What Do You Mean I Owe Taxes? I Don’t Have Any Money.

I speak with many entrepreneurs and business owners and all seem to fear the ‘boogie tax man’.

“I don’t understand my business finances or the taxes and that side of it”.

The unfortunate next chapter to this story is that taxes, while scary for just about everyone, business owner or not, is the least of an entrepreneurs worries.  The sad truth is most entrepreneurs I speak with aren’t actually making any money in their business and just don’t know it.  Or worse they are making money on paper and do not have any cash.  Don’t get me wrong, taxes are also a very real boogie man.  If you don’t understand what is financially happening in your business, taxes can and will bite in the a*s on tax day.  I have seen it with far too many clients…”what do you mean I owe Uncle Sugar, I didn’t make any money last year and I don’t have any money now”.

What you need to take away from this situation is that as an entrepreneur you need to know how much money you are earning and what your expenses are each month. PERIOD.  Yes, it gets more complicated and no, this doesn’t take into consideration timing of revenue and expenses, that’s another topic for another day.  The most important thing to take away from this is ‘what $$ is coming in & what $$ is going out the door’.  You need to know what these numbers are because they will become the foundation for all of the other business planning.  Yes, you SHOULD be doing business planning.  Just like a pilot doesn’t take the plane up in the air and start flying around, he has a plan and a direction.  You may be ‘flying’ directionless in your business now, but that SHOULD change.

We are in an amazing age of technology, especially in business.  Apps exist to simplify every aspect of your business, from finance, marketing, CRM, sales and beyond.  You can sync your business bank accounts to apps like Quickbooks Online, Freshbooks, etc. to track your earnings and bills.  That’s why it’s so important to have separate bank accounts.  If you don’t believe me, read here.  Some apps are free, while others have nominal charges.  Consider what is best for you and the options for upgrading as your business grows.  The free option may be great today, but may not work as you grow.  Look slightly down the road to see where you plan to go with your business and decide accordingly.  When you start your business, every dime counts, but like everything else in life “you get what you pay for”.  Make your business finance app choice, sync up your bank accounts and look at your results.  If your financial results are gibberish to you, don’t worry your not alone.  It is for most entrepreneurs.  Reach out to your trusted accounting advisor and ask them to help you decipher your business results.

Learn more or connect with us at bodhi@bodhibusinessadvisors.com

Do You “Fear” Your Business Finances?

I get asked a lot about business “finances” all the time. The term “business finance” is vague…its like saying “I eat healthily” in big air quotes. I eat healthy too & I ate a bag of vegan cookies from D’s lectables yesterday afternoon, therefore “I eat healthy”. Context is what matters. Like anything else in life or business, the story we create in our head is what we fear. It’s not our finances, it’s the story we tell ourselves about our finances that we fear. Entrepreneurs fear their business finances like Jason, Freddy Kruger & the guy from all the Saw movies are wrapped up in a creature in their closet. They keep the finance “closet” door tightly closed for fear the Creature will escape. In order for you to really get what you want out of your business, whether that be flexible time with the family, ability to pursue a wood whittling hobby, a need to change the world or whatever it is, you need to look your business finances in the eye. Don’t make the monster bigger than it is.

The first thing I tell new business owners is “make sure you have separate cash & credit card accounts for your business”. You might be thinking “well that’s silly & super easy”… Yes, yes it is & far too many new entrepreneurs & business owners do not heed this warning. A Separate Checking account & credit card account is the first step in “understanding your business finances”. Find a credit card with great rewards, free miles or cash back or whatever floats your boat, but get one. Use the local bank you have your house accounts in or a totally separate bank, just open a business account. I can give you my thoughts on the national versus local banks, but that’s for you to decide. I will point out that regardless of the bank, make sure to build a relationship with the local branch or individuals working in it. There may be a day down the road where you may want or need to borrow money for expansion & that is not the moment to try & build a relationship with your financial institution. You will quickly find you don’t have the winning poker hand for that negotiation.

Separate your bank accounts. Deposit the money you earn from your business, whether it be a service or product business & pay all of your business vendors out of this account. When you need to “pay yourself”, another taboo topic for another day, you simply “draw” the funds out of your business account & deposit into your personal account to spend or pay house bills. It’s that easy. Most entrepreneurs make this far too complex, but that is your business finances at its simplest.

Non-financial tip of the day: Build your team of trusted partners sooner rather than later. Connect with & find great accountants, attorney’s, bankers, etc. to support you on this journey. You CAN NOT & WILL NOT be able to do it alone. You don’t want to be scrambling to find a great lawyer to defend a law suit once you’ve been served by the Constable. It’s too late.

Learn more or connect with us at bodhi@bodhibusinessadvisors.com

Are you on track to achieve your 2019 business goals?

Join the Bodhi Clarity Cohort Experience

If you’re a solopreneur or entrepreneur in the early stages of your business or a seasoned entrepreneur who feels like you are spinning your wheels all by yourself, feel like you have no idea what you’re doing or no one you can talk to for real about your biz, we’ve got an amazing solution for you.

In this 12-week Clarity Cohort Experience, you’ll join a group of entrepreneurs just like you to get clear, once and for all, about your revenue goals and (more importantly) how to achieve them. The benefits of this arrangement are twofold, Bodhi will lead the way by providing expert guidance and personalized support in the container of a group setting, while you’ll receive the value of partnership accountability and group support as business owners from different backgrounds weigh-in on the solutions to similar challenges they’ve faced. Together, we’ll break down the barriers stunting your growth, help you reclaim your business and your life, and transform the beast that is your business into a well-oiled machine that works for you.

Here’s what it will look like:

We’ll dive into every aspect of your business – people, processes, technology, and marketing – to reveal your barriers to growth. Every other week over the course of 12-weeks, we’ll meet as a group virtually via Zoom conferencing to cover the following topics:

1 – Mindmapping / Ideation
2 – Creating a plan / Business Canvas Model
3 – SWOT analysis
4 – Scoring :: Plan / Do / Test / Act
5 – Pricing for Profit
6 – Financial Statements / Projections

Together, we’ll develop quarterly goals and outline what you need to do to achieve them. At the end of 12-weeks, you’ll be crystal clear on what you’re doing and where you need to go. Armed with this powerful insight, you’ll know exactly what to do to achieve your goals quickly and easily.

Amplify Upgrade
Continue to leverage the value of the group formed in the Clarity Cohort Experience, and Amplify these connections through group accountability and guided quarterly meetings.

Ultimate Upgrade
For the Ultimate Cohort Experience, choose the full Clarity Cohort Experience, plus the Amplify offering (described above) and 1:1 personalized strategy session with Lisa once per quarter to dig through the nitty-gritty personal stuff.

Learn more!


via Welcome New Innovation Women: 6-13-18

Welcome to our latest Innovation Women speakers! We’ve got an incredible new crop of speakers to satisfy every event manager’s fondest wish.

We’ve got an incredible new crop of speakers to satisfy every event manager’s fondest wish.

We have new speakers and subject matter experts in education, HR, financial services, designers, a dentist, data scientists, yoga instructors, entrepreneurs and founders, engineers, scientists, marketers and more. And every one of them just happens to be a woman.

Invoicing + no collection process = cash flow issues

Cashflow problems don’t discriminate.  Even profitable businesses with ‘plenty of revenue’ & interested investors can have cash flow difficulties.  Studies show that over 80% of small businesses failures are due to poor cash management.  Your business may be this year’s Tickle Me Elmo or Pet Rock but if you are unable to manage cashflow, the business could be forced to close its doors.

This post outlines cashflow problems & solutions any business can implement around its invoicing function.

Invoice scheduling   

Business owners get busy & administrative functions like invoicing & vendor payment can fall by the waste side.  Inconsistent invoicing policy can leave collection timing in question.  Business should designate a day of the week or month for invoicing & stick to that schedule.  Depending on the industry, invoicing may only need to be done once a month & others may need to invoice weekly.  Look at your industries standards & start developing your schedule from there.

Invoice Terms, Early Pay Discounts & Delivery Method

Default payment terms have historically been 30 days.  This policy dates to a time when invoices & payments were mailed.  In today’s market, invoices tend to be sent through email & speed up the process.  A study by Xero (cloud accounting software) shows that customers on average pay invoices two (2) weeks late.  Do you offer incentives for early payment?  Do you discount for upfront payment?  What are payment term standards in your industry?  Consider payment & incentive trends in your industry & the marketplace in general & revise payment terms accordingly.

Collection & Payment Reminders

Having a schedule for payment & collection reminders is just as critical as how often invoicing is performed.  If an invoice is sent off without follow up, the likelihood of timely collection diminishes.  Set up a schedule that manages the timing of each phase of collection.  Consider contact to confirm receipt of invoice & reminder of due date in the days prior.  If your customer utilizes an invoice & payment portal, ensure you are loading invoices correctly & receiving confirmation of receipt.  You don’t want to find out when once the invoice is severely past due that you didn’t load the invoice in the portal correctly & will have to wait another period for payment.  Once the invoice has become past due, send out another email & begin telephone contact to determine if there are any other issues.

A firm understanding of where customer invoices are in the collection process is necessary in the cash flow forecast & projection process.  Cloud accounting systems can be set up to support the collection process with reminder emails & electronic cash collection which both speed up the collection process.  If you are not using cloud accounting, consider it & other apps to support your business.  Most are inexpensive, user friendly & improve workflow efficiency.

Cash flow problems can be serious and threaten your ability to stay in business. If you don’t have direct financial experience, consider working with a CPA or financial expert to help you determine which problems you have – and how to solve them.  If your accountant or CPA doesn’t offer cash flow forecasting & projection services we can help.  You don’t even need to be in the same part of the US… we can work with you from anywhere.  With real-time cloud accounting access, your accountant & trusted business advisor located anywhere in the world can help you operate, understand & grow your business rather than just adding up the numbers.  To find out more about business planning, contact us at bodhi@bodhibusinessadvisors.com.

What Opportunity are you losing out on at Year-End?

As a small business owner, you probably went into business to make money because you had found a way to satisfy a need with a product or service in the market place.  You’re an expert in your field.  In most cases, you’re not an expert in your businesses finances.  Are you doing your own bookkeeping & accounting?  As an entrepreneur, the answer is probably yes.  Small business owners tend to take on all the hats in their business.  When I made the decision to go into business for myself, I thought I could do everything.  If you have read my blog before, you know that I tried out web design early on in my business.  Let’s just say that disaster resulted in two hours of my life I will never get back.  Some things are best left to the experts.  Lesson learned.

When it comes to your businesses finances, what is the cost of handling your own finances?  The cost could be devastating.  Wrong financial moves could set your business back significantly or much worse, sink it.  Owners are preoccupied with getting the next shipment out or hiring the right staff.  When you’re in the thick of your business day to day, are you really paying attention to the financial information?  This is where the opportunity lies to strengthen the relationship with your accountant beyond the annual tax season visit.  Accountants can take the financial information & translate it into an understandable language that will help business owners make better decisions.  Here are a few ways to capitalize on the relationship with your accountant.

Finding New Growth Opportunities

The accountant relationship is not the typical vendor – customer relationship.  Accountants are trusted advisors & partners for your business & not just your ‘tax guy’.  Once you see that your relationship with your accountant is not the same as the copier guy, owners can make the most of that relationship.  With the use of cloud accounting tools providing real time data, accountants can gain an understanding on a continuous real-time basis.  Quarterly reviews can provide business owners with unbiased understanding into their businesses revenue plans, budgeting & cash flow.  Offering insight into potential areas of growth.

It’s All About the Plan

There are times in business when operating off the seat of your pants works, but it’s not a long term strategic plan.  You may have a vision for your business & your accountant can help you convert that vision into an actionable plan.  With a well thought out business plan, it can be determined if objectives are being met & revised where necessary.  Contingency plans can be developed & actioned in difficult times.  Working with your accountant as a strategic partner can improve your chances of making it through a challenging time.

Where Did All My Cash Go?

Funding the next payroll is the number one fear of most businesses owners.  Cash is constantly cycling in & out making it difficult to determine what may be draining the businesses resources.  Businesses don’t fail just because they were unable to generate revenue.  Cash flow management is key to the success & growth of a business.  Poor cash management is the leading factor of failure in a business.  An accountant’s review & advise on process revisions surrounding cash collection can improve cash flow & profitability & everyone starts a business to make money.

Bookkeeping & finance are like the boogie man of business.  Everyone is afraid of it, but in the end to be successful, the financials of your business need to be embraced.  Operating & running a business isn’t easy.  Like many other things in life…it takes a village.  Business owners can’t do it alone.  Accountants can provide more than a tax return in April.  Accountants are a year-round trusted business advisor & partner.  They can help business owners understand growth opportunities, develop a plan & find where the cash is going.

If your accountant doesn’t offer planning & advisory services we can help.  You don’t even need to be in the same part of the US… we can work with you from anywhere.  With real-time cloud accounting access, your accountant & trusted business advisor located anywhere in the world can help you operate, understand & grow your business rather than just adding up the numbers.  To find out more about business planning, contact us at bodhi@bodhibusinessadvisors.com.

The problem with only speaking to your accountant when you pick up your tax return

As a business owner, when was the last time you spoke to your accountant? If it was the day you picked up your tax return in March, your relationship with your accountant is a lost opportunity.

Historically, accountants are publicly perceived as the ‘tax guy’ or auditors & only consulted when there is a serious problem, i.e. unpaid taxes or financial bankruptcy. Your accountant can influence directly & indirectly the success & direction of your business. Like the relationship with a banker or attorney, the relationship with an accountant is long-term & can provide support with decision making & support during tough times.

Have you done tax planning for this year?

If you only see your accountant during tax season (generally February – April), you are losing out on tax planning opportunities. Tax saving options after the close of the year are limited & have time constraints. On the other hand, if you are planning in March for the current year, plans will be based on forecast & projection. If actual results differ from projections, tax results will differ. No business owner ever wants to find out after the tax return is complete that they had a more profitable year than expected & now have a whopping balance due. At a minimum, business owners should have a mid-year tax review with their accountant. A quarterly meeting is optimal. Periodic meetings can be used to anticipate results variances & provide options for changes.

Does your business have an annual business plan?

Your accountant can provide more value than simply preparing a tax return. The annual business planning is a great way to partner with your accountant & utilize their expertise. An accountant can help you develop a revenue plan based on your business product or service. Their experience in a specific industry or revenue models can provide insight into how to build the foundational plan for your business. What do you need to charge to per product or service to meet revenue goals? An accountant can help you with a pricing structure. Will you be profitable with the current revenue plan? If you need to analyze your profitability, it’s a perfect time to sit with your accountant & review the results. A solid revenue plan will be the backbone of future marketing plans and all other business plans for the year. Your accountants experience can help you develop unbiased options to all your business plans.

Cashflow is getting tight & I don’t know why?

Many business owners have difficulties with cashflow. They are unclear about when money is coming in & what it is going out for. A careful review of cashflow operations (invoicing, collection & payments) by an accountant can expose process breakdown & provide recommendations for improvement. A small process adjustment in the invoicing & collection process could make a world of difference in projecting cash inflow. Pricing can also be a cause of cashflow issues. Are you charging the right price for your product or service? A review of operations & costs with your accountant could reveal the business isn’t charging enough? Accountants can help you review costs & develop new pricing structures which will lead to improved profitability.

Your accountant can truly become a trusted business advisor. Accountants can help businesses plan, review results & act on them with process & business adjustments. If your accountant relationship is only utilized once a year for preparing a tax return, your business is missing out on guided support & growth from an experienced professional. Seek out your accountant & trusted business advisor & work with them to strengthen your business.

If your accountant doesn’t offer planning services we can help. You don’t even need to be in the same part of the US… we can work with you from anywhere. With real-time cloud accounting access, your accountant & trusted business advisor located anywhere in the world can help you operate, understand & grow your business rather than just adding up the numbers. To find out more about business planning, contact us at bodhi@bodhibusinessadvisors.com.

#trusted advisor

Why Your Business Needs a Revenue Plan

Any successful business owner will advise ‘you need a plan’; a business plan, a marketing plan & even a revenue plan.  A revenue plan will be the foundation for your businesses other planning efforts.   In its simplest form a revenue plan is, ‘what do I need to sell to generate the revenue desired for my business’?   This isn’t solely an exercise for when you start your business, a revenue plan should be part of your annual planning & goal process.  Large businesses have annual revenue plans as part of their overall business plan, but small businesses tend to ‘guess’ what their revenue might be, their plan ‘lives’ entirely in the business owners head or they forgo the entire process.

Like any of your other business plans, a revenue plan should have the ability to be viewed by others (paper or in electronic format) & be reviewed regularly.

Foundation for a marketing plan

A revenue plan will give you actual information about how much you need to sell to generate the revenue you want for the business.  How much of your individual offerings (combination of products & services) do you need to sell each month & quarter to meet your annual revenue goal?  Your revenue mix will help you develop the marketing plan that is needed to support the planned revenues.  If this isn’t the first time you have developed a revenue plan for your business, review your prior marketing expenses & apply the scenario in the opposite direction.  What marketing costs converted to the most leads & closed deals/sales?  What products/offerings were sold from the leads?  If you are spending on marketing that isn’t converting leads to closed sales, eliminate the expense & focus your efforts on other marketing options.  Marketing & revenue planning go hand in hand & help you develop your next business move.

Time & effort to earning

A revenue plan can be used to determine the time, effort & costs associated with earning that revenue.  It’s the old 80-20 rule, will 80% of your revenue come from 20% of your effort or vice versa?  Are you spending 80% of your time to earn 20% of the businesses revenue?  Once you have your plan mapped out, take a moment to review the time & costs associated with each product offering.  Once you see the plan & costs on paper, a review of the options may reveal a need to revise or eliminate an offering that takes too much of your time.  Your revenue plan is an essential part of your continuous decision-making process.

Revenue mix

The best revenue plans take into consideration ‘what-if’ scenarios…What if you sell the more widgets with wheels?  What if you sell more rubber widgets?  What does the difference in revenue mix do to the overall gross revenue & expenses.  Developing what-if scenarios can be used to determine where your greatest revenue opportunities lie & help you weed out the offerings that don’t bear the greatest benefit.

Your businesses revenue plan will be the foundation & driver of your annual marketing & resource goals.  By reviewing the revenue scenarios, you can determine the best use of your time & resources.  Talk to your accountant & trusted business advisor about developing a revenue plan.

If your accountant doesn’t offer revenue planning services we can help.  You don’t even need to be in the same part of the US… we can work with you from anywhere.  With real-time cloud accounting access, your accountant & trusted business advisor located anywhere in the world can help you operate, understand & grow your business rather than just adding up the numbers.  To find out more about revenue planning, contact us at bodhi@bodhibusinessadvisors.com.

The reality of cutting costs versus developing a revenue plan

The ‘Gut’ reaction when a business isn’t profitable is to cut costs.  The unintended results of cost cutting may be reduced product or service quality, cash flow shortages or further erosion of profits & margin.  Let’s take a ‘widget maker’ with two or three employees.  He is looking for a way to improve profitability on the widget with wheels.   He has determined that there are three (3) cost (expense) cutting options…

  • Eliminate administrative/finance headcount
  • Eliminate direct product headcount
  • Reduce direct product costs

We will review the options & impact it may have on your business.

Option 1 – Eliminate administrative/finance headcount

If you have spent any time as an admin or finance colleague in industry you will learn that you ‘aren’t a revenue generator’ therefore the first to see an ax to your budget.  It is determined the admin/bookkeeper can be eliminated & the owner will take on the function.  How hard can it be?  The realization over the upcoming weeks is the bookkeeper invoiced customers weekly, chased customer payment, maintained vendor relationships, paid vendor invoices weekly & managed payroll bi-weekly.  Suppliers are refusing future shipment without payment; the credit card has been frozen for non-payment & customers are slow to pay because no one has been following up regularly to confirm payment.  The cash on hand is not enough to cover payroll on Friday.  Lesson learned.

Option 2 – Eliminate direct product headcount

As a business owner, you determine that savings can be found in cutting headcount.  Cutting headcount is never a popular option for the employer or employee but the apprentice widget maker is let go from the business.  The apprentice was preparing the individual pieces for assembly & the senior was assembling.  Removal of the apprentice results in the senior preparing & assembling all product & results in a reduction of production each day by one third.  Reduction of daily production affects the ability to fulfill customer orders in a timely fashion.  The product cycle is increased by 2.5 days.  The result to the business is customers wait an additional 3 – 5 business days to receive their order.  Customer is less than thrilled to wait this long.  In an instant gratification society, an additional 3 – 5 business days to wait for my widget with wheels to arrive is an eternity.  Customer may think twice about ordering from you in the future.

Option 3 – Reduce direct product costs

After countless hours researching on the internet, you find a manufacturer of ball bearings & the ball bearings can be procured with a significant savings.  The new bearings are used in production & shipped to customers.  Customers begin to flood your Facebook page with complaints that your product is garbage because their widgets with wheels are broken.  Turns out roughly one third of your shipment of ball bearings was damaged.  The direct cost to the business are countless hours spent rectifying customer complaints with returns & replacements & a new social media marketing campaign launched to keep the angry internet trolls from destroying your business.  Keep in mind that in today’s market disdain for your product or service can burn across social media like wild fire in no time.

Do you have a revenue plan?

The real opportunity for profitability is in developing a revenue plan.  Take the data collected from a cloud accounting system & add-on CRM (Customer Resource Management) system & analyze the information already on hand.  What are the marketing expenses?  Are the marketing sources driving revenue?  Who are your existing customers & how did they find you?  What is the mix of products sold?  What mix of products do I need to sell to meet revenue goals?  The list is not inclusive but all are questions that can be answered by digging into the numbers & data in your financial systems.

Talk to your accountant & trusted business advisor about developing a revenue plan to increase your revenue & profits.

If your accountant doesn’t offer revenue planning services we can help.  You don’t even need to be in the same part of the US… we can work with you from anywhere.  With real-time cloud accounting access, your accountant & trusted business advisor located anywhere in the world can help you operate, understand & grow your business rather than just adding up the numbers.  To find out more about revenue planning, contact us at bodhi@bodhibusinessadvisors.com.

Are you getting your critical business information in real time? Part 2

Every successful business has its finger on the pulse of its financial information.  Business owners need to know their key numbers, revenue, closed deals, cost of goods sold & not the numbers in last year’s tax return & financial statements.  Last year’s information is out of date.  Businesses need today’s numbers…Today!

A cloud accounting system can provide real-time financial information for your growing business.  If you don’t have a cloud accounting system this blog will review how to get started with cloud accounting.

To recap, there are essentially just 4 types of accounting systems: manual, spreadsheet, desktop & cloud accounting which were discussed in detail in Part 1.  While manual, spreadsheet & desktop systems may be initially cheap, they all have hidden time & system related costs.  The benefits of a cloud based accounting system are numerous.

Your first decision is determining which cloud accounting system to adopt.  Which has the reporting & functionality necessary for your industry (services, retail, construction, etc.)?   There is countless cloud accounting systems & they are all different.  Some have more functionality than others, some are better for specific industries, some have a more user-friendly interface & the list goes on.   The major cloud accounting vendors Quickbooks Online (QBO) & Xero have add-on app’s (applications) that work in conjunction with the cloud accounting to further enhance the financial & non-financial reporting or minimize or eliminate time consuming functions.  The add-ons are so extensive, that is a topic for another day.  Assessing all the options is time-consuming.  The point is, with all the options on the table choosing the wrong solutions will cause you a big headache.

Once you settle on the best system for you and your business, now you have to set it up!  For an experienced accountant or bookkeeper, setting up an accounting systems typically takes a full day or more of uninterrupted time.  System implementation requires entering all the key details of your business (accounting year end date, Federal Identification number, and so on) & you also need to set up you chart of accounts (that’s the specific types of sales, income, expenses, assets and liabilities unique to your business).  Once that’s done you need to transfer any opening balances.

While you can set up the system yourself, your time is valuable.  We recommend you talk to your accountant & trusted business advisor to answer questions about cloud accounting offerings & implementation.  Every good accountant will be able to set up your cloud accounting software.

We specialise in cloud accounting, so if your accountant doesn’t offer this service we can help.  You don’t even need to be in the same part of the US… we can set it up online for you.  With real-time access, your accountant & trusted business advisor located anywhere in the world can help you operate, understand & grow your business rather than just adding up the numbers.  To find out more about cloud accounting, contact us at bodhi@bodhibusinessadvisors.com.