Summit CPA's Profit Focused Accounting Blog

What's the "Best Practice" for Your Business? Our Virtual CFO Has A Few Tips

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Did you make any New Year resolutions about your business?  Do you want to be more productive and successful this year? Maybe you made a resolution to “turn over a new leaf, make a fresh start, or get your ducks in a row”.  These are familiar clichés we’ve all heard over and over, but their message is valid. It’s a new year why not start with a renewed commitment to running a more successful and productive business.

There are many ways to do this, you just need to figure out and adopt best practices that fit your business. “Best practices” are a set of operational guidelines that are expected to produce a favorable outcome.

In deciding the “best Practice” there are three stages called “The Three I's”:

Identify

You need to identify the problems you are trying to solve. Where are your bottlenecks? Are there problems with collections, cash flow, or timely and accurate payroll? Have you seen a reduction in your customer base? Are your bills being paid late? Are you having trouble keeping up with inventory?

Make employees part of the process, they have a lot of insight into what works and what doesn't.  Most employees are pleased to be asked what ideas they may have to make their jobs easier. Let’s not forget that a happy employee is more productive. The more productive the employee, the more successful the business.

Implement

Turn your ideas into policies, formalize them, put them in writing. Make a big deal out of introducing them to all staff related to accounting, and explain the rationale behind them. They're intended to improve your company's financial bottom line, which should translate into a positive outcome for everyone.

Don't turn your presentation into a critique of past performance; emphasize the constructive nature of the changes. Here are some examples of best practices that other businesses have implemented:

• Invoice at the time of service/shipment, instead of once or twice monthly.

• Set a specific time interval to deal with collections. If you're running QuickBooks, you can use the Collections Center. Previous versions have numerous helpful reports, like A/R Aging Detail, Open Invoices, and Collections Report.

• Estimate your income tax obligation monthly, not just quarterly. When payments come due, there won't be any major surprises.

• Make sure everyone who works with accounting has a backup person who can fill in.

• If you don't have a merchant account - which QuickBooks supports - get one, and encourage customers to pay in this fashion. Pay your bills the same way wherever possible. Use all of the technology that makes sense for you.

• When it's logistically possible, have employees who incur billable time use a timer. A few minutes lost here and there adds up. QuickBooks has a built-in timer; remote employees can use Time Tracker.

• Looked at your pricing structure? Are you building in enough profit? Evaluate your selling ratios on a schedule. You should run inventory reports regularly.

Insure

The concept of “best practices” is a matter of putting the most effective work processes into place and maintaining them. Evaluate the effectiveness of the new best practices. Schedule follow-up meetings with employees and ask them what's working and what isn't?

This step is absolutely critical: Appoint a compliance officer who will follow up with individual employees and departments.

If you would like more information about the “best practices” for your business contact us at (260)497-9761 and speak to our financial advisors.