Recently I’ve been asked to attend a daily 15 minute project status meeting. So far, each day at least one person has kept the group waiting 5 minutes. That’s 1/3 of this meeting, but I digress.
At first glance, you think “It’s only 5 minutes, what’s the big deal?” Well I have a couple of issues with tardiness to meetings. First, where I come from, punctuality is a sign of respect. I know sometimes there are traffic or other issues and I am certainly not 100% perfect. Occasional lateness is understandable and 5 minutes late for a one time meeting is not that big of a deal (but do apologize!). However, when it’s a phone meeting that is every day of the week, being late every day is unacceptable in my book. It’s disrespectful to those who are waiting for the tardy attendee to show up.
Now let’s move on to how much money this costs. In the case of the project meeting I’m attending, at least 2 people are waiting every day for others to show. 2 people, 5 minutes a day, 20 days in a month. That’s 3.33 hours of WAITING. Is that in the project budget? I doubt it. Assuming a minimum bill rate of $100 per hour, that’s $333 per month because one person hits their snooze button every day. What a waste.
Time tracking is an area that most creatives vehemently oppose.Â “It’s a creative process, we don’t know how much time it will take.”Â or “It depends on the person and the project.Â Sometimes it’s quick and sometimes it’s not.”Â These are valid arguments.Â These arguments can be applied to other service based businesses as well.Â I can assure you, I don’t like time tracking either and when I hire bookkeepers, some are faster than others.
Even though the argument is valid, you still have to find a way to price projects appropriately, track work in process, and measure profitability.Â Like it or not, time is the best measure.Â That’s not to say there aren’t other ways of estimating.Â You have to figure out the easiest, best way to reasonably approximate how much effort each project takes.
At this time of year, a lot of my conversations revolve around tax saving strategies. I’ve spoken with several CPAs recently and the advice for cash basis tax payers is consistent. If you are showing a net profit for the year, here are the top 3 strategies for reducing your 2010 tax bill:
Defer income – If you can, push income into 2011. Delay the invoicing, ask your clients to hold payment until January, and/or be less aggressive with your collection efforts.
Accelerate Expenses – Buy needed items before the end of the year and pay down your accounts payable. Cash basis tax payers don’t get deductions until the money is spent, so pay as many of your outstanding bills as possible. Some accountants caution that prepaid expenses (like rent) are not deductible until the period they are used. Check with your tax accountant before pre-paying regular bills.
Buy Needed Equipment – If you are going to need equipment next year, buy it before year end to take advantage of the Section 179 deduction.
Of course, talking with your tax accountant and reviewing your specific tax situation is advised.
A relatively simple Microsoft Excel spreadsheet is usually the best tool for predicting cash flow.Â This spreadsheet will track when you expect your revenue to hit the bank account and when your bills and payroll will leave the bank account.Â The first column (each column represents a time period, usually a week) in your spreadsheet will begin with your bank account balance, then add incoming cash, subtract outgoing cash, and finally total to what you expect to have left in the bank.Â That ending bank balance will be the beginning bank balance in the next column (time period)…wash, rinse, repeat.
Sample Cash Flow Forecast
(Invoices are kept on a separate spreadsheet in this sample.Â Forecast would normally extend numerous weeks)
I bought inventory and pre-paid the invoice with a credit card. When I received the inventory, they said they had misquoted me and refunded me $50.00 on the order. The refund was made back to the credit card that was used to pay for the order.
The question (in two parts):
This is a refund on the the whole order, not just a handful of the inventory itemsÂ (i.e. I am not returning anything, I’m just getting some money back on the job overall). Do I handle that by using Bill–>Misc and entering negative $50Â as the bill, which generates a return credit to me? AND
If I do that, I am then being asked to to apply that $50 to one of my accounts, but which one?
I recently read an article in our local paper that details a pretty standard embezzlement case. In this case (Wilsonville bookkeeper gets theft conviction), the bookkeeper charged at least $17,000 of personal charges to a company credit card.Â She also wrote convenience checks off the credit card to pay personal bills.Â She is believed to have stolen at least $30,000.
When you don’t have any internal controls in place and you give one person access to everything, it’s easy for this to happen.Â What are you doing to ensure your cash and credit is secure?Â At a minimum, you should ensure bank and credit card accounts are reconciled monthly, preferably not by the person paying the bills.Â The owner should also regularly review bank and credit card statements.
Itâ€™s common for small business owners to measure their financial health based on their income statement or bank account balance and deem their business â€œfitâ€ if the bottom line looks good.Â To reveal why this approach can be deceptive, letâ€™s apply a dieting metaphor.
Only looking at the bottom line is the equivalent of â€œsucking it inâ€ when you look in the mirror.Â Sure, it looks like youâ€™ve lost some weight, but what happens when you exhale? You might appear skinny for a moment, but that version of the situation isnâ€™t accurate.
Do you manage your business by the bank balance? Many busy entrepreneurs do but what we know is that managing your business by your checkbook is like managing your personal health by the scale. While the number on the scale is a helpful indicator, it certainly doesn’t mean you’ll get a clean bill of health from your doctor. Join us to learn about other financial tools to help you see, understand, and manage your business’ financial health.
Topic: Beyond the Bank Balance – Create a Dashboard to Manage Your Business for Profit & Growth! Date: Wednesday, June 9th Time: 11:30am-12:30pm PDT (2:30-3:30pm EDT)