When should I incorporate? AND Pros and Cons

As a CPA providing bookkeeping services, I often get this question:

When should I incorporate?

Incorporation has Pros and Cons and we’ll step through them here to help you decide.

Pros:

Risk is isolated.

If you do business as a corporation, you limit the risk of loss to the amount of your investment. This is especially important when you are running a high-risk business where your customers or your employees may be injured. Examples include construction & trades businesses, gyms, and personal trainers. Accidents happen. Even if it might not be your fault, you may be sued. If you are, and you don’t have enough insurance, you will be personally liable. Prevent this situation at all costs.

A caveat: In Canada, a corporation doesn’t necessarily protect you against gross negligence or fraud. In those situations, your corporate veil can be “pierced”, and you could be personally liable.

Much clearer data.

If you have a bookkeeper that supports you with financial intelligence, having a corporation can really help. A sole proprietor doesn’t have a balance sheet because personal and business assets and liabilities are all mixed together. Therefore, it’s hard to do analysis, such as Current Ratios, Return on Asset, Return on Equity , Debt to Equity Ratio . It’s even hard to do a Cashflow Analysis, and as you know, in small business, Cash is King.

You might be wondering—do I even need this data? When you are small, you probably don’t need deep analysis and ratios. You can tell how your business is doing by looking at your bank account. As your business grows, it’s important to have keep track ratios as your Key Performance Indicators (KPI’s) and do Cashflow Analysis to help you make decisions to take your business to the next level.

Additional credibility and name protection.

When you have Ltd. or Inc. behind your business name, people tend to trust you more. People believe you are an established business and not operating alone. Also, when you incorporate, you must do a “Name Search“, The name search process helps you find a unique name for your business.  A distinctive name helps you stand out and protects your brand.

Existence despite the owner.

A corporation is its own entity. If something happens to a business owner, the corporation would still exist. A separate entity is especially important if you are older, and want to the business to survive longer than you.

Flexible financing and/or tax planning opportunities.

The shares of the company can be sold to investors to raise money. This may be the only way if you are a high-risk business and bank financing isn’t an option. This is true of many startups. If you are a highly profitable business, the shares of a corporation can be held through a Holding Company, or a Family Trust to take advantage of Income Splitting, a legitimate method of tax avoidance.

If there are so many benefits of incorporation, why don’t more people do it?

Con’s:

Incorporation is more expensive.

Generally, filing a corporate tax return is more expensive than an individual tax return. A corporate return costs $2,000/year or more. A personal return, with business income, may cost you up to $1,000. If your bookkeeper did a good job, your taxes will take less time, and you may see savings at year-end. Beyond the costs of financials, you also have more work. You must file legal documents and keep your Minute Book active and accurate. On the banking side, you will need to open a business bank account and a business credit card, which means more bank charges. Bank charges add up.

It’s more of a hassle.

It’s much easier to be a sole proprietor. The business is you, and you are the business. The bookkeeping is easier, and overall, you don’t have to worry about a corporate entity and the associated paperwork.

Losses cannot be deducted personally.

If you have a new business and you are still losing money, it might be a good idea to not incorporate. When losses happen in a corporation, then only the corporation can claim these losses. A new business typically loses money in the first 2-5 years, so it might be a while before you can use these losses to reduce your tax burden. On the other hand, if you are a sole proprietor, business losses can be claimed against your personal income, and it can be used right away.

Timing

Now that you know about the pros and cons from a bookkeeping point of view, when should you incorporate?

There are no hard and fast rules, but generally, if the Pros start to outweigh the cons, then you should do it. Sometimes, the benefits are there from day 1. For example, if you run a high-risk business, and want to protect yourself, it might be wise to incorporate to get that peace of mind. Of course, you can also purchase enough insurance to achieve the same effect.

Generally, if your business’s net income is near $60,000, you might be fine either way. However, if your income is greater than $60,000, then it might be better to incorporate to take advantage of tax planning opportunities.

Now that you’re armed with the answers to “When Should I Incorporate?”, are you ready to make the right call?

Click here for our free 30-minute consultation to go through whether you should incorporate. 

Feel Shame Because You Don’t Know Your Finances? Doesn’t Have to be That Way.

Entrepreneurs feel shame around not knowing their finances. It doesn’t have to be that way. Know your KPI’s, and you’ll know your business.

My friend and I were hanging out and we started talking about business. He was wanting my thoughts on whether he should expand. As an accountant, my next question naturally was, what are your Gross Margins? He tried his best, explaining the costs that go into providing that service, but he couldn’t give me a %. At that point, he became quite embarrassed.

I didn’t realize until that moment, but I’m sure lots of my clients feel that way. They got into business to do something they love, and bookkeeping is just something that they have to do. Even when it’s done, they may not know what to do with their numbers.

If you are feeling this way, just know that you’re not alone. Here are a few good places to start.

Gross Margin

Gross Margin is Revenues minus Cost of Goods Sold.

Why is this important?

It tells you how much they have left over from sales to cover other operating expenses. You have to make sure you Gross Margins are high enough to cover your operating expenses.

For example, you’re a consulting company. Your revenues are your invoices to your clients. Your costs are payroll to your sub-contractors or your employees to provide those consultations. Or, you are a restaurant. Your revenues are your sales, and your direct costs to provide those meals are food costs and labour. Let’s say your revenues are $100,000 for the month, but your costs to provide that product/service is $75,000, then your gross margin is $25,000, or 25%. This means that for every dollar you bring in, you only have $0.25 to go cover your overhead, which includes rent, management wages etc.

If you’re not getting this information, make sure to ask your bookkeeper to structure your bookkeeping so that you can get his figure on a monthly basis.

If your gross margins are low, consider the following

  • Can you improve your operational efficiency to lower cost?
  • Can you raise prices?
How to increase your Gross Margin: Improve your Operational Efficiency to Lower Cost and/or Raise… Click To Tweet

Comparisons vs your prior year or quarter

Tell your bookkeeper to send you a “Profit & Loss statement separated by month, with comparisons against prior year or prior quarter”. You can literally copy and paste this request. (If they don’t know how to get this information to you, it’s time for you to get a new bookkeeper).

Why is this important?

This report will show how you’ve done with a comparison to the same time period last year or last quarter. It provides very valuable information because it can show you how you have grown over the past period, but also where your expenses went up.

For example, if you’re doing $60K in January 2017, and you did $30K in January 2016, then the good news is that your business has doubled in one year! However, if your wages increased from $15K last January to $40K this January, then that’s not a good thing. Comparing your financials to other periods gives you context.

Rent

If you are a business that has a high rental cost, such as manufacturing, retail, restaurants, etc. it might be good to consider these 2 financial metrics

Rental efficiency ratio

Basically you take revenues and divide by your rent. E.g. $100K in revenues and you pay $10K in rent, then your rental efficiency ratio is 10:1.

Why is this important?

What this means is that for every $ you pay in rent, you get $10 in sales. This means very little in a vacuum, so it’s important to track this metric from month to month to see if this ratio is increasing or decreasing. Consider how you can increase this ratio. How can you increase sales without having to increase rent?

$ / sq foot

Similar to the ratio above you take the revenues and divided by the sq foot of your store. E.e. $100K in revenues in a 1000 sq foot store. Then you’re generating $100/sq foot.

Why is this important?

Again, it doesn’t mean anything on its own, but if you compare it to your competitors or track it from month to month, you can see if you are able to increase your sales without increasing your store footprint. Often times, this can be done by adding complimentary products that don’t that much more space. For example, a gym can start selling towels, t-shirts, books or drinks. A restaurant can sell art, or dessert-to-go. You can increase revenues without taking up that much more space.

Labour efficiency ratio

If you have a business that heavily depends on labour, then tracking this ratio is essential.

Why is this important?

It tells you how much revenues you bring in for every dollar you spend on labour. For example, if you have $500K in revenues, and you’re spending $300K on labour, then your ratio is 5/3 or $1.7. For service based businesses, you should be aiming for ~2. Keep track of this ratio and see how you can improve it on a monthly basis.

Job costing or division tracking

Like most businesses, there are lots of moving parts. For a trades and construction business, you might have many jobs all going on at the same time. Therefore, it’s extremely important to ensure that all of your jobs are profitable. Quickbooks allows you to do job costing for each of your jobs. Have your bookkeeper explore ways in which they can demonstrate to you how much profit you have made from each job after materials and labour.

You might have divisions. For example, we have a client who is part Retail business, part event equipment rental. They are two unrelated businesses operating under the same umbrella. Therefore, we created 3 divisions – Event rental, Retail Store, Head Office – so she has absolute clarity on which division is profitable and which is not

For us, Legacy Advantage has 2 locations and 1 “phantom location”. We have an office in Vancouver, an office in the Fraser Valley, and a “Head Office”. We allocate all revenues and costs associated with these locations accordingly. Then I allocated Head Office expenses to each location accordingly. For example, marketing costs and my wages are split a third, a third. This type of allocation gives me extremely valuable financial intelligence so that I can make better decisions.

In Summary,

Don’t just look at the net profit number. Know your KPI’s. You’d be missing out on so much by not digging into the details. Have your bookkeeper report on these ratios above and gain more financial insight into your business.

 

[8 Do’s and Don’ts] to Improve Your Small Business Cash Flow

For growing companies, cash is king. For entrepreneurs and small business owners, cash flow can be a defining factor for whether or not your business succeeds. So how do you improve cash flow?

Put simply, business cash flow is the balance between the cash flowing into your business and the cash flowing out of it. Small business growth requires increasing investments in staff, administration, equipment, and materials. Without the cash flow to cover these expenses, you can quickly get in over your head.

Diagnosing the state of your small business cash flow is fairly straightforward. If you have more cash outflow than inflow, you have a cash flow problem. If you have more inflow than outflow, you’re in a great position. So, how can you ensure a positive cash flow that grows as your business grows?

Here are some basic do’s and don’ts that will help you improve your business cash flow:

Do: Collect up front and pay later

Cash flow is like a game of tug of war. You want to collect as quickly as you can. Your suppliers, meanwhile, want you to pay as quickly as possible, and usually in advance. Your job is to collect sooner and pay later. Collect deposits at the start of work and create package pricing that ensures you get paid before the full delivery of service. At the same time, ask your suppliers if you can extend terms without paying interest and they just might say yes. If you can pull this off, you will improve your cash flow.

Don’t: Use a factoring service or advance service to cover expenses

Some services will advance you funds in exchange for a fee, and request these funds be paid back within a few months. This is cheating. Funding services are a Band-Aid solution to a shortage of cash flow, and as cash flow is the life blood of your business, that shortage is a sign that there is a fundamental problem in your company that needs to be addressed. Use these services sparingly (and only when necessary) as a temporary solution, but do not rely on them to improve cash flow.

Do: Reduce your inventory

If you sell products, bear in mind that larger inventories require more cash to maintain. The simplest fix here is to look for ways to reduce your inventory. Perhaps you could implement a Just In Time (JIT) inventory system that enables you to order and receive goods only as needed. As your business grows, you can ask for better terms from your suppliers that will allow you to expand your inventory.

Do: Reduce your Work in Progress

If you sell services, you need to reduce your overhead production costs, often referred to as Work in Progress or Work in Process (WIP). For example, when you pay employees to provide a service, that outlay of cash comes in advance of receiving payment from your client, which usually arrives 30-40 days after delivery of the service. This puts tremendous strain on your cash flow. You can reduce this by invoicing more frequently or asking for a deposit. The best solution is to stop charging hourly and start offering value-priced packages that are the same every month and collected up front.

Do: Use credit cards (… and pay on time)

All credit cards have grace period of 21 or 28 days. This is essentially an interest free loan that you can take advantage of every month to improve cash flow. Many credit cards also have fringe benefits, such as points earnings or cash back. That said, you MUST pay your credit cards off on time, because paying 29.99% interest on late payments is the exact opposite of improving cash flow. Assuming you can manage this, using credit cards is ideal from a bookkeeping standpoint because your credit card transaction records offer a detailed paper trail of your business expenses. Here’s more on setting up a simple bookkeeping system.

Don’t: Continually use a line of credit

A line of credit is essentially a revolving loan. The idea is that you use them and then pay them back within 30-60 days, at which point those funds become available to you again (hence the revolving part). This makes lines of credit rather dangerous, because having one is like having a really, really, large credit card allowance. The initial interest rate is often much lower than your credit card, so comparatively it seems like a great option. However, most people treat lines of credit as a standard loan, and rarely pay them back within the time allotted, resulting in high interest charges. A line of credit should only be used in times of emergency. As mentioned above, what you should be doing is examining your business and see if there are fundamental problems to your cash flow. A line of credit is a Baid-Aid, not a solution to cash flow.

Do: Reduce expenses

Every company has recurring subscriptions to things that they never use. For example, let’s say you use a SaaS CRM and pay per person per month, but someone has just left your company. That extra $20 a month that you’re paying will add up over the year. Review your credit card statement, bank statement, and financials to identify unused subscriptions. Take a hard look at meals, entertainment, and any other luxuries that could be cut down, and evaluate campaigns (ex: Google AdWords) to determine their effectiveness. If something is unnecessary or unproductive, cut it. Cutting costs is the most sustainable way to improve cash flow.

Don’t: Short change your employees

When cash flow gets tight, some business owners are tempted to short pay their employees or to delay paychecks. This is dangerous territory. Your employees are your company’s most important asset, so it’s not wise to extend terms with them. If you have a great relationship with your team, they may be understanding of the circumstances and accept delays for a short time. But, at the end of the day, they need to make a living. If they leave, they take vital expertise with them, which will only worsen your already tight predicament. And if they leave with a bad impression of you and your business, it could seriously impact your reputation in the community.

Let me repeat again

Revenue is Vanity, Profit is Sanity, Cash is King

Don’t just chase revenue, but make sure you’re also profitable. And at the end of the day, make sure you have more cash in your hands than the day before.

If you’re interested in how a great bookkeeper can support you to improve cash flow, click here.

Focus – “There are Riches in Niches”

I’ve heard a saying: “There are riches in niches.” Now, this may not be the best rhyming couplet, but it’s certainly some of the best advice you’ll ever get about starting your own business so it bears repeating. Choose a narrow focus, and then specialize. Become an expert in your field, build a reputation for a particular skill set, and own that space of the market.

To find your niche, you need to keep your eye open for opportunities. 

To find your niche, you need to keep your eye open for opportunities. Click To Tweet

While I was working at a Big Four accounting firm, I noticed two very important things. Firstly, clients seemed to have a really hard time finding quality bookkeepers, and often didn’t have full access to reliable financial data about their own company. Without a clean set of financials, the tax accountants were spending far more time than necessary on the client’s NTRs and T2s. And because the fee was the same regardless of how much time the accountants spent on the file, the accountants were essentially losing money. Secondly, there was no major company or brand that had established itself as the leading expert in quality bookkeeping (and bookkeeping only). None. Anywhere. In the world.

That was it—my niche. I wanted to create a bookkeeping business, Legacy Advantage, that would offer a win-win-win solution to the accountants, the clients, and the bookkeepers. If we could start a bookkeeping business that could provide a clean set of financials to the accountants, we could save the accountants time (hence boosting their hourly take-home) and also provide clients with superior financial data that would empower them to make better business decisions. If they were happy, they’d continue to work with us, and help us build a powerhouse bookkeeping brand through word-of-mouth and referrals. Win. Win. Win.

To solidify your niche market position, you need to specialize.

You might think that you need to offer your clients a full suite of services in order to attract their business and remain competitive, but you’d be surprised. While setting up Legacy Advantage, I quickly discovered that doing less opened more doors than it shut. How? Well, specializing in bookkeeping with Quickbooks Online allowed us to become experts rather than jacks of all trades, and this did two things. One: It enabled us to do things that other bookkeepers couldn’t, making us sought within our field. Two: It allowed us to complement rather than compete with accountants, turning those accountants into allies.

Your specialization need not be defined by what software you use, nor by doing work that others cannot or prefer not to do. I know some accounting firms that have defined their niche by focusing in on a particular industry. For example, a colleague of mine launched a business focusing entirely on offering accounting solutions to Creative Firms. This enabled him to zero in on business and financial particulars that are unique to the Creative Business Owner. Given the incredible growth of and interest in Marketing Agencies, PR Agencies, Photographers, Videographers, over the past few years, his company quickly became a go-to consultant for new and existing Creative Firms that were looking for accounting and/or business development insights specific to their industry.

Consider what can you do that no one else is doing. Can you provide specialized services to an industry that’s being under-served? Can you offer rare or uncommonly in-depth expertise with a particular technology or skill? Do you have a fresh solution to an old problem? Do you have a first solution to a new problem? If you can answer, “Yes,” to any of these questions, then you may have just found a great place to start.

In summation, it boils down to this: Go an inch wide and a mile deep, not the other way around. There are lots of companies skimming the surface. You have to dig deeper to find the win-wins, and when you do, you’ve got the makings of a great start-up.

Here’s a webinar on finding your niche.

Lead, don’t manage

If you’re planning on starting your own business, that means that sooner or later you’re going to be in charge of a team, and the members of that team are going to be your most valuable assets. Not your clients, not your software, not your IT, IP, or your location. Your staff. And it will be your job to find them, invest in them, and engage them.

Yes, I suppose you could say I’m talking about good business management, but in reality I’m talking about good business leadership. Stephen Covey, author of “7 Habits of Highly Effective People” said, “You can buy a person’s hand, but you can’t buy his heart.” In other words, if you pay for someone’s labour, you’ll get their labour, but you may not get their creativity, their ingenuity, or their loyalty. So how do you earn these?

Give your employees a cause to believe in.

This is especially true for millennials, which, as a group, can be challenging to manage. I know. I am one. I was hard to manage (a heartfelt “Sorry!” to all of my old managers out there).

Give your employees a cause to believe in. Click To Tweet

Millennials are often seen as entitled, and sure, some of us are, but for the most part, I think millennials are idealists. We need a cause to believe in and a vision we can buy into. And when we do, we give it our all. But that puts the onus on our managers not to manage us, but to lead and inspire us. That may sound like a tall order, but I don’t think it’s as far out of reach as it seems.

According to author, coach, speaker, and leadership expert John C. Maxwell, “Leadership is influence, nothing more nothing less.” So, let me ask you a question. How much influence do you have? Think about it. Do you have influence at work? At home? On social media? Over your life? Over other people? Most of you likely have some influence in some, if not all, of those areas, so my argument is this: Most of you are already leaders. Want to be a better leader?

Seek leadership development just as you would professional development.

What does this mean? It means you must continue to grow as a leader—to gain new viewpoints, new skills, and new inspirations—and ultimately this boils down to how well you know yourself and your own motivators. Begin by asking yourself: Are you the best you can be? Are you a person that’s worth following? Do you know where you’re going? Do you have an inspiring vision for your life? If the answer to any of these questions is “No,” then ask yourself why that is, and how you can change that.

As a University of British Columbia alumnus, one of the most frustrating things for me when interacting with current students is that many of them don’t know who they are, where they’re going, and what they want to do with their life. In business courses they’ve been taught how to generate corporate vision statements, mission statements, and company values, but they’ve never considered what their own vision, mission, and values are.

Yes, they’re young. Yes, they’ve got time. But, at the end of the day, a company is just an organization of individuals. If those individuals don’t know who they are or why they are there, they won’t be passionate about their work, they won’t gel as a team, and they won’t help your company thrive.

As the business owner, you are the leader. You set the tone, the direction, and the pace. If you know who you are, as a person and as a leader, and what your business represents, in terms of its mission and values, then you can begin to inspire and influence your team.

Bookkeeping Company vs Freelance Bookkeeper

Why should I hire a bookkeeping company instead of a freelance bookkeeper?

Nowadays you can hire freelance contractors to help with almost any aspect of your business, from HR to marketing to maintenance. Freelance bookkeepers abound, and many of them are excellent at what they do. There are, however, certain benefits to working with an outsourced bookkeeping company that can offer you the resources of a team over those of an individual.

Here are five reasons you should consider hiring outsourced bookkeeping services instead of a freelance bookkeeper to manage your company’s accounts.

1. Dealing with work overload

One bookkeeper can easily become overloaded with work, especially around busy times of the year such as year-end tax filing. This can dramatically decrease their response time and also lead to increased stress, which may result in a lower quality of work and less attention paid to critical industry developments (ex: policy changes). A bookkeeping team can spread this workload among themselves to ensure that customer service and quality never suffers.

2. Sharing knowledge and expertise

When a freelance bookkeeper encounters difficulty, he or she can’t simply turn around and ask a colleague for input. The only available options are to: a guess, or b) spend hours searching for the answer. A team can talk through the issue and arrive at a solution more quickly thanks to their combined knowledge, training, and certifications. Most bookkeeping teams are led by a manager whose experience and knowledge alone can save the team hours of research.

3. Covering for vacation and leave

If all of your bookkeeping is tied to a single person, what happens when this person gets sick? Or takes a leave of absence during your busiest time of year? Or goes on vacation when you happen to experience a moment of crisis? If your books are being managed by a bookkeeping team, there will always be somebody else able to step in and ensure that there is no interruption to your workflow.

4. Covering for accidents and emergencies

Forget vacations. What happens if, God forbid, your freelance bookkeeper falls seriously ill or is accidentally injured or killed? If all of your accounting information is stored with this individual, you’ll have a hard time retrieving it. A bookkeeping team has contingency plans in place so that you’re protected if the unfortunate happens. Another representative in the company will take over management of your accounts so that your business can continue uninterrupted.

5. Maintaining accountability

A freelancer is his or her own supervisor, meaning your freelance bookkeeper has to hold him/herself accountable to the goals and deadlines you’ve agreed upon. It’s hard, and at times you might find yourself having to manage your bookkeeper. A bookkeeping team will have management and review systems (ex: performance reviews) in place to ensure that everyone on their team is held accountable.

Now you know the difference, but what should you ask before choosing a bookkeeper?

You are in luck!

We’ve created a FREE extended guide called “5 Things to Ask Before Choosing Your Bookkeeper – And The Responses They Should Give You.”

We’ve shared insights that will help you understand how bookkeepers operate, bill, and deliver results. Most importantly, the guide details exactly what a good bookkeeper should tell you when you ask those questions. Our guide is a must-read for those looking to save time and money.

Download Your Free Guide Today!

5 Ways Bookkeepers Support Business Decisions

As your business grows, you need to surround yourself with a team of people that have the skills and drive to help you take your vision to the next level. And when it comes to bookkeepers, you want a financial quarterback on your side, not a data-entry monkey.

Unfortunately, both can be called bookkeepers, but the quarterback is the bookkeeper that asks how they can make your business better. They’ll pair their knowledge with a clear assessment of your business data to help you make the business decisions that are in the best interests of your company.

For example, a bookkeeper can improve how you approach decisions about:

Managing Cash Flow

Have difficulty keeping track of your cash? Great bookkeepers can give you a cash flow report that shows where your cash has been spent. They can also develop cash flow projections that will help you to manage your current and future cash needs.

Selecting Projects

If you take on a lot of project work, a bookkeeper can assist you with project costing and give you a breakdown of which jobs made you money and which jobs didn’t. This can help inform the decisions you make about what jobs are worth taking on in the future.

Improving Gross Margins

Are you looking to improve your company’s gross margin? A talented bookkeeper can help you analyze direct and indirect costs and determine where your greatest opportunities for improvement lie, enabling you to make informed decisions about production, materials, and pricing.

Offering Employee Incentives

To get the most out of your employees, you have to encourage their efforts. Whether you’re looking to launch an incentives program or expand an existing one, your bookkeeper can help you analyze, plan, and execute a bonus scheme that will enhance employee performance.

Buying or Leasing

Small- and medium-sized business owners need to consider their investments carefully, particularly when it comes to big ticket items like office space and equipment. Should you lease, or buy? Your bookkeeper can give you the data you need to make a wise decision.

Your bookkeeper can also help you make decisions about expense management, tax filings, and a host of other issues. These insights can impact the growth and efficiency of your business and also ensure that your business stays in line with relevant business regulations and CRA requirements.

Learn more about how Legacy Advantage can help you make the right business decisions. Contact us today.

 

7 Apps To Streamline Your Business Cloud Accounting

It goes without saying that your business should have an online presence. But should you take your business online? And what does that even mean? Simply put, the future of business management is in the cloud. No, not “up in the clouds,” actually ON THE CLOUD — using business cloud accounting software or apps.

If you’re not yet familiar with the cloud, then in the simplest terms according to PC Magazine, “cloud computing means storing and accessing data and programs over the Internet instead of your computer’s hard drive.” From file storage, back-ups, and software updates to group collaboration and client management, business cloud solutions offer companies enormous benefits. And while every aspect of cloud computing may not be a fit for your business, business cloud accounting will be.

Cloud applications effectively streamline business accounting functions, so let’s take a look at some apps that may benefit your company in the following areas:

Integrated Cloud Accounting Platform

The first step in establishing a business cloud accounting system is to select a cloud-based platform from which all of your other applications will be managed. Our preferred choice is QuickBooks Online (QBO). It’s easy to learn, and it integrates with thousands of other applications.

Point of Sales (POS) System

If you need a POS, then Square is a great choice. It has a very simple cost structure, and a beautiful interface suitable for most retail operations. If you don’t need a POS, you can email invoices directly from QBO, which handily offers your customers the option to pay by credit card.

Cloud applications effectively streamline business accounting functions Click To Tweet

Receipt Tracking

Never lose a receipt again! HubDoc and Receipt Bank are mobile applications that allow you to take photos of receipts and store that information digitally. As soon you as you digitize your receipts, you can throw away the original rather than store it in a shoe box under your desk.

Data Analysis and Reporting

QBO has great native reports, from simple profit and loss statements and balance sheets to more complex reports that can break down your profits and losses by month, by customer, by class, or against your budget. Unfortunately, QBO’s dashboard and visuals aren’t as impressive as its data. If looks matter, another option is Fathom, which allows you to generate both insightful and beautiful reports.

Transfer and Storage of Data

Your financial team can’t accurately process the information they don’t have or can’t read. Receipts, invoices, statements and other paper documents are easily lost or garbled, but there are tools that can digitize and upload these to your cloud accounting system. On the go, you can use the mobile app CamScanner to upload items you’ve just received. If you’ve got a backlog of paperwork in the office, you can digitize it with the Scansnap scanner and never look back.

 

Looking for more tips on how to set up a business cloud accounting system? Legacy Advantage would love to help.

 

Three Ways to Achieve More Simplicity in Business

In so many ways, workplace productivity and efficiency boil down to finding greater simplicity in business, and most of us can agree that simplicity and administration are infrequent bedfellows.

Recently, I was listening to a Harvard Business Review podcast interview with Basecamp CEO Jason Fried in which he was advocating that businesses reduce administrative burdens so that employees can focus more on their work.

I couldn’t have agreed more.

Simplicity has always been at the core of our philosophy at Legacy Advantage. Now that’s easier to say than it is to achieve, so we’ve embraced the Results-Only Work Environment approach known as the ROWE system developed by Cali Ressler and Jody Thompson. The basic logic is this: when, where and how you do your work is less important than what results from that work. Simple, right?

Simplicity in business starts by reframing the question and asking yourself not what you’re trying to track but what you’re trying to achieve. Our aim has been to eliminate as much administrative work as possible so that we can instead spend that time adding value for our bookkeeping clients.

Ask yourself not what you’re trying to track but what you’re trying to achieve. Click To Tweet

Here are three easy ways you can achieve simplicity in business:

1. Have as few meetings as possible

When you think about it, meetings are expensive. If five of your employees participate in a one-hour meeting, that’s five productive hours gone. Truth be told, meetings (especially status update meetings) are usually a huge waste of time considering, as Fried points out, these updates could simply be summarized and sent out.

If you’re running meetings daily, weekly, or even monthly, take a step back and ask yourself this: What is the result I’m trying to achieve, and what is the result I’m actually achieving?

If the aim is to keep everyone in the loop, why is that important? Does person A working in Department X really need to know what person B in Department Y is doing? If yes, then do persons C and D need to be there? More importantly, can A update B in a more efficient way and still keep management in the loop? Bottom line, hold meetings sparingly and run them efficiently

2. Stop tracking time and attendance

Companies spend a lot of resources tracking holidays, paid leave, unpaid leave, sick days, etc., but keeping track of whether or not someone is at their desk eight hours a day only proves that they were there. It doesn’t tell you how productive they were.

What if they could be more productive by working outside the normal 9-5 business hours? My senior manager comes to work at 11am. Crazy, right? Not really. He’s a night owl, so he works late because that’s when he’s most productive. Give your employees some flexibility and they may pleasantly surprise you.

The same goes for holidays. Tracking holidays is tedious, especially as your team grows. What if you let your employees decide when and how long they need for vacation? How much do the details matter if your employees are refreshed, at their best, and delivering quality results on time. If your fear is that employees will abuse this sort of policy, then you either have a corporate culture issue or they’re not the right employees.

3. Maximize your profits and efforts

Did you know: the majority of your profits come from a small number of customers and only a small percentage of your marketing efforts acquire the bulk of your new customers.

Now, when you have a great idea or a great product, you tend to want to tell everyone about it. You need spread the word wide and far by as many means as possible, right? Wrong.

What you need to do is maximize your productivity by identifying your best margins. Who are your top customers? What are your most effective marketing channels? You need to find your niche.

All of these ideas about maximizing efforts and profits feeds into the 80/20 principle which I’ve written about at length in a previous blog.

Once you’ve figured it out, trim the fat by eliminating underperforming and unnecessary products and services. By doing this, you can redirect your time, energy, and resources towards your top marketing activities and big ticket clients.

Finding greater simplicity in business ultimately maximizes both profits and productivity, makes your employees happier and frees up your valuable time.

 

Bookkeeping Rates of Pay: What You Need to Know

Have you ever considered how rates of pay can impact your relationship with your bookkeeper?

Traditionally, bookkeepers (not to mention many, many other contract professions) have charged an hourly rate of pay. This is why most conversations about project costs and estimates begin with the question, “What’s your hourly rate?”

However, an hourly fee structure is no guarantee that you’re getting the best value or the best service. At Legacy Advantage, we advocate a flat fee over an hourly rate. Considering rates of pay when choosing a bookkeeper can save you time, money, and provides relational opportunities. Here’s why:

Hourly Rates of Pay Encourage the Bookkeeper to Take their Time

The math here is pretty simple. The more hours your bookkeeper works, the more he/she gets paid. Unfortunately, this can make bookkeepers resistant to adopting new technologies or innovations that would speed their work because reducing hours means reducing income. Why innovate when slow and tedious means more income?

Flat Rates of Pay Encourage Bookkeepers to Work Faster

To set a flat fee that accounts for all of the work involved, the bookkeeper must conduct a lengthy discovery process with you, the client, in order to clarify the scope of the engagement. This will actually encourage the bookkeeper to innovate, because the more efficiently he/she can complete the file, the more he/she earns per hour. You still win, because a clearly defined scope and an efficiently managed process result in less admin work for your staff.

Considering rates of pay can save you time, money, and provides relational opportunities. Click To Tweet

The Client Assumes All of the Risk When Paying Hourly

If there are errors in the work that’s been done, the bookkeeper will charge you for the additional time it takes to fix those errors. If you have a question about the process, the time it takes to answer your question will also be billed to you. This turns the relationship between you and your bookkeeper into a purely transactional one that will discourage you from being more actively engaged with the work your bookkeeper is doing.

The Bookkeeper Assumes All of the Risk When Paying a Flat Fee

Under a flat fee structure, the bookkeeper will take as much time as necessary to fix errors in the work. That time is on them, and the more time spent correcting errors, the less they end up getting paid per hour. This incentivizes your bookkeeper to get it right the first time. You, as the client, are also free to ask questions without incurring additional fees, which results in a much better relationship between you and your bookkeeper.

 

Interested in hiring Legacy Advantage to help with your business bookkeeper? Get a quote today!