Small Office Solutions

Do you know why most small businesses fail? The common theory is lack of funding, but I disagree. I believe it is because people go into business to do what they love to do or what they do best without realizing how much time they need to devote to things they don’t like to do or don’t know how to do. What things, you ask? Well, quite a few come to mind – bookkeeping, computer maintenance, database management, marketing/telemarketing, graphic design, making deliveries, preparing mailings, processing payroll, and the list goes on. Worse yet, most people are afraid to admit they don’t like or don’t know how to do some of these things and don’t know where to turn for help.

Most business owners think they are saving money by trying to do everything themselves. When considering outsourcing jobs to outside vendors, business owners seldom realize how much of their time can be saved. It’s difficult to accurately calculate the full impact this has on your bottom line, but you can draw some logical conclusions. The question to ponder is: “What is the cost of the vendor versus the value of my time?”  Let’s say that you commit to yourself that in exchange for hiring this vendor, you will spend an equivalent amount of time (i.e., an hour of your time for every hour you pay the vendor) on income-generating activities. When you spend time on these activities, you can generate $120 of income per hour. The vendor you are considering engaging will cost you $60 per hour. Just a simple calculation would show you this transaction is likely to pay for itself (based on a 50% profit margin for easy math). The reality is, however, that the vendor is likely more qualified and able to complete these tasks in half the time, or better. So, consider that you are paying a vendor $60 to do work that would decrease your income by $240 if you were to do it yourself. Now you are actually making a profit on this transaction! So what if the vendor could complete the work in one quarter of the time it would take you?

Ironically, business owners are reluctant to let these tasks go for fear of “losing control”. Who are we kidding? Can you honestly look at stacks of receipts and convince yourself that your financial records are under control? Can you look at boxes of business cards and feel comfortable with your contact management “system”? No, no more than you can argue that making your own deliveries is the best use of your time. And yet, this is what we do, probably because we believe it is uncomfortable to ask for help. But, consider this – the professional is in their business for at least two reasons: 1.) They see a definite need for the service they are providing (translation: “you are not alone”) and 2.) They have expertise in this area and can do an excellent job for you (translation: “we can help!”). How comforting is that?

Furthermore, you not only have little or no control over these areas of your business, but because these areas of your business are out of control, it is affecting every area of your business. You are stressed, and while you are performing all your other duties, these things are tugging at your mind – and you may even be losing sleep over it all.

So, what’s the answer? OUTSOURCING is the answer!

Where do you start? I suggest you start with the things that cause you the most stress. The areas can be tasks you dislike doing, things you don’t feel you have time to do or areas where you feel your expertise is weak. For most business owners, one task that falls into all three categories is their financial records. Money is like the elephant in the living room – everyone knows it’s there and works around it every day, but they refuse to acknowledge it and would certainly never discuss it. But, every time you go into the living room, there it is – as big as life! The question is: Is it doing any damage? How would you know?

For some, it might be easier to start with something less intimidating. How about hiring someone to clean your house? Let’s say it takes you 5 hours to clean your house. Would it be worth it to you to commit to spending that same 5 hours on income-generating activities so that you don’t have to spend that time cleaning? O.K., so maybe you like cleaning (bless your heart!) and cooking is your least favorite, most time consuming task. So, you could hire a personal chef to come in every other week for 4 hours so that all you have to do is take the meals out of the freezer and pop them in the oven! At the same time, you are increasing your income by four times your hourly rate.

A very common problem among small business owners is being stretched too thin to be able to effectively handle all the tasks necessary to manage their business. It’s a slippery slope. One area falls behind and others are sure to follow. So try to view these options as positive alternatives. Don’t focus on how things are, imagine how they can be and seek out a professional than can make it happen. Shore up the foundations of your business by reaching out to experts who can help you make your business soar!

Submitted by:
Doralee Billings

To be successful in your business, one of your most important tools is financial analysis.  Accurate financial records can help you answer some very important questions like:  Are you making money or losing it?  Is your business on strong financial ground, or are rough times ahead?  A good bookkeeping system is the foundation on which all of this valuable information can be built. But, how much of it can you do yourself, and how much should you rely on an accountant to do for you?  Chances are, keeping financial records is probably not what you do best.  In all probability, even if you were a bookkeeper or accountant in your “past life”, it is not what you like to do, or you would still be doing it. There are varying degrees to which businesses can rely on outside accountants.  If record keeping is your absolute nemesis, you might consider paying an outside accountant to handle all your bookkeeping duties.  Keep in mind this is a crucial step.  My philosophy is “If you take care of all the little things, the big things will take care of themselves”.  Well, it’s not really that simple, but by taking care of the little things, you will at least be able to SEE the big things.  You can’t fix what you can’t see! 

The second option is to handle all the day-to-day bookkeeping on your own, but having an accountant handle less routine tasks, such as setting up your books, preparing adjusting and closing entries, preparing financial statements and tax returns, or helping you prepare a budget.  If you’ve been in business for a while, you might want to have an accountant give your bookkeeping procedures a one-time or periodic check up.

The third (and most cost effective) option is to just have an accountant to prepare a year-end financial statement and your tax returns. Unless you have opted to have your accountant handle the day-to-day transactions, there is certain information you will need to gather for him or her to do her work.  The following is a list of the information you need to provide to an outside accountant for the preparation of year-end financial statements and tax returns.

• Reconciled December Bank Statement – Reconcile the bank statement you receive in January for the period ending December 31.  Your accountant will need a copy of the bank statement, as well as the form you used for reconciliation.  If you are using a computerized accounting program (QuickBooks, Peachtree, etc.), this report can be printed out.
• List of outstanding bills (Accounts Payable) – These are the bills you still owe at December 31.
• List of outstanding invoices (Accounts Receivable) – This is the income that is due to you as of December 31.
• Trial Balance – This is a listing of the balances in every account in your Chart of Accounts as of December 31.
• Copies of all tax deposits (including payroll, if you have employees) – If you have made estimated tax deposits throughout the year, include copies of the forms you filed.
• List of any equipment purchased or sold during the year – Your accountant will need to know the purchase price of any equipment purchased.  If you have traded in or sold an older piece of equipment, your accountant will need the original receipt from when you purchased the item.

By providing the above information in concise form, your accountant will be able to prepare your financial statements and taxes with ease – which translates to lower cost for you.  Remember, most accountants charge by the hour.  The more work they need to do, the more it will cost you. 

Even though computer programs are available that will help you fill out your taxes, there is no question that a periodic review of your financial records by a qualified professional is beneficial to your business.  In 2001 there were over 400 changes in tax laws – how would you ever keep up with them (or understand them, even!).  There is no substitute for a personal relationship with someone who has your best interest (your success!) at heart – someone who knows the laws and knows how they pertain to you and your business.  An accountant is not just a numbers cruncher, they can also be a trusted business advisor.

Submitted by: 

Doralee Billings