since the start of the pandemic. If the reputation of your firm depends in part on your maintaining confidential client records secure and private, then this insurance is a must. It’s not a matter of “if,” but “when” your private business info will be breached.

Finding the Right Insurance

The best place to start is your current insurance agent or a general insurance broker that you trust. Cybercrime policies are separate policies that cover specific acts, and you will need to read the policy carefully to see exactly what you are protected from. You should also distinguish between personal and business policies; you may want both.

In a business policy, some of the items you want to consider being protected against include:

• Data breach
• Ransomware attack
• Spoofing and identity theft
• Wire fraud
• Civil fines
• Lawsuits
• Costs of notification, reputation repair, forensics and data restoration, credit monitoring, and other potential damages

A good policy will cover some or all of these costs:

• Business interruption costs
• Data breach costs
• Extortion costs
• Crisis management and public relations costs
• Data recovery costs
• Computer replacement costs
• The cost of reputational harm

Just like any other insurance, you will need to complete an application to obtain a quote. Some of the standard questions include:

• Type of products and services sold in the business
• Type of electronic data stored on its computer systems
• Whether laptops are password-protected
• Whether you have written network security and privacy policies in place
• Whether you have physical security procedures in place
• Whether you have the most current software and processes to keep it upgraded
• Whether you have backups
• Whether you monitor unauthorized attempts to access systems
• Whether you are in compliance with PCI DSS (Payment Card Industry Data Security Standard), HIPAA (Health Insurance Portability & Accountability Act), and GLBA (Gramm-Leach-Bliley Act)
• Whether you have a written document retention and destruction plan in place
• Whether you have encryption enabled
• Whether third parties are involved in data handling
• Whether you have a process to check copyrights of materials you use
• Whether you have a risk management education program for employees
• Your current insurance policies
• Whether you’ve had a breach in recent years
• Whether you’ve had any lawsuits or claims in this area
• Whether you use a firewall
• Whether you use anti-virus protection
• Whether you have an employee/third party off-boarding process that terminates access to computers and data

As you can see, the application process itself is an excellent way to “cross your Ts and dot your Is” when it comes to putting safeguards in place for your business. And of course, your premium will be less expensive when you have these items in place. It goes without saying that your premium will be less expensive if you get insurance before you are attacked, so that you have a clean application.

A key part of owning a business is managing enterprise risk effectively, and a cybercrime policy will go a long way toward protecting your hard-earned investment and giving you peace of mind so you can sleep better at night.

Pick up just about any public company’s most recent annual report, and you’ll find a section on ESG. ESG stands for Environment, Social, and Governance, and the trend of not only considering, but also measuring a company’s sustainability performance on ESG issues has become key. A new generation of investors is driving this movement as they become more discerning when selecting companies to invest in.

While ESG is still predominately a large company issue, small companies can benefit from being aware of this trend. But first, here is a very brief summary of the ESG components:

Environment

Measuring a business’s impact on the environment means taking into consideration topics such as climate change and sustainability. How many natural resources does the company use, and are they replenishing them as they use them? If they are polluting, how are they cleaning it up?

Social

The social impact of a business is the broadest of the three areas. It includes a multitude of topics, including:

• Diversity and inclusion in the workforce and with suppliers
• Consumer protection related to its products
• Human rights, including workforce issues such as working conditions and minimum wage, especially overseas
• Animal welfare in product research and development

Governance

The area of governance measures the leadership of the company when it comes to topics such as ethics, transparency, compensation issues for both executives and employees, and employee relations in general.

Accounting for ESG

The accounting industry is developing and adopting standards for how to measure a corporation’s sustainability performance. As of this writing, the IFRS (International Financial Reporting Standards) Foundation has proposed the creation of the Sustainability Standards Board, which will help to set standards for ESG in 140 countries.

This move will better align the current financial performance of the company with the new sustainability measures. However, all of this is many years off, as there are many organizations that have developed standards for numerous components of ESG that need to be consolidated and adopted.

In the meantime, we do know that positive sustainability performance by a company drives positive financial performance. There are many ways small businesses can participate in ESG’s benefits.

ESG and Small Business 

ESG can have a positive impact on your company’s value, company culture, who you hire, the vendors you select, and the customers that select you.

As an example, if you plan to do business with a large company, mirroring their ESG values can help you align with them, giving you an edge in the selection process. Similarly, when you communicate your ESG values and contributions, you are more likely to attract employees with the same individual values, making for a better fit.

While there are a lot of things a small business can do, here are just a few ideas:

• Disclose your starting hourly rate, if it’s well above your state’s minimum wage, to attract better quality hiring candidates.
• When purchasing vehicles, consider electric or hybrid.
• Match employee nonprofit contributions, and give them time off to volunteer.
• Practice transparency when it comes to executive salaries or financial results.
• Write and post a diversity and inclusion statement.
• Conserve electricity by closing off unused spaces, turning off lights when not in use, and switch from gas to electric appliances when possible.
• Optimize service routes to reduce fuel consumption.
• Donate excess food to shelters (in the case of restaurants).
• Protect customers’ private information with privacy processes and policies.
• Make product components recyclable, purchase supplies that are recyclable, and train employees to recycle.

Add your own ideas to the above list.

Ask yourself how your business measures up when it comes to ESG, and make a plan to make the changes you want to see in your business.

Getting your business loan can be an exciting step in the growth of your business. Recording your loan properly in your accounting system usually requires special handling by your accountant. Your loan statement will provide the information you need to get it booked properly.

You’ll need the following pieces of information about your loan:

• Total amount borrowed
• Date of loan
• Date of first payment
• Payment amount
• Term of loan
• Number of payments
• Interest rate

The full amount of your loan should be recorded as a liability on your business’s balance sheet. Two liability accounts should be set up: one for short-term and one for long-term. The offset is either an increase to cash or the recording of new assets like a car, truck, or building.

Each payment you make consists of two parts: interest and principal. Interest is an expense and is recorded in an Interest Expense account. It will reduce your profit. Principal is the amount you pay toward paying off the loan. It reduces the liability account where the loan is recorded. It does not affect your profit, but it does improve your liquidity with each payment you make.

The interest and principal amounts are not the same for each payment. Early loan payments consist of higher interest and lower principal amounts. As you reach the end of paying off your loan, the interest portion is smaller and the principal becomes larger. An amortization schedule shows you the exact amount of interest and principal for each payment.

Each time you make a payment, cash is reduced for the entire amount of the payment. The offset is split between interest expense and your loan liability, using the amounts in the amortization schedule. When you code your loan payment, you can use the amortization schedule to get the correct amounts to both of those accounts.

In a simple service business with no assets except cash, your cash balance can mimic your profit level. When you introduce loans and new, non-cash assets with depreciation expense, that won’t be true anymore. You might wonder why you have no cash and more profits, or the opposite might be true. This is why it’s a good idea to understand how these transactions affect your Balance Sheet and Income Statement as well as your business’s overall financial health.

At year-end, your accountant can make correcting entries if needed between the loan balance and interest expense. They can also adjust the short-term and long-term liability accounts to reflect the correct balances for the upcoming year. The amount of principal reduction planned for less than one year goes into the short-term liability, and the rest goes into the long-term account.

If you failed to make payments or made them late, your accountant can make those allocations as well using manual journal entries.

Often, when you get a loan, you have also purchased some type of asset, such as a car or land and building. Those assets should be recorded on your books correctly as well. You should have some type of closing statement or purchase contract that has the details for your accountant. They will also compute and record the correct amount of depreciation for the asset type.

Your accountant can speak with you in more detail about your specific situation and can better explain the interplay between cash and profits if you are interested. Feel free to reach out to us anytime.

A refund policy defines the processes and rules for when customers want their money back and want to return the products or services they purchased from you. It’s often required by your credit card or shopping cart company as part of maintaining PCI (Payment Card Industry) compliance. Plus, it’s just a good, fair business practice to post one.

As a business owner, you can set your own refund rules. The important thing is that they are communicated clearly to the customer in advance of their purchase.

A good refund policy answers the questions that customers have when the item they purchased from you does not work out. It reduces conflict and ambiguity, and improves customer service. It also helps your employees work with customers’ expectations, by allowing them to refer to the posted policy that a customer can see with their own eyes.

Here are some of the components you’ll want to address in your refund policy:

Items to be returned: Which items can be returned and which can’t? Some products, after opening, like food, simply can’t be returned safely. You might still honor a refund of money even if the item can’t be returned or re-sold.

Condition of items: You may want to stipulate for some returned items that they are in a condition to be re-sold. That means the customer may need to return packaging as well as the item in order to qualify for a refund.

Time limit: How long from the date of purchase do customers have to return the item and ask for a refund? Common time limits range from 7 to 30 days.

Shipping: If shipping cost is involved, who will pay it?

Processing time: How long will it take to receive a refund once the item is returned?

Money: How will the money be returned? Will it be on the credit card used? What if it is cash or a check? Or will you give store credit only?

Requirements: Will customers need to fill out a form, request refund approval, or use a specific shipping return label?  What instructions do you need to provide them for proper return requests and processing?

Fees: Will there be a re-stocking fee, cancellation fee, return processing fee, or any other fee that reduces the amount of the refund?

The first step is to decide the answers to all of the above questions. You might be tempted to have a “no returns, no refunds” policy, and this could be the right thing in many cases. However, the refund policy is a chance to build trust with the customer, and a rigid one could cause lost sales. Often a “no questions asked” refund policy can increase sales in the long term. Only a very tiny percentage of people will take advantage of it.

Once you have determined the answers to your refund policy, you can write up the policy. Post it on your website and near your cash register or checkout areas of your store.

Next, make sure you have a smooth process in place for handling returns on a timely basis. Most stores have a separate checkout area or customer service desk to process returns so that they don’t slow down the regular check-out lines. Employees should be trained on how to talk with the customers, how to accept the returned items back into inventory for resale or return back to the vendor, and how to use the cash register or shopping cart system to process the returns.

You can even turn returns into a positive experience for everyone. If an item is the wrong size, it may be able to be converted into an exchange for a different size so the sale is not lost. A great sales person can also provide upsell opportunities for new or similar items to the returned item. Proactively, your store can sell warranties at the time of purchase for selected items.

The more customers you have, the more chances there are of having a customer who asks for a refund. Be prepared with a clear, fair, well-documented refund policy.

Measuring and encouraging customer retention is important for businesses in many industries. There are a couple of great measures to see how you are doing in this area. We’ll explain those and provide some tactical tips in this article.

Measuring Customer Retention

The most common metric to measure customer retention is the customer retention ratio. The best report to run to gather the data for this is a Revenue by Customer Summary Report. Each customer should be listed in a row of your spreadsheet, and each year’s revenue for that customer should be listed in the columns.

From this report, you can get the following numbers. Let’s use 2020-2021 as our measurement period.

A = How many customers you had with sales in 2020

B = How many customers you had with sales in both 2020 and 2021

The formula is B / A, which will give you the retention ratio. The formula A – B will give you a count of how many repeat customers you lost.

C = How many customers you had with sales in 2021, but not 2020

Answer C will tell you how many new customers you gained in 2021. This doesn’t inform customer retention metrics, but it does help to know how many lost customers you replaced.

Now dollarize your figures.

D = 2020 total sales of customers you had with sales in both 2020 and 2021

E = 2021 total sales of customers you had with sales in both 2020 and 2021

The formula E / D measures the percentage increase or decrease in sales of your repeat customers, so that you can see as a trend whether they are buying more or less from you. A lot of factors go into being able to influence this number, including upsell and cross-sell opportunities over time, sales communications, your business model, and products offered to repeat customers.

One final measure is customer lifetime value, which is easy to pull. Run your Sales by Customer Summary Report for all of the years that you have in your accounting system, then sort by highest revenue. Your most valuable customer over the years included will be listed at the top of the report.

Want to compare how you’re doing with other businesses? Industry-standard value ranges for each of these metrics vary greatly and are beyond the scope of this article. However, your best competitor is yourself, and learning how you can improve your own results year after year can be time very well spent.

Encouraging Customer Retention

No matter what industry you’re in, the best thing you can do to improve customer retention is to maintain an email list of customers, so that you can communicate with them on an ongoing basis. Letting them know when you have sales, new products and services, and even new staff members can go a long way toward building long-term relationships.

Other ways to promote customer retention include:

• Your business model – a VIP membership or subscription model with perks and special access and bonuses can work for numerous businesses to maintain customers
• Rewards programs
• Special events
• Special gifts
• Thank you notes
• Special discounts or exclusive offers
• Social media presence, especially groups and active engagement where questions are encouraged and answered

Anything to make your customers feel special will work to increase retention. Think about what you can do to increase customer retention, and make a plan to execute your ideas. If you’d like to find out more about calculating these metrics, please reach out.