New Business Direction LLCThere 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!
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.
One of the many online marketing options available for businesses is blogging. A blog can act as a company’s daily newspaper, letting customers and followers know the latest news about what’s happening. It can also be a wonderful revenue-generator.
As long as the content of your blog is relevant to your readers, you can post on a wide variety of topics. You might want to let clients know about an upcoming sale, a new employee, or a tip related to a product or service of yours.
Some businesses make a separate revenue stream out of blogging. The most profitable blog today is the Huffington Post. Revenue from blogging can be earned in many ways:
- By selling ad space to people who want to get their products in front of people who read your blog
- From sponsors
- By holding events your readers attend
- From commissions from the sale of products on your site
- By creating products and services such as membership sites which allow paid access to your resources
Making money from blogging through one of these revenue streams takes work. Not only do you have to find or create content, you’ll need to attract readers too.
You can also simply use your blog to generate a following for your products and services. The right content can improve customer service, educate customers on your products which leads to better client retention, or inform them of the benefits of your products during your sales cycle.
If you’re not a writer, there are plenty of freelance writers available that you can hire to create your blog posts. You can also curate articles, meaning you can find existing articles and ask the author if you can re-publish theirs.
Creating a blog is easy with software like WordPress or apps like Blogger.com WordPress.com, and Wix.com, and all of these solutions are free.
Think about how a blog can impact your business for the better.
Increasing your profits might sound like it’s an unattainable dream just out of your reach. But there are a finite number of ways that profits can be increased. Once you understand what they are, you’ll have clarity on how to best reach your goals.
There are two primary ways to increase profits:
- Raise revenue
- Lower expenses
That’s not particularly enlightening or instructional, is it? Let’s look at the four ways you can increase revenues and the four ways you can reduce expenses to get clearer on what actions we can take.
Four Ways to Increase Revenue
1. Raise prices
The easiest way to raise revenue is to simply raise prices. However, this is not foolproof and assumes you’ll be able to maintain the volume of sales you’ve achieved in the past.
This method is also limited by market demand, what your customers are willing to pay.
2. Add new customers
Adding new customers is what most entrepreneurs think about when raising revenue. Increasing your marketing or adding new marketing methods is typically the way to add new customers.
Another related option is to work hard to keep the customers you already have. You can also potentially contact the customers you lost and ask them to come back.
3. Introduce new products or services
For some companies, your products and services are changing every year. For others, not so much. To increase revenue, consider adding new products or services that will bring in an additional revenue stream that you didn’t have before.
Even if your products are changing every year, you can consider adding something completely different that your customer base would love. For example, a hair salon could add a nail desk, a clothing store could add handbags or shoes, a grocery store could add a coffee bar, a restaurant could add catering, a landscaper could add hardscaping, and so on.
4. Acquisition
The final way a business can increase revenue is to acquire another business in a merger or acquisition.
Four Ways to Reduce Expenses
1. Negotiate for a better deal with vendors
If you’ve been working with a vendor for a while, you may be able to re-negotiate your contract with them. This is especially common with telecom companies. Call your phone provider and ask them for the latest deal. They always favor new customers over long term customers, but they don’t want to lose customers either. Just calling them usually yields a better price than what you are paying now.
2. Change vendors
If a vendor has gotten too expensive, it might be time to look for a new vendor. Health care insurance seems to be in this category. Often, changing providers will lower your costs.
3. Cut headcount
If there is not enough work to support your employees or not enough cash flow to pay them, then it might be time for a layoff or restructuring. You might also consider outsourcing a function that you previously did in-house.
4. Cut the expense or reduce services
It might be your business no longer needs to spend money on an expense. Perhaps this expense has been automated. In this case, it’s an easy decision to cut the expense out entirely.
Those are the eight ways to increase profits. Which one makes the most sense in your business? Create a plan around these eight ideas to boost your profit in 2017, and let us know if we can help.
Are you ready for next year to be even better than this year? If so, take a few minutes to reflect on the questions below and take action to set your profit plan for the next year.
Question 1: What were the three best business things about this year?
No need to re-invent the wheel. If you knocked it out of the park this year, can you wash, rinse and repeat these tasks in the next?
If you’re having trouble thinking of three things, here are some hints:
- What apps saved you time and money?
- Did you make some good hires?
- Did you let go of a bad hire or two?
- Was there a marketing campaign that really worked?
- Were there any events you went to that generated great ideas?
- Did you add or remove products and/or services?
- Did you buy new equipment or open a new location?
Summarize the three best things that happened in your business for the last year and think about how you can repeat them to enhance your next year in business.
Question 2: What were the three worst business things about this most recent year?
While we don’t want to dwell too much on our failures, we do want to learn from them. Think about the three things that are causing you to lose time, money or gain stress, and decide if you can make changes for the next 12 months.
Question 3: What vision do you have for your business in the coming year?
At the end of next year, what has to have happened in order for you to have a successful year? Think in terms of metrics as well as intangibles, such as peace of mind and happiness.
Once you know your destination, the fun is in creating a roadmap to get you there.
Your Profit Plan for Next Year
If your vision includes financial goals, then creating a profit plan is one way to measure your progress throughout the upcoming year. Start by deciding how much profit you want to make. From there, you can compute your revenue goal and make a plan. Then you can add expenses to complete the budget. Here’s an example:
Let’s say you want to make $50,000 in profit for next year. You can do that in a number of ways:
- Generate $500,000 in revenue and $450,000 in expenses.
- Generate $2 million in revenue and $1,950,000 in expenses.
- Generate $150,000 in revenue and $100,000 in expenses.
- And so forth.
From your profit number, you can create a revenue plan. A revenue should include how many items you need to sell. Like this:
| No. of units | Price | Revenue | |
| Widget A | 3,000 | $200 | $600,000 |
| Part B | 100 | $2,000 | $200,000 |
| Service C | 700 | $1,000 | $700,000 |
| Total | $1,500,000 |
Once you have your revenue plan, you can fill in your estimated expenses.
You might be thinking that this sure sounds a lot like making a budget. And it is. But it’s far more fun to work on something called a profit plan than it is a budget. And if you need us to do the number-crunching part, please feel free to reach out any time.
Here’s to a very happy and prosperous next year in business for you.
As a business owner, you’re likely torn in a hundred different directions every day. It can take up most of the work day just fighting fires, serving your customers, and answering employee questions – never mind the time spent on email. It’s super-easy to lose sight of what you can be doing to move your business forward the most.
That’s when “the one question” can come in handy. It’s something you can ask yourself at the very beginning of each day, even before you check your email. Make your question about you and your goals for your company.
The one question is, “What’s the highest payback thing I can do today?”
If your goal is to boost profits, then ask “What’s the highest payback thing I can do today that will boost my profits?” If your goal is to empower your employees, then ask “What’s the highest payback thing I can do today that will empower my employees?” If your goal is to make a difference in your community, then ask “What’s the highest payback thing I can do today to make a difference in my community?” If your goal is something else, tailor your one question to that specific goal.
It’s not about fighting fires or answering routine employee questions or even serving current 
customers. Although those tasks are all important and essential, none of them will take your business to the next level.
It could be meeting with a power partner or referral source that sends you a lot of business, designing the next campaign that will bring in a higher level customer, meeting with your employees for lunch, or researching new products to sell. It’s going to be a task that gets you working “on” your business instead of “in” your business.
If you like this idea, consider writing the question on a sticky note and posting it to your bulletin board so that you can see it 
every day. I write my question and my intentions each morning on a colorful piece of paper that I carry with me all day. I do this while having my coffee and long before I check an email, text or telephone message.
Try asking yourself this one question each day: “What’s the highest payback thing I can do today?” Then do it, and watch your business grow.
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.
Some numbers need reviewing on a daily basis, and one example of this is cash. When cash is coming in from a number of places, it’s great to have a daily summary of what was collected.
It’s also great to make sure all the collections hit your bank account so you can feel confident that no errors were made along the way. A daily cash reconciliation report will serve both needs very well.
A daily cash report will vary depending on the type of business you have, but it will look like a combination of a bank reconciliation and a sales report wrapped into one.
If you are managing your cash closely from day to day, then this report will help you stay sane. You’ll need two very brief spreadsheets to get started. The first one below is your daily sales from all sources. Your accounting system may be able to generate this.
| Today’s Sales | |
| Cash | $300.00 |
| Checks | $600.00 |
| Total Bank Deposit | $900.00 |
| Mastercard Visa | $400.00 |
| American Express | $200.00 |
| Total Credit Card Due | $600.00 |
| PayPal | $100.00 |
If your accounting system is up to date, all you’ll need to do is pull the cash balance and adjust for today’s activity. The following day, you can double check your accuracy and adjust accordingly using the last two rows.
| Daily Cash Report | |
| Book Cash Balance | $5,000.00 |
| Deposit from Today’s Sales | $900.00 |
| Merchant Deposit | $600.00 |
| Less Checks Written Today | ($1,200.00) |
| $5,300.00 | |
| Expected Bank Balance Tomorrow | $8,300.00 |
| Actual Bank Balance | $8,300.00 |
| Explain any differences |
If your accounting system is not updated in real time, you’ll need to start with the bank balance and correct it for uncleared transactions as well as list today’s activity.
| Daily Cash Report | |
| Bank Balance | $5,000.00 |
| Deposit from Today’s Sales | $900.00 |
| Merchant Deposit | $600.00 |
| Less Checks Written Today | ($1,200.00) |
| $5,300.00 | |
| Checks Still Outstanding | ($3,000.00) |
| Deposit from A/R Paid | $5,000.00 |
| Expected Bank Balance Tomorrow | $8,300.00 |
Using these formats, you can easily extend them to cover the entire week. This way, you’ll know what your cash balance will be from day to day.
If you see the value of this report for your business and would like help creating it, please reach out.
A great way to speed up your cash flow is to get paid faster by customers who owe you money. One way to do that is to examine your payment terms to see if you can accelerate them. First let’s talk about what payment terms are common. Then I’ll share a study that showed which payment terms generate the fastest payments.
English, Please
Traditional payment terms are spoken in the following format:
Percentage discount/(Days due from invoice date), “Net” (Days due before payment is past due)
An example is 2/10, Net 30. It means to the customer that if they pay within ten days, they can take two percent off of the invoice due amount. If they don’t want to do that, they need to pay the full invoice within 30 days of the invoice date.
You could write “2/10, Net 30” on your invoice, but you will get paid faster if you write it out in plain English.
Industry Standard
If your industry “has always done it that way,” I encourage you to challenge the status quo. Getting your cash faster is important to all small businesses, so don’t let your industry hold you back.
Discounts
Most corporations are required to take discounts if they are offered, so offering an early pay discount might help you get paid faster.
Insights
There are several studies on how to get paid the fastest. Of course they all have different conclusions! FreshBooks advises that “due upon receipt” terms can work against you as most people decide that that can mean anything. They suggest using wording that says “Please pay this invoice within 21 days of receiving it.” Here is their blog post on the topic:
Xero produced a page on the topic as well. Their research suggests that debtors pay bills 2 weeks late on average. They also suggest using terms of net 13 or less in order to get paid within 30 days. Here is their page on the topic:
https://www.xero.com/us/small-business-guides/invoicing/invoice-payment-terms/
Feel free to contact us if you’d like help deciding on payment terms for your business.
