5 Essential Accounting Skills for Small Business Owners

The role of a small business owner can be difficult because they are required by necessity to assume a number of different roles including that of an accountant or bookkeeper. Staying on top of your accounts is critical to the success of any business small or large. Although there are many accounting skills that can be of benefit to small business owners I regard the following as the most essential ones.

Accounting Skills: Recognition of loss making business activities

Small Business Owners must recognise any business activity which is not turning out a profit. These business activities may include long running business products which are in demand from the business’s customers but which have become expensive to produce, due perhaps to a shortage of raw material. If the increased cost o production cannot be reflected in the sale price, then production of the product should be discontinued. Continuing to sell a product line below cost will inevitably lead to serious losses within the business.

Small Business Owners will sometimes consider the loss of some of its customers with the lack of profit on a certain product line. If the product line concerned is an inexpensive product which contributes a very small profit margin it may be acceptable o suffer a small loss on the product line in order draw customers to the store. This concept is generally known as a “Loss Leader” and is often seen in certain industries such as the furniture retail business. One item, say a coffee table is put on display at or slightly below cost in order to attract the public into the shop with the view that everything is priced similarly low there. When a customer enters the shop they will usually purchase one or more expensive products along with the coffee table.

Cash flow monitoring

Small Business Owners should continually monitor the business cash flow in order to ensure that any up and coming cash surpluses can be invested profitably and earn a good return on investment. Any expected cash flow shortages must also be carefully provided for with additional short-term bank finance or personal loans. A business may be running profitably with a full order book and loyal customers but a cash flow shortage for even a short period of time can lead to the business becoming bankrupt or being forced into liquidation.

A business will have a set bank overdraft limit and this usually cannot be increased at short notice. If the business is delayed a large payment from one or two customers for eight to ten days it can have a devastating effect on it. The business will have to pay its suppliers and its staff and if it cannot raise short-term finance or organise a loan to the business then an unpaid supplier or a union representing unpaid staff will apply to the courts for a winding up order for the business.

Control of overhead expenditure

Small Business Owners should keep a careful watch on overhead expenditure to ensure that profit margins are not being exhausted paying for excessive day to day running expenses. Overhead expenses will include business rent, rates, light, power, telephone, advertising etc. Some of these overheads are fixed and unavoidable such as rent and rates but other overheads such as advertising are variable and must be controlled to avoid excessive use of profit margin and cash flow.

Annual budgets should be prepared to determine the correct amount of variable overhead expenditure each year in line with expected sales income. Strict adherence to budgeted overhead expenditure is necessary and any excessive spending on; advertising for example, can eat into gross profit and create an accounting loss which may not be discovered until the financial year end.

Controlling staff costs with staff production

Small Business Owners should ensure that labour costs are adequately matched with the revenue created by each staff member. Staff should not be reimbursed for merely attending the work place during work hours. Staff attributes such as skill, timekeeping, loyalty etc. should be taken into account when a new member of the workforce is being recruited.

A Small Business invests heavily in its work force and a return on this investment is essential if the business is to continue profitably. Controlling of staff costs and recognition of each staff member’s productive capabilities is an essential skill for all Small Business Owners.

Business break-even analysis

Small business Owners should analyse the business break-even business projections at the beginning of each fiscal year or each major business contract. This analysis will always form part of a business plan prepared by a new business prior to commencing trade but should be prepared by business owners when quoting for a new contract or at the beginning of a financial year.

If this analysis provides evidence that the business will not break even, in other words the business will run into a loss making situation, then the business venture should not be undertaken.

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Invoice Discounting Vs Factoring – Which Is Better For A Small Business?

When a business faces financial crisis and with the growing demand for working capital in the market, securing finance to meet your daily business needs has become an item of luxury. The banks are growing to be even less credit-friendly as they were and obtaining working capital is becoming more and more difficult for both small and large scale companies. In this post we look at invoice discounting vs factoring and how it can impact on your small business.

For those not familiar with Invoice Discounting, it is simply a short term loan provided by financial agencies to the business owners, utilizing the unpaid sales invoices as collateral. Factoring on the other hand is the selling of the invoices to a third party at a discount. While both the terms may sound the same to many, there are often noticeable differences between the two.

Invoice Discounting Vs Factoring

  • Factoring arrangements are a complete sale of ownership of the debt owed to your company to a 3rd The invoices are sold at a discount with an agreement that the payment for the invoices will directly be collected by the 3rd party which is also known as the ‘Factor’. This not only provides immediate cash flow into your business but also relieves you of the burden of collecting debts for the unpaid invoices. Chasing unpaid invoices is often a time consuming process which can affect your business further. Factoring thus takes care of your short term finance requirements and your debt collections.
  • Invoice Discounting on the other hand, is a loan borrowed against the invoices which are held with the financing organization. As compared to Factoring, the business owners retain the right to collect the payment for the pending invoice. The finance company also charges a monthly fee and interest on the loan. While this doesn’t provide the same benefits as Factoring, it is more helpful in maintaining client relations. The Invoice Discounting is often done on a confidential level between the business and the financing company and the client will never get to know about the funding.

What Should You Consider For Your Business?

If you own a small business it is often confusing to choose between Invoice Discounting and Factoring as both of them have a fair share of pros and cons. Although, both are being put off by several businesses due to the financing organization’s high demands from the applicants and only suits a handful of businesses. Factoring indeed seems to be a better choice for small businesses as you have a flexibility of putting only a portion of your total invoices for sale while still maintaining your valuable and more trusted clients.

One must remember that most small businesses thrive on the healthy client relationships and selling up the more profitable clients can stain your business’ reputation in the long run.

Despite of Invoice Discounting and Factoring being popular the popular means to raise short-term finance can provide several disadvantages to small businesses. One can also opt for the several other means for finance, available for small businesses. Short-term bank loans, invoice financing, equity financing, peer-to-peer lending, government loans and grants etc. are the various other methods through which working capital can be raised for your business.

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How to Cut Costs When Organising a Business Conference

Nowadays the importance of face-to-face meetings is obvious. We are looking at so many opportunities that are available and when it comes to conferences, everything is a lot more necessary and needed than in the past. These meetings are necessary for so many different reasons and while it is so hard to organize them, this need automatically leads to price analysis. Saving money is something that is always necessary.

The problem is that we cannot simply save money by doing cost cutting. It is really important that we do all we can in order to choose the correct answers. This is definitely something that is a lot more complicated than you may be tempted to believe at first glance.

Choosing a Correct Venue

Most of the money you can save is available by simply taking a close look at the venue options available. Choosing a perfect conference venue that is affordable in terms of price and quality offered is what will help you out the most. Never choose something that is too expensive. It is not difficult to save money if you just stay focused on the best venue.

Cutting Costs on Services

You do not necessarily need to agree to absolutely everything that is offered by the venue you chose. Remember that time is precious and you will be tempted to save money and time by just agreeing to a specific package. However, most of the different venues that you will consider will include many opportunities that you were not aware of so that you can save a whole lot of money. All that you would have to do is ask. Make sure that you do so and you analyze what the contract allows you to do and what not.

Using the Internet for Information

The more information you have about the options available for you at the moment, the higher the possibility you will make a correct choice. The World Wide Web does offer all the information that is needed in order to make the best possible choice. For instance, when you live in London, you can easily find the best possible venues by simply looking at search engines for business conference venues.

It is also important that you use the internet in order to learn more about how to organize the perfect business conference. The truth is that all you really need to do is remain informed at all times. There are so many things you might miss out without even realizing it. What counts is to know exactly what options are available for you.

We have to add that we can also include various different blogs in our list of resources available for research. There are many internet professionals that talk about the many different opportunities that can be taken into account and it is not hard to learn how specialists deal with cutting costs. Organizing conferences may be a necessity these days but it is not something that has to be done with huge attached expenses.

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The 10 Basics of Export Marketing for Small Business

Expanding your company by targeting overseas sales is a fantastic way of developing a business. However, export success certainly won’t happen overnight and there are many potential hazards out there that need to be overcome before success is achieved.

Marketing your business, product or service is crucial to your success. Prior to launching anything internationally, you need to sit down and plan, plan and plan some more.

So here are 10 essential points to effective export marketing that should hopefully help you on your way.

1. Create an Export Marketing Plan

Remember those days when you were launching your company and you sat down and spent hours writing out a business plan? Well you need to do that again but this time to plan out just how you’re going to be successful at launching into export. You need to work out where you are going to aim your product, when this important development of your business is going to take place and how much you should budget for it.  Keep hold of this and continually refer back to it.

2. Do your export homework

You have an idea just where you are going to launch your product but you now need to find out as much as possible about that country or region. Learn about the population, their habits and what possible challenges lay ahead. There is a wealth of free information available online now that exporters can use to get quickly up to speed on all the key areas that might impact their export offering.

3. Competition analysis

It’s important that you find out who your likely competitors are going to be. Find out what they are currently doing, how they are doing it and how you can do it better (hopefully) and conduct a SWOT analysis. If you are going to be selling toothpaste into Indonesia, would you really do so without understanding who already does so and how much they actually sell? Scrutinise competitors’ approaches; take what is good and leave what is bad.

4. Make sure you overcome any cultural differences

The country you are going to be exporting to is likely to have cultural differences and you must find out about these. It’s so easy to make expensive blunders that could have been avoided if research had been carried out. This is particularly important with your advertising material with everything from your logo to the name of your product being potential hazards. A US toothpaste manufacturer once sold into an area of South East Asia where the locals saw black teeth as beautiful! Obviously they didn’t sell too many tubes.

5. The importance of language

From the emails you send to your foreign clients to the language used in your marketing material, there’s plenty you need to learn if you want to be a successful exporter. Don’t include words that may be innocent in your own country but have a totally different meaning in the country you want to trade with. Make sure you use a linguist or a professional from the target country who can advise you on your language as well as your website copy, brochures, manuals, etc.

6. Where is the best place to put your message across?

Once your marketing material has been created where should you place it to get the best results? It could be via a search engine, in the local press or on social media. Again you need to find out what works best in the country you are exporting to. Not every country will have the same channels for marketing and advertising. In some West African nations, the tribal chief might actually be your best marketing channel!

7. An online presence

If you haven’t already got a website then get one!  If you do have one then you need to make sure it can aid your export drive not hinder it.  Make sure your site is towards the top of search engines and get the site translated so your potential new customers can fully understand the message you’re trying to put across. As well as translating the contents, look at the usability of your website. For example in some languages they read right to left – how would this impact your site’s effectiveness?

8. How do you want them to contact you?

Those potential new customers have found your website and understand it too. So what do you want them to do next? Decide if you want them to email you or telephone you. If you do want them to call you make sure you have staff who can successfully take that call. There is no point marketing your service to Germany and then not being able to deal with a phone call or email in German. Think through how these foreign prospects can be dealt with.

9. Ensure you can receive payment

Your new customer wants to buy your product online but is that possible? Make sure that your site can take foreign payments. Ensure you closely look at the local payment methods people use. Online credit card payments are distrusted in Germany so what would the alternative be? Check competitors’ sites and see what they are using.

10. Don’t forget to test

As you’ll see there’s a lot to learn if this export drive you desire is going to work. Have a trial run, start off small and apply what you’ve learnt. Take a small dip in the export waters, learn from any mistakes you make and then start to grow the export side of your business. Test, test, test and improve…..continuously.

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Asia Trade Forum and UCD Smurfit Business School Team Up For Mentoring Partnership

The Asia Trade Forum of the Irish Exporters Association and Smurfit Business School has entered into a mentoring partnership where students will work on a group project with a member company to complete a new market entry strategy.  In response to the rapidly growing markets in Asia, a country from that region will be chosen. Other international markets may also be considered.

The key focus of each project will be on entry strategies for a particular product / service into a particular international market.

The key outcomes of this ‘live project’ for the students are:

  • To learn successful strategies for entering new markets with a real life Irish company
  • They will receive mentoring from successful business people
  • To enhance their CV and become more employable
  • To hone their presentation skills
  • They will learn how to deliver and present a professional report

The key outcomes for the IEA member company are:

  • To have the opportunity to develop an international market opportunity for their company
  • Give something back to the community.
  • Operating in a mentoring capacity, they will provide students with a live project to enhance their international market entry strategy skills which, not least, will make them eminently more employable in the currently difficult economic environment.
  • They will facilitate creativity and initiative taking by group members.
  • They will work more closely with Smurfit Business School, deepening the relationship over time, potentially provide internships for strong students, and potentially source Smurfit graduates as prospective employees over time.

Mentors

Hugh C. Kelly, Managing Director, Associated Marketing Ltd. Director, Irish Exporters Association.
Mr Joe Tynan, Tax Partner, PwC. Director, Irish Exporters Association.

Feedback from Last Year’s Projects

The project for us has certainly added value. The market research on the various regions is excellent. In short, they covered all aspects of the project we asked them to. Everything from the perception of Irish beef to possible markets and route to market.

(the group) delivered a very good and well established project and I must say all of the team acted in a very professional and courteous manner throughout & I have given each of them a letter of reference following my time working with them over the last 3 months.

The whole team at SIA are very impressed with the quality and depth of your analysis and recommendations.  The report has been completed to an excellent standard with a real understanding of the industry and our position in the global market. To prove the point we have been in initial discussions with DC Logistics last week to become our partner in Brazil and they were first on your list.

I just wanted to drop you a note, to thank you and the group for the work done on the project. We believe it will be very useful. I would also like to let you know that we were very impressed with Killian’s work as leader on the project.

Project Schedule

Duration of Project: Monday 27 January – Thursday 24 April 2014.

What are Companies expected to do?
Company participants should take ownership of this project. Critically the intellectual property of this project resides with the company. Companies are expected to guide and mentor their groups toward the realisation of a high quality project, keeping in mind the grading criteria. Clarity with regard to brief is a starting point. Sometimes companies may be rigid in terms of their brief. Please provide space for the students to demonstrate creativity and to use their initiative. They may ‘talk theory’ initially, not least as academically they are expected to have a theoretical underpinning to their project. Please empathise, as I’m sure you appreciate that all business transactions have a theoretical underpinning. The presentation and physical copy of the final report has to be to the highest standards, a report and presentation that you yourselves would stand over.

Communication between Company and Students
It is the expectation that companies will communicate with students face –to-face, by phone, Skype, or email for the duration of the project, and be proactive in this regard. This is to avoid a situation where students get lost in their project and would gain from immediate communication and mentoring rather than losing time going down blind allies in their market research.

Contact

The contacts details for interested and eligible parties are as follows:

Dr John (Sean) Cassidy, Module Coordinator, UCD Smurfit Business School
Contact Details: Tel: 01-7164831; Mobile: 086 812 0654; Email: john.cassidy@ucd.ie

Ms. Ashley Beston, Manager, Asia Trade Forum, Irish Exporters Association
Contact Details: Tel: +353 1 6424178; Email: AshleyBeston@irishexporters.ie

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Export Ireland Survey

On Wednesday November 13th I had the pleasure to attend a reception to launch the Irish Exporters Association’s “Export Ireland Survey & International Trade Finance Review for 2013”. The reception was hosted by Grant Thornton and they were also sponsors of the publication.

The main objective of the publication is to research and measure the opinions and expectations of companies in Ireland in relation to their export activities. Every year hundreds of companies participate providing their highly valuable input.  The results allow the main stakeholders in the Irish economy to have a better understanding of the state of the Irish export industry and allows the IEA to present the findings to Government and propose actions to be taken to improve export performance.

Irish Export Industry

Speaking to Simon McKeever, CEO of the Irish Exporters Association, he said “Our survey provides an insightful annual temperature check on the challenges and opportunities affecting the Irish Export Industry.  This year the survey shows positive momentum with  increased plans to introduce new products and services over the next 2 years, and a positive trend in the number of sales people recruited over the last 12 months. “ However we cannot afford to be complacent.  Our competitiveness remains an issue for many small businesses. We need to encourage more Irish firms to export, to help them identify opportunities and to win business successfully overseas.  We are grateful for the professional expertise brought to the survey by our economic adviser Philip Halpin and the continued support of our partner Grant Thornton.

My thanks to Simon for granting me permission to use content from their publication. It is an excellent survey/review and I would urge any company involved in the export business or considering entering new markets to contact the IEA to discuss the findings in more detail and see how they can be of help.

There are seven main parts to the survey and these are:

  1. Challenges in the marketplace and opportunities facing exporters
  2. Currency issues
  3. Trade Finance and Banking
  4. Payment Issues
  5. Credit Management
  6. Support for Exporters
  7. Grant Thornton Review

The Guest of Honour was Mr Michael Noonan, Minister for Finance, Mr Patrick Burke, Partner Grant Thornton welcomed the guests, Mr Colin Lawlor – President of the Irish Exporters Association spoke on behalf of the IEA and Mr Philip Halpin, Economic Advisor to the IEA presented the findings.

The Report

The publication showed that the “green shoots” are coming alive as we emerge from our deep recession; they also tell us about the challenges our exporters feel as they develop new markets.

Some interesting points to emerge from this excellent report show that:

  • 80% of businesses expect exports to increase in 2014
  • 70% of respondents are targeting new markets
  • 88% plan to introduce new products and services over the next two years
  • 51% of exporters have recruited new sales staff over the past twelve months
  • 45% expect to increase their R&D spend in 2014
  • 95% of respondents export to ensure sustainability of their business
  • 61% see exporting as having helped them understand their home market more

The Irish Exporters Association can be contacted on + 353 1 661 2182 / iea@irishexporters.ie or at www.irishexporters.ie

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Irish Trade Mission to Moscow

Ulster Bank often works with Enterprise Ireland in their efforts to assist Irish companies in the SME sector develop their export business.

We do this in many ways, some recent examples involved speaking at their Funding for Growth seminars, joint hosting of events on doing business is a variety of markets and travelling on Trade Missions with Enterprise Ireland and their clients to key business markets.

Recently Gerry Ennis, Head of Trade Finance at Ulster Bank (pictured here with Minister of State Alan Kelly and Patrick Edmond of Shannon Airport)  attended a trade mission to Moscow , organised by Enterprise Ireland and led by the Minister of State Alan Kelly, and he has provided the following report on the trip:

Two trade missions to Moscow

Two trade missions to Moscow took place at the same time (Aviation and Agriculture) and in excess of 40 people travelled from Ireland. Each mission was fully supported by the Irish Embassy in Moscow.

The Irish Aviation / Transportation mission focused on the growing opportunities for Irish companies in that sector. It was interesting to hear that the aviation industry in Ireland is directly responsible for 26,000 jobs with an estimated further 16,000 jobs supported in the aviation supply chain. This sector contributes in excess of €4bn to Ireland’s GDP. The second group of companies attended an “Innovation in Agriculture” trade mission , these were companies providing product and services to a very dynamic market in Russia.

Irish exports of goods to Russia for the first eight months of 2013 were €434m , up 8.5% on the same period last year. It is interesting to note that our Imports at €109m for the same period this year is only one quarter of our exports.

Russia is not an easy market to crack, having said that many of the companies on these missions have shown that they can sell their product successfully throughout Russia and also to neighbouring countries such as Belarus, Ukraine and Kazakhstan.

Enterprise Ireland

Enterprise Ireland have a fantastic team based in Moscow , led by Gerry McCarthy and ably supported by his colleagues – all of whom were excellent hosts to attendees on the mission. Our Ambassador to Russia, Eoin O’Leary and his team were very involved and supportive of the mission. The Embassy and Enterprise Ireland both have an open door policy when it comes to supporting Irish companies as they seek to develp their business in Russia. Gerry can be seen here in the company of Ambassador O’Leary.

During the trip I attended a dinner hosted by Enterprise Ireland and in excess of 200 people , Irish and Russian were present at a hotel within a stone’s throw of the Kremlin. Ambassador O’Leary hosted an evening reception at the Embassy on another evening. At other times I networked with these companies to explore ways in which we could work together. I also visited the main local banks in the company of Natalia from the local RBS office in an effort to promote Ireland but more importantly to promote the bank in Ireland to these major banking giants. RBS employs close to 300 people in Russia, with offices in Moscow, St Petersburg and Sakhalin.

I would be pleased to talk to any of our readers if we can be of any assistance to you as you seek to explore new business opportunities in Russia or for any emerging market in fact. My main contact details are as follows:

Telephone: +353 1 643 1724
Mobile: + 353  87 7681263
E-Mail: gerry.ennis@ulsterbankcm.com

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