Do You Go to Power Hour?

I’m sure you’ve heard of Happy Hour, but have you heard about Power Hour?  Power Hour is something you should be doing at least once a week during your working day.   It’s the time that you carve out of your busy schedule to do the highest-payback tasks for your business.  These include items like strategic planning, product or service development, deal-making, and leveraged revenue-building activities. 

Chances are some of these power hour tasks may not even be on your to do list.  Sometimes it takes some brainstorming and being away from working “in” your business to develop the innovative ideas your need to move your business forward. 

To make Power Hour the most effective, schedule it on your calendar on at least a weekly basis (a few times a week would be better).  The entire hour should be uninterrupted and free of phone calls, email, and current clients. 

What can you do that is going to bring in a significant amount of business across a multiple number of clients?  If you think of some things, make a note right now. 

Power Hour also brings perspective.  It allows you to slow down and examine all of the tasks on your list to see what may not make sense to do.  As your Power Hour ideas take root and produce revenue, you may very well be able to delete some items on your to-do list that are less profitable.  That will free you up so that you’re working less and making more.  In effect, you’ve just given yourself a raise by implementing Power Hour. 

Try Power Hour for a month and see what happens in your business.  If you’re already doing some form of Power Hour, formalize it, expand it, and leverage it so that you’re benefiting even more.  

What’s Your Opportunity Number?

Is your revenue increasing or decreasing every year? There are many factors that can cause your revenue to slide, and one of them I’d like to introduce is your opportunity number.

Your opportunity number is the smallest amount of business you’re willing to take on when you take on a new client. Here’s an example: if you have a ten-hour minimum per client engagement and your hourly rate is $300.00, then your opportunity number is $3,000.00.

Going after a business opportunity that is too small could actually cause your company to earn less. Since our limited resource is time, we can either spend our time going after small fish or big fish. If we want our business to grow, we need to let go of the small fish. In our example above, it’s not worth it to you to sign up a new client for less than $3,000.00.

Define your own opportunity number

The first action item is to set your opportunity number if you don’t already have one. Take a look at your average annual revenue per client for last year or the last twelve months. Continuing our example, let’s say it’s $10,000.00. You always want to be striving to increase your average annual revenue per client year after year, in most cases.

Your opportunity number and your revenue per client are related in an important way. If your opportunity number is too low, it can drag down your revenue per client average. That means it’s going in the wrong direction.

Evaluate your opportunity number

If your opportunity number is too high, you may be walking away from business that could be profitable after a period of time. It’s possible once you build trust after doing a small engagement that the client will come back for more. So it’s important to factor in the potential.

If you have a sales team, you may have a different opportunity number for each sales person and yourself. They may have more time to pursue a larger number of smaller deals. If you have lots of leads and less time, then you want to find a way to work on the largest opportunities by qualifying those leads, estimating the potential revenue, and comparing that to your opportunity number.

Once you implement your opportunity number, you might free up quite a bit of time. You’ll have more time to go after the larger opportunities while giving yourself permission to “throw the small fish back in the pond.”

Seizing the opportunity

There’s nothing wrong with taking your opportunity number a step further and proactively seeking power clients and deals that will net far more than your opportunity number. I have one client that doesn’t look at deals unless they have a $1 million potential. His opportunity number is $1 million.

Let us know if we can help you calculate yours.

Find your ideal client in 2012

If you could wave a magic wand and work with any client you wanted in 2012, who would they be and what would your business look like? It’s a fun exercise to think about right as we start a new year.

Let’s begin with your current client base. You may want to create a report of customers that you had in 2012 and list them by revenue collected. Who are your top revenue-producing clients? Are they easy to work with? Do you love the work you are doing with them? If so, you may want to find out a little bit about the type of client you enjoy working with so that you can find more of them in 2012.

Are they male or female? In a particular industry? Have a particular personality trait? Enjoy the same hobbies you do? Have kids? Are they from your alma mater? Do they live in a certain neighborhood that you enjoy?

Look to see if your top clients have characteristics in common. You are beginning to make a picture of who you best work with.

The questions are endless, and you may need to ask quite a few of them before you stumble on what your top clients might have in common. Perhaps they are all dog lovers, pilots, or football fans. Perhaps they have all been in business for less than five years. Perhaps they are all transplanted from the south. Once you see the connection, you will have some freedom and a clear direction to find more people just like them.

Also take a look at what services you like to deliver best. Once you’ve been in business for a while, you may have some work that’s not your favorite, but you keep doing it for the money. In 2012, think about how you can proactively attract clients that need the type of work you love to do. Work that challenges you, is interesting, and is profitable will keep you from burning out. Plus, it will help your entire business and your other clients to seek clients that energize you because you will be happier.

Start by creating another report that shows you revenue by service or product line. What would the ideal 2012 mix be if you could wave your magic wand again?

The intersection of your ideal client and your ideal service/product revenue mix is the sweet spot you want to aim for in 2012.

It’s simple exercise, yet a very powerful one. Take a deep breath, wave your magic wand, and think about what would really fulfill you as a business entrepreneur. Then take the first step to creating a business full of the ideal client and ideal work of your dreams.

Happy Holidays From A Step Up Bookkeeping

Your Year-End "To Do" List

It’s almost the end of the year, and although the holidays are coming, there are a few tasks you need to address before year end. Getting your financials in order now will start you off right for the New Year. A Step Up wishes you a very merry holiday season and a prosperous 2012.

1. Invoice your clients for all outstanding time and expenses. You want to be sure that invoices are sent for all work done during the year, and many of your customers will want to pay you for this work now to lower their tax liability. Make it easy for them to do so! Receiving payments at the end of the year also gives a cash basis business a bit of flexibility. You can count the income in this year by using the check date on the payment in QuickBooks. Or move it to next year by using the date you received or deposited it (be sure this is actually in 2012).

2. Review your open receivables and determine if any should be sent to an outside collection agency for assistance or if they are un-collectible. If you are on an accrual basis, you can write these off as bad debts and lower your business profit totals. Even if you are cash basis, getting these off your books gives you a truer picture of what is outstanding for the new year.

3. Reconcile all bank accounts, credit card accounts and loan accounts. You need accurate balances to make informed decisions for the future. Ensuring that the totals of your accounts match the bank also improves the likelihood that you haven’t missed any deductible expenses.

4. Prepare a budget for next year. Review this year’s reports and set a plan for realistic growth next year. What income categories were profitable? What expenses can be trimmed? Set a plan for how you will increase revenue and lower expenses in the coming months. You can also enter this information into QuickBooks, and then you can compare how you are actually doing against your plan from month to month.

5. Double-check all employee addresses and social security numbers. Make sure that employee paycheck names and Social Security numbers match their SS cards and W-4 data. Remind employees to submit new W-4 forms if there has been a change in their filing status due to marriage, divorce or dependents (birth, adoption, child turning 21), or if they want to retain their federal ‘exempt’ status.

6. Ask your payroll service (if you use one) for a W-2 adjustment run, or run a Payroll Summary report before closing out 2011 to verify and correct:
- excess SS withheld: if any employee exceeded the 2011 limit of $4,485.60 make an adjustment or refund before sending in your final tax-year 2011 deposit
- additional amounts paid to employees that must be captured on W-2s, including relocation expense reimbursements, personal use of company vehicles, company-paid educational assistance and other taxable items that were paid outside of the payroll system;
- manual or voided paychecks not in your system;

7. Review 2011 paychecks outstanding more than two pay periods so you have time to void and reissue in time for 2011 W-2s.

8. Get address and social security numbers for all 1099 contractors. Send W-9 forms to obtain this information if needed. Review all names, addresses and tax ID information as well as the categories of payments made for accuracy.

9. Meet with your CPA to review your preliminary totals. There are things you can do now to reduce your business tax liability, such as contributing to a retirement plan or paying employee bonuses, but they often must be done before December 31st. It also may or may not be a good idea to make a large equipment purchase at this time. Depreciation deductions are not as favorable if the majority of the year’s purchases were made in the last quarter. Corporations will need to calculate and pay out shareholder distributions by the end of the year. Talk to your CPA about your tax strategy for this year. Of course, you will want to have your records in order and caught up to reap the most benefits from your meeting.

A Step Up Bookkeeping is available for assistance with getting your record-keeping caught up. Give us a call for a no-obligation consultation at 603-679-2022.

Five Tips to Speed Up Cash Collections

If your accounts receivable balances are edging up and getting older and older each month, then it might be a good time to bring out the aging reports. But what if we looked earlier in the cycle to see what we could do to collect the sales even sooner? Let’s take a look at five potential changes you can consider making that will speed up your cash flow, reduce aging receivables, and possibly reduce lending costs in your business.

1. Get paid in advance.

Getting paid in advance manifests itself in a number of ways:

• Prepaid gift cards
• Deposits
• Prepayment plans
• Monthly or project retainers

If it’s common to get paid in advance in your industry, then all you need to do is focus on doing more of it. If it’s not common in your industry, I encourage you to see how you might apply one of these ideas to your industry. You may be able to invent an entirely new way of doing business within your industry.

2. Increase your cash-equivalent payment choices.

If you’re not already able to take the following forms of payment, then it’s time to sign up for:

• Credit cards, especially MasterCard, Visa, Discover, and American Express
• PayPal
• Wire transfers
• Cloud-based bill payment systems

If you have overseas clients, being able to easily accept wire transfers keeps it simple if the client does not maintain a bank account in your country’s currency. And although most wire transfers still need to be handled manually, you can systematize and automate the process as much as you can by having written procedures for your clients.

Offering a cloud-based billing solution such as Bill.com eliminates the physical writing of checks, and you can approve and send payments from anywhere, even if you are on an airplane. The efficiency cannot be beat.

It’s surprising how many business-to-business payments come through PayPal, so if you don’t have this one as an option, you might want to consider it.

3. Streamline your time and billing system.

If you can bill faster, you can collect faster. Take a look at your processes and identify the bottlenecks in your billing system. Is it the partner who keeps the invoices on their desk for days before they are approved to be mailed? Is it an antiquated time system that is not real-time? Is it duplicate data entry that can be streamlined? Once you’ve determined your bottlenecks, you can take action to eliminate them.

4. Implement eCommerce.

An online shopping cart can help clients serve themselves and cut way down on your customer service. Today’s online shopping carts can handle one-time payments, recurring payments, and variable bills. The best of them offer a portal for clients to update their own credit card expiration dates, respond to declined card messages, and basically serve themselves. It’s quite fun to come into the office each morning and find loads of cash sales already in your cart from the night before, without any help from you or your staff.

5. Card on file.

For long-time clients, it makes sense to set up automatic approval on a monthly basis by having their card on file. Most busy and successful clients will appreciate the time savings when using this method, and you will have more control and be able to get paid faster. You can also use a hybrid of this method – semi-automatic approval – where a simple email exchange approves the current month’s amount.

Try one or more of these five tips to speed up your cash flow, simplify collections, and lower the amount you need to borrow from the bank to finance your business.

Russian Roulette, er, I Mean Bookkeeping

The main square in Yekaterinburg

The early snowstorm in the Northeast a few weeks ago reminded me of the city of Yekaterinburg, a large city two hours east of Moscow by air that often sees snow in October all the way through May. The western border of Siberia is a few hundred miles to the east. In Yekaterinburg, there are many small businesses whose owners need to keep their accounting books just like you do. However there are a couple of twists as you might imagine.

The old Russian accounting system was built for one purpose: to calculate taxes. And the tax system is complicated, expensive, and volatile. In the 1990s, about 600 new laws were published every year (just in case we think U.S is the only country that has a crazy tax system). The Russian government has broad powers to garnish business accounts, and many transactions are handled in cash to avoid this capability.

As a matter of fact, it was quite common for small businesses to maintain three sets of books:

• One “official” set of books for the government.
• One for payroll which was mostly done in cash.
• One for management to see what was really going on.

It’s interesting to see whether QuickBooks could handle such data requirements.

At any rate, it would need to be QuickBooks in Cyrillic to support the Russian alphabet. Microsoft Excel is definitely available in Cyrillic; I’m not sure Intuit has any plans for a Cyrillic version any time soon, which brings up another challenge: there are not too many plug and play accounting systems available in Russian.

Another challenge in the new, turbulent post-perestroika economy -- inflation. Lending rates ranged between 130% and 200%. That’s pretty brutal to profit margins. What's worse, a loan has to be paid back in three months. A company needing cash for several months is forced to find a new bank every three months to pay off the old loan and lend it the money for the next three months.

Until 1992, Yekaterinburg was a closed city: No foreigners were allowed to visit for reasons of national security. Concepts that we take for granted in America, such as profit and efficiency, are relatively unknown in Russia. There is no Russian word for “efficiency.” Imagine describing efficiency to an employee who has never heard of the concept or the word.

The chief accountant, who is often a company officer, is usually educated as an economist, which is the closest profession that Russia has to accounting until recently. There is a great hunger for management accounting and reporting because there wasn't anything like it.

Sometimes it’s a breath of fresh air to experience a new perspective. In the U.S. we don’t have to keep three sets of books; one is quite enough for most of us. It’s illegal to make payroll in cash in most states. We have about half a million CPAs and far more bookkeepers to help us with anything we don’t understand. Most of them are quite efficient, and that’s a lot to be grateful for.

If we can help you with anything that feels foreign to you in your accounting system, please call on us anytime.