Concierge CPA's online newsletter for February 2018
February 2018
8221 Brecksville Rd, STE 205 Brecksville, OH 44141
borbala@conciergecpas.com
(440) 340-1030
Conciergecpas.com
Do You Really Know Your Numbers
or Are You Kidding Yourself?
If you are a client of Concierge CPAs, or if you have followed us for any length of time, you know how big we are on knowing your numbers, as well as understanding the story the numbers tell you about the business. Recently, we conducted a VIP strategy day with a law firm at their office. Laz and I had not worked with this firmbefore, and we were excited for the opportunity to get to know thembetter. The goal was to figure out the owner’s blind spots and to help him formulate a strategy to grow his practice. It wasn’t an easy mission, considering he was already successful. And from the outside, the business looked like a well-oiled machine. Their bookkeeper and office manager joined us for the day. It became evident that the numbers the firmowner threw around in our conversations were different than what was reported by the bookkeeper and office manager. This example remindedme of how different measured reality can be compared to howwe feel things are going in our business. It is hard to overemphasize the importance of measuring and tracking your key performance indicators. Howdo you get a clear picture of the state of your business? There are different numbers in your firm that you need to examine on a daily, weekly, andmonthly basis. DAILY We recommend you get a simple email report each day with the following information:
These two pieces of information let you keep a pulse on one of the most important factors—cash. Even if you are physically away from the business, this simple email (without any attachments) will either put you at ease or alert you to do something about a negative situation. WEEKLY Each week, you should be presented with the following reports:
1. Two-week cash projection, showing expected deposits and bill payments.
2. Weekly sales and productivity report with this information: a. Number of new files opened and closed in each department. b. Total number of open cases.
c. Billable hours per staffmember. d. Accounts receivable aging report.
If the projected bank balance drops below a certain figure on the cash- flow projection report, it should trigger either acceleration of collections or postponement of bill payments. Looking at the billable hours generated each week will show you who needs to up their game, and it gives you the opportunity to do something about it before a staffmember gets way behind their billable goals. The A/R report alerts you to reach out to clients who owe you before it becomes too late to collect. MONTHLY At least once a month, metrics and key numbers of the firm should be presented in a clean and easy-to-digest format. Think about a more condensed version of your income statement that shows the current monthly and year-to-date figures, both actual and forecasted, and the variance between the two.
The income section should list all revenue streams separately. The expenses should be summarized in labor, facilities, marketing, client expenses, and other.
1. Cash balance of the business’bank accounts.
2. A list of the client payments received and deposited that day.
Some of the other non-financial data that you should be presented with is where new cases come from—social media, paid advertising, etc. This gives you a clear picture of where you should focus your marketing efforts.
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Tips From the King of Customer Service
What happens when an internet personality complains about your company? If you’re Amazon, youmake sure the next time they talk about you, they’re singing your praises. ScreenJunkies News is a popular YouTube channel dedicated to media and pop culture. In early November of 2017, the channel streamed a panel discussion that focused on comments from Amazon’s CEO, Jeff Bezos, who said he wanted to pursue video content that would appeal to a broader audience. One of the panelists, Dan Murrell, quipped that he’d rather Bezos make sure the DVD racks he ordered fromAmazon arrived on time. This off-the-cuff complaint garnered laughter from the other panelists. They chimed in with their own comments on Amazon’s delivery practices, and one panelist brought up third-party couriers’ inability to find Murrell’s leasing office. When the panel moved on to other topics, Murrell’s Amazon comments were seemingly forgotten — that is, until two days later when ScreenJunkies News streamed another video, during which Murrell shared his experience with a customer service representative who reached out to him.
After seeing the first video, the representative said they wanted to rectify the situation. They personally checked that Murrell’s most recent order, a bookshelf, was scheduled to be delivered on time, and they gave Murrell the opportunity to air his grievances about third-party couriers. During the panel discussion, Murrell mentioned that he’d never seen the movie“Lawrence of Arabia,”and the representative told him that Amazon had sent him a Blu-ray copy of the film, free of change. Also, $100 was added to Murrell’s Amazon account. This response may seemover the top for aYouTube joke, but Amazon’s model works. Last year, Jeff Bezos became the richest person in the world, surpassing Bill Gates. The key to Amazon’s success? Don’t wait for complaints. If a package is late, Amazon sends the client a new delivery date. Amazon’s Kindle Fire tablet includes a Mayday Button, which encourages customers to contact around-the- clock support the moment they feel frustrated. And, by reaching out after seeing Murrell’s complaints, Amazon is no longer the company that can’t deliver a DVD rack on time.
A Word With Eadie/Hill Trial Lawyers What Our Clients Are Saying
“My partner and I had left a larger firm. We had always been employees so we’d never really thought about running a business or everything that went into it. Sitting down with Concierge CPAs,
“To keep up on finances, we needed someone doing the bookkeeping separately who could learn how to give us reports. Michael and I weren’t going to find the time to do that. Without the online bookkeeping and the practice management software we implemented, we wouldn’t be able to manage either the cases or the finances if we didn’t have a system to keep track of everything. As we’ve grown, we now have five times the case volume as when we started. We would be underwater if we didn’t implement the software.
going through the startup costs, how to do it, even the business organization, and how to manage ourselves whether we’re an S-corp or anything else, was great and very relaxing and relieving. It gave us a lot of peace of mind. We’re about seven months into it, and in terms of our budgeting, it’s been close to what we estimated
“I’ve talked to other folks who think you should have desktop QuickBooks, and I always think, ‘Well, is that one computer?’ If that falls in the ocean, what do I do then? I love the idea I can get to QuickBooks anytime
originally. We’ve been very satisfied, to say the least.” –Michael Hill, Eadie/Hill Trial Lawyers
“It’s been critical for us to think about and plan out ahead of time how much money we’ll need to cover cases and to market for the cases to come after those. Trying to learn the business principles so we can work on the business and not just in the business has been a really important part of our development.
if I want to run a report or keep our IOLTA account up to date. If you’re not a CPA or professional bookkeeper, why would you want to spend time trying to be one?” –William Eadie, Eadie/Hill Trial Lawyers
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A Balancing Act Set Your Fees So You Don’t Cut Profits Out of Your Rates Would you sell something for less than what it cost you to make it in the first place? The answer is no, but you probably do it unintentionally in your own practice. • Let’s start by looking at the three broad categories that your fees (flat or hourly) should cover. • Overhead. • Labor costs of delivering the work (even if you are the one doing it). • Your profits as a business owner. The profit component represents your reward for all the headaches you endure while running and managing the firm and the staff and for taking the risk and initiative of starting your own business. Solo attorneys are often tempted to leave out the profit category when setting their rates. They think the only way to stay competitive is to set low fees that cover only the overhead and labor costs. Unfortunately, doing so will prevent them from growing their firms. Why is that? If your fees only cover overhead and your own labor costs, you can never hire anyone to supplement your work. If you do hire staff, you won’t have any margins left after paying them. This is one of the most common reasons why attorneys stay solo and are unsuccessful at growing their firms. • One-third of your fees should generally cover all your marketing and overhead. • The second third should cover the cost of labor. If you are the one doing the work, then this third is yours. • The last third is your profits as a business owner. If you don’t have profits, you are cutting yourself short and practically creating a job for yourself. Look at your monthly income statement to find out whether your revenues cover the overhead, labor costs, and your profit margin. If not, it’s time to review the numbers and make a few changes! HOW WILL THE NEW TAX CODE AFFECT YOU AND YOUR BUSINESS? Find out about it on our Thursday Live Roundtable Calls! Register for free here: BeyondTheNumbers.club How can you set fees? A good starting point is the rule of thirds.
Now, to Murrell, the other panelists, and the channel’s 1.5 million subscribers, Amazon is the company that makes things right. Who wouldn’t want to do business with a company that takes care of them?
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Need help setting up these reports, especially with delegating the responsibility of collecting this information? In most cases, you, with the best of intentions, do not have the time to gather this info. It’s your responsibility to look at it and interpret it, but you don’t actually have to pull it together. If you don’t delegate that part to your bookkeeper, office manager, or significant other, it won’t happen. We can help set up these reports so they require little effort on your part, and you’ll get a clear picture of where your company stands financially. Figuring out which existing systems can provide the pieces and how to pull them all together? Please don’t hesitate to reach out to us for help! Need help interpreting your numbers? More clarity about how can your business be more profitable? Finding the hidden efficiency-suckers? We’re here to help you! Like our new friends who requested the VIP day, let’s make this the year when you finally see a clear picture of how your firm is doing based numbers and facts, and not just your gut feeling. This will be your first step to bringing home more profits in 2018! –Borbala Banto, CPA Need help with setting up your weekly or monthly reports? Identifying what to measure?
3 (440) 340-1030
8221 Brecksville Rd, STE 205 Brecksville, OH 44141
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(440) 340-1030
INSIDE Do You Really Know Your Firm’s Numbers? Page 1 What Makes Amazon the King of Customer Service? Page 2
Conciergecpas.com
borbala@conciergecpas.com
A Word With Our Clients Page 2
Setting Your Fees to Balance Profit With Your Rates Page 3
Do You Have the Success Gene? Page 4
Discovering True ‘GRIT’
If you’ve ever been told you won’t succeed because you lack talent, bring a copy of “Grit” to your next meeting. While teaching high school math, author Angela Duckworth noticed some of her highest-achieving students weren’t the ones with the highest IQs, while some of her “smartest” students weren’t doing all that well in class. “Why?” she wondered. She followed her curiosity to Penn State’s psychology program. There, she studied several demographics, including cadets psychological studies, Duckworth discovered that “grit”was the common denominator in successful people. Duckworth defines grit as “passion and perseverance for very long-term goals.” People who display grit don’t start a project and abandon it a month later. They devote at West Point, young teachers, and sales representatives. After numerous
themselves to an overarching goal that drives everything they do. She explained that someone who practices grit goes through life like a marathon, not a sprint.
it in four simple steps.
First, identify an interest that can blossom into a passion. Second, practice that passion, a lot.
Perhaps most instructive is Duckworth’s equation (she was a math teacher, after all):
Talent x effort = skill. Skill x effort = achievement.
“Effort counts twice” could be the battle cry of grit. Gritty people are willing to put in the extra effort to achieve their goals, and that’s what helps them reach their goals if they don’t have innate talent. While this provides a strong case that those born with grit will succeed, grit doesn’t factor luck and opportunity into the equation, something that Duckworth is transparent about in her book. She says those who aren’t born with grit can develop
Third, develop the belief that your passion has purpose. While it’s not an overnight transformation, these guidelines can at least give us hope, which is the fourth step: Hold on to hope that you can succeed. Our biggest takeaway from “Grit”? Look at failures as milestones on the journey to success. Getting gritty means failing and learning from it. Any of us can get gritty if we’re willing to put in a little elbow grease.
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