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Five Metrics to Gauge Your Business Performance

7/27/2016

 
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As business owners, the foundation of your finances revolves around the balance sheet and income statement. However, the most telling numbers in your business are not necessarily on the monthly reports.
 
There are a few numbers that, when known and tracked, can make a huge impact on your business decision-making. Here are five such numbers:
Revenue Per Employee

Revenue per employee can be an interesting number. It is easy to compute: take total revenue for the year and divide by the number of employees you had during the year. (This applies even if you are a solo business owner.)
 
You may need to average the number in case you had turnover or adjust it for part-time employees.
 
Whether your number is good or bad depends on the industry you are in as well as a host of other factors. Compare it to prior years; is the number increasing (good) or decreasing (not so good)?
 
If it is decreasing you might want to investigate why. It could be you have many new employees who need training so that your productivity has slipped. It could also be that revenue has declined.

 
Customer Acquisition Cost
 
If you have ever watched Shark Tank®, you know that CAC is one of the most important numbers for investors. This is how much it costs you in marketing and selling costs to acquire a new client.
 
Factors such as annual revenue or the lifetime value of a client will affect how low or high you can allow this number to go.
 

Cash Burn Rate
 
How fast do you go through cash? The cash burn rate calculates this for you.
 
Compute the difference between your starting and ending cash balances and divide that number by the number of months it covers. The result is a monthly value.
 
This is especially important for startups that have not shown a profit yet so they can figure out how much cash they need to borrow or raise to fund their venture.


Revenue Per Client

Revenue per client is a good measure to compare from year to year. Are clients spending more or less with you, on average, than last year?


Customer Retention
 
If you are curious as to how many customers return year after year, you can compute your client retention percentage.
 
Make a list of all the customers who paid you money last year. Then create a list of customers who have paid you this year. (You will need to two full years to be accurate.)
 
Merge the two lists. Count how many customers you had in the first year. Then count the customers who paid you money in both years.
 
The formula is:
 
Number of customer who paid you in both years / Number of customers in the first or prior year * 100 = Customer retention rate as a percentage
 
New customers do not count in this formula.
 
You will be able to see what percentage of customers came back in a year. You can also modify this formula for any length of time you wish to measure.   
 
Try any of these five metrics to gain richer financial information about your business’s performance. 
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.
​

Form 5500 Filing Reminder Plus Changes

7/11/2016

 
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August 1, 2016, is the deadline for filing retirement or employee benefit returns (5500 series) for plans on a calendar year. (The usual due date of July 31, 2016, is a Sunday.)

You’ll also want to note two IRS updates regarding Form 5500. First, the compliance questions are optional. Form 5500 includes new compliance questions for 2015 tax years (returns with a due date of August 1, 2016, for calendar year filers). Because the questions were not approved by the Office of Management and Budget, the instructions for Form 5500 say plan sponsors should skip them when completing the form.
​

Also, some Form 5500-EZ filers will need to file electronically. If you’re required to file at least 250 returns of any type with the IRS, including information returns (for example, Form W-2 and Form 1099), you may need to electronically file Form 5500-EZ for calendar year 2015.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.

Do the New Overtime Rules Affect You?

7/6/2016

 
In May, the Department of Labor updated the rules for paying overtime. The changes take effect December 1, 2016, and will affect 4.2 million workers across the country.

Under the new rules, salaried employees who earn less than $913 per week ($47,476 per year) will be eligible for overtime pay. That’s double the annual exempt amount of $455 per week ($23,660 per year) from previous rules.
​
In addition, the total annual pay for an exempt highly compensated employee is $134,004 (up from $100,000 previously). This new threshold will increase every three years beginning in 2020.
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To avoid penalties and fines for noncompliance, begin reviewing your payroll now for adjustments needed. Important steps that you should take now include:
  1. Begin tracking hours for your salaried employees
  2. Review your payroll practices to determine the best options for your business

For employees who become eligible for overtime under these new rules, employers have a choice of three actions they can take:
  1. Pay time-and-a-half for overtime work
  2. Raise worker’s salaries above the new threshold
  3. Limit worker’s hours to 40 per week
​
In some cases, a business owner may find it cheaper to hire an additional part-time worker to handle work that now requires overtime hours.

You can find more about the new overtime law here.
This is general information and should not be acted upon without first determining its application to your specific situation. Please contact your CPA or tax advisor for additional details.

    Author

    Successfully meeting the challenges inherent to new and smaller businesses provides me with a special type of satisfaction. 

    Supporting businesses that have the potential to become amazing – from both the perspective of owners and team members as well as their clients – is what I enjoy. 

    I hope to use this blog to provide information specific to businesses that are growing from small beginnings into exceptional companies.

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  • Home
  • Why Us?
    • Reviews
    • Open Positions
  • Client Services
  • Resources
    • Save on QBO Subscriptions!
    • Tax Refund Status
    • Gusto Year End Checklist
    • Videos >
      • Business Taxes >
        • 2019 Business Tax Highlights
        • 7 Ways Small Business Can Save On Tax
        • Taxes for S-Corp Owners
        • The IRS Loves Businesses
      • Personal Taxes >
        • 2019 Tax Highlights
        • Five Yearly Tax Essentials
        • 4 Common Tax Surprises
        • Retirement Can Be Taxing
        • Advance Child Tax Credit Reconciliation - 2022
        • Make the Most of Your Donations
        • Five Great Tax Secrets
        • Renting Your Property Tax Free
        • Ideas to Audit-Proof Your Tax Return
      • The Tax Cuts & Jobs Act >
        • The Tax Cuts & Jobs Act: What You Need to Do Now
        • The Tax Cuts & Jobs Act: Are Itemized Deductions A Thing of the Past?
        • The Tax Cuts & Jobs Act: The New Child Care Tax Credit
      • Tax Topics >
        • Tax Season is Coming!
        • The New World of Deductions: What Everyone Needs to Know
        • Proving Your Deductions
        • How to Fix a Mistake on Your Tax Return
        • How Long Should I Save It?
        • Tax Credit vs Tax Deduction
        • Understanding Effective Tax Rate
        • Understanding Marginal Tax Rate
      • Life Events >
        • Life Events: A New Birth
        • Life Events: Marriage
        • Life Events: Divorce
    • Articles >
      • Accounting & Bookkeeping >
        • How to Get the Most Out of Your Accounting Fees
        • The 10 Biggest Money Leaks in Your Accounting System
      • Business Factors >
        • IRS Rules for Classifying Workers
        • Checklist for a Healthy Cash Flow
        • 12 Ways to Improve Your Business Profits
        • 10 Step Annual Business Check-Up
      • Tax Topics >
        • Tax Guide for Self-Employeds
        • 15 Things Every Tax Payer Should Know
        • Disaster Casualty Losses
        • Travel & Entertainment Deductions
        • Tax Guide - A Deduction Checklist
        • What You Should Know About Tax Audits
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