Blog

Aberdare Business Solutions Blog

Gambling Winnings

By proadAccountId-371192 23 May, 2017

How to Document Issues With An Employee

 Whether your company has a HR manager or not, it is still up to every business owner and supervisor to keep accurate and consistent documentation of employees. From formal performance evaluations to positive recognition sent in an email, a written record of an employee's actions can be used as evidence to support everything from promotions to employment termination. Though including positive feedback in an employee's file is important, keeping a detailed record of employee violations is crucial and mandatory as it can protect a company from future litigation. Use these five tips to ensure you're documenting employee infractions appropriately:

 

1.)   Write It Down
This may seem like an obvious point, but the most important, and often the most challenging, part of keeping records of employee behavior is actually documenting it in a timely manner. Whether you are dealing with formal documentation for an employee's personnel file or informal documentation that records a manager's discussions and observances, all documentation should be written down (in print or in email) and saved in a secured, private place. This should be done for all employees, not just for employees with performance issues. If you make a record of one employee violating a company policy, you must keep records of all employees who violate that policy. Consistency and fairness are key.

2.)   Be Specific

Writing down every positive/negative behavior or action an employee makes isn't necessary, but if an event occurs that will potentially impact an employee's standing with the company, it is important to write a detailed report of the incidence immediately after it occurs. Your written record and credibility may be questioned if you wait too long to record the events, so timeliness is critical. On each document (formal or informal), include your name and title, the employee's name and title, and the date. If misconduct occurs, state which specific policies the employee violated and how this action harms the company. This provides valuable knowledge to any future supervisors who manage this employee and protects you and the company if the employee takes legal action in the future.

3.)   Be Objective

Documentation may be used by fellow colleagues and third parties (such as lawyers) at any time, so it's important to write all documentation in a professional manner. The point of keeping a record is not to editorialize, but instead to maintain a factual and fair history of events. Avoid using opinions (like calling an employee “lazy”) and interpretations of an employee's behavior (like stating a employee is “in over his head.”) Instead, note when the employee missed a specific deadline or failed to complete a task he/she was assigned. Stick to the facts without inserting your feelings.

4.)   Share Feedback

When it comes to addressing issues with an employee, it is important to be direct and provide feedback as soon as an incident occurs. Include an action item or takeaway from any initial conversations to address how the employee will avoid this behavior moving forward. If there are consistent problems, you may need to put the employee on a performance improvement plan or sit down for a formal evaluation to share detailed documentation that outlines the issues to date. During this meeting, review the infractions, discuss a plan of action to address the errors, create a timeline for improvement and state the consequences if the behavior continues. Ensure another supervisor or HR manager is in these meetings to witness all formal actions taken and ask the employee to sign and date the formal document for acknowledgment. This protects the company if further incidents occur. If the employee wishes to formally respond in written form, allow them to do so and include that in his/her file.

5.)   Follow Up

After a formal evaluation or disciplinary action is taken, it's important to continue the conversation by setting up regular meetings to track the employee's progress. Review any agreements or goals previously discussed and document any changes. If you've made commitments to help the employee strengthen their skills, document when and how you've provided assistance. If additional incidents occur or the employee is still under-performing, discuss additional options with a HR manager or legal representative. If termination is the next step, make sure you understand all legal and contractual requirements. The termination process will be much easier if you've been properly documenting the employee's behavior all along!

Want to learn more about how our trusted Aberdare Business Solutions advisers can set your business up for success? Give us a call at 281.599.3380 or email info@aberdare.us.com .

By proadAccountId-371192 25 Apr, 2017

Invoice Overhaul: Make it Easy for Customers to Pay on Time

 

Not receiving payment as promptly as you’d like might be the most frustrating part of managing your freelancer finances. Especially in the small business world, the success of your self-employed venture hinges solely on not just getting paid, but getting paid on time. Silently checking your inbox or mailbox each day doesn’t cut it, but neither will bugging your clients 24/7. Get things in order by giving your invoicing process an overhaul.

Evaluate

First, take a good, hard look at your current invoicing process and see if there are any obvious ways you can improve. For example, if you’re inconsistent about when you send out invoices, it can send the message that you’re fine with customers being inconsistent with when they send payment back.

Look into how your customers usually receive invoices, how they generally remit payment back to you, and the average length of time it takes to collect payments.

Look for Patterns

Throughout this process, look for patterns. Is there a connection between the amount of time you’ve been working with a client and how frequently or infrequently their payments are on time? Are invoices that are sent out weekly more likely to be received on time than invoices sent out monthly?

In addition to evaluating the platforms you use and timetables you abide by, consider reviewing your communication with clients. Are you lackadaisical, passive-aggressive or overly forgiving when discussing payment schedules?

Track to Act

Create a customer database to track payments and client behaviors. This will help you act accordingly. If you find that one account has sent late payments for the past six months, it may be time to contact them and re-establish payment terms or discuss a late payment penalty policy. On the other hand, if you find that another account has sent payments on time for the past year, you might send them a thank you note or offer a discount on their next invoice to show your appreciation.

Organize and Automate

Use an online invoice generator, if you aren’t already doing so, to streamline the look of and information in each of your invoices. This will help clients know exactly how much you’re charging them for each product or service, and they’ll know what to expect and look for with each invoice. You’ll eliminate any possibility of a delay because of ambiguity. Then, automate what you can — whether that’s setting up recurring billing with your long-term clients or using a tool like Boomerang that will send scheduled invoice reminder emails to clients.

 

Use Positive (or Negative) Reinforcement

As an incentive, consider offering a reward or discount to customers who not only pay on time but pay early. Make sure the reward is high enough to make it worth it to pay early, but reasonable enough to not affect your bottom line. In addition, consider penalizing those who are consistently late with an appropriate finance charge. Doing so will relay the message that you expect to be paid on time; just make sure the amount is reasonable enough to encourage them to be on time in the future without the risk of losing them as a client.

Offer Convenient Payment Options

Accepting only cash, check or credit won’t cut it anymore. Consider accepting various other methods of payment, including platforms and digital wallets like PayPal, Venmo, Apple Pay and even Bitcoin. Doing so shows your flexibility, and also makes it easier for customers to use whatever they’re already comfortable with. No matter how you collect payment, be diligent and transparent about data security so your clients won’t hesitate to pay.

Want to learn more about how our trusted Aberdare Business Solutions advisers can set your business up for success? Give us a call at 281.599.3380 or email info@aberdare.us.com .



 

 

By proadAccountId-371192 25 Apr, 2017

How to Document Issues With An Employee

 

Whether your company has a HR manager or not, it is still up to every business owner and supervisor to keep accurate and consistent documentation of employees. From formal performance evaluations to positive recognition sent in an email, a written record of an employee's actions can be used as evidence to support everything from promotions to employment termination. Though including positive feedback in an employee's file is important, keeping a detailed record of employee violations is crucial and mandatory as it can protect a company from future litigation. Use these five tips to ensure you're documenting employee infractions appropriately:

 

1.)   Write It Down
This may seem like an obvious point, but the most important, and often the most challenging, part of keeping records of employee behavior is actually documenting it in a timely manner. Whether you are dealing with formal documentation for an employee's personnel file or informal documentation that records a manager's discussions and observances, all documentation should be written down (in print or in email) and saved in a secured, private place. This should be done for all employees, not just for employees with performance issues. If you make a record of one employee violating a company policy, you must keep records of all employees who violate that policy. Consistency and fairness are key.

2.)   Be Specific

Writing down every positive/negative behavior or action an employee makes isn't necessary, but if an event occurs that will potentially impact an employee's standing with the company, it is important to write a detailed report of the incidence immediately after it occurs. Your written record and credibility may be questioned if you wait too long to record the events, so timeliness is critical. On each document (formal or informal), include your name and title, the employee's name and title, and the date. If misconduct occurs, state which specific policies the employee violated and how this action harms the company. This provides valuable knowledge to any future supervisors who manage this employee and protects you and the company if the employee takes legal action in the future.

3.)   Be Objective

Documentation may be used by fellow colleagues and third parties (such as lawyers) at any time, so it's important to write all documentation in a professional manner. The point of keeping a record is not to editorialize, but instead to maintain a factual and fair history of events. Avoid using opinions (like calling an employee “lazy”) and interpretations of an employee's behavior (like stating a employee is “in over his head.”) Instead, note when the employee missed a specific deadline or failed to complete a task he/she was assigned. Stick to the facts without inserting your feelings.

4.)   Share Feedback

When it comes to addressing issues with an employee, it is important to be direct and provide feedback as soon as an incident occurs. Include an action item or takeaway from any initial conversations to address how the employee will avoid this behavior moving forward. If there are consistent problems, you may need to put the employee on a performance improvement plan or sit down for a formal evaluation to share detailed documentation that outlines the issues to date. During this meeting, review the infractions, discuss a plan of action to address the errors, create a timeline for improvement and state the consequences if the behavior continues. Ensure another supervisor or HR manager is in these meetings to witness all formal actions taken and ask the employee to sign and date the formal document for acknowledgment. This protects the company if further incidents occur. If the employee wishes to formally respond in written form, allow them to do so and include that in his/her file.

5.)   Follow Up

After a formal evaluation or disciplinary action is taken, it's important to continue the conversation by setting up regular meetings to track the employee's progress. Review any agreements or goals previously discussed and document any changes. If you've made commitments to help the employee strengthen their skills, document when and how you've provided assistance. If additional incidents occur or the employee is still under-performing, discuss additional options with a HR manager or legal representative. If termination is the next step, make sure you understand all legal and contractual requirements. The termination process will be much easier if you've been properly documenting the employee's behavior all along!

Want to learn more about how our trusted Aberdare Business Solutions advisers can set your business up for success? Give us a call at 281.599.3380 or email info@aberdare.us.com .

�%=��
By proadAccountId-371192 12 Apr, 2017

A Refresher...Understanding your  Unemployment Insurance Tax Rates for 2017

Texas continues to see business growth and a strong economic environment. Texas Workforce Commission (TWC) works to minimize increases in the overall unemployment insurance tax bill to Texas employers and to make responsible decisions that will result in savings to businesses in Texas.

At the end of 2014, TWC sold bonds through the Texas Public Finance Authority in order to avoid interest that would have becomes due on federal advances. Although employers will see an obligation assessment associated with the unemployment tax bills to repay the bonds, we are keeping employers’ taxes as low as possible by spreading this over a period of several years. The good news is the bonds are on a schedule to retire in July 2017.

Because unemployment claim activity has outpaces tax collection from employers, the balance in the compensation trust fund has fallen below the statutory level established in the Texas Unemployment Compensation Act (TUCA). As a result, Section 204.063 of TUCA adds a deficit tax when the fund balance is below the floor of the compensation fund, in order to replenish the fund.

The components of your 2017 tax rate are:

·        The obligation assessment – to collect the amount needed to repay the bond obligation due next year. It is experience-rated, based on your 2016 general tax and replenishment tax rates.

·        The general tax – based on claims against your account. If TWC has paid benefits to former employees who were laid off or separated through no fault of their own in the past three years, you will pay the general tax.

·        The replenishment tax – charged to all experience rated employers to cover unemployment claims not charged to a specific employer. This tax tends to rise following economic downturns when claims increase and businesses close.

·        The deficit tax – charged to all 2016 experienced rated employers when the Trust Fund balance falls below a certain statutory level or balance. It is experience-rates, based on your 2016 general tax and replenishment tax rates.

·        The employment and training investment assessment – a flat tax of 0.1 percent, paid by all employers, used to fund the skills training program.

Set your business up for success by leveraging the expertise of our trusted Aberdare Business Solutions advisers.For more information or a business evaluation please call our office at 281.599.3380 or email info@aberdare.us.com.


By proadAccountId-371192 12 Apr, 2017

Deposit Requirements for Employment Taxes

There are two deposit schedules – monthly or semiweekly – for determining when you deposit social security and Medicare taxes and withheld federal income tax. These schedules tell you when a deposit is due after a tax liability arises (for example, when you have a payday). Before the beginning of each calendar year, you must determine which of the two deposit schedules you must use. The deposit schedule you must use is based on the total tax liability you reported during a lookback period . Your deposit schedule isn’t determined by how often you pay your employees or make deposits. See Application of Monthly and Semiweekly Schedules, later.

These rules don’t apply to federal unemployment (FUTA) tax. See the Instructions for form 940 for information on depositing FUTA tax.

Deposit rules for Form 941. Your deposit schedule (monthly or semiweekly) for form 941, Employer’s QUARTERLY Federal Tax Return, is based on the total tax liability you reported on Forms 941 during a four-quarter lookback period discussed below under Lookback period for Form 941.

Instead of making deposits during the current quarter, you can pay your total Form 941 tax liability when you timely file Form 941 if:

1.      Your total Form 941 tax liability for either the current quarter or the preceding quarter is less than $2,500 and

2.      You don’t incur a $100,000 next-day deposit obligation during the current quarter.

If you’re not sure your total liability for the current quarter will be less than $2,500, and your liability for the preceding quarter wasn’t less than $2,500, make deposits using the semiweekly or monthly rules so you won’t be subject to failure to deposit penalties. For more information about deposit rules for Form 941, see Pub. 15.

Deposit rules for Forms 943, 944, 945, and CT-1. Generally, the deposit rules for form 941 also apply to tax liabilities for Form 943, Employers Annual Federal Tax Return for Agricultural Employees; Form 944, Employer’s ANNUAL Federal Tax Return; Form 945, Annual Return of Withheld Federal Income Tax; and Form CT-1, Employer’s Annual Railroad Retirement Tax Return. However, because Forms 943, 944, 945, and CT-1 are annual returns, the rules for determining your deposit schedule apply to a calendar year rather than a calendar quarter. See Lookback period for annual returns below. For more information about deposit rules for annual returns, see Pub. 15 (for forms 944 and 945), Pub. 51 (for form 943), and the Instructions for Form CT-1.

Federal tax deposits must be made by electronic funds transfer (EFT). You must use EFT to make all federal tax deposits. Generally, an EFT is made using Electronic Federal Tax Payment System (EFTPS). If you don’t want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. EFTPA is a free service provided by the Department of Treasury. Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee.

For more information on making federal tax deposits, see section 11 or Pub.15. To get more information about EFTPS or to enroll in EFTPS, visit www.eftps.gov or call 1-800-733-4829 (TDD). Additional information about EFTPS is also available in Pub. 966.

Depositing on time. For EFTPS deposits to be on time, you must submit the deposit by 8 p.m. Eastern time the day before the date the deposit is due. If you fail to submit an EFTPS deposit on time, you may use the same-day wire payment option discussed above.

Lookback period for Form 941. Your deposit schedule for a calendar year is determined from the total taxes reported on your Forms 941 in a four-quarter lookback period. The lookback period begins July 1 and ends June 30, as shown in the following chart. If you reported $50,000 or less of Form 941 taxes for the lookback period, you’re a monthly schedule depositor; if you reported more than $50,000, youre a semiweekly schedule depositor. The lookback period for a 2017 Form 941 filer who filed Form 944 in either 2015 or 2016 is calendar year 2015.

Form 941 Lookback Period for Calendar year 2017

Lookback period for annual returns. For annual returns (Forms 943, 944, 945, CT-1), the lookback period is the calendar year preceding the previous year. For example, the lookback period for 2017 is 2015.

Monthly Deposit Schedule

You’re a monthly schedule depositor for a calendar year if the total tax reported for your lookback period was $50,000 or less.

Under the monthly deposit schedule, deposit accumulated taxes on payments made during a calendar month by the 15th day of the following month.

New employers. Your tax liability for any quarter in the lookback period before the date you started or acquired your business is considered to be zero. Therefore, you’re a monthly schedule depositor for the 1st year you’re an employer. However, see the $100,000 Next-Day Deposit Rule, later.

Semiweekly Deposit Schedule

You’re a semiweekly schedule depositor for a calendar year if the total taxes during your lookback period were more than $50,000.

Semiweekly deposit period spanning two return periods. If a return period ends on a day other than Friday or Tuesday, taxes accumulated on the days during the return period just ending are subject to one deposit obligation, and taxes accumulated on the days covered by the new return period are subject to a separate deposit obligation. For example, if a return period ends on Thursday, taxes accumulated on Wednesday and Thursday are subject to one deposit obligation and taxes accumulated on Friday are subject to separate obligation. Separate deposits are required because two different return periods are affected.

Deposits Due on Business Days Only

If a deposit is due on a day that isn’t a business day, the deposit is considered to have been made timely if it is made by the close of the next business day. A business day is any day other than a Saturday, Sunday, or a legal holiday. For example, if a deposit is due on a Friday and Friday is a legal holiday, the deposit will be considered timely if it is made by the following Monday (if that Monday is a business day). The term “legal holiday” means any legal holiday in the District of Columbia. For a list of legal holidays, see Pub. 15 or Pub. 51.

Semiweekly schedule depositors have at least 3 business days to make a deposit. That is, if any of the 3 weekdays after the end of a semiweekly period is a legal holiday, you’ll have an additional business day to deposit for each day that is a legal holiday. For example, if a semiweekly schedule depositor accumulated taxes for payments made on Friday and the following Monday is a legal holiday, the deposit normally due on Wednesday may be made on Thursday. This allows 3 business days to make the deposit.

Application of Monthly and Semiweekly Schedules

The terms “monthly schedule depositor” and “semiweekly schedule depositor” don’t refer to how often your business pays its employees or even to how often you must make deposits. The terms identify which set of deposit rules you must follow when an employment tax liability arises. The deposit rules are based on the dates wages are paid; not on when employment tax liabilities are accrued.

Monthly schedule example. Pine Co. has a monthly deposit schedule. It paid wages each Friday during July, but didn’t pay any wages during August. Under the monthly schedule, Pine Co. must deposit the combined tax liabilities for the July paydays by August 15. Pine Co. doesn’t have a deposit requirement for August (due by September 150 because no wages were paid and therefore, it didn’t have a tax liability for the month.  

Semiweekly schedule example. Maylen Smith, who has a semiweekly deposit schedule, pays wages once each month on the last Friday of the month. Although Maylen has a semiweekly deposit schedule, she will deposit just once a month because she pays wages only once a month. The deposit, however, will be made under the semiweekly deposit schedule as follows: Maylen’s tax liability arises when she pays wages on April 28, 2017 (Friday); the liability must be deposited by May 3, 2017 (Wednesday). Under the semiweekly deposit schedule, liabilities for wages paid on Wednesday through Friday must be deposited by the following Wednesday.

$100,000 Next-Day Deposit Rule

If you accumulate a tax liability of $100,000 or more on any day during a deposit period, you must deposit the tax by the close of the next business day, whether you’re a monthly or semiweekly schedule depositor. The deposit period for monthly schedule depositors is a calendar month. For semiweekly schedule depositors, the deposit periods are Wednesday through Friday and Saturday through Tuesday.

For the $100,000 next day deposit rule, don’t continue accumulating tax liabilities after the end of a deposit period. For example, if a semiweekly schedule depositor has accumulated a liability of $95,000 on a Tuesday (of a Saturday through Tuesday deposit period) and accumulated $10,000 liability of a Wednesday, the $100,000 next day deposit rule doesn’t apply. Therefore, $95,000 must be deposited by Friday and $10,000 by the following Wednesday.

In addition, once you accumulate at least $100,000 in a deposit period, stop accumulating at the end of that day and begin to accumulate anew the next day. For example, Fir Co. is a semiweekly depositor. On Monday, Fir Co. accumulates taxes of $110,000 and must deposit this amount on Tuesday, the next business day. On Tuesday, Fir Co. accumulates additional taxes of $30,000. Because the $30,000 isn’t added to the previous $110,000 and is less than $100,000, Fir Co. must deposit the $30,000 by Friday, following the semiweekly deposit schedule.

If you’re a monthly schedule depositor and accumulate a $100,000 tax liability on any day, you become a semiweekly schedule depositor on the next day and remain so for at least the rest of the calendar year and for the following calendar year.

Adjustments and the Lookback Rule

Determine your tax liability for the lookback period (four-quarter lookback period for Form 941 and calendar-year lookback period for Form 943, Form 944, Form 945, and Form CT-1) based on the tax liability as originally reported. If you later made adjustments to correct errors on those returns by filing a Form 941-X, Form 943-X, Form 944-X, Form 945-X or Form CT-1X, these adjustments don’t affect the amount of the employment tax liability for the lookback rule.

Example of adjustments and the lookback rule for Form 941. An employer originally reported a tax liability of $45,000 for the four quarters in the lookback period ending June 30, 2016. The employer discovered during January 2017 that the tax during one of the lookback period quarters was understated by $10,000 and corrected this error with an adjustment on Form 941-X. This employer is a monthly schedule depositor for 2017 because the lookback period tax liabilities are based on the amounts originally reported and they didn’t exceed $50,000. The $10,000 adjustment doesn’t affect the amount of tax liability for the lookback rule.

Accuracy of Deposits Rule

You’re required to deposit 100% of your tax liability on or before the deposit due date. However, penalties won’t be applied for depositing less than 100% if both or the conditions are met.

1.      Any deposit shortfall doesn’t exceed the greater of $100 or 2% of the amount of taxes otherwise required to be deposited.

2.      The deposit shortfall is paid or deposited by the shortfall makeup date as described below.

Makeup Date for Deposit Shortfall

Monthly schedule depositor. Deposit or pay the shortfall with your return by the due date of the return. You may pay the shortfall with your return even if the amount is $2,500 or more.

Semiweekly schedule depositor. Deposit by the earlier of:

1.      The first Wednesday or Friday that falls on or after the 15th of the month following the month in which the shortfall occurred, or

2.      The due date of your return (for the return period of the tax liability). Form 941, Form 943, Form 944, and Form 945 are due by the last day of the month following the period for which the returns were made. Form CT-1 is due the last day of the second month following the calendar year.

For example, if a semiweekly schedule depositor has a deposit shortfall during June 2017, the shortfall makeup date is July 19, 2017 (Wednesday). However, if the shortfall occurred on the required April 5, 2017 (Wednesday) deposit due date for the March 31, 2017 (Friday) pay date, the return due date for the March 31 pay date (may 1) would come before the May 17 (Wednesday) shortfall makeup date. In this case, the shortfall must be deposited by May 1.

To understand these tax deposits or to understand more leverage the expertise of our trusted Aberdare Business Solutions advisors. 

For more information or a business evaluation please call our office at 281.599.3380 or email info@aberdare.us.com.

By proadAccountId-371192 06 Apr, 2017

State Taxes:

States are using IRS data from Form 1099-K to generate audit leads. IRS has been comparing 1099-Ks reporting payments from credit and debit card firms and networks such as PayPal with income shown by taxpayers that got the forms. It sends letters to businesses that it believes are underreporting their cash receipts because the firms have a higher-than-average percentage of receipts from card sales as compared with cash sales. 

It is also sharing the information with the states, which are interested in the issue for purposes of both sales taxes and income taxes. One state letter we’ve seen gives a dollar range of potentially underreported receipts and warns that the state taxing agency will monitor amounts reported in future filings.

By proadAccountId-371192 06 Apr, 2017

Tax Tip:

You’re ready to fill out your 2016 return but haven’t yet received your W-2. What do you do? First contact your employer and ask for a copy of the form. If that doesn’t work, you can call the IRS, which will send a letter to your employer. You’ll need the company’s name, address and phone number, dates of employment and an estimate of wages and tax withheld, which you can get from your final pay stub. 

Don’t file your return late!

If you still haven’t received the W-2 by early April…April 18 is the filing due dates… file your return anyway and attach Form 4852. This is a substitute W-2 form on which taxpayers should estimate their wages and taxes withheld to the best of their ability. This can be found at www.irs.gov . Using a year-end pay stub will help. 

By proadAccountId-371192 03 Apr, 2017

5 Key Performance Indicators For Your Business


You may have a gut feeling that your business is humming along smoothly — and you might be spot on. But there is no substitute for concrete numbers when it comes to measuring your business’ financial health. That’s where financial KPIs — key performance indicators — come in.

KPI is a blanket term for the types of markers that businesses use to measure performance in a variety of areas, from marketing to HR to finance. Keeping close tabs on your small business’ financial performance is essential to long-term success. These five financial KPIs will help you answer the question: Is my business meeting its goals?

1. Gross Profit Margin

Your gross profit margin tells you whether you are pricing your goods or services appropriately. Here is the equation to calculate this:

Gross profit margin = (revenue – cost of goods sold)/revenue

Your gross profit margin should be large enough to cover your fixed (operating) expenses and leave you with a profit at the end of the day (see #2 and #3, below).

2. Net Profit

This is where the rubber hits the road. Your net profit is your bottom line — the amount of cash left over after you’ve paid all the bills. You can figure out your net profit using simple subtraction:

Net profit = total revenue – total expenses

For example, if your sales last year totaled $100,000 and your business expenses for rent, inventory, salaries, etc. added up to $80,000, your net profit is $20,000. If you are a sole proprietor, your salary or draw will come out of your net profit, so it’s vital that this amount be enough to cover your personal needs plus enough extra to build reserves that can keep your business operational during slow periods.

Financing is also a possibility to help smooth out seasonal fluctuations. Many companies go this route to keep things moving during the down season.

3. Net Profit Margin

Net profit margin tells you what percentage of your revenue was profit. The equation is simple:

Net profit margin = net profit/total revenue

In the example above, your net profit margin is 20 percent. This metric helps you project future profits and set goals and benchmarks for profitability.

4. Aging Accounts Receivable

If your business involves sending bills to customers, an accounts receivable aging report (most likely a standard report in your accounting software) can be eye-opening. If customer A consistently pays her bills within 15 days, while customers B, C, and D drag their payments out to 90 or even 120 days, you may have found a root cause of your business’ cash flow problems. It could be time to start charging interest on overdue accounts or let go of slow-paying clients.

Invoice financing  is also an option that can help you capitalize on outstanding invoices.

5. Current Ratio

This accounting term describes the ability of a business to pay its bills. It can be calculated like this:

Current ratio = current assets/current liabilities

The resulting number should ideally fall between 1.5 and 3. A current ratio of less than 1 means you don’t have enough cash coming in to pay your bills. Tracking this indicator may give you advance warning of cash flow problems, especially if your current ratio dips into the danger zone between 1.5 and 1.

 

Use these strategies to keep understand some of the numbers in your business. Set your business up for success by leveraging the expertise of our trusted Aberdare Business Solutions advisers.

For more information or a business evaluation please call our office at 281.599.3380 or email info@aberdare.us.com.


By proadAccountId-371192 26 Mar, 2017

5 Ways to Get Return Customers

Prospects and buyers who interact with you via social and email are more likely to become customers with a higher lifetime value. This is because people prefer to buy from companies and people with whom they have a perceived relationship. They made that first initial leap to engage with you (or purchase from you); now you need to position yourself as the best answer to their future problems. Here are some ways to make sure they return to you.

Value Time

People value time more than they value money. Consider all the buzz about Amazon Go and its non-existent checkout lines. Find ways to make getting customers in and out of your store as convenient as possible.

One way to do this is by making your store — whether it’s brick-and-mortar or online — easy to navigate. Finding products should be intuitive. If it’s not, customers will go elsewhere.

Another way to speed up the process is to make checkout seamless. Take, for example, the Apple Store. There are no lines. Every employee carries around an Apple device and when you walk in the door, an employee puts your name in the queue. You wander the store until you reach the “front of the line” and someone comes over to help with whatever you need. If you’re purchasing something, they can complete the transaction right from their device. It’s painless, convenient and respectful of the customer’s time.

Track Inventory

Nothing frustrates a customer more than when you run out of the item they’re looking for. Whether you run a grocery store or a restaurant, you have to be intentional about the way you purchase and keep inventory on hand.

I was recently changing all the electrical outlets and switches in my kitchen. I went to a hardware store but they didn’t have nearly enough of the light switches in the color I needed. On the other side of the highway, the other hardware store did. Guess which one I go back to now.

Implement a Loyalty Program

People love rewards programs and incentives. Just look at the massive success Amazon has had with its Prime membership program.

Lick Ice Cream, my go-to shop in town, has a loyalty program that keeps me coming back. Theirs is based on how many scoops I buy, but not all loyalty programs have to be in the buy-10-get-one-free style. You could consider a VIP club or a way to send out freebies or coupons after customers spend a certain amount of money with your business. Structure a program that appeals best to your customers.

Schedule Reminders

If people consume your product on a regular basis, remind them when it’s time to purchase again. Maybe they need to do maintenance, resubscribe or change batteries. A friendly, well-worded email can prompt them to return to your store, or at the very least get your name in front of them again.

Tailor the email with specifics related to the customer, which you can keep track of in your CRM. I appreciate when I get an email reminder from my vet letting me know that my puppy Hero’s heartworm medication is due for refill.

Be Memorable

Provide exceptional experiences that customers want to share. You already know who your target audience is, but get to know them better. What value do you bring to them? Create specific personas so you — and everyone from the boardroom to the stockroom — can better empathize with customers.

You’re trying to make everyone who buys from you an advocate, a five-star reviewer and a returning customer, so engage them by soliciting their feedback. Ask them what you can do to make their experience better. Map out the experience from the beginning starting with how the customer found you.

Use these strategies to keep customers coming back. You’ll see your sales numbers improve as a result. Set your business up for success by leveraging the expertise of our trusted Aberdare Business Solutions advisers. 

For more information or a business evaluation please call our office at 281.599.3380 or email info@aberdare.us.com.

By proadAccountId-371192 23 Mar, 2017

6 Ways to Get Your Invoices Paid on Time

If you’re having trouble getting invoices paid by your customers, you’re not alone. A 2016 study from Fundbox found that 68 percent of small businesses are affected by late payments.

This puts business owners between a rock and a hard place. It’s frustrating to spend hours following up on past-due invoices, but it’s even worse to hold off on hiring, upgrading equipment or paying your vendors because of a cash-flow pinch. Still, client relationships can be fragile. Repeated phone calls and late fees don’t always go over well with the people who hire you.

Predictable revenue keeps you focused on the task of running and growing your business. Simply put, positive cash-flow keeps the wheels greased. Here are a few ways to make sure you get paid as quickly as possible for your hard work.

1. Accept All Forms of Payment

The easier it is for your customers to pay, the more likely they are to pay on time.

Checks

Paper checks, for example, may seem like a thing of the past, but according to a survey by the Association of Financial Professionals in 2014, businesses within the U.S. still pay half their bills by check. According to the Wall Street Journal, “That’s down from 74% in 2007, but the rate of decline has slowed, suggesting stubborn barriers to change.”

Clearly list your company’s name and mailing address on your invoices. If you don’t have an office, list a P.O. Box or your home address. Make it impossible to misinterpret where checks should be sent and when they’re due.

Credit and debit cards

Credit and debit cards are easy to use and therefore a form of payment that will help you get paid on time. Some of the best and most popular merchant credit card processing services include:

  • QuickBooks Payments.  Email invoices with a “Pay Now” button and your customer can pay you with a couple clicks by credit card. Simple, fast, and easy. Plus your accounting will be automatically done for you. Same rates for all major credit cards (2.9% + $.25 for an invoice paid online).
  • Square  allows the processing of credit or debit cards in-person or digitally. Plus, you can auto-import sales and expenses in QuickBooks using the Sync with Square app.

ACH Bank Transfers

Bank transfers are often the cheapest and easiest way to move money. QuickBooks offers free ACH transfers, meaning customers can deposit funds directly in your checking account with no fees.

This is especially helpful option for customers that you work with on an ongoing basis. Just setup the account and routing numbers once, then collect 100% of the money you’re owed.

PayPal

It’s easy to pay and receive payments with Paypal, and it only takes a few minutes to get started. The receiver—i.e. the invoicer—is responsible for the fee of 30 cents plus 2.9 percent on every transaction. (Remember, these fees can be deducted as a business expense.)

On top of this, PayPal and QuickBooks sync beautifully together so you can offer customers this payment option without creating additional bookkeeping.

2. Create Accurate, Easy-to-Understand Invoices

When your revenue relies heavily on getting those invoices paid, it’s worth investing a little time in making them as clear as possible. Even the slightest ambiguity will slow things down.

Make total and due date clear

Start by making the payment amount and due date stand out. The customer should easily be able to identify how much they owe and by what date. These are two of the most important components of receiving prompt and accurate payments.

Itemize

Discuss costs, fees, upcharges and overtime rates up front. Then, itemize these costs on the invoice. Customers want to know exactly what they are paying for. The fewer questions they have about their invoice, the faster you’ll get paid.

Send it to the right person

Depending on your business, you might invoice people or other businesses. Ensure you have the right contact information when sending out the final invoice—for businesses, this might be a CPA or someone in their accounts receivable department. Set yourself a reminder to verify this information on a yearly basis, too. The fewer hands the document has to go through, the faster you’ll see payment,

Track and simplify

Always include a unique number with your invoice as this will make it easier for both parties to record, track and follow up. Consider using simpler language too, like “days” versus the term “net” when listing out how many days until payment is due. Clearly state the details of your invoice terms and make them easily trackable to avoid any miscommunication.

3. Be Timely

Don’t wait too long to send out your invoices. The quicker you do so after performing a service or providing a product, the more top-of-mind the work will be.

Here are some ways to ensure your invoices get out quickly, and into the right hands.

Don’t underestimate promptness

Send out invoices according to the timeline stated in the contract, or at the very least, as soon as the project is complete. Don’t make your customers request an invoice to pay you.

Automate

Automated invoicing, one of the most helpful features in QuickBooks, allows you to create an invoice template that can be used over and over again. You can even schedule recurring invoices so you don’t have to spend time preparing them manually.

Be persistent with follow up

Larger projects and invoices may take some following up before payment will be received. Don’t be afraid to follow up on larger invoices a couple of times before the payment due date. Customers and clients are busy, and a payment reminder is often welcomed. QuickBooks can help here too—you can set automated email nudges to remind customers that a payment is due.

4. Establish Penalties

Small business owners tend to shy away from assessing late fees for fear of upsetting the relationships they’ve established with customers. Think of penalties as a way to promote timely payments, not punish your valuable customers.

Businesses get into trouble with late fees when they aren’t expected. Explain them to customers in conversation and state them clearly in your contracts for complete transparency. Late fees should never be a surprise.

Here are a few ways to implement penalties for late payment:

Flat late fees

A flat late fee is a specific dollar amount that’s useful when dealing with smaller invoices.

For example, assessing a 2 percent late fee on a $200 invoice only comes out to $4, which is hardly motivating. Instead, you could implement a flat $20 late fee to all invoices less than $1,000, then assess 2 percent on anything over $1,000.

Accruing interest

In addition to charging a late fee, whether it’s a flat fee or a percentage, you can also assess an accruing interest charge for every week or month that payment is late. The terms of this percentage should be laid out in your contract or payment policy. An example would be to charge 2 percent capitalized weekly until the invoice is paid.

Finance charges

Finance charges cover the gambit of flat fees, a percentage of the invoice amount, accruing interest and any other forms of fees you assess clients for failing to pay. QuickBooks has this feature built-in, so you can assess any finance charges to outstanding invoices without a huge hassle.

When it comes to enforcing payment, this type of reinforcement works. If you do decide to implement late fees, be transparent about them to avoid creating conflict with your customers.

5. Automate Reminders

Don’t let your busy schedule interrupt cash-flow. Automating invoice reminders will save you a little bit of time and a lot of cognitive stress. It completely eliminates the mental clutter—“Has [customer] paid? When did I follow-up last? It is time to follow-up again?”—associated with collecting payments.

Automate reminders before and after the due date

Don’t wait until an invoice is 45 or 60 days past the payment date before setting up an automatic payment reminder. Like with the initial invoice, the likelihood of collecting old invoices decreases over time.

QuickBooks Online makes it easy to send past-due reminders in less than 30 seconds. In addition to sending invoices the day a job is complete, past-due reminders should also be sent promptly, right as the invoice becomes past due.

6. Incentivize Early or On-time Payments

Encourage on-time payments by providing incentives for clients. You don’t need to offer freebies or discounts to make people feel great about working with you. Think of these incentives as a way of offering a thank you to customers who make payment a priority.

Early payment perks

Positive reinforcement is a good strategy to offer to customers who pay early. Offer a 1 to 2 percent discount for those who pay within the “early” time frame window. For example, you could offer “2/10 net 30,” which means that payment is due within 30 days, but if payment is made within 10 days, the client will receive a 2 percent discount.

Send handwritten “thank you” notes

Every time a project is finished and paid for, spend five minutes writing a quick “thank you” note to the customer. This personal touch helps establish a good rapport between your business and your customers. Think of it as a receipt—a meaningful conclusion to the work you’ve done together.

Late and unpaid invoices create a lot friction in small business—there’s just no way around that fact. But putting a few simple systems like these in place can greatly reduce the time spent chasing customers and get revenue in your bank account more quickly.


Set your business up for success by leveraging the expertise of our trusted Aberdare Business Solutions advisers. For more information or a business evaluation please call our office at 281.599.3380 or email info@aberdare.us.com.



More Posts
Share by: