Bringing Home the Bacon: A Profit Growing Guide for Restaurateurs
Editor’s Note: This post was originally published in February 2017 and has been revamped and updated for accuracy and comprehensiveness. It’s no secret that the restaurant business is tough, even in the best of times. Really tough. Even before the COVID-19 shutdowns, industry analysts estimate the failure rate for new restaurants in the first year was somewhere around 60%, with another 20% shuttering the doors before the 5-year mark. That’s only gotten worse during the pandemic, with hospitality being one of the industries hardest hit by shutdowns and restrictions. However, as bleak as that reality may seem, the restaurant industry is still viable, and there are things you as an owner can do to help increase restaurant profits and make sure you stay in the 40% that do well. Understanding Profits: Gross vs. Net When discussing how to increase restaurant profits, it’s important to distinguish between gross profit and net profit. Gross profit for a restaurant is defined as the price of the item minus the cost of goods sold, i.e., food cost. For example, if your signature lasagna dish sells for $20 and the ingredients to make it cost $7, your gross profit on that item is $13, and your profit margin is 65% (13 divided by 20). Industry norms and best practices suggest that food costs should run somewhere around 30%, which means that if your total sales for the month are $100,000, you should be spending roughly $30,000 with your foodservice vendor. Food costs that run higher than that can often be an indicator of excessive waste or theft (often referred to as shrinkage), so it’s essential to know your gross profit margin. Net profit is the amount left over after ALL operating expenses are deducted, not just food costs. That includes expenses such as labor, food cost, rent, utilities, equipment repairs or leases, insurance, etc. Because it consists of a much more expansive list of expenses than gross profit, net profit will necessarily be a much smaller number. Typical net profit margins have shrunk in recent years but typically hover around 3-5%. It’s critical to stay on top of your books and know exactly what your margins to increase restaurant profits because if you’re playing catch-up bookkeeping, you’re flying blind. Generally, when discussing how to increase restaurant profits, most people mean net profit because it’s the one that keeps the lights on for your business. With that in mind, there are two ways to boost your bottom line – you can increase sales or lower expenses. So let’s look first at ways to boost your sales numbers and increase your average ticket price or cover the average. Review Your Menu Pricing As we noted above, your food cost should be around 30% of your menu price, so you’ll need to calculate the plate cost of each menu item to help increase restaurant profits. To do this, first, make a list of each ingredient required to prepare the dish. Next, choose which unit of measure your foodservice vendor uses for the items (e.g., do you buy it by the pound, gallon, dozen, etc.) and identify your unit cost from your vendor. There may or may not be a yield percentage for the item, which would be waste from trimming or peeling the item before use. For example, certain cuts of meat may require trimming away fat or gristle, which reduces its useful yield. These can usually be found in standardized yield charts available from many vendors. Finally, do a similar calculation for the way you prepare the dish: 1. Select the correct serving unit, which is usually as simple as the unit of measure that your recipe calls for. 2. Calculate the serving unit cost by dividing the cost per measure by the number of serving units per measure. The cost per measure for items with no yield is the unit purchase price, and for items with a yield, the unit purchase price is divided by the yield percentage. For example, if you buy ground beef for $4 per pound and your serving unit is ounces, the serving unit cost would be $0.25 per ounce ($4 divided by 16 ounces to the pound). 3. Select your portion size, which is the quantity called for by the recipe. A simple plate cost for a hamburger and fries might look like this, assuming four potatoes to the pound and six slices per tomato: Ingredient Purchase Unit Purchase Unit Cost Yield Actual Unit Cost Serving Unit Serving Unit Cost Portion Size Portion Cost Ground Beef Pound $4.00 N/A $4.00 Ounce $0.25 5 $1.25 Bun Dozen $6.00 N/A $6.00 Each $0.50 1 $0.50 Tomato Pound $1.89 N/A $1.89 Slice $0.31 2 $0.62 Mustard Gallon $13.00 N/A $13.00 Ounce $0.81 1 $0.81 Potato Pound $2.00 .81 $2.46 Each $0.62 1 $0.62 $3.80 So we can see that the plate cost for this hamburger and fries meal is $3.80. Sticking to the rule of 30% food cost, the menu price of this item should be $12.50. If it’s less than that, it’s probably eating into your bottom line. Identify Your Menu Hits and Misses Now that you know your plate cost for each item on your menu, it’s time to compare those to some sales reports from your point-of-sale (POS) system to see where your profit is coming from. Create a spreadsheet with four categories and label them “HIGH PROFIT/HIGH SALES,” “HIGH PROFIT/LOW SALES,” “LOW PROFIT/HIGH SALES,” and “LOW PROFIT/LOW SALES.” Then, put each item on your menu into one of those categories to see where each item falls. Dishes that fall into the “LOW PROFIT/LOW SALES” category are candidates for removal in favor of more profitable offerings. Also, consider running daily specials that combine high-profit, low-sale items with big sellers to help move those lower selling items to get that incremental revenue. Up-Sell and Cross-Sell Effectively It’s impossible to overstate the importance of staff training in proper selling techniques to increase restaurant profits. Train your service staff to offer customers an
How to Change from an LLC to an S Corporation
Remember back when you had to decide on a name to register your new business, forming a limited liability company—LLC? Now your small business has grown up thanks to your hard work and dedication. You may have outgrown your current legal status and it’s time to change from an LLC to S Corp to gain additional tax benefits that you’ve earned! Since determining the status of your business is important to its success and potential, we’ll break it down for you. What is an S Corporation? Under “S” corporation status, the small business owner’s income, losses, deductions, and credits “flow through” to you and are reported on your personal tax returns and assessed at your individual income tax rate. S Corp status is great for small businesses because you have the LLC protection from losses beyond your capital investments, while still providing you with the flow-through taxation. How is an LLC Different from an S Corporation? As an LLC owner, you could lose everything you have invested in the business, but your personal home, bank account, and other assets are protected. The main differences between an LLC and an S Corp are: An S Corporation isn’t a business entity like an LLC—it’s an elected tax status. LLC owners must pay self-employment taxes for all income. S corp owners may pay less on this tax, provided they pay themselves a “reasonable salary.” LLCs can have an unlimited number of members, while S Corps are limited to 100 shareholders. Why you should consider changing from an LLC to an S Corp Here are three great reasons to change from an LLC to an S Corp: Self-employment taxes S Corp distributions aren’t subject to FICA/self-employment taxes. This is one strategic way to minimize self-employment taxes, making it a great business structure for consultants, sole-proprietors, and more. If you have an S-Corporation and are active in the business, you must pay yourself a market-rate salary for your work The IRS won’t let you pay yourself entirely in distributions to avoid self-employment tax. Tax-preferred retirement savings You can contribute more to retirement accounts with an S Corp than an LLC because with an S Corp you can set up a Solo 401(k) in addition to a Roth IRA. Easier to scale S Corps allows for a smoother transition from a C Corp. Stockholders are required to report their percentage of the profit/loss whether or not they actually receive that money as a distribution. If you own 100 percent of an S Corp and it makes X dollars in profit, you can keep that money in the business to make purchases next year. You are still required to report the profit on your individual tax return. If you anticipate keeping a significant amount of money in the business, you may be better off as a C Corporation. How do I change from an LLC to an S Corporation? If you decide to change from an LLC to an S Corp for federal tax purposes, you can simply make an election for the LLC to be taxed as an S Corporation. All you need to do is fill out a form and send it to the IRS. Once the LLC is classified for federal tax purposes as a Corporation, it can file Form 2553 to be taxed as an S Corporation. With this approach, you don’t change the actual entity type, only the federal tax classification. Even though the IRS classifies the LLC as S Corp, it is still an LLC and may be taxed as such by the state where it is formed. To change the actual entity structure you must formally change the LLC to an S Corporation with the formation state. If the simple conversion process is not allowed by the formation state, then you can do the following: send the IRS a letter informing them of the structural change choose to be an S Corporation by filling out IRS Form 2553 cancel the LLC while filing with the state for a new corporation Is Switching from LLC to an S corp right for my business? When you’re ready to change from an LLC to S Corp, we recommend that you consult an accountant or tax preparation services to make sure there are no mistakes that could cause you to lose your money-saving tax status. Your xendoo team of small business accounting experts can help you find the right solutions for your small business, and take the hassles of tax prep and filing off your shoulders. Whether it’s the 1120S, 1120, or 1065, xendoo’s CPAs will file the right return for you, right on time. With bookkeeping, tax consulting, and tax filing all under one roof, your U.S.-based xendoo financial team is here to answer all your questions and to file your business and personal taxes. We’ll do what we do best — and let you get back to doing what you do best to make your business a success. Sign up today. [av_sidebar widget_area=’Blog Post Disclaimer’ av_uid=’av-om2w’]
How to Setup Your Online Store to Integrate Accounting Software
You’ve set up your online store set, and orders are starting to come in. But in your rush to pack, ship, and sell, there’s a good chance you haven’t made time to integrate accounting software with your eCommerce software. By downloading a third-party app plug-in, you are just a few clicks away from saving time and money by automatically sharing data between your accounting and eCommerce programs. It sounds like a lot of work, but it’s simple! Most popular online accounting software options like QuickBooks, Xero, and FreshBooks all have a menu where you can search for compatible app plug-ins. And most popular eCommerce programs like Shopify, Squarespace, and WooCommerce have a corresponding app available from a third-party software developer. So you can easily install an app to sync the two programs! What to Look for E-Commerce Accounting Software As soon as you begin spending or making money, it’s time to set up your eCommerce bookkeeping and start accounting. There are many affordable online eCommerce accounting software options available. Programs such as QuickBooks Online or Xero store a business’s financial data in the cloud and are always connected to the internet. In addition, they automatically receive and update your data by connecting to your bank accounts. Sounds easy, but not all accounting programs are the same, and there is a lot to choose from. When deciding which program is best for you, you’ll want to consider the following: Compatibility – Does the program work with all of the devices you plan to use? How many users can be simultaneously logged in? Can your international team members log in, too? Cost – Many options have a free plan, but the pricing goes up as your business scales and grows. Support – What are the customer service options? Does the program offer expert bookkeepers and accountants you can hire to take on the work when you are ready to delegate? Can they help you file your taxes? Additional Services – All of the programs offer basic bookkeeping and financial reporting, but what kind of extra offerings does the software have? Some eCommerce trends include hefty employee management solutions to help with payroll, time tracking, and benefits, while others may offer project management tools. Some offer payment processing through third-party partnerships. Integrate accounting software with your eCommerce program – Make sure the two programs sync so you can limit the amount of data entry you are doing. Ideally, you will be able to eliminate manual data entry of sales, invoices, customers, products, and more. Most popular eCommerce software options, such as Squarespace and Shopify, integrate easily with third-party app plug-ins compatible with accounting programs like QuickBooks and Xero. Once synced, your inventory, orders, customers, and shipping can be automatically updated and will stay accurate. And getting started is easy! Most of these integrations only require a quick authorization and a few clicks to import your eCommerce data into your accounting program. Below is a list of some popular eCommerce platforms that offer integrations with popular online accounting software programs. Keep in mind that this list isn’t exhaustive, but these are the most popular eCommerce platforms that easily integrate with accounting software like Xero and QuickBooks Online. Squarespace WooCommerce BigCommerce Shopify Square Integrating your accounting software with your eCommerce platform can help save you time and money. You’ll be able to get an instant view of your financials, allowing you to plan your sales strategy more effectively. As your eCommerce business grows and you decide to sync your eCommerce software with your accounting software, there are many aspects of eCommerce and accounting that you will want to keep in mind for this integration. For example: Inventory Management – You will want to be able to connect multiple sales channels such as your brick & mortar’s Point of Sale, your Online Store, and your Pop-up location to ensure stock levels always stay up-to-date. Choosing the correct payment gateway – Does the available option match your needs? Will international business be supported? Tax settings – How does the software help you with your sales tax reporting? What role does it play in monitoring important tax deadlines? Why You Should Outsource Your E-Commerce Bookkeeping and Accounting As your eCommerce business grows, you will want to outsource your bookkeeping and accounting to professionals. Even though app integrations with the best accounting software for small businesses are great, many automatic tools such as your monthly reconciliation can be inaccurate. Even a minor error in your bookkeeping can have a ripple effect and lead to everything from your financial reports being inaccurate to your marketing budget and your tax payments. It’s best to have an experienced set of eyes on it! These professionals can even find tax breaks you were missing and help you save even more money! Spend more time growing your business and less time crunching the numbers by working with the team at xendoo. [av_sidebar widget_area=’Blog Post Disclaimer’ av_uid=’av-om2w’]
9 Common E-Commerce Accounting Mistakes to Avoid
As a new business owner, you have a lot to manage on your eCommerce site. From making sure that customers can easily find what they need to creating an easy path to purchasing your goods, it may leave less time to tidy up the little things in your accounting processes. However, these mistakes and misses can snowball into significant issues that could cost your eCommerce business profits and customers. To make sure your business is running efficiently from top to bottom, here are nine common eCommerce accounting mistakes that you need to avoid. Not adjusting your inventory levels Inventory levels play a significant role in your profit & loss, balance sheet, and cash flow forecasting. Not adjusting your inventory levels is a mistake that can carry over from one accounting cycle to the next and affect all your reports. It may be time-consuming, but doing a physical stock take is essential to avoid this mistake. Fortunately, technology is on your side, and there are many excellent inventory control applications to help you streamline the process. Sticking with spreadsheet or paper ledgers While it is good to have a backup, manual entry, especially those not saved to the cloud, can cost you when it comes to tax time. As your business grows, you will need more than a digital spreadsheet to keep your accounts in order. Manually combing through all your sales and entering them is highly time-consuming, and chances are, as an eCommerce business owner, it is time you do not have. Unless you are meticulously keeping up with sales tax and the like, you may end up costing yourself more than you make. If you haven’t already, it is time to upgrade to accounting software like Xero for eCommerce or QuickBooks for eCommerce. Both of these accounting softwares can sync with your website, do a lot of the grunt work for you, and help you avoid this eCommerce accounting mistake. Still, you will need to have an eye on your accounts to make sure everything is accurate. xendoo’s eCommerce bookkeeping service can help ensure your books are up to date and accurate, giving you more time to focus on your business instead of your books Mixing business accounts with your personal accounts While it may seem convenient to use your personal accounts for business-related purchases, mixing the two can create more problems down the line than it solves. Maintaining separate business and personal accounts is the best practice. You can take advantage of several tax benefits with a business account. It allows you to keep the proper line of sight over business income and expenses while avoiding accounting nightmares and potential liability issues if you get audited. Not monitoring your cash flow You may be seeing how much money your eCommerce business is generating, but are you keeping track of how much you are spending? Account reconciliation compares your internal financial records against monthly statements from external sources such as banks, credit cards, or other financial institutions, to ensure they match up. Knowing how to reconcile your accounts is essential for the financial health of your eCommerce business. You need to reconcile your accounts to provide a clear picture of how much cash flow you have to reinvest or to pay yourself. If not, making this eCommerce accounting mistake could have you missing out on new investment opportunities, or worse, realize that you don’t have enough money to run your business. If it all sounds a little complicated, then xendoo can help you get a clear picture of your financials and the overall health of your business. No accounting for fees Many sales channels have different fees, and if you are selling through multiple channels like Amazon, Etsy, eBay, etc., you probably are starting to lose track of which channel charges what. If you aren’t keeping track of all these different channels and adjusting your pricing for each, you may be losing more money than you make. Accounting software can help you manage the multiple-fee structures for each channel. An accountant can help you avoid this eCommerce accounting mistake and figure out what you need to charge to make a profit for every order and which channels you should prioritize. Not keeping track of your overhead expenses We mentioned the importance of tracking your inventory, but you also need to keep track of all the overhead expenses like advertising, shipping, website domain licensing, etc. All these monthly charges can add up fast. If you aren’t tracking your overhead expenses and comparing them to ensure they are not growing at a different rate than your sales, your eCommerce business may be without valuable resources to keep it running. Every day you can’t make a sale, you don’t make a profit, and worse, you may lose potential and existing customers if they go to our website and it isn’t there. Not choosing the right business entity type Picking a legal entity may not be as fun as naming your eCommerce business, but you must try to get it right the first time. Every business entity comes with its own tax benefits, and misclassifying your eCommerce business means you could be missing ways to maximize IRS tax savings. Plus, misclassifying your business is one eCommerce accounting mistake that could lead to compliance issues that can cost you. An accountant can help you choose which business entity is the most beneficial. And you’re just starting an eCommerce business, an accountant, like the ones at xendoo, can help you switch to a business entity that provides you with the most tax breaks. Not making time to focus on your accounting Accounting and bookkeeping are huge time commitments, but putting them off is one of the worst eCommerce accounting mistakes you can make. For all the reasons mentioned above, you need to take the time to follow these eCommerce bookkeeping basics, so your financial records are in order. If you’ve been avoiding your books, it’s not too late. xendoo provides catch-up bookkeeping for eCommerce
How Outsourcing Accounting Can Help Grow Your Small Business
Small business owners are notoriously short on time. They manage everything from sales and marketing to employee scheduling and benefits, not to mention being an expert in whatever good or service it is that their business offers. And there are hurdles every step of the way as you try to grow your business. Hiring an outsourced accounting service can help you tackle many of these including ensuring you don’t pay too much in taxes, that you have time to focus on sales and marketing, and that you are able to prepare thorough financial reports for investors. Why is an accountant important in a business? Accountants consider the big picture strategy needed to keep your business strong and growing. They can answer your questions about financial reports, cash flow, depreciation, and more. They can give tax savings advice, such as when to make capital purchases, what you can deduct, and how to reduce taxes on capital gains. They can identify opportunities to improve profit margin and business growth and keep you legal – preventing missed deadlines and noncompliance penalties. When you’re looking to grow your business but don’t have the time or resources to do so, hiring an outsourced accountant or outsourced accounting service like xendoo can free up your time and provide insights and ways into how you can increase your cash flow, strategically prepare for your taxes, and focus on what you do best. How does outsourcing accounting help your business grow? It’s not just keeping track of your financials. Outsourcing an account can help your business grow in the following ways: Accountants help save money We can tackle the reinvestment more in detail here and use the tax preparation anchor here. Accountants help small business owners save money in many ways, including through strategic tax preparation. They help you make smart decisions on your operating expenses, when to make big purchases, and what deductions you can make. Many small business owners spend too much money on taxes – an accountant can help you prevent overspending on taxes and help you strategize on how to cut costs in every area of operation. The money you spend on an accountant is an investment into your business and will help you grow by saving you money in the long run and leaving you with more money to invest back into your business. Accountants help save you time Time can be spent on marketing and other business growth while they look into the books. Small business owners have enough on their to-do list – when you’re looking to outsource some of the work and focus on growing, outsourcing accounting and bookkeeping services are the best choices. Bookkeepers and accountants will do a better job at a quicker pace than a small business owner who is strapped for time and whose talents might lie elsewhere. You’ll be able to focus on sales, marketing, and all of the other ins and outs of growing your business when you aren’t worrying about accounting. Outsourced accounting services are scalable As you grow so can your services without the need to hire FTE. Your outsourced accounting team can easily grow as your small business does. You won’t need to hire a full-time employee to handle your accounting when you have a scalable outsourced accounting team on board. You can skip the hassle of hiring and managing a full-time employee as you grow (and save on the need to offer expensive benefits, too!) by hiring outsourced accounting services like xendoo. Better business analysis Gives you accurate insights into your business strengths and weaknesses, which is important if you want to expand. Investors will want to see accurate books. As you grow you will continuously need better analytics on your business. An outsourced accounting team can provide accurate insights into your business strengths and weaknesses, helping you strategize on how to grow. And when you’re ready to take on investors or apply for a line of credit the banks and investors will want to see accurate and detailed financial reports. By having an outsourced accountant on your team, you will be able to show investors and banks precise, up-to-date records and prove you take your finances and the growth of your small business seriously. Help increase cash flow Keep track of outgoing and incoming money. Can find ways to help you save money long term with paying on time or ahead, and chasing down delinquent invoices. A key strategy to growing your business is taking charge of your cash flow. Outsourced accounting services like the team at xendoo can keep track of your incoming and outgoing money and can help you find ways to save money in the long term – through strategic tax preparation, cutting operational costs, and paying your bills on time or even ahead of time! And they can help you chase down delinquent invoices from clients who are behind on paying you. Your accounts payable and receivable will be closely monitored and managed without you ever needing to worry about it. Outsourcing accounting can help you grow your business. By outsourcing your accounting, you can save money on hiring a full-time accountant, plus, it will give you more time to focus on running your business and creating value for your customers and your employees. xendoo is all about providing timely and accurate financial information to business owners allowing them to make strategic decisions. If your business is struggling, know that there is a better way and xendoo can help. 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Five Customer Loyalty Tricks for Fitness Franchisees
Editor’s Note: This post was originally published in October 2017 and has been updated for accuracy and comprehensiveness. As a fitness franchise owner, you know the challenges of getting new members through the door, even in the best of times. It’s never been easy, but the fitness industry has been one of the hardest hit by COVID-19, with value brands representing the largest share of losses in the industry. Major gym franchises like Gold’s Gym have filed for bankruptcy protection, and others may soon follow. Polling has shown that as many as 60% of Americans either have canceled or are planning to cancel their gym membership due to financial hardship or concerns about safety. Simultaneously, the growth of digital and at-home fitness products has added to the pressure on gyms, with Peloton doubling its sales in 2020. So, in that environment, how do you get new customers through the door and convince your existing customers to remain loyal? We can start by taking a cue from one outlier in the value gym segment that has shown more resiliency than its competitors through the pandemic. The Anytime Fitness franchise rolled out a comprehensive COVID-19 policy to protect their members’ and staff’s safety and begun offering advance reservations to secure a spot when capacity is limited. When customers have confidence that you are genuinely looking out for their best interests, they are more likely to remain loyal. But beyond just building trust among your members, there are some other things you can do to encourage customer loyalty in this most challenging of times. Loyalty Rewards Program Have you ever noticed that it seems like every store you go into wants you to join their rewards program? Well, there’s a reason for that – it works. Create a rewards program for your loyal customers with some nice little freebies to help keep them engaged. This might take the form of a free t-shirt after ten visits, or maybe a free post-workout smoothie with every 10 purchased. You can get very creative with this, so don’t be afraid to experiment. Never underestimate the power of free swag for customer loyalty. Everyone wants to feel special. Frequent Customer Discounts Many gym members, particularly in the value segment, care just as much about the size of their wallets as the size of their jeans, so giving them a discount on a product or service is a great way to boost customer engagement. This might be a discount on a personal training session within the next month, or possibly a coupon for deals on gym apparel. Gym apparel is a particularly desirable thing to encourage because, in addition to the revenue from the sale, you get the added benefit of free advertising for your fitness franchise every time the customer wears it. Referral Rewards Let’s face it – we all have that one annoying friend who can’t stop going on about how great his or her fitness studio or workout program is. Well, that’s exactly who you want to be your customer, so you need to create a compelling reason for that person to be your customer. Create a referral rewards program and offer a membership discount for each new customer brought in on a referral. You’ll soon find your membership roster – and your bottom line – growing steadily. Premium Memberships Take a cue from companies with the most loyal followings and offer VIP or premium membership packages. Do a little up-selling. The key here is to create a value proposition that’s compelling enough to entice your customers to pay a little more without eating into your bottom line. If a member is already paying $30 per month for a basic membership, he or she would probably be willing to pay $35 or $40 to add free tanning or a free monthly workout with a personal trainer. It can be tricky to find the right balance for your package, but this is a great way to reward your most loyal customers if done right. Run Contests Contests can be a great way to keep your members engaged with the club and create valuable rewards for members who participate. You might run a contest with a free gym t-shirt or duffel bag to the member with the most visits during the month, or possibly a “Biggest Loser” type contest with a free month of membership as the prize. You can also incorporate social media into your content strategy by encouraging people to share, like, and comment on your content. Give members who complete one workout and check in on Facebook during the next month a raffle ticket to a drawing for a free duffel bag or another prize. Focus on Your Core Business Business owners are notoriously bad at time management, spending too much time on things that others can do and not enough on what an owner should be doing – growing the business. Offload time-consuming administrative tasks to employees or an outside firm. Consider outsourcing your bookkeeping and accounting, which is one of the biggest time vampires in an owner’s day. By getting those off your plate, you can have time to spend on thinking up creative ways to engage with your members and drive loyalty at a time when you need it most. So what’s the best way to boost customer loyalty at your gym franchise? Start by taking your own gym’s advice and just do it. Set a goal and commit to seeing it through. Start with these tips, but don’t just stop there. Be creative and come up with other ideas, and then let us show you how xendoo can help your fitness franchises become more profitable with a free trial. Let’s start building that customer loyalty muscle together!
How to Do Catch-Up Bookkeeping Services for Small Businesses
Author’s Note: This was updated on Dec 13, 2021, with new information and resources for small business owners. Nearly 25% of businesses are behind on their books and nearly 41% of business owners try to do their bookkeeping themselves. It happens easily— you fall a month or two behind, then by the time you look up, an entire quarter has gone by, and your books haven’t been updated. With inaccurate and out-of-date books, you might have late invoices, end up over-extending your small business, and not be able to dial in your operating cash flow. You might even be in danger of being non-compliant with the IRS. Perhaps nothing bad has happened yet, but you know it’s time to catch up on bookkeeping. For more guidance, explore these bookkeeping tips for small businesses which can help you stay on top of your financials more effectively. One of the most essential services a bookkeeper can provide for a business owner is to keep the company’s books accurate and up-to-date. Being able to quickly and easily review the status of your finances is crucial to short and long-term success for any business owner. When you know the health of your finances, you can make quicker decisions concerning everything from who to hire next to what marketing strategy recently worked best. Reasons to catch up/reconcile Besides being a smart business practice, catch-up bookkeeping provides additional benefits grow growing companies. Such as: Smart/quick decisions: A bookkeeper will review vendor payments and record expenses to manage your spending, helping you manage your cash flow. A bookkeeper will track your sales, so you know what’s most profitable and can focus on what works. Tax compliant: With up-to-date, accurate records, a bookkeeper can assist you during tax season – helping you maximize deductions and stay compliant. Loan: As you grow, you may want to borrow money or open a line of credit. Your lender will want accurate financial statements, and ideally, you aren’t scrambling to create them right then and there. What is catch-up bookkeeping? A bookkeeper will review source documents such as your monthly bank and credit card statements, invoices, payroll, receipts, and record basic accounting information for you, such as your monthly reconciliations, in your company’s books. The end goal is to bring your financial records fully up-to-date. Outdated books only create problems when it comes to long-range business strategy and tax preparation. In the worst-case scenario, your outdated books can leave you in the dark when it comes to your cash flow, jeopardizing your ability to cover expenses, payroll, and more. Catch-up bookkeeping isn’t just for those who neglect their books. Anytime you migrate data or need to reconcile your accounts, it’s helpful to give yourself an audit to ensure you’re working with the latest data. Catch-up bookkeeping therefore offers peace of mind and the confidence you need to focus on your company’s future. How do I catch up on my bookkeeping? In fact, the more you can prepare and organize before you start the process, the smoother things will go. Don’t limit your timeframe to when your books started to unravel. Many business owners discover that their books decline in accuracy over the course of time. You’ll therefore want to make sure your catch-up process covers a sufficient number of weeks to ensure total financial accuracy. Understandably, many business owners want to catch up on their books themselves. We can’t blame anyone for wanting to cut costs, but isn’t that what got you into this situation to begin with? Busy entrepreneurs often get behind in their books because they’re trying to handle their administrative tasks, as well as their core business. It’s unlikely that you’ll be able to find the time to perform catch-up duties, at least not with the speed and accuracy your business deserves. That’s why you should seek out an accounting team that specializes in catch-up bookkeeping. Admittedly, this will cost your company money, but most small businesses discover the cost is negligible compared to the peace of mind that comes from having a team of experts to bring their books up to date. During the catch-up bookkeeping process, a skilled accountant will help you do the following: Gather your paperwork Some of the paperwork and documents you will need to gather for your bookkeeper are: Receipts Bank and credit card statements Invoices Debt collections Business expenses Vendor accounts This is an important part of the process, as it will provide a clear record of all of the income and expenses that apply to your business. The first benefit will be immediate. You’ll discover whether your business has any outstanding invoices that your customers have yet to pay, which can later be used to track down delinquent accounts and make arrangements to write off bad debt. It can also let you know whether you have any outstanding debts you need to pay. These receipts will also be useful during tax season, providing a record of any business expenses that can be used as tax deductions. Reconcile your bank accounts Each month you need to reconcile all of your bank and credit card accounts. First, make sure all transactions for the month have been entered. Using your bank statements, you can make sure all of the transactions in your books match the transactions in your statements. This allows you to find any errors in your books and ensure your records are accurate. It’s easy to fall behind on reconciliation, especially if you come across reconciliation errors that need fixing. If you are too far behind on your monthly reconciliations, the bookkeeping team at xendoo can help you get organized, reconciled, and caught up. Collect W-9s, 1099s, and W-2s W-9s are IRS forms that all business owners must keep on file for any self-employed workers (such as freelancers and independent contractors), to keep track of their external team members. If you employ subcontractors, you’ll need to make sure you are collecting these important forms. When a small business pays an
A Prettier Profit and Loss Statement: Up- and Cross-Selling Techniques for Salon Owners
Editor’s Note: This post was originally published in October 2017 and has been updated for accuracy and comprehensiveness. If you’re like most salon owners, the chances are good that you decided to start a hair salon because you love meeting new people and helping them feel more beautiful than when they walked in your front door. It’s only natural because everyone loves a rewarding job. Focusing on sales techniques, like up-and cross-selling for salons probably wasn’t high on your list of “pros” when you got into the salon industry. But for better or for worse, persuading clients to purchase products or services that they didn’t initially come in for is an essential part of your marketing strategy and can boost your profit and loss statement. That doesn’t mean selling them products they don’t need. Cross-selling and up-selling are selling them products they need but didn’t know about. It’s part of your job to educate the client, so let’s take a look at how up-selling and cross-selling for the salon business can be less faux-pas and more moo-lah, and why salon owners already have a head start. The Difference Between Up-Selling and Cross-Selling Up-selling is the practice of encouraging customers to purchase a more expensive item than they had initially intended. We do this by creating value for the customer in the more expensive product. Often, the customer just needs someone to point out the extra value. Depending on the type of salon, if a client is scheduled for a regular manicure/pedicure procedure at retail price, check-in staff can create value for the customer by offering a deluxe spa treatment for just a slightly higher price. You might even be able to have your salon software automatically remind staff to offer the upgrade at check-in. If the customer is already spending $50, it’s easy to justify upgrading for just $10 more because it represents a good value. Cross-selling for salons is the practice of encouraging customers to purchase other products or services that complement the original sale in some way. Sometimes customers don’t know what they need, and it’s your job as the expert to educate them about it. Effective cross-selling for salons might look like this: If a dark-haired client has decided to go blonde, you as the stylist know that those harsh chemicals can damage and dry out the hair, but the customer may not know that. You can explain this and encourage your client to buy a conditioning treatment to help offset that damage. Why Cross-Selling and Up-Selling Are Important The bottom line is that up-selling and cross-selling for salons are critical to your bottom line in several ways. If you’re not doing it, you’re leaving money on the table. If you have a low-margin product that’s selling great and a high-margin product that’s not selling so well, an excellent cross-selling technique might be to bundle the two together and get that extra profit. But even more importantly, it allows you to create additional value for your customers, which is crucial to maintaining customer loyalty and trust. After all, value is why your customers come to you to begin with and what makes a successful salon. When deciding whether a sales opportunity is right, ask yourself, “Will this improve my customer’s life? Will it help them feel more beautiful?” If the answer is yes, you know what to do. So What’s This Head Start? Salon business owners have a special trust relationship with their clients, which gives them an edge in ideas to increase profits. Stylists don’t just know their customers’ names; they know everything going on in their lives —their children, jobs, and health. They open up their entire lives to you, which puts you in a unique position of influence with your customer. To put it more bluntly, if they trust you enough to let you bring sharp blades around their heads and irreversibly alter their appearance (for a few months, anyway), they will trust your recommendation on special products and services. Remind your team that they have this superpower because it’s critical to your business, but don’t abuse it by selling customers things they don’t need. That will almost always backfire and damage your relationship. OK, I’m Convinced. Now What? Now that you know the importance of upselling and cross-selling for salons, here are a few things you can do right away to get the ball rolling. Get effective inventory management and accounting system for your salon if you don’t already have one to know exactly which products are moving and which aren’t, and what the margin on each one is. Good accounting for hair salons is a must, and if you don’t have that information at your fingertips, you’re flying blind. Create an attractive display with high visibility where customers can browse it easily. Never put it behind the counter because curious customers will feel like it’s inaccessible. Keep it organized, and well-stocked with the products that you believe are strong candidates for this strategy. Remember: eye-level is buy-level. Research has shown that products placed at eye level get 35% more attention than products placed at lower levels. Ensure your staff is using the products you sell and posting them on social media. The best advertisement for a product is being able to see the results in real-time on a person’s natural hair or skin. Remember the trust relationship; if the stylist uses the product, it gives the customer confidence that it must be good. It’s almost like giving away a little trade secret. Purchasing salon-quality products that stylists actually use makes your customers feel like they have a leg up in their beauty routine. Give your staff the tools to make cross-selling for salons easier. At a minimum, everyone in your salon should be familiar with every item you sell and be able to describe it to customers. But knowledge of the products is only a start. Your team needs to be trained in effective cross-selling and up-selling techniques and incentivized to
Choosing the Right Accounting System for Your Shopify Business
Editor’s Note: This post was originally published in October 2017 and has been updated for accuracy and comprehensiveness. Whether you’re brand new to online retail and trying to decide how to set up your eCommerce business, or you’ve been around a while and simply reached the point where your DIY accounting solution just isn’t cutting it anymore, xendoo’s innovative suite of business offerings can help you. xendoo can get your small business accounting running like a well-oiled machine so you can focus on what’s important – growing your business. To be competitive in the new economy, cloud-based accounting is no longer a luxury; it’s a necessity. Here are some of the best accounting systems for Shopify that can help get your business on track. QuickBooks Online QuickBooks Online is the cloud-based version of the popular and versatile QuickBooks business accounting software. Quickbooks Online accounting system for Shopify allows you to access your account information from any web browser, and the API creates a seamless interface that links directly to xendoo’s platform. That means you can easily organize and sync all of your critical financial data with no tedious manual data entry. Additionally, Quickbooks Online for Shopify allows you to easily create and send invoices, receive payments, pay bills, and manage payroll. Track income and expenses Capture and organize receipts according to your chart of accounts Download and organize bank account and credit card transactions Print checks Create and send invoices, as well as receive payments Print financial reports Tax organization Xero for E-commerce QuickBooks is a popular accounting system for Shopify, but it may not be the best choice for everyone. Xero is another cloud-based accounting solution that will appeal to a lot of Shopify store owners. Xero is fast, simple, and powerful. It can sync with hundreds of third-party applications for point-of-sale, inventory, and much more. It also offers a mobile app for convenience and allows customers to create an unlimited number of users. From within the Xero accounting software for Shopify, you can manage your accounts payable, accounts receivable, budget, and category or division tracking. Customizable dashboard Create invoices and quotes and receive payments Track inventory Bill payment Expense management and project management Create and print financial reports Bank account reconciliation Highly scalable for small or growing businesses A2X for Shopify A popular middleware, or “connector,” application that links your Shopify store with your cloud-based accounting system is A2X for Shopify. It automatically posts your Shopify sales and fees directly into QuickBooks or Xero, saving you hours of tedious work each week. That also means no more stressing over why transactions don’t match your bank deposits because A2X eliminates data entry mistakes. Automatically post store data into QuickBooks or Xero Automatically reconcile bank statements Automatically make adjustments for fees and refunds Create and print summarized statements TaxJar for Shopify A major time vampire for business owners who sell on Shopify is state sales tax compliance in the wake of Wayfair, Inc. v. South Dakota (2018), which requires online sellers to comply with sales tax requirements in each state where they do business. TaxJar accounting system for Shopify will streamline your sales tax compliance process by showing you where you should be collecting sales tax according to economic nexus laws and generating return-ready reports. It can even auto-file your returns for you if you want. Calculate sales tax based on each state’s nexus Daily updates allow for timely return filing AutoFile option for automated return filing Display fines and penalties for delinquent filing Compare actual collections to what should have been collected Shopify Apps In addition to your accounting software, Shopify offers over 1,000 plug-in applications from their app store to help you with managing inventory, shipping, reporting, and much more. However, we suggest that you fully explore the capabilities of QuickBooks, Xero, A2X, and TaxJar before making any decisions about additional applications. A lot of functionality might be duplicated, and you certainly don’t want to pay for the same thing twice. In addition to tons of helpful plug-ins, Shopify also features a profit margin calculator. Just plug in your cost of the item and a markup percentage, and Shopify will calculate the sale price, your gross profit in dollars, and your gross margin. Outsourcing Your Bookkeeping and Accounting Even though these accounting systems for Shopify can make life much simpler for sellers than even just a few years ago, it can still sometimes feel overwhelming. If you begin to feel like you might be in over your head, you should consider outsourcing your accounting and bookkeeping to a small business accounting firm like xendoo. There are a lot of good reasons to outsource your accounting for your Shopify eCommerce business, and it’s more affordable than you might think. xendoo’s accounting team works with small business owners just like you to provide expertise and insight into the accounting needs of e-commerce businesses. xendoo can take care of everything from weekly bookkeeping to filing business taxes for you, and our flat monthly fee is less than half of what you’d probably pay an accountant. xendoo’s mission is to give you the peace of mind of knowing it’s being done right, and free your time to focus on what’s important – growing your business. Sign up for a free trial today. [av_sidebar widget_area=’Blog Post Disclaimer’ av_uid=’av-om2w’]
When You Need to Hire a CPA
Bookkeeper? Accountant? CPA? Which one does your business need, or does it need all three of them? Actually, it depends. Staying on top of your business’s finances is key for a small business owner, but you may need more than day-to-day bookkeeping. When you have more questions than a bookkeeper can answer, you’ll probably need to look into CPA services. Fortunately, xendoo has you covered. Read on to see if online CPA services are best for you and your business. What is a CPA? It’s important to understand the differences between a Certified Public Accountant, CPA, and a regular accountant. A CPA is an accountant who has met specific state and education licensing requirements and passed the CPA exam. So, accountants with the title of CPA offer a higher level of financial analysis for you and your business and can act as a fiduciary on your behalf. At that same time, an accountant can give you tax savings advice, such as when to make capital purchases, what you can deduct, and how to reduce taxes on capital gains. They can answer your questions about financial reports, cash flow, depreciation, and other accounting processes and identify opportunities to improve profit margin and business growth. Additionally, they can help set up business accounting systems, teach you best practices, keep you legal, and prevent missed deadlines and noncompliance penalties. What does a CPA do? Certified Public Accounts can be the financial strategist for Fortune 500 companies or advisors to neighborhood businesses. CPA act as consultants on many issues, including taxes and accounting. Generally, online CPAs services include: Prepare financial statements Identify red flags and growth opportunities Prepare and file taxes Plan capital purchases and other investments Strategize for scaling the business When should I hire a CPA? Whether you’re starting or growing your business, an accountant can help set up financial systems and analyze data so that you can make smarter business decisions. They have the power to forecast business success, diagnose financial health issues, and increase revenue—saving you significant money, time, and hassle. So while a bookkeeper focuses on the everyday tasks that maintain your business’s finances, accountants consider the big picture strategy to keep your business strong and growing, and a CPA has an even higher level of financial analysis to assure you’re making the right moves at the right time. How much does a CPA cost? Budgeting for bookkeeping and accounting services is tough for a small business. Traditionally, bookkeepers have charged an hourly rate; the more time they spend on your books, the more you have to pay. Typical rates are: Bookkeeper — $30 to $90 per hour CPA — $150 to $450 per hour Or you may only need an accountant for an occasional project such as tax preparation. Tax return (unincorporated) — $200 to $500 Tax return (incorporated) — $800 to $1,800 Financial statement — $1,000 to $2,500 Audit — $2,000 to $5,000 This is why accounting for a small business can become expensive. Plus, you may decide you only need an accountant for an occasional project such as tax preparation, financial statement, or audit, which costs a fixed amount that can add up, or you may not have allotted this in your end-of-the-year budget. A popular option with small businesses is an accounting service that charges a fixed amount every month. It’s easy to budget for, and it can cost less than half what you would pay an hourly accountant for the same amount of service. That’s why xendoo offers a monthly pricing structure to our clients, charging a fixed amount every month. It’s easier to budget for bookkeeping and inline CPA services monthly and cost less than half of what you would pay an hourly accountant for the same service amount. The right account professionals for your business A small business accounting service will file your taxes, but you’ll need to have your bookkeeping in order so you can provide them with the data and reports they need. xendoo’s online team of bookkeepers and CPAs will handle everything for you – they will manage all of your bookkeeping and accounting and will file the right return for you, right on time. Plus, xendoo also takes care of all the filing that goes along with your tax return to itemize your business deductions. Ultimately, it’s best for you and your business to have both a bookkeeper and an accountant. Making xendoo your financial partner means joining a community of small business owners who love working with xendoo’s bookkeepers and CPAs. xendoo’s online CPA accounting services are ideal for small businesses because the more eyes looking out for your business, the better. Your dedicated financial team provides the perspective on your finances that can help ensure you’re able to anticipate problems and have the appropriate solutions ready to go. In gaining a complete picture of your company’s financial health, you can confidently grow your business.