How good is your insurance agent?

If you have employees, you have Worker’s Compensation insurance that is required by the State of Nevada. Are you contacted by your insurance agent at least once a quarter? Does he take the time to check in and see how things are going? More importantly, does he ask for your quarterly payroll figures?

Not only is a call from your agent just good old-fashioned customer service, but the ramifications of not reporting the correct payroll figures to your insurance carrier can result in receiving a bill that you weren’t prepared to pay. After each policy year the insurance company will conduct an audit. If the payroll numbers exceed the number they were provided in preparing your premium your carrier will readjust the premium and send you a bill for the difference. And it’s due upon receipt. It can result in thousands and thousands of dollars, especially if you are growing and adding staff. A good insurance agent will be proactive, contact his clients about their payroll numbers to ensure they don’t get a surprise in the mail from their insurance carrier.

If you only hear from your agent once a year at renewal time, then fire him. I mean it. Fire him. He is providing no service to you nor does he have your best interest in sight.

The Importance of Inventory Control

Managing inventory is like going to the dentist. It’s dreaded, postponed and causes anxiety attacks. But in the end both must be done.

Here are three simple facts about inventory:

1) You need it to create sales.
2) You need to know what you have so you know what to order.
3) You need to maintain it throughout the year because of shrinkage (broken pieces, samples sent, etc.)

Here are three simple results if you don’t manage your inventory:

1) Your employees are less productive because they are asked to count stock to determine ordering or fulfillment needs, constantly being interrupted.
2) There is no knowledge of what money is being spent on inventory.
3) Your balance sheet is incorrect.

Here are three simple ways to manage inventory.

1) Conduct a physical inventory. Either close your business for a day or two or come in over weekend and count everything you have. Involve the staff because you’ll need counters and data entry support.
2) Do not process an order until the information is entered into the system. Depending on the size of your inventory this could be done in two days. The hours are long and the work is tedious, but it’s imperative that it’s done and done correctly.
3) Maintain the inventory. Have a section that gets counted every week and rotated throughout the warehouse. This allows adjustments to be made more often so your inventory reports are correct.

Unmanaged inventory is like having a tooth that needs a root canal. For a long time you can get by without getting it fixed. But one day you wake up with a pounding tooth ache that needs immediate attention. You put your life on hold, get to the dentist and leave feeling much better. Inventory is no different. You can function without controls in place. However, you realize one day that you have no idea how much money you have sunk into inventory. It’s usually a day when cash flow is tight. You decide to get it under control, conduct an inventory count, put processes in place and become more efficient. And you and your company begin feeling much better.

Tackle it now and get it done!

Take a look at the everyday things

Looking to cut your overhead? Maybe save some money? Evaluate these three areas of your expenses and you’ll probably find some overspending.

1) Cell phone bill – Is the plan you are on the one that’s right for your current usage? I realized about three months ago that I had a lot of minutes that were rolling over on my plan that I didn’t need to pay for. So I called my carrier and reduced the plan by $100 a month. I found a $1200/year savings in a 15 minute call.
2) Insurance – Are you over insured? Because the value of property is down you may not need as much coverage as you had before.
3) Internet – this is a necessity in most of our business lives and often can get expensive. Check with your phone carrier on bundle plans. This moves all your telecommunication services to one company that rewards you by giving you a better rate rather than having the services separated between different businesses.

Take about 30 minutes to truly evaluate your everyday expenses. I'm sure there is money there for you to save.

Reality Check

We are only 1 ½ months away from mid year and it’s time to take a reality check. Ask yourself these questions:

1) Do you know if your business is showing a profit?
2) When is the last time you reviewed your Profit & Loss?
3) Do you know how much it takes to run your business every month?
4) Do you have a cash flow plan?
5) Are you expenses inline with your income?

If you don’t know the answers to these questions you are running blind. How will you be able to manage the cash flow for a decline in business or prepare for growth? It’s time to embrace the facts, NOW.

If you know the answers what are you doing with the information? Making adjustments monthly? Strategizing for growth? This information can be the pathway to taking your business to the next level.

Don’t let the numbers intimidate you. Or overwhelm you. The beauty of numbers is if they are entered correctly they do not lie. They tell you exactly what is going on in your business. Use them as a tool as you are constructing your business.

Change? It may be time.

“But we’ve always done it this way”. I have heard that phrase so many times when I analysis my clients’ procedures. We are all guilty and all do it in some part of our lives. We can’t help it. We are creatures of habit.

But when it comes to your business we have to be aware of that trap because we are so busy. I know it is easier to do something the way you know how than stop for a minute and really determine if it is the fastest, most efficient way. But does this help your business grow?

When is the last time you went over your processes to determine if you are being as effective as possible? Several times a company will outgrow the original process, but never make the changes because “it’s always been done this way”. In the end this costs the business big bucks. Image taking a task that usually takes 4 hours and restructuring it into 2 hours. Image taking a process and streamlining so only 2 people handle the paperwork instead of 5. The change may be a little rough, but it is temporary. The end result is worth it. You will save not only money, but time. And we all could use more time.

Do you know what your "nut" is?

I’m talking about your business overhead, not walnuts, pecans or peanuts. So many owners think they know by adding it up in their heads rather than looking at the Profit & Loss report. That’s like balancing your checking account mentally instead of recording your activity in the register that’s included with your checkbook. We all are guilty of the “virtual checkbook” at some point or another. But what happens is that you inevitably forget about a check or transaction you did and your bank balance is wrong. Same goes for your business. The figure in your head is off.

Knowing your monthly business expenses is very important. How do you know your break even point if you don’t know what your total expenses are?

Take the time to sit down with your bookkeeper and review the Profit & Loss report of your company. This will show you what your total expenses are per month. You can take a quarterly, bi-annual or annual average, depending on the nature of your business, to determine your monthly expenses.

If you are in the service industry this is the minimum number you should generate in sales per month. You will have made enough to pay the bills and make payroll, but that’s it.

If you sell products make sure you keep in mind that you need to take in account the cost of the product in addition to your monthly expenses.

Is all this making your head hurt and causing confusion? Join the club. Nine out of ten business owners have an idea of this information, but it’s usually not complete. By determining what your “nut” is you can begin to build a foundation for your business that isn’t made of toothpicks. You will be able to make adjustments for your business mid month instead of three months later.

Don’t be intimidated or overwhelmed to review your Profit & Loss. If you don’t know how to interpret the information rely on your bookkeeper or CPA. If they can’t explain to you in a way that you can grasp the information then get a new bookkeeper or CPA. These professionals should assist you in understanding the numbers, not talk over your head.

Let's Talk about the Recession

It's here and it's real. Don't let the media determine your mindset. Decide, today, that you want to grow your business. Decide that you aren't going to let the economy take you down. If your company needs to "zig" when you have always "zagged," make the change. Do what you need to do to keep your doors open, your employees employed and your company thriving. It is realistic to make this happen. Just think outside the box. Brainstorm with employees, friends or family. Hire a business coach if you can afford it. It might be that you can't afford not to hire one because of what a good coach can do for you (personal experience talking here). Also look over your Profit & Loss statements provided by your bookkeeper for areas of opportunity.

You can face the recession, make adjustments and survive and/or thrive. Or become a statistic. It's your decision. I vote for punching the recession right between the eyes and knocking it on its keister.