Looking to Outsource?

Whoever said, “If you want something done right, you have to do it yourself,” wasn’t a business owner. It’s impossible for a business owner to do everything herself. Sure, at the beginning, limited cash flow means DIY for some tasks. But as soon as possible, it’s time to outsource tasks that don’t make money, or are best left to a pro, like IT and accounting.


When you start looking to outsource, your business needs reliable vendors that address your business needs, deliver as promised, and don’t create headaches. So where are those reliable vendors, and how do you find them?


Follow these four steps to get the right vendor and stop the DIY:


  1. Check and Compare

Talk to other business owners about vendors that they use. Look on industry association and Chamber of Commerce websites for preferred or endorsed vendors. Selecting a vendor based on the lowest cost could end up costing more. Develop a Vendor Selection Scorecard to help compare terms, services, and other performance factors. Consider checking on prospective vendors’ financial soundness to make sure they will still be in business when you need them.


  1. Define Expectations

Documenting expectations helps to hold the vendor accountable and avoid misunderstandings. Agreements should include how the vendor will address deadlines, quality, and other essential success factors for your business. Be sure to document your business’ responsibilities, too, such as providing necessary information and approving deliverables. Nailing all this down can also help you figure out all the details you might not have thought through before.


  1. Get Updates

Vendors should provide periodic work status updates or statements so you can track their progress against the agreement, budget, or project plan. Vendor invoices are another update opportunity. Invoices should include enough details to show what was being billed, the price, and any other terms that impact the total amount. Verify that purchased goods and services were received as expected before paying the invoice.


  1. Track Performance

Use agreement terms to develop a simple Vendor Performance Scorecard. Follow-up if performance starts to trend below acceptable limits. Status updates and scorecards don’t replace direct communication. If something changes or doesn’t seem “right”, ask what’s going on and why. Follow-up if the answer doesn’t make sense. Ignoring red flags could cost you money and your reputation.


Tired of DIY and looking to outsource? These four steps will get your business on track to find reliable vendors to address its needs, without the headaches.


Achieve Goals by Tracking Progress

Your organization’s goals are spelled out in budget and planning documents. Those goals are usually established at the beginning of the year. At the end of the year, you see if the goals were achieved. Do you really want to wait until the year-end?


Probably not. Year-end is too late to find out whether goals were met.


Tracking established goals is the best approach to manage your organization’s progress and avoid getting knocked off course. Organizations achieve their goals with tracking mechanisms that address these four areas:


  1. Result Areas – Think about what “success” looks like for your organization. Identify the outcomes, roles, and processes that are essential to achieving success. Result Areas may be specific to your industry or market. They can be financial, operational, or programmatic. Examples include achieving specific profit margins, quality standards, or market share.


  1. Indicators and Attributes – Select the outcomes, roles, and processes that are necessary to achieve the established goals. There’s a lot going on in your organization, and you can’t track all of it. Focus on the essential activities that MUST work for each goal to be achieved. Identify the information needed to get a view of what’s going on, and whether things are working well or not, such as financial, production, and employee reports.


  1. Collect and Report Data – Standard processes for collecting, tracking and reporting data helps ensure that information is reliable. Automation generally increases accuracy and makes it easier to obtain. Define “normal” profits, volumes, transactions, etc., to help recognize results that are abnormal, or “exceptions” that require more attention. Include all applicable stakeholders in defining normal vs. exception results.


  1. Analyze and Act – Review tracking reports and interpret them based on circumstances and established goals. Analyzing trends can help organizations see an issue early, before it grows to a crisis. Exception results should be assessed in an effort to understand what is causing the exception. Knowing the cause of the exception helps to identify corrective actions help get things back on course.


Don’t wait until year-end to see of your organization’s goals were achieved. Use these four tracking mechanisms to manage your organization’s progress and stay on course.

Manage your Organization with your Budget

Every year, your organization puts together a budget. Then what happens with it? If you’re not using your budget to manage your organization, you’re missing out on a powerful tool to help achieve your goals.


Leveraging the power of your budget starts with deciding what information to collect and track to monitor progress toward achieving specific objectives. Next, you need to make decisions about managing and reporting information, otherwise known as the financial statements.


That’s a lot of setting up and deciding to do before you’ve got a powerful management tool. So where do you start?


Manage your Organization with your Budget by performing these three actions:


  1. Set Performance Parameters


Establish a formal financial oversight process to stress its importance and to set clear information requirements, actions, and time frames. Ensure that all responsible parties are aware of obligations, accountabilities, expectations, and authorized activities. Define expected financial outcomes related to strategic and operational goals. Ensure that financial reports address progress toward meeting those goals.


  1. Identify Critical Areas


It’s not necessary to review every financial line item. Only significant items that relate to performance results should be assessed to get to the root cause of variances or unexpected results. Explaining the root cause often helps you identify the corrective action that is needed to stay on course and meet budget and operational goals. Common financial assessments include variance analysis of planned vs. actual performance for significant line items and ratio analysis to assess financial health (e.g., liquidity and debt).


  1. Focus on Objectives


Stay laser focused on progress in meeting your short, medium, and long term objectives. Documenting the review and resulting decisions and actions help to track progress throughout the year. Promote discussion about balancing the organization’s immediate and mid-term needs with long-term goals. Think beyond the day-to-day. Needs too large to fund from current operations require decisions about postponing or incurring debt.


Leveraging the power of your budget by performing these three actions will help you Manage your Organization, and achieve your strategic, financial and operational goals.

Taxes, Your Car, and Your Business

Using a car in your business means tax deductible expenses. But what are the rules? How much can you deduct? What records should you keep?

Here are some answers to those questions. As usual, it’s a bit more complex than the amount of information that fits into this space. See more details and information links at the IRS website

The Rules – The entire cost of operating a car or other vehicle used only for business purposes can be deductible, subject to some limits. However, if the car is used for both business and personal purposes, only the portion of the cost used for business can be deducted. More about figuring that out under “Recordkeeping.”

How Much – Two methods can be used: the Standard Mileage Rate Method or the Actual Expense Method. Calculate the deduction both ways and choose the method that gives you a larger deduction. You can switch between methods if the car is owned. If it’s leased, the method must be selected in the first year and used for the rest of the lease period.


  1. The Standard Mileage Rate can be taken for owned or leased cars not part of a vehicle fleet operation (e.g., five or more vehicles). The Standard Rate is determined annually by the IRS, based on average operating costs including depreciation. The Standard Rate is $.53 per mile for business use in 2017.


  1. Actual Expenses can be deducted by tracking what it actually costs to operate the car, multiplied by the percentage of the business use of the car. Operating expenses include gas, maintenance, repairs, insurance, registration fees, licenses, lease payments, and depreciation.


Expenses for parking fees and tolls attributable to business use are deducted separately, whether you use the Standard Mileage Rate Method or Actual Expense Method.

Recordkeeping – All business expenses must be substantiated by adequate records or evidence. Payment for many car expenses is evidenced by a receipt or invoice, just like any other expense item. However, there’s only one way to substantiate the business and personal use of the car – tracking the mileage. No matter which method you use, track those miles using an app or a log book.

Sure, deducting the business use of a car on your taxes takes some effort and planning. But once you see how those deductions can add up – at $.53 a mile – you’ll see that time pay off in tax savings.

Could your Organization Fall Victim to Fraud?

Did you know that about 5% of all revenue earned by organizations in the United States is lost to fraud? That’s 5% of everyone’s hard work being siphoned off every year! The statistics are even worse for small businesses and nonprofits because they usually have fewer people and resources.


So exactly what is fraud? How can it happen, and how can it be prevented?


Fraud is an illicit act of deceit or mistrust to obtain money, or derive business or personal advantage. Fraud is perpetrated with intent to inflict suffering on another to achieve financial or other gain.


Frauds fall into three categories:


  1. Asset misappropriation represents the highest volume of fraud instances, but the lowest dollar amount. Examples include taking home office supplies and using a company vehicle for personal transportation.


  1. Financial statement manipulation represents the lowest volume and the highest dollar amount. This is due to the position and motives of the organization’s senior management. They have access to alter reported revenue and expense information.


  1. Corruption includes submitting fraudulent invoices from fictitious vendors and paying bribes. These frauds may also involve regulatory breaches, such as under the Foreign Corrupt Practices Act (FCPA).


Organizations that take these three actions reduce their chances of falling victim to fraud.


  1. Zero Tolerance – Communicate and train everyone in your organization that fraud and related activities will not be tolerated. Address the ramifications of engaging in fraud, such as termination and prosecution. Be prepared to take those actions, if necessary.


  1. Segregate Tasks – Assign transaction tasks in a way that makes it difficult for funds to be diverted from your bottom line. Examples include separating payment request and preparation from spending approvals and signing checks.


  1. Reconciliations/Independent Review – Someone who has no responsibility for initiating, preparing, or approving transactions must reconcile the books. Periodic reviews should be performed by someone who is independent of the transaction process, but familiar enough with the organization to identify inappropriate activity.


Avoid losing 5% in revenue to fraud by taking these three actions, and reduce the chance that your organization will fall victim to fraud. Your bottom line will thank you.

Monitoring Nonprofit Finances

Nonprofit Boards have a big job. One of the biggest parts of that job is fiduciary responsibility — making sure that the organization is funded, and that funds go to supporting the mission. Reviewing organization’s financial condition is one way that Boards fulfill their fiduciary responsibility.


How do Boards review the organization’s financial condition? It all starts with receiving and reviewing periodic financial statements, and analyzing financial performance in relation to the budget and financial ratios.


Nonprofit Boards should monitor financial performance and take action in four areas:


  1. Budget vs. Actual Performance

The year-to-date budget should be compared to actual performance. Analyze variances between budget and actual performance, especially for key income and program or administrative expense categories. Identify why variance from plan are occurring for significant differences and line items.


  1. Liquidity

Periodically assess four financial ratios to identify trends and their impact on fundraising and other plans:

  1. Days Cash on Hand – days of operation with no funds received and no investments liquidated
  2. Days Cash and Investments on Hand – days of operation after liquidating investments and before borrowing funds
  3. Current Ratio – divide current assets by current liabilities to assess overall financial health
  4. Debt Ratio – divide total liabilities by total unrestricted net assets to assess the need to reduce leverage


  1. Fund Raising

Assess the potential for overreliance on one individual funding source, indicating the need to diversify. Benchmark fundraising expenses in relation to funds raised against Charity Navigator or another metric to determine the return-on-investment of individual fund raising events and activities.


  1. Program Expenses

Measuring the relationship of each program’s expenses to overall expenses helps the Board to prioritize their attention on programs where more organizational resources are invested.


Nonprofit Boards fulfill fiduciary responsibility by monitoring the organization’s financial condition and making prudent decisions to maintain financial stewardship. By focusing on the four financial areas above, Boards can assess and act appropriately on financial performance.


Your Price Should Reflect Your Value

Pricing is one of the biggest questions for businesses that are new or launching new service or product line. How do you strike the right price? It’s not as simple as covering your costs and checking out competitor’s prices.


Your price should reflect your value. Just covering costs and having a little profit to show for your hard work isn’t enough. That approach doesn’t recognize the value that distinguishes you from your competitors.


Pricing boils down to three elements: Cost, Competition, and Value



Start by figuring out all the costs you need to cover, both direct and indirect. Direct costs are usually the most obvious, like materials and labor. Indirect costs, like rent and marketing, also need to be recognized in the total cost per service or product. Consider recovering the cost to replace equipment that will wear out within three to ten years.



Once you know your costs, check out the competition to get some perspective. Take care not to use competitor prices as your only guide. You don’t know enough about how the situation or profitability. Does your market have unmet demand? Competitive pricing and great customer service create market presence and capture market share.



Should your price reflect your superior quality, experience, credentials, or team? Absolutely! Don’t hesitate to charge more than the competition as long as you can distinguish your service or product from the others. Identify the qualities that create more value to your customers and reflect them in your price structure.


Pricing your service or product should consider Cost, Competition, and Value. Identify your value proposition and make sure that Your Price Reflects Your Value. Deliver more value to your customers and earn that higher price!



Are Your Goals Just Dreams?

Frequent readers know my opinion that workshops are a great way to get a lot of information in one place. Last week’s Fierce about Your Finances Expo, conducted by Financially Fierce, LLC, proved me right again. The Expo provided lots of financial information to plan for achieving your goals.


A Goal without a Plan is just a Dream.


Planning to achieve personal and business financial goals was the overall theme of the Expo. Participants were there to obtain useful information to start or augment her or his plans. Exhibitors (including me) shared her or his knowledge to help those plans along.


Topics at the Expo ranged from taxes (me again), to retirement, mortgages, and debt recovery. For all the topics, the Expo delivered three common messages about planning to achieve financial goals:


  1. Establish Clear Goals

Determining what you want to accomplish, at what level, how, and by what date are essential to establish clear goals. Answering all those questions about what, how, and when also helps you track your progress and know when you’ve achieved your goals.


  1. Do Your Research

Harness the information available at Expos, professional organizations, and networking groups. Seek out successful people and ask for guidance. Read books and publications. Attend conferences and events that offer the information necessary for your plan.


  1. Adapt to Updates

New information and changing conditions make your plans change. Plans must be adapted based on new inputs and the learning that happens while you’re doing. Recognize the difference between adapting your plan and losing focus on your goals.


Adopting these three messages helps people and businesses to Plan for achieving their Goals, to  keep those Goals from being just a Dream that never comes true.