ABC Solutions

The Power of Listening

Now, more than ever before, the act of listening is important. Not only is it important to listen to someone, but to effectively listen to them. Sure, we all know that in order to understand individuals, to connect with them and understand their wants and needs, we need to be alert, focused, and mindful. After all, the power of listening—effective listening—will help you get more information from clients, increase their trust and commitment in you, and reduce conflict and misunderstanding.

Below, we’ve included more information on the power of listening, and tips on how to be a better listener.

What It Means To Listen

We don’t need to give you a textbook definition of listening; you already know what it means. However, it is necessary to point out that the act of listening and actually comprehending what a person is saying can lead to strong, healthy, and thriving relationships—all very important qualities in any type of relationships, specifically a business one.

If you don’t believe us, think about the last time you were having a conversation with someone and felt as if you weren’t being heard. How did that make you feel? How did that affect the relationship? Did it make you feel valued?

According to Dr. Carl Rogers, a psychologist, active listening is a specific communication skill. Giving free and undivided attention to a speaker through active listening is the most effective way to achieve individual change and group development.

Isn’t that the ultimate goal? Whether the relationship is professional or personal, don’t you want to establish a solid, mutual ground of respect? It’s the only way for both parties to succeed.

If your listening skills are in need of a little tune up, don’t worry—we’ve got you covered! We’ve put together a list of different ways to help you become a better listener.

Tips On Becoming A Better Listener

If you truly want to become a better listener, then consider implementing these tips into your daily life.

Understand The Benefits

First, it’s imperative to understand that listening to someone is beneficial to both the person doing the talking and you. Nothing bad or negative comes from listening to another person speak, but the complete opposite. Remember, if you thoroughly listen to an individual, it’s more likely that same individual will listen to you when it becomes your turn to speak. The partnership the two of you are hoping to grow can only be successful with mutual listening.

Make Eye Contact

Next, when someone is speaking to you, always make eye contact. This tactic not only shows respect, but it will also help you focus on the other person’s words, what he or she is saying and how they feel.

No Distractions

When sharing a conversation with someone, make sure there are no distractions. Obviously, this means you need to put down your phone and give the speaker your full attention. Don’t worry about what’s going on around you; don’t think about your next meeting or what you plan to have for lunch. Listen, engage, and show the person talking that you care.

Ask Questions

One of the best ways to show the speaker that you are really listening to them, is to ask them questions. Make sure you fully understand what they’re saying by verifying their wants, needs, and/or concerns with specific questions.

Remember, nothing bad comes from listening—only good. The next time someone is speaking, consider opening up your eyes, ears, and mind just a little bit more. In doing so, you will gain the full benefits of the power of listening.

The 13-Week Cash Flow Forecast

One of the best tools to forecast cash requirements is the 13-week cash flow forecast. It can help a business owner predict what their cash balance will be 13 weeks in the future. It helps to answer whether there will be enough cash to cover payroll and bills for a particular week. If you’re having significant ups and downs in your cash balance, it’s the perfect tool to help gain clarity around your cash needs.

Thirteen weeks may sound like an odd length to select, but it’s the length of a calendar quarter. This is the length of a financial projection that is typically used when a business is in financial distress; however, it’s also useful when a company is going through some ups and downs or simply wants to get a better handle on its cash requirements.

The forecast computations start with entering cash receipts and cash disbursements into a spreadsheet. Start with actual spending and receipts for the first week, then use estimates for the remaining weeks. Include planned expenditures such as overhead, payroll, and loan payments. Add in inventory purchases. Project your receipts based on history or recent changes in your business.

Once you’ve completed your forecast, you can make changes and do what-if scenario planning.  For example, if the forecast shows that you will run out of cash in week seven, you have some time to decide what you need to do to remedy the shortfall. Options might be:

  • Accelerate the collection of 30 percent of your receivables.
  • Dip into your line of credit to cover a portion the shortfall.
  • Furlough 10 percent of your workers.

Plug your selected scenario into the forecast to see how much that relieves your shortfall.

The benefits of creating a 13-week cash flow forecast are many. You can see what actions need to be taken and when to take them well ahead of time. You can also see how much of an action you need to take. For example, instead of furloughing 50 percent of your staff, you may only need to furlough 25 percent.  Or instead of borrowing $50,000, you might only need $20,000.

The cash flow forecast can also save time when developing your annual budget. Budgets are especially useful when business conditions are volatile or when business owners need all the clarity they can get.

Try your hand creating a 13-week cash flow forecast for your business, or reach out to us for help any time.

Building a Continuity Plan for Your Business

At the beginning of 2020, you might have thought that developing a business continuity plan was not a top priority. Or maybe you thought it was only for large businesses. Fast forward to today, and a business continuity plan has become an essential staple in business planning.

There are more business risks than ever before to consider that can affect business continuity. Businesses are being shuttered, reopened and shuttered again from the pandemic, fires, hurricanes and damage from riots, just to mention a few of the more common issues in this unusual year.

The biggest benefit of a business continuity plan is the process of developing it. It helps you think through the steps you should take if a business interruption occurs. If you have a disaster recovery plan – or even a few steps jotted down of what you’d do – then you have already started a portion of the process.

Here are some of the major pieces of a business continuity plan to consider developing for your business.

Roles and Responsibilities

In this section, all of the business stakeholders should be identified and listed. On a high level, questions like these should be answered:

  • What is each person’s role within the company, and how would that change if the business is interrupted?
  • What new skillsets should be acquired in the case of a disruption?

Potential Impacts to Your Business

This part of the continuity plan lists major scenarios where something could go wrong with your business.  It should include things like weather events, fire, riots, theft, leadership interruptions, cash flow shortages, and the long-term impact of the pandemic. For each event, an analysis should be made as to how it will affect the business and what possible outcomes could occur. This part is also called a Business Impact Analysis.

Recovery Strategies

Once you’ve identified impacts, the next set of questions covers how to most effectively recover from them.  These remedies might include seeking additional financing, selecting backup locations, checking IT department functionality, creating alternate supply chain and distribution sources, and identifying many more actions along these lines.

As we’ve seen this year, this is just as important to think through for small businesses as it is large businesses.

When owners and employees are not in the middle of an actual disaster, they can better map out a recovery strategy that’s optimal and cost-effective for the business.

Implementation

A good plan should be implemented through distribution, testing, and training. All stakeholders should read and understand the contents of the business continuity plan. The plan should be tested in drills and exercises when possible. Employees should be trained so they know their part and feel comfortable carrying it out while under high stress.

The long-term viability of your business is important, and it can be strengthened when you put a business continuity plan in place.  If we can help, feel free to reach out any time.

3 Essential Metrics for a Smarter Marketing Spend

The only way to get smarter about how to invest your marketing dollars is to document and measure what’s happening now in your business.  What you’ve measured, you can then improve.

Marketing Spend

The first step to measuring what you spend on marketing is to aggregate all of the costs.  They may be in one account or several.  Some of the places to look for marketing expenses include:

  • Advertising – for online or print ads, trade shows, sponsorships, and other advertising costs
  • Dues and subscriptions – for membership fees to networking and professional associations
  • Education – for marketing training
  • Marketing – for obvious reasons
  • Office supplies – for graphics subscriptions and fees
  • Payroll, salaries, and wages – for allocation of employee time spent on marketing projects
  • Printing and postage – for flyers and direct mail
  • Professional fees – for marketing consultants, coaches, designers, and writers
  • Software/Technology – for marketing software and apps
  • Travel – for trade show or conference attendance

Once you have aggregated all of these costs, you’ll have a good idea of what you’re spending on marketing and you can calculate the first metric, marketing spend.  The formula is:

Total marketing costs / total gross revenue = Marketing spend

This gives you a percentage.

Most companies spend five to ten percent on marketing. Higher growth companies will spend close to ten percent, and stable growth or slow growth companies will spend close to five percent. Large companies will spend more, from nine to 12 percent of gross revenues, than small companies.

CAC – Cost to Acquire Customer

Probably the most important metric for marketing is how much it costs on average to acquire one customer. To compute this, count the number of new customers for any period of time, and use this number in the following formula:

Total marketing costs / number of new customers = CAC

A more granular version of CAC is CPA, cost per acquisition. Unlike CAC, CPA is measured by campaign or marketing channel, or the source of how the customer was acquired. Example marketing channels include email marketing, social media, and paid ads, to name a few.

Revenue per Customer

Revenue per customer is a good measure in many companies.  It can tell you how much, on average, a customer will spend at your company over a period of time, adding up all of the orders, projects, visits, or engagements for that customer. The formula is simple:

Total revenue for a period / total number of customers for the same period = Revenue per customer

A similar metric that’s valuable is how much a customer will spend at your company in their lifetime. That’s called CLV or customer lifetime value.  Use the same formula above but compute it based on the longest period of time you have records for.

When you can compare revenue per customer or CLV with CAC, you can determine how much you can afford to spend to acquire new clients.

Let us know if we can help you calculate these metrics so you can become wiser about how to invest your marketing dollars.

5 Signs You Need to Upgrade Your Accounting System

To maximize profits in your business, all of your business functions need to run smoothly, including your accounting department. Your accounting system is at the core of your accounting function. If it is old or lacks the features you need, your business may suffer.  Here are five warning signs you can look for to determine if it’s time to upgrade or replace your current accounting system with something more cost-effective.

1. Not enough users

If your current system limits the number of users you can have in the system at any one time, this could be a major enough reason in itself to switch to a larger option. Luckily, most accounting software companies include an accountant user for free, so at least this type of user doesn’t have to count toward your total requirements.

If you’re not sure how many users you currently have a license for, we can help you check on that. It might be as easy as buying more licenses if you’re not at the maximum capacity.  But if you are at maximum, it may be time to look for a better accounting system with room for you and your business to grow.

2. Outdated

If your accounting system runs on desktop-based software that’s upgraded every year and you have not paid for or installed the upgrades, then your system is outdated.  If it’s been sunsetted, that means the software vendor no longer supports the software. You are at major risk for the software crashing, getting buggy, getting hacked, or worse, permanently breaking.

The cost of getting the system current may be better spent looking for a new alternative, or moving to a cloud-based system where updates occur automatically.

3. Lack of functionality or scale

It is commonly the case that your business has grown so much that it’s outgrown your original accounting solution. That’s good news!  It’s time to find a solution that will scale better for your business.

You might be missing important features that are costing you more time and money than if you were on a system that offered those features. Common time-wasting activities in accounting include too much time spent on data entry and/or Excel spreadsheets to make up for what the accounting system can’t do.

4. Lack of reporting and analytics

If you’re unable to receive the reports and analytics you want to run your business better from your current accounting system, it may be time to switch. With better data comes better decision-making and if lack of data is costing you money, then it’s time to find a more robust system.

5. Lack of integrations

Thousands of apps exist to expand accounting systems’ core functionality. If your current accounting system lacks integration capabilities or does not have apps that are built to integrate with it, you may be missing out on additional functionality.  This include mobile apps; it’s quite common now to do much of your accounting work from your mobile phone.

Does your current accounting system have any of these red flags?  If so, please reach out. We can help you find a best fit for your accounting needs.