Business Processes

25

May'18

How do I find the Right CPA?

Finding the right CPA or the right accountant is really important. Important because the results depend upon who you get, and it’s an area where you, the client may not be aware of whether you got the best advice or not. There are a lot of stuffy accountants (CPAs) out there who have very high opinions of themselves. They talk about “the firm” and act like they are something special. They tend to be rigid, unimaginative, high priced and advocate for themselves. There are also a lot of very friendly nice guys who are not very competent. They talk a good spiel, but they have neither the resources nor the experience to handle your problem. So how do you find the right CPA? What are you looking for? Lets see: 1. A hard-bitten no nonsense negotiator who can deal with the IRS at their level, knows all the audit tricks, has been there many times, a street fighter. 2. A clever innovative thinker who knows all the ins and outs of the law, understands the difference between light gray and dark gray, wants to take you to the limit of tax savings, but without crossing the line. 3. A plugger, …

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26

Mar'18

A Friend as a Business Partner: Good Idea?

This is an interesting question, and the answer depends upon a lot of factors. Being in business with friends can either be the best thing you ever did, or the worst nightmare (and friend-destroyer) ever. A lot of this depends upon you and your friend’s personalities, and the way that each of you approaches business. Being in business with anyone is going to be very stressful at times. How do you resolve disagreements (and there will be many), how do you each divide the work (and there will be inequalities), and how do you each manage (management styles can be a lot different than friendship styles). In a casual friendship, lots of stuff that might otherwise cause friction and conflict gets avoided. Take that same pair and put them in a business environment and you may have a giant cat fight. I have been in partnership with “friends” and it ended badly. It turns out my friend was very insecure, and from a large corporate environment. He needed to play politics, create factions, and act like he was back in Corporate America. It’s the only way he knew how to act. I’m a small company guy. Politics, factions, rumors, “back …

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18

Mar'18

What are the issues most entrepreneurs face?

What are the main struggles and issues most entrepreneurs face? In my experience, there are several: 1. Death by ducks: the tyranny of the immediate. Too many things to do, no one to do them ( or the inability to delegate ) and the resultant constant pressure to be productive in the face of an onslaught of “immediates.” 2. Marketing and sales: the over-riding obsession that most business owners must have to succeed. Nothing happens until something is sold. 3. Back office operations: paperwork, regulatory filings, accounting and the like are constant drains on productivity, but are necessary for survival. 4. Personnel: hiring the right people is incredibly difficult. It’s even harder to keep them, and there is a constant drive to find people that can and want to work. Far too many employees are just marginal. 5. Quality control: things go straight downhill if you don’t watch each element of quality. Pre-sale, production, delivery, and post-sale are all prone to quality control breakdowns, either through benign inattention or indifference. This is especially true in service organizations, where quality may be difficult to accurately measure. 6. Cash flow issues: most small businesses struggle with some form of seasonal cash flow …

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05

Aug'17

What is “Days Payables Outstanding” and Why is it Important?

Simply put,  Days Payables Outstanding it’s the number of days worth of  expenditures that you owe in the Accounts Payable balance at any point in time. It’s mechanically calculated by taking your accounts payables and dividing it by the average expenditures per day. For a manufacturing business, the “average expenditures per day” is usually calculated by taking the cost of goods sold for the last year and dividing by 365. Sometimes a shorter period is used, especially if things are changing rapidly. For a service business, the total expenses are used, less salaries, payroll taxes, payroll related expenses (such as pensions) and then dividing that by the number of days … similar to what is done for a manufacturing facility. Of what use is this number? Of and by itself, not much. As a comparative figure to industry averages, mildly interesting, perhaps indicating an abnormality. As a comparative figure to past periods ( horizontal analysis), it is very indicative of what’s happening in payables management. It’s a good figure to monitor. If you can get it, a great measure of payables management is the “discounts lost” figure, which indicates how much in those “ 2–10, net 30” discounts for prompt …

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03

Jun'17

Should I do a Customer Profitability Analysis?

The ease with which you do this analysis and the accuracy depends entirely upon the level of granularity of your accounting system and ancillary reporting systems. The obvious idea is to figure out how much each customer provides in profit. You need to know what customers buy, how much they buy, how often, and the gross margins from each of those products. However, to do a realistic job of analysis, you have to take into consideration the returns, defects, post sale customer service, and the cost of maintaining the customer. Some would also suggest that the cost of acquiring the customer should be factored in… to get a total profitability from each customer. Few organizations have enough data to provide all this information in an easily accessed format. Figuring all this out depends upon whether you can get the requisite information, or whether you have to make “assumptions.” The biggest and most distorting assumptions will be in the product mix and the after-sale support. If you are considering the total profitability, you also have to figure out how much it cost to acquire the customer… a process fraught with assumptions. So, you end up doing all this analysis, and what …

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31

Mar'17

What’s the Biggest Challenge for Small Businesses regarding Financials?

The biggest challenge most small businesses  have is just getting accurate financials. When you own and operate a small business, 110% of your effort is devoted to marketing and execution. The backroom tasks – including bookkeeping and accounting tend to get second fiddle, at best. As a result, back office systems in most small businesses are not given enough attention, until, that is, the company runs out of cash. Then there is a fire engine approach that takes over, as the business owner attempts to put out this fire and that. Not particularly conducive to developing sound information reporting systems. Most small business owners are not systems or detail oriented. They are big picture people, by necessity. As a result, keeping history, making things neat and developing internal reporting systems falls by the wayside. I have seen dozens of small businesses which ran by dashboard metrics alone. No financials. At year end, the outside accountants would struggle to make sense of the mess and sometimes the financials actually corresponded with the dashboard results… sometimes. Most of the time, the financials come as a rude shock. This is a symptom of being an entrepreneur. It’s a rare one who understands the …

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09

Feb'17

How can I Reduce the Costs of Production?

Question:  What are some suggestions to reduce the costs of production? Response: This is the question Operations Management people ask themselves all the time.  Here’s a list of things to do: Look at the product. How is it engineered? Can it be designed to use less parts? Can it be designed to be assembled faster? Can features be eliminated? Look at the systems by which the product is assembled. Can they be streamlined? Is there a natural flow, a logical set up and a more efficient process? Are you using a batch method when a process flow would be better? Look at tools. Do you have the best tools/ machines for the processes? Do you have enough of them? Are they positioned correctly? Are they maintained properly? Are their bottlenecks which cause wasted time and disrupt production? Look at labor. Can it be mechanized, automated or enhanced? Can the quality of the labor be improved, by additional training, better tools, better conditions? Look at materials. Can less expensive materials be used? Can better materials, with less defects be used? Can materials be purchased in different sizes to reduce waste? Look at the shop. Is the environment conductive to efficient production? …

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02

Feb'17

Cutthroat Management Style

Many business owners think that a cutthroat pressure-cooker management style works.  Turn up the heat and things will cook.  Be ruthless with people and only the best will survive. It’s almost a cliche — put on the pressure and you’ll get results.  Does it really work? High pressure organizations may think their approach works, but it has consequences.  The stress results in higher healthcare costs, more workplace accidents, and a revolving door with employees. Who can be loyal to a company that treats its employees like automatons, throws out the “bottom” 10 % each year, and creates internal conflict and strife as a management approach? Studies have shown that cutthroat organizations are actually less productive.  They have less employee loyalty and higher turnover. It negatively affects workforce health, sucking the life out of people. What exactly is a cutthroat organization?  What things characterize that management style?  As in most things, there’s a spectrum, from mild to extreme.  Most  cutthroat environments have these ten characteristics: 1. They overwork people. Bring on those 50 hour workweeks! Create artificial deadlines and pile on the tasks.  Be sure to put high priority on  all tasks, and as a kicker, when one project is only half done, …

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08

Sep'16

How Do You Prevent Employee Fraud and Theft?

How can you run a business while avoiding people from defrauding you? The answer is that you will at some point have someone steal from you. It happens to all business owners. It’s probably happening right now. The issue is how much.

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04

Aug'16



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