Tidbits From Cherry City Accounting
5 Tips to Better Pricing
by Cherry City Accounting on 06/17/11
A McKinsey study reveals that, assuming demand remains constant, a 1% increase in prices spurs an average 11% jump in operating profit. Here are 5 ways to increase operating profits and keep customers happy when you do:
1) Price by market--not product: See what customers are willing to pay for an item by comparing competitors' prices, then decide if your item is the same or offers added benefits or features that support higher price.
2) Try to "brand" products: Decise a name, term, design, sign or symbol that sets your product apart and conveys the sense that only your company can truly meet customers' needs. Discounts attract price-sensitive customers but can devalue a product in customers' minds, making full-price hard to get.
3) Offer pricing options: Offer different options to customers who may want them, such as different prices for direct purchases v. paying over time v. leasing v. prepaying.
4) Offer versions of the same item: Offer a basic, better and best version of the same item. This appeals to a range of customers from those who look for price first and last to those who want top quality first and last.
5) Start with your customer base to determine pricing: Some want discounts, some want to pay cash, some will buy if you offer the right pricing plan for them. Pricing flexibility can capture new customers and retain old ones.
Source: Rafti Mohammed
Short on cash and owe Payroll Taxes?
by Cherry City Accounting on 04/03/11The IRS requires that you pay employment taxes BEFORE any other bills, even if that means taking out a loan to do it. Spending money for other purposes is "willfull failure" to pay taxes. Before you delay payment and pay another creditor or vendor first, consult your CPA or a qualified tax lawyer.
Avoid Small Business Fraud
by Cherry City Accounting on 11/04/10
"With the downturn in the economy, you see an uptick in fraud," says Ken Springer, president and founder of Corporate Resolutions Inc., a New York-based company that investigates fraud reports.
And that can cost. Participants in a survey by the Association of Certified Fraud Examiners in Austin, Texas, credited 5% losses in annual revenue to fraud, or a median loss of $160,000. When applied to the estimated 2009 gross world product, that's more than $2.9 trillion.
TheStreet recently called Springer, who previously investigated fraud for the Federal Bureau of Investigations, to discuss smart practices for small businesses that want to avoid getting fleeced by their employees.
1. Before hiring anyone, conduct a background check.
More than 85% of fraudsters have never been charged or convicted for a fraud-related offense, according to the Association of Certified Fraud Examiners. But a background check, even a cursory one, still can set off red flags that prevent would-be fraudsters.
"In this day and age, no matter who you are, you need to make sure you know who you're doing business with, whether it's a low-level employee or a senior employee," Springer says.
Small businesses that don't want to invest in a full criminal background check should at least check an employee's references to verify employment. And a Google search, while not foolproof, can reveal resume discrepancies too, as well as problematic patterns -- such as a history of filing lawsuits at the drop of a hat. A credit check that reveals a terrible score is another potential fraud flag.
In a recent ACFE study, the most common behavioral red flags fraudsters displayed were a tendency to live beyond their means (43% of cases) and experiencing financial difficulties (36% of cases).
2. Keep an eye on each other
In lean times, when many small companies are operating with skeleton crews, it's all too easy for operations to get compartmentalized to the point where one department doesn't know what the next is doing -- or for one person to be doing the work of multiple departments. This is a recipe not only for overworked employees, but also for fraud.
But employees are less likely to attempt fraud if they know the company is at least trying to prevent it. Occasional audits can help prevent money laundering, and installing cameras in loading zones can prevent property theft. Sounds like common sense, but many small-business owners don't employ common sense
"Many times the entrepreneur has blind faith," Springer says. "And then the bookkeeper can write expense checks to companies that don't exist."
More than 80% of frauds in the ACFE study were committed by people in one of six departments: accounting, operations, sales, executive/upper management, customer service or purchasing.
3. Invest in fidelity coverage
Most business owners are familiar with insurance fraud. But fewer are familiar with fraud insurance -- aka fidelity insurance -- which protects businesses in case of losses due to embezzlement, forgery, robbery, burglary and so on.
"Sometimes to save money, people won't buy fidelity insurance, but in the scheme of things it costs peanuts," Springer says. "We had one case in which the bookkeeper was the one who said they couldn't afford the fidelity insurance, and it was the bookkeeper who was stealing the money."
4. Enable anonymous whistle-blowing
In a small business, where the whole company works side by side, employees might worry about the ramifications of ratting each other out on fraudulent behavior -- unless they can do so anonymously.
Hire a third-party intermediary to field anonymous tips and help determine whether an accusation is valid or just sour-grape complaining. According to the ACFE, such a system can be even more effective than an audit.
"Staff members are an organization's top fraud-detection method; employees must be trained in what constitutes fraud, how it hurts everyone in the company and how to report any questionable activity," reads a recent ACFE study. "Our data show not only that most frauds are detected by tips, but also that organizations that have anti-fraud training for employees and managers experience lower fraud losses."
--reported by Carmen Nobel
