Author: Pamela Swift

Categories
Finance & Capital

Key Questions to Ask Your Accountant While In Your Business Meeting

Article Contributed by Irena McKenzie

Any manager or owner of a business will find themselves periodically in meetings with the company’s accountant. When taking time to review regular reports on the business’s finances, there are certain questions to ask and items to focus on to gain insight into the health of the business. These items will also help to identify early any potential problems, often before they ever arise. Here are a few questions to ask, along with reasons they are significant.

  1. Are there any unreconciled transactions? The process of reconciling transactions involves matching internally-accounted transactions with those reflected in company bank accounts, so naturally it is a red flag when there are transactions that cannot be matched. More likely than not, in a meeting with your accountant you will not need to ask about this point – they will bring it up almost immediately – but it is worth being aware if they have encountered any in your business recently. Having unreconciled transactions can mean that you have outstanding company checks, someone trying to overbill your company, or even potentially someone trying to steal from you.
  2. Are there any glaring control issues with company finances? Control issues can arise when one or more people within a company have sufficient control over the company’s finances (e.g. check-writing or wire transfer authority) that they can represent a risk to the firm. Accountants will often search for potential control issues during regular reviews, and it’s best to be aware of these potential risks as early as possible so you can determine the appropriate steps.
  3. What is the business’s free cash flow; is it higher or lower than in previous periods? Free cash flow is a measure of the business’s cash remaining from operations (income minus expenses) after any necessary investments in property or equipment. Essentially, this figure shows how much discretionary income that the business has left to reinvest, sustain itself through a fall in revenue, escalate investment in equipment, or undertake new marketing or other initiatives. In the world of personal finance, this measure would be like the amount you have left over each month after collecting income, paying your rent and mortgage, groceries, utilities, and car and student loan payments. This is how much you have left to save for a vacation, spend on meals or entertainment, buy a new personal computer, or pay for a class at a local college.
  4. What is the company’s current ratio? In finance, a current ratio is a measure of the company’s current assets (these include cash or those items that can be quickly converted to cash) versus immediate payables or short-term debts. An easy way to think of this number is to compare your business’s cash (or how much cash you could have if within 30 days if you converted certain liquid items to cash) to its debts due within the next 30 days. Ideally this number should be more than 3 to 5, meaning that your company has 3 to 5 times the amount of cash needed to pay off its short-term loans, but in almost no event should this figure ever fall below 1.5. The higher this number, the easier you should be able to rest at night; when it starts falling or nearing 2 or 1.5 is when you can start getting nervous and looking for ways to reduce debt or convert assets to more liquid cash.
  5. What is the average length of company receivables? This figure measures the average amount of time between when you send an invoice and when you get paid. You want to know if this figure is changing – especially if it is getting longer – because it could mean that you have one or more problem clients who may be a growing risk to your business.
  6. How concentrated are the company’s receivables? This question is in the same vein as #5, but it will help you to get a feel for whether your business has just a few clients who contribute most of your revenue. If one or a couple of these clients were to leave, there could be a substantial impact on your company finances. Diversifying clients, which can also be interpreted as spreading out your receivables, can help to reduce the risk presented by having just a few large clients on whom your business depends for survival.

It is worth noting that these are not hiring guidelines, or questions to ask of a potential accountant. These are aspects of a business’s financials that you need to know on a periodic basis. These are questions that need to be asked of whomever oversees the accounting for your business, whether it’s an accountant or mobile bookkeeper. Even if you are filling this role yourself, the items above are things that you need to track and periodically review. Hopefully they will aid you in identifying any potential risks to your business, and taking any corrective action as quickly as possible.

Irena McKenzie

Irena McKenzie is a Castle Hill local and is a very experienced local, mobile bookkeeper and successful small business owner. She has many years’ experience in all facets of bookkeeping and office work.  She has run various small businesses for many years and understands exactly what it takes to get a small business up and running at full speed.

Categories
Human Resource

How to Start the Hiring Process for Your New Startup

As an entrepreneur, hiring a new employee to join your ranks can be both exciting and nerve-racking. You may be thrilled to see your business grow to the point where you need to bring on extra help, but you may also be concerned about hiring the right individual to assist you. After all, making a poor hiring decision in this early stage in the game can be devastating to your business reputation, your finances and more. If you are preparing to start looking for a skilled and qualified candidate to join your business, focus on these helpful tips to guide your efforts.

Create a List of Job Duties and Responsibilities

While your business may be small currently, you should still approach the hiring process in a professional way. This means that you should begin the process by developing a reasonable list of job duties and responsibilities that you want the individual to handle for you. The list should be suitable for the type of position that you are hiring for, including based on the job title as well as whether the position is full-time or part-time.

Develop a Competitive Compensation Package

Many job seekers look for a position that has excellent compensation and benefits alike. They may also look for growth potential and the ability to make great industry connections. Because your business is smaller, you may not be able to offer the same types of benefits available at a larger company. For example, your small business may not offer health insurance or a retirement plan. To compensate for the lack of benefits that may be available with other positions, you should plan to offer a reasonably higher salary than what is average or typical for the position. This is essential if you want to attract and retain top talent at a startup.

Confirm Skills and Credentials

Many job seekers spend considerable time tweaking their resume until it glows, and some will unfortunately artificially inflate their level of skills, training or experience in order to be considered for better positions. Because it is critical that you hire only qualified applicants, consider creating interview questions or even interview tests to confirm skills and credentials before you extend an offer of employment.

Be Transparent About Current and Future Needs

During the interview process, job seekers will be examining your business and the position to determine if they want to pursue the opportunity. This means that you should use the interview process to screen candidates as well as to sell the position and the company to top candidates. Be clear with candidates about the current duties and responsibilities, but talk about realistic growth potential and how the position may change in the future. For example, the individual may take on a managerial role when other employees are added to the department.

Seek Hiring Assistance When Needed

The hiring process can be tedious and stressful for busy owners and managers. Many entrepreneurs are swamped with the process of running their business on their own or with minimal help from a small team, and finding extra time in their day to review resumes and to interview candidates can be challenging. A smart idea may be to hire a recruiter to assist with the process. The recruiter can screen resumes, conduct qualifications tests and send only the most qualified candidates to you for a final interview.

Creating new positions in your company and expanding your team are signs of business growth and prosperity. However, making a poor hiring decision can impact customer service, company reputation, client satisfaction, your own available time during the day and more. You simply cannot afford to make a poor hiring decision when your company is still young and struggling to grow every step of the way. With this in mind, consider how these important tips can assist you in making a great hiring decision for your current and future job openings.

Categories
Sales & Marketing

How To Execute A Successful Discount Marketing Campaign

Article Contributed by Anand Srinivasan

Startup entrepreneurs have a very distorted view of how discount marketing campaigns work. It is commonly believed that the only way to penetrate a saturated market is by offering massive discounts. In other words, discounts are merely seen as a way to generate sales where none exist. However, this couldn’t be further from the truth. Discounting campaigns go beyond price wars and are instrumental in changing consumer habits and behavior.

Creating incentives for new customers 

Products and services cost money. This creates a barrier for prospective new customers to try them out on a whim. This is especially true for customers who are not already paying for an alternative. A good example of this is Uber. Unlike on-demand cab services, traditional taxi systems do not require passengers to share their credit card information. This creates a hurdle for companies like Uber that want customers to try their service. One way to bring down the barrier is by offering free rides for new registrants. The prospect of riding the service for cheap creates an incentive for users to provide their credit card information. This way, services like Uber and Lyft successfully bring new customers to their system.

Changing consumer habits 

If you are entering an industry where your competition is already well-established, then a discount on new registration would only help with customer acquisition and nothing more. Retaining these customers and training them to habitually move away from your competitor’s product to yours takes a lot more effort and resources. This requires a sustained strategy where discounts are recurring in order to nudge the customer towards developing a habit over time. For instance, online food delivery startups send promo codes to customers everyday during lunch and dinner hours to building this habit in consumers. The actual return on this investment is only gained after these consumers become regular users who order food even in the absence of discounts.

Last minute deals 

If you are in a business that deals with branded products (smartphones, computers, etc.), then no matter how loyal your customer is to your store, they are likely to shop for cheaper deals before making a purchase. It may however not make sense to advertise promo codes right on your website. In doing so, you could be losing out revenue from customers who may have purchased from you even without a discount. What companies like Walmart do instead is to promote discounts as direct mail coupons. This way, customers shopping for coupon codes get access to these during the purchasing process while other loyal customers who are not seeking discounts may transact at the market prices.

A discount on the selling price is a notional loss for your business. You should therefore discount marketing very judiciously. It is important to identify specific challenges and metrics where you want the needle to move and launch discounts that target these metrics specifically. Launching a marketing campaign that offers an umbrella discount on all products and to all kinds of customers is a money sink and should be strictly avoided at all costs. This is especially true if you are a bootstrapped startup that does not enjoy the luxury of big spending like VC-funded startups.

Categories
Planning & Management

4 Ways You Can Boost Your Business Efficiency

Article Contributed by Dan Razak

Even though many people think that the business world is very complex, it’s actually pretty easy to explain. Customers are constantly looking for companies that can offer them better products or services at more affordable prices. But of course, reaching the stage where you can offer your customers something like this is never easy. The first thing you have to do is ensure your business is constantly becoming more efficient. And if you’re wondering how to achieve that, here are 4 ways that are guaranteed to do the trick.

Invest in marketing

If you want your business to be more efficient, you should always aim at increasing the number of your customers. And the only way you can achieve this is to invest in marketing. Of course, if you’re just starting out, you won’t have enough funds to start a multi-channel marketing campaign. That’s why you’ll have to prioritize and turn to some less expensive ways to promote your business. Social media marketing is a big deal today and you simply have to run pages for your business on platforms such as Facebook, Instagram and Twitter. Another great idea is to turn to influencers who have already reached your target audience and can bring your products or services closer to them.

Take your business home with you

What’s so great about the 21st century is the fact that it allowed us to do a lot of jobs from our homes. This means you should keep working even when you’re home and encourage your employees to do the same. Of course, they’ll need to have all the necessary hardware for taking their jobs home with them. Even though a smartphone might be enough, it’s always a better idea to equip each of your employees with their own laptops that will allow them to work from home. Those who constantly work from home, however, might fare better with a custom made desktop setup packing a reliable intel processor and a high-end graphic card li NVidia GTX 1070. Also, you can use cloud to store all of the important data, as that way, you and all of your employees will be able to access it no matter where you are.

Keep your employees motivated

No matter how good your products or services are, if your employees aren’t motivated enough, you’ll hardly be able to take your business to the next level. Every successful business needs a set of dedicated employees who are passionate about what they do and share your ambition. And it’s up to you to make sure your employees are motivated enough and want to see your business progress. First of all, this means they should receive appropriate wage for what they do. Another great idea would be to host office parties from time to time and prepare gifts for your staff. Employees who feel appreciated will always be ready to do some extra work, that will help your business grow.

Ask for feedback

There’s no need to say that how efficient your business is going to be heavily depends on your customers. That’s why turning to them in order to come up with some new ideas for your business is always a great idea. If you have a website, you can create a survey where your customers will be able to leave you feedback, as well as their ideas on how you can improve your business. Starting a survey like this will not only show your customers that you care about what they think, but it will also provide you with some new business ideas that might help you make your business more efficient.

Follow these 4 ways and your business will undoubtedly get an efficiency boost. Just bear in mind that running a business is all about working smart, and by thinking your every move through you’ll be able to unleash its full potential.

About the Author

Dan Radak is a marketing professional with eleven years of experience. He is a coauthor on several websites and regular contributor to BizzMark Blog. Currently, he is working with a number of companies in the field of digital marketing, closely collaborating with a couple of e-commerce companies.

Categories
Finance & Capital

Finance and Capital Raising Tips for a New Start-up

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“Convince yourself that your startup is worth investing in, and then when you explain this to investors they’ll believe you.” Paul Graham

If you are not backed by an elite accelerator, raising money for your company can be difficult. In fact, at present there is tremendous competition in the market and that makes it more arduous for entrepreneurs to get their start-ups off the ground.

According to a recent research conducted by Shikhar Ghosh, a senior lecturer at Harvard Business School, venture-backed start-ups fail in strikingly high numbers. About three-quarters of venture-backed firms in the U.S. don’t return investors’ capital.

You don’t want to be one of them, which is why it is essential to know the right methods of acquiring funding. Without adequate funding, a business cannot launch and sustain itself. Hence, fundraising is the key to the success of your startup. When done correctly, it can lead to lucrative partnerships with angel investors and venture capitalists.

Here are a few tips that can greatly help you with the process of fundraising.

  1. Go Step-By-Step

You want to target the right mode of investment for your company. For this, it is essential to pursue the right method of fund raising.

Accepting cash in the form of VC (venture capital) funding may not be the right choice for every newbie entrepreneur. According to Kauffman Foundation, only 16% of the total fastest-growing private companies in the United States, identified in the annual Inc 500 list between 1997 and 2007 had taken VC money. However, several of today’s recognizable tech giants have partnered with VCs.

Crowd funding is also a brilliant fund raising option. But, it is not the best option for long-term funding. You can consider opting for angel investing too. Regardless of the fund raising method you choose, make sure to evaluate your specific circumstances and decide accordingly.

After the evaluation, ensure to approach funding in phases. Here’s what you should know about a startup’s funding rounds:

  • Seeking out seed money: This phase involves receiving a small amount of money from the investor in order to give the start up the momentum it needs to produce the initial product. A portion of this investment should also be directed towards marketing efforts in order to create buzz about the product.
  • Series A: This phase involves the entrepreneur working out the nuts and bolts of moving the startup’s product into the marketplace. The funding is at a larger scale than the seed round (usually between $3-7 M) and is offered in exchange for a portion of the startup by the investors. Expenses at this phase should include operations, branding, growth, optimization, marketing, staffing, promoting the product, and hiring social media/community managers to attract users.
  • Series B: By the time the start-up has reached series B, it should have a product and a business model, and will need enough capital to bring the product to a broader market. The funding in this phase witnesses a significant incline, from $7M to about $50M. Moreover, in this phase, start-ups should continue balancing business development duties with user acquisition.
  • Series C: In series C funding, the start-up should move the work it’s been doing in series B towards international markets and/or focus on diversifying its product for multiple platforms.
  1. Brilliant Pitch Is Essential

When it comes to preparing a fund raising pitch, there is no one-size-fits-all. However, by keeping certain essential aspects in mind, you will have an edge over others.

Here are a few tips that can help you with your pitch:

  • Know your strengths and play to them.
  • When it comes to pitches, telling a great story is important. In fact, according to Oren Jacob, co-founder of ToyTalk, storytelling is a crucial part of making a pitch memorable and resonant.
  • Your pitch should include the objective and the goals of your company, the problem you intend to solve through your service/product, the kind of technology involved, and the reasons your potential customers will like your product/service.
  1. Focus on Networking

Networking is one of the most prominent aspects of fund raising. It plays a critical role in business development. Being in the nascent stage, speaking with investors and developing relationships can prove beneficial. Here’s what you should do for networking and finding investors for your start up:

  • Get your company on AngelList.
  • Email potential investors on a regular basis in order keep track of their responses.
  • Reach out to current investors to see if they can help you make new connections.

Embrace the power of networking. However, don’t make this your top priority. In the initial stages, customer demand and data should be your primary guide.

Financial Management

More often than not, capital financing is considered as the Holy Grail for a start-up. However, there’s more to start-up finance than fund raising. Also, good fund raising starts with good financial management.

Keep the following in mind for maintaining the financial health of your start-up:

  • Ensure steady finances and ready small business loan liquidity available at all times for your startup.
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  • Have your company’s financial information at your fingertips. This will enable you to make informed decisions in terms of budgeting, expenses, hiring, and investments.
  • Have a solid understanding of the cash flow of your business.
  • Build realistic growth projections for your company as that will help you with budgeting as well as in attracting investments for your company. Also, for successful investments you need to understand its various aspects beforehand. Regardless of what you choose to invest in – a mutual fund, a rental property, or gold, you should be clear about how and which sector you want to invest in to get the best return. For instance, if you’re planning to exchange cash for gold, make sure that you are familiar with market prices, gold futures and trends.
  • Use financial management software to manage your start-up’s finances effectively.
  • Consider having a financial mentor by your side as he/she can help you navigate the seemingly complicated financial landscape and stay on top.

Conclusion

Raising funds for a start-up can never be easy, which is why several first-time entrepreneurs fret over fund raising. But remember, acquiring funding for your start-ups is a means and not an end in itself. Don’t let this process consume you. At the end of the day, your business is all about your customers and not your investors. Also, financial management plays an equally important role in a business, especially in the risk-driven world of entrepreneurship. Failure to manage it can lead to financial disasters. The above-mentioned tips can help you handle your finances effectively and ensure that your fund raising experience is a smooth-sailing one.