Meet the Team: Sandy Kundert

124What is my role? My role is to ensure our clients are getting the best possible Eide Bailly experience they can. I do this by making sure we understand what our clients need, what they wish for and suggesting things they may not have thought of. Then we try to match a member of our team with the client. If our clients are successful, then we are successful!

Why are numbers important for business? Numbers are like lab test results from the doctor. They not only show us the current health of the business but aid in what we need to do in order to improve over time. Good decisions come from being informed and numbers do just that.

Why do I want you to succeed? I have several clients I have worked with for many years. You get to know each other on a personal level and they become like family. I always feel a little pride when my clients have a win, no matter how big or small and I’m thankful they let me be a part of that.

#ILoveSmallBiz – Whether a small business succeeds or fails, it has a huge impact on their employees, customers, and the local economy. By helping small businesses succeed, we all become winners.

Benchmarking: Part 3

You might have noticed, but we really want to see your business succeed from information gained through benchmarking. In other words, we want you to be a pro. But, before we unleash you to get started, we need to share a few things to avoid when you start a benchmarking analysis.

  • Comparing Company A to Company B: Make sure the peer group that you’re comparing to the business is representative of the industry. Comparing yourself to another, single company, can prevent you from seeing a true comparison if there are considerable differences. If you are looking at a benchmark analysis that restricts the sample size to only one other company, be critical in your findings.
  • Be aware that the benchmark analysis doesn’t end with a variance report: Once your report reaches the variances between its financial metrics and its peer group benchmarks, you might think you’re finished, but the work is just beginning. Don’t get worried — as the work is just beginning, so are the opportunities! When viewing the variances of your report you are now given potential problem areas to fix and also the opportunity to improve the overall performance of the company. For example, the variance report shows the areas of the business that are excelling. Now that you can see the areas of your company that have successes, see if this strategy can be implemented in other areas of the company.
  • Assume that numbers and performance are always changing: Positions in a car race are constantly shifting: first to third, second to last and so on. It isn’t optimal to compare your business to its peers only once per year, since many industries are always changing, even if your business isn’t. By preforming frequent benchmark analyses, your business can identify trends and react sooner.
  • Be mindful with calculations and the conclusions drawn from them: Certain benchmarks are common financial measurements (turnover rations, net profit margin, and liquidity rations) and their calculations generally do not change. If your benchmark analysis is expanded to include industry specific key performance indicators (KPIs) (airline-sales per seat, for example), make sure to use the same calculations, period after period. However, if a subaccount is added for one period but then removed the next period, the trend analysis performed might be misleading.
    • All members of management and the financial team need to understand the definitions of the metrics, and have a copy of them as well. You want to make sure there is only one interpretation, which will help defuse any confusion. Be sure everyone is on the same page to allow for complete and easy understanding.

It may not seem like a must do task, but benchmarking is important. When it comes down to it, remember the true purpose of benchmarking: to illuminate successes and challenges for your company, and to give you, the business owner, insights to inspire action!

*Shameless plug: If benchmarking sounds like the thing for you, let us know. We love helping businesses see how they’re doing!

 

Benchmarking: Part 2

In our latest blog post, we looked at why benchmarking is important for your business. Some of those reasons include:

  • It keeps you up to speed with real-time data (that is, as long as the data is timely, relevant, and accurate).
  • It never goes out of style and can be used continually, rather than a one-and-done solution.
  • It truly helps you understand the well-being of your business situation.

So now that we have a refresher of why benchmarking is great for your business, let’s dive in deeper. After you decide which data source you’ll use (make sure it’s accurate, timely and relevant), the challenge is now deciding which benchmarks to analyze and use as a tool for the success of your business.

We’ve said it before, but we will mention it again. Different industries, and different companies within an industry, might have different success measures. For example, a contractor might have large subcontractor expenditures. Are these expenses normal considering the contractor’s sales volume?

Instead of taking a look at industry-specific metrics, we’re going to focus on some metrics that are universally important and can provide a quick look into a company’s health.

  • Liquidity Ratios. Yes plural – because there are two that need to be analyzed together. They are:
    • Current Ratio which is shown as current assets divided by current liabilities. This metric shows general liquidity, but it does have some limitations. If inventory is included in calculating the current ratio, it might provide a distorted understanding of your cash flow.
    • Quick Ratio is expressed as cash accounts receivable divided by current liabilities. This ratio might not be perfect for showing liquidity, but it can be a useful and popular comparison to pair with the current ratio.
  • Net Profit Margin. Expressed as net-profit before taxes in a given period divided by sales. Another way to view this? How many cents of profit you extract from each dollar you earn in revenue. This might be a basic metric, but it’s extremely important!
  • Turnover Ratios. There are three ratios that you should consider:
    • Inventory Days which is shown as inventory divided by cost of goods sold, multiplied by 365 days. Inventory days tells the story of how long it takes to sell off inventory. However, it’s important to remember this ratio is very industry-specific. Imagine how long wine is stored in a winery compared to the length of time milk sits in a grocery store cooler. Usually, lower numbers are better.
    • Accounts Payable Ratio is expressed as accounts payable divided by cost of goods sold, multiplied by 365 days. The accounts payable ratio shows the number of days you take to pay the vendors. Higher numbers are better – it means you hold on to cash longer.
    • Accounts Receivable Ratio is shown as accounts receivable divided by sales, multiplied by 365 days. This is a rough measure of the number of days your company takes to turn accounts receivable to cash. You want lower numbers, as it is better to have cash in the bank than extra receivables on the books.

By paying attention to some of these important metrics, you can build a picture of where your business Is, where it should be going and what it will take to get there.

Benchmarking: Part 1

Do you ever wonder how your business does compared to others similar to you in size and industry? Maybe knowing this information would give you a more competitive drive, or would lead you to make some improvements to better your company. Or, maybe you’re just curious.

Whatever your reason for wanting to know, benchmarking can be a powerful tool to compare you to your peers and check your performance. Benchmarking can even lead to an overall greater level of success as a company.

Here are a few (of many) reasons why we think benchmarking is pretty awesome.

It never goes out of style| Benchmarking isn’t just a one and done concept. It can, and should, be used throughout the entire lifecycle of the business. As your numbers and statistics change, the same happens for the competition. Benchmarking can provide a real-time look into how your business is stacking up against the competition and industry trends, and can help you find solutions at any stage in your business.

Knowledge is power| When you see and understand how your business is ranking relative to similar businesses, you can empower management to evaluate company performance and make informed decisions. This information can also be used to identify new and future opportunities that can lead to greater growth and success. To accomplish this, it’s best to compare on an industry or peer group level, rather than just a one-company comparison.

Data doesn’t lie| Without good data, you’re wasting your time. Make sure to look for data from benchmarking that is:

  • Relevant – Data won’t mean much to you if it isn’t relevant to your business. Make sure you consider your geography, size and industry when getting your data. Each has their own trends and characteristics that are incorporated into the data – which makes for a meaningful comparison.
  • Timely – You want to be sure the benchmarks being used are the most recent available, which helps account for seasonality, economic cycles and other fluctuating factors.
  • Accurate – If you’re making sure your data is relevant, it will likely be accurate too. However, it’s always a good idea to verify the data before applying to make important decisions.

A way to measure success| Each business and industry (even businesses in the same industry) has a different way of measuring what success means to them. While you can only decide what success looks like for your business, there are a few metrics that can provide a quick, high level view of your business’s well-being:

  • Net Profit Margin = Net profit before taxes, divided by sales
  • Liquidity Ratio – Current Ratio = Total current assets divided by total current liabilities
  • Turnover ratios, which include inventory days, accounts receivable days and accounts payable days.

As you can see above, benchmarking is a great way to get a picture of how your business is really doing compared to those around it. Using this information, you can feel comfortable making changes to better grow and improve your business.

Is it Time to Upgrade?

Accounting software is a great tool for your business. It helps you keep track of invoices, let’s you see where are your money is going and even allows you to access your information basically anytime, anywhere.

But if your accounting software is out of date, it actually might be doing more harm than good for your business. Here are some signs that it might be time to look into an updated system.

  • Are you still communicating with vendors and customers through email or even *gasp* snail mail? If so, it may be time to look for a system that provides an easier way to communicate.
  • If your desk is covered in papers and you have paper invoices and timecards coming out your ears, it’s time to stop endangering the tree population and look into a system that can do this electronically.
  • It might be time to look into some new software if your system doesn’t allow you to look at your information anytime, anywhere. This includes your cell phone – many systems allow you to have all of your information at the swipe of a finger.
  • Is your chart of accounts endless? Or, maybe you need to create a whole new set of accounts each time you add another profit or cost center (grants, jobs, products lines, etc.). Either way, both are major signs that it’s time to upgrade and update.
  • Your account system should do what you need it to, without you having to perform extra steps and work arounds. If your system is doing the exact opposite of its intended purpose, it’s time for something new.
  • If your vendor has completely stopped (or won’t be for much longer) supporting your software, you’ll need to upgrade. Although this sounds pretty obvious, we see this problem quite often!
  • It’s time to upgrade to a new system if you’re still using spreadsheets to track date and compute calculations. (Hint: accounting software does this for you!)
  • Here’s a big one. Do you enter manual journal entries – maybe you’ve even compiled them in your spreadsheets? Are you operating in several systems that don’t sync together? Time to get on board with a new, updated system!
  • Consider how much time you are devoting to closing the books each month. If you’re manually creating reports and manually completing the consolidation process, you’re wasting your time. An updated system can help you save your time to dedicate to other parts of your business.

If any of these common warning signs sound like something you are experiencing, now is probably a good time to start looking for new, updated accounting software. Although the transition won’t be easy, the benefits to your business will be worth it!

Have Questions? We have Answers

In our line of work, we get a lot of questions on anything and everything related to owning and operating a business (and we’re happy to answer them, too)! While a lot of these questions are usually pretty easy to answer, sometimes we get a few that really make us think. Even then, we enjoy researching and finding the answers to help business owners be successful.

So, what questions do you have about your business? We would love to help you reach your dreams and goals.

In case you think your question might be too far out there, we promise it’s not. Check out some of these questions (and our answers) to get you started on finding the information you need to watch your business succeed.

“I have invoices coming out of my ears! What do I do with all of them?”

When you have a large amount of invoices to deal with, it’s easy to get overwhelmed and lose track of what needs to get done. When invoices aren’t being properly managed, your business can see some serious negative side effects, such as fraud. Following this list of tasks can help you make sure you’re keeping everything in check. Looking to an automated system, such as QuickBooks, is also a great way to keep your invoices at a manageable level.

“Where in the world did all of my cash go?”

This question is more common than you may think. While your business may be profitable, you can still be running out of cash, which might be a concern. Financial struggles can be hard, but our professionals are available to help. Check out this blog – and then, let’s talk!

“Why don’t I have enough time to do everything that needs to get done?”

We get it: owning and operating a business means you have a lot on your plate. From accounting and finance, to human resources to the day-to-day operations, you probably don’t have enough time to do it all yourself. The good news is you don’t have to! Consider your team of employees. What can you delegate to take some of the burden off your shoulders and free up some time? Another option is outsourcing. When you outsource some of your business activities, such as your accounting processes, you free up time to focus on why you got into business in the first place.

“What is this accrual accounting thing I hear so much about? Am I doing it?”

Knowing the specific ins and outs of accounting can be a confusing, daunting task. What it comes to what method of accounting you are using, the water may get even muddier. Maybe you’ve heard of cash based accounting and accrual accounting, but you really have no idea where to begin. We’ve written multiple blogs on how to tell the difference and how to select what fits your business and set up your books. Check them out!

“Taxes terrify me. Where do I even begin?”

Taxes are a complex issue, and questions regarding this topic are common. Whether you want to know more about R&D tax credits, employer vehicles and mileage, how to track your taxes or even all those pesky (yet necessary) forms, we’ve got you covered. Check out our tax archive for answers to all your most pressing questions. If you can’t find the answer, let us know.

Remember, although we numbers nerds really like our financial lingo, we promise to answer your questions in a way you will understand, not just a bunch of accountant talk. After all, we want to see your business succeed!

A Community Resource: Emerging Prairie

Guest Blog By: Annie Wood, Director of Community Programs, Emerging Prairie

Founded in 2013, Emerging Prairie began with the goal to create a community we all want to be part of. We want to do our part to make Fargo a great place to bet on ideas, start companies and improve the human condition through technology-based solutions. In 2016, Emerging Prairie became a non-profit organization and maintains its mission to connect and celebrate the entrepreneurial ecosystem.

At Emerging Prairie, we live out our mission in multiple ways:

– Platforms: we have an online content publication and several events that create opportunities for people to share and spread their ideas. We also utilize platforms like 1 Million Cups (caffeinated by the Kauffman Foundation) and TEDxFargo to help champion these ideas.

– Coworking: we run The Prairie Den, a coworking and event space in downtown Fargo. The Den provides a home for startups, small businesses, entrepreneurs, an office away from the office for other organizations, and a place for people to meet.

– Connecting: we run multiple programs and groups that are designed for authentic connection for entrepreneurs to connect to other entrepreneurs, as well as build connections between members of the community.

– Convening: we play a role in helping bring entrepreneurs together so our community learns together and can share what we collectively need when folks like the Bank of North Dakota are working on new ways to serve the startup community.

Companies of any stage can connect with us. Some of our programs are geared to companies of different sizes, stages and industries. For example, 1 Million Cups Fargo (which is supported by the Kauffman Foundation) is curated to be primarily tech-based founders or entrepreneurs who have a product or software as a service (SaaS) companies. We work to put founders first, so many of our programs are more geared toward supporting founders versus the size and stage of the company.

The Prairie Den is an inclusive space in the heart of downtown Fargo – it’s truly a place for community to be built. We think of it like a student union for our city. Just like a student union on a college campus is a place for students to study, hold meetings and social events, The Prairie Den provides a similar area to the community. It’s a place for connecting, for working, for moving ideas forward, and for groups to gather. We offer workspace for teams, individuals, and as an office-away-from-the-office for employees of many organizations. We also have conference rooms, a classroom and even an event space that we rent to members and non-members.

The Den is also where Co.Starters is hosted by our friends at Folkways. Co.Starters is a nine-week course to help people with ideas turn them into businesses, or people with young businesses strengthen them.

Emerging Prairie subscribes to the Fargo Thesis, which Co-Founder and Executive Director Greg Tehven first wrote about in Fargo Monthly. The Fargo Thesis is to Connect It, Believe It and Love It. This is how we operate in our community –Connecting people; Believing that Fargo is a place of possibility; and showing love by celebrating and caring for community members.

As an organization, Emerging Prairie is excited about continuing to support our startup community. We believe ideas matter. We know it’s a leap of faith to start something new, so we want to celebrate those who take the leap. And we want to be an organization that helps pave the way for founders to bet on their ideas, to build teams around them and to pursue possibilities to create a community that we all want to be part of.