While we all have to keep our monthly books up to date for tax and other compliance reporting purposes, your accounting efforts should never stop there. Your books hold a wealth of data that you can use to run your business better. Below, we outline five reports your business should never be without.

Budget-to-Actual Profit and Loss Statement

Hopefully, you’ve already seen how powerful the Profit and Loss Statement is. We can take it to a deeper level, though, by adding in budget comparison. With this upgrade, you can now plan your way toward the sales and profit figures you want. As a result, you’ll know every month whether you’re on track, ahead of the game, or need to hustle to close the gap next month.

Most accounting systems allow you to enter monthly budget numbers for your sales and expense accounts. Imagine that this is the financial equivalent of Google Maps, and your business is a cross-country journey. You will be able to see where there is construction and traffic so that you can adjust your route to one more favorable. You can also see where there are cool opportunities ahead and plan accordingly to take advantage of them. Remember: your numbers tell a story.

Actual-to-Prior-Year Profit and Loss Statement

An actual-to-prior-year P&L Statement is an easy report to generate, so long as you have at least two years’ worth of information in your accounting system. This report allows you to compare your business’s results for this year alongside last year’s. Are you ahead? Behind? Have new products and services? New employees? New expenses?

With this comparison, you can take action based on how you would like your business to perform this year versus last year. Unfortunately, while this report is readily available, few companies study it to glean the insights available. Make sure you’re one of them and spend some time analyzing the data in this report.

Sales by Item, Customer, or Division (or All Three)

Inside every business’s sales information is a treasure trove of possibility. Where do you see growth, and how can you capitalize on it? Conversely, where do you see a slowdown, and can you run a promotion to juice things up?

Choose the breakout – customer, item, division, or another – that is meaningful to your business type. Then, if possible, arrange for a searchable database so you can drill down into the detail even more. What trends do you see? What opportunities do you see?

Operations Reports   

To obtain more information about your profitability and get into the details of how your expenses match up with your sales, you need to review your operational accounting reports. The precise report will depend on your business type. For example, if you are in services, you’ll need payroll reports and timesheets; for retail, inventory reports; construction, job costing reports; and manufacturing, cost of goods sold.

Cash Reports

The last report that is essential for good business management is all about cash. There is more than one option here, and these reports can include Accounts Receivable Aging, Accounts Payable Aging, cash flow forecasting, and various cash flow reports.

If you grant customers credit, you’ll want to actively make sure that money is collected on time from customers. If customer balances get too old, action must be taken. Even if you don’t grant credit, transactions such as returns, expired credit cards, and bounced checks need special attention.

The same is true for amounts you owe to vendors with the Accounts Payable Aging report.

If you run tight with your cash balance, you may want to have a cash flow forecasting report on hand. This report gives you good warning as to when your bank balance may dip below your needs. You can then delay vendor payments or find an infusion of cash to cover the shortfall.

With these five categories of reports, you will have dozens of opportunities to run your business more proactively and improve your bottom-line results. If we can help you find or generate any of these reports, please reach out anytime.

Worker shortages have affected many companies over the past year. If you’re one of them and find yourself needing additional workers to keep up with your growing business, we’ve outlined a few jumping-off points that might help your hiring process.

Where to Look for Workers

You may think of workers as only being employees. Though, especially in today’s job market, you may find you have an easier time securing talent through more unconventional methods or platforms. Consider some of the following hiring alternatives: 

  • Recruiters
  • Employment agencies
  • Online job portals, such as Indeed, SimplyHired, and ZipRecruiter
  • Social media, including LinkedIn Jobs
  • Your own website, email list, or employee referrals
  • Temp agencies
  • Specialized online job portals that cater to your industry and business type
  • Virtual assistant organizations
  • Day labor online sites and pickup areas
  • Job matching sites such as Upwork, Fiverr, and Freelancer.
  • Colleges, when you need interns and entry-level workers
  • Your local unemployment office
  • Small business development centers
  • Virtual assistant agencies or businesses
  • Chambers of Commerce and other business organizations
  • Professional organization directories where a license is required, such as hairstylists, dentists, or CPAs
  • Friends, colleagues, competitors, and neighbors; your own personal or business network
  • Craigslist and local classified ads
  • High school guidance counselors if you want to hire straight out of high school
  • Outsourcing to a company that provides the labor that does what you need
  • Volunteer matching sites

Options for Adding Workers/Labor

There are many ways you can increase labor in your business. Of course, the obvious is hiring employees. But, beyond employees, there are many more options than you might first consider:

  • Contractors, where you have a contract for a particular job and meet all of the IRS and other compliance requirements
  • Temp workers, where you “lease” an employee who stays on the temp agency payroll or hire them outright with a limited term of employment.
  • Part-time workers on your payroll
  • Companies that you outsource the work to and contract with as vendors to provide a particular service. They may outsource your labor needs or have labor as a component of the product or service you have hired them to supply.
  • PEO, or professional employer organizations, act as a customer’s employer, hiring their employees and managing payroll and other HR compliance tasks.
  • Interns, which are unpaid positions. Check your state and local rules for laws regarding hiring interns.
  • Volunteers, a common source of labor if you operate a nonprofit organization.

With all of these options available, you should be able to take advantage of less mainstream ways to add labor and grow your business.

From recycling to driving electric cars, there are myriad ways for all of us to make a difference, and you’re probably already doing your small part to live more eco-consciously. If you’re somebody who frequently looks for better ways to do just that, guess what? There’s an app for that! 

In reality, there are a few different apps that can help you track your carbon footprint. In doing so, you can physically see your carbon environmental impact. Below, we have detailed a few of these apps and their benefits. Take a look! 

Capture

Capture is an app that calculates users’ monthly CO2 targets by asking a series of questions. These questions include things like, “How many flights a year do you take?” and “What kind of diet do you adhere to?” Capture also utilizes GPS tracking to predict emissions from transportation.

Specifically, the app was designed to make planet-friendly living possible, but it also makes the process easier for those interested. Capture claims that users can conveniently “track, reduce, and remove CO2 emissions from everyday life.”

Interestingly, the app can be used single-handedly or with colleagues. If you are a numbers person who likes measuring and tracking, Capture might be an excellent solution for you.

Almond

The mission of the UK-based company, Almond, is simple: to help as many people reach Net Zero carbon emissions as soon as possible in four steps:

  1. Understand your carbon footprint
  2. Discover responsible brands
  3. Earn offset coins when you make a switch
  4. Offset your carbon footprint

Almond allows you to scan products to not only learn about a particular item’s story but also see what’s in the product (i.e., if it’s environmentally friendly). You can earn money with crypto rewards to plant and protect trees, which offset your carbon footprint. The more you earn, the faster you can grow your forest to achieve a carbon-balanced lifestyle and reach your personal CO2 Net-Zero.

The Recap

Of course, plenty of other smartphone apps and tools are available to help you better track and reduce your carbon footprint, including The Extra Mile, My Planet, and Carbon Footprint. The trick is to find the app or tool that works best for you and your lifestyle. Hopefully, our list provides a good jumping-off point for you in your eco-conscious journey.

A lot of times, new business owners ask us one question: How much will it cost for you to do my accounting or taxes? And, we’re happy to answer that question as soon as we find out more about your business and whether we can help you with what you need.

However, you might want to ask us more questions than simply inquiring about our fees.  Here are some to consider. And yes, feel free to grill us. We appreciate your interest and want you to know us better. Setting expectations at the beginning contributes toward a healthy long-term relationship between a business owner and their accountant.

  1. How long have you been in business?
  2. What experience do you have with companies in my industry?
  3. What experience do you have with companies at my revenue level?
  4. What professional bookkeeping, accounting, and/or tax credentials do you have?
  5. How skilled are you with technology?
  6. What accounting software do you support?
  7. Have you earned any accounting software credentials?
  8. Do you partner with any accounting software vendors, and what benefits do your clients receive from your partnership?
  9. What accounting and tax services do you offer? Do you have a specialty or favorite service or niche?
  10. What services are inhouse and what is outsourced by you to other vendors? (example: payroll)
  11. Are your employees US-based or overseas?
  12. What size is your team, and who would support my business?
  13. How do you bill for services: flat-rate or hourly?
  14. How long is my initial rate locked in for?
  15. How often do you raise prices on clients?
  16. What price would you charge to perform the services I need?
  17. Do you offer a guarantee or warranty on your work?
  18. How do you protect and secure my financial data?
  19. Who in your company and supply chain will see my financial data?
  20. How secure is the accounting software you use?
  21. Do you require me to sign a contract or engagement letter?
  22. What is your cancellation policy?
  23. If I pay for software through you and decide to cancel, what happens to my software and data inside the accounting system?
  24. Is your firm environmentally-friendly?
  25. Does your firm support diversity and inclusion?

While Net Profit and your cash balance are probably the first two numbers you look at on your monthly financial reports, those aren’t the only important factors you should be looking out for in your regularly scheduled reviews. You can glean a lot more gems by digging a little deeper and looking at your data through any of the following six perspectives.

Automation Opportunities

Look at your labor detail reports and professional and outsourced expenses to see where you could be automating specific tasks or work types. For example, adding more automation to your workflows could be as simple as automating your team’s calendars so that your admin professional(s) don’t have to spend as long coordinating between other team members. Additionally, if you find that duplicate data entry is driving up costs, reach out to us about integration solutions like Zapier that could free up more time to keep your employees working in their most profitable capacities.

Duplicate or Excessive Expenses

Have you noticed that you’re paying for things twice on your Profit and Loss Statement? Or, are there services, applications, or other expenses you could cut back on?

An area you might see duplicate spending, for example, is insurance coverage. Perhaps your liability and your business umbrella both cover worker’s compensation; see what you can do to reduce the overlap.

A significant example of excessive expense could be your rental. Especially in today’s environment, when many employees are working on a fully remote or hybrid basis, or your overall team is reduced, your office rental could be costing you more than it needs to. For example, if you rent 5,000 square feet but now only need 2,000, see if you can re-negotiate your lease, sublet that extra space, or move to a location that more suits your needs.

Lastly, retainer and recurring expenses should be scrutinized; are you getting what you’re paying for? These opportunities could lead to increased services for the same cost, or you might be able to negotiate for a lower fee.

Outsourcing Opportunities

Remember, all because you can do something doesn’t mean you should. Are there tasks or work that an outsource company could do cheaper and better than you? If so, outsourcing could be a profitable option to look into further.

Indications of Fraud, Theft, or Excessive Risk

As owners, we need to protect our business investment, and we should always be on the lookout for signs that our investment may be at risk. If your numbers look odd or unexpected, you should be skeptical and investigate further.

Tax Savings Situations

Investing in tax planning almost always yields the best results, especially this year with new tax relief available to qualifying businesses. Get help from a tax professional to see if you qualify or close to qualifying for tax deductions, credits, and savings.

Sales Growth

This list would be remiss without mentioning the obvious opportunities of finding ways to grow sales. Your sales results can give you an idea of where more growth can occur, where promotion opportunities exist, and where completely new revenue sources can be created.

So the next time you review your financial reports for your cash number and net profit, take a closer look through these six filters to extract insightful data on how to run your business better.

Many small business owners focus on generating more revenue every year, and that’s a wonderful goal.  But not all revenue is created equally since some items are more profitable than others. If you sell more than one product or service in your business, then you may benefit from looking at your revenue mix.

While it’s fun to watch revenues grow, your business profit is what really matters. If your expenses grow faster than your profits, then you have a lot of activity going on, but you don’t get to keep as much of what you make.

An insightful exercise to try is to take a look at your revenue mix. Then you can ask “what if?” to optimize your profits.

Your Revenue Mix

Let’s say you offer three different services: Services J, K, and L. Your revenue pie looks like this:

J:  $700K or 70% of the total
K:  $150K or 15% of the total
L:  $150K or 15% of the total
Total:  $1.0 million

In this example, Service J is clearly the service making you the most revenue in your business. But is it making you the most profits?

The profit you receive from each of these service lines is as follows:

J:  $80K
K: $10K loss
L:  $30K
Total:  $100K

While Service J is generating the most profit volume for your business, it’s actually Service L that’s the most profitable.  Earning $80K on $700K yields an 11.4% return on Service J, but earning $30K on $150K yields nearly double the return at 20%.  Service L generates the most return. And if possible, Service K may need to be discontinued or turned around.

Optimizing Profits

Your strategy for a more optimum revenue mix might be to sell as much of Service L as possible while eliminating or fixing the problem around Service K.

It’s fun to experiment with different revenue mixes. And of course, there are many more variables besides profit, such as:

  • What services/products do you prefer to work on/sell?
  • Are you able to sell more of the most profitable service or are there marketing limitations?
  • Is one service a loss leader for the others?
  • Are you able to adjust the price on the lower margin services to increase your profits?

There are many more questions to ask and strategies to consider to make you more money, which is why we love being accountants.

A New Mix

We hope you’ll spend some time analyzing your revenue mix and having fun asking yourself “what if?” If we can help you expedite the process or add our perspective, please reach out anytime.

If you keep any kind of digital information in your business, you have a chance of becoming a victim of a cybercrime. The odds have increased exponentially during the pandemic, with more cyberthreats and scams floating around than ever before. Here are some ways to reduce your chances of getting attacked.

Social Engineering

Social engineering is when thieves try to get your employees to provide confidential information via a phone call or email. You can reduce your risk here by developing procedures and training any employees that take customer phone calls for the business. Require them to ask for identifying information such as a pin or code, or simply prevent them from giving out any information over the phone.

Passwords

Passwords are terribly inconvenient but incredibly necessary. Almost everyone is guilty of using passwords that are simply too easy to guess. Here are some password tips:

 

  1. Avoid using dictionary words, even if the syllables are broken up in the password.
  2. Always use a combination of upper and lower case, and don’t just make the first letter uppercase which is too predictable.
  3. Include special characters, and don’t just use the exclamation point.
  4. Use separate passwords for everything, especially for banking apps, accounting apps, and social media apps which are frequently hacked.
  5. Make your passwords at least 12 characters.  Better yet, utilize a password vault app to generate secure passwords.

Receiving and Delivering Information

If you deliver or receive information, it should be done safely and securely. One way to do this is to use a customer portal such ShareFile or SmartVault, where the information is securely stored in the cloud. Another tool to safeguard information delivery is encrypted email.

Anti-Virus

All computer users should have anti-virus software implemented and active on their devices, including tablets and cell phones as well.  Company procedures should dictate the settings as well as the brand to use.

Spam Protection for Email

Anti-spam software is also necessary to protect the device from bad links in emails.  Users should be trained to detect and avoid phishing emails.

Malware Protection

Malware can be installed on your computer without your knowledge and if you are not careful.  To protect against these threats, avoid file-sharing when possible, be careful when visiting unknown websites, don’t download software that you don’t recognize, and be careful with links in emails.

You may also need to protect your website from malware attacks by installing a firewall or other preventative solutions.

Software Releases

Stay current with all of your software updates and upgrades. Updates and upgrades can patch vulnerabilities, so you are safer with each new installation.

Data in the Cloud

Make sure any data that you have in the cloud is behind an acceptably secure technology solution.  Today, this generally means files are stored with AES 256-bit encryption. You can also look for SOC1 and SOC2 certifications.

Need to Know

There are many policies that need to be developed for employees with regard to data handling. One example is providing data access to employees on a need-to-know basis.  For example, an operations manager does not need the password to the payroll system, but the payroll manager does.

Reducing Business Risk

These items above are the tip of the iceberg when it comes to having good data security practices in your business. Develop an excellent set of policies, train and monitor employees, and set a great example yourself when it comes to this growing threat to your business.

A great way to start 2021 is to take a fresh look at your business finances. Many things changed in 2020, and if you are in the habit of spending on the same items year after year, it’s the perfect time to decide what is essential and what can go.

There are only a few ways to increase profits when you think about it in black and white terms. You can either raise revenues or cut costs. Let’s take a look at where we can potentially cut costs.

Publications

These expenses tend to be monthly or yearly, and we tend to just let them automatically renew time after time. But do we really need them? Take a look in your Dues and Subscriptions account to evaluate what you really need to stay informed, and cancel the rest.

Memberships

If you are a member of an organization or two, what benefits are you getting from your investment? Does it raise revenue for you? Do you use everything the membership offers? If not, it might need to go on the chopping block.

Memberships are especially tricky if the organization provides a local meeting component as a benefit and your state or county has been shut down. There’s a tradeoff right now between supporting the organization so that it’s still there when we can freely meet again and being responsible about your own business costs.

Office/Store Rent

With many employees working from home, the question has come up in many businesses about how much space they really need. As leases expire, consider how much space you really need. Some employees may love to work from home permanently, which frees up space.

Retail stores that have moved their business online may be able to cut back on customer-facing space but might need more inventory storage space. A restaurant that has successfully transitioned to pickup and delivery orders might be able to get by with a smaller seating area.

Software Apps

Are you paying for any technology applications that you are simply not using?  This is a good place to look for cuts.

Some applications charge by number of contacts.  Keeping your lists clean inside these apps will avoid increases and cut costs in some cases.

Office Supplies

Do you really still need things like staplers and scissors on everyone’s desk? If your business is going paperless, you can save a lot on office supplies.

Printing

Do you need to spend money on printing, or can the printed item be delivered electronically?

Shipping/Postage

While information can be delivered electronically, physical goods still need to be shipped.  Make sure you have the best deal with your shipping vendors based on your volume.  You may also need to consider building your shipping costs into the price of the product or add a shipping fee to the bill if you don’t already.

Marketing

A great way to increase profits is to become more intentional about your marketing costs. Are you able to measure what’s working and what isn’t? Or are you doing the same thing year after year?

Marketing has changed so much, even in the last few years. It might be time to implement digital marketing methods, which can be more cost-effective than older, outdated methods.

Labor

Make sure employees manage their time effectively by providing the right training and supervision. This should help to reduce labor expenses.

Telephone/Internet

Has your business changed?  Do you need all those extra features you are paying for?  Could you do without those extra lines?  Would another phone plan save you money on long distance or international calls? Many telecommunication companies will often bargain with you or offer you a new deal just for checking in with them.

This gives you ten places to look to cut costs and correspondingly increase profits for 2021. If you need help reviewing your income statement, please reach out.

Qualifying small businesses can now apply for Paycheck Protection Program (PPP) loans through certain lenders. The Small Business Administration (SBA) reopened its PPP portal on January 11, 2021 after Congress passed and the President signed legislation in December 2020, authorizing the continuation of the program and an additional $284 billion in funds.

The program allows for two types of applications:

  • First Draw Loans to qualifying entities that did not receive a PPP loan in 2020, and
  • Second Draw Loans for previous PPP loan recipients and with a narrower set of qualifications.

First Draw PPP Loans for First-Time Borrowers

Borrowers that qualify for first-draw PPP loans can apply for up to 2.5 times their average monthly payroll costs (with caps), for a maximum loan amount of $10 million. Generally speaking, the applicants must have been in operation on February 15, 2020 and be among the following types of businesses:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans
  • Sole proprietors, some self-employed individuals, and independent contractors
  • Nonprofits, including churches
  • Sec. 501(c)(6) businesses
  • Food or lodging operations with NAICS codes that start with 72 and with fewer than 500 employees per location
  • Certain news operations with qualifying NAICS codes in the 51 range

A number of entities are specifically prohibited from receiving loans.

The SBA application for First Draw Loans is here:
https://www.sba.gov/document/sba-form-2483-ppp-first-draw-borrower-application-form

The applicant must attest to the necessity of the loan, among several other declarations.

Second Draw PPP Loans for Borrowers That Received a PPP Loan in 2020

Borrowers that qualify for a second-draw PPP loan can apply for up to 2.5* times their average monthly payroll costs (with caps), for a maximum loan amount of $2 million. Generally speaking, the applicants must qualify as follows:

  • Employ no more than 300 employees
  • Have spent all of their first PPP loan on eligible expenses
  • Do not have to apply for forgiveness for the first loan ahead of receiving the second loan
  • Can show a 25 percent drop in gross receipts in any one 2020 calendar quarter from 2019. If it’s easier to show a 25 percent drop for the entire 2020 year compared to 2019, applicants can submit their tax returns as proof.

*Companies with NAICS code 72, which generally speaking are food and lodging operations, can borrow up to 3.5 times their average monthly payroll costs (with caps).

The SBA application for Second Draw Loans is here:
https://www.sba.gov/document/sba-form-2483-sd-ppp-second-draw-borrower-application-form

The applicant must attest to the necessity of the loan, among multiple other certifications and declarations.

Loan Forgiveness

PPP loan recipients can apply to have PPP loans forgiven if the funds are used within a specified covered period from 8 to 24 weeks on the following eligible costs: payroll (60 percent of funds), rent, covered worker protection and facility modification expenditures, covered property damage costs, certain supplier costs, accounting (!) expenses, and a handful of other qualifying expenses.

Timing

The SBA portal opened Monday, January 11, 2021 for first-draw loans by lenders (about 10 percent) that cater to underserved communities. These include Community Development Financial Institutions (CDFIs), Minority Depository Institutions (MDIs), Certified Development Companies (CDCs) and Microloan Intermediaries.

On Wednesday, January 13, 2021, the SBA application portal began accepting applications for Second Draw loans. A few days later, additional lenders will be added to the portals.

SBA says it “plans to dedicate specific times to process and assist the smallest PPP lenders with loan applications from eligible small businesses.”

What to Do Next

Here are some suggested steps to get ready for this next round of PPP funds.

  1. Determine which lender you want to use to apply for PPP funds.
  2. Visit your lender website to see if they have a PPP notification signup so you can get notified of updates.
  3. Collect the documents you need for the application.
    a. Payroll summary reports
    b. Profit and loss statements
    c. Tax returns
  4. Begin calculating the amounts you’ll need for the application:
    a. Gross receipts by quarter for 2020 and 2019
    b. Average monthly payroll costs, including cap limits for wages over $100,000, for the year you want to use (2020, 2019, or the year from the application date)
  5. Contact us if you need help with documentation or calculation or other advice.
  6. Contact your tax preparer about tax ramifications.
  7. Contact your attorney to evaluate the loan agreement.

Further PPP Resources

Updated PPP Lender forms, guidance, and resources are available at www.sba.gov/ppp.

CARES Act Treasury page: https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses

Jan 6, 2021 SBA PPP Interim Final Rule – 82 pages
https://home.treasury.gov/system/files/136/PPP-IFR-Paycheck-Protection-Program-as-Amended-by-Economic-Aid-Act.pdf

Jan 6, 2021 SBA PPP Second Draw Interim Final Rule – 42 pages
https://home.treasury.gov/system/files/136/PPP-IFR-Second-Draw-Loans.pdf

A cashless business is one that processes all cash transactions electronically. There is no paper or coin money taken or handled. While no one society has become 100 percent cashless yet, most organizations are moving in that direction.

A business can become cash-free by providing multiple electronic alternatives to payment.  Credit cards are the most common electronic payment implementation. This option most likely includes MasterCard, Visa, Discover, and American Express.  Some businesses also have a PayPal account and offer that method for payments. Venmo, owned by PayPal, is an efficient mobile alternative, but it is mostly used for consumer-to-consumer transactions. And there is also cryptocurrency.

Cashless businesses are more efficient, help to reduce crime, and have a better audit trail of transactions. Going cash-free also saves money and time spent counting the money, storing the money, safeguarding the money, protecting employees at risk of becoming theft victims, and physically going to the bank.

On the negative side, credit card companies charge fees to merchants, although these can now be passed to the customer in most states. Electronic transactions also require a higher level of technology, and privacy is reduced. And while security is an issue, all merchants that take credit cards must comply with PCI (Payment Card Industry) security standards and sign a document each year stating so.

If your clientele does not keep their money in a bank or if they are not able (or have chosen not) to have a credit card, you may need to rethink going cashless. About 20 percent of U.S. households are challenged when it comes to having access to checking and savings accounts. This has led to several state and local laws being passed in the U.S. prohibiting a business from going cashless. Nothing has been passed at the national level as of this writing, however the Payment Choice Act was introduced in both chambers in mid-2020.

The pandemic has accelerated the move to cashless with the desire for contactless transactions. Several countries are leading the way to becoming cash-free as an entire country, including Sweden, Finland, Norway, China, and South Korea. Sweden’s government has been the most aggressive, claiming they will become a 100 percent cashless society by 2023.

Is going cashless right for you? Meeting your customers’ needs is a prime consideration. At the very least, you can move to increase the percentage of electronic transactions and decrease the percentage of cash transactions when feasible.  This measure will save time and money in and of itself.