How to Take Your Business to the Next Level

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The Importance of Financial Statements

Sometimes all a business needs to get to the next level are good financial statements.  A business owner can be surprised at what their financial statements reveal.  Do you know exactly what inventory item you spend the most on?  Do you know what product or service brings you the most revenue?  Your financial statements can teach you what buying patterns need to be changed.  They can teach you what product or service is working best for you and then you can devise a plan to promote it more.  You can learn what aspects of your business you can leverage.

Are you aware of all of your expense items? Did you purchase a service with a revolving payment years ago that you aren’t even aware that you’re still paying for?  You can eliminate what you don’t need and what is no longer working for you.  Financial statements can make you aware of trends on buying patterns.  Are sales always low in January? You can be prepared for the low months but you can also determine a plan to try to increase sales in the routinely low months.

You can’t fix what you don’t know.

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How is Your Business’ Cash Flow?

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Do you have ample cash flow monthly? It can be a tricky question for any business. Without ample cash flow you might not have enough cash on hand to pay expenses as they come due.  You might end up paying unnecessary late fees and miss out on early pay discounts some vendors offer.  Some people believe that simply signing more clients or selling more products will fix their problems.  All too often though, it just masks more serious problems and doesn’t really fix anything.

The key to cash flow is not just having plenty of it, it’s making sure you maximize what you have.  If you have been organized and diligent in your accounting, then you should have access to information that can start this process right away. What are some examples of things that will improve your cash flow?  If you invoice customers, it is important to review your accounts receivable (AR) activity and see what balance you are carrying monthly.  Analyze the account to determine the average time to pay.  If a majority of your customers are slow to pay you can offer an incentive, such as an early pay discount.  This can drastically improve cash flow by improving the reliability of payments.  Knowing what you have and when you are going to have it improves planning.

Another option that I recommend using in conjunction with the above is reviewing your routine expenses.  Check to see if a frequently used vendor can extend your terms. For example, if your payment is due 15 days after invoicing, maybe they can change it to 30.  Or maybe your cash flow increases at a certain part of the month, say the 15th.  If you have a specific day each month a bill is due see if the vendor can change the due date.  For instance, from the 10th to the 18th.  You might be surprised how willing companies such as, insurance and auto loans are willing to do this.  This type of planning takes time and the proper information, but it will help you to smooth out the highs and lows of your cash flow.

Copyright 2018 Christi Rains, President Alpha Omega Consulting & Bookkeeping, LLC – Sensiblebusinessowner.com – Email Christi@AOBookKeeping.com for more information.

Your Next Big Idea Might be Just Around the Corner

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Why Business Owners Need Downtime

Have you ever been working and had a thought and by the time it took you the 5 seconds to get the paper and pin to write down the thought it was gone?  When this happens it is a CLEAR sign to step away and take at least a few minutes of downtime.  Trust me you will be better off for it.

Our minds read and hear so much information every day. It can be hard to sift through it all, let alone remember it.  Time away from the demands of work can give your mind time to rest and rejuvenate. During non-work activities such as, resting, exercising and hobbies your head can have time to clear. One of the ways I take downtime is by taking a morning walk before I start my work day.  It’s during this time that my mind clears and I think of ideas for my business. It could be a new idea for a blog post, how to solve a clients problem or even a great dinner idea for my family.  When I am ready to start my work day, I can start with a clear mind, which usually leads to a productive day.

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Do you want to save time and money in your business?

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THE IMPORTANCE OF USING AN ACCOUNTING SYSTEM

One of the most important factors for a small business’ financial health is to use an accounting system. Accounting systems track revenue, expenses and produce financial statements.  They can save a business owner valuable time and money when compared to the alternatives.

Do you use Excel? While Excel might seem like the simple solution, it really isn’t the best use of your time. Why spend your time using a completely manual process when you could be using an automated one?

Are you a shoebox client? Are you not using any type of method during the year to track income and expenses? Do you just toss your receipts in a box and forget about them until tax time? Do you rely on your tax preparer to sort through your paperwork and determine your income and expenses right before the dreaded tax filing deadline? If this describes you, how do you know the performance of your business without proper and routine tracking of sales?

Your time is the most valuable asset your business has.  Use it wisely to grow your business.

The advantages to using an accounting system are numerous. I touch on some of the main advantages below.

  • Tracking Income 

Entering your financial information into an accounting system will automatically track all income. You will know what customers have paid and what invoices are outstanding. Knowing on a regular basis what amounts are owed to you can help you be proactive in collecting past due amounts.

  • Tracking Expenses

You will know what vendors have been paid and what items are open. Having this information can aid you in paying bills on time and avoiding late fees and penalties.

  • Financial Statements 

An automated financial system allows for financial statements and activity reports to be generated quickly, and accurately. Your financials are critical to assessing the health of your business. If you are a shoebox client, reports are not possible during the year.  As well, if you are using Excel you will need to manually prepare reports.

Having all of your information located nicely within an accounting system can help you save time and money, prepare your taxes and increase your bottom line.  A business can’t truly know their financial outcomes without proper tracking. If you are using Excel or are a shoebox client, I urge you to think about moving to an automated system. Your time is the most valuable asset your business has.  Use it wisely to grow your business.

One final point, as important as having and using an accounting system is, it is equally important to ensure it is managed properly.  If you are unsure of how to use an accounting system or how to accurately account for transactions you should seek professional help.  Too many business owners try to do it themselves and find themselves owing penalties and interest on incorrectly filed sales and income taxes.

If you would like to discuss how to get setup on an accounting system please contact us. We handle system set ups, training and routine review for accuracy.

Copyright 2014 Christi Rains, Alpha Omega Consulting & Bookkeeping, LLC

The Seven, not-so-deadly, Sins of Small Businesses

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Be Sure Your Business Isn’t Making These Common Mistakes

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During my time working with small business owners, and of course being one myself, I have found that there are certain common mistakes that can ultimately doom most businesses.  All too often, small business owners become enamored with the idea of “being their own boss” and doing something they “love”.  These thoughts often cloud the judgment of even experienced business owners in their desire to pursue the American Dream.  In order to avoid these pitfalls you have to establish a strong foundation to your business; put in place systems that will help you keep your feet firmly planted in reality while you pursue your dreams.  Below, I have listed seven common mistakes that prevent entrepreneurs from building that strong foundation for their dreams;

  1. Seek professional advice

“Concentrate on your strengths and seek help for your weaknesses.”, that is the first piece of advice I give to any new entrepreneur.  Seeking out trustworthy professionals to guide you through the start-up process will help you to avoid all manner of financial and legal problems.  Later on, when the company is up and running, these same professionals will continue to be valuable members of your team. In order to grow your business you need to be able to concentrate and put your energy into your core business. Allow the professionals to take care of tasks such as; accounting, marketing and legal affairs while you manage growing your business.

2Create a formal business plan

Creating a formal business plan is important for any business. Think of a business plan like a road map.  It can aid you in determining specific goals and be a guide to help you stay on track.  In the process of creating one you will determine the size, location and buying pattern of your target market and the feasibility of your business idea. It can also be useful when seeking outside funding from banks or other types of investors.

3. Form a legal entity

If you are thinking of starting a business as a sole proprietor or are already doing business as a sole proprietor you need to examine your threats and determine if it’s really right for you. It’s important to note that a sole proprietor is not a legal entity. There is no separation between the business and the owner. Because of this, the business will cease to exist when the owner dies. Also, this form of business does not provide any type of personal liability protection between your business and personal assets. If you want to develop a successful long term company, it is advantageous to form the proper legal entity

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The number one way to lose your business and self

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THE IMPORTANCE OF FORMING A LEGAL ENTITY 

Q. My business is a Sole Proprietorship. Is this classification significant? 

For the most basic business, such as a hobby, this designation is fine. Unless you use dangerous equipment, sell a product, have high liability or hire employees. But keep in mind, a Sole Proprietorship is not a true legal entity. It does not provide personal liability protection, which means there is no separation between the business and the owner.  If sued, your personal assets can be taken. As well, if business debts cannot be paid with business assets then your personal assets can be taken.  

There is a large misconception in the business community that this entity form is acceptable due to the ease and low cost to form

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How to put Your Dreams Into the Proper Perspective

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Most of you know the story of the jar, rocks, pebbles…etc.  It’s about the priorities we set in life and how we fit these things into our lives.  The parable applies to our dreams and goals in business as well.

There is a path to follow for true success in business and it starts by setting out the big vision for our companies.  The Jar that holds these dreams and plans represents the answers to some big questions; “What do I want to accomplish?”…”Why am I doing it?”  The big rocks represent the type of company you want to be; the industry, the size and scope…your mission statement.  These first choices can set you on a path to success or failure.  Make the vision too narrow and you can’t respond to changing situations, too broad and you are stretched too thin.  Pick the wrong industry, and it won’t provide you the means to achieve your dreams.

If those decisions worry you…good, they should scare you.  The best way to overcome this fear though, is information.  The best source for this information, and how it fits with your dreams and hopes, is a Business Plan.  As you and your professional research and prepare the plan, you may realize that the business you hoped to open wasn’t a good choice or you may find a better option that fits your needs.  No matter what the case, a well thought out and researched Business Plan can help you pick the right rocks to fill your jar with.

With the rocks firmly in the jar, it’s time to pick out those pebbles.  These are the monthly, quarterly and yearly goals that we set in order to mark our path toward bigger things.  Just like the rocks, pebbles can cause problems too…it can become hard to gain traction.  What if you don’t meet some of your goals; what if you don’t get that second store front opened on time?  Or reach $50,000 in sales when you expected?  Don’t Panic!   Combined with accurate accounting and up to date financials, you should always be able to plot a course to firmer ground.

Finally comes the sand and water; the day to day grind we go through to make it all happen.  This part is on you…no one can make you be the first one in or the last to leave, except you.  But if you have the right Jar, then you can always look to it for motivation on the hard mornings.  The right rocks will give you the necessary foundation to hold firm to when those pebbles beneath your feet begin to shift.

If you would like to speak to a business adviser or need help creating a business plan, please don’t hesitate to contact us. 972.743.0602 or wecanhelp@aoaccounting.com

Copyright 2014 – Christi Rains, President Alpha Omega Consulting & Bookkeeping, LLC

 

Do you Have the Plans and Dreams of an Entrepreneur?

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“A goal without a plan is just a wish.”

–Antoine de Saint-Exupery

Sadly, this is exactly where so many first-time entrepreneurs find themselves.  They know they want to own their own business, they have a passion they want to share or they simply see it as the way to get rich.  Whatever the case, they have their eyes firmly fixed on the idea that they want to own their own business and be their own boss.

“By failing to prepare, you are preparing to fail.”

–Benjamin Franklin

So many times, this is exactly where the dream dies, because people have no idea how to move forward.  In some cases though, the dream does move on but without a plan or preparation.  Often, people think that simply latching on to the “latest and greatest” thing will insure success while they figure out the nuts and bolts of owning a business.  Maybe, you’ll open that restaurant?  Everyone loves your cooking, and you’ve seen every episode of “Restaurant Impossible” on the Food Network… Or, How about a lawn service?  How hard could that be? I’ve been mowing yards since I was 12.

It sounds easy, when you’re having the discussion in your head.  Then reality sets in.  What type of company do I want to form?  What are the start-up costs? Do people even want what I’m selling?  Do I need permits? These questions, and a thousand more need to be answered BEFORE you open your doors, failure in any one of these areas could doom you before you really get started.

“When you anticipate adversity, you can then plan for adversity.  You may never gain control of it, but you can keep it from controlling you.”

–T Jay Taylor

The “simple” answer to this problem lies with a well written and well thought out business plan.  First, a business plan can help you to understand your market, or even if there is one…you can get a feel for your competition and what your industry standards are.  Second, it will give you an idea of the costs and potential rewards associated with your field.  Finally, it can help you secure financing, give you the basic information to formulate a marketing plan, and help you to establish reasonable short-term goals to achieve your long-term aims.

“The best laid schemes o’ mice and men often go awry.”

–Robert Burns

There is never a guarantee to success, and the creation of a business plan is no exception.  But what it does do is guarantee that you have an accurate picture of the road before you.  It allows you to take your wish and turn it into a goal with a plan for success.  Preparing for and anticipating the various pitfalls that may lie before you is crucial in being able to adjust when surprises do occur.  Your business plan provides you a focal point to build around by keeping you focused on your long-term aims as short-term goals change and adjust.

The question for you now is: Where does this road start?  Do you know the right questions to ask for your business plan or where to find the answers?  Sit down with an accountant or business consultant that can guide and mentor you through the process.  The time, money and preparation spent now, can go a long way to achieving your goals and avoiding adversity. If you have questions or need help creating or fine tuning a business plan please don’t hesitate to contact us.

Copyright 2014 Christi Rains, President, Alpha Omega Consulting & Bookkeeping, LLC  www.aobookkeeping.com

Are you Making any of These Mistakes With Your Money?

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Tips for Saving Your Business Money

If you are like most small business owners you are looking to save money. But also like most owners, it is all too easy to get buried in running your business and miss out on chances to save money. Organization and setting guidelines are the keys to finding these various savings opportunities.

1. Missing tax deadlines, failing to fill out proper paperwork, or a hundred other legal complications can cost you hundreds or thousands of dollars.  The two main causes for these issues are not knowing or forgetting.  The solutions are simple though; maintain up-to-date calendars and procedure guidelines OR hire an expert that does.

2. Review expenses quarterly. Make sure all your routine expenses are legitimate and are working for you the way you expect them to. Do not get caught paying for services or products that you are not using.  Making sure your accounting is current, will insure your access to reports that will quickly and easily show you this information.

3. Use a budget, do not get caught making impulse decisions. Create your budget and stick to it with little to no deviation.  Do you have a hard time saying, “no”? I have a guideline for myself, I won’t buy from anyone on their first communication with me.  This gives me time to look into the product and determine if it will benefit my company and if the budget can accommodate it.

4. Do not let family involvement cloud your judgment.  Having the support of family in your business can be very reassuring. But when too many people are making financial decisions you can very quickly find yourself over budget.  You might also find you are going in various directions due to varying financial styles. Strict guidelines and a little bit of tact on your part can spare hurt feelings and save your business money.

Stress comes with the territory when it comes to owning your own business, and most of this stress revolves around money.  With some planning and proper systems in place you can go a long way to alleviating some needless worries. If you need help in this area, please contact me for a complimentary needs assessment.

Copyright 2014-2015 – Christi Rains, President Alpha Omega Consulting & Bookkeeping, LLC

Financial Statements Explained

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Financial Statements 101

As a business owner, have you ever been asked to provide financial statements to a vendor, creditor or investor? Do you dread this question? Have you ever felt guilty because you don’t run routine financial statements? Maybe you feel uneasy to see the results. Don’t be. Regardless of what financial statements say about your company, they are your best resource at evaluating your strengths and weaknesses. It is through these statements that you can better plan; you can’t fix problems or prepare for the future without the right information.

It is important to remember the statement, ‘garbage in, garbage out’. Before you run financial statements, it is necessary that you confirm all information has been entered into your accounting system and that the information has been verified for accuracy.

Below, I have listed the three main types of financial statements. It is important to become familiar with the value that each report provides your business.  Continue reading