How To Give Your Company Extra Financial Insurance

how to insure company financial protection insurance

In today's volatile economy, it pays to have extra insurance for your business. That means literal insurance policies as well as other financial protections to your assets, employees, and income.

To make sure your business is growing strong, you need to pay attention to key financial metrics. How well is your business doing? Are you pricing your products and services appropriately? Are you spending too much on labor and not enough on sales and marketing? Should you hire another employee or outsource some of the work? Should I continue to outsource to a contractor? These are the most common questions asked by customers about their company's financial security. 

Fortunately, the answers to these all-important questions are contained in financial statements. As CFO and Accounting team, we focus on providing information that helps you make important strategic decisions in your business. Unfortunately, not all accountants and accountants are created equal, and not all can help make business decisions. Many accountants simply enter transactions into  Accounting Software, issue financial reports, and need to decipher the results. Also, many CPAs focus on tax compliance issues and tend to produce high-level financial reports that please the IRS, but not the details to analyze what is really going on in the business. 

That is where we come in, sitting in the middle of those two extremes and giving you enough detail to actually run your business without breaking your head. For example, for a healthy business, the cost of providing products/services should not exceed 50% of sales. This includes labor costs for providing products/services. When we compile your accounting records, we actually take your payroll records and measure each employee's salary by comparing the time spent producing products / services and the time spent running the business and performing more administrative tasks. Allocate according to other times.

For example, did you know there is a tax called the NIIT? It is an additional tax on your investment earnings. To project what the NIIT will be for you this year, I need to collect some information, Things like: Your investment income, Investment expenses, and Something called MAGI. But we can explain everything during our meeting (don’t worry, it is not that complicated and it will not be a hassle). The good news is that actively earned income — like wages from a day job or income from a business — is NOT subject to the NIIT. The point is, we have additional strategies to reduce this tax. And therefore, we believe we can save you some money this upcoming year! 

The result is a financial report that gives you a quick and powerful analysis of your company's success at a glance! You can use this information to optimize your business and keep up with suggested metrics. For example, if your cost is 60% of your sales, you may need to negotiate the price of consumables...or your employees may need better training to be more efficient at their jobs. Or maybe we need to raise prices! You are the captain of the ship. If you are off course, there are several ways to correct your course and return to your destination. As a CFO and Accounting team, I can help you analyze your current figures and make any necessary corrections. ​​​​​​​To learn more about the key financial metrics you should be paying attention to.

Watch your receivables turnover rate, and keep your business healthy. Turnover is a measure of the receivables cycle. It begins when the customer purchases the product and ends when the customer finally pays. Everything that happens in between is part of the debt collection process. How is the collection effort going? And how quickly can you receive money from your customers?

Turnover rates vary depending on your industry and the nature of your customers. If you are dealing with a large corporate client, expect a significant slowdown in sales (because companies are notorious for incorporating a lot of bureaucracy into their payment processes). If you are in an industry where your customers regularly use and/or are considered a "key vendor", you should start paying them much sooner (without the risk of them pissing you off). 

This information is very useful for managing cash flow. Without knowing how money flows through your business, you cannot properly plan your cash outflow. Nor can it identify future issues that may require short-term loans or lines of credit. ​​​​​​​So make sure you insure your company with the right insurance and tax assurance!

Official Bootstrap Business Blog Newest Posts From Mike Schiemer Partners And News Outlets