Author: webadmin

Managing finances can be a challenge for any small business owner. Often, the reason your small business is successful is because of the skills you bring to the table — you know, the ones you went to school for and which are more up your alley — like PT! If you don’t have a lot of experience with managing business finances, it can feel like a chore and you could be slipping into bad financial habits that could one day (soon!) harm your business. We’ve selected some of the most important things to consider — and if you want some assistance, do set up a call to speak with us. We’ve done this successfully for hundreds of practices! 

One area many business owners struggle with is keeping track of their finances, but it is one of the most important areas given that cash flow is the lifeblood of the business. Small mistakes and a lack of knowledge and resources can be costly and problematic.

We’ve selected some of the most important things to consider and provide these tips and resources.

• Find the best local credit union. Given their frequent willingness to provide loans, finding a credit union that understands the needs of your business can go a long way. There are many online tools to find credit unions based on specified criteria. Many local credit unions require membership in an affiliated organization, often listed on their website, but costs to join are usually minimal and well worth it. Here are a few tools to start with: Find A Credit Union, Credit Unions Online, Credit Union National Association.
• Find a trusted mentor. Access to free help is just a click away, with sites that help connect entrepreneurs with mentors fitting their needs. Having a mentor assist with setting up finances can be invaluable if the person is trustworthy. One resource is the Association of Small Business Development Centers, which provides access to full-time business counselors around the country, often former entrepreneurs or M.B.A. graduates. Other sites for finding mentors include SCORE (affiliated with the Small Business Administration), iMantri and MicroMentor.
• Choose the correct accounting software. While software is a mainstay of small business finance, sorting through dozens of choices isn’t easy, since there may be better options for your specific needs than the popular QuickBooks program and related packages. Find Accounting Software is a free tool that helps find exactly the right solution through a detailed questionnaire. TaxSites provides extensive resources including a list of software for small businesses.
• Consider hiring a bookkeeper. A good, trusted bookkeeper can handle all of the mundane tasks that go along with keeping finances on track. Be sure to understand the various types of bookkeepers and how to avoid fraud. A free bookkeeper hiring test (to be taken by prospective hires) can be requested.
• Accelerate cash flow with mobile payment systems. Mobile payment systems can allow faster and easier acceptance of payments for products and services. A system called GoPayment from Intuit allows acceptance of payments through mobile phones and can directly download the data into QuickBooks. To monitor transactions, users can access Intuit’s online Merchant Service Center to search, view and create reports.
• Look into factoring receivables. Accounts receivable financing allows immediate payment for invoices, rather than waiting 30 days or longer and tying up working capital as a result. Factoring services advance the amount of the invoice minus a “discount,” or fee (advances of 80 to 90 percent are common), and provide a “rebate” when invoices are paid – the amount depends on how long it takes the customer to pay. FactorFind provides a directory of factors specializing in small businesses. Businesses can be matched with the most appropriate factors at the International Factoring Association, BuyerZone, and Resource Nation.
• Understand and measure capital versus operational costs. The goal often is to drive down the totals on the capital costs side of the spreadsheet and move more over to the operational side of the equation. Operating costs don’t require complex depreciation calculations and are more easily adjusted from year to year. Outsourcing is one way to do this because it sits on the operating cost side and helps to free up cash by not tying it up in capital investments (such as IT infrastructure, servers, etc.) or tasks like head hunting and payroll management.
• Measure bottom line impact by looking at the service budget year over year. Are the costs for delivering a service going up, staying the same or dropping? Figure out how much it costs to deliver specific services to the business such as recruitment, payroll or benefits management. Understanding cost-to-serve offers the business great insight into projects and tasks, how long it actually takes to do them, and as a result how much they cost. If you want to pare back on the budget, there are hard numbers to work with that show exactly what the impact on quantity and quality of service will be if resources are reduced.

You don’t need to do everything on your own. From billing to marketing, including credentialing and patient eligibility verification, Perform Practice Solutions can help. Give us a call today at (833) 764-0178 and join our Facebook community for more physical therapy billing solutions and ideas.

Reference: [https://smallbiztrends.com/2009/09/tips-resources-managing-business-finances.html]

Creating a business budget is a crucial step toward success. Many people think of budgeting as their least favorite part of running a business — but if you want to be successful, creating and maintaining a proper business budget will be a critical component of that success. Don’t turn away from it! Here’s a step-by-step guide for how to create a business budget. If you want to save money in some places and make more in others — that’s where we come in! A quick consult at no charge to you — and you’ll quickly see where we can help you trim the fat and increase margins and revenue — FAST. 

An organization’s budget dictates how it leverages capital to work toward goals. For this reason, the ability to prepare a budget is one of the most crucial skills for any business leader—whether a current or aspiring entrepreneur, executive, functional lead, or manager.

Before preparing your first organizational budget, it’s important to understand what goes into a budget and the key steps involved in creating one.

WHAT IS A BUDGET?

A budget is a document businesses use to track income and expenses in a detailed enough way to make operational decisions.

Budgets are typically forward-looking in nature. Income is based on projections and estimates for the periods they cover, as are expenses. For this reason, organizations often create both short- (monthly or quarterly) and long-term (annual) budgets, where the short-term budget is regularly adjusted to ensure the long-term budget stays on track.

Most organizations also prepare what’s known as an “actual budget” or “actual report” to compare estimates against reality following the period covered by the budget. This allows an organization to understand where it went wrong in the budgeting process and adjust estimates moving forward.

Budget vs. Cash Flow Statement

If the definition above sounds similar to a cash flow statement, you’re right: Your organization’s budget and cash flow statement are similar in that they both monitor the flow of money into and out of your business. Yet, they differ in key ways.

First, a budget typically offers more granular details about how money is spent than a cash flow statement does. This provides greater context for making tactical business decisions, such as considering where to trim business expenses.

Second, a budget is, quite literally, a tool used to direct work done within an organization. The cash flow statement plays a different role by offering a higher-level overview of how money moves into, throughout, and out of an organization.

Instead of thinking of the two documents as competing, view them as complementary, with each playing a role in driving your business’s performance.

STEPS TO PREPARE A BUDGET FOR YOUR ORGANIZATION

The steps below can be followed whether creating a budget for a project, initiative, department, or entire organization.

1. Understand Your Organization’s Goals

Before you compile your budget, it’s important to have a firm understanding of the goals your organization is working toward in the period covered by it. By understanding those goals, you can prepare a budget that aligns with and facilitates them.

For example, consider a business that regularly experiences year-over-year revenue growth that’s offset by rising expenses. That organization might benefit from focusing efforts on better controlling expenses during the budgeting process.

Alternatively, consider a company launching a new product or service. The company may invest more heavily in the fledgling business line to grow it. With this goal, the company may need to trim expenses or growth initiatives elsewhere in its budget.

2. Estimate Your Income for the Period Covered by the Budget

To allocate funds for business expenses, you first need to determine your income and cash flow for the period to the best of your ability.

Depending on the nature of your organization, this can be a simple or complicated process. For example, a business that sells products or services to known clients locked in with contracts will likely have an easier time estimating income than a business that depends on active sales activity. In the second case, it would be important to reference historical sales and marketing data to understand whether the market is changing in a way that might cause you to miss or exceed historical trends.

3. Identify Your Expenses

Once you understand your projected income for the period, you need to estimate your expenses. This process involves three main categories: fixed costs, variable expenses, and one-time expenses.

Fixed costs are any expenses that remain constant over time and don’t dramatically vary from week to week or month to month. In many cases, those expenses are locked in by some form of contract, making it easy to anticipate and account for them. This category usually includes expenses related to overhead, such as rent payments and utilities. Phone, data, and software subscriptions can also fall into this category, along with debt payments. Any expense that’s regular and expected should be included.

Variable expenses are those your business incurs, which vary over time depending on several factors, including sales activities. Your shipping and distribution costs, for example, are likely to be higher during a period when you sell more product than one when you sell less product. Likewise, utilities such as water, gas, and electricity will be higher during periods of increased use. This is especially true for businesses that manufacture their own products. Sales commissions, materials costs, and labor costs are other examples of variable expenses.

Both fixed expenses and variable expenses are recurring in nature, making it easy to account for them (even if variable expenses must be projected). One-time expenses, also called “one-time spends,” don’t recur and happen more rarely. Purchasing equipment or facilities, developing a new product or service, hiring a consultant, and handling a security breach are all examples of one-time expenses. Understanding major initiatives—and what it will take to accomplish them—and what you’ve spent in previous years on similar expenses can help account for them in your budget, even if you’re unsure of their exact values.

4. Determine Your Budget Surplus or Deficit

After you’ve accounted for all your income and expenses, you can apply them to your budget. This is where you determine whether you have enough projected income to cover all your expenses.

If you have more than enough income to cover your expenses, you have a budget surplus. Knowing this, you should determine how to use additional funds best. You may, for example, move the money into a rainy day fund you can access should your actual income fall short of projections. Alternatively, you may deploy the funds to grow your business.

On the other hand, if your expenses exceed your income, you have a budget deficit. At this point, you must identify the best path forward to close the gap. Can you bring in additional funds by selling more aggressively? Can you lower your fixed or variable expenses? Would you consider selling bonds or shares of company stock to infuse the business with additional capital?

AN IMPORTANT FINANCIAL STATEMENT

The person responsible for generating a budget varies depending on an organization’s nature and its budgetary goals. An entrepreneur or small business owner, for example, is likely to prepare an organizational budget on their own. Meanwhile, a larger organization may rely on a member of the accounting department to generate a budget for the entire business. Individual department heads or functional leads might also be called on to submit budget proposals for their teams.

With this in mind, anyone who aspires to start their own business or move into an organizational leadership position can benefit from learning how to prepare a budget.

Perform Practice Solutions can help you optimize your day-to-day operations, from billing to marketing, including credentialing and patient eligibility verification. You don’t need to do everything on your own. Make the commitment to improve your clinic’s performance for real this year — and don’t look back. Visit our Facebook page or give us a call at (833) 764-0178.

Reference: [https://online.hbs.edu/blog/post/how-to-prepare-a-budget-for-an-organization]

2021 is quickly coming to an end, and while most of us are busy scrambling for holiday gifts and preparing for parties, business owners have their schedules jam-packed with mountains of responsibilities. From reviewing accounting to adding-up expenses, this is the time of the year when your small business needs attention. Don’t worry; we bring you some planning tips below for easing the process — and are available for a complimentary consultation to help you with billing, marketing, credentialing, and even your practice sales!

It’s that time of year again! While many people focus on holiday celebrations and new year’s resolutions this time of year, small business owners also need to focus on year-end business planning. This includes both preparing for the new year, AND taking stock of the year past!

But because the end of the year is so hectic, it’s not always easy to keep up with all the end-of-year preparations you should be doing to wind down 2021 and plan for 2022.

These activities — taking stock, preparation, and planning — are key to running a successful business. After all, what is measured is improved.  This review helps you realign goals and resources so you can take advantage of new opportunities.

That’s why we’ve prepared this year-end small business checklist. It’s a rundown of every major and minor task you need to take care of before 2022 becomes a reality.

Small Business Checklist: End of 2021

1. Prepare Your Key Financial Documents

Financial documents play a crucial role in your company. Reviewing your financial documents gives you three benefits.

First, it shows you whether you’re running a healthy business or if you need some belt-tightening going forward. Your documents should provide a guide to your company’s financial position and health, and should include details about your assets and liabilities, profit and expenses, and cash flow.

Second, if you do need some adjustment (more sales, say, or fewer expenses), financial documents show you where adjustments are needed and tell you how much you need to adjust. Third, if you’re in the market for funding, expansion, or mentorship, financial documents are often required to let interested parties see the financial records of your business.

The financial documents you need before year-end are:

• The balance sheet report, showing all the assets, liabilities, and equity;
• The income statement report, showing revenue, expenses, and profit; and
• The cash flow statement report, showing opening and closing cash within a specific period, with inflow and outflow itemized.

Let’s get started. Don’t forget to see if your accounting software, accounting team, or CPA can put these together for you!

Prepare Your Year-End Balance Sheet

A balance sheet helps you determine if you’re in the black or the red. It does this by comparing everything the business owns against everything the business owes. The business owns things like physical inventory, property or equipment, trademarks, and invoices the business needs to collect. The business owes things like pension plan obligations or invoices they need to pay. By doing this comparison, you can determine whether you should be cutting back on your spending, or pushing your business to grow.  And yes, the balance sheet should ALWAYS balance.

How to Prepare Your Year-End Income Statement

The income statement is important because it clearly shows you if you are earning more than you’re spending, or vice-versa. It compares the amount earned in a period of time versus the amount spent. Because of this, it is also called a profit and loss statement. It’s different from the balance sheet because it looks at business expenses and earnings across a period of time, instead of a single, frozen instance like the balance sheet. It also doesn’t take into account any external equity you, as the business owner, might have, such as stock. While the income statement of a large company might be longer than that of a sole proprietorship, the overall format of an income statement is uniform across business sizes. First, choose a period of time, either 2021 as a whole or just the last three months. Write down all your revenues and gains during that period on the top half of the page. On the bottom half, document all your expenses and losses. Subtract the latter from the former, and you’ll be able to see your net income during that time period.

How to Prepare Your Year-End Cash Flow Statement

Your cash flow statement should show how much cash you have at the beginning and end of a specific period, and where it all went. On a cash statement, you want to document three things:

• Cash flow from operations, such as revenue and expenses. In other words, the money you earned or lost from doing business as usual.
• Cash flow from investments, such as assets bought and assets sold. This can also include stock.
• Cash flow from financial decisions, such as loans and their repayment.

Once you have an itemized list of all of the above, you should be able to clearly see up how much cash you have at end of this period. When compared to what you had at the beginning, you can see if you generated or lost money.

Putting Your Financial Reports Together

From these documents, you should calculate the following numbers:

• Current Ratio – the current assets divided by your current liabilities. Ideally, your current ratio should be between 1.5 and 2. A current ratio of 1 means you may not have enough money to last the year, whereas a current ratio of more than 2 could mean you’re not investing enough money into your business or outside investments.
• Debt Ratio – your total debt divided by your total assets. A “good” debt ratio depends largely on the industry, but anything below 0.3 is considered fair. Anything above 0.6 tends to make it difficult to bet additional loans.
• Gross Profit Margin –  First, divide your profit (what you have leftover after paying your costs) by total revenue (the total money you brought in). This shows you what percentage of your income is actually profit!

Small business owners should keep these statements on a monthly or at least a quarterly basis. You want to know the state of your business consistently, so you can plan accordingly. If you want to expand, you need to know you can, for instance. If your business is starting to show red ink, you want to know as soon as possible.

However, especially if your business is a new startup, you may have put off either compiling the information or having it done. There’s no time like the present!

2. Get Your Tax Documents Together

While the end of the year may not be tax season, it’s a good idea to get Get your tax documents together as well. The financial reports you prepared in the previous step should help you fill out your small business return. However, you may need to fill out additional tax forms, which may include:

• Form 1099-NEC and Form 1096
• W-2 Forms and W-3 Forms
• State and federal payroll returns annually (Form 940) or quarterly (Form 941)

You should also compile your income, both business and personal, if relevant. Gather all your deductions.

3. Assess Your 2021 Goals

If you had a specific 2021 goals list, pull it up and go over it. If you didn’t, write down what your unwritten goals were (and consider a written list for 2022). Review your goals systematically and assess them using the following questions:

• Were your goals achieved? Why or why not?
• If they were exceeded, why? How?
• What are the next steps? (Do you want to use higher than anticipated revenue to expand, for example, or make debt payments?)
• If they fell short, why? How?
• What are the next steps? (Do you need to pull back on your product line, for example? Pare down your forecasts? Lower prices?)

4. Plan Employee Morale Events

Don’t forget your employees in your year-end planning. They’re an important ingredient in your business success. Not only that, but the year-end holiday season provides multiple opportunities to reward them for what they’ve done.

As a stellar business owner, you want to boost morale and company loyalty. Consider what your employees might value: A big holiday party? More time with their family over the holidays? (If so, can you swing extra days off for everybody?) Flexible time to shop? (Could you give flex hours so they avoid the huge crushes in stores?) Company time to conduct a drive for charity? Could that be used for your business’s benefit?

5. Plan Your Own Vacation

All too often, small business owners put off their own vacation until the year is totally over! Everybody needs some time to recharge and relax. Plan a vacation or think through your time off before the year is out.

Perform Practice Solutions can help you to optimize your day-to-day operations, from billing to marketing, including credentialing and patient eligibility verification. You don’t need to do everything on your own. Make the commitment to improve your clinic’s performance for real next year — and don’t look back. Visit our Facebook page or give us a call at (833) 764-0178.

Reference: [https://www.guidantfinancial.com/blog/small-business-year-end-checklist/]