Clarify Your Vision
A vision statement for a company helps to keep everyone on track and seeing the bigger picture of what they are accomplishing day after day.
What does the world look like after it has consumed your product or service?
How is the world smarter, more beautiful, happier, healthier, or wealthier after they have left your business?
If you haven’t written your business vision and mission statement, consider completing this exercise for 2016.
Create New Habits
What habits are holding you back? Which ones are propelling you forward? Choose one habit that is costing you the most and make a commitment to drop it from your 2016 repertoire.
Conversely, identify the habit that is brining you happiness and wealth and multiply it.
Sometimes we need to let go before we can move forward. What do you need to let go of? Are there customers or employees in your life that sap your energy or your bank account?
Build Your Support Structure
Are you short-staffed? The way you manage your time has everything to do with your success or the lack of it.
If low- or no-revenue producing tasks are taking up your time, it is going to be hard to boost your income and get ahead. Surround yourself with support to do everything that can be delegated, such as filing, bookkeeping, appointment scheduling, and routine customer service.
If possible, outsource personal tasks such as grocery shopping, housekeeping, cooking, and lawn maintenance as well.
Make a list of areas where you could use support, and fill these gaps. In today’s world, you do not need to hire full time people to fill these slots. You can simply hire responsible contractors, other small businesses, and virtual assistants to build your support team.
What project or task would make a huge difference in 2016 if you could pull it off?
Focus on the high payback projects and commit to one, even though it might be out of your comfort zone. Imagine the difference in your business once it is completed, and get inspired to get started.
Choose just one of these areas to start your 2016 out with hope, intention, and excitement.
For example, let us say you are entitled to a $100 payment. If you receive the $100 now and you are able to invest it at a 5% annual interest rate, you will have $105 after one year. Assuming you do not need the money for expenses, it will be worth $110.25 after two years, and so on. This amount is known as the “future value” of the money.
Similarly, you can compute the “present value” of money. Suppose you won’t receive the $100 payment until one year from now. The value of the money must be discounted due to the opportunity cost. Using the same 5% interest rate, the present value of the $100 you will receive a year from now is $95.24 ($100 value divided by 1.05).
It is easy to see how this concept can affect your business. Accelerating payments from customers will enable you to better meet your current obligations and provide reserves for investment.
On the other hand, delays hamper cash flow and reduce the opportunity for investment. Computing the time value of money may also encourage you to lease, rather than buy, assets.
To benefit the most, make time to review your business situation to see where you can increase the time value of your money.
If you have questions on what tax-savers you might utilize for your business, please contact your CPA or tax preparer to discuss your personal situation.
COGS: COGS stands for Cost of Goods Sold. It’s a form of expense that directly relates to the product or service being sold. For example, if shoes are being sold, the cost of purchasing those shoes are consider COGS, while something like rent or insurance is simply an expense. COGS is more important in manufacturing, retail, and distribution companies.
Net Income: Another word for net income is profit. It’s calculated by subtracting expenses from revenue. If what’s left over is a positive number, it’s net income and if it’s negative, it’s a net loss. Besides your salary, it’s the amount of money you can either keep or re-invest into your business.
Debit: A debit is a term that tells you whether money is being increased or decreased. The hard part is that it’s opposite depending on the account and the company. Here are some examples:
Credit: A credit is a term that tells you whether money is being increased or decreased. The hard part is that it’s opposite depending on the account and the company. Here are some examples:
GAAP: GAAP stands for Generally Accepted Accounting Principles. It refers to the set of standards that must be followed by accountants when creating accounting reports for people like bankers and investors who rely on them.
Liabilities: Liabilities are what you owe. If you have loans taken out for your business or owe vendors money for invoices of purchases they sent you, those are liabilities. Common liabilities include sales tax that you’ve collected but not paid, unpaid vendors’ invoices, credit cards that are not paid off each month, mortgages on buildings, and any bank loans you’ve taken out.
Equity: In mathematical terms, equity is the net of your assets less your liabilities. In more philosophical terms, it’s the net amount you and your fellow business owners have invested in your business adjusted by the years of net income you’ve made less what you’ve taken out of the business.
How many terms did you already know? Knowing accounting terms will help you understand this aspect of your business a bit better.
Small business owners have a lot on their plates, and time simply does not allow you to become an expert in all the areas required for running a business. Here are a couple of common mistakes that we see all the time. Correcting them will help you be more productive and profitable in your business.
Some accounting systems and/or document management applications allow you to upload the receipt and attach it to the transaction in your accounting system. This is a great solution, and if you’re interested in this, please ask us about it.
Being proactive with your accounting will help you spot opportunities in your business that you can act on, as well as spot and correct problems long before they manifest into trouble.
Mixing business and pleasure
In your bank accounts and on your credit cards, mixing business and pleasure is to be avoided when possible. All businesses should have a separate bank account, and all business transactions should go through there. It takes an accountant much longer to correctly book a business deposit that was deposited into a personal account.
Taking out a separate credit card and putting all your business transactions on it will save your bookkeeper a ton of time. The credit card doesn’t even have to be a business credit card. It can just be a personal credit card that’s solely used for business. If you have employees making credit card charges, sometimes a separate card for them helps you control fraud.
The hardest area in which to separate business from pleasure is cash transactions. Be sure your accountant knows about these. The accountant can either set up a petty cash account or a reimbursement process so that you can get credit for cash expenditures that are for the business.
How did you rate on these three mistakes? Avoid these three and your accounting department as well as your business will run a lot smoother.
Successfully meeting the challenges inherent to new and smaller businesses provides me with a special type of satisfaction.