CAT | Bookkeeping
7
How to Get the Most Out of a Business Health Review with Your Accountant
Comments off · Posted by Cynthia Marsh-Croll in Bookkeeping, Digital Tools, Increase Productivity, Increase Profits, Management, Reducing Costs
- Certified Lean Office And Data Management Specialist Cynthia Marsh-Croll
While working with my clients and as Program Manager of the Entrepreneurial Assistance Program I have a common theme presents itself. How do I figure out how my business is doing? As a business owner I need to know the answer to this myself. So when I meet with my accountant, I want to give him the most up to date and accurate information. Thus providing the data he needs to help me make sound financial decisions. Your accountant can do this for you but they will need “information”.
I recommend that all businesses no matter what size have a solid and well maintained accounting system. This is the financial history of your business. To get the most out of a business health review with your financial professional include these questions
- What are my projected sales for the next fiscal year per month (factoring in product and sales cycles)? By collecting information on your previous sales, customers, etc. you can use that information to make an educated assumption about what is going to happen in the future.
- What were my costs for the last fiscal year? What are my projected costs in the upcoming fiscal year? Again, by tracking everything you paid out, to whom and for what will help you develop a realistic budget. This information can be utilized by an experienced bookkeeper to help you create and maintain that budget.
- What does my cash flow look like? Do I have enough operating cash to stay in business? Even if your profit and loss statement shows you made money that does not mean it is in the bank. Businesses who do not manage their cash flow tend to go out of business.
- What is my break-even point? In other words how may widgets (product/service) do I have to sell to cover my costs? At what point should your business be making a profit?
- There are other ratios your accountant can help you calculate that will provide insight into managing your inventory, accounts receivable and accounts payable. If you are seeing problems with your cash flow one of these may help you understand why.
With all of the different threats and opportunities in today’s business environment, business owners need to make educated decisions for the long term health of their organization. That includes using an accounting system to collect information while conducting business and utilizing that valuable data to formulate plans for the future. A quality account can help you reach your business goals if ~ you help them help you.
Croll Productive Synergy has been successfully helping diverse businesses operate better, faster and cheaper than their competition throughout the Hudson Valley. By “creating the shortest path to success”, Ms. Croll has been able to facilitate improved workflow systems, allowing clients to save time, focus on revenue generating tasks, prioritize for maximum cash flow, effectively delegate and, consequently, increase profits. To learn more visit www.crollproductivesynergy.com.
Automation · bookkeeping · competitive edge · data management · faster cash flow · improved productivity · increased productivity · reduce costs · reduced stress
2
How to Make More Money in 2012 with Data Driven Decisions
Comments off · Posted by Cynthia Marsh-Croll in Bookkeeping, Digital Tools, Increase Productivity, Increase Profits, Management, Reducing Costs
Operate Better, Faster, Cheaper than Your Competition
I have mentioned in many of my articles about metrics. Things we use to measure success and how far you are from reaching your goals. Data is much more than that – it is a valuable tool to make solid business decisions. It also helps you to save as well as make money. Below are some of the metrics you can use to help grow your bottom line in 2012.
Many business owners understand it is far more cost effective to up or cross sell an existing customer than to acquire a new one. Unfortunately, most small businesses are so busy getting new business and fulfilling the orders they do not leverage the gold mine of existing customers. By collecting the information below you are accurately tack your current and past customers. This can be done with a database and/or accounting system. Both these digital tools are essential in running reports for making educated businesses decisions.
Average customer Lifetime Value
“Customer lifetime value (CLTV) is a formula that helps a marketing manager arrive at the dollar value associated with the long-term relationship with any given customer, revealing just how much a customer relationship is worth over a period of time. Understanding CLTV is a very powerful tool. It becomes extremely useful in considering customer question processes as well as selecting optimal service levels to provide different customer groups.” (Harvard Business School Publishing) The Harvard site has a tool that you can use to calculate this value.
This metric can help you to determine what types of customers you should be following up with now and targeting in the future.
A simple way to calculate CLTV is as follows:
Average order size is $500
Average purchases per year 3
Average customer lifetime 1.26 years
Average lifetime value ($500 x 3) x 1.26 = $1,890
Let‘s examine the components of this formula. We need to collect: average order size, average order frequency and average customer lifetime. Let’s look at each of these key metrics to help us determine how much our customers are worth.
1. Average order size
To complete this you will need to track your customer’s orders. Using a bookkeeping system such as QuickBooks or Peachtree would assist you with the information you need to complete the calculation. Make sure to take out exceptions or orders, either large or small or both, that are not the norm for your business. Otherwise the calculation will be skewed and inaccurate.
Number of orders in Quarter 4: 60
New orders in Quarter 4: $30,000
Average order size: $30,000/60 = $500
2. Average purchases per year
This number is how many times a customer buys from you in one year. See the example below:
Total orders in 2011: 240
Total active buyers in 2011: 80
Average purchases per year: 240/80 = 3 per year
3. Average Customer Lifetime
Average customer lifetime is how long a customer will buy from you from beginning to end. This is calculated by determining who your inactive customers are and how long they purchased from you. Get this data into a spreadsheet in a list format so you can calculate the lifetime for each inactive customer. You can also see if your bookkeeping software can provide you with the date for first and last order and export that information into a spreadsheet or run a customer report from within the program.
Date of last order: 1/17/2011
Date of first order: 10/15/2010
Customer lifetime: 1/17/2011 – 10/15/2010 = 457 days (1.26 years)
After you have calculated this number for all your inactive customers – calculate an average and that is your Average Customer Lifetime.
Ok so you figured all this out, now what? How can you use this information to help grow your business? Start with who of your current customer base is coming to the end of their lifecycle. This would be a good opportunity to reach out to those customers and let them know how much you appreciate their business in the past and look forward to serving them in the future. It is also an opportunity to cross or up sell them products or services to extend the lifecycle. You are also able to survey those customers to see what other products or services they would be interested in. Additionally, you may want to survey your inactive customers to touch base and let them know about your products and services that have been added since they last purchased from you. Possibly bringing them back into the buyer cycle. Reach out to only inactive customers that look like they have the potential to become active. Some customers will only be low or single order. In other words, make sure you are targeting the right people to get a return on your time investment.
Calculating the Customer Lifetime Value can aid in forecasting and determining your goals for 2012 and do they line up with previous sales? What do you need to do differently to reach your goals? Compiling these numbers will take a bit of time but are worth the effort.
There are many metrics a company can use to measure success in their business. These are just a few. These numbers can help you make smart decisions about marketing and customer retention. Start with the metric that would most help you in making educated decisions and then move onto the next. You will start to discover trends that can provide vital information on what to do next to make 2012 a prosperous year.
Croll Productive Synergy has been successfully helping diverse businesses operate better, faster and cheaper than their competition throughout the Hudson Valley. By “creating the shortest path to success”, Ms. Croll has been able to facilitate improved workflow systems, allowing clients to save time, focus on revenue generating tasks, prioritize for maximum cash flow, effectively delegate and, consequently, increase profits. To learn more visit www.crollproductivesynergy.com.
Copyright © 2012 Cynthia Marsh-Croll, Croll Productive Synergy
bookkeeping · competitive edge · data management · faster cash flow · improved productivity · increase profits · reduce costs
31
Why Effective Reporting Makes You Money
Comments off · Posted by Cynthia Marsh-Croll in Automation, Bookkeeping, Digital Tools, Increase Productivity, lean office, Management, Reduce Stress, Reducing Costs, Uncategorized
- Certified Lean Office Specialist Cynthia Marsh-Croll
Many organizations today rely heavily on their technology to get things done. This is something that will become increasingly important as we move into the future. Those who have learned to leverage the information they have can effectively market, close sales, produce their products or services quicker and save money on maintaining those customers. One way to achieve this is through effective reporting.
When I work with clients one area that is a challenge is accurate and effective reports. They either get reports that are outdated or the information needs to be reworked to be accurate. When I dig a little deeper the usual culprit is information is not being entered correctly into their system. Everyone has heard garbage in garbage out. I like to say correct information in money making tool out. Here are some key areas of information you can glean in reports that will help you grow your bottom line.
1. Prospecting – There are many systems for tracking this. If done effectively, you can produce reports that will help you convert your leads quicker and obtain a competitive edge. While the sales people are collecting information as they communicate with your prospects you are learning about demographics, preferences, buying habits and sometimes why you lost the quote to your competition. Now what do you do with this information? You can produce reports to see who in the past has bought your product, why and are they still buying and compare that to your prospecting. Are you prospecting the right target market? Is your marketing working? (How did you hear about us?) What is the competition doing that is causing you to lose business? Being able to answer these questions will not only save your company money it can assist you on where to spend your advertising dollars, have a shorter sales cycle and product development. This will translate into more customers while spending less to get them.
2. Customer Profile – Again, studying who has bought from you in the past and why is an important component of making sure you continue to meet your customers needs. It is much easier and cheaper to maintain, cross sell or up sell an existing customer than to get a new one. Think about when you call a large company’s customer service department they have your demographic information, previous purchases, etc. They know how and why you buy. This drives many areas including marketing, sales and development. Are you growing a certain customer base? Are there opportunities to expand in an area with your current base by offering ancillary services or expanded higher end services? Think about who and where you buy? Ask yourself why. You should know the same about your customers.
3. Marketing and Advertising – Where should you spend your money that will give you the best conversion rate of transforming a prospect into customer? Many small businesses do not have a system to track their marketing results thus wasting an absorbanent amount of money on things that do not work. How do you know if something is effective? Track the results. You need to know who is buying, what are they buying, where are they buying, when are they buying, how are they buying and why are they buying. The information you collect as you prospect and track customers will help you answer these questions so you can make informed decision about where to spend your money in the future. Most businesses today do not have the luxury of spending their marketing and advertising budget willy nilly. Nor would you want to. You need to get the most leverage out of those dollars so that you are taking to the right people, at the right time and in the right place, they understand your message and are prompted to act. Without the right information you cannot make an informed decision where to spend this money effectively.
4. Accounting and Finance – Here we have 2 main areas; accounts receivable and accounts payable. Money coming in and money going out. In this economic environment customers are waiting as long as possible to pay their bills. This is affecting the cash flow of all their vendors. This in turn is having those vendors wait longer to pay their bills. A vicious cycle. So you need to track who is paying you on time and who is not. Why? Because you want more of the kind of customers who will be paying you on time. This may mean reviewing your target market. Many organizations have had to shift who they are focusing on because of available business capital. Equally important, how can you shorten the collection period on your accounts so you get your money sooner? Some solutions can be automating the collection process, changing your billing terms or collecting partial or full prepayment. Your bookkeeper can help you with running the reports on who owes you money.
- The other area is accounts payable. Here is where you can find money. Run a report on a year to year comparison on what you paid your vendors and suppliers. Did the prices go up? If yes, negotiate with your current vendors to change payment terms, reduce prices, etc. You would be surprised how many companies will work with you to keep your business. Also, it gives you the information you need to shop around if your current vendor cannot meet your needs. Lastly, there are companies that do purchasing audits and can assist you with finding cost effective vendors.
Having accurate information to produce useful reports is one the most powerful tools in helping you make smart business decisions. Without information all you are doing is guessing. In today’s environment guessing can put you out of business. It pays to put in the effort to collect accurate information because Effective Reporting Makes You Money.
Croll Productive Synergy has been successfully helping diverse businesses operate better, faster and cheaper than their competition throughout the Hudson Valley. By “creating the shortest path to success”, Ms. Croll has been able to facilitate improved workflow systems, allowing clients to save time, focus on revenue generating tasks, prioritize for maximum cash flow, effectively delegate and, consequently, increase profits. To learn more visit www.crollproductivesynergy.com.
Automation · bookkeeping · competitive edge · data management · faster cash flow · improved productivity · increased productivity · lean office · reduced stress · Waste in the office
1
Top 10 Reasons Why You Need a Bookkeeping System
Comments off · Posted by Cynthia Marsh-Croll in Bookkeeping, Bookkeeping Software, Delegation, Digital Tools, Increase Productivity, Reducing Costs
- Operate Better, Faster, Cheaper than Your Competition
As technology progresses it is becoming increasingly important for companies and non-profits to track their information. In a previous article I discussed how to maximize your customer relationship management software. This month I am going to talk about your bookkeeping system. These two areas tend to be neglected by a new business or existing businesses using an effective system that is too difficult to maintain. Either scenario will cost you money, time and sales. Below are the top 10 reasons why you should use a bookkeeping system.
1. Determine if you have enough money coming in to cover all your expenses.
2. Where is most of your profit and customers coming from?
3. Determine which vendors have raised their prices so you can negotiate a better rate. Thus control your costs.
4. Ability to create a budget so you do not spend more in an area of your business than planned for.
5. Ability to review the budget and if overspent in an area determine why and adjust for the future.
6. Create financial statements that can help you with projected sales, market trends and overall financial health of the business
7. Ability to look at your financial performance monthly, quarterly, yearly instead of just at tax time.
8. Ability to create financial statements needed for securing additional capital for expansion.
9. Reduced accountant fees.
10. Ability to delegate the bookkeeping to a professional so that you can spend more time on revenue producing activities.
When I review these items in my workshops or with clients most of this is common sense. However, when we talk about how your bookkeeping system is not just for the IRS it is also for helping your business remain viable and sustainable they see the value of maintain accurate records. Your past performance is an important tool in helping to determine if you are reaching your goals and objects as well as next steps. Information is an essential part of making smart business decisions.
If you do not have a current bookkeeping system talk to your accountant about which software best suits your business’ needs. They usually can recommend a bookkeeper to you that will work with your accountant to make sure the records are accurate and error free. If you already have a system, see if you are using the information to its full potential in strategizing for your business. Either way a good accounting system is a must. For more data management articles visit www.ProductiveSynergy.biz today.
Croll Productive Synergy has been successfully helping diverse businesses operate better, faster and cheaper than their competition throughout the Hudson Valley. By “creating the shortest path to success”, Ms. Croll has been able to facilitate improved workflow systems, allowing clients to save time, focus on revenue generating tasks, prioritize for maximum cash flow, effectively delegate and, consequently, increase profits. To learn more visit www.crollproductivesynergy.com.
bookkeeping · data management · faster cash flow · reducing errors · staff untilization
