Palmer Financial

The Pursuit of Payment: The Secret to Getting Clients to Pay On Time

2011-11-28T16:48:00.000-08:00

For any small business, payment from clients and customers is the life-blood for keeping an organization alive. Without a doubt, one of the biggest challenges that small businesses face in this economy is getting paid on time.

What many small businesses don’t realize that getting clients to pay on time is an art form -- taking a certain amount of finesse, tenacity and friendship building.

Following is the secret sauce that I use to get clients to pay on time.

Tip #1 – Have your “finance person” follow-up on all payment matters. If you are the person doing work for a client/customer, it helps that you are not the one following up on payment related matters. This creates a layer between you (the client service person wishing to keep and grow the account) and the need for payment. If do not have someone, find someone (your wife/husband/”accountant" just might do the trick).

Tip #2 – Send invoices out in advance. If the work is going to be performed and billed on a certain completion date, send the invoice out in advanced of that date with the expected completion date on the invoice. The goal is to get the invoice into the accounting system as quickly as possible, even if the invoice date is in the future.

Tip #3 – Send regular statements (via email and in hard copy). On a monthly basis (at a minimum), revisit your Accounts Receivable listing and create a process of sending statements to clients who have not paid.

Tip #4 – Be friendly, appeal to the “human side” and befriend the Accounts Payable person. In the beginning of the pursuit of payment, the old adage “you get more flies with honey” is extremely true. The goal is to become friends with the Accounts Payable person and make every correspondence upbeat and friendly. Make sure to thank the person for any effort but be sure to ask for specific expected payment dates.

Tip #5 – Talk to others in the organization. If the Accounting person is not paying the bills, the chances are great there is a reason (these people are usually agnostic with respect to who is getting paid). Make sure to talk to your client/customer liaison as soon as possible and ask for reasons why the bills are not being paid.

Tip #6 – Stay away from lawsuits. In my early years of playing this game, I was keen to involve a collection lawyer early in the process. I have found that it is much easier to appeal to a person’s sense of doing the right thing then threaten a lawsuit. If the client is now a former client and simply does not return calls, etc., engage a lawyer to write a threatening letter and do the minimum at first on an hourly basis and not on a contingency basis (which is usually a third on the balance).

It's That Time Again…Budget Time for 2012

2011-10-10T12:32:00.000-07:00

The fourth quarter of the year is usually the time when budget & plans get finalized for the following year. Setting a plan for the year is extremely important.

Budgets and plans are important for executive management to set goals. It is also important for employees to know the goals and work as a team to achieve.

Here are a few tips for setting a budget and/or plan:

REVENUE
1 – Use foreseeable/signed revenue. Businesses with signed contracts into the next year should use this as the main basis for the revenue plan.
2 – Know the sales cycle & be realistic. Make sure that, when budgeting for new revenue, the timeframe and amounts are realistic. For example, a company planning on receiving government contracts should probably not plan for new revenue in January if the contract process is not too far along.
3 – Be cognizant of receivable cycles. If the accrual based budget leads to a cash flow forecast, make sure the timing of when funds are received accurately reflects the customer payment terms. For example, the expected accrual revenue generated in January may need to be assumed collected in March or April (especially if your customers are large organizations).

EXPENSES
1 – Use zero based budgeting. Many times, budgets are created using last year’s expense figures. This is usually not ideal. It is far better to start from scratch and focus vendor by vendor on setting a plan.
2 – Require lots of detail. The old adage: “the devil is in the detail” is true when budgeting. Make sure that the expenses are well thought out and lots of detail for each expense line item is documented.
3 – Create cost centers. Organize budgets based on cost centers and assign one employee for each center.
4 – Create “ownership” of budgets. Make people responsible for creating, tracking and authorizing the spending in their budget line item.
5 - Realistic & Agreed. Make sure that the final budgeted expenses are realistic and agreed upon by all parties before implementing.
6 – Incent employees to achieve (or beat) budget. Give financial rewards for employees who come in under budget.
7 – Report/Reward Regularly. After the budget has been approved, and 2011 is underway, make sure that the monthly results are regularly delivered to the team. Also reward the employees regularly during the year for favorable budgets.
8 – Allow for Change. Sometimes, events happen at an organization that makes the existing budget not achievable. For example, the company may bring on a extremely large project but also involve a lot more costs. Make sure that the plan is revised for the year and that the budget owner is responsible for the updated plan.
9 – Remember taxes. If a C-Corp, remember to include income taxes into your budget for March. Corporate tax payments are due by March 15th. If your company is profitable, this could be a large amount that will need to be factored into cash planning.
10 – Use financial metrics. Once finished, look to industry standards for budget reasonableness. If gross or net margin percentages look unusually high, they probably are too thigh - they probably reflect a cost that has not been accurately figured into the budget.

Don’t let perfection get in the way of action

2011-06-02T07:45:00.000-07:00

Sometimes management’s biggest fault is a lack of action.

In many cases, project owners want to produce the best product or service. And, as a result, are slow to finalize a project. This happens a lot of times with software builds. The project owner wants to have a product that is bug free and perfect for the end user.

As business owners, moving forward and creating new opportunities is the key to progress - and we need to continually put something out there. In the words of Fred Foster, an inspirational trainer & speaker, “it is more important to be accurate as it is to be precise. For example, if you are shooting at a target, it is better to have more shots in the circle around the bulls eye than to actually hit the bulls eye.”

This means that even if the project is only 80% or 90% perfect, it is better to move forward than to strive for the 100% - because it may never be 100% perfect and the opportunity may pass you by.

I like to call this approach to completing projects “The Google Approach”. Google is notorious for creating software that is in Beta version but is available for use. We recently used this approach when our Tax App for the Android and iPhone was created. We could have spent another month re-designing the interface and/or including more tax data but decided to finalize and get the App out before the end of the 2010 tax year. This worked well and we have had thousands of downloads.

It is important to continually create and build. When doing so, be sure to not let perfection get in the way of action.

100% of nothing is…NOTHING (Share the Wealth)

2011-05-04T07:05:00.000-07:00

In earlier blogs, I mentioned that it is important for businesses to “guard” company equity. While I still maintain that, at times, this is important, there are also times when it is critical that prospective investors and employees be rewarded with equity. Here are a few times:

Angel/initial round raises. Many entrepreneurs get so focused on company valuations (when there is not even a proven business model) that they lose out on investment capital due to company valuations being too high. In addition, entrepreneurs sometimes turn away investors because they think that they have raised enough capital and they do not want to dilute the company shares.

Employees rewards. Many company founders are stingy with stock options for employees. Again, they feel that they do not want to “dilute” the company value with option shares. What entrepreneurs fail to realize is that stock options tend to keep the employees dedicated. And, dedicated employees are usually the sole reason for a company’s success (or failure). I can think of numerous examples of companies that did not include employees in option rounds and ultimately failed.

I still maintain that companies need to guard equity in situations where a company is strong and profitable. However, for companies that are just starting out, founders may want to share the wealth – because 100% of zero is….zero!

Debt Can Be a Great Thing When Raising Money

2011-04-29T06:55:00.000-07:00

With President Obama and the Small Business Administration’s push to lend Money, now may be a great time to raise money via Debt (instead of Equity). Below are 5 reasons why:

1 – The SBA Debt is Cheap. We have seen a few SBA deals recently and the loans appear to be priced inexpensively relative to an equity finance cost of capital. This means that there exists a potential to benefit greatly from the gains due to the leverage. (Note: There is an MM Theorem in traditional finance which states that Leverage is irrelevant, meaning that a company’s cost of capital will not change with leverage, because as a firm increases its leverage the cost of equity will increase to offset gains on leverage. The current SBA deals seem to indicate that this theorem does not apply).

2 – Tax Benefit. Interest on debt is tax deductible, whereas, dividends on equity is not deductible (and actually can be taxable). In fact, the higher the marginal tax rate of the company, the higher the amount of debt a company should have in its tax structure.

3 – Discipline to Owners/Management. Debt adds an element of discipline to an organization. The old adage “Equity is a cushion; Debt is a Sword” certainly applies. In fact, the management teams of firms with high cash flows left over each year are more likely to be complacent and inefficient.

4 – Ownership Stays the Same. Although most likely creating financial covenants, financing through debt keeps the control of an organization intact. Owners/Managers value control.

5 – Creditors Are Not in Your Business. One of the biggest downsides to debt is the possibility of being forced into bankruptcy and/or being taken over by a lending institution. Although this is possible and has been happening more frequently than ever, we have seen that banks have no intention to take over a company that has fallen behind in interest payments (or broken a financial covenant). Banks would much rather work with a company than take it over.

“SPRING CLEANING” TIME FOR YOUR FINANCIAL RECORDS: WHAT TO KEEP AND WHAT TO THROW AWAY

2011-03-25T07:31:00.000-07:00

It’s that time again for “spring cleaning” of company financial records. For those company pack rats, this can sometimes be major challenge. What to keep? What to store off site? What to destroy? Inevitably, most people will just throw their hand up in the air and decide to keep everything just one more year. Here are a few tips:

Create a Retention Policy and Stick to It: Designate one person to have the responsibility to determine retention periods to approve record destruction and the destruction method and to set record retention policies and procedures. Then, stick to the designated plan.

Make Sure Archived Records are Retrievable: Records are to be maintained in a safe and retrievable place for the duration of the retention period/policy created above. Where possible, all records should to be scanned and a PDF copy kept as the supporting documentation. Go paperless as soon as possible!

Soft Copy Records Should Be Useable: The physical ability to process/use retained records must also be maintained. If new computer systems are placed in service, any preexisting records should be converted to a format that is compatible with the new system.

Test Your Backup: Magnetic media should be tested on a sample basis at least once a year to determine whether information has been lost. Backups of magnetic records should be kept at a separate location from the primary records.

Clearly Marked Destruction Date: The destruction date shall be clearly marked in all records that are maintained at an outside storage facility. All file boxes should contain complete lists of their contents. Please note that a copy of all file box listings should be maintained by the Company. It is important to file records with similar destruction dates in the same file boxes. Here is a suggestion:

Description of Record -- Retention Period
Payroll Reports/Journals from Payroll Company -- Retain indefinitely
Copies of returns files (forms 940/941) -- 10 years
Forms W2s -- Retain indefinitely
Forms W4s -- As long as in effect/4 yrs thereafter
Human resource Files -- As long as in effect
Annual Audit Reports -- 6 years
Hard Copy Expense Reports -- 7 Years
Vendor Contracts -- Life + 2 years
Leases -- Life + 7 Years
Vendor Invoices -- 7 Years
Compliance certificates -- 5 Years
Availability certificates -- 5 Years
Customer Invoices -- 10 Years
Customer Contracts -- 5 Years
Voided Checks -- Destroyed After Audit
Canceled Checks -- 10 Years

This post also appeared on Denise O'Berry's blog here.

TAX ALERT: Our 2011 Android Tax Reference Application Has Arrived!

2011-02-24T08:14:00.000-08:00

Our 2010 Tax Reference was successful and appreciated by many around the country. We have had thousands of downloads. The 2011 Tax Reference Application for the Android is even better:

>It has includes the many legislative changes for 2011

>It now includes State tax information:

>AND it allows for receiving our new Tax Alert service (which may help save you from penalties)

If you have an Android phone, check it out! Go to the Android marketplace and search for “2011 Tax Reference". Click on this link for a preview:

http://www.androidzoom.com/android_applications/finance/2011-tax-reference_shql.html?nav=related

Top Tips for Entrepreneurs

2011-02-16T07:21:00.000-08:00

Here is a recent interview with tips for starting a business:

http://www.myobpod.com/myob_2011-01-24.aspx

Highlights include:
1 - Do not start a business with the intention of immediately selling it; 2 - Raise more money than you need and try to get to profitability as soon as possible; 3 - Don’t let perfection get in the way of action

I hope this is useful.

How can businesses make 2011 the best year ever?

2011-01-21T13:02:00.000-08:00

Here is my advice:

1 - Get out of "hunker down mode". The economy seems to be picking up in many areas of business. A small business owner needs to know when to grow and when to retract. In my opinion, 2011 will be the initial year to begin growing again. This means considering hiring, spending on technology, raising prices, etc.)

2 – Raise Your Credit Line. Now may be the time to increase your company’s credit line. With increased revenue comes increased working capital needs. Also, with the Federal Government’s push to ensure that banks are lending to small businesses the timing is right to double (or triple your line).

3 – Look into strategic partnerships. When the economy grows, your company may want to increase it’s market share. Now may be the time to form a relationship or merge with another company in your field.

4 - Take advantage of the tax package. Besides having two more years of Bush tax cuts, new tax incentives for buying equipment and self employed individuals will help add to your bottom line.

5 - Use New Technology. We experienced the internet for the past decade. Now we have social media, smart phones and tablet PCs. Use this technology to your company’s advantage. Consider hiring a social media expert to help you company (e.g. our company just published a new app to help companies and individuals know the tax rates).

What Businesses Can Learn About Success from the World Cup

2010-07-12T07:08:00.000-07:00

Now that the World Cup has come and gone, I noticed that teams’ success characteristics are similar to company success traits. Here are a few:

Leadership – The teams that went far in the World Cup had inspired leaders. Argentina’s Diego Maradona, for instance, has not been coaching for long but his passion, energy and love for the game served as motivational tools for his players. Argentina's players seemed to tap into Maradona's energy and Argentina went far in the tournament. The same is true for leadership in business. A successful company is usually accompanied by an inspired and passionate leader who sets a positive tone for his employees.

Desire to Win & Never Give Up – Many of the World Cup teams were similar in ability. Many times, what made one team win was the “fire from the inside”. The U.S. team had this quality. Landon Donavon and the rest of the team had a "never say never" attitude that helped propel the U.S. to the next round. Businesses must also have a similar unwavering drive to succeed. Many companies recently have re-emerged from bankruptcy with good leadership to fight another day. The desire to win is necessary for long term company success.

Confidence & Enthusiasm – Ghana is a team that had the confidence to go far in the tournament. In many games, they were playing a country with technically better players and better overall records; however, they managed to level the playing fields with a collective belief that they could win. And despite the odds, they managed to advance almost to the quarterfinals. The same is true for small businesses. A business must believe in the idea that it can succeed in order to succeed. When facing any opportunity and/or problem it's the "I CAN" attitude that will help get a business to the next level.

Timing – The best teams knew when to strike and when to pull back and guard their leads. Germany is an example of a team that “went for it” when the timing was right (and scored sizeable leads), and retracted when necessary. Businesses that succeed know when to strike and when to be conservative. It's key for a company to understand good timing in order to maximize opportunities when available, but then guard its assets and retract when times are not so good.

Skill – The teams that went to the final rounds ultimately had some of the most skilled players (and the above characteristics). It is also important for businesses to have and deliver the best products in the most professional manner possible. For professional services businesses, the skills of the professionals should be refined regularly and new skills learned in order to stay competitive. Prior to this year's World Cup, only six countries had ever won this title. This year, a new country ( Spain ) has been entered among those prestigious ranks and added to the record books as a World Cup champion. Similarly, with the proper guidance, passion and expertise, there is always room for a new company to advance to the top.

SMALL BUSINESS FINANCE TIPS: Maintaining Your P&L During a Down Economy

2010-03-18T08:46:00.000-07:00

For any small business, managing revenues, costs and expenses comes with inherent challenges - especially in a down economy. For example, maintaining healthy profit margins – in the face of rising materials and labor costs – can be daunting, but is necessary for a small business to thrive and survive in today's economy.

I have developed the following tips to help small businesses best maintain their P&Ls that I hope you all find helpful:

Revenue:

- Create revenue plan & hold employees accountable for the plan
- Lock down clients with long term contracts if possible – to help revenue become predictable
- Plan to continually grow revenue (this will guard against client drop off)
- “Love” your existing clients/customers keep them happy, send thank you cards, buy them an occasional thank you present
- Grow revenue with existing clients/customers (these are your best opportunity)
- Get rid of undesirable clients (this will not help you in the long run)
- Use a sales tracking software/tool to help you find keep focused on new client opportunities
- Have action plan for growth & action plan for downturn and be ready to use (do not be caught off guard)

Expenses:

- Revisit P&L results on a monthly basis
- Ensure the expenses can easily be identified (i.e. make sure that there is not one vague line item where all expenses are booked)
- Continually compare results against income and expense benchmarks

For a professional services firm for example:
- The net margin of no less than 20% of revenue (note: ensure that the owner/officer salary is included as an expense before looking at the net margins)
- Employee costs should be about 50% of revenue; look at revenue per head as another metric – revenue per head should be no less than $150K; Greater than $200K per employee is preferable
- Rent should be no more than 3-6% range of company revenue
- Spend money (5-10% of revenue) on business development
- Incentivize appropriate employees around expense goals to ensure the company stays “lean”
- Ensure that the company is profitable and keeps a healthy margin (this will guard against down times)
- Keep and maintain projections which would include actual results PLUS forward looking projections for the year
- Include spending on assets/depreciation (a non-P&L item) in the monthly review…this is an area where spending can get out of hand and often gets overlooked
- Do a vendor analysis on an annual basis (keep good relations with your vendors but make sure that an expense is not widely out of whack)

I welcome all thoughts comments and feedback!

GUARDING YOUR BALANCE SHEET – Tips for Survival in Today’s Volatile Market

2010-03-10T09:59:00.000-08:00

As the the recession continues to extend into 2010, we continue to be inundated by news about the challenges that face the small business community.

While we are not completely out of the woods in terms of the economy, there are several things that small business owners can do to protect their businesses during these challenging times:

1) Manage Collections: Outstanding invoices should be aggressively followed up on round-the-clock. Having unpaid invoices will create instability. Be aggressive and assume the worst.

2) Collect Upfront: Make sure that all of your contracts stipulate payment upfront. Net 30 can stretch into Net 60, then you are stuck doing work for 2-3 months without being paid.

3) Turned Unused Equipment into Cash: Do not let any unused equipment sit around…turn it into cash immediately.

4) Limit Company Credit Cards: When only necessary, provide your executives with corporate credit cards. Don’t give them out to your entire staff and never give out debit cards to your employees.

5) Managing Account Payable: You want to keep as much cash in the bank at all times. As such, pay only critical vendors first, then pace vendor payment with receivable collections. Stay away from regular payments on credit cards. You can dig your business into unnecessary debt in no time.

GUEST POST: John Garcia, Tax Director at Targus Group International, Discusses Increased Scrutiny from States Due to Budget Deficits

2010-03-08T10:24:00.000-08:00

We were fortunate enough to receive a guest post from John Garcia, Tax Director at Targus Group International. John is a well renowned CPA and MBA, professor and corporate tax veteran. John shared with us his recent concerns regarding the increased scrutiny from States due to budget deficits in the following illuminating blog post:

With imploding budgets and other fiscal woes, it is no secret that many states are hurting financially. To help solve these problems, states are formulating and implementing new innovative state tax regimes that spread their tax bases.

Interstate commerce that traditionally was protected from state income tax by federal legislation such as the Commerce Clause of the US Constitution and Public Law 86-272 are no longer valid. Already, Texas, Michigan and Ohio have enacted state tax measures which subjects multi-state enterprises to tax when there is only a minimal connection to the state.

The mere presence of consigned inventory, a sales person, and even a Website can subject taxpayers to multi state tax. Clearly, this is not a short term matter but a sign of things to come. So, if you are concerned, it might make sense to do a Nexus study and be prepared when that out of state auditor sends you that audit notification.

It also makes sense for business owners to consult your tax advisor to create strategies to mitigate fines and penalties associated with non-compliance with State legislation.

PLAN FOR THE FUTURE: DON’T GET CAUGHT “OFF GUARD”

2010-02-22T08:08:00.000-08:00

As the Jim Morrison of The Doors once said, “the future’s uncertain, and the end is always near.” While he may have been referring to his short and rather debaucheries life, he was right about one universal thing: the future is uncertain.
Now, is the end always near? I will be the first to admit that I am not an expert on Nostradamus studies, so I will let the religious and academic scholars try to answer that question. I do know though that uncertainty about the future is a common feeling for most small business owners.

In fact, as soon as an entrepreneur loses sight of this, they can get very complacent and easily get derailed. And, from a financial planning perspective, I believe it is critical for any company to develop a strategic plan for the future. This plan could include planning for additional funding, an acquisition, or if they are ambitious an IPO. Either way, a plan is needed for the “end game,” or as many call it an “exit strategy.”

While many CEOs have studied finance, or have financial backgrounds, it is critical to get the right financial talent on board to help develop these strategic plans. Most people would not try to re-wire their houses would they? Of course not…they bring in an electrician to handle with this complex and somewhat dangerous task.

The same could be said for using the right talent to handle financial planning. It is the future after all. And, if Mr. Jim Morrison is right, the future is uncertain. So, why not bring in the right experts to make the future clear, bright and within reach.

Planned Obsolescence: Success Means Clients No Longer Needing Our Services

2010-02-08T07:38:00.000-08:00

Many contractor/company relationships are dictated by the contractor’s ability to justify its services, and be retained for the longest possible time. While this makes complete business sense from a professional services perspective, and unless it’s an ongoing business issue being addressed, shouldn’t a contractor do such a good job that their services will eventually no longer be needed?

In pretty much any professional services sector, the answer is actually “no.” It is much easier for contractors to keep an existing client happy – and engaged for a longer period of time -- than fight to find new business.

As a provider of outsourced financial department services, I actually take a counter intuitive approach and believe in providing the financial backbone to allow a small- and/or mid-size company to spread its wings and fly -- without the need of our services.

Most small companies will eventually need to hire a CFO and/or a full-time accounting team, and they should if they are doing well. As such, before the start of our engagement, we clearly identify that changeover point and plan accordingly to transition to an in-house solution.

And, the reality is that we to develop a solid financial infrastructure to allow for our clients to one day out grow us. Once a company reaches this point, we have done our jobs. And, isn’t that what it’s really all about?

SMB News Round Up: Failed Emergency Small Business Boost and How to Avoid a Tax Time “Train Wreck”

2010-01-25T10:24:00.000-08:00

Every so often, I like to compile some of the latest news headlines in the small business sector. As always, there is no shortage of news to cover – since the SMB sector is the backbone of our economic recovery. This news round up post includes a number of stories regarding the America’s Recovery Act (ARC), as well as tips of how to avoid any tax time “train wrecks.”

An Emergency Small Business Boost That Fizzled
A stimulus measure crafted to get emergency funding to Main Street businesses has turned out to be such a flop that even its Congressional advocate wants the program killed. But for the 5,000 business owners who have jumped through all the hoops to land loans, even a flawed lifeline is better than none at all. The "America's Recovery Capital" (ARC) loan program was created as part of February's $787 billion Recovery Act. From the very beginning, the program struggled. Congress ordered the Small Business Administration to release guidelines for the loans within 15 days. Instead, it took four months. Read the full CNN Money article here.

Unsecured Small Business Loans—Will They Help Businesses And Unemployment?
Small businesses obviously need capital to run and maintain a certain standard of operation, and in the past unsecured small business loans have been a source of that capital. Also, small businesses are needed to combat unemployment and make more jobs available for those who are seeking work. The problem seems to be that if a small business is doing well, even in the face of a tough economy, just getting by or making a decent profit isn’t going to be enough for them to grow and expand their workforce. Bringing in enough money to pay expenses, employees, and maybe put a little away isn’t going to go to far in helping a small business create more jobs. That is where unsecured small business loans come into play. Read the full Red, White and Blue Press blog post here.

Small Firms Should 'Increase Their Website Presence’
As someone who has been advising small businesses for more than 25 years, there has never been a better, yet more challenging, time to start or run a small firm. The contradiction in that statement is deliberate. Better, because never has the playing field been so level - and challenging, because of the current economic malaise. Running a small business requires a skill set of extraordinary proportions, and it really is a miracle that so many survive, yet alone prosper. Read the full BBC article here.

Small Businesses Can Avoid a Tax Time Train Wreck
For some small-business owners, income tax filing season feels like a slow-motion train wreck. These are often owners who tend to be disorganized and unable to keep good records. Instead of keeping their companies' books with a small-business accounting program, they use a stack of overstuffed file folders or worse, boxes and shopping bags. They often end up spending hundreds of extra dollars paying their accountants to sort through the whole mess -- provided the accountants will even agree to deal with it. Read the full Salt Lake City Tribune article here.

WHY OUTSOURCING YOUR FINANCE DEPARTMENT MAKES SMART BUSINESS SENSE

2010-01-19T07:21:00.000-08:00

For many smaller and mid-size companies, the hiring CFO-level talent can be too costly and completely unfeasible. In addition to searching for the right candidate, you have to offer a highly competitive package – even in today’s economy – to attract the top-level finance talent you need for business success.

In addition to requiring C-level finance talent, smaller- and medium-sized businesses require a dedicated finance department that can handle the entire spectrum of financial support services – from strategic financial business planning to day-to-day accounting.

So, the challenge is posed for any entrepreneur…how can I have a viable finance team without the dedicated resources for hiring talent?

A more cost-effective and sound business approach is to outsource your complete financial needs. Here are the reasons why this makes complete business sense:

You Can Get Senior, CFO-Level Support for Strategic Financial Guidance

All Accounting Can Be Taken Care of Seamlessly

Outsourced Partners Can Provide an End-to-End Solution

Outsourced Partners Often Provide On-Site Support (i.e., Can Work in Your Office a Couple Days a Week)

So, rather than making the investment in internal finance talent, outsourcing to the right partner can help bring your business to the next level. Much like many companies outsource marketing and advertising support, why shouldn’t a company make a similar – and more cost-effective – investment into the right finance team?

Small U.S. Business Owners End 2009 Downbeat? Things Seem Better to Me

2010-01-14T11:27:00.000-08:00

The National Federation of Independent Business recently issued its small business optimism index, which fell for the second straight month, dropping 0.3 point to 88.0 in December. According to the report, the reason for the dip is that small businesses were hurt by weak sales and worries about government policies.

According to a statement from the federation’s chief economist, William Dunkelberg, "Continued weak sales and threatening domestic policies from Washington have left small business owners with little to be optimistic about in the coming year.”

What is interesting about this news it runs counter to what I am seeing in the marketplace: SMB owners are starting to feel optimistic. 2009 was, without a doubt a tough year for the entire U.S. business sector, but things are looking up.

This week, the Federal Reserve Board issued a report saying that economic activity has been picking up in recent months in New England. The report also stated that things were getting better in Texas. And, retailers reported that holiday sales were up from last year.

These are all signs that things are getting better. My gut is telling me that that National Federation of Independent Business report results were influenced by a general fear that many SMB owners had in Q4 2009. Don’t worry the fear will subside and better times are ahead (saying this cautiously, of course!).

SMB News Round Up: Can the Big Banks Spur Job Creation, and the Obama Administration’s Efforts to Trim Joblessness in the SMB Sector

2010-01-11T07:28:00.000-08:00

Every so often, we like to highlight some of the key stories that deal with the small business sector. As always, there is no shortage of news since the SMB sector is so vital to the health of our economy. Today, we feature a wide range of stories from the White House’s efforts to trim joblessness to an analysis of whether some of the larger banks will help spur job creation in the SMB sector.

Will Bank Of America, Wells Fargo, CitiGroup Lending To Small Businesses Spur Job Creation?
In 2010, lending to small businesses, from institutions like Bank of America, Wells Fargo, and CitiGroup, is said to be the one way in which unemployment can be effectively combated. As governmental stimulus programs are said to be temporary and no real fix for unemployment, target a small section of workers, like state employees, or are not set to take place for years down the road, many are left wondering about what are the solutions for the now. Read the full blog post from the Red, White and Blue Press blog here.

White House Plans More to Trim Joblessness
President Barack Obama plans more economic stimulus measures to bring down the high U.S. unemployment rate, while cutting the bulging budget is a longer-term challenge, a top White House economic aide said on Sunday. "We are ... talking about actions right now to jump-start job creation," White House Council of Economic Advisers Chairwoman Christina Romer said on CNN's "State of the Union. "You don't get your budget deficit under control at a 10 percent unemployment rate," she said. Read the full Reuter’s story here.

8 Essentials to Succeeding With a New Business
Thanks to modern technology and the Internet, it's become relatively easy for just about any aspiring entrepreneur to start a business. In fact, it may be too easy, say small-business experts, considering that 86 percent of all small businesses fail within the first three years. If you want to avoid the same fate for your own start-up, you need to lay the proper foundation and groundwork. Read the full Newsday article here.

SBA Boost: Money Makes Loans Attractive to Both Lenders, Business Owners
The nation's financial meltdown in late 2008 has made it more difficult for small businesses to get loans, but millions of dollars in federal stimulus money has given small-business loans a boost in El Paso in recent months, some in the lending community said. The dollar volume for Small Business Administration-backed loans grew in El Paso last year in large part due to $375 million in stimulus money available nationwide to enhance lending features of SBA-backed loans, and has helped keep loan activity strong in the past several months, said Phillip Silva, director of the SBA's El Paso district office. Read the full El Paso Times article here.

2010: A New Decade and New Threats for Small Businesses

2010-01-06T12:36:00.000-08:00

Although 2010 is poised to be a turnaround year for small businesses, and things may start to seem a bit rosier, business owners must anticipate emerging threats and always be on guard. The tides can turn at any moment. A new competitive force could emerge and knock you on your feet. New legislation and tax codes could prove harmful. Or, as is the fate with many small businesses, Google could decide to take over your industry sector – then you are in real trouble.

Below are the emerging threats as I see them for small businesses in 2010 and beyond.

The Uncertainty of the Tax Code – Nobody really knows what will happen with taxes in 2010 and beyond. With our biggest deficit ever and anticipated additional spending over the next few years, it is almost certain taxes will increase. In fact, the major provisions of the Bush tax cuts are scheduled to “sunset” as of the end of this year. As a result, this will give less incentive for an entrepreneur to grow a business, and give private equity less incentive to invest in speculative but higher rates of return.

Competition from the individual 1099 contractors -- Although 1099 contractors are somewhat entrepreneurial in nature, professional services firm will face major competition from individual contractors (in the US and overseas) in addition to other competing firms. Tom Freedman’s book “The World is Flat”, explains this challenge and the challenge is a threat now more than ever -- with so many out of work professionals.

Access to Capital -- Although the Obama stimulus has earmarked hundreds of millions of dollars for SBA loans, companies still are finding access to this money harder than expected. In addition, the Venture Capital funds and tolerance for risk simply does not exist going into 2010. Entrepreneurial companies must become profitable from the start and not count on debt or equity for help.

Surely this is just the tip of the iceberg in terms of threats. As always, I welcome all comments, feedback and insights.

SOCIAL MEDIA AND SMALL BUSINESS: HOW MUCH SHOULD YOU PAY?

2010-01-05T08:48:00.000-08:00

2010 is shaping up to be the year that many small businesses will be dipping their toes into social media world. For many small companies, having the internal marketing resources to manage social media campaigns is just not feasible.

As such, many companies will be looking to outsource these efforts to social media firms and/or consultants. This is certainly a sound strategy. But, the big question that looms for many is: how much should I be paying for social media? As a financial services executive who works with both small businesses and PR/marketing firms, I wanted to share some pricing insights.

BLOG DEVELOPMENT AND MANAGEMENT
Many small companies are opting for the self-publishing method of bypassing the media filter and communicating directly with customers and prospects through a blog. You should be able to find a marketing partner who can handle all elements of the blog including content creation, podcasting and social media dissemination through Twitter and other social media channels. This is a very valuable service and the range for a small company should be somewhere between $5,000 and $10,000 per month (depending on the required blog activity per month).

CREATIVE CAMPAIGNS AND VIDEO CONTENT
Developing creative campaigns that are tied into more high-value content like video can be costly. However, not every online video has to appear as if Francis Ford Coppola produced it. And in the new Flip video era we are living in, there are other ways to keep the video production costs down. That said, for more professional/creative videos, a small company would want to pay about $10,000 per campaign. And, for the more DIY-videos, the scale should be somewhere between $3,000 to $5,000 per video.

TWITTER, FACEBOOK AND LINKED-IN CAMPAIGNS
In 2010, many small businesses will need someone to manage all other social media elements – besides the actual blog. This means, developing and running their official Twitter feeds, Facebook Fan Pages and Linked-In Groups. In addition, an outsourced marketing partner can promote content on a myriad of Linked-In groups that are industry related. As such, a comprehensive campaign that contains all of these elements could easily touch thousands of prospects on a daily basis. This is a very valuable service and the range for a small company should be somewhere between $5,000 to $7,000 per month.

Social media is still the “Wild West” in terms of determining what you should be paying. And larger companies have the financial resources to pay for larger social media campaigns. The budgets I have highlighted in this post are based on what I have seen in the industry and are geared towards smaller businesses looking to enhance their marketing through social media. I hope you have found this helpful. I welcome all thoughts, comments and feedback.

SMB News Roundup: Stimulus Relief Extends for SBA Loans; SMB Bankruptcies Up in California; and Secrets of a Serial Entrepreneur

2009-12-22T08:34:00.000-08:00

As the small business sector is so vital to the health of our economy, there is no shortage of business news regarding efforts to pump life back into this economic engine. For this post, we have decided to highlight all the key stories and developments in the SMB sector – from the good, bad to the ugly. Read on and feel free to share your comments and insights.

Stimulus Relief Extended for SBA Loans

The Senate voted this weekend to temporarily extend funding for two popular stimulus provisions that reduced fees and boosted guarantees on Small Business Administration-guaranteed loans. The provisions, which helped bolster small-business lending over the past year, had run out of funding in late November. With the new extension, included in the Defense Appropriations bill, the government's maximum guarantee on SBA loans is restored to 90%, compared to pre-stimulus levels of 75%. Fees that the agency normally changes banks are also waived. Read the full Wall Street Journal article here.

Small-Business Bankruptcies Rise 81% in California

The Obama administration's new plan to give a boost to small businesses reflects continued trouble in that sector, which is facing new failures even as much of the nation's economy is stabilizing. As credit lines have shrunk and consumers have cut back on spending, thousands of small businesses have closed their doors over the last year. The plight of struggling firms has been aggravated by the reluctance of banks to lend money, said Brian Headd, an economist at the Small Business Administration's office of advocacy. Read the full Los Angeles Times article here.

Obama to Meet with Small and Community Bankers

President Barack Obama will discuss the economy, lending to small businesses and financial regulation when he sits down at the White House with representatives of a dozen small and community banks. Obama scheduled Tuesday's session as a follow-up to a similar meeting he held last week with some of the nation's top bankers. Read the full AP story here.

Small Business Lessons From a Serial Entrepreneur

It is always inspirational to see stories about serial entrepreneurs who have lived through all of the successes and failures. Check out this “Biz Beat” blog post from the Atlanta Journal Constitution on serial entrepreneur Hank Datelle.

“Up In The Air:” Laying Off Employees is a Good Thing

2009-12-15T12:40:00.000-08:00

In the Jason Reitman’s hit move “Up In The Air,” George Clooney plays Ryan Bingham, who is a corporate downsizing expert who essentially lives on the road and is a hired gun who does the dirty job of laying people off.

While I have not yet seen the movie, I read the book by Walter Kirn and Clooney’s character in the book is often portrayed in a negative light for his efforts in putting a positive spin on laying people off. When firing someone, he presented it as an opportunity as opposed to something that was actually bad.

Of course, being laid off is a devastating blow for any employee. And, in the day-and-age, it has unfortunately become the cost of doing business. What is not often explored is the simple fact that laying people off can be a very good thing.

That is correct. Laying off staff is a good for business. As I mentioned in my previous post, it does no one any good to keep employees around if the company is then at risk months later. Corporate America is not always a cold place, and most companies tend to do the minimum amount of layoffs of employees -- to keep morale up and do the “right thing.”

The truth is that most companies put themselves at risk by only laying off the minimal amount of people. And, once the storm has passed, and business has stabilized, then companies can bring more talent back. So, is it worth putting an entire company at risk by having a bloated employee base?

President Obama Taking Steps to Help Small Businesses

2009-12-09T12:54:00.000-08:00

This week, President Obama announced that he is pushing to eliminate capital gains taxes, extend write-offs, and create employment incentives for small businesses in an effort to boost to a segment of the economy still reeling from the downturn.

President Obama certainly did the right thing by bringing this issue to the forefront. The small business sector is the backbone of innovation for our country. It is also the life-blood of many people running smaller, localized businesses in smaller towns throughout the nation. The bottom-line is that the health of the small business sector is critical to getting our economy back on the right footing.

Specifically, Mr. Obama that he would extend break (through 2010) allowing small businesses to immediately write off as much as $250,000 in qualified investments, and a second break allowing small and large businesses to deduct more capital expenses upfront.

Of course, one of the biggest challenges for small businesses is the inability to get bank loans these days. Mr. Obama proposed to eliminate fees and increase government guarantees in 2010 for loans from the Small Business Administration. He said the Treasury would step up loans to small businesses from the bank bailout fund, the Troubled Asset Relief Program.

These are all certainly steps in the right direction for this beleaguered sector. I look forward to seeing how these efforts will pay off in 2010, which will be a critical year for our economy. Stay tuned for more small business news and tips from this blog. And, I welcome all thoughts, comments and feedback.

2010 Small Business Tips: You Have Weathered The Storm; Now What?

2009-12-07T12:05:00.000-08:00

For many small business owners, 2009 was a year of reckoning. We experienced the worst economic meltdown since the Great Depression and many industry pundits and economists are torn as to whether or not we are actually experiencing a recovery.
Regardless of what the economists are saying, small businesses need to operate with a completely new mindset – recovery or not. 2009 was all about survival and if approached correctly, 2010 can potentially be the year for small business to go beyond survival to prosperity mode.

So, small businesses have weathered the storm – so to speak. So, what to do now? Below are some key tips and lessons learned that will help speed the recovery process for small business owners.

Lesson Learned #1: Make Deep Cuts When Businesses Future is Uncertain. The key to business survival is to stay profitable. So, how does one do this? Simply put; you may need to lay off more employees to stabilize the business. It does no one any good to keep employees around if the company is then at risk months later. Companies tend to do the minimum amount of layoffs of employees but then put themselves and remaining employees at more risk shortly thereafter.

Lesson Learned #2: Take More Money than Necessary. Businesses tend to raise the minimum amount of equity or debt necessary based on a financial model that is usually not conservative. Before the Great Recession, companies should have taken as much money as possible during the period when capital was being easily distributed.

Lesson Learned #3: Get to Profitability As Soon As Possible. While venture-backed fund can certainly be the lifeblood for a start up – it is often like having golden handcuffs. These companies are at the mercy of the VCs. Their survival is solely dependent upon the next round of financing. There are many reasons for a VC to pull the plug and it may have nothing to do with the business viability. It could be caused by the VC’s own capital needs or the need to shut down the fund and start another fund. The key to not being dependent on a VC or the next round of funding is to have a self-sustained business.

Lesson Learned #4: Get The Upper Hand with a SBA Loan
Thanks to the American Recovery and Reinvestment Act, the Small Business Administration (SBA) is armed with $730 million for lending and investment programs. The maximum loan sizes have also been increased to $5 million (from $2 million). These loans are also reasonable in nature and achievable to obtain – take advantage of this.

Lesson Learned #5: Spend Money Now on Advertising
Now is the right time to spend money now of advertising for 2010. Simply put; the golden rule of spending money on advertising is a recession still applies. There is also a tax savings for 2009 for most small companies if the money is spent now (even if it is for advertising in 2010).

So, the big question is; what is your small business doing to make 2010 the year of business prosperity?