No Excuses! Own Your Numbers!

December 24th, 2013

Entrepreneurs, by nature, are optimists. Working with hundreds of entrepreneurs throughout my career, I’ve found we (I’ll include myself in this mix) tend to explain our way out of financial statements. “I had to take a hit because of a capital expense.” “I haven’t had time to sort through all my receivables.” “I lost my receipts.” Don’t kid yourself by saying how the books are wrong or special in some way. The tricks and games we play in our books confuse our accountants and us! Keep it simple. If you feel the need to explain yourself, see if you can quantify those explanations so they appear in your books. There are also the excuses like: “I’m not a numbers person.” “I don’t know where to start.” “My accountant handles all of that.” You put yourself and your business at risk by not understanding the basics of where you are. As the owner of the business, you own your numbers. You may not handle them day in and day out. In fact, I hope you don’t, but you need to be the person responsible for understanding and action on it. Stop avoiding your numbers and take ownership. Spending this time will help you discover:

  • Numbers that are lying to you
  • Numbers that are out of balance
  • Numbers that are useless

Take an hour a week to review these things, at least, and at least a day each quarter getting a handle on the stories your number are telling. Let me know if I can help.

Assess the Quality of Your Numbers

December 17th, 2013

Feeling pretty jazzed about his business, a friend of mine, Steve, went to the bank to get a loan to expand his business.

During a meeting with the banker, he shared his numbers, pretty certain he was in good shape to get the loan. The banker had a different point of view. She thought my friend was going to go out of business within 3 months based on the story his numbers told!

Numbers tell stories. Do your numbers tell the same story about your business that you would tell? If the answer is “No,” there are only two reasons: either you are wrong or your numbers are wrong.

To assess the quality of your books, you need about 30 seconds to review the profit and loss statements to see if you can quickly identify your top line, your bottom line, and your gross margin.

Top line = the amount of revenue your company brings in.

Bottom line = what you have after you pay expenses.

Gross profit = the money you make on each “items” or “services” after the cost of delivering those is subtracted out. Easy if your company sells a widget – the cost of the widget needs to subtract out. A little more involved for agencies and firms – you’ll have to take out any expense you’ve paid on behalf of your clients and outside contractor costs.

If you can’t find these numbers, you need to, right away!

Finding the Stories In Your Numbers

December 10th, 2013

Most accountants don’t read their clients’ bedtime stories.

But I do.

And my story sounds a bit like this: Once upon a time, there was a number that stood out among all the other numbers. It practically jumped of the page, but for some reason, no one noticed this number – even though it had superpowers to grow a business.

There are stories in your numbers. Busy entrepreneurs are working on building their clientele and running their business. They see the value of the story, but they don’t have the time to find it themselves.

Tax accounting doesn’t tell stories. Tax accounting is cash based with the ultimate goal being tax minimization. In other words, you want to minimize profit, at least on paper.

Business accounting is accrual based, with the ultimate goal being an illustration of the reality so that you can make strategic decisions to increase profit, pay down debt, and grow your business.

This new blog series tells you how to find the stories in your numbers to get you ready for the opportunities 2014 will bring. I hope they are helpful to you.

As always, if you have a question about any of the topics I cover in the blogs, or another accounting topic, please contact me.

Daily Habits of a Successful Entrepreneur: Keeping Track

December 3rd, 2013

In my third blog on how to improve your juggling abilities, I want to talk about tracking your progress. As you may know, I’m a big proponent of dashboards because they tell a story at a glance. In fact, I provide custom financial dashboards to each of my clients, giving them meaningful metrics based on their business. Obviously, financial data is important to keep track of, but what else can you create dashboards for that will afford you at-a-glance information about your business or your life? Here are some suggestions for dashboard I use in my own business:

  • Accounting dashboards – many accounting products have built-in automated dashboards so you know your income versus expenditures per month, the number of invoices you’ve sent, accounts aging reports, and other information.
  • Sales dashboards – Sales dashboards provide great insight into which products or services are more successful, bookings versus quotas, customer behavior, and more. Large businesses use sales dashboards all the time, but entrepreneurs may rely on their memory and lose the benefit of having data to analyze. Salesforce.com and other CRM systems can create these dashboards.
  • Productivity dashboards – another benefit of a dashboard is to track the amount of time you or your staff are spending on tasks. This can help you determine if your pricing strategy is appropriate, or if you need to improve efficiencies.

Many business problems can be solved using the insight of a dashboard. The insight provided will help you keep your priorities straight—and even move the needle on the dashboard. The web has a variety of great tools available to help you create your own, including NetVibes, which claims to dashboard everything. I’d love to hear about your business dashboards! Drop me a line and let me know what dashboards you find more important to your business. Read other Daily Habits’ posts:

Daily Habits of a Successful Entrepreneur: Make Time for Yourself

November 26th, 2013

As we approach Thanksgiving, it seems appropriate to talk about what we’re thankful for in our lives and in our businesses and make sure we are devoting time to those things. In this third Daily Habits blog, I want to remind you to that even a great juggler can only handle so many balls. Having time for yourself is essential to being good at what you do. Jogging, painting, bike riding, playing with your kids. These are not things on the checklist to get done every day; they are enriching activities that help you be better at your job. For myself, working out is essential. It clears my head, relieves my stress, and enables me to do a better job. I recently participated in a 30-day fitness challenge. Having this personal goal was a good practice in focus for me and drove home the need for clear goals and maintaining a systematic approach to the way I handle business and personal matters. Making time for yourself does not have to be goal-oriented, though. It just needs to be a daily habit. Happy Thanksgiving! Go spend time with those you are thankful for! Read other Daily Habits’ posts:

Daily Habits of a Successful Entrepreneur: Focus

November 4th, 2013

I want to rename the term entrepreneur to juggler because each and every entrepreneurial client I work with is a master juggler, able to toss 5, maybe even 7 balls and rotate them through the air, touching each briefly and trying not to let any drop. It’s hard work. It got me thinking, what are daily habits that I and some of my clients have that help make the juggling easier? My next few blog posts will share some tips I’ve found useful in managing my own juggler lifestyle. #1. Focus If we learned anything from Steve Jobs, it was focus. But with multiple balls in the air, how do you determine what to focus on? The first thing I do is separate the “to do” list from priorities for the day. Each day I ask myself, what actions do I need to take today to make me feel like I had a successful day? Then I write down my goal for the day. This helps me prioritize and determine what actions serve my goal for that day. I also have to fight against my distractions so I can have a successful day. Email frequently causes me to lose focus. For that reason, I carve out a portion of my day to be email free, so that I can put my own agenda above anyone else’s. A change of locations also helps me stay focused. I spend time in my “office” at the coffee shop when I need a fresh perspective. Stay tuned for daily habit number 2. Drop me a line or comment below if you have any other ideas on how to stay focused to achieve your goals.

Make 2014 Your Best Year Yet: Understand Your Numbers

October 28th, 2013

If you are a regular reader of the DeepSky blog, then you know I’m very passionate about helping entrepreneurs get a better handle on their accounting by understanding how their numbers drive outcome and help meet their goals.

However, most entrepreneurs tell me they just don’t have the time or the personality to do this. My response? Wake up because you can’t afford not to!

In 2013, I’ve spent countless hours looking over the mediocre financial reports brought to me by entrepreneurs – prepared by CPAs and bookkeepers who have no passion or knowledge of how all these numbers related to their client’s business – and the reports are reflective of that.

So, to help entrepreneurs get a leg up for 2014, I’ve prepared a new webinar I’m calling “Make 2014 Your Best Year Yet: Understand Your Numbers” that will go over the top 3 steps to whip your accounting into shape in time for the new year. I know it seems as if it’s still 2013 (and it is), but 2014 is just around the corner and you must be prepared. I can’t think of any better way to get ready than to get a handle on your numbers.

In this 1-hour webinar, you’ll learn how to:

  • quickly determine if your numbers (accounting) are valid and useful,
  • figure out the first 3 steps you need to take to shape up your numbers, and
  • leave the trash at the curb for a clean start in 2014.

This free webinar is ideal for entrepreneurs who have little time to spend on accounting, yet want to understand how to meet their 2014 goals.

Date: Wednesday, November 13, 2013

Time: 11 am PST/2pm EST

Register Here

Finding the Accounting Firm That Fits Your Entrepreneurial Needs

October 1st, 2013

During my career, I’ve seen clients come and go for a variety of reasons. Some went out of business. Some decided to move to Alaska. Some decided to move on to another accounting firm because we either didn’t offer the services they needed or we weren’t a good fit.

My last blog post talked about how an accountant has to possess the right mix of attributes in order to serve an entrepreneur. Great, but keep in mind that finding a good fit with an accountant really doesn’t have to be that hard if you spend a little time up front identifying your needs. You’ll want to examine your business needs to find a good accounting fit.

Ask yourself:

What services do I need? Accounting is a broad profession. Think about what you are looking for in an accountant as you begin your search. Hiring an auditing firm may benefit you once a year, but it won’t provide monthly financial analysis. A firm that specializes in tax preparation and planning may not offer payroll services. Make sure you’re clear on what services your business needs.

How does the firm bill? Some accountants charge by the hour; others bill a flat rate. Make sure you understand the workload you are asking the accounting firm to take on as you evaluate how they bill. To ensure there are no surprises, get an estimate of an accountant’s monthly fees.

What size firm do I prefer? With a small firm, you usually get one-on-one attention. Larger firms may have a team dedicated to your account. Which is going to work better for you? If you want someone who is at your beck and call, a larger firm may be a better option for you. If you want a one-on-one feeling, knowing that someone it intimately acquainted with your business, a small firm may be a better option.

Does location matter? DeepSky works with folks all over the world, but some clients really want to be able to sit in the same room as their accountant.

How is this firm going to make my life easier? The answer to this question should not be “they do my taxes.” It should be “by providing useful business insights so that I am empowered to make decisions.” Anything less doesn’t cut it.

Once you know what you’re looking for in an accounting firm, ask around. Ask friends, colleagues, business partners, your lawyer, or banker who they would recommend and why. Make sure you get their answer to how the firm makes their life easier.

Next Steps: Vet the firm

Once you have identified a firm to meet your needs, take the time to interview.. Check if the firm has experience in your industry, your size of company, and what tools they use to manage your accounting.

Ask to meet with the staff members who will be working with you. Make sure communication is clear and direct even with negative news or advice.

Finally, check references. This is an important decision and the business owner must perform adequate due diligence before making a decision.

 

What Entrepreneurs Should Look for in an Accounting Firm

September 24th, 2013

I was working at my “other” office the other day – my local coffeehouse, and noticed a meeting going on at the table next to me. From the conversation I overheard, it was obviously a discussion between an accountant and an entrepreneur. From the body language of the entrepreneur, I could tell the meeting was NOT going well. The accountant was leaning forward, talking quickly and throwing out accounting jargon. Although the accountant was passionate, he was painfully unaware of the glazed look in his client’s eyes.

This encounter got me thinking. The relationship between an accountant and an entrepreneur is an important one. The success of that relationship can mean the difference between a business that thrives and one that just moves along without any measurable success.

In order to work with entrepreneurs, accountants need to have these 5 areas down pat:

  1. Risk taker – The last thing you want is an accountant who will put the kibosh on your plans due to risk phobia. An entrepreneur’s accountant needs to be able to tolerate risk. While you won’t necessarily find too many who want to take a lot of financial risks themselves, you want your accountant to understand the entrepreneurial spirit, which means willing to be creative in analyzing the risks you want to take with your business.
  2. Communication – Accrued liability, amortization of intangible assets, variable expenses. Don’t hire someone who throws around accounting jargon to impress you. How will you be able to follow their advice if you don’t know what they are talking about? You need someone who can explain the numbers and tax laws in a way you understand. More importantly, you need an accountant who can turn financial data into meaningful content to help you run your business.
  3. Strategy – Filing taxes and analyzing P&L statements is a necessary thing, but it doesn’t help you reach your strategic goals. Your accounting firm should be a trusted advisor, enabling you to plan your company’s future. They should be able to offer you advice on things like long-term tax planning, business planning, and even introduce you to resources in the community. Your accountant should be a partner who will strategize on your behalf to create the maximum possible benefit for you.
  4. Experience – Education and certifications are certainly important, but equally important is that your accountant has worked with a business similar to your business – and you want someone who understands small business and your industry. Having industry experience will give you the extra leg up in understanding your company and thus your finances.
  5. Trust – Probably the most important element in choosing an accountant is finding someone you trust. Whether you trust them because of who referred them to you, their reputation, or just because you like them, trust is essential to a good working relationship.

Obviously, there are other things to think about when hiring a firm, but for entrepreneurs, ensuring you have the above combination will make you much happier with your accountant.

Next time I’ll blog about helping you identify your needs in an accounting relationship.

 

Steve’s Saga Continues: Turning Numbers Into Insights

September 17th, 2013

When we last visited with Steve, he was invoice rich, but cash poor. Having resolved that matter, he called again the other night. “Man, I just can’t make sense of all these numbers. I’ve been trying to look at my bottom line again, income versus expenses, and invoices, and I’m just downright confused, again.” “Haven’t you looked at the dashboards I sent?” I asked. Like Steve, many of my clients are entrepreneurs who are interested in closing the next deal and building their operations, but they find the details of accounting tedious. That’s why I provide custom dashboards for each client, helping to provide them with meaningful metrics based on their business. By doing this, we turn big, scary financial reports into simple, salient points that are really easy to understand. For example, Steve has a creative marketing agency. One of his hot buttons is ensuring his staff completes a project within the hours allocated for that project so he doesn’t have to eat the costs. To help him, DeepSky creates quarterly charts based on Steve’s time tracking system that compares the number of hours spent on a project with the number of hours invoiced. This way, Steve knows which of his clients take more time and whether he needs to modify the way he bids on a project. Dashboards are really useful tools because people either don’t know how to read a financial report or don’t want to take the time to thoroughly digest it. Dashboards tell a financial story at a glance. Part of my process when working with clients like Steve is to understand the financial story he needs to see each month. For example, Steve needs to make sure he is not paying staff more than he is charging clients. Each business has its own unique financial story based on the work it does. The next time you get stuck, think about turning the numbers into something visual. It really does help.