New Business Direction LLC
The income statement of any business is probably the most utilized report of all. It is a snapshot of the financial performance of your business over a period of time, such as a month or year. You might also hear it called the Profit and Loss Statement, or P&L.
The income statement can give you all kinds of insights as to whether you are bringing in enough sales, if your prices are generating enough profit, and how your expenses are running. Let’s take a look at the report, step by step.
Revenue
The report starts by listing the revenue for the period of time covered. Revenue includes all sources of income, including sales from operations and any other source of revenue. In most small businesses, sales will be the largest part of the revenue, if not all of it. In some countries, the term used for sales is turnover.
If you sell more than one item or have more than one location, it might be a good idea to be able to view the sales detail from these categories. This should not be detailed on your income statement, but you should be able to get a drill down report on your sales detail behind the scenes.
Look for exceptions to what you expect to see. There can be some decisions you can make and actions you can take from the insights you discover.
Cost of Goods Sold
This section of the income statement includes costs you incur directly on items you sell. If you maintain an inventory, it’s the cost you paid for the inventory items that you sold during the period. If your business is a manufacturer, cost of goods sold, or COGS, will include costs of materials and labor to produce the items.
If you’re in construction, COGS will be Materials, Labor, Subcontractor Expense, Equipment Rental, and General Conditions.
If you own a service business, COGS will typically be zero. As a service business, you may incur direct costs when providing services, and these costs can be booked in a variety of expense accounts, including supplies.
Gross Profit
Some income statement formats will include a gross profit number which is sales minus cost of goods sold. This number is important for businesses with inventory or job costing.
Expenses
The expenses section of the income statement is your company overhead. It includes all of the expenses you incurred in your business, including advertising and marketing, rent, telephone, and utilities, office supplies and meeting expenses, travel, meals, and entertainment, payroll and payroll taxes, and several more.
Other Income/Expenses
These are non-operational revenues and expenses. Other Income includes interest and investment income, revenue from insurance claims, and sales from assets or other parts of the business. Other Expenses include depreciation, amortization, interest expenses, and taxes.
To review your expenses, check line by line to see if anything looks out of sorts, and take the appropriate action.
Net Profit or Loss
The final number on your income statement represents whether you made or lost money in the period the report covers. The formula is simple: revenue less COGS less expenses plus other income less other expenses equals net profit or loss.
Net profit/loss can go by many names, depending on the size of your business and your accountant’s vernacular. You may also see EBITDA: Earnings before interest, taxes, depreciation, and amortization. Earnings is another word for net profit.
Perspective
It’s a good idea to compare your income statement numbers to other periods in your business. Common comparisons include last period, last several periods, and same period last year.
It’s also a great idea to have a Revenue Plan that sets goals for your income statement numbers. Then you can compare budget to actual numbers and take action on the variances.
If your business falls into a standard type of business, you may also be able to see how it is doing compared to others in your industry. This is called benchmarking, and the income statement is a very common format that’s used in benchmarking.
Do spend some time each period reviewing your business’s income statement. It can help you make a faster course correction in your business so you can be even more successful than you already are.
Please let us know if we can help with any of this!
If you feel like you spend too much time on email, you’re not alone. Almost everyone feels the same way. That’s why it’s so important to learn how to be as productive as possible when it comes to handling email. Here are five tips to help you do just that.
1- Automate your emails.
If you’re sending a lot of the same emails to clients, you may be able to add them to email list management software like Constant Contact or MailChimp. Then you can automate a series of emails using the autoresponder function.
Another way to automate your emails is to set up inbox rules so that certain emails are automatically filed into the folders you’ve set up. For example, if you get a monthly email for a recurring bill payment, you could send it straight to your bills folder if you don’t want to read it. This will save time in the morning when you sort through the pile of email that’s sent overnight.
2- Set a timer.
Make a habit of checking your email only once or twice in the day. Plan those times on your calendar and set a timer to stop if you need to. This employs time batching, one of the most productive ideas in time management. It’s unproductive to stop and read each email exactly as it comes into your box, so setting times restructures the way you work with email for the better.
3- Create draft email answers of your ten most frequently asked questions.
Do you get a lot of the same questions over and over again in your email? Don’t start from scratch each time you craft an answer. Start with a draft of a previous answer, make it generic, and save it in your drafts folder. When you get that question again, copy and paste the draft and customize it as necessary.
Repeat this for your top ten (or twenty) most-asked questions or emails that you send. You’ll shave minutes off each email reply from now on.
4- Learn the email software you’re using.
Sure, everyone pretty much knows how to send, reply to, and forward emails. Most even know how to add attachments. But what else do you know and use on a regular basis?
If you are tech-savvy, then simply spend some time reviewing your email settings and functions. There may be some you discover that will make your day.
If you don’t feel very comfortable with all things technical, then sign up for a formal course, preferably in person, where you have a real human teacher that can answer all your questions. It will be a day well spent.
5- Set up folders.
Folders, labels, or categories in your email software are all good ways to segment email so that it can be processed in a particular order. Your folders might be by priority, client, service type, or something else. In any case, it’s easier on your brain to answer all questions from one client or topic at a time than it is to ping-pong back and forth.
Use folders when you are complete with an email but want to save it for future reference. That way, your inbox will stay cleaner and emptier.
6- Use the search function.
Using the search function liberally in your email software when you need to find an old email will help you save tons of time.
7- Get a new email address if your current email address is too spammy.
You may be losing the spam battle with email addresses that have been used for more than a few years or that have been hacked. If so, the best solution might just be to switch to a new email.
Choose a good email address in the first place by staying away from email addresses that hackers can guess, like webmaster@yourdomain.com, sales@yourdomain.com, or info@yourdomain.com. Instead, use service@yourdomain.com or a version of your first and last names.
8- Unsubscribe. Unsubscribe. Unsubscribe.
Try these email productivity tips to help you spend less time on email while still getting the job done.
It’s always fun to surprise and delight your customers. This puts a smile on your client’s face, boosts loyalty, and is fun for your employees too. Here are five ways to surprise and delight your customers with inexpensive perks.
1. Handwritten thank you note.
Email and social media have all but killed the handwritten thank you note. So when you send yours to your top customers, it will really stand out.
2. Promotional items.
Promotional items are frequently handed out at trade shows, but they can be used in other settings too. These are items where your logo is typically imprinted and you purchase them in quantity. Items that are useful and popular include coffee mugs, t-shirts, fidget spinners, screen cleaners, webcam covers, key chains, notepads, calendars, and more.
Choose an item that is similar to or a reminder of your business or product. An IT consultant might choose a screen cleaner, while an accountant might choose a piggy bank.
3. Coupon bag.
If your business is located in a shopping mall or office building with other businesses around, go door to door and ask for coupons that you can put in a coupon bag to give to clients. Clients will be delighted to get a coupon for the dry cleaners, florist, and hair salon in your center no matter what type of business you’re in.
4. Random prize.
If your business has a stream of clients coming in a physical store or a virtual one, you can award prizes randomly to customers. If customers are grouped together as in a classroom or lecture hall, it’s easy – you can hold a drawing for a prize. Or you can select a random number and the customer assigned that number wins a prize.
Choose a prize from one of your services or products, or give something away that’s universal and “hot,” such as an Amazon Echo Dot.
5. Free samples.
The cosmetics industry has been giving away free samples and gifts with certain purchases for decades. Grocery stores often have free samples of food at a little booth staffed by a host at the end of an aisle. You might be able to apply this idea to your business with a little bit of creativity.
Think of how you can “sample” your service or product and package it up in a free gift or sample. If you offer a service, you may have to get extra creative. A consultant can offer a book that’s related to the service offered, a spa can have healthy treats while clients wait, and a divorce attorney can offer stress balls or fidget spinners.
With customer service declining in many businesses, try these five things to wow your customers and set your business apart.
One of the most important success factors of small businesses is the ability to generate revenue, and to do that, most businesses need to market their services and products to bring in new customers and sales. The challenge for small business is how to make their marketing dollars work the hardest, and this requires careful tracking and measurement. Here’s one way to get started tracking your marketing spending so that you can find out what’s paying back the most.
List your sources of revenue
First, determine where your sales are coming from by making a list of all the ways you are currently attracting customers. Here are a few:
- Website via search
- Social media
- Google ads
- Referrals from existing customers
- Ad in a local magazine
- Article or Newsletters
- Board membership on local nonprofit
- Chamber of Commerce membership and participation
Track your expenses by source or method
Once you have your list, it’s time to look to your accounting system. Create an account for marketing expenses in your chart of accounts to track expenses for these marketing methods. Sort them by the payee to review totals for each category. If you need our help, please feel free to reach out.
The goal of this step is to be able to get all costs associated with each of these marketing methods so that you have a total cost over time by method. Don’t forget labor: if an employee spends three hours a week updating your social media accounts, this should be included in your costs.
Determine the source of your sales
To the extent you can, match the sales that come in with the marketing source or method. In other words, if a customer knows you from the Chamber and spends $500 with you, match the $500 revenue with the Chamber marketing source. Do this for every sale you can. If you don’t know or can’t attribute the sale to any one method, then code it to an Unknown tracking code or account.
This step can be difficult, depending on your business type, especially if your customers are anonymous, as in retail or restaurant sales. However, every business can do better by asking “how did you find out about us?” to each new client that comes in and recording that answer.
For online sales, you can use tracking apps such as Google Analytics to help you measure digital marketing methods.
Do the best you can on this step, and implement procedures to capture this information as accurately as possible for future sales.
Analyze and adjust
This is the fun part. Once you’ve done all the hard work, you should be able to match sales to costs and determine the volume of sales that are coming in for each marketing method. Let’s say you found out that you are getting no sales from your nonprofit board membership, the newsletters articles, and social media. You now have some decisions to make.
If you are doing these things solely for the purpose of marketing, you could cut them out and focus on the remaining methods. It could also mean that you need to redo your social media strategy; it’s not working now, but another strategy might. Or just one article or newsletter is not enough, but three articles could start paying off.
At any rate, you have far more information than you did before you started, and now you can make smarter decisions about your marketing. If we can help you code and crunch all of these numbers, please reach out any time.
Learn How Revenues Are Transactional with Rhonda Rosand, CPA and QuickBooks® Pro Advisor of New Business Directions, LLC. If you want to create more revenues within your business you just need to create more transactions! New Business Directions, LLC specializes in QuickBooks® set up, clean up, consulting and training services, coaching small…
There are a lot of deadlines that come with running a business. Missing some deadlines can have serious financial implications to the health of your business. Let’s take a look at how much you’ll save by being on time with the following deadlines.
Payroll
One of the toughest deadlines of all, making payroll, is essential to keeping employees happy. Making payroll tax deposits on time is even more crucial. You’ll save the following in penalties by staying on time with payroll deadlines:
- If you’re 1-5 days late with payroll tax deposits, the penalty is two percent of the payroll.
- If you’re 6-15 days late, you’ll pay five percent in penalties.
- If you’re more than 15 days late, the penalty goes up to 10 percent.
And that’s just the federal penalties, not your state penalties.
Income Taxes
Everyone knows about the April 15th deadline to file your taxes. Some people file an extension and have until October 15th. However, we need to remember that the best estimate of your tax liability needs to be paid by April 15th even if an extension of time is granted. Failure to correctly estimate and pay income taxes leads to a penalty that is calculated by multiplying the number of days the tax is late by the effective interest rate.
Paying Vendors
If we’re slow to make our accounts payable payments, our vendors may tack on a penalty, but the larger consequence is the effect on our credit score. Plus, you will get better pricing from your suppliers if you pay on time and within terms.
Business Goals
It’s so easy to let internal deadlines slide, but they may be the most important of them all. To move your business forward, set goals with deadlines so that you can measure your results.
Mastering Deadlines
Here are a couple of tips to master your deadlines so you can avoid the above consequences:
- Keep a list of deadlines, or hire someone to help you with them.
- Make a mental commitment to yourself that the deadline is important to your business.
- Set aside the time you need to prepare for the deadline. Block time on your calendar and stick to it.
- Remind yourself of the consequences of missing the deadline.
- Try not to overcommit. Delegate other tasks when possible.
- If possible, automate or systematize the processes around the deadline so that it’s met automatically.
- Stay up late if you have to in order to meet your deadline.
- Celebrate when you meet your deadline!
Attracting and retaining talent in your small business can be a giant step toward growing into a mid-sized business. Beyond attracting new employees with salary and benefits, here are several perks, policies, and benefits to consider when recruiting women, and employees in general, to your workforce.
1. Flex work hours.
Everyone likes regaining control over their workday, and offering flex hours can be one of the lowest cost policies to implement. Flex hours support work-life balance and are especially important for employees who have school-age children who can plan work around their children’s day.
2. Wellness initiatives.
Large companies are able to offer a wellness program, but small companies can take small steps to reach the same result. Find a local gym to partner with for a membership discount. Bring in the occasional yoga teacher. Or hire a nutritionist to speak once a quarter to your employees. All of these small initiatives demonstrate to your employees that you honor a culture of wellness.
3. Maternity and adoptive leave.
Do you have a policy about time off for new parents? And more importantly, you’ll need a process to re-integrate the employees into the business when they return.
4. Child care support.
Even if you can’t afford to provide onsite child care, you might be able to partner with a local child care facility to provide reduced or subsidized rates.
5. Gender hiring goals and metrics.
Do you have an equal number of men and women in your workplace? If not, do you have goals in place to adjust the ratios when possible? If you have a disproportionate number of one gender making all of the hiring decisions, you may want to consider the effects of implicit bias on your hiring processes.
6. Mentoring.
One way to speed the growth of employees is to provide mentoring. All employees will benefit from strong role models.
7. Opportunities for promotion.
Both men and women will perform better when there is a clear path to promotion as well as leaders in current positions who demonstrate leadership.
8. Dress for your day.
One of employees’ favorite perks is to be able to dress casually when no customer meetings are scheduled.
9. Paid time off.
Paid time off, which used to be called sick pay, is a favorite. But now, with most employers, you don’t necessarily have to be sick or explain your reason for wanting to take a personal day from work.
10. Gender-neutral company events.
Many companies create events for employees and sometimes customers to enjoy and mingle. This can include the company Christmas party, lunches, and happy hours. It can also include sports events such as golfing and attending baseball games. For every traditionally male event, be sure to plan a traditionally female event to keep the options gender equal. Spa day, anyone?
These benefits are a great start to attracting top talent, boosting employee morale, and maintaining a happier workforce in your business.
Every business has a gold mine in its current customer base. But not all business owners remember to mine this gold because they are too busy trying to attract new customers or developing new products or services. This is the perfect time of year to step back and remember the three easiest ways to grow your business revenue using your existing customer base.
1. Offer More
Offer steady customers a product or service with more features than they usually purchase. Examples include moving a client from coach to first class, from a budget vacation to a luxury one, from a standard model car to a luxury version, from an off-the-rack suit to a designer suit, from the standard service to an all-you-can-eat version, and from a regular meal to a super-sized one.
Some customers simply need to be given permission to splurge on themselves, so why not by you? Others have outgrown the standard package but find it hard to break the routine. With a gentle nudge from you, a percentage of your clients will purchase the upgrade, therefore boosting your sales with little effort on your part.
2. Additional Services
Restaurants practice this the most, asking us if we want appetizers, dessert, or fries with our entrée, and you can apply this to your business too. If you offer two services and a client is only participating in one service, make sure they know about the other service you offer and find out if they have a need for it.
This is called cross-selling, where you offer a current customer a service or product that they don’t already purchase from you. For example, an attorney that does trademark work for clients might also let clients know that they do wills, too. A pool builder who also offers maintenance service will want to follow up with the new pool owner once the pool is built. A real estate agent who also manages properties will want to let rental property investors know about this service.
3. Review Your Pricing
In the retail business, if your costs have gone up but your prices have remained the same, you’ve accidentally given yourself a pay cut. No one wants that, so raising prices is an option that will restore your profit margin to the way it was before costs went up.
If you’re in the services business and you are better, faster, and prettier than you were last year you’ve also given yourself a pay cut. If it takes you less time to do something because you spend the money and the time learning a new skill, you need to be compensated for this.
If it’s been a while since you’ve raised prices, it might be time to make an adjustment. Review your price list for your services and products and determine what you need to do to bring the numbers back in balance. Let us know if we can help with some profit margin or breakeven calculations to help you make this decision.
Raising prices requires careful consideration and timing. Customers do expect periodic price adjustments, so don’t let procrastination or fear hold you back from making a good solid business decision here.
All three of these strategies will help to raise your average revenue per customer and boost your overall revenue without a lot of additional work on your part. Try these strategies so you can enjoy a more prosperous 2018.
Happy New Year! January is the month of new beginnings and a perfect time to strategize about projects that will boost your business prosperity. Here are five ideas to get you thinking about new beginnings for your business in 2018.
1.Learn new technology.
Every year, tens of thousands of new online software applications are invented that will save us time and money. Learning at least one new app will keep us sharp and hopefully improve our business. There are many to choose from, and one way to narrow it down is to find one that will help you do your job better.
Look for an app that supports your administrative work, such as a new phone system, video conferencing, scheduling, cloud storage, shipping, document management, or data entry automation. Or you might have a need for apps in marketing and sales, such as social media, customer relationship managers, email list management, or web applications. If you’re not sure where to look, ask your friends what has saved them the most time.
2.Upgrade your accounting system.
If your accounting system is not updated to the current version, it may be time to perform the upgrade. Check with us for advice on the current version and any new features that you can benefit from.
3. Develop your 2018 prosperity plan.
The word “budget” has somewhat of a negative connotation, but a prosperity plan sounds like fun. They are the same, of course, and the idea is to determine what goals you want to reach so that you have a clear path to making your desired prosperity a reality.
4. Create a theme or mantra.
Want to stay more focused in 2018? A theme or mantra can remind you to stay on track with a particular project or goal. Brainstorm a phrase that will guide you in 2018. Here are some examples:
- Customer service excellence
- More me-time
- Enthusiastic, engaged employees
- Expanding digital presence
- Going green
- A prosperous new product line
5. Delegate something that isn’t getting done.
One way to feel amazingly rejuvenated and re-energized about your business is to give someone an item that’s been on your to-do list for far too long. It magically gets done right before your eyes!
We’re wishing you a most prosperous and happy new year.
Mission statements are not just for large corporations. As an owner of a small business, you can benefit from going through the exercise of writing your mission statement. It can not only re-connect you with your “why,” it can also communicate an important part of your business to all of your stakeholders.
What Is a Mission Statement?
A mission statement answers the question “What impact will you have on the world?” It’s your core purpose, your reason for being.
Here are a couple of mission statement examples from large companies you’ve probably heard of:
Harley-Davidson: We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments.
Darden Restaurants: To nourish and delight everyone we serve.
FedEx will produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business and related information services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards.
Ford: We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world.
Levi-Strauss: People love our clothes and trust our company. We will market the most appealing and widely worn casual clothing in the world. We will clothe the world.
At Microsoft, we work to help people and businesses throughout the world realize their full potential. This is our mission. Everything we do reflects this mission and the values that make it possible.
NIKE: To bring inspiration and innovation to every athlete in the world.
The mission of The Walt Disney Company is to be one of the world’s leading producers and providers of entertainment and information. Using our portfolio of brands to differentiate our content, services and consumer products, we seek to develop the most creative, innovative and profitable entertainment experiences and related products in the world.
A mission statement differs from a vision statement because a vision statement communicates what the company wants to be.
Ask yourself what your business’s core purpose is. What is the impact you want to have on the world? Once you know, you’ll be able to write your own mission statement.
Sharing Your Mission Statement
There are many ways you can share your mission statement.
- Make sure your employees know it.
- Display it in the About section of your website.
- Add it to your marketing material where appropriate.
- Use it when recruiting for new employees.
- If it’s short, use it on promotional items such as mugs and t-shirts.
- Frame it and hang it in your office.
- Mention it in speeches you give.
A mission statement is something to be proud of and something that should make people smile. Yours should motivate and energize you. Once you’ve written yours or if you already have one, be sure to share it with us.
