Management Consulting Services are a Premiere Option for New Businesses in Gaithersburg

New businesses stand a chance to benefit greatly from the services offered by management consultants. A startup business is often consumed with the challenges of laying a firm foundation for the business to succeed and often feel overwhelmed by all there is to accomplish. One of the greatest advantages of hiring management consultant professionals is their expertise in marketing development, brand presentation and client management. These services are provided at a cost that is less than staffing a full time team to carry out these duties. Consultants are professionals who have consistent training in various areas that apply to the success of the company and help to yield results that profit the new business in a major way.

Research before You Partner Up

There are a wide variety of management consulting services available and it’s crucial for new businesses to take an up close look at the agency before bringing them on board. Make sure that the firm has a proven track record of success in that they have helped other businesses, especially new businesses succeed. Experience is a major contribution and references, including the option of speaking with former clients of the service is a great way to research their performance. This will provide much needed information on the abilities of the service and more importantly, what they can do to help your business. It is imperative that whatever service you select is capable of carrying out the needs of your business in a professional manner.

Overcoming Obstacles

New businesses who may have tried to proceed without the help of a business management service may begin to experience obstacles early on. It is beneficial for the company to enlist the assistance of a team of professionals to get them on track. Once the firm is on board, the time their services will be needed may vary but most importantly, the depth of their success can be measured by how well and fast the business prospers. Success is measured by several different elements but a positive cash flow, passed audits and phenomenal profits are a great tool to measure success. It is beneficial to develop a strategic plan of action that outlines an expected result to be brought forth by the management professionals. This allows the company and the team to develop a plan to work towards a common goal with preset results made clear to both parties.

Management consulting services in Gaithersburg are a great benefit to new businesses.

Budget Planning Can Lead to Success

Budget planning for your business doesn’t automatically make you a successful entrepreneur. But you’re on the right path, if you conduct some financial forecasting.

Creating a budget allows you to accomplish business goals. A financial forecast is probably already on your mind most of the time, but it helps to see it in black and white. Recording the details and turning them into a cohesive plan will give you a reliable strategy to implement. The budget helps you anticipate profitability of each of your products or services and gauge the impact of new decisions.

Elaborate projections are not required. You simply have to understand your business and apply some common sense. To begin, you must establish some basic bookkeeping elements. This is the foundation of your budget planning.

Cash vs. Accrual

Your first objective is to have financial information that accurately matches the timing of income and expenses. This may require accrual basis accounting. Accounting software like QuickBooks produces either accrual basis or cash basis reports. Accrual basis shows income when earned and expenses when incurred. Cash basis counts income when payment is received and records expenses only when they are paid.

With some businesses, cash and accrual are nearly identical. For example, when customers pay at the time of sale, cash basis revenue is the same as accrual basis revenue. Accrual accounting is a little more accurate at matching the timing of expenses to the income generated from incurring them. You may use cash basis for tax purposes, but use accrual basis for budgeting – especially if your type of business has significant lags between sales and receipt of payment and time gaps between receiving and paying bills.

Adjusting for Current Circumstances

Start your budget with categories and amounts that exactly match your historical income and expenses. Sales accounting must have distinct revenue accounts for each type of product or service. Also, your bookkeeper should separately classify the direct costs of each sales category.

Amend your budget to reflect new sales projections by category. Sometimes the best seller is the least profitable. So endeavor to sell more items with the highest profitability. Increase or decrease direct costs that change in relation to revenue adjustments. Finally, determine which general overhead expenses are higher or lower than you expected. Adjust your budget to curtail excessive expenses.

Adding New Actions

Add budget lines for new products or services you plan to introduce. For each of these, budget separate revenue and associated costs. Ask your bookkeeper to systematically account for these differential categories.

Increase budgeted spending for areas where you plan changes such as adding new employees or launching an advertising campaign. Maybe you need to pay for revising your website or improving your physical location.

As you write down objectives, you begin to prioritize which ones you can truly accomplish this year. This makes you focus on what’s most important and avoid being distracted by less-worthy tasks. Plus, you will find you can execute the plan to achieve these goals when you know they are affordable.

 

 

For Insurance Providers: Why Your Client Needs a Business Valuation

Why Your Client Needs a Business Valuation
 
As an insurance provider, your clients look to you to provide them the peace of mind in case of a financial or health emergency. For business clients, not only do you need to watch out for the individuals in the company but also the future of the organization as a whole. Whether the company is just starting up or whether it is ready for a change in ownership, knowing the value of the business at any given time plays a key role in its protection.
Valuations, Buy-Sell Agreements, & Insurance
 
Buy-Sell Agreements and life insurance very often join forces when that unfortunate moment does arrive. For instance, if a company majority shareholder unexpectedly passes away from a terminal illness, the minority partners would be able to acquire the majority owner’s share by having a buy-sell agreement in place beforehand. Because this is a case of the death of the owner, life insurance can be used to fund necessary purchases that must be made as a consequence. At a time when the economy is not at its best, these funds can cover capital requirements when the markets are down, supplemental retirement income, and even to buy out a retiring partner should death or disability not occur. A consistently updated business valuation will maintain a buy-sell agreement current in the case shareholders need to give up their shares or exit the company.

Restaurant Edition: How to Balance Supply and Demand

Balancing Cash and Inventory

Is your restaurant a full house every night but at the end of the month you’re still low on cash? Is your kitchen pantry stocked up with food that is never cooked? There can be countless reasons as to why your sales are not exceeding your expenses. On the bright side, there are simple tweaks that you can make a part of your daily/weekly/monthly routine to solve these issues. Here are a few ideas:

Food Portions: If customers are asking for more sides or toppings, these items must be an extra cost, no freebies

Drink Portions: It is one thing to have free soda refills but if it is alcohol, make sure the bartender is not over pouring and that drinks are properly mixed

Hungry Employees: In the case that items disappear from your inventory, do a count at the end of the day, as there may be a possibility that your employees are getting the munchies

Wasted Food: Are your waiters taking down orders correctly? Check your POS system as to how many Server or Kitchen Errors there are regularly

Time Management: During a busy night, is the chef taking so long to serve that free food has to be offered? Pre-slice vegetables and fruit and label all containers for easy and quick access

Why Accounting Is Important

While your POS system and bank balance show you where the numbers are, they do not reflect scheduled payments to vendors for the next month or late customer payments for packaged products. It is important to implement an organized accounting system where you can keep track of recurring expenses, profit and loss, cash flow forecasts, and more. You should be in contact with your accountant on a regular basis to make sure your margins are balanced, you are meeting state requirements, and you are making your sales tax deadlines.

As the owner or manager, it is better to be doing what you are good at and leave the numbers to the experts. Don’t wait until you have hit a plateau or you are suddenly $300,000 in debt. It will cost you more when you are under water after procrastinating your bookkeeping than working with an accountant who will be keeping a watch out for you. Let them take the weight off your shoulders and follow their advice – after all that is what you’re paying them for.

Improving Your Profitability

Input Efficiency

The first aspect of business operations is to examine input efficiency. This is commonly measured by knowing how much cost you incur for everything you sell. It goes beyond calculating overall gross profit by deducting from sales revenue the direct costs to manufacture or acquire goods. The truly useful figures are gross profit for each product. Studying cost fluctuations for every one of your products permits you to know the cost to produce more of anything and recognize when to adjust prices.

For a wholesale or retail business, the costs are more than just outlays for each item. You have to allocate expenditures for warehousing, packaging and shipping as well as personnel costs for selling, receiving, and customer relations. Facility operating costs are not necessarily equally proportioned among all products. Some items require more overhead.

The same input analysis applies to service businesses, where owners can measure the costs for each type of service offered. There are always subtle variances. The nature of some projects requires more selling time. A month of emails and phone calls to land big deals is more costly than just three days to procure simpler contracts. After adding travel expenses and some contract labor, sometimes the larger projects don’t provide any more profit than the smaller ones.

Output Efficiency

The second area to assess is output efficiency. For companies providing services, the recommended measurement is revenue per employee. A growing business naturally tends to add staff. Eventually, extra support personnel are supposed to help the frontline employees produce more revenue. Constant examination of revenue per employee is a simple way to make sure this is happening. For product-oriented companies, management inventory is crucial. Efficient businesses move inventory quickly. There’s nothing worse for a retail or wholesale business than having to mark down old inventory to get rid of it. Plus, holding inventory uses up capital that could be deployed for other purposes. Measuring inventory turnover requires accurate financial statements. Your accountant can help you maintain that accuracy and show you have to measure inventory turnover. A trend of slowing inventory turnover is generally a sign of trouble.

Cash Flow Management

The final area to evaluate is cash flow management. This involves calculation of the average number of days required to collect accounts receivable and the days that accounts payable are held. These measurements also require accurately rendered financial statements immediately after the end of each month. Net income and bank balances are not reliable predictors of future cash. Aging trends for accounts receivable and accounts payable are proven indicators of financial health. A sound business doesn’t continue stretching delays for paying bills. Your accountant can help you with these cash flow calculations that allow you to avoid a cash crisis.

Stop Fearing the Cash Flow Roller Coaster

As you know, starting your own business isn’t for the faint of heart, and you didn’t take the plunge because you enjoy leisurely amusement park rides. So stop fearing the roller coaster ups and downs of cash flow.

Understanding your business cash flow allows you to plan ahead and gives you a high comfort level that you will be able to meet your goals. To achieve business success you must capture new opportunities, whatever the risks. This is evident when using cash for expansion or upgrades. Having cash on hand gives you a feeling of security, but your business will stagnate if you fail to deploy cash to grow. The only obstacle is making sure you have sufficient funds.

Determining Cash Flow

Start by assessing your company’s cash flow. Many enterprises have “cash basis” bookkeeping – income is recorded only when collected. Counting income when you send an invoice is “accrual basis.” When using cash basis, expenses are those already paid; accrual basis records expenses when you’re billed.Your cash basis profit and loss statement (P&L) mainly reflects actual cash flow for both income and expenses. Some adjustment is required for cash outlays not on the P&L, such as principal paid on loans or purchases of furniture and equipment. Also, non-cash accounting expenses such as depreciation are added to profit when determining cash flow. Your accountant can create a cash flow statement as part of your monthly financial reports. This is particularly important if you have an accrual basis P&L. Accounting software such as QuickBooks allows printing of cash flow statements.

Evaluating Cash Flow

Improve cash flow by finding ways of reducing expenses without draining productivity. Sometimes cutting your own salary is the best option; a wise entrepreneur is willing to reduce his pay in the short term for a long-term gain. A reasonable calculation of monthly cash flow is the average over several months. This is the amount of money your business generates to solve special problems such as equipment breakdowns as well as to tackle unforeseen events such as shipping problems or a late-paying customer. Calculate the cash you’ll need each month for these contingencies. Cash flow is also required to reduce debt. You must keep your borrowing power intact for those times when you need an immediate loan. After accounting for emergencies and loan repayments, the remaining cash flow is available for new goals.

Funding Goals

Next, prioritize objectives for improving or expanding your business. Outline costs and benefits for each goal and identify best choices. Armed with the cash flow figures, you now can determine how many months of operation are required to safely build the funds needed for a particular task. Goals such as upgrading equipment or adding an employee are easy to implement if you plan using cash flow management. Or you can use the excess cash flow to service additional debt. That analytical approach is what bankers need in order to loan you money to modernize and grow.

How a Working Budget Benefits Your Business

Many microenterprises and solopreneurs believe they are too small to need a working budget. Some start-up owners who are busy launching their operations think it’s a waste to spend time developing one. And some small and medium-sized enterprise owners reason: “It’s just a shot in the dark, anyway.”But no matter how small or entrepreneurial your business, you need to have a working budget. A budget is a critical part of the initial planning stage, a crucial component of your business model and a vital tool for ongoing strategic planning. A working budget can help an entrepreneur determine whether a new product or idea is financially viable. It serves as a game plan for planning and timing the growth of a young business.

For an established business, a working budget is a way to monitor the firm’s financial condition and a key part of sound fiscal management. The term “working budget” refers to the fact that the budget is a work in progress and that it will undergo modification and adjustment as time goes on. You may need an accountant or financial professional to help you set up your budget initially, but it’s important that you be familiar with the numbers and thoroughly understand all the components of your budget. If you are a new business owner or an entrepreneur with just an idea, you will need to do some research to come up with realistic budget numbers. Look at similar businesses in your industry or sector and in your area. This research will enable you to understand the market potential of your business and will help you in many other ways as you develop products, pricing, promotions and market presence.

Of course, if you are an established business owner, you can use your historical data to estimate future revenues and expenses. Make sure that your numbers are reasonable or, better yet, on the conservative side.And be sure that you add plenty of detail about items in your budget, including specific data relevant to your particular business.The more detailed and thorough your budget is, the easier it will be to use it to secure funding from banks and lending institutions and support from investors. From time to time, you will need to adjust your budget based on variances between the budgeted figures and your actual figures.This is a good opportunity to evaluate your financial situation and tailor your business plan to help you reach your business and financial goals.

Maintaining a budget for your business on a regular basis will also help you track expenses, analyze your income and anticipate future financial needs. Use your budget as a tool to improve and fine-tune your business – and to keep expenses in line. By having and using a working budget you will be better able to make good decisions about your business and any new ventures you’re considering.

Buying a Business? How to Establish the Value of Goodwill

Goodwill is the value of a business to a purchaser over and above the net assets of the business in question. Ultimately, goodwill is a reflection of the intangible portions of the business, such as reputation, brand name, customer relations and employee morale as well as other factors that improve the company name.

When a business is purchased, goodwill will rarely be mentioned, but its value will be factored into the overall purchase price. Unlike the net assets of a particular business in which the value can be easily appraised, goodwill is more subjective. The value of goodwill is negotiable, and it is up to the buyer to decide what the goodwill of a particular business is worth. This is done by determining the additional value the goodwill brings to the business.

In order to place a value on the reputation of an operating business, the purchaser must consider how well the current clientele fits into the purchaser’s visions for the business. In a turnkey operation, reputation, customer relations and employee morale will weigh heavier on the goodwill scale. Conversely, in a situation where the new owner intends to make several changes in order to improve the business, the goodwill may not weigh so heavily.

Ask questions that will assist in defining the value of the goodwill. Will the business realize additional profits due to business name? Would a similar business without an established clientele be as profitable? Does the value assigned by the seller to the goodwill aspect of the sale meet your purchase requirements? These variables allow the investor to establish whether or not the goodwill value is supported.

 

What to Look For When Hiring an Accountant

As business owners, we share one common goal – growing our business. Although you may be an expert in your field and you have an all-star sales team, your full time CFO is crunching numbers in the back without letting you know what exactly your current financial status is. Even though you are winning bids right and left, are you sure that you will be able to afford to do the labor? If this makes you think twice on who you’ve hired as an accountant, here are some guidelines for choosing your next one.

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