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Online Bookkeeping Solutions Blog

The Online Bookkeeping Solutions Blog is an timely collection of interesting and helpful information for those companies who want to outsource their bookkeeping solution and utilize bookkeeping services by subscription. Outsource your bookkeeping to a cloud based solution backed by experienced CPA's.

Use KPI’s To Score Your Business

Key Performance Indicators (KPI’s) help an organization define and measure progress towards its goals.

A business won’t grow without a methodology for measuring its successes and areas to improve upon, which is why establishing KPI’s is critical. After all, you can’t improve what you can’t measure.

KPI’s begin as business goals. The only way you can create the future of your business is to have a vision for it, through the goals you’d like to achieve. A good KPI program allows a business to measure its performance against pre-determined benchmarks that ultimately track back to the organization’s original goals and strategy.

KPI’s are highly quantifiable by nature – they must be if they are to serve of any value to the business. If you set a goal that fails to be quantifiable, then you aren’t truly getting a measure of your business goal’s success. For example, if a goal is to “increase new customers,” then there must be a KPI that distinguishes between new and repeat customers. Otherwise that KPI is useless.

When setting KPI’s, keep top of mind the type of organization you run, as your KPI’s should be developed around this. An organization that desires to be the most profitable company in its industry will have KPI’s that relate to profit and fiscal measurements, while an organization less focused on profit, for example a school, may set KPI’s focused around graduation rates, attendance, and enrollment.

It is best to set a fairly small amount of KPI’s from an overhead level so as to stay focused on the business’s primary goals. If the business has different departments, then they too can have their own unique KPI’s, related to their departmental functions, but ultimately laddering up to organizational goals.

KPI’s should be used on an ongoing basis not only to improve areas of poor performance, but also to uncover positive results in order to achieve continuous growth.

Based on the type of business you have, what do you think would be some good KPI’s to put into place?

 

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When And Why To Outsource Your Bookkeeping

Due to the complex details and calculations involved in bookkeeping, it can become quite time-consuming and unfortunately, can get neglected. Thankfully, in this day and age there is a solution: outsourcing your books.

There is an increased trend for businesses to outsource the functions that are not main sources of revenue generation, and bookkeeping is one of the most popular functions being outsourced. But how do you know if the time is right for your business to outsource its books?

Savvy business owners interested in capitalizing on their business should start to consider outsourced bookkeeping. In addition to eliminating the burden of bookkeeping, outsourced bookkeeping offers many benefits that traditional bookkeeping methodologies cannot offer. Here are just a few of them:

  • Save time and money managing your ledgers and books
  • Devote more time to core business activities
  • Gain more understanding of items appearing in your accounts that confuse you
  • Guarantee your books are in order if you are considering geographic expansion, which increases the complexity of bookkeeping
  • Remove IT costs and enhance data disaster recovery
  • Use reliable bookkeeping providers who have perfected the craft of bookkeeping

Have you outsourced any components of your business so far? If not, it’s definitely a smart strategy to consider as we advance into an era where transactions are handled virtually more and more often. Ultimately, outsourcing small and mid-sized business bookkeeping will be well worth your investment.

 

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IRS Increases Small Business Audits – Be Ready

The Internal Revenue Service (IRS) has begun its Employment Tax National Research Project (NRP). This project entails comprehensive business examinations, similar to audits. This is the first NRP after a 25-year hiatus, to see how well business are complying with tax regulations, which have changed significantly over the past years. Now more than ever it’s critical to make sure your business is compliant.

From 2010-2012, two thousand small businesses annually have received or will receive an NRP examination letter notifying them they have been randomly selected to participate in this project. The audits focus on four key areas:

  1. Worker Classification: whether workers are classified as employees or independent contractors
  2. Executive Compensation: salary and non-salary compensation
  3. Fringe Benefits: perks for executives and employees
  4. Payroll Taxes: Form 941 and Form 1099/W-2 will be carefully examined for issues including withholding and next-day deposit requirements

The best thing you can do to be prepared for receiving this letter is to have all your ducks in a row and keep well-organized, compliant records to expedite this process and make sure your business emerges compliant. Think about some of the topics discussed even in this blog, and consider transitioning some of your processes, such as payroll and bookkeeping, to more current and efficient systems. Conduct an internal audit, and if anything questionable arises, be proactive and take immediate steps to resolve the issue.

Because even if your businesses never receives the audit letter, the results of the NRP project will still have far-reaching effects on small businesses. The findings of the NRP will be used to develop long-term crackdown policies on business tax compliance with employment issues in particular.

 

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Systemize Your Outstanding Account Collection Process

 

It’s never fun to collect on an outstanding account; however, the costs of collecting an overdue debt can be high over a period of time and put a big hole in your profit margin. It is therefore recommended that you systemize your collections process.

Firstly, implement a system that insures you are alerted at least weekly of accounts that become overdue, and then begin a series of communications with the debtor that continues until the outstanding amount is collected. The most effective collection systems use a combination of telephone calls and letters to get results.

Collection efforts should be made in a series of communications that gradually increase the pressure on the debtor, ranging from a gentle reminder to warning of court action. A standard four-step system can be used in most instances, bearing in mind that communications back from the debtor may require some variation.

Step 1: A written reminder that the debt is overdue

Step 2: A written reminder of the previous communication, plus a specific date for payment

Step 3: A final demand for payment by a specific date

Step 4: Warning that legal action is about to commence unless payment is received immediately

The first notice just serves as a “reminder” and gives the customer time to make payment within a reasonable period of time. It also gives him/her a chance to query the amount or any other details of the account.

The notice should be sent to the person in your customer’s company who has the authority to deal with the outstanding account and process the payment. It should be a formal piece of correspondence and be limited to reminding about the overdue account, not any other matters that may be occurring between you and the debtor.

If there’s no response to the first notice you can use either a reminder letter or a phone call to follow up. Using a letter is common when the amount is not significant. It should mention that the first notice has not been acted on and that now you would like payment by a certain date. Seven days or so is recommended.

If it’s a large amount in question, you might prefer to use the telephone and speak to the person responsible for paying the account. Talking personally indicates a stronger degree of concern than a letter.

In a telephone call, always try to get a commitment to payment. If you get any excuses that don’t sound convincing – the usual ones are claiming the payment was made some time previously – promise to investigate the situation immediately and respond with details within 24 hours. If your debtor gives you a verbal commitment to pay, send him/her a letter or email that restates this commitment and informs him/her that you’ll be looking for this payment by the agreed upon date.

If you need to go to the next stage, making a final demand, you should definitely use a letter for legal reasons, but accompany it with a telephone call that tells them the letter has been sent and offer the debtor a final opportunity to make payment before legal action is necessary.

Legal action itself should only be taken when you’re certain that this is going to be the only way to recover the outstanding amount. Remember that legal action incurs additional costs and takes up your time. Even if you win, the court may order payments to be spread over a period of time. Legal action should only be taken as a last resort.

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