Accounting as Marketing? Yes!
Most solopreneurs dread doing their bookkeeping. Some give every piece of paper to an accountant at tax time. Some don't open their bank statement when it arrives each month or cringe as they look at the balance.
Let's face it. If we had wanted to become an accountant, we would have, We didn't. But there are more reasons to keep up with your financial record-keeping than holding creditors at bay. Financial reports are great marketing tools. Cash flow keeps your "doors open" but how do you get that cash to the door. Here's how to have a marketing mindset about your accounting.
1. Accounts Receivable Collection
This is something very few sole practitioners want to deal with. Try this:
* Discuss your payment terms right up front. Better yet, get a deposit or full payment before you begin.
* If you have to become a bill collector, turn this into a sales opportunity. Ask if the product or service has worked for them. Have an "add-on" that you present at this time. Introduce a new product that you have just begun to sell. Get off the phone with your payment and a new order.
2. Inventory Control
If you sell products, be sure they are correctly valued on your books. This is especially critical to artists and artisans. You buy supplies to produce your pieces and charge the supplies as expenses. You add your time to turn them into finished goods. Put a value on the final creation .
* Know what you have in your inventory. Check in at least bi-monthly. See what's selling and what's not.
* Have a sale or featured product promotion to move old inventory.
* Create special promotions to feature the products that sell well - so that you can sell a lot more!
If your books are set up with an inventory figure in them, it will remind you that you have cash sitting right there in front of you (or in the basement)
3. Profit Centers
Most people have more than one product or service. If you haven't then you should.
If you're just starting out, then you're probably trying several things to see which one brings income fastest. Once your income becomes steady, you can focus on some of the others.
Experienced business owners have three or four different streams of income they have developed. Do you know which item brings you the most profit from the least effort?
There is a very simple way to find this out- every month - even if you're not an accountant.
* Have your books set up on something like QuickBooks which can then have a separate category (class) or profit centre for each product and service.
* When you do your bank deposit, put the name of this category beside each item on a deposit.
* Do the same when you write a cheque. Record where the money went. This is isn't always straight forward but make an estimate.
The resulting Profit and Loss report will show a separate column for each category- its own income and expenses. And you'll know where to spend your time and sales and marketing efforts at a glance.
4. Customer Sales History
There are three ways to increase your sales: get more customers, get your customers to buy more frequently.
You don't have to do this through an accounting system while your client list is short, but it’s the most important aspect of the financial management of your business after cash flow. If you want to build your business easily, then you can begin today.
* Draw a chart by answering the following questions.
How many clients do you have? How much did they each buy from you in the last 12 months? (total dollars)? Don't worry about the pennies. Approximate figures will work.
What products or services did they buy?
How many times did they buy from you?
How many new clients did you have in the last 12 months?
Do you see any surprises? Do 20% of your clients account for the 80% of your business? Be aware of the risks if one or two of them account for 80% of your sales.
Take this information and put it with what you've learned about the most profitable areas of your business and you can evaluate your existing marketing activities or look for new ones in very specific areas.
For example, If you've been doing yellow page ads and only a very few new clients came from there, compared with the ad you placed in the newspaper, you can make an informed decision.
Try this with your chart. Calculate the average sale for each client (total sales divided by total number of clients) What would it take to get each of them to purchase 10% more in the next year. How easy would it be to get them to do this? Easy, right?
Numbers don't have to be intimidating. And they certainly aren't just for accountants. With a different approach and attitude, you can love reading those financial statements because you know how to get them to become a sales tool.
About the Author:
Trudy Van Buskirk, entrepreneur and founder of Smallbizbuilder, has been helping small business owners be better marketers since 1980 and publishes a free ezine full of valuable marketing tips, resources, and books designed to create business success. Go to her website at http://www.smallbizbuilder.com for more products and programs to grow your business easily.
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