Category: Operations

This article is contributed by Heather Johnson, a freelance business, finance and economics writer.
With a tax deadline looming over their heads, many self-employed Americans are scrambling to get their ducks in a row. After all, the last thing anyone wants is to be audited. Even muttering the word strikes fear into the hearts of most people.
Why should entrepreneurs be especially concerned about audits? It is because the government is more likely to examine the self-employed a little closer. This is because many people accept cash payments, avoiding those pesky W-2 forms. As you can imagine, not everyone complies with the honor system when it comes to claiming his or her income.
So, now you know that you’re more likely to be audited than someone else who isn’t self-employed. Mind you, that doesn’t mean the IRS is waiting in the bushes and ready to pounce. Chances are, you will never be audited and if you are, it really isn’t the end of the world.
That being said, there are a few precautions you can take that will work in your favor. Below are eight tips for making you the least likely candidate for an IRS audit:
1. Be Honest – Don’t purposely fudge on your taxes, even if you know someone who gets away with it or if you’ve done it in the past. It’s wrong, it’s illegal and it’s really not worth it if you get caught.
2. Save Every Document – This is the most important step in good accounting and you’ve heard it a million times. Should the IRS ever come knocking on your door, this will be your saving grace.
3. Hire A Professional Accountant – Just as many people don’t save receipts like they should, not many people heed this advice. However, it really is best to hire an accountant to handle your taxes when you are self-employed. Your paperwork is more complicated than those who work for a company.
4. Avoid Math Errors – A miscalculation that is spotted by the IRS will alert them to your records. The goal here is to keep a low profile, so any discrepancies make you stick out like a sore thumb. Mind you, a miscalculation may just result in a friendly notice from the IRS and not a full-blown audit, so don’t panic.
5. Don’t Forget Your Signature – What could be more conspicuous than you failing to sign your return form? Even a minor mistake like that could make the government suspicious.
6. Don’t Drastically Change Your Lifestyle – If you were to move from a palatial mansion to a single-wide trailer, this might ring some alarms when you file your taxes.
7. Don’t Be Successful – Heh, this may be the best rule to break. Hopefully you are successful and will become even more so, but a drastic change in income will certainly make the IRS a bit curious about your situation.
8. Be Careful With Your Deductions – Don’t go crazy with deductions, particularly if you aren’t sure how they work. Also, forget about deducting anything you don’t have a receipt for. As far as the IRS is concerned, you didn’t buy it for that reason if you don’t have a receipt.
Here’s some encouraging news: as of the year 2003, only 1% of Americans filing tax returns were audited. So, that leaves a 99% chance you will never have to face those scary taxmen. Also, don’t assume you’re going to the poor house or the big house if they do choose to audit you. As long as you are as honest and as thorough as possible, the IRS won’t send you up the river.
Heather Johnson is a freelance business, finance and economics writer, as well as a regular contributor at Business Credit Cards, a site for best business credit cards and best business credit card offers. Heather welcomes comments and freelancing job inquiries at her email address heatherjohnson2323@gmail.com.

This article is contributed by Sam Carpenter, author of the new book, ‘Work the System: The Simple Mechanics of Working Less and Making More’.
Sam Carpenter never really understood the old adage, “work smarter, not harder.” Now, the multi-million dollar business owner lives by it.
Eight years ago, Sam was working ridiculously long hours for meager pay, crumbling under stress, and had zero time for himself or his family. The president and CEO of Centratel, a struggling telephone answering service business, Sam might as well have been working a per-hour job. For 15 years, he put in 80- to 100-hour workweeks, simply trying to keep his business afloat. His body was a wreck from the stress, and his doctor, convinced he was depressed, prescribed him Prozac and then Ritalin. On top of all this, he was a single parent of two children for this entire decade and a half.
Five days before he was going to miss a payroll for the first time and ultimately lose his business, Sam had a breakthrough epiphany. He realized that his life and business problems did not require “holistic” solutions. He saw that the primary systems in his life and business are made up of linear “sub-systems” that can be isolated and then perfected one at a time. By perfecting sub-systems, the primary systems would, in turn, function flawlessly. So, at once, he grabbed hold of the reins on his business, health, and relationships. He extracted and optimized each sub-system, then reinserted each back into the mix. Improvement was dramatic on all fronts.
Now, the author of Work the System: The Simple Mechanics of Working Less and Making More, Sam works two hours a week, runs a multi-million dollar telecommunications company once on the brink of folding, and makes more in a month than he used to make in a year. He is of robust health – climbing, cycling and skiing again. He owns a second home and travels, and recently remarried. On top of that, he also founded and operates an international non-profit organization to aid third world schoolchildren, and is in the process of launching a major internet startup site with his wife, Linda.
Follow Sam’s six steps to “working less and making more,” and watch your own business or corporate management position become more efficient, your workweek lessen, and your income skyrocket. Also, watch your personal life become more efficient and rewarding:
1. Change your fundamental perspective of the mechanics of the world. Take a position “outside and slightly above” your job and your life. See that everything is composed of linear systems and that these systems can be improved, one-by-one. Understand that by perfecting a primary system’s sub-systems, the primary system will in turn be perfected.
2. Know there is a universal propensity for order and efficiency: 99.9% of everything works just fine. Life wants things to work out; you just have to “climb on board.” There’s probably not much that requires repair.
3. Stop playing Whac-a-Mole. End the fire-killing. Instead of repairing problems as they arise, dig down deep, identify the inefficiencies, fix the dysfunctional systems that cause them, and prevent the problems from re-occurring. Climb down into the mole-holes and eliminate those critters altogether.
4. Create simple documentation. It has to happen. Boring, but true: the existence of documented protocols is the single greatest difference between large successful businesses and small struggling businesses. Create a strategic objective, operating principles, and working procedures for your job or your business. It won’t take long and the return will be a thousand-fold.
5. Make sure you’re in a position of advancement. If you look upward and there’s no rung on the ladder for you to reach, consider switching jobs. Or, find a small business that’s struggling, buy it, and fix it. To attain freedom, you must be in a position where upward mobility and hands-on management are possible.
6. Hire people who “get it.” You must surround yourself with people who agree with your philosophy and methodology. If your employees aren’t on the same page, don’t expect to get the results you want.
Sam Carpenter, author and speaker, is president and CEO of Centratel, an elite quality telephone answering service, and author of the new book, Work the System: The Simple Mechanics of Working Less and Making More. Success in life, business, and relationships can be yours, too. Sam’s approach is not mystical or esoteric; it’s simple, mechanical, and attainable. Visit http://www.workthesystem.com to purchase your copy of Work the System.

Business Managers not focused on improvement become administrators at best and bureaucrats at worst.
We tend to think of Sales as being the only competitive area of business, but that’s only the beginning; competition continues beyond Sales through the entire business process.
Improvement Equals Profit Enhancement
There are 4 basic ways to improve the bottom line:
1. Cook the books.
Long before the guys at Enron there was another Texan who bamboozled for profit. Billie Sol Estes made the cover of Time Magazine in the early 1960s as the “Texas Wiz Kid”. An inquisitive child, Billie Sol grew to be an inquisitive man; he figured out that liquid fertilizer was lighter than water and was worth a whole lot more. Huge storage tanks filled with water, except for the top 2 or 3 inches of liquid fertilizer, provided the security for loan after loan. He also once borrowed money on his neighbor’s cattle.
Billie Sol built a financial empire on one shady deal after another. He had all the politicians in his pocket, including LBJ. There’s a down side to “cooking the books”, you may end up with a room mate named Burno who insists you wear a little apron. . . Don’t do it!
2. Raise Prices.
An increase in prices should increase profitability; unless you end up being noncompetitive and lose customers. Raising prices works best when you’re a sole source provider or when you have more business than you can handle. Remember the 90s?
Better still is raising prices when the quality of the product / service and business processes is higher / better than anyone elses. It’s the customers’ total cost of doing business, not price that keeps them buying. “Buying cheap to save money can be like stopping a clock to save time.”
3. Sell More.
If you sell more and control the costs of those sales you’ll make more money. The most profitable sales are most often the repeat sales to the same customers. Customer retention and repeat sales are tied to more than price.
4. Decrease Costs.
Any reduction in cost of doing business without loss of income will have a dramatic impact on profitability. Improved productivity rules.
Ronald Coase and Friction in Business
An English economist, Coase wrote that there is friction or costs involved with business entities. There’s the friction/cost of “searching” for customers and suppliers. There’s the “coordination friction/cost” of on-going business processes. The last and most expensive friction/cost, is that of “failure”, of something going wrong and having to be redone. The CEO of a chain of white table linen restaurants estimated that for every meal sent back, 32 new meals had to be sold to make up the loss.
Smart customers understand about the “total cost” of doing business. Your competitor’s prices may be lower, the quality of their product/service may be equal to yours; but if their business processes are screwy and drive up the customer’s cost. . . you have no competitors. You don’t have to be twice as good as the next guy, be just a little better and you stand heads and shoulders above competitors.
Fewer Doing More
Unemployment is up, and so is productivity. Those companies that constantly work on improving the quality of their product/services and of their business processes will be the survivors. The future holds more of the same.
Document Knowledge / Expectations
All human endeavor is predicated on knowledge, on what you know. Business knowledge is more than facts or data; it’s the “orderly collection of information needed to get things done.”
The verbal communication of policies (goal driven guidelines) and procedures (steps needed to achieve goals) expands on training time and creates errors. Word of mouth business operations are like a sailor’s promises while on shore leave, they’re not worth the paper they’re not written on.
Every manager’s job description should start with a commitment to improvement; “Focus on improvement, on how things can be done better for the same costs or less.” If people aren’t told in black and white what’s expected of them, they get busy and forget.
Track the source of screw ups and reward customers / employees / vendors who tell you of a failing, of an opportunity for improvement.
Write down the goal(s) of each business function and then ask the experts, the employees, how the goal(s) can best be reached. Write down the steps necessary and ask new employees for new knowledge; how they’d do things differently.
In Closing
Don’t worry about industry averages when gauging the KPIs for different business areas; it’s much more important to focus on improvement, on how things can be done better. It takes a lot less effort to keep an old customer satisfied than to get a new customer interested.
And remember, “the bitterness of poor quality lingers long after the sweetness of cheap price is forgotten.”

Abe WalkingBear Sanchez is an International Speaker / Trainer / Consultant on the subject of cash flow / sales enhancement and business knowledge organization and use. Founder and President of www.armg-usa.com, WalkingBear has authored hundreds of business articles, has worked with numerous companies in a wide range of industries since 1982 and has spoken at many venues including the Shakespeare Globe Theater in London.

Every business operates on knowledge and yet many companies never organize and document that knowledge into useable P&P.
As a result of this failure to organize and document the knowledge it takes to operate a business, many companies operate on a word of mouth basis.
“The new guy learns from the old guy who learned from the dead guy.”
Scott Stratman
Business Friction/Costs
Ronald Coase, of “Coase’s Law”, says that there is friction involved with being in business. The original friction or cost is that that goes with finding customers for a company’s products/services, and of finding vendors/suppliers who can take care of the company’s needs.
Beyond “acquisition” costs there’s the ongoing friction of doing business; transactional costs.
The most expensive cost/friction is that of failure. Regardless of the “industry”, the most expensive work done in a business is the “re-do”.
As Right as Possible, the First Time
Some companies just don’t seem to understand or care that when something goes wrong it drives up their cost of doing business, and it also drives up “cost of doing business” for their customers and vendors. Its like they really think that they don’t have time to do things right the first time. Baloney.
A major source of errors, omissions, miscommunications and screw ups is the lack of written P&P, of operating on a “word of mouth basis”. The cost? A $30 mistake can take $300 in time and effort to correct, and if that company is doing a 5% PTP (pre tax profit) it takes ( 20X$300) $6000 in sales to cover the cost of failure. And if a customer is involved there’s no way of knowing the impact/cost of the mistake on/to that customer. And there’s no way of knowing who that customer might have told about the failure. What’s the cost in lost business from “negative word of mouth advertising”?
” The true cost of errors is unknown and unknowable.” Edwards Deming
The 5 Organizational Ps
Every company needs a plan, a strategy that drives it’s actions. The plan may be to increase market share, to reduce costs, retain existing customers, provide new products/services to old customers or it may be to have the “lowest price, always”. Wait a minute that plan is already taken.
Based on the “plan”, every business function must have a “Purpose” that compliments the “plan” and which answers the question, “Why incur the costs that go with this business function?”. For example, distributors incur the costs of having a warehouse so that they can meet or exceed customer expectations, so that they have an acceptable “fill rate”. A distributor doesn’t have to have 100% of what customers want 100% of the time, but if they don’t have an acceptable “fill rate” the customers will go elsewhere. Purpose is the first of the 5 Ps.
Once the “Purpose” is established`, every business function can be broken down into it’s major components. In our warehouse example those major components might be “receiving”, “shipping”, “truck maintenance ” and “inventory control”. The goal for each major component is the basis for “policies’, for goal driven guidelines. Policies are the second of the 5Ps.
There are 6B people on the world and there are 6B versions of reality. The third of the 5Ps is “Procedures”, and one size does not fit all. Purpose and Policies are determined by managers who, if they’re smart, let the experts (the guys doing the job) tell them how the goals established will be accomplished.
The fourth of the 5 Ps is “People”. Based on the steps needed to achieve established goals hire the right people for the job.
The fifth and most important of the 5Ps is “Process Monitoring/Performance Measurements”. The key steps in the “procedures” need to be monitored to ensure things aren’t falling through cracks, that the process is on track.
In life and in business things will happen for which we haven’t planned. In 1969 I was living in Denver and I was going to drive out to S.F.. My plan was simple enough, I’d drive north to Cheyenne, Wyo. and turn left. Outside of Boulder, Colorado there was a “hippie” and his girlfriend holding up a sign saying “SF”, I picked them up. They had a large bag of soy nuts and of this other stuff which they shared; we missed our turn. Montana was nice and we eventually got to S.F.. It was a trip.
Performance must be measured against goals. If the goals are well thought out and achievable but are not being met its one of two things; either the procedures are wrong or you have the wrong people for the job.
“Employees respect what managers inspect , not what they expect.” Don Rice Tex A&M
It doesn’t matter what you ask for, its what you monitor and measure for that tells employees what you really want from them.
BestBizWays; Powerful in Effect with Little Waste of Effort
Document the knowledge needed to run a business and you’ll do a better job of hiring the right people, you’ll reduce training time with new employees, errors will be minimized, customer service levels will rise and the bottom line will go up.
Organize and document the knowledge needed to operate a company and you increase it’s value by having a “cookbook”.
In Closing
Harvest new knowledge by asking new employees to tell you how things can be done better. Do this in the first two weeks on the job, before a new employee starts thinking like everyone else. P&P are never done, things are always changing. P&P should have a cover sheet that says “Under Construction”. The best information in the world is worthless until you put it to work. Its up to you.
The 5 Organizational Ps
Purpose: Every business function must have a clearly stated purpose which compliments the “Plan” and answers the question, “Why incur the cost ?”.
Policies: Goal driven guidelines for each of the major components within the function.
Procedures: The steps needed to be taken in order to accomplish established goals.
People Requirements: Based on the procedures hire the right people for the job.
Process Monitoring/Performance Measurements: Track key steps in the process and measure against the goals.

Abe WalkingBear Sanchez is an International Speaker / Trainer / Consultant on the subject of cash flow / sales enhancement and business knowledge organization and use. Founder and President of www.armg-usa.com, WalkingBear has authored hundreds of business articles, has worked with numerous companies in a wide range of industries since 1982 and has spoken at many venues including the Shakespeare Globe Theater in London.

Scientists believe that about 150,000 years ago a huge volcanic eruption created a cloud of ash that covered most of the Earth for 6 years. Not all sunlight was blocked but enough so that most plants and animals died.
Those life forms that survived “the long winter” were the smart and the strong. Those life forms that perished were the weak and those who couldn’t adapt to the change. It’s kind of that way in business.
We are in an economic downturn and a culling of the herd is taking place.
Never Time Enough
Errors, glitches, screw ups, misunderstandings, omissions, the left hand not knowing that the right hand exists much less knowing what it’s doing; all drive up the total cost of doing business. Vendors, sellers and customers all pay for inefficiency.
Too often the unofficial motto of some companies seems to be “we never have time to do things right, the first time.” A “redo” is the most expensive and unprofitable work that a business does. Some businesses make money in spite of themselves.
By documenting the knowledge it takes to get things done right the first time, their best biz ways, companies can improve their efficiency and better prepare themselves to deal with reduced sales, slow cash flow, thinner margins and major business disruptions. Moving from “word of mouth” operations to written policies and procedures promotes efficiency of action.
The Closet Report and Dead Customers
You’ve most probably have encountered inefficiencies that have left you scratching your head and wondering what the heck is going on.
Steve Epner of BSW Consulting, Inc. tells a story about a report that clearly illustrates wasted time and effort. It seems that a woman in a company spent the last 2 hours of each day compiling some data into a report. She’d leave it on the corner of her desk and the next morning it would be gone.
When asked what the report was for and who it went to, she didn’t know. The woman had been trained by her predecessor to do the report but was never told why or to whom it went.
It turned out that about 3 years before the CEO had asked that the report be generated and left for him to pick up at the end of each day. After a while he decided he didn’t need it and he quit picking it up, but forgot to tell the preparer.
As the reports piled up the janitor took note that they were unsightly and got in the way of his cleaning. He started moving the report to a nice safe out of the way closet. He referred to it as the “closet report.” When the stack in the closet got too high, he’d toss them out and start a new stack.
My friend Russ Case use to tell a true real story about a hospital room in England where the patients unexpectedly kept dying. All the equipment was checked and double checked, the air was tested, the water and food were checked out and found to be safe. The deaths continued and the toll hit 10 before the cause was found. Again, it was the janitor.
It seems that this room has a shortage of electrical outlets and when the clean up crew came in they’d unplug the life support equipment so that they could plug in their cleaning equipment. To protect their hearing the cleaning guys wore ear muffs and couldn’t hear the patients’ death struggles.
Profit and Survival Enhancement
The former head of the Federal Reserve, Alan Greenspan, issued a warning in March 2007 that the world’s largest economy could be heading for recession.
U.S. consumers have helped keep the world economy afloat in recent years by borrowing against the rising value of their houses to finance spending. Now, hit by higher gasoline/energy/transportation prices, a crumbling housing market and an increase in worldwide demand for more credit..the economy has soured.
During an economic downturn the demand for goods and services drop off and a number of businesses, most especially those already struggling, fail.
Just in case Greenspan is right, here are some thoughts on how businesses can position themselves to better survive an economic downturn.
Companies run on money, fail to pay the phone company, the IRS, the power company, employees and suppliers and you are out of business. So now, before you have the need is the time to secure long term financing. Don’t delay, sit down now with your lender and work out a line of credit that you can draw on as needed. The time to borrow is when you don’t need it because when you do need it you may find you can’t get it.
If you already don’t know, you need to identify and embrace your core customers. Think of the 80/20 rule. Do 20% of your customers make up 80% of your business, if so you best know those customers, their needs and desires and the names of their kids.
You also need to know how any downturn in business would effect them, they may be your buddies now but if they fail you don’t want them taking you down with them. Run credit reports on core customers on a regular basis to help you remain confident of their ability to pay…and to possibly increase their credit line, if they need and can handle an increase.
Invest now in finding new customers.
Don’t allow your salespeople to become order takers who service existing customers and forget how to sell. The sharpest tool becomes dull from misuse or nonuse.
Putting all your eggs in one or a few baskets may be efficient and profitable during good times but can come back to haunt you during an economic downturn.
Even during good times it’s important that your people be under a little stress so that they don’t become lazy or indifferent toward their work. And hearing that some guy got the sack for not showing up or failing to work hard keeps the other employees on their toes.
Weed out weak employees and cross train the strong including senior managers. This is always a good idea but becomes critical when business slows.
Combine Overlapping Business Functions
In theory customer service is the customers’ champion, the guys who care and who make things right. However, in practice and most especially in regard to consumer customer service, customer and service is an oxymoron. It’s as if the “mad hatter” was in charge. Mumbo jumbo and then more mumbo. B2B customer service tends to be better because of competition for the same limited customer base and the larger sums of money involved.
In the course of dealing with why customers have not paid according to terms, the credit area deals with many different segments of the business chain, both internally as well as outside the company. Credit is kind of like being the guys with shovels following the parade.
Consider combining customer service with credit for improved efficiencies and communications.

Abe WalkingBear Sanchez is an International Speaker / Trainer / Consultant on the subject of cash flow / sales enhancement and business knowledge organization and use. Founder and President of www.armg-usa.com, WalkingBear has authored hundreds of business articles, has worked with numerous companies in a wide range of industries since 1982 and has spoken at many venues including the Shakespeare Globe Theater in London.