We are pleased to announce that effective 5/14/18, RBI's clients have Receipt Bank included as a part of their accounting and bookkeeping service.
Receipt Bank seamlessly integrates with Xero (our preferred accounting platform) which makes life so much easier and convenient for our clients.
Data input, invoice management, document retention, compliance, and audit are effortlessly handled with a simple picture taken on the smart phone app which automatically sends the document to us for recording.
This is just one of many investments that RBI makes for the benefit of our clients. Receipt Bank not only makes our clients lives more convenient and less cluttered with receipts, perhaps most importantly, this is a crucial step to providing real-time cash flow management.
Check out the video below for more information:
When you are done with the video, contact us to see how we can help you simplify your accounting and administrative processes.
The hot topic coming from clients this week centered around sluggish sales. In evaluating the P & L's, we were able to confirm that YoY sales were in fact down so it was time to get to work and figure out what was causing sales to slow down.
Where do you start when diagnosing the reason for declining revenues?
At RBI, we use Strategyzer's Business Model Canvas as a foundation of Business Development as it allows for rapid adjustment in the business model. It can also serve as a diagnostic tool when we, as business owners, are not seeing the results we are looking for in our business.
When using the Business Model Canvas, we can zero in on the right hand side of the canvas to learn more about the customer facing aspects of the business. This helps us to diagnose those aspects of the business that are the cause of declining sales. The 4 areas we are specifically talking about here are:
At RBI, we find that when we use a tool like Strategyzer's Business Model Canvas, it helps us create a systematic approach to identifying the root of the problem. If declining sales are the issue, it's likely that the cause is:
Mark-up vs. margin... This is a topic we encounter regularly with our clients. Often when a client comes to us with concerns about their cash flow, there are a few areas of the financial statements that we can turn to for answers. Pricing is usually one of the areas that inconspicuously sabotages cash flow if the cost structure is not understood when a company prices it's products or services. After the costs structures are understood, then it becomes an exercise in algebra to make sure that the pricing of the product or services maintains the integrity of the margin we are seeking.
Many business owners tend to focus strictly on the dollar value of the margin they are seeking or worse yet, setting the price based on a percentage of increase they think is the margin.
The example below is what happens if the business owner keeps the focus on making that $ or % of gross margin: notice we kept $30 in gross margin dollars, but look at our margin %. Our company is failing. This is what happens to many companies and explains why companies fail even when sales are increasing. They tend to forget that costs (direct costs) increase proportionately with sales.
Another common mistake that business owners make is they calculate the price by multiplying the known costs by the percentage of margin they want. In the scenario below, each of the costs were multiplied by 30%, the desired margin, and then 30% of the cost was added to the cost to establish the price. The problem is, this doesn't reflect the actual margin. Notice that the actual margin came in at 23% in each case.
The example below is what happens when the business owner understands their cost structure and then establishes a price that maintains the profit margin they are looking for.
It really does become an algebraic equation at this point. In the example above, we know that our direct costs (direct material and labor) are 70% of our desired price because we wish to maintain a 30% profit margin. The equation looks something like this: P = .70x with x representing our known costs. To solve, you divide both sides of the equation by .70 to come up with the price needed to maintain a 30% profit margin.
Scenario 1 gives us a profit of $90 while scenario 2 gives us a profit of $99 and scenario 3 give us a profit of $142. This is a difference of $9 and $52 respectively, due to erroneous pricing assumptions.
What questions do you have?
In my daily interactions with the businesses and business owners I work with, I often find myself addressing the topic of relevance. The daily whirlwind of chaos that consumes the majority of our time leaves little room to properly address this subject. Often times, when a business realizes the necessity of evaluating relevance, it is from a reactive stance rather than a proactive stance.
Businesses can expend vast amounts of resources trying to attract and retain sales that will drive profitability. Experience has taught me that understanding cash flow and how it differs from profitability is a relevant topic that invokes fear and is therefore ignored. Even the concept that sales and profitability are different is relevant and avoided.
Current market conditions, local, national, and international economics; local, national, and international politics, and ecological factors all influence decisions we make in our lives as consumers, business owners, and members of society. Yet, so many distractions are purposely put in front of us to distort the relevance of these issues in our lives.
So how is relevance, relevant to you?
For me, the process of relevance begins by looking at Regenerative Business Institute through the eyes of our clients. Those of you that are clients have likely heard me mention at some point that it will benefit you to look at your business through the eyes of your customers. Business owners, and especially those who consider themselves to be entrepreneurs, often pride themselves on being great innovators. They bring “world changing” ideas and vision to the table but often fail to view that innovation through the eyes of their customers. Henry Ford once said: (it is arguable that he actually said it but his actions tend to imply that his thought process leaned towards) “If I had asked people what they wanted, they would have told me a faster horse.” And “You can have it in any color, so long as it’s black.” Steve Jobs had a similar approach, insisting that customer feedback would hinder innovation because customers themselves don’t know what they want. This idea can be a topic in and of itself.
The point I wish to make here is that whether you are a leading edge tech company, a traditional retailer on Main Street, an automotive manufacturer, or a home based business your relevance begins by solving a customer’s problem(s). At the end of the day, the customer must be willing to sit across the desk and write a check (so-to-speak) for a product or service that solves a problem. When a business owner looks at their business through the eyes of their customer, they are actively engaging in the process of relevance.
Asking what makes you relevant to your customers doesn’t have to impede innovation. It doesn’t have to mean that you only deliver what customers are specifically asking for. It simply means that you consider all factors that affect what is relevant to your customers and you make that relevance, relevant to you.