Why Do Private Investigator Businesses Struggle or Fail?
12 Oct 2016 Adam Visnic
Investigator Adam Visnic polls PIs and does an accident investigation/post mortem on why PI companies go bust.
If you go to the recovery room at the hospital, you’ll see a lot more people with gunshot wounds in their legs than in their chests. But that’s not because people don’t get shot in the chest; it’s because the people who get shot in the chest don’t recover.
As private investigators and business owners, there’s an important parallel: Autopsies done on the patients who made it back to the ER aren’t worth as much as those who never made it back. Likewise, learning from successful companies may not be as important as learning from failed private investigator firms. Understanding what fatal mistakes led to failure is as important, if not more, than what made successful companies great.
So, what are those mistakes? How did specific PI companies go out of business? And more importantly, what can we learn from those mistakes?
For valuable insight on this topic, we polled private investigators from across the nation for insight into how their colleagues had failed, or, how they themselves had failed and learned. Nearly a dozen PIs chimed in to help. And, though the resulting stories may be grim, they are telling.
Here are some of the insights they shared, along with a few of my own:
1. Failure to Become a Businessperson
Brian Willingham, from the Diligentia Group, gives insight into the value of making this major shift: “Most private investigators I know are simply not good businesspeople. Some of the best investigators that I have ever met are the absolute worst businesspeople. They are two very distinct skill sets.”
2. Failure to Market Your Business
“The biggest failure I’ve seen is a lack of marketing skills. A majority of private investigators are former or retired law enforcement officers. While these individuals are highly skilled and experienced investigators, they typically have no marketing ability or sales skills.” says Brian C. Muhlbach, vice president of Resource Investigative Services in Fort Walton Beach, FL.
Getting your name out there is crucial to the life of your business, and adapting to today’s style of marketing is equally valuable. As Ruben Roel, from InvestigatorMarketing.com says, “Your website is your neon sign.”
Christopher A. Borba, principal of Emissary Investigative Services, shares a story of how this translates in the real world: “About a year ago, someone reached out to me on LinkedIn to discuss business growth and marketing. He had started his own PI firm six months before and had not received one call for business. His website was a free website, and the only advertising he had done was on Craigslist. That same business failed quickly afterward.”
3. Failure to Answer the Phone
Communicating with your clients is fundamental. April Higuera, owner of ADH Investigations, maintains that investigators often fail because of poor customer service. “PIs must be available, diligent, reliable, and comprehensive, and [they need to] communicate frequently and effectively with people,” she said.
As Utah private investigator Scott Fulmer (founder and principal investigator at Utah Gumshoe) points out, a key business failure is “waiting for the phone to ring and then never answering the phone or returning phone calls if it does ring.”
Francie Koehler, host of PIs Declassified and owner of Special Circumstances, says simply: “Lack of timely follow up with clients” is what leads to failure.
4. Failure to Develop Relevant Skills
Early in his career, Warren Buffet felt he needed an important business skill: public speaking. Despite having a lifelong fear of it, he signed up for just one public speaking course and overcame his fear. If public speaking isn’t your thing, writing well-researched and compelling articles can help you become an expert on a specific subject while communicating your business vision.
“Taking the time to organize my thoughts and stand up in front of a crowd has gotten me in front of a lot of people I needed to meet,” said Hal Humphreys, executive editor of PursuitMag and founder of FIND Investigations. “And number two, it’s caused me to think about what it is we do in an organized way. It gives me a clarity for what we do and why.”
5. Failure to Work With Good Talent
Not investing in a professional team of investigators, assistants, or even a business partner could end your business. Trying to do it all yourself is a quick path to failure. As C. W. Sellers (director of education & training for the California Association of Licensed Investigators) says, “Knowledge of how to build a team of supportive colleagues ready to help and get their hands dirty” is an area where investigators have too often fallen short.
6. Failure to Manage Finances
Years ago, an investigator I managed told me a story: “I once had a company with six investigators underneath me,” he said. “We did well for years. But where it went south was when I spent all the profits. Every dollar that came in went right out the door.” He readily admitted that he handled his finances poorly and failed to put money back into the business.
“Instead of reinvesting the $12,000 windfall they got from their first case, they go on vacation and spend it all,” says Ruben Roel. “Seven to eight months later, they’re out of business.”
7. Failure to Find a Niche
Trying to be everything for everyone is another route to failure. “To be a successful private investigator, you must have a niche and understand your demographics and whether that niche will work for your area. Whether it’s local, statewide or national, that needs to be determined before you open your business,” says Jay Rosenzweig , owner of J R Investigations.
8. Failure to Charge the Right Price
How much do we charge? Some companies charge too little. Some charge too much. Failed companies don’t know what they’re worth. And failure to charge enough leads to reduced profits and thereby, reduced growth. Instead of throwing out lowball numbers, help your clients understand the value of your services. Show them that a small investment, in the form of your services, up front can reap huge savings down the road.
“We’ve got to value ourselves,” wrote Amy Lynn Burch in a PursuitMag article last year. “One of the greatest challenges we face as professional investigators is communicating the value of our services to clients in a marketplace glutted with mass-market information providers.”
9. Failure to Deliver Quality Work
Your work product needs constant pruning. It’s one thing to put out a subpar product or service, but to never fix it is bad business. You’ll find that if you don’t develop your services, you’re not only wasting time, money, and effort on products and services but you’ll be putting out a product that customers don’t want or need. Iteration is key – make small, incremental changes with every report you write.
10. Failure to Abide by the Law
The sad fact is that the perception of private investigators sometimes wavers between a used car salesman and a shady lawyer. Want to know why? Many private eyes creep over that invisible line – breaking the law. It’s the surest path to failure. Alberto Paoletti, owner of Informark S.R.L in Florence, Italy, said that he knows of some investigators who failed because they didn’t abide by the law and went bankrupt as a result.
He told me the story of an Italian PI (Emanuele Cipriani) involved in an illegal wiretapping scheme from 1996-2006: (*We’ve edited his comments.) “The Italian judges were able to prove that executives of the main telephone company in Italy had asked his investigations agency to gather information about prominent people in politics, journalism, sports, etc. The investigator came by the information illegally and with the help of the police and other public employees, the judges found. The investigator was arrested and his earnings (about 20,7 million euros) were confiscated.”
11. Failure to Maintain Certification and Education
Many investigative companies squander growth opportunities “by not joining state organizations, national organizations, listening to audiobooks, or seeking out continuing education. So many PI’s just keep doing what they’ve always done and so they get what they always got,” says Scott Fulmer.
12. Failure to Find Repeat Clients
Philip A. Becnel IV, partner at Dinolt Becnel & Wells Investigative Group, explains the importance of finding clients that pay, and pay more than once. “Successful private investigation companies tend to have a benefactor. This could be an insurance company or a law firm—some larger company that gives them stability and lets them weather the crowded market of companies chasing what I refer to as transactional cases. These are one-off cases where, for example, some random dude hires you to follow his wife.”
* * *
Many private investigators enter the industry with dreams of solving tough cases and running a successful business — one that thrives on innate curiosity, diligence, and effort. But in order to keep a business, you’ll have to make the necessary investment into the areas listed above. Otherwise, you’ll be just another “gunshot victim.”
If you can make the transition from top-notch investigator to top-notch businessperson, you’ll be on your way towards achieving your goals.
5 REASONS TO OUTSOURCE ALL OF YOUR BOOKKEEPING PROCESSES
September 19, 2016 by Veronica Wasek
As a CPA and owner of a modern accounting company you would think that I love working on my bookkeeping. Actually, no I don’t! I discovered early in my business journey that my time is best spent growing my company and taking care of clients than working on my own bookkeeping. I made the decision a year ago that one of my very qualified bookkeepers would take care of 100% of my company’s internal bookkeeping. All I do now is make remote deposits, approve payroll, approve vendor bills electronically, approve one expense report, and review invoices. I freed up at least 2 or 3 hours a week! I’m going to share with you 5 reasons to outsource all of your bookkeeping processes.
A FAMILIAR STORY
Does this sound familiar? You, your spouse or relative, or your administrative assistant spent hours a week working on your company’s bookkeeping. You don’t know if you’re doing right, you feel out of control, and you don’t have the patience to work on it. Worst yet, you don’t do your bookkeeping – nobody does! It’s been months since you did any bookkeeping other than prepare invoices and pay vendors. Yikes! This is an all too familiar story.
Why do you hesitate to delegate your bookkeeping? It’s because you think you should be able to master it because you’re smart and educated, or you think you can’t afford it. You may be driving your company into the ground if you don’t free up your time and trust a qualified professional to take care of your company’s bookkeeping processes.
BUSINESS PROCESS OUTSOURCING
Have you heard of business process outsourcing? Business process outsourcing (BPO) is becoming the norm. Basically, you subcontract business-related tasks to a third-party service provider. In the past, a company had to hire a whole bunch of employees to create an “accounting department”. With technology and the cloud, you can outsource the entire accounting function to a qualified team of professionals.
REASON #1 – FREE UP YOUR TIME SO YOU CAN GROW YOUR COMPANY
Remember when you decided to start your business? You had a great business idea and you thought you would change the world. You envisioned yourself as a successful entrepreneur making a difference in the lives of your customers. Did you think about the long hours you would spend setting up your QuickBooks, trying to figure out what a chart of accounts is, running payroll, paying the bills, or reconciling accounts? Of course not! I bet you were in for a surprise when you realized how much administrative work you would have to do as a new entrepreneur.
The # 1 reason to outsource all of your bookkeeping processes is to free up your time and free yourself from mental clutter so you can focus on growing your business. Why spend your time on a task that generates no revenue for you when you can devote those hours to growing and scaling your business?
REASON #2 – GAIN CONFIDENCE AND PEACE OF MIND
Most of the business owners I talk to tell me that they are worried that they’re not doing their bookkeeping correctly or that they may get in trouble with the IRS. I don’t know how long the average business owner spends worrying about their bookkeeping – either because they’ve made a mess or because they’re not working on it. When you outsource all of your bookkeeping processes to a qualified accounting professional, you can be confident that your bookkeeping is being handled timely and accurately. It’s amazing how much more you can accomplish when you rid yourself of worry and mental clutter that worry brings.
REASON #3 – MODERNIZE AND INTEGRATE YOUR COMPANY’S OPERATIONS
Whether you want to admit or not, your entire company’s operations revolve around the accounting and financial aspects of your business. With QuickBooks and integrated software applications (apps), you can implement solutions for your entire company’s operations, including:
REASON #4 – PROTECT YOUR COMPANY
The average business owner delegates way too much responsibility to inexperienced support staff. That includes sharing banking credentials, giving administrative access to QuickBooks, processing the payroll, signing checks, and handling the company’s purchases. You might as well hand over your wallet to that person!
By outsourcing all of your company’s bookkeeping processes, you retain full control while qualified professional work securely with your data. A professional and reputable accounting firm should never ask for any sensitive information such as your banking credentials and they should never sign any checks with you. With QuickBooks and integrated solutions, you are in control and you still make all key financial decisions – such as when a payment will be released to a vendor. Just imagine, with a tool such as Bill.com, your vendors email their invoices directly to your e-mail box at Bill.com. Your bookkeeper assigns the correct accounting category to the transaction and sets up the vendor bill for approval. You receive an email notifying you that you have bills to approve. You view electronic images of your bills and approve each one for payment. Bill.com sends a check to your vendor after you approve and release the payment. Wasn’t that easy? No paper and no checks. Nice!
REASON #5 – GET THE POWER OF FINANCIAL INTELLIGENCE REPORTS AND DASHBOARDS
When you outsource all of your company’s bookkeeping processes, you can now get meaningful and timely reports. Did you know that you can go a step further? Now that you have clean data in your QuickBooks, you can integrate it with a financial intelligence app to get dashboards, key managements reports, and insights to help you manage your business. Really? Yes you can. I bet you thought that the only reason for maintaining your bookkeeping is so you can file your taxes. Actually, the true reason for having clean, timely, and meaningful financial data is to get the reports and insights you need to manage and grow your business. That is the most important reason and well worth the investment.
WHO IS A GOOD CANDIDATE FOR FULLY OUTSOURCED BOOKKEEPING SERVICES?
A service-based company is an excellent candidate for fully outsourcing their bookkeeping processes. That includes professional services, law firms, creative agencies, technology firms, marketing firms, and consulting firms.
WHAT IF YOU’RE NOT READY TO OUTSOURCE EVERYTHING YET?
No worries. If you work with a professional accounting firm, they will help you to identify which bookkeeping processes you can easily outsource. They will work with you to customize a package that fits your needs.
I have shared with you the 5 reasons to outsource all of your bookkeeping processes. You will free up time, gain peace of mind, streamline your operations, protect your company, and gain powerful financial insights to take your company to the next level.
5 REASONS A BOOKKEEPER CAN SAVE YOU MONEY
BY JANICE BANDICK
POSTED:APRIL 7, 2016
UPDATED:OCTOBER 26, 2016
If you’re a small business owner, chances are that you’re a fan of the do-it-yourself lifestyle. After all, you went into business for yourself. But while many small business owners love the freedom that owning their own business brings to them, it also means that expenses need to be kept to a minimum.
This frame of mind is certainly important in ensuring the success of your small business, as 30 per cent of small businesses are estimated to fail within 24 months because of increased expenses and low profits. However, there are times that being frugal can do more harm than good.
Owning and running your own business means handling an ever-increasing number of tasks, but putting off managing your finances has real repercussions. Come tax season, what started off as small molehill of paperwork can turn into a mountain of unbalanced ledgers.
But while many small business owners feel confident with payroll and bookkeeping software and that they can’t afford to hire a bookkeeper, the reality is that this attitude can do more harm than good.
Here are five reasons why hiring a bookkeeper may be the best choice for your business.
1. Makes Managing Your Profit Margin Possible
Owning a small business often means working with razor-thin profit margins, and a professional bookkeeper can keep track of these margins while offering insight on how to leverage them into larger returns on operating expenses.
A bookkeeper can also manage your monthly transactions, handle payroll, take care of government remittances and ensure that bills are paid on time, freeing you up to concentrate on growing your business.
2. Lets You Take a Load Off
Running a small business, especially in its early years, is no easy task. In fact, the first few years are often the most difficult, and many small business owners struggle to make ends meet. This often means juggling multiple tasks at once, which can translate into neglecting administration, a task that bookkeepers can help with.
3. Alleviates the Stress of Taxes
The collective panic of business owners across Canada that comes during tax season is no laughing matter. We would all like to avoid it, but taxes are a necessary part of business. Employing a bookkeeper, even on a temporary basis, means accurate and timely reporting of your expenses, write-offs, salaries and budgets.
4. It’s Only Temporary
The majority of small business owners can get away with outsourcing their bookkeeping operations, which allows you to save money. And unless your business employs over 30 employees or your revenues exceed $1 million annually, it’s unlikely you will have enough work to employ a full-time bookkeeper. Calling in the help of a bookkeeper for tax season can be a beneficial and temporary solution to this.
5. Peace of Mind
Beyond the tangible benefits to your business, bookkeepers can also provide you with peace of mind. Jacquie Johnston, VP of the Canadian Bookkeepers Association, recalls receiving countless end of fiscal year phone calls from frantic small business owners. On the benefits of hiring an external bookkeeper, she says, “Flexible scheduling and hourly rates allow you to pay for only what you need—nothing more, nothing less.”
While employing a bookkeeper may be a difficult decision for a small business owner, the decision may be worth it, as it could save you time, money and reduce some of the stress of running your small business.
THINGS WE CAN DO FOR YOU
Thinking of case management development? CROSStrax immediately removes the inevitable unknown and large costs involved with ancillary IT projects.
CROSStrax integrates chat and email correspondence, saving your organization significant time re-entering already available information. Automated case creation saves additional time and administrative burden.
CROSStrax maintains integrated relationships with leading online data solutions. Download database reports and create professional invoices to get paid faster with dynamic billing features through Quickbooks.
CROSStrax maintains a defined workflow process, allowing you to organize critical case information that will ensure best practices, ownership by involved stakeholders, accurate metrics, and overall better results.
Imagine having a mobile app where your investigators have access to case information, subject photos, and first-party GPS software so you know where and when your investigators are working and onsite. CROSStrax has it!
CROSStrax client metric reporting ensures consistency of reporting with actionable data on each individual case ensuring accountability and enabling informed decisions.
With CROSStrax, you and your investigative staff have the luxury of generating investigative reports with one click, allowing you and your management staff to easily analyze performance to improve your agency.
With CROSStrax, you’ll never miss another important event with interactive and shared calendars – you, your investigators, and your clients are now always on schedule.
The CROSStrax dashboard allows users to easily navigate assignments. This will allow your staff the ability to easily identify current tasks, potential client problems, or assignments that require special attention and visibility.
With CROSStrax, your investigators will now upload video, audio, and photos that you can share with your clients and codec maintains the date and time stamp with no need for costly video production programs.
Integrates with QuickBooks
A professional bookkeeper actually saves you money through less human error and the bills that get paid on time.
Co-founder of Hostt
MARCH 21, 2017
Consider a scenario where your startup is on its way from idea to formal business. There are many, many things to think about and consider.
And one of them may just include that all-important decision of when to bring in outside experts to assist you with some of the operational functions that go into running a business.
Those functions almost certainly include the financial aspect of your business. While you may not need -- or want -- an accountant, you could at least consider a bookkeeper to help with the various financial aspects. Your only other alternative is to become a bookkeeper yourself so that you understand every aspect of your business! And that's just not realistic.
So, returning to the bookkeeper option, here are 10 reasons why you should definitely consider hiring one:
1. Keep your focus on core business needs. A startup needs the attention of its founder, including his or her attention to growing the idea into a viable product or service. That means that, as that founder, your time should be devoted to strategy, marketing, funding and other key areas that require your focus over the daily operational tasks of a business.
2. Stay out of what you don’t really know or understand. Not many founders have backgrounds in finance or even a working knowledge of accounts payable, accounts receivable and taxes. It’s better that a professional who took courses and was certified in these areas handle those aspects of the business.
That way, mistakes will be less likely, as well as issues that could cost you more money. Remember, if you miss a bill or forget to pay something important, this will significantly impact your business credit.
3. Calibrate a work-life balance. While you could focus on core business needs and handle everything else in your startup, the problem is you’ll have no time left at the end of the day or week for yourself or your loved ones. Therefore, you’ll be missing that balance every person needs in order to stay healthy and not burn out on what you are doing.
4. Get a different perspective on the business. Although you may believe you have a good idea about the state of your startup during the development phase, it helps to have another pair of eyes on this.
Your bookkeeper can put the financials in order and run reports showing how you are doing each month, where the funds are going and how your efforts are paying off (or might need improving upon). He or she will give you that "big picture" through the numbers being crunched.
5. Escape the tedious aspects of business. It’s hard to imagine that the financial aspects of your business make you excited. You likely have no passionate feelings about tallying up payroll or writing checks to pay the bills.
However, your bookkeeper may enjoy those tasks, so it makes sense to hand over these areas to someone who does them -- and does them well -- because of that motivation.
6. Make sure everything is paid on time. Between traveling, keeping the startup moving forward, putting out the daily fires that pop up and staying balanced, something most likely gets left out along the way. And that often ends up being the bills that need to get paid.
You don’t want your credit impacted by late or forgotten payments, so put a bookkeeper in charge to give you the confidence that everything has been handled on time.
7. Ensure correct tax filings. The last thing you want is to get audited or have the taxman after you just because you forgot those quarterly or annual tax filings. Depending on the type of business structure you’ve created for your startup, you will have various tax requirements, including estimated tax payments, corporate tax payments, 1099s for contractors or freelancers and other filings.
It’s ideal to find a bookkeeper who can handle taxes a well as payroll and other financial issues.
8. Maintain cash flow. Because you are so busy, you may not realize that there are outstanding payments from your client base. Any late payments here could infringe upon the cash flow you need to keep your startup humming along.
With a bookkeeper working for you,he or she can stay on top of this and send out reminders to make sure your cash flow remains optimal. This will also look good when it’s time to seek another round of funding because you can show positive cash flow you might not have been able to show without that assistance.
9. Resolve conflicts of interest with any business partners. With more than one founding partner, issues could arise where each partner has some idea of how the money should be spent and how to easily access it. Otherwise, conflict could arise that could impede the progress of your startup.
That's why a bookkeeper should be the gatekeeper of the money, creating the necessary approval processes that stop partners from just withdrawing money.
10. Reduce the cost of financial obligations. Although you may think you save money by doing everything yourself, the fact is that a professional bookkeeper actually saves you more. That’s because there is a reduced level of risk for human error, lack of knowledge, missed payments and tax obligation due dates and delayed accounts receivable.
Plus, your time is money that you could be using toward getting your new business running and bringing in the revenue to move to the next level.
From the time and money savings, to the focus on expertise and greater cash flow, a bookkeeper makes good business sense for your startup. So, go start the hiring process today.
Posted by Bill Gerber on March 7, 2017
We talk a lot about the importance of having solid accounting processes and procedures in place to govern your bookkeeping. We discuss how bookkeepers, controllers and CFOs can be strategically aligned to produce advanced insights into even the most complex accounting structures. But we don’t often spend a lot of time on the downsides in the accounting department—partly because the topic is often pretty negative in the grand scheme of things. After all, the vast majority of our clients end up coming to us only after experiencing some of the worst problems in accounting and bookkeeping.
While there may be something to be said for experiencing “the bad” in order to fully appreciate “the good”, we would always prefer our clients avoid hardship if possible! So we compiled that many varied reasons that clients have sought our services in the past so that you can learn from their previous mistakes and problems—and hopefully avoid them in your own business.
Lack of bookkeeping processes & proceduresThis is a classic and the most common among our prospective clients. It is not easy to setup and maintain a comprehensive list of all the bookkeeping tasks, accounting processes and administrative procedures required to ensure your bookkeeping runs smoothly and on time. After all, we have a 10-person team solely dedicated to this job when onboarding a new client—trying to do this with limited staff lacking experience in process management is likely going to be nearly impossible.
Wondering if a lack of bookkeeping processes is your problem? If you answer “Yes” to one or more of the following questions, it may very well be.
11 Expectations to Set for Your BookkeeperBefore you bring someone on board to handle your books, check their skills and lay the ground rules to ensure you're getting the right person for your business.
JULY 17, 2006
As business owners, we like to think we can learn any skill it takes to run our companies better. But can just anyone learn to do their books? That's like saying anyone can learn to be an artist. Is it true? Maybe. However, some will learn the skills easily and others will work at developing the skills for years and still only be "average."
You may be a successful business owner with a multitude of skills, but if bookkeeping is one of your weakest links, you should probably hire a bookkeeper to help you out. But before you bring someone on board, you need to make sure they know what to do, and you'll want to set expectations for them in order to get what you need.
Here are 11 expectations you should establish for your bookkeeper to ensure that they're going to provide the service your business needs:
1. Your bookkeeper must have a basic understanding of bookkeeping/accounting terms. They should have a basic understanding of the difference between the five basic types of accounts (assets, liabilities, equity, income and expenses).
2. They must be detail oriented. You need someone who's going to be able to focus on the little things: This will enable the big things to take care of themselves. You don't have time to babysit them; they need to be able to take charge and take care of all the little things that need attention when it comes to your basic financial operations.
3. They must have an understanding of the big picture. If you buy a piece of equipment, are they going to understand the concept of setting up the asset and liability accounts? Do they know how to allocate the payment to interest expense and liability principal reduction?
4. They must have a willingness to follow through. You want someone who'll ensure that projects and questions are followed through to completion. They need to be responsible for the follow through because you're just too busy to be the one in charge of project completion. You're there to assist with questions, but the financial projects have to be something they're in charge of.
5. They must have monthly financial statements available by the 10th of the following month. The three basic financial statements include the balance sheet, the profit/loss statement and the cash flow statement.
6. They must understand how to do proper job costing. It's important that they are tracking all the costs by item and job detail. Job costing is critical to the success of knowing how much your projects are truly cost. You have to be able to depend on their information to be reliable.
7. They must have a basic understanding of your industry. While this is something that can be learned, you'll be miles ahead on the learning curve if the person you hire has a general understanding of your industry. And while bookkeeping for a retail store, hair salon, internet service business and many others have the same basic bookkeeping fundamentals, it's not exactly the same. Each industry has different terms and insider aspects that can only be learned on the job, so be sure to look for someone with experience in your industry.
8. They must have good communication skills. If your bookkeeper doesn't understand something, they've got to be willing to ask for clarification or help. Communication is critical so that you'll have a good understanding of what's taking place in the office without you having to be the one doing the day-to-day work.
9. They must be computer literate. The days of doing almost anything by hand are long gone. You must have a computerized bookkeeping system to be able to get quality reports. Your bookkeeper should not only know the basics of your bookkeeping software but should also be familiar with Word, Excel, e-mail and the internet.
10. They must be interested in continuing their education. They should be committed to enhancing their skills with additional classes or self-study to ensure that they're staying up to date with the accounting skills your business demands.
11. They must be willing to make a strong commitment to your business. If you're hiring a part-time bookkeeper, it's essential that you find someone who will make your business a priority. Don't let your part-time bookkeeper "squeeze" their responsibilities to you into their personal life. This is one of the biggest issues I see with many small businesses. The owners allow their bookkeepers to do their work whenever they have time. But by doing this, you're enabling them to put your business at the bottom of their "priority" list. You need someone who's focused on ensuring things get done.
If you want your company to truly function in a profitable way, it's critical that you set expectations for your bookkeeper before you bring them on board. Good financial records are fundamental to the success of your business. If you can't rely on your books--or your bookkeeper--then how are you going to know where your business is headed? Set these expectations for your bookkeeper so they'll be a successful part of your team. You'll be setting your business up for success.
At last, the argument of whether a small business should or shouldn’t be operating in the cloud has been put to bed. The cloud has won.
Running a business these days almost hinges on cloud computing. According to the annual Vanson Bourne cloud computing study, some 78% of UK organisations have already adopted at least one cloud-based service.
Everytime you update your Facebook status, Tweet an article or check your bank balance online you’re pulling data from the cloud.
Deciding to adopt cloud technology has helped small businesses, right around the world, transform into more agile entities with the ability to take on giants in their sector.
Moving to cloud is helping small businesses act like giants. Size no longer matters. Many tech advances which were once available only to big businesses are now ubiquitous. That means small businesses are better equipped than ever to compete with multinational powerhouses in their sector.
PR agency, firstlight, is one small UK business which has used its size as an advantage to help it compete with some of the largest firms in its field.
“I thought our size was our weakness,” recalls firstlight founder, Paul Davies. “But I soon realised it was our strength.” That realisation gave him the confidence to take on big agencies head on, vying for the biggest brands… and winning.
He remembers one momentous land grab: “We beat some of the biggest agencies in the world for a global retail business – which was amazing for a small business. We were invited to the shortlist, no-one knew who we were… and we won the business.” After a major scalp as a start-up agency, they went on to add LinkedIn as another household name on an increasingly prestigious client list.
Despite growing turnover and an enviable client list, Davies knows lean businesses mean business.
And although his days as a jack of all trades – fulfilling bookkeeping, IT support and day-to-day management – are over, Davies still wants to keep his team agile and efficient. Xero helps him to do just that. When Davies hired a Financial Director, Xero allowed him to make that role part time, just one day a week. Without Xero, Davies estimates that would increase to three days. It’s a small but meaningful difference.
Small businesses now have a grip on what’s going on, before it happens. For other small businesses, cloud technology helps them better forecast peaks and troughs and plan accordingly.
For Darren Rook, Founder of The London Distillery Company, his busy period is September – that’s when his Christmas rush begins. Crafting fine London gin in time for the festive season means he needs a robust inventory system to help keep an eye on stock and invoices and manage his cashflow.
“After some trial and error on different software platforms we settled on Xero. It’s simple interface and range of useful tools helped us plan for all the extra costs at Christmas including extra bottles, storage space and base ingredients,” Rook said.
“The problem with running a distillery is managing stockist expectations. Fortnum & Mason’s, for example, want their Christmas stock delivered in September, so we have to work months ahead of Christmas to be ready for the trade orders. We use the financial control system on Xero as it’s perfect for collecting, storing, analysing and monitoring stock figures.”
Having all this data available enables Rook to plan for the slow periods and ramp up for the busy times.
Big company resources for small businesses
Being a small business means you usually have limited resources. You don’t usually have a full security, HR, sales, finance or PR team. Usually the owner plays each of those roles, either all at once or switches between them throughout their day.
All this juggling means many small business owners spread themselves wide but not deep. However, cloud technology is helping fill those gaps by enabling small business owners to implement some muscle in spots they may not be able to tend to.
Take security, for many small businesses protecting data can often slip down the priority ladder. It’s not that it’s not important, it’s usually a resource issue – owners usually focus their energies on hitting primary business goals. However, for cloud platforms keeping data safe and secure is a business critical task. This means but implementing a cloud solution for web hosting, storage, data backup or even email, many small businesses benefit from big business grade tech, without the huge outlay.
As a financial platform, Xero is making many little, yet significant, impacts across the business; from allowing employees to track expenses easily, to cutting down report production to a few clicks, and billing effortlessly through an accounts receivable email address – it all adds up.
Davies mulls over the biggest benefits of Xero: “Cost and time. In that order. If we didn’t have Xero we’d have to pay someone to do everything manually. That would have cost us a lot of money over six years and would have stopped us doing what we do best – working hard for our clients.”
By Andy Sowards
Many small businesses are failing to utilise some of the most important tools and services that are available to them. This includes cloud services, outsourcing and smart social media advertising. As a small company with a shorter reach, it’s difficult for a startup business to appeal to the same audience as a big corporation unless they manage to target a niche and utilise money-saving tricks to stretch their budget as far as possible.
For example, large businesses can get away with hiring entire teams to handle specific tasks such as human resources, marketing and IT maintenance. However, a small business cannot afford to hire such specialised teams in their business when they’ve only got a dozen or so staff in employment. As a result, the employees that are hired by a small business must be flexible.
Here are some examples of the most useful resources and services that a small business can utilise. In general, these things can be applied to almost any business, regardless if you run a bakery or a design company—they’re universal tips that can be applied in some way to every business.
Portability with smart devices and laptops
When assigning an employee to a variety of tasks it’s inevitable that they will have to be in several places at once. Be it attending meetings, scouting out locations, speaking with clients—they’re on the go most of the time. Because of this, it’s vital that you equip them with the necessary tools to carry out their work on the go. This includes a laptop, a smartphone or perhaps a tablet. Ensure that these are company-bought expenses and install the relevant software on them, and run your employee through a training course if needed.
Managing a business is much easier when you have less to worry about. Hardware failures, networked storage and finances are some of the few things that many startup owners dread.
When a business’s hardware fails and they lose vital information such as customer data and sales records, it can be a disaster. There’s no excuse even if it happens due to a natural disaster, a hacker attack or a freak accidental fire—you are responsible for keeping that data safe. But by using Dropbox as a backup solution, you can store your information in the cloud and keep it ready to access no matter what damage your storage solution suffers. While you’re repairing or replacing your server hardware, you and your employees can continue working without a hitch.
In addition to cloud storage, we also see regular use of cloud applications among small businesses. One of the most common examples is the use of bookkeeping software. Typically a business will hire a professional to keep track of finances, estimate sales and pay employees. But with the help of online bookkeeping and finance tracking software, you’re able to punch in a couple of numbers into a computer and have the system do the work for you. They usually cost a low monthly fee, but it’s far cheaper than hiring a specialised member of staff to do the job.
Lastly, we have cloud applications that offer collaboration opportunities. One of the main issues with software on a computer is that there’s very little support for two or more people working on the same document at once. Most of the time, only a single person is allowed to make changes to documents, but with the help of cloud applications such as Google Docs an entire team can collaborate, edit and make suggestions on a single document. This is incredibly helpful for multi-use spreadsheets with lots of complex calculations or information.
Much like cloud services, outsourcing removes the need of hiring a dedicated team member for specific tasks. For example, if you’d like someone to manage your finances for you but don’t want to use a cloud application, then you have the option of outsourcing your bookkeeping needs to a third party business that specialises in it. Outsourcing services are usually far cheaper than hiring an employee because you don’t need to worry about recruitment, benefits, pensions and salary. You hire the individual professional on a contract basis (much like a freelancer) and they do the job that you need and get paid for it.
Outsourcing is popular because it allows a small business to thrive with professional help at affordable prices. Many startups outsource design tasks such as website design, logo creation and advertisement design. They also might outsource the initial hardware setup to get computers, servers and networks built to their specification.
. If you’re like most small business owners, you started off wearing a lot of hats and performed your own bookkeeping. But, at a certain point, it makes sense to bring in a professional. An accounting professional can perform tasks more efficiently, meet compliance requirements, and convert accounting data into useful information. This allows you to refocus your time on growing and managing your business.
Bookkeepers and CPAs both extend their services to small businesses that are ready to outsource their accounting. Although you could hire just one, it makes sense to use both to keep your accounting costs low and finances in order.
Use a Bookkeeper for Basic Accounting Tasks
Bookkeepers handle day-to-day accounting transactions and issues. Most bookkeepers are able to manage accounts receivable (sending out invoices and collecting payments), accounts payable (making payments for business expenses), monitor and report on available cash, perform bank reconciliations, and run payroll. More advanced bookkeepers, sometimes referred to as “full charge bookkeepers,” can also book routine journal entries, including month-end journal entries, and prepare internal-use financial statements.
The term “bookkeeper” is not a protected title, so bookkeeper skill and experience varies. Some bookkeepers have no formal accounting education and have learned procedures on the job. Others may have an accounting degree or have completed a few bookkeeping courses. Many have a solid grasp of accounting principles and can keep your books in shape by themselves while others are limited to basic data entry.
Call On a CPA for Complex Accounting Issues
Although there are quite a few types of professional accounting designations, the CPA is arguably the most rigorous and difficult to obtain. To earn the CPA credential, an accountant must pass comprehensive exams on tax, regulation, financial reporting, audit, economic, ethics, and business topics. They also must have sufficient accounting education and work under another CPA for at least one or two years before obtaining the license.
CPAs can identify the correct accounting treatment for complex issues, perform a review to help you obtain a business loan, file your business tax return, advise you on tax planning, and offer you strategic financial advice. But just because an accountant is a CPA doesn’t automatically mean he can handle any accounting job. If the CPA earned his stripes at a large accounting firm, it’s likely that he specialized in either tax or audit from the get-go. As a result, there are some CPAs who have never filed a tax return and others who have never worked an audit engagement. Carefully review a CPA’s experience and specialties before engaging his services.
Divide Accounting Duties
The amount that bookkeepers and CPAs charge for their services varies based on experience, industry specialization, and region. However, the Bureau of Labor Statistics reports that accountants earn about twice the annual salary that bookkeepers do. Figure that the hourly rate for the average CPA for will be at least twice what a bookkeeper charges.
Since you’ll pay a premium for CPA services, it’s wise to confine their duties to high-level accounting issues. Your best bet is to find both a bookkeeper and a CPA with complementary skills that can work together. For example, you can hire a full-charge bookkeeper for basic accounting and month-end closing duties and only consult your CPA for ad-hoc accounting issues and tax returns. In this situation, it’s best that the CPA still review your books once a year or every six months to identify and correct potential accounting issues.
Find the Right Fit
CPAs and bookkeepers are accustomed to working hand in hand. If you already have a CPA, he can probably recommend a bookkeeper he’s worked with and vice versa. If your business is a little bigger (more than $1 million in revenue) but you’re not quite ready to hire in-house accounting staff, a bookkeeping or managerial accounting firm can be a good option. These firms staff a team of professional bookkeepers, accounting managers, controllers, and CFOs. By using this type of firm, your business can benefit from a cohesive team of accounting professionals without having to pay full-time salaries.
Why Your Business Needs Bookkeeping
By Bonnie Lee
Published January 17, 2014 Taxpertise FOXBusiness
When you own a small business, it is imperative that you keep a good set of books that are consistently and contemporaneously updated. The tax man will not be satisfied with records that were thrown together at the end of a year.
Tax preparation is a key reason to maintain a detailed set of books, but there are other factors at play. It’s important to know how much money your business is bringing in along with how and where the money is being spent. Compare your results to industry standards to determine where you need to improve your business model. You should also compare this year’s sales and expenses to the prior year(s) to note your progress in the business world. Reviewing this year’s balance sheet accounts (cash, receivables, liabilities, etc.) to prior years will also help establish profit and sales goals.
Another reason to have current financial statements is to satisfy a lender who will certainly require them in order to evaluate your qualification for a business loan.
This means that your business needs to employ software more sophisticated than a simple spreadsheet format in order to obtain current as well as comparative data. My software will pull up 10 years of profit and loss statements side by side in one report so that I can compare key elements whenever I need it.
For me it’s a given that every serious business owner follows these rules. So imagine my surprise when I received an email from Greg Jones, founder and chariman of BookKeeping Express, making the following claim: “Bookkeeping is a painful and expensive part of operating a business. And while there are more than 30 million small businesses in the US, 74 percent do NOT employ full-time or part-time accounting help according to a June 2012 article published by AccountingToday.com. Consequently, many small business owners are attempting to figure this out on their own without the necessary background, taking away valuable time from running their business.”
Going at it alone might save money at first, but if you aren’t qualified to do the work, you could end up landing in more trouble. Tasks such as posting payroll properly, tracking credit card usage and reconciling accounts can be tricky. Just knowing which account to post a particular transaction isn’t always clear.
I must admit that I have seen my share of inaccurate books over the years. Throwing data into QuickBooks without knowing the key elements of the bookkeeping process can create some disastrous results. And those results may adversely affect your tax return. Not only that, but a subsequent IRS audit may result in additional tax liabilities as well as open up other years for examination.
Experts will tell you to seek out professional help in all areas of your business in which you are not competent.
Jones says, “In the past, small business owners have had three options when it comes to business bookkeeping: handle themselves, utilize online bookkeeping programs or outsource to a CPA. Small businesses embrace online tools for their lower dollar cost, but without accounting expertise, spend valuable time trying to figure out tasks in desperate need of a human being for guidance. CPAs, on the other hand, are expensive and localized.”
So try going the middle route. There are many qualified bookkeeping services that don’t charge as much as a CPA but can deliver exactly what you need. The trick is to be sure the person or agency you engage knows what they are doing. You may want to have your tax professional or a qualified CPA refer you to someone who can help you or review their preliminary work to determine if they are handling your books accurately and completely.
What Is Virtual Bookkeeping?
by Amanda Banach
Virtual bookkeeping allows an accountant or bookkeeper to provide accounting services for a client remotely. Telecommuting positions are becoming more common as businesses seek creative ways to find a balance between staffing arrangements and workloads. A virtual bookkeeping arrangement can be beneficial to both the business and the bookkeeper in terms of flexibility and cost.
Virtual Bookkeeping Defined
Virtual bookkeeping allows a bookkeeper to telecommute instead of physically working at a client’s office. Aside from the work location, there is not much difference between regular bookkeeping services and a virtual arrangement. A virtual bookkeeper uses computerized bookkeeping software to post financial transactions, review and update statements and reconcile accounts.
How It Works
To enable virtual bookkeeping, the business grants the bookkeeper remote access to its server, software and financial documents. The bookkeeper signs onto the company’s secure network from his home computer and accesses the documents just as he would if logged onto an on-site company computer and installs the company’s bookkeeping software onto his computer. Depending on the arrangement, either the worker or the client may purchase and register the software, but both must use the same program and version to ensure proper transfer and communication of the files. If the bookkeeper is employed by the company, she will be paid according to the employer’s payroll policies and cycle. If the bookkeeper is working as an independent contractor, she will invoice the business for the services performed and the client will remit payment in accordance to its contractor payment policy.
A virtual bookkeeper may be appealing to a company because of the cost savings and flexibility associated with this arrangement. Virtual bookkeepers do not require office space or supplies, and those working as contractors require no insurance, benefits or employment taxes -- a huge savings for the employer. Virtual bookkeepers offer flexible availability and can work as little or as much as the business needs; this can be especially beneficial for small businesses that may not need a full-time on-site bookkeeper or whose financial services needs fluctuate.