This is an article about our CEO, Matt Garrett’s presentation to Vistage. You can view the original article on the Vistage Website.
As the COVID-19 pandemic continues to worsen, finance experts say the global economy is spiraling towards a recession at best. Some also warn that a depression may be right around the corner with unemployment levels we have not seen for 90 years.
“This is 100% unprecedented,” says Matt Garrett, CEO of TGG Accounting, who has spoken to more than 600 Vistage groups about finance best practices for small and midsize firms. “We’re going to lose years and years of productivity. It’s going to present a massive unemployment problem…and a massive problem for the business community at large.”
Having led businesses through the 2008 recession, Garrett offers candid advice for CEOs trying to prepare their firms for today’s tumultuous environment. “Run your business by the numbers,” he says. “Get the numbers right and then make decisions based on those numbers.”
From a tactical point of view, Garrett says, this means taking seven steps.
Frequently Asked Questions (FAQs)
Every year TGG’s Founder and CEO, Matt Garrett speaks with thousands of small business owners around the country. They ask him numerous financial and accounting questions, yet the same ones come up time and time again. These are the most frequently asked questions Matt has been asked:
Basic Business Model
At TGG, we believe in simplifying things whenever possible, especially when it comes to developing a basic business model. Accounting is complicated enough! One area where simplification helps tremendously is benchmarking. While every business has some unique characteristics, businesses within industries share many more similarities than differences with respect to how they make money and what range of profitability can be expected.
Simplifying and comparing to a Basic Business Model provides the benefit of benchmarking any business against the expected industry business performance at any given time. It can be broken down into the following five parts; Revenue, Cost of Goods Sold (COGS), Gross Profit, Sales, General and Administrative Expenses (SG&A) and Net Operating Income. The basic business model is a static equation, but the inputs change by industry, making this simplistic model extraordinarily powerful.
Infographic: Roles & Responsibilities in your Accounting Department
When it comes to accounting, a multi-layer structure is critical to provide appropriate internal controls and to produce accurate and timely financials to manage your business. Check out our infographic and click here to read our blog to learn more about each accounting level.
The Ideal Accounting Department
What should your ideal accounting department look like? It’s a common question among businesses. It’s important to know proper roles and responsibilities along with how to best structure it. When it comes to accounting, a multi-layer structure is critical to provide appropriate internal controls and to produce accurate and timely financials to manage your business.
Executing Your Plan
You have a plan that’s specific to your business. Now what? How do you execute on this big picture plan? Start by using your budget and forecast to run your business by the numbers. Running your business by the numbers also means tracking Key Performance Indicators (KPI’s) and establishing a regular cadence for meetings to be able to execute your plan and measure your results.
Annual Business Planning Checklist
Annual business planning is one of the most important things that a business owner or CEO must do. It sets the strategy, the goals and determines the tactics for the following year.
Of course, there is a lot to consider in terms of where your business has been and where you are headed. It’s important to be organized and stay focused because how you plan often sets the tone for your business. Here are 7 key steps for an efficient planning process.
How to Read a Nonprofit Statement of Activities
The non-profit statement of activities reads much like an Income Statement in for-profit organizations.
Instead of breaking down the activities into Revenue, Cost of Sales, General and Administrative Expenses, and Other Income and Expenses, the non-profit statement breaks down income and expenses into three major buckets:
Program revenue and expenses
Fundraising revenue and expenses
General & Administrative expenses
How We’re Turning Small Business Accounting on Its Head
Only one in 20 small businesses has accurate financial statements.
That makes up only five percent of businesses. Almost half of all small businesses experience some kind of accounting theft at their company, which costs them an average of about $114,000 per occurrence.
The Association of Certified Fraud Examiners puts out a report annually that is a giant eye-opener for how much fraud and theft is out there. The numbers are staggering–and it’s was one of the factors that led CEO Matt Garret to found TGG Accounting. Small business accounting can help mitigate these threats.
In an interview with Stay Wealthy San Diego, Garrett shares the story behind TGG and how it’s turning traditional accounting on its head.
Plan B – Preparing for the unexpected
Contingency planning for the 1 in 100 situations that can arise may seem like catastrophic thinking, a waste of time, or farfetched, until a widespread virus disrupts supply chains the world over. Having a Plan B can be the difference between dying intestate and losing all you and a partner had worked for and having the time and space to deal with unexpected crises knowing the business is taken care of.
Guide: Is Outsourcing Right for Your Nonprofit?
Nonprofit executives must wear many hats. Not only are they responsible for fundraising to advance their organizational mission, but they may also be responsible for strategic planning, board communications, human resources, and recruiting, among other things.
More so than ever before, nonprofit leaders are under pressure to fundraise, manage operations, comply with state and federal regulatory requirements, and leverage resources cost-effectively.
The challenge of hiring and retaining talent is intensifying as the US workforce shrinks and wages increase. Most nonprofits do not have the resources to achieve all of this this in-house.
Selling Your Business? What You Need to Know Before You Start
Selling your business can be a cumbersome task. Where do you even start?
Most business owners are experienced at running a business, often very successfully. However, selling a business is usually not something most business owners have a great deal of experience with, especially if this is their first sale.
Most business owners know about valuation and exit scenarios and have heard stories from others about their experiences selling their business – both positive and negative. But there are so many terms, details, possible scenarios, and implications involved in any merger and acquisition (M&A) transaction that it’s next to impossible for most business owners to be experts in this area.
Rather than getting caught up in all sorts of lingo and potential details, it’s best to understand that any sort of M&A transaction is a nebulous process – the value of the deal is as acceptable as whatever both parties involved agree it is. Instead focus on a couple of key areas that you, as the business owner, can control.
Small Business Taxes and the Trap you Need to Avoid
There’s a small business tax trap that many owners fall prey to. The IRS requires you to make quarterly estimated payments of your tax liability. Most of us small business owners either underpay the tax rate or not even pay at all. The worst part is that, unfortunately, a lot of CPAs aren’t paying attention to this either.
So how do we plan for taxes appropriately? We need to make sure we’re not falling into this tax trap, where we get stuck and end up paying a huge chunk of our revenue at the end of the year to pay for taxes we didn’t expect.
Remember, the number one cause of business failure in this country is a lack of cash. To combat this small business tax trap what you’ve got to do is make sure you have enough cash on hand to pay your taxes. After all, they’re your number one creditor every single year.
Why Accounting Matters for Your Business
This is an article about our CEO, Matt Garrett’s presentation to Vistage. You can view the original article on the Vistage Website.
As the COVID-19 pandemic continues to worsen, finance experts say the global economy is spiraling towards a recession at best. Some also warn that a depression may be right around the corner with unemployment levels we have not seen for 90 years.
“This is 100% unprecedented,” says Matt Garrett, CEO of TGG Accounting, who has spoken to more than 600 Vistage groups about finance best practices for small and midsize firms. “We’re going to lose years and years of productivity. It’s going to present a massive unemployment problem…and a massive problem for the business community at large.”
Having led businesses through the 2008 recession, Garrett offers candid advice for CEOs trying to prepare their firms for today’s tumultuous environment. “Run your business by the numbers,” he says. “Get the numbers right and then make decisions based on those numbers.”
From a tactical point of view, Garrett says, this means taking seven steps.
Sales Planning: Finding the Right Customers
Finding the right customers is crucial to your business. There are a few things that you need to consider when you’re thinking about who to sell to. I’ll share a brief story and discuss how we solve this problem here at TGG.
Data-driven Fundraising Ideas for Nonprofit Organizations
TGG recently hosted a roundtable on nonprofit fundraising. We invited our clients and other nonprofits in the community to discuss strategies for increasing donations, expanding their donor base, and appealing to millennial donors.
The forum was moderated by Steve Goldstein, a Consulting CFO with TGG. Steve not only serves some of our not-for-profit clientele, but also founded and runs his own non-profit, Starfish Asset Fund, which provides low interest loans and financial education for transitioning foster youth.
We’ve compiled some of the takeaways from the roundtable because we believe these insights apply to a broad range of not-for-profit organizations.
The agenda covered many aspects of marketing, with an emphasis on using technology and data to improve results.
There were many great discussions and actionable items that can be applied by any nonprofit organization intent on realizing their mission. We have summarized a number of the top takeaways:
Cash vs Accrual Accounting
Cash accounting and accrual accounting are two concepts that are foreign to most people, but it’s important to understand the difference. As a business owner, if you manage your books on a cash basis, you will ultimately fool yourself. Why is this?
Understanding Business Metrics and KPIs
Key performance indicators provide insight into the financial health of your business. Before you can track key performance indicators, however, you need to have accurate financial reporting.
There are three key areas where key performance indicators (KPIs) come into play: sales, operations, and safety.
We’ll review two KPIs in each area that will help you manage your business more efficiently and effectively.
Outsourced Accounting vs Hiring In-house: What Business Owners Should Know
Small and medium sized businesses are usually at a crossroads when it comes to their bookkeeping and accounting, especially if they’re growing. “Should we hire a Controller or should we try to do it ourselves?”
There’s a third option that gets frequently overlooked: outsourced accounting services.
Outsourced accounting didn’t really exist ten years ago, but small businesses are turning to full-service outsourced accounting firms more often to increase efficiency, add professionalism and save time and money.
Most business owners assume that having an in-house bookkeeper, Controller, or CFO who can pay bills, run payroll and manage company finances is the best scenario for their business. They believe having a person down the hall will ensure they have a clear view of the company’s financial position, but this isn’t always the best solution.
In this post, we’ll explain why having access to greater financial expertise can be game-changing for small businesses looking to grow.
The Easiest Sale: Upselling Tips
What’s the easiest sale that you can make as a business? The easiest sale you can make is to a happy customer, and you can sell them something else. Here are a couple upselling tips:
First, you can sell your customers a new product or service. This is actually the hardest of these three different upsells to make, because you have to create or stock a new product, or provide a new service.
Next, you can sell your customers more of what you’re already selling them. It’s the same product or service, but more of it. This expands the relationship.
Third, you can do something that is often the easiest to do, but people are the most fearful to try. You can increase your prices.
4 Myths About Outsourced Accounting Services Debunked
At TGG, we meet business owners everyday that are reluctant to outsource their accounting and financial functions because they think it will reduce visibility into the financial health of their business.
At the same time, they’re struggling with accounting and reporting issues–even when they have someone on staff to handle bookkeeping.
Large companies benefit from accounting and finance departments that have several layers of expertise at their disposal.
It’s usually too costly for small businesses to staff an entire finance department. But they can emulate this model by using an experienced, outsourced accounting service that provides the right expertise at the right times.
You might be surprised to know that this does not necessarily mean getting rid of your current staff.
Accounting for small business can mean different things at different times in your company’s growth and it’s important to have the right expertise on hand.
Here are the most common questions we hear when small businesses are considering outsourced accounting services.
How Increasing Utilization Affects Profitability
We’re going to talk about increasing gross margin. One of the best ways that you as a business owner can go about figuring out how to improve profitability without increasing sales. One of the best ways to improve gross margin is by increasing throughput or increasing utilization.
It’s easiest to talk about in terms of the manufacturing sector. Products get created in a manufacturing building. They go in on one side, and come out as finished goods. If products are being manufactured at a 100% efficiency rating, that means that we’re going as fast as we possibly can. But nearly no one is going as fast as they possibly can. If a realistic efficiency rating is more like 80%, what would happen if we increased it by just 10%? What if we could go from 80% to 90% efficiency?
How Discounting Affects Profitability
When we’re thinking about cash, we have to think about the discounts that we might be offering, and how discounting affects profitability. Clearly, we want to try to take discounts if we get them. But what about discounts that we’re offering, sales or incentive discounts for people to either buy more, do different things with our products, or buy them at certain times? What about sales discounts? What is that doing to the cash and profitability of our business?
Improving Cash Flow: Days Sales Outstanding
Today we’re going to be talking about the important topic of DSO. DSO stands for Days Sales Outstanding. Most importantly, it means how long it takes for your customers to be paying you. It’s important because it directly relates to how much cash you have, which is the most important factor in the health of your business.
If you sell products or services and no one pays you, you will have no cash. You might have made lots of money on paper, but if you have no cash, you’ll be out of business. It’s very important that we track DSO – days sales outstanding – to understand how long it takes for our customers to pay us.
5 Sales Planning Steps to Profitability
True sales planning is one of the most important things that a business can do each year. It forces business leaders to think through – in significant detail – what is necessary to accomplish their business goals.
Sales planning is more than a tactical plan set from on high: “Your quota is $1MM, now go sell!”
Instead, it’s about planning to sell profitably.
Selling profitably is something that is not as straightforward as it seems. We see examples all the time, in companies big and small, that believe they are selling profitably and selling well–but simply are not.
There are examples of strategic decisions to sell certain products or services at lower margins or even at a loss. These may include gaining traction in a new market, gaining a marquee client in a new industry, or an initial sale with high likelihood of highly profitable add-on services.
But these examples should be few and far between and only done based on a specific plan, not because you didn’t realize it was an unprofitable sale.
Sales Planning: Setting the Stage for Business Growth
Establishing a plan for business growth in the coming year requires thoughtful planning. An objective review of your sales strategy and tactics, and building a sales plan are a key to the success of your business.
We offer some tips on what to contemplate when building a sales strategy recognizing that as your year unfolds, the strategy and goals may change. The sales metrics and milestones you establish should be reviewed throughout the year to ensure they remain relevant to your overall company goals and to the changing environment.
Importance of Sales Forecasting
The single most important element in the forecasting process is the Sales Forecast. Generally, Sales drives everything else; it is what determines the expense spending plan. If the company is a manufacturing company, the sales forecast will drive the production plan.
There are several different ways to approach Sales Forecasting. Typically it starts with the Sales Department figuring out how much product they can sell in the following year. Sales people are naturally optimistic by nature, usually overestimating achievable sales. There are several factors that can impact the forecast:
Cash is King
55% of businesses are failing in the first four years. According to The Brookings Institute 11% fail every year thereafter. This is all attributed to lack of cash. Here are 6 elements of cash flow management to watch:
Sales and Accounting – They make a great team.
Sales and Marketing is a far more regular team than sales and accounting. CEO Matt Garrett outlines the many ways that sales and accounting are actually on the same team.