Many small business owners are so busy with the day-to-day operations of the business that they can’t see the forest for the trees. They are underutilizing information about how the business is doing financially and, hence, are missing opportunities to improve the financial performance of the business.
This financial information is analogous to gauges on an automobile: they tell you how well the underlying business processes are working. They should function as an early warning system of problems requiring remediation or as an affirmation improvement efforts are being successful.
Each business needs to develop indicators specific to its processes, but several are widely used. In this article we are going to share some examples of helpful measures. It is important to note that these metrics are not taken from B-school textbooks, but rather are “best practices” drawn from successful business people.
A typical financial statement is a snapshot in time of what is going on. Graphing trends over time in such areas as sales, gross margin and units produced is analogous to a video, and provide a much clearer picture of whether things are getting better or worse. A second helpful approach – but difficult to format – is to separate fixed and variable expenses. Certain expenses should fluctuate with levels of business activity and others should not. This exercise also will force you to address expenses that should be variable that are, in reality, fixed. Opportunities for improvement come with this epiphany.
Many people utilize certain ratios to help spot trends over several years. These are helpful because it’s hard to keep track of the cumulative impact of the changes made from one year to the next. Ratios such as sales/employee, unit production/ employee and overhead/employee are all helpful long-term benchmarks.
Many small business people let the cost accounting tail wag their pricing dog. They don’t put themselves in the shoes of a customer making a purchasing decision. A product or service ought to be priced to reflect value as perceived in the marketplace. Would someone discern a value difference proportionate to the price difference between your product and the others next to it? What is the competitive price point that will optimize your product’s take off the shelf? Value is a combination of price and quality. Most of the time as consumers, we make trade-offs between these two aspects but our purchasing motivation goes way up and we become raving fans when we get quality at a bargain price. The same is true of your customers.
Once you determine a price point, a projection of the net-before-tax profit of the product should be the basis of evaluating its contribution to the business.
Pricing based upon a mark-up over cost is commonly used because it is easier to determine and accountants are comfortable with it. But it completely misses the perceived competitive value of the product or service in the eyes of the customer. It is helpful – but hard – to develop profitability by customer and profitability by product or service lines. This information is always surprising the first time you do it and usually leads to some different ways of thinking.
Profitability should be calculated at the net-before-tax level to give a true picture of all the costs associated with the product or service line. Some people have difficulty fully allocating expenses but it is doable and follows easily once set up. Formatting information this way can also help reveal if increases or decreases in performance are due to take, costs, or volume.
Putting together these indicators can be time consuming at first but once in place can be easily updated and are invaluable to the health of your small business.
From The Collin County Business Press
This week, Intuit announced that it will be releasing the 2010 versions of Quickbooks Pro and Quickbooks Premier to users on Oct. 7.
So what’s new for Quickbooks users in 2010? Intuit says it has streamlined the install process from 15 screens to only six for small businesses with simple accounting needs. You will be able to edit multiple items in the lists of items/customers/vendors at one time in a spreadsheet-style screen, and data can be pasted into those lists from Excel. There are new form templates, and more form customization options, including decorative backgrounds. For more advanced customization, there is integrated access to design services. Quickbooks 2010 users will also have the ability to put their signature on their checks directly within the program without printing them.
Some of the more useful-sounding new features are the additions to the Company Snapshot screen that was introduced in Quickbooks 2009. This screen can now be personalized to display the data most relevant to the user’s particular business. If this works half as well as described it will be a great improvement to what was already one of my favorite features in the 2009 version. This is the most promising sounding of the newly announced features, but also reminds me of iPhone cut-and-paste: something that should have been there from the beginning.
Another promising area of improvement is in the reporting. According to Intuit, it’s been “radically redesigned” to make it easier to find reports. The redesign includes a carousel view, a list view, and a search function, as well as a favorites view to show your most frequently used reports. As a Quickbooks user who gets annoyed by having to wade through a massive library of irrelevant reports to get to the few that I use regularly, the ability to go directly to a favorites list of reports sounds very helpful.
The most common complaint about Quickbooks has long been its heavy-handed marketing of add-on services inside what is already an expensive software package. Unfortunately, most of the new features being advertised for Quickbooks 2010 appear to simply be an extension of Intuit’s philosophy of aggressively generating add-on sales. Popular personal finance management app Mint.com, recently purchased by Intuit, also operates under a business model based on selling add-on services through its software. But there is a major difference between Mint and Quickbooks: Mint is free.
The features that fall under what Intuit calls its “Connected Services Strategy” include:
- Document Management Services: These services allow attaching of documents to transactions, accounts or people in Quickbooks. The documents are stored online and can be accessed remotely and shared with others.
- Check Deposit Services: With Intuit Check Solutions for Quickbooks, users can deposit check payments into their bank account. For companies not already using Quickbooks merchant services, the check service starts at $19.95 per month plus per-transaction fees.
- Marketing Center: Quickbooks’ integrated email marketing service (currently in beta) offers customizable templates for creating email marketing campaigns and then allows for tracking the results of those campaigns through Quickbooks data.
- App Center: Everyone has to have apps these days, and Quickbooks is no exception. The App Center contains about 25 programs in four categories. The apps cover topics from task management to project management to online storage. Most are only peripherally related to the core accounting functions, and all but a few require a monthly subscription (although free trials are available).
Quickbooks Pro 2010 will have a single-user MSRP of $199.99, or $179.99 for an upgrade. Pre-order street price for the full version Quickbooks Accounting Pro on Amazon.com is currently $149.99. Quickbooks Premier 2010 will have a single-user MSRP of $399.99, or $349.99 for upgrade buyers. The pre-order street price on Amazon.com is $249.99 for the full version of that program.
If you bought Quickbooks 2009 in the 60 days before the 2010 product announcement on Sept. 28, you will likely be happy to know about the existence of a little-advertised “migration upgrade” program that provides free upgrades to the 2010 version. To get the upgrade if you qualify, make sure you have your 2009 product’s information and sales receipt and call 888-246-8848. Stay on the line after the menu options to reach customer service.
Most QuickBooks® Merchant Services customers will pay more to accept credit card payments as of October 1, 2009, it was announced today by agent relations for Intuit-owned Innovative Merchant Solutions.
According to the release, fee increases to take effect October 1, 2009 are as follows:
Existing IMS accounts and QuickBooks Merchant Service for PC accounts:
- Transaction fee Increased by $.04
New Intuit QuickBooks Merchant Service for PC Transaction Fee:
- Qualified and Mid Qualified: $0.27
- Non Qualified: $0.34
Posted by AccountingWEB on 09/18/2009 - 17:11
Intuit has a fairly long history of providing accounting solution software programs for both accountants and their clients. QuickBooks is one of their flagship products and an industry standard for small businesses. Intuit QuickBooks Payroll Services offers two ways to do payroll. Both start with you (or your client) inputting the paychecks but in the first option you track, prepare, and pay the payroll taxes and do the filings and in the other option you create the paychecks but Intuit handles the taxes and filings.
Assisted Payroll is the package for those who wish to have Intuit handle the taxes. It provides a “No Penalty Guarantee” that taxes will be paid on time and correctly. A payroll specialist helps you to set up the employees from the beginning. The cost is $60 per month plus $1 per check. It is not recommended for a business with over 150 employees.
Enhanced Payroll is for those who would like to prepare and pay their own payroll taxes. The tax tables are downloaded so the withholdings can be automatically calculated once the hours are entered. It has the capability to file and pay the taxes online. It handles payroll for up to 800 employees, a QuickBooks limitation. It is an affordable package,
1-3 employees $249 annually, 4 or more $349 annually. (This is active employees at a time, not a W-2 limitation)
According to Intuit, Enhanced Payroll for Accountants makes it easier for accountants to serve their clients in additional ways – by preparing Client-Ready reports. These reports help clients understand all the details of their payroll with seven pre-configured reports that print out on standard paper.
Either payroll software can be added on to any version that is QuickBooks 2007 or higher. QuickBooks Payroll can handle up to 3 EINs per payroll license. It is designed for the individual company to manage their payroll.
One of the nice things about the QuickBooks Payroll Service for QuickBooks users is that its format is the familiar format they are used to.
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