Managing Your Business During Difficult Times

By Angela L.H. Sayers, CPA, MBA

This column ran in Business Insider Magazine’s first issue of 2009

The stock market is extremely volatile and our investment portfolios have plummeted. So how can we keep our businesses running profitably and riding through the recession without too much turmoil? Small business owners have to manage their companies much more effectively than large corporations on Wall Street regardless of the economic climate. After all, small businesses are going to pull our country out of the recession. Here are some points to help your business navigate through these difficult economic times.
First, keep operating costs to a minimum. Success does not hinge on a posh office and a giant payroll. Rent only the space you actually need and keep it functional. Also, retain only the bare minimum number of employees required for the average workload. In addition, find one or two individuals who can help you in a pinch if you have a short busy period but do not need to be on the payroll full-time. In my CPA office, I have one full-time employee year-round, but also one or two others I can pay to come in during tax season to provide extra help. As for the other services, buy only exactly what you need and no more. You do not need to have the latest gadget or computer to do your job efficiently.
Also, watch your receivables. If you do not call or email your clients when they are late in paying you, they may get the idea that they do not have to pay. Do not keep working for clients who do not pay. The only exceptions are those with short-term financial difficulties who at least make the effort to pay when they can.
Employees can be our most valuable asset and/or our worst nightmare. Make sure that your employees remain a valuable asset by always being there in case they need help or encouragement. This economy can be as rough for them as it is for you and, in extreme cases, may cause them to rationalize dishonest behavior by thinking you do not pay them enough or that you are not standing behind them them as it is for you and, in extreme cases, may cause them to rationalize dishonest behavior by thinking you do not pay them enough or that you are not standing behind them when they need you. Always remember: internal controls, internal controls, internal controls.
Most small business owners believe they see everything and that they only hire honest employees. Internal controls are only another hindrance on getting the work done. In reality, no company is too small to merit some form of internal controls. Here are a few internal controls that are simple and accomplish what the small business owner needs:
For every expenditure paid, there needs to be a receipt or an invoice regardless of the method of payment. If employees want reimbursement, they need to have a receipt. The page of their credit card statement reflecting the charge is fine if there is documented approval (e.g. your signature). While you must keep the copy of that page of the employee’s credit card statement in your accounting records, black out the employee’s credit card account number (i.e. with a Sharpie).
Employees should sign for receipt of all paychecks and that signature should be kept on file with your copy of their pay stub. If employees misplace or damage their paychecks, issue new ones only after verifying that the previous check has not cleared your bank. If they do not bring the original destroyed paycheck back with them, issue a stop payment on the replacement check and deduct the bank stop payment fee from their bank.
As the owner of the business, you should be the only person who can sign on the account or has access to the banking website to make payments. You should have sole authority over approving expenses before they are expended. Never allow your bookkeeper to sign checks, go online and pay bills or approve expenses. The bookkeeper is recording transactions that have already occurred and should not have the ability to consummate a transaction. Their only access to your banking information should be getting duplicate statements and questions to your bank about transactions that have already occurred. They should never have the ability to call the bank and consummate their transaction.
As the owner of the business, you should look at the bank statement with the canceled checks before anyone else is allowed to open it. Make sure that everything on the statement is what you authorized, and that there are no extra transactions or washed checks. Also, make sure that all deposits actually are recorded on the statement. If not, you should find out why.
If you have a business that uses a cash register, only one person should be allowed on the register at any one time. When that employee’s time on the register is over, the register needs to be properly closed out. When closing out the register, the register should be able to tell you what sales are broken out between the various credit cards and cash. You will then know how much cash should be in the register. The cash and checks in the register should be counted. If the register is short (has less than the amount of cash or checks it is supposed to), you need to find out why. If the register is more than a few dollars short, than the employee that was responsible needs to explain why. If the register is malfunctioning, causing it to appear short, the employee must let you know as soon as possible and you need to have that fixed immediately.
If you loan your credit card to your employee to pay for some expenses, that employee should come back with all receipts from the various charges (or at least a list of what was charged) and your credit card. All of these charges should have been approved by you and should match your credit card statement.
If you absolutely have to give your employee(s) a credit card (i.e. their job may require significant travel for you), at the end of the month they should be required to bring in all of the receipts for charges that you have hopefully approved, and match those receipts to the statement that you receive. If they used it for personal reasons, they should give you the receipt for that and make a payment from their own funds to pay the credit card for those expenses. However, that practice should be frowned upon and the exact required procedure should be documented in detail in your employee handbook.
Proper employee screening with the help of an experienced human resource professional is an imperative step. Then have procedures and internal controls in place to keep them honest and hard working.
You have to follow the same procedures and internal control rules as your employees to show them the procedures are important. If you do not follow them, you have set a tone that these procedures/internal controls are not very important.
These business tips are important regardless of the state of the economy. Keep in mind that small businesses such as yours—not large companies—are the ones creating new jobs to help the economy every day. If you properly apply the above principles along with offering your clients that great service they are accustomed to, your business can be one of those small profitable companies that create jobs.
Angela L.H. Sayers, CPA, MBA, hs provided professional tax and accounting advice for over 14 years. Her full-service accountance corporation offers a wide range of services that provide value and tax savings, whil being small enough to be flexiblew and responsive to clients’ needs. You may contact Angela at 310-541-1611 or by email at angelasayerscpa@cox.net. You can get more information about Angela at www.AngelaSayersCPA.com