As a confirmed excel nerd, there is something about large amounts of data that I am inextricably drawn towards . I suppose it has something to do with an affinity for organization combined with a love of numbers and the innate desire to solve problems. As an accountant and financial consultant , I am often presented with the task of organizing and analysing data into a format that allows for greater insight into my clients businesses . And although good accounting software is absolutely necessary for any small business owner, a significant amount of analysis and reporting is done most effectively in excel.Read More
One of the numerous ways in which technology has benefitted small businesses has been to increase the number of payment options available. While conventional methods of payment like cash and cheque still exist, there are also a variety of other options like debit cards, internet transfers and mobile payments that have greatly facilitated payment infrastructure and made financial management significantly more flexible. Every business owner must wade through the alternatives and decide what type of payment options are right for their customers. This is based on several factors including their industry, common practices, location and of course business specific considerations. For example, a retailer will usually allow for payment by credit and debit cards, cash and possibly some form of mobile payment. Conversely, a law office may not offer a credit card option, but request payments via cheque or bank transfer.
Some payment alternatives for small businesses to consider are discussed below:Read More
The temptation to start a small business or venture into self employment can be strong particularly for those who are unhappy with their existing employment situation. The freedom and flexibility that being your own boss seems to offer can be seductive, as is the potential for growth which you, as the business owner, can have full control over. You may have an idea or a particular skill that you believe is desirable to a specific target market and you are confident that once this target market is aware of your existence they will all be banging down your door. Consequently, you start your business by offering an amazing product or services, only to realize that building up a customer base is more challenging than you thought. Additionally, there are a number of other obstacles for which you do not have the expertise (done by another department when you were an employee) whether it is marketing, website development, legal research and accounting. Finally, you realize that you actually need a fairly sizable source of cash to maintain the business, deal with growth opportunities, whilst ensuring that you are able to support yourself.
The chart below, published by Statistics Canada available Key Business Statistics – July 2012 (this seems to be the latest data that is available), demonstrates the percentage of small and medium sized enterprises (SMEs) that actually survive over a five year period.
An accounting system can be an extremely powerful tool for business owners. When well-structured , according to the specific needs of the business, it converts raw data into a format that actually tells a story about your business and can allow for insights that are essential to optimum decision making (the magic of debits and credits). The balance sheet is a snapshot at a specific date, while the profit and loss is more of a narrative. It provides feedback on how your business is doing and communicates what you need to do in the future. Some of the information that can be gleaned is discussed below:
Having a dynamic, regularly updated sales forecast can be essential to the success of a small business. By forecasting your sales revenue you are helping to control for its unpredictability, an inherent risk in any business venture, and prepare for the decisions that are essential to your business profitability. Whether your sales are increasing, decreasing or static , it is always better when decisions are made proactively rather than reactively.
Preparing a sales forecast can be as simple as you want it to be and does not necessarily require an accounting degree, particularly when your business is small (although an experienced accountant can certainly help refine and streamline the process). Below are some tips to help you prepare your sales forecast:
One of the more unpleasant aspects of being a business owner is having to chase clients that do not pay. It is simeltaneously frustrating, stressful and disheartening, while attempts to collect are an utterly unproductive use of time and can have a significant impact on cash flow, particularly if you are unprepared.
There are ways to mitigate the possibility and impact of bad debts. Some of these include:
- Performing a credit check on potential customers
- Charging a retainer, which is paid up front
- Offering discounts for early payments
- Allowing several payment options including credit cards which allows for immediate payments
- Following up on delinquent receivables dilligently.
Regardless of your efforts to prevent them, incurring bad debts is often inevitable and ultimately, a cost of doing business. Consequently, it is important to ensure that you are prepared.Read More
As a chronic procrastinator I tend put all my non “attend to immediately” documents in baskets and boxes resulting in, at year end, a colourful array of documents. There are letters, bills, invoices, receipts, statements and the occasional delivery menu that did not get filtered out. The intention is to organize them, on a regular basis, in the near future. In reality, this usually does not tend to happen until the end of the year.Read More
As the end of the year approaches, some of us find ourselves overwhelmed by top 10 lists, the shopping masses and endless renditions of Winter Wonderland. Businesses, on the other hand, tend to experience a slowdown, which makes it the perfect time for small business owners (when not partaking in holiday madness) to take a closer look at their overall business, financial and tax situation. A thorough review and analysis of your business will allow you to optimize your current financial situation as well as prepare for the future.Read More
One of the primary challenges facing a small business owner is uncertainty about the future. (It is also what makes entrepreneurship exciting). We may have an amazing product or service, but we can’t be sure whether this will actually translate into a profitable business model. A budget is an excellent tool to manage uncertainty and, contrary to popular belief, can actually be fairly straightforward to prepare, particularly for small businesses that do not have to worry about different departments, product lines and geographic areas .
A budget, very simply, is a tool that helps you predict your sales, expenses and profitability as well as your cash flow needs. It is based on estimates, which in turn are based on a combination of experience, history and industry knowledge. In terms of presentation, a budget should essentially mirror your financial statements and will include the following main categories:Read More
In a recent study by TD Bank Financial Group it was determined that one of the primary challenges facing small business was cash flow (The other two were managing clients and government red tape). This probably comes as no surprise to most small business owners, especially in the early stages. Of course, the simple answer to this problem would be a limitless source of cash. (Of course if we had unlimited funds, we may not find it necessary to endure the trial and tribulations of business ownership). Since this is usually not possible, we need to do the next best thing: analyze our cash flow requirements and find the most cost effective and easily available solution for any shortfalls. Even the most successful business can find itself shutting its doors if it is not able to manage it's cash flow needs.
Below are 4 financial metrics, which if monitored regularly, can actually help improve your business' cash flow:
When people hear the term accounting, there is an involuntary reaction whereby the comprehension centres (the medical term) of their brains tend to shut down, and sleep mode is activated. This is unfortunate, as accounting, especially to a small business owner, can actually be quite interesting. It is one of the primary tools by which business owners and other interested parties can gage the success of their business, as well as identify areas that require attention andneed improvement. To understand accounting, business owners need to have a basic understanding of how it works (debits and credits) and it's results (financial statements), explained below:Read More