How Business Owners Should Be Using Their Accountant

Only 19% of small business owners go to their accountant for business advice according to the 2013 US Bank Small Business Survey.  I saw this and immediately thought - why not?  More often that not, a business owner uses their accountant once per year...during tax time OR they have a bookkeeper that is routinely paying bills and keeping their books in good shape. In both instances, the accountant may not be viewed as a trusted business advisor, but they could be!

If this is also your view, listen up!   A good accountant can be an untapped resource for your business!  After all, they are familiar with your company and have access to all the right data in order to provide you with useful information to help you make better decisions.  Your accountant may just hold the secret to how healthy your company really is and how to improve it.

If you are a relatively small company (i.e. less than $500K in revenue and/or less than 3 employees), you may benefit from consulting with your tax accountant at least twice a year on non tax matters.  If you are larger than this, but not quite ready for a full-time CFO, your business could really thrive with a part-time or outsourced CFO.  Consult with your CFO monthly or quarterly - depending on your needs and your budget.

Ask your accountant to examine your financial statements (P&L, Balance Sheet, and Cash Flows), to compare results to prior years, and to forecast future results. Discuss your current pain points and ask them where they feel improvement is necessary. Talk to them about your longer term goals and how your current results are either getting you closer to or further from your goals. 

Good accountants should be able to point your business in the right direction.  They are skilled at examining mounds of financial data, pulling relevant and meaningful information from this data, and translating that information into a format that you can use as a basis for making important decisions.

Its time to start thinking of your accountant as more than your bookkeeper or your tax guy or gal.  They can be a trusted business advisor and can really help catapult your business to the next level! 

Learn more about what we do at www.mytrustedcfo.com.

What is the difference between a bookkeeper and an accountant? Who should I hire?

You've decided to hire someone to help with the books, but where do you start?  Many times the title of "bookkeeper" and "accountant" are used interchangeably because - lets face it - its confusing who does what!  Which is right for your business?

What is the difference between a bookkeeper and an accountant?

A bookkeeper, quite literally, keeps the books.  They are the paying bills, recording transactions, reconciling accounts, running reports, etc..  To be a bookkeeper or Certified Bookkeeper, you do not need a college degree, although some bookkeepers do have a 2 year associates degree or a 4 year college degree.

An accountant focuses on financial reporting, process improvement, business analysis, and often is a business advisor.  Accountants have 4 year degrees.  To be a Certified Public Accountant, you now need 150 college hours (the equivalent of a 5 year degree), to pass the 4 part CPA exam, pass the ethics exam, and meet certain experience requirements that vary by state.

As I'm sure you can guess, bookkeepers without a degree are the least expensive, while CPAs are generally the most costly.  Which level you need, depends on several factors.

Who should I hire?

This depends on your business. Is it complex?  Do you have several employees?  Do you require customized financial reporting?  In general, be weary of hiring a bookkeeper without some amount of formal accounting education.  Although they may have the necessary skills to complete the day-to-day tasks, that person typically lacks the broader perspective. 

A good option is to have an experienced bookkeeper to keep up the books on a regular basis and have a CPA that periodically works in tandem with the bookkeeper.  The CPA (sometimes you may hear them referred to as an outsourced CFO or controller) can offer customized solutions, innovative reporting, forecasting, improve processes, monitor costs, and can act as a financial advisor for your business.

Above all, you need to hire a bookkeeper and/or accountant with integrity.  This is the most important quality and the hardest to judge.  Try to get referrals from other business owners on who they use and who they trust and check references!

7 Clever Ways to Increase Your Bottom Line

Ok. It will come as no surprise that increasing sales will (usually) increase your bottom line. I'm not here to point out the obvious.  I'd like to explore a few less obvious ways to make your company more profitable.

1.  Think about your discounting differently!  There is a difference between the customer's perceived value of a discount and your actual cost. For example, you could sell a $1,000 computer at 20% off.  The customer sees a $200 savings and you see a $200 cut from your bottom line. Conversely, you can offer a free printer/fax/scanner that sells for $200 with the purchase of a $1,000 computer. The customer still sees a $200 savings, but the cost of that scanner might have only been $100...you can do the math from here.

2.  Stop selling low gross profit margin items!  To do this, you first need to invest a little time (if you haven't done so already) to know your profit margins by product.  If you are a restaurant that sells 80 different main entrées, you may be surprised to find that 10% have a profit margin that is much less than the other entrées. Stop selling those low margin items! If you consider the fixed costs, you could be losing money with each sale of these low margin products! 

3.   Take a second look at your vendors! I have found that companies don't like to change vendors because, frankly, it can be a pain.  You know the saying..."No pain, no gain!"  However, I'm not saying you have to switch up your credit card processor, your point of sale system, your payroll provider, your accountant, and all your suppliers in one go.  But, it may be worth it to go to market, see what prices you can get from your vendors' competitors, and then ask your vendors to match it.  You may be surprised in the flexibility your vendors have on price.

4.  Go green! Going paperless can save printer/copy machine, paper, utility, and postage costs!  Offer direct deposit, pay bills online, email rather than snail mail your customers, keep the office 1 degree warmer in the summer, turn off lights and your computer at night.  It all will add up!

5.  Don't be a luddite! Embrace technology! Don't know what I'm talking about? A luddite is a term describing those opposed to, or slow to adopt new technology.  Reduce travel costs by using video conferencing or conference calls where it is reasonable to do so.

6.  Manage your inventory!  I can't stress this enough. You can lose money from obsolete inventory. Monitor your turnover by product line. The way to keep profits high is to keep your turnover as high as possible without risking an inventory shortage. Its a fine line, and the companies that have done the appropriate inventory analysis can walk that line, and they will see higher margins.

7  Follow up on receivables timely! First off, if you are going to offer credit to your customers, do a credit check.  Second, if you have past due accounts, don't be afraid to contact the customer when the account becomes a few days past due!  Give them a call - you don't need to attack them. Tell them you noticed the invoice is past due, given them the benefit of a doubt, and ask if they received the invoice or misplaced it.  If the customer informs you that they can't pay it, offer to help by setting up a payment plan. Don't be shy.

There are many many more ways to increase that bottom line.  Sometimes you have to step back and think outside the box, develop new processes that are more efficient, or simply pass up on buying the brand new designer desk and fancy rug for your office (heaven forbid).

What have you done to increase your bottom line?  I'd love to hear how others have done it!

Please visit my website at www.mytrustedcfo.com to learn more about what I do. 

Top 7 Budgeting Mistakes

If you are like me, you love budgeting: the number crunch, trying to predict the future, and all the planning! But more likely - you'd rather have hiccups for the rest of your life than work through a budget.  Let's face it, budgeting can be a daunting, overwhelming, and sometimes heartbreaking task. Now what's worse?  You go through the exercise of developing a budget for your business, but make one or several costly mistakes. Below is a list of the top 7 budgeting mistakes business owners make.  Avoiding these budgeting blunders will help keep your business on the right track.

1.    What budget?
The number one mistake small business owners make is NOT HAVING a budget!  That's right.  I was surprised to find that many business don't actually have a budget.  So if you have a budget, congrats. You are already heading in the right direction! 

2.    Creating a budget without linking it to your long-term financial goals
Is your 5 year goal to expand into a new market, to sell your company, or to purchase that $100,000 widget maker?  Whatever your long-term goals, your current budget needs to be structured in a way that will help you inch closer towards these goals.  If you are budgeting just to "predict what will happen next year" - you're doing it wrong.

3.    Setting unrealistic, aggressive targets
As entrepreneurs, we are naturally optimistic. In setting revenue targets, we can't just budget for what we'd like to happen. We need to 1) look to the past to get an idea of how our numbers have trended, 2) consider how the trend needs to change to reach our longer-term goals (see #2 above), and 3) consider outside factors or changes that your business will make that will impact future sales. If you are going to increase sales by 10%, there should be a rational explanation and plan for how you expect this to materialize.  Nothing is more disheartening than getting half-way through the year and realizing that you are nowhere close to meeting your budget.

4.    Assuming that high revenue and low expense budgets indicate high cash flows
Just because we are budgeting profits to be up 10%, doesn't mean that we should also expect cash flows to be up 10%.  When we budget, we are typically looking at the P&L (profit and loss or the income statement). You should make considerations for "non-P&L" type items such as major purchases, investments, debt re-payments, etc.  It may even  be a good idea to do a cash-flow budget - especially if you have experienced cash flow issues in the past.

5.    No cushion for emergencies
It is inevitable.  You will forget that one large insurance bill that comes once a year or the credit card processing fees you are charged monthly.  You will have an unexpected legal matter rear its ugly head. There should be some wiggle room in your budget for these surprises.  Trust me on this.  You will thank me later.

6.    Forgetting about Uncle Sam
You've heard the saying: "Only two things in life are certain: Death and Taxes."  Many budgets are made without taking into consideration the state and federal taxes that you will need to pay.  This is a major expense for most and forgetting to budget for this is a costly mistake.

7.    Creating the budget, but not actively monitoring costs against it
So you've created the budget and have not made any of the above mistakes - good! Although this is the last item on my list - it is one of the most important. If you have a budget, but don't compare your actual revenues and expenses to it each month (or quarterly at the VERY least), you would have made you budget in vein.  Harsh, but true. Monitoring against the budget is the whole point of creating the budget.


Please visit my website at www.mytrustedcfo.com to learn more about me and what I do.  Thank you!
-Bonnie Forssell, CPA

If Excel Were a Car...

I found this gem on groco.com. I must admit that I love excel more than the average person, but this list was quite humorous, so I had to share.  Enjoy.

If Excel Were a Car...

• It would crash two or three times per day for no apparent reason. The driver is often hurt, but the car itself receives no permanent damage. You'd just accept this fact, restart the car, and begin your trip again.
• Occasionally, your car would fail to restart after a crash, and you'd have to reinstall the engine. For some strange reason, you'd just accept this too.
• You would be forced to buy a new model every 18 months, and your old model would have no resale value. Each new model would be bigger that the previous one, require more gas, and would operate differently. Furthermore, parts from the old car would not be interchangeable with the new car.
• You could call a special phone number when you had a problem. The phone would be staffed by people who know less about your car than you do.
• There would be a special Macintosh model, powered by the sun. However, it would only run on 5 percent of the roads and require different driving skills.
• You would have to spend additional money to buy the operating manuals. The oil, engine, gas and alternator warning lights would be replaced by a single warning light: "This car has performed an illegal operation."
• Before engaging, the airbag system would display a message, "Are you sure?"
• Every time you looked under the hood, an obnoxious cartoon character would appear and ask if you need help. No matter how many time you refused help, it would keep appearing.
• A special feature would let you automatically record the route for a particular trip, so you could repeat the trip automatically later on. However, after repeating the trip you always end up at a different location.

Does my business need a CFO or Controller?

Unfortunately the answer to this question isn’t as easy as saying that once you hit a certain revenue figure, its time to hire a CFO or Controller. The fact is, you could have over $10M in revenue and not need a financial executive if your business is profitable, relatively simple, and predictable.  However, you may have only a few hundred thousand in annual revenues or less and need a part-time CFO/Controller if you aren’t seeing profits, are having difficulties managing cash flow, or are spending too much time sorting through numbers and not enough time growing your business.

Business owners are sometimes hesitant to invest in in CFO services.  This is mainly because it’s difficult to determine your return on investment since there sometimes isn’t a direct correlation between profits and the services that the CFO provides.  This is true of many “overhead” type rolls such as IT, HR, and Accounting.  Assessing the value of a CFO/Controller is more qualitative than quantitative.  Will adding this person to your team increase the efficiency at which your business runs? Will it provide your business with direction for the future?  Will it give you knowledge that you otherwise wouldn’t have had to make better business decisions?

Although this is not an exhaustive list, here are some indicators that your business may want to invest in a part-time or outsourced CFO/Controller:

• You do not have a budget and aren’t sure the best way to put one together.
• You do not have timely or useful financial reporting.
• You are not profitable and need help finding ways to become more profitable.
• You have difficulty managing and predicting cash flow.
• You have a long-term goal for your business, but no financial plan on how to reach it.
• You are starting to grow and now want advice on how to best manage your profits.
• You aren’t sure of the overall health of your company and want assurance that its financially solid or want to know where there may be financial risk.
• You find that you are spending too much time trying to manage your company’s finances and not enough time trying to grow your business.
• You have a person on your team who is doing the bookkeeping and account reconciliations, but they need additional training and their processes need improvement.
• You  are trying to reach a certain target whether it is to break-even, see a certain profit margin, hire more employees, or pay off debt and need help creating a plan to accomplish that goal.
• You want someone to monitor your business’s performance on an on-going basis and report their findings.
• You are contemplating buying out another small business or investing in another product or service line and need someone to perform due-diligence or assess the value of such a transaction.

For more information, visit my website at www.mytrustedcfo.com.

CFO Services? What is that?

Since I graduated college, I find that more often than not, I am constantly explaining what it is I do for a living to my friends and family – most of which still have no idea.  Whether I was an auditor or a financial analyst or a controller, I usually just responded with:  “I’m an accountant” or “I’m a CPA”, and I probably always will to some degree.  But if I really answer their question, it’s that I provide part-time CFO services to small businesses. 

I can usually tell how much of an accounting background a person has by their next question.  I will either hear:  “What is a CFO?” or “So, what type of services does a part-time CFO provide?”

A part-time CFO (or Chief Financial Officer, in case you are in the group that asked the first question) is an outsourced consultant to a business that needs an accounting professional.  Part-time CFOs scale their services to what a business needs and can afford. They are flexible in that they can work within all levels of the accounting department – as CFO, controller, accounting manager, and/or staff accountant. Part-time CFOs provide support in a variety of ways from strategic planning to all elements of financial operations and financial reporting.  They can also provide project-based support.

Since the recession, there has been an increasing trend in the use of part-time CFO /Controllers.  In general, a business owner may decide to outsource their CFO/Controller when they find that their business is need of a financial professional in some capacity - but they may not need to hire someone full time.  A full time CFO or Controller can demand a hefty salary which isn't feasible for many growing businesses - nor is it needed.  By contracting a CFO/Controller, a business owner can add an experienced financial professional to their executive team at a fraction of the cost.

The services I provide will vary from client to client.  It may range from financial reporting and analysis, development of a budget, monitoring of costs against the budget, short or long term forecasting, cash flow management, profitability studies, etc.. The list goes on….Regardless, I am one of the strange few that enjoy all the accounting profession has to offer and CFO services touch on a variety of areas in finance and accounting. 

Visit my website at www.mytrustedcfo.com