Four Ways to Encourage Innovation in Customer Service

When business people speak of innovation, the focus is usually on a pioneering product or state-of-the-art service that will “revolutionize the industry.” But innovation can apply to any aspect of your company — including customer service.

Many business owners perceive customer service as a fairly cut-and-dried affair. Customers call, you answer their questions or solve their problems — and life goes on. Yet there are ways to transform this function and, when companies do, word gets around. People want to do business with organizations that are easy to interact with.

Here are four ways to encourage innovation in your customer service department:

  1. Welcome failure. Providing world-class customer service involves risk, and inevitably you’ll sometimes fail. For example, many businesses have jumped at the chance to use “big data” to develop automated systems to direct customers to answers and solutions. But the impersonality of these systems can frustrate the buying public until you establish the right balance of machine and human interaction. Remember, every failure opens the door to better strategies for serving your customers.
  2. Link compensation to employees’ contributions. Companies that fail to reward innovation aren’t likely to retain their best customers or establish a good reputation. Because customer service employees tend to be paid hourly or relatively nominal salaries, consider a cash bonus program for the “most innovative idea of the year.” Or you could hold semiannual or even quarterly innovation challenges with prizes such as gift cards or additional time off.
  3. Praise the groundbreakers. Employees who challenge customer-service tradition may find themselves at odds with management. But don’t be too quick to reprimand those with new ideas or methods. Fresh language and modes of communication enter the public consciousness regularly. Give company-wide recognition to those who find ways to adapt — even if their initial efforts bend the rules a bit.
  4. Be the customer. Among the most simple and practical ways to innovate your customer service is to simply pretend you’re a customer to get a firsthand view on how your employees treat those who contact your business. Business owners can make these calls themselves or, if your voice is too recognizable, find someone who’s less familiar but capable of taking detailed notes of the interaction.

Finding new ways to improve your company’s customer service isn’t easy. But innovations are always just one bright idea away. If you’d like more information and ideas about building your bottom line, contact our firm.

Tax Document Retention Guidelines for Small Businesses

You may have breathed a sigh of relief after filing your 2017 income tax return (or requesting an extension). But if your office is strewn with reams of paper consisting of years’ worth of tax returns, receipts, canceled checks and other financial records (or your computer desktop is filled with a multitude of digital tax-related files), you probably want to get rid of what you can. Follow these retention guidelines as you clean up.

General rules

Retain records that support items shown on your tax return at least until the statute of limitations runs out — generally three years from the due date of the return or the date you filed, whichever is later. That means you can now potentially throw out records for the 2014 tax year if you filed the return for that year by the regular filing deadline. But some records should be kept longer.

For example, no statute of limitations applies if you fail to file a tax return or file a fraudulent one.  Therefore, you’ll generally want to keep copies of your returns themselves permanently so that you can show that you did file a legitimate return.

Also bear in mind that, if you understate your gross income by more than 25%, the statute of limitations period is six years.

Some specifics for businesses

Records substantiating costs and deductions associated with business property are necessary to determine the basis and any gain or loss when the property is sold. According to IRS guidelines, you should keep these for as long as you own the property, plus seven years.

The IRS recommends keeping employee records for three years after an employee has been terminated. In addition, you should maintain records that support employee earnings for at least four years. (This timeframe generally will cover varying state and federal requirements.) Also keep employment tax records for four years from the date the tax was due or the date it was paid, whichever is longer.

For travel and transportation expenses supported by mileage logs and other receipts, keep supporting documents for the three-year statute of limitations period.

Regulations for sales tax returns vary by state. Check the rules for the states where you file sales tax returns. Retention periods typically range from three to six years.

When in doubt, don’t throw it out

It’s easy to accumulate a mountain of paperwork (physical or digital) from years of filing tax returns. If you’re unsure whether you should retain a document, a good rule of thumb is to hold on to it for at least six years or, for property-related records, at least seven years after you dispose of the property. But, again, you should keep tax returns themselves permanently, and other rules or guidelines might apply in certain situations. Please contact us with any questions.

Could Your Next Business Loan Get “Ratio’d?”

We live and work in an era of big data. Banks are active participants, keeping a keen eye on metrics that help them accurately estimate risk of default.

As you look for a loan, try to find out how each bank will evaluate your default probability. Many do so using spreadsheets that track multiple financial ratios. When one of these key ratios goes askew, a red flag goes up on their end — and the loan may be denied.

Common metrics

To avoid getting “ratio’d” in this manner, business owners should familiarize themselves with some of the more common metrics that banks use to gauge creditworthiness.

For example, banks will compare cash and receivables to current liabilities. If this ratio starts slipping, you’ll likely need to push accounts receivable so money comes in more quickly or better manage inventory to keep cash flow moving. Other examples of financial benchmarks include:

  • Gross margin [(revenue – cost of sales) / revenue],
  • Current ratio (current assets / current liabilities),
  • Total asset turnover ratio (annual revenue / total assets), and
  • Interest coverage ratio (earnings before interest and taxes / interest expense).

Some banks may also calculate company- or industry-specific performance metrics. For instance, a warehouse might report daily shipments or inventory turnover, not just total asset turnover. Meanwhile, a retailer might provide sales graphs that highlight product mixes, sales rep performance, daily units sold and variances over the same week’s sales from the previous year.

Other methods

Bear in mind that not every bank uses ratios to evaluate performance, or they may combine ratio analysis with other benchmarking tools. Some use community-based scoring, by which a selected group of finance professionals rate and review companies based on their payment histories. Others use proprietary commercial-scoring models that use creditor reports to develop credit scores for businesses.

Preventing disappointment

When a strategic initiative fails to launch because your business can’t obtain financing, it can be crushing. To prevent such disappointment, have your financials in order and target as many common ratios as possible. Please contact our firm for help evaluating your performance and determining where you may need to improve to obtain a loan.

2018 Q2 Tax Calendar: Key Deadlines for Businesses and Other Employers

Here are some of the key tax-related deadlines affecting businesses and other employers during the second quarter of 2018. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

April 2

  • Electronically file 2017 Form 1096, Form 1098, Form 1099 (except if an earlier deadline applies) and Form W-2G.

April 17

  • If a calendar-year C corporation, file a 2017 income tax return (Form 1120) or file for an automatic six-month extension (Form 7004), and pay any tax due. If the return isn’t extended, this is also the last day to make 2017 contributions to pension and profit-sharing plans.
  • If a calendar-year C corporation, pay the first installment of 2018 estimated income taxes.

April 30

  • Report income tax withholding and FICA taxes for first quarter 2018 (Form 941), and pay any tax due. (See exception below under “May 10.”)

May 10

  • Report income tax withholding and FICA taxes for first quarter 2018 (Form 941), if you deposited on time and in full all of the associated taxes due.

June 15

  • If a calendar-year C corporation, pay the second installment of 2018 estimated income taxes.

Home vs. Away: The Company Retreat Conundrum

When a business decides to hold a retreat for its employees, the first question to be answered usually isn’t “What’s our agenda?” or “Whom should we invite as a guest speaker?” Rather, the first item on the table is “Where should we have it?”

Many employees and some business owners might assume that a company retreat, by definition, must take place off-site. But this isn’t necessarily so. Holding an on-site retreat is an option — and a markedly cost-effective one at that. Then again, it may also recall the old adage: You get what you pay for.

Staying put

Staying put can better keep out-of-pocket expenses in check in several ways. The most obvious is that you won’t need to rent one or more meeting rooms. Perhaps even more important is the fact that no one at your company will need to spend valuable time and energy calling around to various hotels, gathering information and negotiating costs.

You’ll also likely spend less on food and beverages. A local restaurant can probably cater in the food for a nominal sum, and you could buy beverages in bulk. Furthermore, you’ll have no concerns or expenses associated with transporting employees to the retreat location (as long as your employees all work on site).

The problem is that employees tend to view on-site retreats as just another day at the office, and that mentality makes turning on creative juices and accomplishing goals difficult. They’re constantly tempted to run back to their desks to check their e-mail and voice mail. Worse yet, they may consider their employer a little too cost-conscious, if you catch our drift.

Heading out

Generally, people are better able to focus on a retreat agenda at off-site locations. They’re in a new, “special” environment that has no visual cues triggering their workday routines. So, even though you’ll incur additional costs, you may get a better return on investment.

During the planning process, remember that everything is negotiable. Hotels and facilities that host company retreats need and want your business. Get several quotes and compare prices and services. You’ll have more leverage if you avoid scheduling your retreat during a time of year when local venues tend to be busy.

Because hotels earn bigger margins on food, beverages, and meeting set-up fees, many will provide complimentary or discounted rooms for guest speakers and out-of-town employees. Also, try to negotiate a set food and beverage price for the entire retreat rather than a per-person or per-event rate.

In addition, don’t be shy about asking for discounts. For example, if the facility requires an advance deposit and the balance at the end of the retreat rather than giving you 30 days to pay, request a discount for prompt payment.

Thinking it through

Not every company can afford to fly their staff to Aruba and hold beach-side brainstorming sessions replete with tropical beverages. But crowding everyone into the break room and expecting mind-blowing strategic ideas to flow forth probably isn’t realistic, either. Find a suitable and productive point somewhere in between. Let us know if we can help with further information or more ideas.

The Fine Line Between a Small Business & a Hobby

It’s a matter of work vs. fun, right?  No, the difference – at least from a tax perspective – is that you can fully deduct business expenses from income.  Under the new tax law, you can’t deduct any hobby expenses.

No single factor is determinative, but you’re probably operating a business if:

  •  You have a profit motive.
  • You keep accounting, inventory, and other records.
  • You invest significant time and effort.
  • You need the income you make from it.
  • It’s been profitable for at least three of the past five years (two out of the past seven years for horse-related activities).
  • You’ve conducted similar, profitable activities in the past.
  • You expect assets that you use to appreciate in the future.
  • You consult professional advisers to help improve profitability.

 

Many businesses start as hobbies.  If you want to make the formal transition to a business:

  1. Write a business plan.
  2. Open business banking accounts.
  3. Begin collecting state sales tax (if applicable).
  4. Choose a business entity.
  5. Engage a CPA and other advisers.

Seven Ways to Prepare Your Business for Sale

For some business owners, succession planning is a complex and delicate matter involving family members and a long, gradual transition out of the company. Others simply sell the business and move on. There are many variations in between, of course, but if you’re leaning toward a business sale, here are seven ways to prepare:

  1. Develop or renew your business plan. Identify the challenges and opportunities of your company and explain how and why it’s ready for a sale. Address what distinguishes your business from the competition, and include a viable strategy that speaks to sustainable growth.
  2. Ensure you have a solid management team. You should have a management team in place that’s, essentially, a redundancy of you. Your leaders should have the vision and know-how to keep the company moving forward without disruption during and after a sale.
  3. Upgrade your technology. Buyers will look much more favorably on a business with up-to-date, reliable and cost-effective IT systems. This may mean investing in upgrades that make your company a “plug and play” proposition for a new owner.
  4. Estimate the true value of your business. Obtaining a realistic, carefully calculated business appraisal will lessen the likelihood that you’ll leave money on the table. A professional valuator can calculate a defensible, marketable value estimate.
  5. Optimize balance sheet structure. Value can be added by removing non-operating assets that aren’t part of normal operations, minimizing inventory levels, and evaluating the condition of capital equipment and debt-financing levels.
  6. Minimize tax liability. Seek tax advice early in the sale process — before you make any major changes or investments. Recent tax law changes may significantly affect a business owner’s tax position.
  7. Assemble all applicable paperwork. Gather and update all account statements and agreements such as contracts, leases, insurance policies, customer/supplier lists and tax filings. Prospective buyers will request these documents as part of their due diligence.

Succession planning should play a role in every business owner’s long-term goals. Selling the business may be the simplest option, though there are many other ways to transition ownership. Please contact our firm for further ideas and information.