8 Essentials of Extraordinary Financial Reporting

Continuing with our series of “8 Essentials”, let’s take a look at the why, what and how of your small business financial reporting.

First of all “why” do we need financial reports?

1) On the most basic level, we are in business to make money. Financial reports inform us as to what is working and what isn’t working. They are one of the key components guiding our decision-making process and those of our investors.

“What” are the most basic reports?

When I interview a prospective bookkeeper, I always ask this one question, which 80% of the time is answered incorrectly. “What is the difference between a Balance Sheet and an Income Statement?”

2) The Balance Sheet –  A report indicating what a company owns (Assets), what a company owes (Liabilities) and what a company is worth (Equity) at any given point in time. This is a PERPETUAL report, where all balances are ongoing.

3) The Income Statement – A report indicating a company’s performance (Profit or Loss) over a given point in time. This is a PERIODIC report, where the net of all balances get transferred to the Equity portion of the balance sheet at a cutoff date (usually the end of the year). These reports are often compared to previous periods to measure growth over time.

Finally, there is what some would call the most informative report of all.

4) The Statement of Cash Flows. This report lets us know how we managed our cash during any given period. This is important because having less cash on hand at the end of a given period then we had at the beginning does not necessarily reflect poor performance. We may have paid down on debt or invested in future growth. Having more cash may also not reflect better performance, as we may have collected on receivables long in arrears.

So the question is “how” do we make sure these three reports accurately let us know what is and is not working?

Always make sure we are comparing Apples to Apples. Maintain a consistent system of recording transactions. With today’s software programs this is easy to do:

5) Make sure every vendor and customer has a default income or expense account attached to it.

For example: Fed Ex is always a Small Parcel Shipping expense. Before a new Customer or Vendor is put into the system, it is vital that someone (the Controller) take responsibility to approve what that account will be. In this way a uniform system is in place. Controllers can periodically print Vendor and Customer reports that list the corresponding default accounts.

6) Make sure all new Vendors and Customers are listed in the system in a uniform way.

For example: If the vendor or customer is an individual, set a policy that all are entered last name first. Otherwise the nightmare begins where we have to print three customer ledgers just to know what is or isn’t owed.

7) Be on the same page as the people who will need this information.

Make sure the chart of accounts is set up so that the year-end tax returns or audits do not require hours of expensive outside labor. This can most easily be done by consulting with your Independent CPA firm and asking them how they would like to receive the information at year-end. This includes depreciation schedules, loan amortization schedules, payroll reporting, and monies paid out or received for the direct benefit of ownership, such as health plan benefits or pension costs.

8) Constant review:

The Controller should set up a month end review of the General Ledger with the person that makes general journal entries to ensure that payroll entries, month end entries and bank reconciliations are done in a timely fashion. The Controller should also set up a weekly review of the Account Receivable Aging and Account Payable Aging reports with the people responsible for receivables and payables respectively. In some companies this could be 5 people, or departments, if a company has different people handling general ledger, billing, collections, purchasing and payments. In smaller companies one person may do it all.

By recognizing these 8 essentials, every small business owner can have peace of mind that together with his Controller or CFO, it will be easy to identify what is or isn’t working, and can now start the process of creating an action plan to address areas in need of attention.

For example: If there are great fluctuations in available cash, check to see if certain vendors are constantly being paid late or if certain customers are paying late. Have credit and payment policies in place. Remember that time is money. If we don’t get paid when expected, then we have to borrow and we pay finance fees. Of course, we can pass those finance fees on to our customers as late fees, but we then run the risk of the customer going elsewhere. We can also pay our vendors late, but then our goodwill with vendors will be damaged and they may decide to stop doing business with us. Some vendors may even offer discounts to us if we pay early that we are not taking advantage of. Vendors and customers respect working with “what you see is what you get” people.  The key here is sticking to a policy, creating a procedure that matches the integrity of the policy and maintain a system that checks the integrity of each procedure.

A professional Strategic Planning Consultant can guide you through the initial process of setting up an accounting system with policies and procedures that work. Once done, a dedicated Business Coach can work with you to make sure the intent behind the system is actualized. Abe Rotbart, founder and CEO of Creating8 is available for both. To contact Abe click here.

Written by Abe Rotbart. © Creating8, Inc 2014. All rights reserved.


Financial Literacy and the Success of Small Businesses: An Observation from a Small Business Development Center

Great study from the University of South Florida — “Small business is the backbone of the U.S. economy; when the financial literacy skills of entrepreneurs fall short of those needed to operate a successful business, it is more than the individual business at risk.”

Click here to read the full study

8 Essentials of an Extraordinary Business Plan

Continuing with our series of “8 Essentials”, let’s take a look at the why, what and how that your business plan must address.

Every business plan has a specific purpose that can be either internal, external or both. The plan can serve as a strategic and flexible blueprint for you, your employees and for potential investors. Most importantly, make sure you take ownership of what is in the plan. Many entrepreneurs have outside consultants write their plans and never really emotionally or financially commit to being held accountable to what’s inside. With every step of writing or tweaking your plan, ask the following questions. Is it clearly written so that even someone unfamiliar with your business can understand it? Is it proactive? Does it match the skill sets of my employees? Does it include input from a management team? If the business already has an established business plan, is the plan reviewed quarterly after evaluating what is or isn’t working, or to address what new opportunities have arisen?

In addition to the body of the plan itself, a professional layout will include a “Title Sheet” with company name, address and phone number, a “Statement of Purpose” page explaining the intent behind writing such a plan, and a ‘Table of Contents”. What follows are the “8 Essentials” that every creative and extraordinary business plan will contain.

1)     A description of the Business

  • Vision Statement – what values are the driving force behind “why” this business came into existence in the first place? Why do you get out of bed each day and come to work? For example, the company may “believe” that every person, rich or poor, has the right to access innovative technology in order to live happier and more efficient lives. This vision is what adds meaning to your company and will always be there to keep you motivated through rough times. It will be the meaning behind your brand and tag line, which perhaps may be “innovation you can believe in”.
  • Mission Statement – “what” will the company be doing to manifest that original vision into a product or service? For example, the company may manufacture affordable personal computers that are so easy to work with that even a caveman could use them.
  • An Executive Summary providing a compact explanation of current activities, a list of short and long-term objectives and a time bound action plan reflecting “how” management intends to grow business and profits.
  • A description of the company’s legal structure such as proprietorship, partnership or corporation.

2)     Product and Service – a more in-depth description should answer the following questions

  • What are you selling?
  • How many product lines?
  • What makes your products unique and profitable?
  • How does your product benefit the consumer?
  • Which of your products are the best sellers both in quantity and profit?
  • How has demand for the different products changed for better or worse?
  • Are any products seasonal or more suspect to external influences?

3)     Market and Competition

  • Who are your current and potential customers (example: women)?
  • Are there sub-markets with common or specialized needs and priorities (example: single women)?
  • Are certain markets growing or shrinking (example: single women over 40)?
  • Are there certain markets that you plan on targeting more than others (example: entrepreneurial single women over 40)? Why?
  • What is the geographical location of these markets?
  • What is your geographical location and how does that impact your marketing efforts?
  • Who are your competitors and where are they located?
  • What advantages do they have that you need to address to close the gap?
  • What share of the market do they have and how does it compare to yours both in unit sales and profit per unit?
  • What is the quality of their product compared to yours?

4)     Marketing and Selling Plan

  • How will you brand your product?
  • How will you advertise through traditional means?
  • What will be your social media marketing strategy?
  • Where and how will you prospect for leads?
  • What strategy will you implement to create opportunities with those leads?
  • What strategy will you use to convert an opportunity into a sale?
  • Will you attend trade shows?
  • Will you maintain a web site or blog?
  • Will you maintain an inbound or outbound call center or both?
  • How will you provide ongoing customer service?
  • What outside expertise will you work with to help you?

5)     Management and Personnel

  • Who are you? What about your background gives you credibility, including what gives your life meaning, what gives you pleasure, what are your skill sets and how do all these serve you in your role as the right person to succeed in this business?
  • Who is your management and why did you pick them?
  • What does your company flow chart look like?
  • Is there a company handbook?
  • Are there job descriptions? 
  • Is there a hiring and training system in place?
  • What future personnel needs will arise as the company reaches goals and expands?

6)     Financial Data (must be up to date at all times)

  • How was the business originally financed and has it needed additional outside investment since?
  • What investors currently exist and how were decisions made in the past regarding financing options?
  • What space in buildings, equipment, automobiles and IT Hardware exist?  Were they purchased or leased and when?
  • What insurance policies are in place?
  • What accounting software system(s) do you have in place to account for company activity?

A record of past activity, which your accountant can help you with,  including:

  • Balance Sheet reflecting current balance of company’s assets and liabilities.
  • Income Statement indicating company performance for a given period of time. Should include quarterly performances and annual as well as comparative to previous periods of the same duration or time of year.
  • Cash Flow Statement showing how the company manages cash and highlighting problem areas that need to be addressed, most likely by securing outside investments.

Budgets and forecasts of future activity including:

  • A measurable, realistic and relevant forecast analysis of the next quarter, 12 months, and 3 years projecting cash flow needs, break-even points and anticipated profit or loss. When creating these budgets it is best to show different “what if” projections that take into account both worse case and best case scenarios.

7)     Potential Investor Returns

  • What promise will you be making to your investors?
  • Will you offer a piece of the pie such as equity?
  • Will it be a guaranteed return?
  • Will it be a loan with a fixed payback schedule?
  • Will a third party be guaranteeing the loan?
  • What other creditors may be in line already with liens on the business?
  • What protection is in place to mitigate their risk?

8)     Supporting Documentation

  • Financial reports for any other businesses owned and personal financial returns for company owners
  • Resumes of key members of management
  • Letters of reference
  • Legal documents such as leases or rental agreements
  • Insurance policies
  • Marketing materials

A professional Strategic Planning Consultant can guide you through the initial process of writing your extraordinary business plan. Once written, a dedicated Business Coach can work with you to make sure the intent behind the plan is actualized. Abe Rotbart, founder and CEO of Creating8 is available for both. To contact Abe click here.

Written by Abe Rotbart. © Creating8, Inc 2014. All rights reserved.

8 Essentials to a Motivated and Successful Executive Level Job Search

For many executive professionals their latest job has been the job search itself. I have heard countless talented individuals complain how hard it is to stay motivated in their job search. This “job search” job doesn’t pay a salary, no commission, no draw against commission. This job can break you. But it can also build you up. Looking at the glass as half full, you have a new opportunity to reinvent yourself, discover skills you didn’t know you have and reconnect to the original vision that you had for yourself, only now you can do it with the experience of knowing what has worked and what hasn’t.

1)      Start with an MPS (Meaning, Pleasure, Skills) Analysis as described by Harvard professor Dr Tal Ben-Shahar in his book, “Happier.

  1. “Make a list of all things that add meaning to your life. This is the “why” in your life. It is your belief system of what’s important. Perhaps you value family, or education, or innovation or health.
  2. Make a list of “what” activities you do that give you pleasure, either because they come natural or because you enjoy the challenge. For example, perhaps you enjoy playing guitar, or working out, or surfing the internet, or reading the wall street journal or teaching your kids how to cook.
  3. Make a list of “how” you best accomplish your goals, i.e. your skill sets. First list your technical skills. These are skills in which you have special training, expertise or have gained over time. Then, because we often cannot see ourselves objectively, ask others what they feel are your strongest soft skills. Do you listen attentively? Do you manage time efficiently? Are you empathetic? Are you a leader?

2)      Know your job! Find the common thread between the three lists above and create a picture in your mind of the perfect job that incorporates all three areas; why you are who you are, what you enjoy doing, and how you best do it.  Your new job is to find that job!

3)      Start networking. One site I personally recommend is Meetup.com. Join a group with people who have similar values or hobbies as you. Join a networking group of professionals in the industry that you targeting. Don’t get stuck behind a computer. You are in sales now and business development is all about relationships. Spend your evenings researching on LinkedIn. Your days must be spent networking and meeting people with similar goals and ideas. Have a networking strategy.

4)      Create a business card. Since so many jobs today are on a 1099 basis, I recommend having two cards. One is to be given out to promote your service as an independent contractor. If you continue to work on a consulting basis, this card may be the first step in branding your new consulting firm. The other card should be given out to promote your value as an employee, such as when you meet with recruiters or HR professionals. On VistaPrint you can design and order both cards at very reasonable prices. You can even add your picture, so people can match a name to a face, which I highly recommend on the card you give out for potential W2 work.

5)      Keep an activity log for two weeks. Mark each action item (I color coordinate them through Google calendar) as either something that was urgent or discretionary. Some items may have been planned and some may have come up unexpectedly. Separate personal action items from work related tasks. Your activity log will have 4 colors. Mine looks like this:

  1. Red = urgent personal related (a doctors exam)
  2. Yellow = discretionary personal related (watching a movie)
  3. Green = urgent work related
  4. Blue = discretionary work related

(Since I have kids, I also use purple for kid related urgent events…being a parent is also a job)

Once you have an idea as to how you spend your time, you will be able to plan and manage your future time more efficiently and succeed at this new job. Note, that I consider sending out resumes to online job applications and writing this blog to be leisure activities. Networking and “staying in traffic”, as a friend of mine who makes a fortune in sales says, is top urgent.

6)      A top urgent personal concern is your health, both mental and physical. Make time in your schedule to work out at least 45 minutes, three times a week. If you are pressed for money, I suggest you check into whether there is a Planet Fitness nearby. For $10 a month you can maintain tip top shape. That is a steal! For mental health, make sacred time to be with friends and family. Have a date night with your significant other. That is also top urgent personal time.

7)      Form strategic alliances. Simply put, start helping others. Be of service to everyone you meet. Pay it forward. Say thank you when others send you a referral. When there is not a networking event, call someone and meet them for coffee at Starbucks and ask “how can I help you?” Even just going to Starbucks and using the free WiFi will get you out of the house and you would be surprised to see how many people go there just to meet people like you.

8)      Get informed. Spend time reading. Knowledge is power. If you cannot afford an actual course, go to the library and get educated regarding your new mission. The more you learn, the more you can have an intelligent conversation, the more you can help others and the closer you get to actualize your vision for yourself.

The above steps will point you in a good direction. There will be rejection along the way and you may often hear lines such as “we are not deciding too quickly on how to proceed”. Do not take it personally or as a reflection of your worth. Middle management is overworked today and finding it hard to effectively fill positions. If it is a not for profit, trying to get the board of directors together to make a decision is often an exercise of frustration and logistics. Just keep doing your job, keep searching with a plan and the doors will open for you to be happier and more successful than you ever imagined.

A professional Strategic Planning Consultant can guide you through the initial process of your career transition. Abe Rotbart, founder and CEO of Creating8 has experience working with individuals and entrepreneurs helping them convert their dreams into reality. To contact Abe click here.

Written by Abe Rotbart. © Creating8, Inc 2014. All rights reserved.

8 Steps to an Extraordinary Business

Starting a New Business? Implementing a New Revenue Stream? Product is right but not making the money you want? Thinking of Selling and Need to Make Things Better First?

The following 8 areas are high priority for any business hoping to get to the next level. In future posts we will look at the 8 steps within each area that are vital…the 8 of the 8 so to speak.

1) Business Planning – Think of your business as a barren landscape. Form a picture of what you want it to look like and start planning out how you will get there.

2) Financial Reporting – Along the way, make sure you have a system in place to know what is working and what isnt working. How else can you make adjustments along the way?

3) Developing a quality team – Surround yourself with talented people who share a common vision and are committed to the mission you have embarked upon.

4) Employee Relations – You pay them. they are your asset.  Invest your time and resources in their success. Be clear what is expected and let them know how they are doing.

5) Work Culture – We are products of our environment. Build a winning environment that people want to come to on a daily basis.

6) Communications – Poor communication is the cause of most conflict. How do you communicate with your leadership and how do they communicate with their staff. In today’s world of social media and texting, how do we really know what we are saying is what is being heard?

7) Marketing – This includes branding, marketing and sales. How do you distinguish yourself from the competition? Does your product reflect your core beliefs? Is your sales system in integrity with what you are selling?

8) Customer Service – Are you turning your customers into sales people? Are your post sales staff properly trained in the product and the needs of your customers?

These 8 areas are the key to success. Now let’s start creating.

Written by Abe Rotbart. © Creating8, Inc 2014. All rights reserved.

IT Departments Losing Control Through Cloud Services Say Cisco and Intel

The cloud offers senior executives the business control they demand, according to international research from Cisco and Intel, meaning IT departments need to “become more collaborative and innovative as result.

The rising adoption of cloud services is “fundamentally changing” how businesses consume IT, according to the Cisco Consulting Services report, in conjunction with Intel…Read More

The Principal of Change ~ George Couros

The Principal of Change ~ George Couros

5 Characteristics of a “Change Agent”

1.  Clear Vision – As mentioned above, a “change agent” does not have to be the person in authority, but they do however have to have a clear vision and be able to communicate that clearly with others.  Where people can be frustrated is if they feel that someone is all over the place on what they see as important and tend to change their vision often.  This will scare away others as they are not sure when they are on a sinking ship and start to looking for ways out.  It is essential to note that a clear vision does not mean that there is one way to do things; in fact, it is essential to tap into the strengths of the people you work with and help them see that there are many ways to work toward a common purpose.

2. Patient yet persistent – Change does not happen overnight and most people know that.  To have sustainable change that is meaningful to people, it is something that they will have to embrace and see importance.  Most people need to experience something before they really understand that, and that is especially true in schools.  With that being said, many can get frustrated that change does not happen fast enough and they tend to push people further away from the vision, then closer.  The persistence comes in that you will take opportunities to help people get a step closer often when they are ready, not just giving up on them after the first try.  I have said continuously that schools have to move people fromtheir point ‘A’ to their point ‘B’not have everyone move at the same pace. Every step forward is a step closer to a goal; change agents just help to make sure that people are moving ahead.

3. Asks tough questions – It would be easy for someone to come in and tell you how things should be, but again that is someone else’s solution.  When that solution is someone else’s, there is no accountability to see it through.  It is when people feel an emotional connection to something is when they will truly move ahead.  Asking questions focusing on, “What is best for kids?”, and helping people come to their own conclusions based on their experience is when you will see people have ownership in what they are doing.  Keep asking questionsto help people think, don’t alleviate that by telling them what to do.

4.  Knowledgeable and leads by example – Stephen Covey talked about the notion that leaders have “character and credibility”; they are not just seen as good people but that they are also knowledgeable in what they are speaking about.  Too many times, educators feel like their administrators have “lost touch” with what is happening in the classroom, and many times they are right.  Someone who stays active in not necessarily teaching, but active in learning and working with learners and can show by example what learning can look like now will have much more credibility with others.  If you want to create “change”, you have to not only be able to articulate what that looks like, but show it to others. I have sat frustrated often listening to many talk about “how kids learn today” but upon closer look, the same speakers do not put themselves in the situation where they are actually immersing themselves in that type of learning.  How can you really know how “kids learn” or if something works if you have never experienced it?

5. Strong relationships built on trust – All of the above, means nothing if you do not have solid relationships with the people that you serve.  People will not want to grow if they do not trust the person that is pushing the change.  The change agents I have seen are extremely approachable and reliable.  You should never be afraid to approach that individual based on their “authority” and usually  they will go out of their way to connect with you.