How to Operate Your Small Business for Maximum Efficiency and Profitability

As far as I am concerned, one of the primary reasons the washout rate for small business owners is so high is because too many investors fail to place enough emphasis on getting the maximum return on every dollar and hour that they put into their small business. Instead, they seem to be more concerned about frivolous stuff like the color of their business cards. In any small business endeavor, a lack of focus, coupled with the inability to prioritize tasks, is a recipe for failure. So, too, is the type of complacency that breeds an “if it ain’t broke, don’t fix it” mentality, which usually results in a stagnant business that’s barely able to keep its head above water. That’s why to my way of thinking, the catch-phrase “easier, faster, and cheaper” should be the mantra of every real estate investor in America. I say this because I’ve learned the hard way that for me to consistently achieve the highest possible rate of return on the money and time that I invest in my business, I must continually analyze, refine, and tweak every aspect of my operation, to make it easier, faster, and cheaper to run. Nowadays, I think of my business as a high performance automobile engine, which must be finely turned and calibrated to run at its optimum speed and maximum efficiency. I can tell you from experience that in order to operate a small business at maximum efficiency and profitability, it takes:

1. Personal and financial discipline.

2. Organizational skills.

3. Management know-how.

4. Meticulous planning and attention to detail.

5. Prioritization of tasks according to their profit potential.

6. Maximum use of available technology.

7. Accurate record keeping.

8. Maximum use of all the tax benefits that are available to small business owners.

It Takes Discipline to Operate a Business at Maximum Efficiency and Profitability

It takes a combination of personal and financial discipline to operate a small business at maximum efficiency and profitability. First, you need to have the initiative and self-discipline that’s required to be successfully self-employed. You must work smart, so you don’t waste your valuable time doing grunt-type tasks that can be hired out. In other words, don’t spend your time cleaning up trash around your office when you should be out searching for customers. Second, you need to possess the financial discipline that’s necessary to operate your small business at maximum profitability. The only way that you’re ever going to be able to keep your spending under control is by:

1. Adopting a bottom-line mentality that’s totally focused on maximizing the profitability of your business.

2. Operating your business on a bare-bones budget by buying all equipment, supplies, and services at the lowest available prices in your area.

3. Keeping close track of operating expenses by carefully reviewing all invoices for errors, overcharges, and bogus charges.

Prioritize Tasks according to Their Profit Potential

The number one question that you must continually ask yourself when you’re working in your small business is: Is what I am doing right this minute the most profitable use of my time? A lot of people fail as small business owners simply because they’re never able to prioritize tasks according to their profit potential. They end up never making a profit because they couldn’t distinguish between what’s important and what’s trivial. As a general rule of thumb, I consider any business function that doesn’t contribute directly to my bottom line to be low priority and best left for after business hours. In other words, if the task at hand isn’t part of the process of completing a real estate transaction that will eventually end with me going to the bank; I put it off until later in the day.

Avoid Reinventing the Wheel Every Time You Need to Complete a routine Task

Whatever you do, don’t fall into the trap of reinventing the wheel every time you need to complete a routine task. The term, reinventing the wheel, refers to re-creating something from scratch. An example of reinventing the wheel would be retyping standard documents, such as purchase agreements, over and over again, instead of storing them in a Microsoft Word document file where they can be printed out as needed. The point here is to work smart by making your operating as streamlined as humanly possible.

Operate Your Small Business on a Bare-Bones Budget

One surefire way to fail as a small business owner is to run your operation in a slipshod manner with no financial controls in place to keep your operating costs from going through the roof.

Do a Cost-Benefit Analysis before You Make a Purchase

I suggest that you do what I always do, before I ever part with any of my hard-earned money, and ask yourself this very poignant question: How exactly is this-(fill-in-the-blank)–going to have a direct impact on the profitability of my business? Unless you can justify to yourself why the purchase under consideration will immediately contribute to your bottom line, you should hold onto your money. This type of decision-making process is referred to in business schools as “cost-benefit analysis,” which means that if the cost outweighs the benefit that’ll be gained from purchasing an item, it shouldn’t be bought. Keep this in mind the next time that you get the urge to splurge.

What You Should Have When You Set Up Shop as a Small Business Owner

I am willing to concede that an owner could possibly run their small business without any of the basic amenities of a modern high-tech office at their disposal. However, it would be a very inefficient operation, and I am willing to bet that most small business owners, in this type of work environment, would end up spending much of their time performing tedious tasks such as retyping the same documents over and over again. I don’t know about you, but I’ve never met anyone who has typed their way to a fortune as a small business owner. As far as I am concerned, every neophyte small business owner, who’s really serious about consistently making money in their small business, should have the following six items when they set up shop:

1. Telephone service and a prepaid telephone calling card to make calls on the road from pay phones.

2. Personal computer with Microsoft Windows operating system.

3. Microsoft Word software.

4. Internet connection.

5. Black-and-while laser or inkjet printer.

6. Financial calculator.

It’s Hard to Succeed in a Digital World Using Horse-and-Buggy Technology

Computer technology is here to stay, and, if you want to make it as a successful small business owner in today’s digital world, you had better embrace the latest technology and learn how to use it to your advantage. So if you happen to be computer illiterate, the very best advice that I can give you is to buy an inexpensive personal computer (PC) and then jump in with both feet and learn how to use it. If someone with a nontechnical background like me can use a computer, anyone can.

What It Takes to Run a Small Business at Maximum Efficiency

According to the Small Business Administration (SBA), 80 percent of all new small businesses fail within five years of opening their doors. More often than not, the cause of failure can be directly attributed to an appalling lack of organization and planning on the part of business owners. I hate to come across as some sort of killjoy, but you just can’t throw a business together without any organization and planning and expect it to be an efficient operation. It takes meticulous planning and attention to detail to set up a small business so that it operates at maximum efficiency. The only way that you’re ever going to have a smooth running business is by doing the little things right, such as:

1. Maintaining a master to-do checklist to run your business.

2. Computerizing all business documents and records.

3. Setting up your business so you avoid re-creating anything from scratch.

4. Organizing your office so that everything you need is available at your fingertips.

Use a Master To-Do Checklist to Run Your Business

To keep your business operating at maximum efficiency, I recommend that you do what I’ve done for the past 20 plus years, and maintain a master to-do checklist. I keep my checklist on my computer in a Microsoft Word file. It serves as a combination checklist and appointment calendar. For example, each entry that I make on my checklist, lists the task or appointment along with the completion or meeting date. This way, nothing slips through the crack and tasks are completed on time and appointments are kept.

Deduct Your Home Office as a Business Expense

In order for a home office to qualify as a business deduction for federal tax purposes, it must be used regularly and exclusively for business purposes. For example, if you’re a part-time real estate investor and a full-time school teacher, who has a home office that you claim as a real estate investment business expense, but you use your office for both your real estate investment business and for grading student papers, your home office deduction would be disallowed if you were ever audited by the Internal Revenue Service (IRS). The IRS would do this because your home office isn’t being used exclusively for business purposes. The best way to make certain that your home office will pass muster with the IRS is to regularly use the space you’re claiming as your home office exclusively as your principal place of business. I comply with the IRS home office use rules by having a home office that’s located in a separate building behind my home-approximately 40 steps one way-and used exclusively for business purposes. My compact home office measures a measly 10 feet long by 10 feet wide and is a scant 100 square feet in size, but it serves its purpose quite well. I like this arrangement, as it allows me to separate my business from my personal life. For more information on how to deduct your home office as a business expense, read IRS Publication 587, Business Use of Your Home, which is available online at the IRS Publications and Forms Web site.

Accurate Record Keeping Is an Integral Part of Running an Efficient Business

Maintaining accurate records is an integral part of running any type of successful business. Yet, it’s probably the most overlooked aspect of the real estate investment business. For many small business owners record keeping is last minute ritual that’s performed annually around 8 P.M. on the fourteenth of April, and forgotten about the other 364 days of the year. Needless to say, this is definitely not the smart way to run a business. Here’s a listing of the five types of records that real estate investors must maintain in order to have a smooth and efficiently running business:

1. Income records: Income records include monthly income and expense statements, bank statements, and accounting records documenting all of the income generated by your real estate investment business.

2. Expense records: Expense records include paid invoices, bank statements, cancelled checks, and accounting records documenting all of the expenses associated with operating your business.

3. Property records: Property records include mortgages, deeds of trust, promissory notes, grant and warranty deeds, surveys, purchase agreements, property appraisal reports, closing documents, easements, blueprints, certificates of occupancy, construction warranties, building material warranties, equipment warranties, building inspection reports, termite and pest inspection reports, and utility services account information.

4. Insurance records: Insurance records include property and casualty insurance policies, title insurance policies, workers’ compensation insurance policies, flood insurance policies, liability insurance policies, umbrella insurance policies, automobile and truck insurance policies, pest control insurance policies, and equipment insurance policies.

5. Tax records: Tax records consist of property tax assessment notices, property tax payments, federal tax returns, federal withholding-tax payments, state tax payments, and county and city occupational license fee payments.

Store Original Copies of Records and Documents in a Safe Deposit Box

I recommend that you photocopy or scan all of your important property related records and documents onto a CD-ROM and store all of the original copies in a safe deposit box. This way, you’ll have all of your original records and documents in a safe, secure, off-site location where they can be easily located in case of an emergency.

Use Generally Accepted Accounting Practices to Maintain Financial Records

Over the past couple of years, there have been a slew of court cases involving fraudulent accounting practices in which CEOs and other corporate higher-ups “cooked the books” to prop up the value of their company’s stock. Unless a stay at a “Club Fed” facility appeals to you, it’s best that you stick with generally accepted accounting practices instead of using creative accounting methods, which are based on fuzzy mathematics. In basic accounting jargon, the term generally accepted accounting practices (GAAP) refers to accounting principles and practices that are standard in a certain industry. The best way that I know to keep bookkeeping straight is to use an off-the-shelf computer software accounting program such as QuickBooks financial software. This way, all you have to do is enter your financial data and the software does the accounting functions and balances the books and makes it easy for you to:

1. Identify the source of receipts.

2. Keep track of tax-deductible expenses.

3. Document expenses claimed on tax returns.

4. Prepare tax returns.

Deduct All Business-Related Travel Expenses

Make certain that you deduct the cost of all travel expenses related to running your real estate investment business. The Internal Revenue Service requires that taxpayers maintain automobile mileage logs to document business-related mileage that’s claimed on federal tax returns as a business expense. The standard mileage rate that can be deducted from federal taxes for the cost of operating a vehicle on business-related travel changes each tax year.

Depreciate All of the Equipment Used in Your Small Business

In order for your small business to earn a maximum profit, you must take full advantage of all of the depreciation allowed under the Internal Revenue Code. To do this, make certain that you claim the maximum depreciation allowed on all of the equipment used in your business to include:

1. Office furniture and equipment such as computers, printers, and facsimile machines.

2. Software programs for accounting and word processing.

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10 Things Every Small Business Should Do To Be Successful in Today’s Tough Market Conditions

The news about the recent economic problems and the looming double dip recession has been tough. The on-going Eurozone economic concerns have triggered a complete collapse in consumer confidence not seen since the original 2008 recession. The consumer confidence collapse coupled with the growing anxiety around global debt has led to a restriction of credit made available to small businesses as worried banks reduce their perceived risk to bad loan repayments. With consumers keeping hold of their money and credit becoming harder to access it is no wonder that small businesses are struggling. This article talks about the important role and benefits accounting software can play in allowing small businesses to navigate through these hard economic times.

How can accounting software help small business?

Business must be lean and financially sustainable to survive through the current business climate. Small businesses with large overheads and complex financing structures should work on re-organising the business to regain control of their long term economic futures. Now is not the time for reckless investment in the pursuit of growth that only adds increased debt and inflexibly that could ultimately lead to the businesses downfall. Now is the time for prudence and tight financial management that allows a business to be financially independent. Accounting software can be central to supporting small businesses become financially independent and below investigates how.

1) Complete focus on cash flow

A business owner should be 100% focussed on the financial health of their business. This means having a thorough understanding of the businesses cash flow position. There is nothing more important in a small business than its cash flow position and as result should be very tightly managed. One of the difficulties for small businesses keeping on top of cash flow is the organisation of receipts and invoices. An accounting software package easily compiles all of the relevant financial information and presents easy to understand dashboards and reports of company performance. Once provided with the required knowledge of the company’s performance appropriate action can be taken to improve the company’s performance.

2) Focus on customer satisfaction

In times of economic hardship competition is notably increased in every sense. As customers are more considered with their buying decisions small businesses need to ensure that every aspect of their proposition is appealing to the customer. Margins are widely squeezed across all industries in the hope of enticing hard-up customers and therefore the only real differentiator to attract business is customer service. An accounting software package does not only improve business productively it also helps structure all customers and suppliers into an easy to manage database. This structured knowledge allows staff to provide a more tailored service to clients.

3) Look for ways to cut costs

In this economic climate any investment that doesn’t directly add value to the top line should be cut. Accounts Payable features with an accounting software package detail every penny that is spent in the business. This allows a thorough review of expenditure to take place to ensure that savings can be made where appropriate. For example costs could be cut down on paper, postage, transitioning to direct debit payroll. These cost cuts would allow the business to reduce its operating cost without cutting expenditure that generates income into the business.

4) Consolidate Suppliers

Businesses can also use accounts payable features within their accounting software package to streamline its supply chain. Many businesses needlessly have similar supplies from a range of suppliers. Buying in bulk is always a more economical way of doing business. Condensing suppliers with larger orders is more commercially viable in reducing supply costs. Generating reports by independent supplier will provide valuable information regarding the profitability of each supplier contract.

5) Negotiate better rates with long standing suppliers

In addition to the consolidation of the supply chain there may also be an opportunity to renegotiate rates with long standing suppliers. The longer the relationship between a business and a supplier the more appropriate it would be that the business qualifies for a rate that reflects the loyalty of the relationship. Reducing the costs of the supply chain can make a significant and welcome difference to a small business P&L during tough recession times.

6) Continuously look for ways to reduce non value adding admin work

In any small business the time of employees is one the company’s biggest assets and therefore spending time on non-value adding activity should be minimised wherever possible. An accounting software package ensures that people are not tied up managing basic bookkeeping tasks and completing quarterly and end year financial reports. Managing a business’s financial affairs can be very admin heavy if not managed in the correct manner. Having efficient software to automate these admin tasks allows staff to focus their attention on growing the business and generating income.

7) Streamline payroll and human resource management

As already discussed people are a huge asset in any small business. An accounting software system can help provide detailed information around staff costs in addition to hours worked and absence information. Having detailed information about staff costs allows a business to more accurately plan for the future and correctly budget for human resources. Also from a financial perspective large fines are imposed on businesses that make mistakes on Tax and National Insurance contributions. Having automated software negates the risk of mistakes occurring at a time when fines cannot be afforded to be taken.

8) Streamline billing and invoicing

Not being on top of your receivables can literally be the difference between success and failure in today’s challenging business environment. An accounting software package allows a business to fully manage and organise its invoices and payments deadlines around the businesses bills and costs. This way invoice payments get received in advance of bill payments ensuring cash flow is never a problem. Having effective and well organised billing and invoicing ensures that a business income remains consistent.

9) Assertive debt collection techniques

Even if a business has streamlined invoice and billing processes there will still be some customers that do not pay on time. All of the structure and process in ensuring invoices are aligned with business costs will have been wasted unless good debt collection processes are adopted as well. Businesses should know when to make phone calls, send written communications and when work with debt collection agencies in order to optimise income collection.

10) Know you financing options

The Accounting software package allows a business owner to have detailed forecasts of predicted income and expenditure over the short, medium and long term. Having a longer term view of capital expenditure allows more intelligent decisions to be made around company financing. As a rule of thumb last minute loans tend to be expensive as owners run out of time and simply need to pay bills. All forms of business financing from credit cards to structured loan agreements should be reviewed in line with long term accounting forecasts to ensure that the best suited finance is in place at the best possible price.

It has never been more relevant for a small businesses to invest in an accounting software package. The benefits run much deeper than simply allowing businesses to keep accurate and timely financial records. Accounting software enables a business to self-analyse every business process in the eyes of profitability and business return. Businesses that adopt the mind set of accounting software by definition embrace the notion that all company expenditure should be controlled and used to drive additional revenue for the business. These lean businesses will be financially sustainable and able to withstand these hard economic times in order to be well positioned in the market to capitalise when consumer confidence returns.

At Compare Software for Business Ltd we understand how con

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