Tim Ferriss made the 4-hour workweek a popular concept in his 2007 book. But is there such a thing, and more importantly, can business owners like you and me cash in on it? As the last of the Baby Boomers approach retirement, the topic of working less while making the same or more income is popular.
Here are five ideas to help you work fewer hours while making the same or more income.
Active vs. Automatic Revenue
Some business models allow you to generate automatic revenue. Automatic revenue is revenue you can earn and leverage over time by doing something only once and not over and over again. Active revenue is earned while doing something over and over again. Showing up for a teaching job with a live audience is active revenue while producing and selling video recordings of the same teaching is automatic revenue.
A goal of a 4-hour workweek concept is to increase automatic revenue while reducing active revenue. You may have to think out of the box to do this in your industry, but the payoff can be huge.
Delegation and Outsourcing
One traditional way to move to a 4-hour workweek is to have others do the work. Hiring staff frees up your time and allows your business to become scalable. When it runs without you, it’s more salable too.
If you have a lot of distractions in your day, you can easily double your productivity by learning time batching, which is grouping like tasks together in a block or batch of time and getting them done. For example, if an employee interrupts you with questions multiple times a day, train them to come to you only once a day to get all their questions handled at one time. Take your calls one after the other in a group, and then stay off the phone the rest of the day. Do the same with email, social media, running errands, and all of your other tasks.
Automation and Procedures
New apps save an amazing amount of time. List all of your time-consuming chores and then find an app that helps you get them done faster. For example, a scheduling app can reduce countless emails back and forth when setting meetings and appointments. To-do list or project management software can cut down on emails among you and your staff. And apps like Zapier can connect two apps that need to share data, reducing data entry.
The key to working less is to embrace the concept of leverage. How can you leverage the business resources around you to save time, increase staff productivity, and improve profits? It takes discipline and change, two difficult goals to accomplish. But when you do, you will be rewarded.
If you grant credit to customers, then you have a balance in accounts receivable. DSO stands for Days Sales Outstanding, and this helps you measure how fast your receivables are being converted to cash.
Here’s how to calculate it:
DSO = Accounts receivable balance / Annual net credit sales * 365.
DSO is measured in days and it represents how many days it takes to collect the customer invoice balance and convert it to cash.
Whether the DSO measure is “good” or not varies by industry as well as the terms you’ve set for your clients. If you’ve set your invoices to be due in 30 days and your DSO is 45 days or less, that’s pretty good. If you’ve set your invoices to be due in 10 days and your DSO is 60 days, then you might want to consider a more aggressive collection policy to speed up your cash flow.
Here are some tips to reduce DSO:
1. Invoice clarity.
Make sure your invoices are accurate and clear. Make it clear whom to make the check out to, where to mail it, the due date, and the amount due. All of these features should be easy to find on the invoice.
2. Consider discounts.
A common discount term is 2/10, net 30. This means the customer can take two percent off their invoice if they pay in 10 days; otherwise they owe the whole amount in 30 days. If you have customers from large companies, discounts are often required by policy to be taken and this can speed up your payments from them.
3. Consider electronic payments.
Going paperless with your invoicing as well as your payment process can speed up the entire billing cycle. Customers getting their bills earlier will also pay earlier.
What’s your DSO? If you need help calculating it, give us a call.
QuickBooks 2016 Desktop was recently released and there are a few new features that you will want to take a look at to see if it has something worth upgrading for.
The Bill Tracker is similar to the Income Tracker in the Customer Center that was released as a new feature in QuickBooks 2014 and improved with QuickBooks 2015. The Bill Tracker is located in the Vendor Center and allows a Snapshot View of Purchase Orders, Open Bills, Overdue Bills and Bills that have been paid in the last 30 days. Transactions can be managed from this area and batch actions can be taken to print or email and to close Purchase Orders and Pay Bills.
This Fiscal Year-to-Last Month
In the past, we had choices for date ranges on financial reports of This Fiscal Year or This Fiscal Year-to-Date as well as This Month or This Month-to-Date, none of which worked well for month-end reporting purposes. We now have This Fiscal Year-to-Last Month which allows us to print our financial reports as of the end of the Last Month, through which accounts are typically reconciled. This will allow us to Memorize Reports with the correct date instead of saving with a Custom Date that needs to be changed each time.
Sales Receipts, Invoices, Estimates and Purchase Orders all have an Email Later check box and it’s a “sticky” feature, meaning that once selected, it remembers for future transactions. In the past, we would accumulate many documents in the queue to be sent later and if we wished to clear the queue, it would have to be done individually. With this release, under the File menu, Send Forms, we can now Select All and click Remove.
do a Backup!
As we move into the fall season and the final quarter of the year, it’s a perfect time to commit to a project in your business that will help you reach the year’s end in better shape. Here are five ideas:
1. Back-to-School Time
If payroll expenses are one of the higher costs in your business, then it makes sense to boost your team’s productivity and maybe also your own. Fall is back-to-school time anyway, so it’s a natural time of the year to take on a course, read a business book, or hire an organizer to help you get more from your workspace.
If you spend a lot of time doing email, consider taking a course on Microsoft Outlook® or even Windows; learning a few new keystrokes could save you tons of time. If you need more time, look for a book or course on time management. Look for classes at your local community college or adult education center.
2. A Garage Sale for Your Business
Do you have inventory in your business? If so, take a look at which items are slower-moving and clear them out in a big sale. We can help you figure out what’s moving slowly, and you might even save on taxes too.
3. Celebrate Your Results
Take a checkpoint to see how your revenue and income are running compared to last year at this time. Is it time for a celebration, or is it time to hunker down and bring in some more sales before winter? With one more quarter to go, you have time to make any strategy corrections you need to at this time. Let us know if we can pull a report that shows your year-on-year financial comparison.
4. Get Ready for Year’s End
Avoid the time pressure of year’s end by getting ready early. Review your balance sheet to make sure your account balances are correct for all transactions entered to date. You will be ahead of the game by getting the bulk of the year reviewed and out of the way early.
Also make sure you have the required documentation you need from vendors and customers. One example is contract labor that you will need to issue a 1099 for; make sure you have a W-9 on file for them. If we can help you get ready for year-end, let us know.
5. Margin Mastery
If your business has multiple products and services, there may be some that are far more profitable than others. Breaking these numbers out to calculate your profit margins or contribution margins by product or service line can help you see the areas that are adding the most income to your bottom line. Correspondingly, you can determine if you have any items that are losing money; knowing will help you take the right action in your business. Refresh your financials this fall with your favorite idea of these five, or come up with your own fall project to rejuvenate your business.
Wow, can you believe that 2015 is half over already? Now that we’ve crossed the halfway mark, it’s time to see if we’re on track for our 2015 goals. To do that, we need to see if we’ve met our mid-year milestones.
Managing By Milestones
A milestone, in project management terms, is simply a point along a project timeline. It’s marked so that project managers recognize when that portion of the project has been completed. We can use milestones to see how we’re faring toward financial goals as well.
Assuming our business is not seasonal, we should have earned half of our target revenues for 2015 as of the June 30, 2015 income statement. If we’re falling short, we can recognize that and perhaps add some promotions or sales to spike revenues so that we can correct the shortfall before the year has ended. If we’re ahead of the game, we can see what is working so well and make sure to replicate it.
Either way, with milestones, we can be more proactive in reaching or surpassing our goals.
By the Numbers
Some of the numbers you may want to set milestones for include:
* Revenue to date
* Profit to date
* Debt paid down or debt taken on
* Assets acquired or sold
* Number of employees added or lost or both
* Number of clients added or lost or both
* Accounts receivable aging
Milestones don’t have to be numeric. You can also use them to determine if you’re on track with internal projects. Perhaps for 2015, your goal was to replace 5 PCs and convert your shopping cart software. You can set milestones to monitor specific phases of these projects or just monitor when you start and complete them.
Mid-Year Milestone Report
Document your accomplishments in a mid-year milestones report. It feels good to write them down, plus you’ll have a history of how much you accomplished as well as what worked.
The report can include the milestones as well as a narrative explaining the performance to date. If you’d like our help creating this report, please feel free to contact us.
Accounting for milestones can help you become more proactive toward reaching your business goals. Plus, it’s great to see how far you’ve come since the beginning of the year.
As always if you have any questions regarding any of our newsletters, please feel free to call for further clarification.
A couple of years ago, QuickBooks® gave Accounting Professionals a tool just for us – it’s only in the QuickBooks® Accountant and QuickBooks® Enterprise Accountant versions. It’s called Period Copy and it allows us to extract transactions between a set of dates for a specified period of time and condense transactions outside of the range.
This preserves transactions in the condensed file only for a particular period with entries prior to that period summarized and entries after that period removed.
This is useful for clients with file size and list limit issues as well as for third-party requests of information – not only for audit requests, but also in the event of a business sale, a divorce or legal dispute when you do not need to provide the entire QuickBooks® file.
First thing – BACKUP your data file. You are creating a new file to be issued to a third-party and you do not want to overwrite your working file.
Then under the FILE menu, UTILITIES, CONDENSE DATA –
Accept the prompt that it is ok to lose Budget data.
When it prompts you for what transactions you want to remove, select “Transactions outside of a date range” to prepare a period copy of the company file. Set your before and after dates to include the period you want to keep.
Then when it prompts you how transactions should be summarized, choose “Create one summary journal entry“.
Remove the recommended transactions.
Once complete, you will have a QuickBooks® data file with only the relevant transactions for a specific period of time and you won’t be disclosing more information than need be.
Many businesses operate with seasonal peaks and valleys. Retail stores flourish in their busy holiday season. Construction contractors are busy when the weather is good. Accountants are very busy from January through April, but also experience a quarterly peak in July and October.
Your business many have its own calendar of busy and slow times. If your business goes through slow times, then your cash flow may suffer at certain times of the year. But having seasonal sales is only one of the reasons for a bumpy cash flow.
You might also have a business where annual payments are made for many items such as equipment purchases, software licenses, insurance renewals, and other large costs. On the revenue side, it could be that your clients pay you annually, which can be hard to predict.
There are many solutions that can help to smooth out the seasonal bumps, and here are a few ideas for your consideration.
Plan for Prosperity
When income and expenses go up and down and up and down, it’s really hard to know if you have enough money for obligations coming up. Creating a budget can help a great deal. Consider creating two budgets: one that shows the ups and downs and one that averages a year’s income and expenses into twelve equal parts.
With both budgets, you’ll be able to see which months will be deviating from average and by how much. From there, it’s easy to create some forecasts so you can stay on top of your cash requirements.
Cash vs. Accrual Basis
It might help your business decision-making to convert your books from cash basis to accrual basis. This is a huge decision that should be made with an accounting and tax expert, as there are plenty of ramifications to discuss.
In some cases, the accrual basis of accounting will help keep those annual payments from sneaking up on you as 1/12 of the payment can be accrued on a monthly basis to a payables account. This also keeps your net income figure steadier from month to month.
If your clients prepay their accounts on a yearly basis, you can book the income monthly and keep the difference in a Prepaid account. This spreads your revenues out and recognizes them over time.
If you feel accrual basis accounting is a little too much of a commitment, your accountant can still work with you to help you avoid the impulse of spending too much during the cash-rich busy season. Perhaps the excess cash can be put into a savings account until it’s needed. You can draw out 1/12 each month as you need it. A little planning such as the above suggested forecasts will help you determine how much you can take out each month. You can even name the Savings account “Do Not Spend!” or “Save for a Rainy Day.”
If it’s just too tempting to have all that excess cash building up in the good times of the year, try one of the ideas above to take back cash flow control and smooth out those bumps.
Both the Desktop and Online versions of QuickBooks maintain an Audit Log showing a history of activity in the file by user.
QuickBooks Online Accountant allows you to see all of your QuickBooks Online accounts listed in one login screen and you can choose which client file to access.
Recently, we have witnessed several cross-overs of usernames in the Audit Logs. For example, you could be working in QuickBooks Online as yourself (the Accountant) on Client A, but the Audit Log shows you logged in as Client B on Client A’s file. If Client A happens to check the Audit Log, this could cause quite an alarm!
Unfortunately, there is nothing you can do to change the username retroactively in the Audit Log. There are, however, ways to fix this if it is happening now, and ways to prevent it from happening in the future.
If you have access to multiple QuickBooks Online companies, review the Audit Log in each company. If you log into QuickBooks Online as yourself, and the Audit Log lists another user’s name, this is where you will need to edit your Username record. To edit your username record in any of your QuickBooks Online company logins, go to https://www.login.quickbooks.com/.
Once logged in, you will see a drop-down menu of QBO companies that you have access to. After selecting the company with the incorrect username, you can edit that username to correct the issue going forward.
When you access a new QBO Company, it is always a good idea to check the Audit Log firsthand to prevent future issues.
We have notified Intuit Support of these Realm issues as have other ProAdvisors, and we are awaiting their solution. In the meantime, you may wish to reach out to your affected clients proactively.
| The balance sheet is one of the main financial reports for any business. Among other things, it shows what a company owns, what they owe, and how much they and others have invested in the business. One of the characteristics of a balance sheet is how it separates what you own and what you owe into two categories based on timeframe.
Current and Long-Term
You may have seen the Assets section of your balance sheet divided into two sections: Current Assets and a list of long-term assets that might include Property, Plant, and Equipment, Intangibles, Long-Term Investments, and Other Assets.
Current Assets include all of the items the business owns that are liquid and can easily be converted to cash within one operating cycle, typically a year’s time. The most common types of current assets include the balances in the checking and savings accounts, receivables due from clients who haven’t paid their invoices, and inventory for resale.
The remaining assets are long-term, or assets that cannot easily be converted to cash within a year. Property, Plant, and Equipment, also termed Fixed Assets, includes buildings, automobiles, and machinery that the business owns. You might also see an account called Accumulated Depreciation; it reflects the fact that fixed assets lose their value over time and adjusts the balance accordingly.
Intangible assets are assets that have value but no physical presence. The most common intangible assets are trademarks, patents, and Goodwill. Goodwill arises out of a company purchase. Investments that are not easily liquidated will also be listed under Long-Term Assets.
Similarly, liabilities are broken out into the two categories, current and long-term.
Current liabilities is made up of credit card balances, unpaid invoices due to vendors (also called accounts payable), and any unpaid wages and payroll taxes. If you have borrowed money from a bank or mortgage broker, the loan will show up in two places. The amount due within one year will show up in current liabilities and the amount due after one year will show up in long-term liabilities.
The most common types of long-term liabilities are notes payable that are due after one year, lease obligations, mortgages, bonds payable, and pension obligations.
Why All the Fuss Over Current vs. Long Term?
Bankers and investors want to know how liquid a company is. Comparing current assets to current liabilities is a good indicator of that. Some small businesses have loan covenants requiring that they maintain a certain current ratio or their loan will be called. The current ratio of your business is equal to current assets divided by current liabilities. Bankers like this amount to meet or exceed 1.2 : 1 (that’s 120%: 100%, although this can vary by industry).
Next time you receive a balance sheet from your accountant, check out your current and long-term sections so that you’ll gain a better understanding of this report.