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

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.

What Businesses Can Learn About Success from the World Cup

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

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

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

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”

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.

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

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

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?