From accounting into the real

OK. I guess you've had enough accounting for a while. What about actually running the business? How do you get the most bang for your business buck?

Let's start with the shop or main office part of your business. We'll take the example of a business making something for resale. We've talked about setting up the paperwork side of the business, now it's time for the hands-on part. You know you have to buy the materials and equipment. Think about the layout of the space and the workflow itself. What equipment has to be at the beginning of the process? I like cabinetry, so I have a shop set up. It's small, so location of everything is critical! The lumber comes in and will flow around and across the shop as the pieces are cut, sanded, assembled, finished and prepared for shipping.

If you're running a service, whether it's drywall finishing, insurance sales, or consulting, you will want to set up your primary work space with a work flow. The drywall finisher will store the necessary tools that will go out on the jobs in an accessible location to the area where they will be taken in and out for use. The insurance agent will plan a front-end customer service area, separate from the administrative area where business planning & record keeping is done. A consultant will have to take similar considerations, depending on the kind of consulting involved.

What do you need to operate? In the case of cabinetry, the key item is, of course, the lumber. Shopping around for the best prices for the quality you need is important. Quantity buying, payment terms and discounts are important. If your customers typically will be paying with delays, delaying your payment terms may be useful. Otherwise, you'll be expected to pay your bills within thirty days but you won't collect your money for maybe sixty days. That makes it tough to take discounts on invoices from your material suppliers. If you can't get extended payment terms, see what other concessions the vendor might be willing to make. As you learn options in dealing with a few of your biggest suppliers, see what you can use in approaching other suppliers as your business grows.

What will it take to have employees? Remember this: The payroll taxes have to be paid!!! Better to use the money to pay the taxes on time than to have to pay tax, penalty and interest later....especially when the penalty may not be deductible for tax purposes. The payroll will take a big bite out of what you were taking home when you were only paying yourself. You have less money, but it is a legitimate business expense - as well as the payroll taxes. If you have someone working for you at $10 per hour, you will need $400 plus Social Security and Unemployment taxes. With few employees, you can pay your payroll taxes quarterly. That means it will be easy to use that money for day-to-day activity and then not have it when it's time to pay the taxes you've withheld and the additional employer's share of payroll taxes.

More to come on this later. Keep in touch.

Gary