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Why Auto Dealers Should Outsource Bank Reconciliations

September 15, 2016 / by Jim Rice posted in Small Business Advice, Orlando

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Jim-Rice-for-web-2.jpgIt was an expensive lesson for California auto dealer Danny McKenna. He found that two of his most trusted employees had systematically drained $600,000 from his five dealerships.

The guilty parties "had been there a long time and had earned this immense trust," McKenna told Automotive News. "Now I don't dog-pile all this trust on one person all the time anymore."

McKenna's losses could have been even more catastrophic. One of the co-conspirators, who worked in McKenna's accounting department, had taken a medical leave. It was only then that a temporary employee uncovered the fraud, which had gone undetected for years.

Auto dealers everywhere should heed the lessons that McKenna learned the hard way. As a small-business owner, you want to build an atmosphere of mutual trust with your employees. But while it might seem counterintuitive, the best way to accomplish this is to outsource your bank reconciliations — if not all of your accounting and bookkeeping services.

Detection and Deterrence

Regular bank reconciliations performed by an outside firm can not only detect fraud that has already occurred, but also deter future fraud.

With their high annual turnover rate — a recent study pegs it at 39.4% industry-wide — auto dealerships are particularly susceptible to fraud and outright theft. One survey found that 88% of dealership fraud was committed by first-time perpetrators. Moreover, up to 40% of employees could be tempted to commit fraud if they thought they could get away with it, according to the same survey. An employee who knows a third-party reconciliation is coming, however, will be less likely to try to cook the books.

Beyond the obvious benefit of saving you money, keeping your employees honest helps maintain morale. McKenna says that the fraud he experienced "affected everyone's life" at the dealership and "was awful." He now uses certified third-party auditors.

Another benefit of third-party reconciliations is that they can uncover irregularities resulting from honest mistakes or faulty practices. That can keep you from casting a suspicious eye on an innocent employee and promote a healthier working relationship. It can also help you streamline procedures and eliminate inefficiencies.

Spreading out the Responsibilities

With multiple streams of debits and credits, auto dealerships can be an accounting nightmare. New cars, used cars, leased cars and loaners all require separate bookkeeping. Most dealerships also have a parts-and-service department, with fluctuating inventory and multiple vendors. A dishonest employee who knows the system can easily play a shell game with your money.

Industry experts recommend dividing accounting responsibilities and building in crosschecks and redundancies to avoid concentrating too much responsibility — and too much information — in one person's hands. It's a simple safeguard against fraud. In addition, a distribution of responsibilities keeps a dealer from being left high and dry if a key accounting employee leaves or has an extended absence.

Cash flow is the lifeblood of any business. For some auto dealerships, the best way to monitor that lifeblood is to use a third-party accounting service. At the very least, a conscientious auto dealer should perform monthly bank reconciliations, according to the Houston Chronicle. "When bank statements are not monitored and reconciled, the potential for undetected loss is high," the Chronicle reports. "Keeping an eye on bank statements can help you keep your finger on the pulse of your company."

 

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How Best to Support Your Remote Employees

September 11, 2015 / by Liz Homem posted in Small Business Advice

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Liz HomemAs a Financial Operations Director at Supporting Strategies, I'm always looking for new ways to help our remote employees feel like they're part of a cohesive team.

One approach I've shared with other managers is keeping a flexible agenda for regular meetings, so informal conversations can mimic the spontaneity, creativity and connection that happens in office interactions.

When I spotted this fun article advising telecommuters on how to succeed, I thought I'd reach out to some of our seasoned managers for their best ideas on making the arrangement work. Here's what Financial Operations Managers Diane Fulginiti and Denise Rosenstein had to say on the subject.

Our top tips and pitfalls when it comes to supporting remote staff:

DO try to talk or text with every associate regularly — even a daily check-in is not too much. Conversations can be client-related or a simple, "How's your day going?"

DO consider offering cross-training opportunities specific to particular clients. This not only makes it easier for associates to take time off, but also gives them a chance to work together and build rapport.

DO encourage associates to look for each other online. Those virtual connections go a long way toward helping them feel comfortable with one another — and willing to ask for help.

DO share your cell number with all associates, and encourage them to use it. Make sure they know they can always call you to brainstorm issues large and small. A phone conversation can be a better place for you to gauge the issues they face and brainstorm solutions together.

DON'T shut yourself off from the team when you're facing down a deadline. It may seem like you're saving time, but it will cost you in the long run.

DO consider setting up informal get-togethers at a local coffee shop or even someone's home. Opportunities to socialize are a great way to build strong relationships across the team.

Thanks, Diane and Denise, for your insights. I thought all of these suggestions were spot-on. For those of you reading, whether managers or associates, what tips would you add to the list?

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The Importance of Financial Management in the ‘Trinity of Management'

August 31, 2015 / by Andy Hale posted in Small Business Advice, Texas, Accounting Services, Bookkeeping Services

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Andy-Hale

For all you small business owners out there, I thought you might like to learn about a useful framework for basic business management. It's called the "Trinity of Management."

Patrick Brower, Enterprise Facilitator for the Grand Enterprise Initiative, explains the concept in this article. He says the trinity has three legs, all of which a business needs to succeed: 1) a superb product or service, 2) strong sales and marketing, and 3) solid financial management.

Naturally, item #3 caught my eye. I urge you to read the article to learn about the three key aspects of financial management, including one vital piece that many businesses miss. How about your business?

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Proposed Changes to Overtime Rules & Their Impact on Payroll Administration

August 17, 2015 / by Bryce Ledet posted in Small Business Advice, New Orleans

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BryceLedetforWebMaking sense of the proposed changes to overtime rules may seem daunting when it comes to payroll administration, but it's important that small businesses take the time to get it right. Although the rules haven't yet become law, it's not too early to consider their potential impact.

In some cases, the rules changes will reduce the overtime threshold for small businesses with salaried employees. Simply reviewing salary isn't sufficient; a duties test also applies. Determining which employees are affected will take some coordination between management and those dealing with payroll administration.

This article from our payroll services partners at ADP lays out the basics.

Steps You Can Take

Beyond determining who on the roster would be affected by the rules change, what can a small business owner do?

Start with answering key questions like these:

  • Is your business in a position to absorb these increased costs?
  • Does the business need to raise prices?
  • Are there changes to be made that would increase efficiencies to get the same amount of work done in less time?
  • Does it make sense to hire additional employees and reduce the overall work week to 40 hours?

For small business owners concerned about cash flow, then, the choice is whether to fund additional efficiencies, uncover ways to manage costs or increase prices, or recalibrate the number of employees to try and reduce overtime.

As payroll services experts, Supporting Strategies is well-positioned to help clients face these challenges. Working together so closely from an operational perspective gives us added insight — knowledge that can help clients take the steps to stay in compliance and minimize the impact on the bottom line.

That's the kind of contribution that serves clients and their employees across the board.

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Tips for Steering Clear of Bookkeeping Pitfalls

August 4, 2015 / by Andy Hale posted in Small Business Advice, Texas

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Andy-HaleIf you don't enjoy bookkeeping (and what small-business owner does?), Business 2 Community author Catherine Lewis has good news: "It is now easier than ever to manage your business finances."

In her Business 2 Community article, "Make Every Dollar Count: 5 Bookkeeping Mistakes to Avoid," Lewis explains that cloud-based accounting software is taking the pain out of bookkeeping for small-business owners. But, she adds, you have to be sure to avoid certain bookkeeping pitfalls.

What are those key pitfalls? Check out the article for a quick rundown.

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Guest Article: Paying for Qualified Employees Pays Off

July 29, 2015 / by Indy Zakaryte posted in Small Business Advice

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One of our referral partners, Christine Searle of Searle Business Solutions, has a great blog. She recently posted an interesting article on the benefits of paying for qualified employees that she has graciously allowed us to republish here. Thanks, Christine!

Without the right tools or equipment to get the job done, it takes longer. Often, things have to be done over. It's the same with people. Trying to do the job with lower-paid, but unqualified, employees will cost your organization more in the long run.

Small businesses and non-profits often think that their budgets aren't big enough to invest in the people they really need. Especially finance and administrative staff, who provide information and support for the entire organization. What does it cost not to invest in knowledgeable and experienced people for finance and administrative roles?

Organizations are exposed to five risks by not investing in the right people:

1. Limited Capacity and Lack of Innovation

People without the necessary skills and experience may not even be aware of what to do, let alone good practices. Organizations planning to grow, or to stay competitive, need people who can keep up with changing conditions and new methods.

2. Turnover

Having unqualified employees often results in high turnover. Hiring and training takes time. Vacancies on your team put stress on your other employees. Time and stress are not expense items on your financial statement. But they are real costs you cannot recover.

3. Time Spent Correcting Errors

Unqualified employees are more prone to errors. Errors are time-consuming and expensive to correct, assuming they are detected. The cost of undetected errors is incalculable.

4. Inefficiency

Experienced people know what to do and how to it. They've seen it before. They assess new situations quickly and accurately. Inexperienced people take more time because they are figuring it out as they go. 

5. Regulatory or Legal Compliance Issues

Employees must be aware of compliance issues that can hurt the organization. It could be issues particular to your industry or general business considerations, such as taxes and payroll. Getting any of that wrong can be very costly.

Getting the right people on the team isn't easy. It's pretty much impossible if the pay isn't enough to attract and retain them. Considering the five risks of failing to invest in the right people will head off the expensive issues that arise from making the cheapest decision. 

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Guest Article: Do Sales Cover My Costs?

July 22, 2015 / by Indy Zakaryte posted in Small Business Advice

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One of our referral partners, Christine Searle of Searle Business Solutions, has a great blog. She recently posted an interesting article on breakeven analysis that she has graciously allowed us to republish here. Thanks, Christine!

Knowing whether your small business is producing enough income to cover costs seems pretty straightforward, right? Not necessarily. If you don't plan your income and expenses appropriately, you could have a nasty surprise. It's good practice to perform a breakeven analysis to make sure your sales are covering your costs, or to work with an accounting professional to get it done.

Breakeven analysis is an approach to find the point at which you have enough sales to cover your production or service delivery costs and overhead. Knowing when you are selling enough to sustain your business involves more than looking at your bank balance; it starts with understanding and documenting your costs.

Know Your Costs

Documenting all the costs of doing business should be part of budgeting and pricing your product. If you haven't documented all your costs yet, this is the time to do it, or to see the aforementioned accounting professional.

For a breakeven analysis, your costs fall into one of two types: variable costs and fixed costs. A variable cost changes when the level of production or service delivery changes. Typical examples include materials and supplies. Fixed costs do not vary depending on the production level, such as rent, insurance, and other overhead expenses.

Some costs are not as clear to categorize. Compensation is typically a fixed cost, unless it is paid as a commission tied to production. Utilities are generally a fixed cost; however, if it is possible to effectively monitor the electricity used by machines in production, utilities could become a variable cost.

Breakeven Sales Point

First, determine your contribution margin, the amount that each sale "contributes" to covering fixed costs. It is calculated by dividing the total fixed cost by the price minus the variable costs. For example, a business with $50,000 in fixed costs that sells a product for $15 with $10 in variable costs has a contribution margin of $5. This means that 10,000 products sold will cover fixed costs. Fixed costs are covered with the 10,001st sale.

Small businesses need to know their costs and understand their breakeven point to avoid nasty financial surprises. For assistance, consult your accounting professional.

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Useful Advice for Choosing Professional Accounting Services

July 21, 2015 / by Georgean Schmidt posted in Small Business Advice, Central Ohio

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Georgean-Schmidt-for-webIf you own a growing business, chances are you'll hit a crossroads at some point: Continue using free or inexpensive online accounting tools or upgrade to professional accounting services? And if you choose to step up to the latter option, how can you make sure you pick the right resource?

Entrepreneur.com's Kim Lachance Shandrow has written a useful guide to help you with this important decision: "10 Questions to Ask When Working With an Accountant." For example, question #3: "What are some considerations I should consult with you about on an ongoing basis?"

Find out the 10 questions you should ask — and why — in this Entrepreneur.com article.

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Four Reasons to Outsource Your Business' Bookkeeping

July 1, 2015 / by Scot Turner posted in Small Business Advice

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Scot-Turner-for-web-2As businesses strive to stay ahead of the constantly changing economy, outsourcing is becoming more and more common. Many businesses have discovered the benefits of outsourcing not only for IT, but also for other departments and job functions. One area to seriously consider: bookkeeping.

Here are four key reasons to outsource your bookkeeping.

1. Every minute you spend on the books is one that could be better spent elsewhere.

You don't need to be told how difficult it is to run a business; there are always fires to put out, be they internal or external. Trying to handle these problems while also performing everyday functions like bookkeeping is bound to hurt your overall productivity.

2. Outsourced bookkeeping means saving on benefits.

These days, everyone is looking to cut costs. One of the best ways to do so is by outsourcing. The costs of employing full-time staff to keep your books go far beyond salary, such as:

  • Health insurance
  • Workmen's comp insurance
  • Increased tax burden
  • Matching retirement contributions
  • Other associated HR costs

3. Keeping your technology current costs money.

Having the latest technology on hand means constant updating. This means incurring the costs of updating your computer systems every few years. And with accounting organizations such as the AICPA constantly redefining best practices, bookkeeping software can also require frequent upgrades.

4. Employee education is expensive, too.

When combined with constantly changing best practices, yearly tax law changes make regular employee education a must. In fact, CPAs are required to attend a number of continuing education courses to renew their certification. And don't think you can just skip your bookkeeper's education. If your business doesn't comply with a new tax law, it could cost you thousands in back taxes and fees.

Whoever said, "If you want something done right, do it yourself," probably never ran a business. Or at least not a successful one. Running your bookkeeping operation in-house costs you time and money, both of which are precious commodities for growing businesses. Outsourcing could make the difference in maximizing your business's potential.

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Mark Cuban Weighs in on the Most Common Problems Plaguing Entrepreneurs

June 15, 2015 / by Andy Hale posted in Small Business Advice, Texas

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Andy-Hale-for-Web-2Businessman. Investor. NBA team owner. Top Shark on TV's "Shark Tank." Mark Cuban has enjoyed success in a variety of areas, so I'm inclined to listen to what he has to say.

Recently, Cuban took part in a panel discussion at the iCONIC conference in Chicago. With regard to the many businesses in which he's invested, he was asked to identify which problems are most challenging for entrepreneurs.

His first response — accounting — came as no surprise to me. "All you entrepreneurs think you have accounting, but Quickbooks and a shoebox does not count," Cuban said, according to Inc.com's Graham Winfrey.

Check out "Mark Cuban on the 3 Things His Shark Tank Companies Get Wrong" to see which other issues made Cuban's list.

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