Alisa A. Mitchell CPA PAMany people have complained about the worker shortages this year. If you need additional workers in order to grow your business, here are some ideas for your consideration.
Where to Look for Workers
We may think of workers as only being employees, but there are a lot more options if you’re open-minded. Here’s a list of places to find workers of all kinds:
- Recruiters
- Employment agencies
- Online job portals, such as Indeed, SimplyHired, and ZipRecruiter.
- Social media, including LinkedIn Jobs
- Your own website, email list, or employee referrals
- Temp agencies
- Specialized online job portals that cater to your industry and business type
- Virtual assistant organizations
- Day labor online sites and pickup areas
- Job matching sites such as Upwork, Fiverr, and Freelancer.
- Colleges, when you need interns and entry-level workers
- Your local unemployment office
- Small business development centers
- Virtual assistant agencies or businesses
- Chambers of Commerce and other business organizations
- Professional organization directories where a license is needed, such as hair stylists, dentists, or CPAs
- Friends, colleagues, competitors, and neighbors; your own personal or business network
- Craigslist and local classified ads
- High school guidance counselors if you want to hire straight out of high school
- Outsourcing to a company that provides the labor that does what you need
- Volunteer matching sites
Options for Adding Workers/Labor
There are many ways you can increase labor in your business. The obvious is hiring employees. Beyond employees, there are many more options than you might first think:
- Contractors, where you have a contract for a particular job and meet all of the IRS and other compliance requirements
- Temp workers, where you “lease” an employee who stays on the temp agency payroll or hire them outright with a limited term of employment.
- Part-time workers on your payroll
- Companies that you outsource the work to and contract with as vendors to provide a particular service. They may outsource your labor needs or simply have labor as a component of the product or service you have contracted them to supply.
- PEO, or professional employer organizations, act as a client’s employer and hire their employees as well as manage payroll and other HR compliance tasks.
- Interns, which are unpaid positions. Check your state and local rules for laws regarding hiring interns.
- Volunteers. This is common if you have a nonprofit organization.
With all of these options available, it should be a bit easier to find ways to add labor and grow your business.
If you’re a business owner who wants to continually find ways to increase your profitability, then you’ll want to learn about direct and indirect costs. Breaking out your expenses into direct and indirect categories can help you arrive at the most profitable volume of sales for your business.
Direct Expenses
Expenses that fall into the direct cost category are ones that relate directly to the items you sell. Here are some examples.
- If you have a flower shop, the cost of the flowers is a direct cost. So is the cost of vases, ribbons, cards, and the labor to put the arrangements together.
- If you are a law firm, the labor and any materials or supplies spent on serving a client is a direct cost.
- If you own a pool building company, the costs of the concrete, tiles, filter, pump, and labor to build the pool are direct costs.
- If you run a toy store, the purchase of the toys is a direct cost.
Direct expenses, unlike indirect expenses, will vary proportionally to the volume of items you sell. The more you sell, the higher your direct expenses. The less you sell, the lower your direct expenses.
In general, direct expenses should be recorded in Cost of Goods Sold. You can get your Gross Profit figure by calculating Sales less Cost of Goods Sold (or COGS). Gross Profit Margin is an important percentage to know in your business. It is computed as follows: (Sales – COGS) / Sales.
Some small service companies might not bother to break out labor into direct and indirect on the Profit and Loss statement each month, but it can be useful to break out periodically or when you are re-evaluating your pricing and profitability.
Direct expenses are important in making pricing decisions, but so are indirect expenses.
Indirect Expenses
Indirect expenses are expenses that you need to incur to run your business, but are not directly related to the items you sell. Here are some examples:
- Telephone
- Rent
- Insurance
- Utilities such as electricity, gas, water, and garbage pickup
- Administrative labor, such as a receptionist or supervisor
- Education and training
- Professional services, such as legal, HR, IT, or accounting
- Office supplies
- Hardware and software
- Business permits
Fixed and Variable Costs
Direct and indirect costs can each be further broken down into fixed and variable costs. For example, HR expenses, education, and training will go up as you sell more and hire more workers. That makes them variable costs.
Other indirect expenses will remain flat no matter what your sales volume is, such as rent. That means they are fixed costs.
Pricing Your Items
When calculating your sales prices, use direct costs to be sure your profit margin is high enough to cover an allocation of your indirect expenses. In other words, sales price should always cover all direct costs plus a profit component, plus enough to cover indirect costs when considering the volume of your sales.
The lower your sales volume, the higher the price per item should be. A higher sales volume gives you more room to spread out your indirect costs over more sales. That leads to either higher profits, or you can lower your price to be more competitive.
If you have questions about direct and indirect costs or want help validating your pricing decisions, please feel free to reach out any time.
You may already be doing your part to help save the planet. From recycling to driving electric cars, to avoiding the use of plastic bottles and carrying reusable bags to the grocery store, there are myriad ways for all of us to make a difference—both big and small. However, it may be important to stop and ask ourselves: Are we currently doing enough?
If you have considered pursuing an even more sustainable lifestyle, guess what? There’s an app for that! Actually, there are a few different apps to help you accomplish the goal of tracking your carbon footprint. In doing so, you can physically see your carbon environmental impact.
Below, we have detailed some of these apps and their benefits. Take a look! If you have any questions, please don’t hesitate to reach out.
Capture is an app that calculates users’ monthly CO2 targets by asking a series of questions. These questions include things like, “How many flights a year do you take?” and “What kind of diet do you adhere to?” Capture also utilizes GPS tracking to predict emissions from transportation.
Specifically, the app was designed to not only make planet-friendly living possible, but also make the process easy—or, easier—for those interested. With the capture app, users can conveniently “track, reduce, and remove CO2 emissions from everyday life.”
Interestingly, the app can be used single-handedly or with colleagues. If you are a numbers person who likes measuring and tracking, Capture is for you.
UK-based, Almond’s mission is simple: to help as many people reach Net Zero carbon emissions as possible, and in just four easy steps:
- Understand your carbon footprint
- Discover responsible brands
- Earn offset coins when you make a switch
- Offset your carbon footprint
Almond allows you to scan products to not only learn about that particular item’s story but also see what’s in the product (i.e., if it’s environmentally-friendly). Then, you can earn money with crypto rewards to plant and protect trees, which offset your carbon footprint. The more you earn, the faster you can grow your forest to achieve a carbon-balanced lifestyle and reach your personal CO2 Net Zero.
Pawprint allows individuals to fight climate change in the palm of their hands. This online tool helps to measure, understand, and reduce your carbon footprint.
Known as the “Eco companion,” this app delivers the following:
- Science-based data you can trust
- Carbon-reducing tips and challenges that suit your particular lifestyle
- Better insight into how your carbon footprint measures up to the rest of the UK (this app is also UK-based)
One factor that sets Pawprint apart from other carbon footprint tracking apps, is that all of its data is validated by Mike Berners-Lee’s Small World Consulting, an expert in the industry.
Of course, there are plenty of other smartphone apps and tools available to help you better track and reduce your carbon footprint, including The Extra Mile, My Planet, and Carbon Footprint. The trick is to find the app or tool that works best for you and your lifestyle.
While we all have to keep our monthly books up to date for tax and other compliance reporting purposes, we should never stop there. Your books hold a wealth of information that you can use to run your business better. Here are five reports you should never be without.
Budget-to-Actual Profit and Loss Statement
Hopefully, you’ve already seen how powerful the Profit and Loss Statement is. Let’s take it a deeper level and add budget comparison to it. With this addition, you can plan your way toward the sales and profit figures you want. You’ll know every month whether you’re on track, ahead of the game (give yourself five stars!), or need to hustle to make it up next month.
Most accounting systems allow you to enter monthly budget numbers for your sales and expense accounts. You can enter them at the beginning of each year and adjust them throughout the year. It’s kind of like having Google Maps on a cross-country journey. You will be able to see where there is construction and traffic, so you can take another route. You can also see where there are cool places to stop, so you can take advantage of the fun. Your numbers tell a story.
Actual-to-Prior-Year Profit and Loss Statement
This is an easy report to generate, assuming you have at least two years’ worth of information in your accounting system. This report allows you to compare your business’s results for this year with how you did last year. Are you ahead? Behind? Have new products and services? New employees? New expenses?
With this comparison, you can take action based on how you would like your business to perform this year versus last year. While this report is readily available, few businesses study it to glean the insights available, so be sure to spend some time analyzing the data in this report.
Sales by Item, Customer, or Division (or All Three)
Inside every business’s sales information is a treasure trove of possibility. Where are you seeing growth, and how can you capitalize on it? Where do you see a slowdown, and can you run a promotion to juice things up?
Choose the breakout – customer, item, division, or another – that is meaningful to your business type. If possible, arrange for a searchable database so you can drill down into the detail even more. What trends do you see? What opportunities do you see?
Operations Reports
To find out more about your profitability and to get into the details of how your expenses are matching up with your sales, you need to review your operational accounting reports. The exact report will depend on the type of your business. If you are in services, you’ll need payroll reports and time sheets. If you are in retail, you’ll need inventory reports. If you are in construction, you’ll need job cost reports. And if you are in manufacturing, you’ll need cost of goods sold and other reports to evaluate assembly and production efficiency.
Cash Reports
The last report that is essential for good business management is all about cash. There is more than one option here, and these reports can include Accounts Receivable Aging, Accounts Payable Aging, cash flow forecasting, and various cash flow reports.
If you grant customers credit, you’ll want to actively make sure that money is collected on time from clients. If customer balances get too old, action must be taken. Even if you don’t grant credit, transactions such as returns, expired credit cards, and bounced checks need special attention.
The same is true for amounts you owe to vendors, with the Accounts Payable Aging report.
If you run tight with your cash balance, you may want to have a cash flow forecasting report on hand. This report gives you good warning as to when your bank balance may dip below your needs. You can then delay vendor payments or find an infusion of cash to cover the shortfall.
With these five categories of reports, you will have dozens of opportunities to be proactive about running your business and improving your results. And if we can help you find or generate them, please reach out anytime.
A great way to start 2021 is to take a fresh look at your business finances. Many things changed in 2020, and if you are in the habit of spending on the same items year after year, it’s the perfect time to decide what is essential and what can go.
There are only a few ways to increase profits when you think about it in black and white terms. You can either raise revenues or cut costs. Let’s take a look at where we can potentially cut costs.
Publications
These expenses tend to be monthly or yearly, and we tend to just let them automatically renew time after time. But do we really need them? Take a look in your Dues and Subscriptions account to evaluate what you really need to stay informed, and cancel the rest.
Memberships
If you are a member of an organization or two, what benefits are you getting from your investment? Does it raise revenue for you? Do you use everything the membership offers? If not, it might need to go on the chopping block.
Memberships are especially tricky if the organization provides a local meeting component as a benefit and your state or county has been shut down. There’s a tradeoff right now between supporting the organization so that it’s still there when we can freely meet again and being responsible about your own business costs.
Office/Store Rent
With many employees working from home, the question has come up in many businesses about how much space they really need. As leases expire, consider how much space you really need. Some employees may love to work from home permanently, which frees up space.
Retail stores that have moved their business online may be able to cut back on customer-facing space but might need more inventory storage space. A restaurant that has successfully transitioned to pickup and delivery orders might be able to get by with a smaller seating area.
Software Apps
Are you paying for any technology applications that you are simply not using? This is a good place to look for cuts.
Some applications charge by number of contacts. Keeping your lists clean inside these apps will avoid increases and cut costs in some cases.
Office Supplies
Do you really still need things like staplers and scissors on everyone’s desk? If your business is going paperless, you can save a lot on office supplies.
Printing
Do you need to spend money on printing, or can the printed item be delivered electronically?
Shipping/Postage
While information can be delivered electronically, physical goods still need to be shipped. Make sure you have the best deal with your shipping vendors based on your volume. You may also need to consider building your shipping costs into the price of the product or add a shipping fee to the bill if you don’t already.
Marketing
A great way to increase profits is to become more intentional about your marketing costs. Are you able to measure what’s working and what isn’t? Or are you doing the same thing year after year?
Marketing has changed so much, even in the last few years. It might be time to implement digital marketing methods, which can be more cost-effective than older, outdated methods.
Labor
Make sure employees manage their time effectively by providing the right training and supervision. This should help to reduce labor expenses.
Telephone/Internet
Has your business changed? Do you need all those extra features you are paying for? Could you do without those extra lines? Would another phone plan save you money on long distance or international calls? Many telecommunication companies will often bargain with you or offer you a new deal just for checking in with them.
This gives you ten places to look to cut costs and correspondingly increase profits for 2021. If you need help reviewing your income statement, please reach out.
One of the best tools to forecast cash requirements is the 13-week cash flow forecast. It can help a business owner predict what their cash balance will be 13 weeks in the future. It helps to answer whether there will be enough cash to cover payroll and bills for a particular week. If you’re having significant ups and downs in your cash balance, it’s the perfect tool to help gain clarity around your cash needs.
Thirteen weeks may sound like an odd length to select, but it’s the length of a calendar quarter. This is the length of a financial projection that is typically used when a business is in financial distress; however, it’s also useful when a company is going through some ups and downs or simply wants to get a better handle on its cash requirements.
The forecast computations start with entering cash receipts and cash disbursements into a spreadsheet. Start with actual spending and receipts for the first week, then use estimates for the remaining weeks. Include planned expenditures such as overhead, payroll, and loan payments. Add in inventory purchases. Project your receipts based on history or recent changes in your business.
Once you’ve completed your forecast, you can make changes and do what-if scenario planning. For example, if the forecast shows that you will run out of cash in week seven, you have some time to decide what you need to do to remedy the shortfall. Options might be:
- Accelerate the collection of 30 percent of your receivables.
- Dip into your line of credit to cover a portion the shortfall.
- Furlough 10 percent of your workers.
Plug your selected scenario into the forecast to see how much that relieves your shortfall.
The benefits of creating a 13-week cash flow forecast are many. You can see what actions need to be taken and when to take them well ahead of time. You can also see how much of an action you need to take. For example, instead of furloughing 50 percent of your staff, you may only need to furlough 25 percent. Or instead of borrowing $50,000, you might only need $20,000.
The cash flow forecast can also save time when developing your annual budget. Budgets are especially useful when business conditions are volatile or when business owners need all the clarity they can get.
Try your hand creating a 13-week cash flow forecast for your business, or reach out to us for help any time.
At the beginning of 2020, you might have thought that developing a business continuity plan was not a top priority. Or maybe you thought it was only for large businesses. Fast forward to today, and a business continuity plan has become an essential staple in business planning.
There are more business risks than ever before to consider that can affect business continuity. Businesses are being shuttered, reopened and shuttered again from the pandemic, fires, hurricanes and damage from riots, just to mention a few of the more common issues in this unusual year.
The biggest benefit of a business continuity plan is the process of developing it. It helps you think through the steps you should take if a business interruption occurs. If you have a disaster recovery plan – or even a few steps jotted down of what you’d do – then you have already started a portion of the process.
Here are some of the major pieces of a business continuity plan to consider developing for your business.
Roles and Responsibilities
In this section, all of the business stakeholders should be identified and listed. On a high level, questions like these should be answered:
- What is each person’s role within the company, and how would that change if the business is interrupted?
- What new skillsets should be acquired in the case of a disruption?
Potential Impacts to Your Business
This part of the continuity plan lists major scenarios where something could go wrong with your business. It should include things like weather events, fire, riots, theft, leadership interruptions, cash flow shortages, and the long-term impact of the pandemic. For each event, an analysis should be made as to how it will affect the business and what possible outcomes could occur. This part is also called a Business Impact Analysis.
Recovery Strategies
Once you’ve identified impacts, the next set of questions covers how to most effectively recover from them. These remedies might include seeking additional financing, selecting backup locations, checking IT department functionality, creating alternate supply chain and distribution sources, and identifying many more actions along these lines.
As we’ve seen this year, this is just as important to think through for small businesses as it is large businesses.
When owners and employees are not in the middle of an actual disaster, they can better map out a recovery strategy that’s optimal and cost-effective for the business.
Implementation
A good plan should be implemented through distribution, testing, and training. All stakeholders should read and understand the contents of the business continuity plan. The plan should be tested in drills and exercises when possible. Employees should be trained so they know their part and feel comfortable carrying it out while under high stress.
The long-term viability of your business is important, and it can be strengthened when you put a business continuity plan in place. If we can help, feel free to reach out any time.
Video creation has gotten so easy that just about anyone can do it. You no longer need professionals. You don’t even need video editing software with the long learning curve and high price tag. All you need is an app and your imagination.
There are many reasons to create a video:
- Web pages that include video rank higher than those that don’t have video.
- People love to watch video; it’s more interesting than text.
- Video is often the best way to educate people.
- Your message comes more alive when you use more senses: sight and sound
The first step is to figure out what you want to say. Here are a number of video topic ideas for your business:
- A customer service tip
- Your company mission, vision, and values
- Your company’s origin story
- Why you’re in business
- A product, event, or service promotion
- A sale
- An employee spotlight
- A customer spotlight
- A how-to
- A deadline reminder
- A new product or service announcement
The next thing you need is a rough script of what you want the video to say, as well as graphics you can use to illustrate your points.
The final thing you need is a video creation app. Animoto is a great example of an easy-to-use video creation app. Just open your browser and go to https://animoto.com/. There are free and paid plans to choose from.
With most video creation apps, you have hundreds of templates that can get your started fast. Choose the template that is closest to the type of message you want to start with. You can easily replace your text, graphics, and sound with your own items, or ones that the software provides.
Options besides Animoto include Adobe Spark, Magisto, and several others.
Don’t be afraid to try your hand at video creation. It’s an easy way to impress your customers.
Every company should have a strict process to follow when an employee leaves the company, no matter what type of termination it is – voluntary or involuntary. Here’s a checklist you can use to compare to your own process so that you can either confirm you’re on the right track or add some ideas to improve your current methods.
1. Collect the resignation letter.
While so many things are remote these days, you MUST get the employee’s resignation letter in writing and signed by them. If they don’t supply one, create a form they can sign that includes the reason for termination.
If you initiated the termination, have the employee sign the notice of dismissal.
This is not only important for general human relations records, it’s also important this year for any Paycheck Protection Program forgiveness documentation if the employee turned down a hire-back request. There may also be a requirement to submit the paperwork to your state’s unemployment office.
2. Handle legal and benefits issues.
- Collect any company advances owed by the employee.
- Ask the employee if they have any final expense reports to file.
- Remind the employee that certain legal requirements, such as confidentiality clauses and noncompete agreements must be upheld after employment.
- Review insurance options such as COBRA.
- Let the employee know how to access their 401(k) and other benefit plans.
3. Update the payroll system and cut the final paycheck.
Compute PTO and vacation balances due the employee. Calculate severance pay. Cut the final paycheck, incorporating those items.
Review the paycheck amounts with the employee, and ask them for a forwarding address.
4. Collect company property.
The employee should turn over their computer equipment, including laptops, monitors, mice, keyboards, PCs, Macs, phones, beepers, printers, drives, and scanners. Don’t forget to ask for keys, business cards, name badges, security badges, gate and garage door openers, uniforms, and tools. Oh, and company cars or trucks.
5. Revoke computer access.
Any user accounts held in the employee’s name should be revoked. Many passwords may need to be changed. Their email address should either be forwarded to someone else who can answer the emails, updated with an autoresponder, or revoked altogether.
Voice mail and their phone extension should also be re-routed. Take the employee’s name off of any internal distribution list and remove them from the About page of your website.
6. Hold an exit interview.
The business owner should hold an exit interview with the employee if they are leaving voluntarily. Ask questions such as these:
- Why did you decide to start searching for a new job?
- Was there anything we could have done to keep you employed here?
- If you could change one thing about your job, what would it be?
- Could you describe your relationship with your direct supervisor?
- Would you consider working here again?
7. Communicate this change to your staff and customers.
Let your staff know immediately after the employee leaves that they will not be coming back. Don’t go into detail about the termination; that information is private.
If the employee was involuntarily terminated, assure your staff that their jobs are safe (if they are) so they don’t ruminate or spread false rumors.
If the employee worked with customers, each customer should be notified and given the name of the new staff member that will be handling their issues.
Follow these steps to protect your company when an employee is terminated.
The purpose of marketing is, in part, about creating relationships with customers and prospects. While traditional advertising is a standard way of letting prospects know more about you, it’s not always the most creative way to connect.
To spice up your marketing, let’s explore six unusual ways to connect with customers.
1. Celebrate an obscure or fun holiday.
For example, August 27 is National Just Because Day. It’s a day to do random things, which can be pretty easily tied to whatever your service or product is.
You can do something as small as send an email or as big as hosting a live event on the holiday you choose.
2. Feature a customer or staff member.
A great way for customers to get to know your team and for your team to get to know your customers is to feature them in a short writeup that you post or send out.
Make this fun by sharing things like favorite ice cream, activity they would love to do, country they want to visit most, most fun responsibility they have at work, favorite purchase from you, and more.
3. Highlight community work.
Does your organization have a favorite charity? If so, share experiences with your customers. Many customers value and prefer to support businesses that make community contributions.
Go as far as holding a volunteer day or do as little as a writeup for donations in your newsletter.
4. Take a survey.
When is the last time you’ve been asked a “deep” question? Send a survey that asks your colleagues and customers a question like what inspires them. Then share the results, with their permission, of course.
This type of activity can lead to meaningful conversations and a deeper connection with your customers. It may also provide great insight into how you can connect with what’s important to your clients.
5. Provide a gift guide.
Is it close to Christmas or another holiday where gifts are exchanged? If so, your customer might benefit from a gift guide you can put together.
You don’t have to own a retail store to benefit from this idea. Service organizations can provide gift certificate and other ideas in their gift guides. And you don’t always have to list only your own items. Add your customers’ and suppliers’ items and make it one big “business family” affair.
6. Tell people a story.
Do you remember your first sale? Write a story about your first sale, the first day you opened your new location, your first hire, or another fun business milestone.
People love hearing stories about how others got started. Don’t be so private that you miss out on this wonderful way to connect with clients.
Try these six fresh marketing ideas to create a meaningful connection with your customers and prospects, and watch your relationships blossom.