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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.

Business As Usual: Disaster Preparedness for Small Businesses

Natural disasters do not discriminate. Hurricanes, flooding, blizzards, tornados, fires…. they can happen anytime, and can be potentially devastating to your business.

According to Diana McClure, Business Resiliency Manager for the Institute for Business & Home Safety, “Of the small businesses that are forced to close due to a disaster, at least one in four never reopens.” But, says McClure, “It’s all about planning ahead.”

If a natural disaster strikes your location, do not let it shut down your business. I recommend that you start thinking NOW about developing plans for your business in cases of emergency.

When everything is fine, a natural disaster is probably the last thing you think about. But consider this. Earlier this month, heat-related power outages were widespread across Detroit. Joplin, Missouri just experienced a devastating tornado. Not to mention disasters larger-scale such as Hurricane Katrina or the Japan Tsunami.

Start developing disaster recovery plans for your business by determining your areas of vulnerability, and thinking of ways to address those risks. For example, if you’re in a region prone to tornadoes, what would you do if one struck your office? Maybe the answer is to open a second office in a different region. Maybe your business develops a “work from home” policy. And maybe these are not the right answers for your business. But the key is to start thinking about it now.

Another huge area of consideration is your business data. You need to make sure it’s protected. If it’s all stored in the office, and there’s a fire, your business operations could be in great jeopardy. I recommend using an Internet service for storing data online so that it will not be lost in the event of a disaster. I also recommend storing the contact information for both your employees and business vendors online, along with your business data.

Finally, test your plans! I would advise testing at least once a year to make sure all your back-up plans are functional, which will give you the opportunity to correct them if they’re not – before it’s too late.

 

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Developing KPI’s For Your Business

Earlier in this blog, I introduced Key Performance Indicators (KPI’s) and explained them from an overhead perspective. Now, I will get more specific with how you can work to develop effective KPI’s that will impact your business results.

Think about this. You can only manage what you can measure. Here are a few basic themes that your KPI’s should incorporate.

  • Raw data. How many products sold per month?
  • Comparison. What percentage are sales up or down from the same time last year?
  • Indicator of actual business performance against a goal. How many sales of an item were desired this month v. how many were actually achieved?
  • Progress measure. What percent complete is the item?

When this data is put in a graph, it becomes a financial dashboard, providing a strong overview of the business’s health.

To develop appropriate KPIs for your business, remember to keep your ultimate end goal in mind. For example, a mall cafe providing lunches to workers in nearby offices will need to serve its customers quickly and efficiently to meet its overheads and make a good profit. So they don’t encourage customers to linger. Customer turnover is an important goal in their business plan. To measure that, the appropriate KPI would be number of customers per table per opening period.

However, a street front restaurant in a high-traffic area may decide that high customer satisfaction will bring in the repeat and higher-spending customers it needs. In this case the goal is to encourage repeat business by eliminating any reason for customer complaint. Since customer satisfaction is a critical success factor, a suitable KPI might be the number of customer complaints.

Customer loyalty is a very important attribute and one that is hard to measure. Customer surveys can be used to track indicators of loyalty by asking the right questions. For example you may want to ask the likelihood to refer on a 1 to 10 scale. Team bonuses can be structured based on your attaining certain KPI achievements.

Tip to create successful KPI’s: Write down four things about each chosen KPI:

  1. A name for it
  2. A definition of what it involves
  3. The actual method you will use to measure it
  4. Your goal, or performance target for this KPI

 

 

 

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The Importance of Cash Management

Poor cash management is a frequent stumbling block for business owners; yet the cash position of a business at any time is easy to determine if you know just three figures – the cash in the bank, the cash that is due to the business and the amount of cash the business owes. Understanding these cash flow fundamentals will help you be better prepared for the unforeseen curve balls that nearly every business faces.

To be on top of your cash flow:

  • Know your bank balance at all times
  • Make sure your debtors know when their payments are due, and have an enforceable collections policy
  • Track the dates when receivables will arrive and when payments have to be made in order to avoid an overlap wherein you don’t have the cash you owe
  • Don’t have too many accounts or use more than one bank. This helps avoid confusion regarding how much cash is on hand

If you’re fortunate enough to have surplus funds, put this money to work for you in a short-term interest bearing account. There’s nothing more wasteful than money just sitting there. Also, see an accountant on a quarterly basis and have your business’s cash flow positioned analyzed by an expert. This helps detect potential holes in cash management before they become more serious.

Cash management is an important responsibility of business ownership. It isn’t all that complicated but it does require your due diligence. Can you think back to a time when better cash management would have resulted in a better end result for your business?

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