KPIs are the measure of a business' success at achieving its operational and financial goals. When the KPIs move in the right way, you know the business is operating successfully. When they move in the wrong way, you have a warning that something is not going to plan. But what are KPIs, how do you decide which you need to track, how do you go about putting a KPI system in place in the business, and how do they relate to benchmarking?
KPIs are quantifiable measures of how well you are performing an activity that is critical to the success of your business. Essentially, they should:
• Reflect the goals of your business
• Be critical to the success of your business
• Be measurable
• Point to the activities you might need to alter if things start to go off track
If you do not currently track your critical success factors, this may seem like a daunting task; however, you really just need to track 6-8 indicators that measure the truly critical processes and activities. In fact, a well designed and regularly monitored set of KPIs can provide you with:
• A knowledge of how your business is performing and
• Target the areas where immediate action ought to be applied
Goal setting and monitoring really are the basis of effective business performance management. There are literally hundreds of KPIs that could be established. To get some ideas on which KPIs are important to your business, please join us this Thursday for an interactive workshop entitled “Measuring Your KPIs” presented by Barb Bitzer, CPA. For more information, visit www.simonsbitzer.com.
Monday, May 24, 2010
Monday, May 10, 2010
3 Tips for Smart Borrowing
Most businesses operate to some extent on borrowed money. Borrowing too much means you are paying more in interest than you need to. Borrowing too little means you are under financed and may not have enough capital to accomplish what you want to do. That is why you have to work out just how much money you will really need, and when you will need it, before you talk to anyone about borrowing funds for your business. Of course, you will also have to work out how to repay what you are borrowing. Here are just three tips for estimating your borrowing requirements.
Check your business plan
Start by taking a good look at your business plan. It should be an overall guide to both the amount you need to borrow and to the times when funds will be needed. If you don’t have a business plan that tells you this kind of information, create one before going any further.
Consider your vision for the business
Where do you see the business in three years from now? If growth is part of your vision it has to be funded somehow. Usually that means making an investment before you begin to get a return, and timing becomes a critical factor in ensuring your cash flow remains sufficient for business needs. Consider what resources your business will need to reach your vision. People and equipment are always necessary, but do not forget to plan ahead for other resources such as additional warehouse space or outside expertise (legal fees, marketing advice, etc.) that might also be needed.
Model the projected financial position of the business
You need to prepare a financial model of the business that will indicate the effects of borrowing the funds you need. This model should demonstrate that the extra funding injected will improve profitability sufficiently to cover the repayments you will have to make. It should also show clearly that the business will have adequate cash flow at all times until the loan is repaid.
Now you are ready to go to a lending authority and make an application to borrow the money you need. By doing your homework, you will know that you will not be borrowing too much or too little. You can be confident that the business will be able to repay the loan from the income it generates. You may also be more likely to impress the lender and get the loan. For help with business planning, budgeting, and financial modeling, please contact a Simons Bitzer team member.
Check your business plan
Start by taking a good look at your business plan. It should be an overall guide to both the amount you need to borrow and to the times when funds will be needed. If you don’t have a business plan that tells you this kind of information, create one before going any further.
Consider your vision for the business
Where do you see the business in three years from now? If growth is part of your vision it has to be funded somehow. Usually that means making an investment before you begin to get a return, and timing becomes a critical factor in ensuring your cash flow remains sufficient for business needs. Consider what resources your business will need to reach your vision. People and equipment are always necessary, but do not forget to plan ahead for other resources such as additional warehouse space or outside expertise (legal fees, marketing advice, etc.) that might also be needed.
Model the projected financial position of the business
You need to prepare a financial model of the business that will indicate the effects of borrowing the funds you need. This model should demonstrate that the extra funding injected will improve profitability sufficiently to cover the repayments you will have to make. It should also show clearly that the business will have adequate cash flow at all times until the loan is repaid.
Now you are ready to go to a lending authority and make an application to borrow the money you need. By doing your homework, you will know that you will not be borrowing too much or too little. You can be confident that the business will be able to repay the loan from the income it generates. You may also be more likely to impress the lender and get the loan. For help with business planning, budgeting, and financial modeling, please contact a Simons Bitzer team member.
Monday, May 3, 2010
Business Tax Changes in the 2010 HIRE Act
Below you will find an overview of the key tax changes affecting business in the recently enacted Hiring Incentives to Restore Employment (HIRE) Act.
Extension of enhanced small business expensing (Section 179).
The new law gives a one-year lease on life to enhanced expensing rules, which allow qualifying businesses the option to currently deduct the cost of business machinery and equipment, instead of recovering it via depreciation over a number of years. For tax years beginning in 2010,the maximum amount that a business may expense is $250,000, and the expensing election begins to phase out when a business buys more than $800,000 of expensingeligible assets. These dollar limits are the same as those that were in effect for 2008 and 2009.
Payroll tax holiday and up-to-$1,000 credit for employers who hire unemployed
workers.
To help stimulate the hiring of workers by the private sector, the new law exempts any
private sector employer that hires a worker who had been unemployed for at least 60
days from having to pay the employer's 6.2% share of the Social Security payroll tax on
that employee for the remainder of 2010. A company could save a maximum of
$6,621 if it hired an unemployed worker and paid that worker at least$106,800—the
maximum amount of wages subject to Social Security taxes—by the end of the year.
As an additional incentive, for any qualifying worker hired under this initiative
that the employer keeps on payroll for a continuous 52 weeks, the employer is eligible for
an additional non-refundable tax credit of up to $1,000 after the 52-week threshold is
reached, to be taken on their 2011 tax return. In order to be eligible, the employee's pay
in the second 26-week period must be at least 80% of the pay in the first 26-week
period.
Workers hired after the date of introduction of the legislation (Feb. 3, 2010) are eligible for the payroll tax forgiveness and the retention bonus, but only wages paid after the date of the new law's enactment receive the exemption for payroll taxes.
To view some additional features of the new hiring hiring incentive, visit www.simonsbitzer.com.
Extension of enhanced small business expensing (Section 179).
The new law gives a one-year lease on life to enhanced expensing rules, which allow qualifying businesses the option to currently deduct the cost of business machinery and equipment, instead of recovering it via depreciation over a number of years. For tax years beginning in 2010,the maximum amount that a business may expense is $250,000, and the expensing election begins to phase out when a business buys more than $800,000 of expensingeligible assets. These dollar limits are the same as those that were in effect for 2008 and 2009.
Payroll tax holiday and up-to-$1,000 credit for employers who hire unemployed
workers.
To help stimulate the hiring of workers by the private sector, the new law exempts any
private sector employer that hires a worker who had been unemployed for at least 60
days from having to pay the employer's 6.2% share of the Social Security payroll tax on
that employee for the remainder of 2010. A company could save a maximum of
$6,621 if it hired an unemployed worker and paid that worker at least$106,800—the
maximum amount of wages subject to Social Security taxes—by the end of the year.
As an additional incentive, for any qualifying worker hired under this initiative
that the employer keeps on payroll for a continuous 52 weeks, the employer is eligible for
an additional non-refundable tax credit of up to $1,000 after the 52-week threshold is
reached, to be taken on their 2011 tax return. In order to be eligible, the employee's pay
in the second 26-week period must be at least 80% of the pay in the first 26-week
period.
Workers hired after the date of introduction of the legislation (Feb. 3, 2010) are eligible for the payroll tax forgiveness and the retention bonus, but only wages paid after the date of the new law's enactment receive the exemption for payroll taxes.
To view some additional features of the new hiring hiring incentive, visit www.simonsbitzer.com.
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