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Should You Outsource? Think It Through.

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I’ll wager that the biggest obstacle Freelancers and small business owners face is limited time. There are so many responsibilities you must manage in order to keep the show on the road. Now look at the bright side—if you’ve got lots to do, it means that your business is growing and has the potential to grow even more. Your stumbling block is, most likely, that you have a small team (maybe just yourself) and you struggle to get your arms around a list of important decisions to make and other responsibilities that demand your attention. You may also have deadlines looming`.

You always assumed, but the point has now been emphatically made, that productivity is a key ingredient in the recipe for success. It’s imperative that you have the focus and ingenuity to develop goals and objectives that will promote your mission and then create and execute strategies and action plans that bring your plans to life. If you’re overwhelmed and stressed by an unmanageable to-do list, you’ll be unable to perform at peak efficiency. Circumstances will force you to make a change because at some point, every business owner must address the challenge of how to get the work done— on time, on budget and in ways that deliver a rewarding customer experience.

Spoiler alert—all potential solutions, including the choice of keeping the status quo (and eroding both the success you’ve created and your health), require that you spend money. The good new is, if you’ve objectively assessed your situation and determined how to efficiently handle your responsibilities, you will be positioned to increase productivity and business revenue.

Weighing your options

The process begins by confirming the tasks that must get done, acknowledging if anyone other than yourself can be reasonably expected to successfully perform certain tasks and documenting the number of days in a typical week you face a backlog of work. If you frequently work more than 50 hours per week, that indicates you’d benefit from bringing in help. If you frequently work more than 60 hours per week, that indicates you’d benefit from a full-time or part-time employee (W-2 tax form). If your need of assistance is more intermittent, for example, during the last week of the month or one or two afternoons a week, outsourcing (1099NEC tax form) is your best solution.

Make an honest assessment of your time, abilities, preferences and money. Furthermore, once you’ve decided which tasks are unsuitable for you, own the tasks that can be most effectively done by you. For example, it will likely be for the best that anytime the face of your brand must be represented, you, business owner, should be present. However, a number of office-based functions can be effectively handled by a savvy outsourced professional. An outsourced marketing expert will be able to suggest goals, objectives and strategies to jump-start growth in ways that the business owner may not immediately envision. A bookkeeper who has experience working with small or mid-size companies will not only bring the entity’s accounts up to a high standard of detail and accuracy but can also advise on issues such as cash-flow problems.

Accept that it may be too expensive for you to perform certain tasks if it diminishes your pursuit of billable hours. In general, if a certain task takes you or your team too long to do, it probably makes sense to outsource the function, especially if it’s something that must be done on a regular basis. Furthermore, if a task is highly specialized, it may make sense to outsource it to someone who spends their time immersed in that particular function and has a real expertise.

Consider outsourcing functions when:

  • You don’t have the ability to adequately perform the task
  • You have the ability to do the work, but dislike doing it
  • You have the ability to do the task, but the time needed to get it done is unacceptable (maybe because it’s specialized and you and your team lack the expertise)
  • You’ve realized how much billable time you’re losing by performing tasks that you could pay someone else to do (for less than your own billable rate).

Enable outsourcing success

Establish goals and define expectations for this new role in your organization, so that you can create a good experience for yourself, your team and the specialist(s) you bring in to provide outsourced services. It will be very useful to include in your productivity improvement journey an outsourced Human Relations professional who specializes in job analysis. This individual will discuss and confirm your recommendations of tasks that might be successfully outsourced and responsibilities that will be best handled by you, or current staff. Your outsourced HR adviser can also develop job specs, review and discuss your performance objectives and suggest the compensation you should offer to whom you’d like to hire.

Benefits of outsourced talent:

  • Cost: When you outsource certain tasks or services, you don’t have to pay the same wages as you would if you hired an in-house employee. Hiring outsourced talent is a way to manage fixed operating expenses as you nurture business growth. Furthermore, outsourced talent does not come with costs associated with in-house employees, such as taxes, insurance, holiday and vacation pay and other workplace expenses.
  • Efficiency: By outsourcing, you can free-up yourself and your team to focus on more important aspects of your business. This allows you to be more productive and get more done in less time.
  • Talent: Outsourcing is an attractive option when you need specialized skills or expertise only on an intermittent or short-term basis. Outsourcing gives you on-demand access to talent that would be impractical to permanently hire.
  • Scalability: If you have access to a larger pool of talent and resources, your business can scale up quickly without incurring the expenses associated with hiring W-2 employees or configuring additional office space, or even additional equipment rental fees. Chances are, your outsourced experts work remotely.

How to choose the right provider

When looking for the right expert to handle those functions you’ve decided to outsource, consider the provider’s specific industry experience. Choose providers who have excellent references and communicate well. When outsourcing critical functions or handling sensitive information, data security and confidentiality are of paramount importance. Assess the outsourcing partner’s security protocols, compliance with industry standards and measures to protect intellectual property. Evaluate their data protection policies, employee training, and physical and digital security measures to ensure the safety and integrity of your confidential information. Cultural fit and values alignment between your organization and the outsourced specialist are often overlooked but can significantly impact the success of the working relationship. Consider factors such as work ethics, corporate culture and shared values to ensure a smooth integration and collaboration.

Frequently outsourced functions:

  • Accounting and bookkeeping: Outsourcing accounting and bookkeeping services can not only save time, but also ensure that business cash is well-managed. You will be grateful when, for example, cash-flow is efficiently managed and you can make better business decisions. Moreover, you’ll be relieved to know that the business complies with tax regulations.
  • Human resources: Outsourced HR services can provide cost-effective solutions should you need to hire additional employees and decide whether the new hires should be brought in as employees or outsourced specialists. Your HR specialist can also create the job specs and refine your organization’s new customer or new hire on-boarding process, to ensure that all paperwork is present and written correctly and see to it that you present a seamless experience that reflects well on your brand.
  • Payroll: Outsourcing payroll services will save time and money by eliminating the need to close books or run reports after every payroll cycle. Regarding new hires and contractors, your outsourced payroll expert will ensure that all tax forms are sent in the on-boarding materials and that information to guarantee timely payment is included and signed by both parties.
  • Information technology: Outsourcing IT services can be beneficial for small businesses that need access to technical expertise without the overhead costs associated with hiring in-house IT staff. You must have a network that consistently delivers peak efficiency. Seamless and reliable IT performance is a necessity.
  • Customer support: Outsourcing customer support services can help your organization provide better customer service without having to hire additional staff or invest in expensive technology solutions that may not deliver the relationship-building personal touch that your organization needs.
  • Legal services: Outsourcing legal services can be a cost-effective way for small businesses to gain access to legal expertise without the onerous expense of paying to add the salary of an in-house attorney or law firm to your payroll. Depending on your needs, it may be smart to negotiate a retainer fee, if legal advice is a regular requirement. Otherwise, contact a business, patent, employment, or other attorney on an as-needed basis.
  • Marketing: Outsourced marketing services can be beneficial when you need help creating and executing marketing strategies, running campaigns and tracking results. Your outsourced marketing expert will introduce marketing automation to your company, or will optimize the automation system you have in place. This specialist will also maintain your social media accounts and ensure timely responses to comments and questions.
  • Web design and development: Outsourcing website design and development services can bring a level of design and technical expertise to your website that you and your team do not possess, even if coding skills are available in-house. Your inbound marketing and marketing automation depend heavily on an attractively, intuitively designed site that downloads quickly and operates efficiently. Your website designer may also provide technical support services that keep your site up and running, as noted above.
  • Virtual assistance: Virtual assistants provide administrative support services for tasks that may include scheduling appointments, managing emails, making travel arrangements and more–allowing small business owners to focus on running their business instead of getting bogged down with mundane tasks. Many virtual assistants offer specialist digital and social media marketing services, helping you attract new customers and some offer specialized accounting and bookkeeping services.

Thanks for reading,

Kim

Image: Stephen Root as Milton Waddams in Office Space (1999), directed by Mike Judge

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8 Digital Productivity Tools

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Freelancer friend, if you’re doing things right, you’re working in the zone and maintaining a steady flow, doing things like managing your client work, generating content for inbound marketing campaigns that fill your sales pipeline and invoicing clients so you’ll get paid, for example. There’s a lot on your plate and making good use of time is a must.

Maximizing productivity is the way to get through your to-do list. Recognizing where you can create operational efficiencies is integral to the process. How wonderful that there are numerous, easy to use online tools that can be of service. You are certain to find that a modest investment in digital productivity tools can pay big dividends, allowing you to save time, show clients that you’re organized and in control of project details and reduce your stress level. Here are eight online tools that can help you get more good things done and give you more time to relax as well.

1. Project management—ProProfs Project $19.99/month (solopreneur)

The right project management software can replace several of the tools you’re using now, to monitor and evaluate the progress of your project, collaborate with clients, share files and feedback, create reports and more. Here’s an online tool that will simplify planning and scheduling of your projects, allow you to quickly view your project, delegate tasks and schedule deadlines all in one dashboard. The platform is a straightforward and user-friendly software solution designed for small to medium-sized businesses across different industries. Keep clients in the loop and let them see that the project is moving forward and you are on top of things.

https://www.proprofsproject.com/

2. Time tracking and invoicing—My Hours free; or $6/user/month

Time tracking software helps employers and workers keep track of time spent on various tasks, projects and other deliverables. You can use this tool to stay organized, whether you’re working solo for a client or when you must track both your own hours and those of subcontractors you’ve brought in to help you.

  • Time tracking: You efficiently keep track of how your employees/ sub-contractors spend their time while on the job.
  • Timesheets: Timesheets calculate the work your employees/ subcontractors perform in terms of billable hours and make client billing and invoicing faster and easier.
  • Reporting: Most time tracking software creates reports on active employee/ subcontractor hours, tasks they complete and more.
  • Integrations: Seamless integrations with project management and communication tools such as Salesforce, Asana and Slack, tools your client probably uses.
  • Mobile app: With a mobile app, you (and your employees or subcontractors) can efficiently manage reporting and tallying billable hours from anywhere.

https://myhours.com/billing-invoicing

3. Digital wallets—Apple Pay 1.5 % fee applied to each transfer of funds to debit card or bank account when using Instant Transfer.

Digital wallets are apps that enable you to store and use credit cards, debit cards, passes, tickets, ID cards, gift cards, reservations, boarding passes, coupons, membership cards and whatever else that you need to store safely and access easily. So many transactions are now online, I think you’ll agree that it’s time to properly organize and safeguard your important records and receipts? Digital wallets are more secure and convenient than traditional physical wallets and can be used to make payments or transfer money directly from your smartphone.

https://www.apple.com/apple-pay/

4. Writing—Hemingway Editor free or $19.99 one-time payment

Are you producing relevant content that showcases you as a thought leader and expert in your field? Of course you are and that means you do a lot of writing. Hemingway Editor will do more than Microsoft Word grammar and spell check to correctly identify spelling and grammatical errors in your text. The software also illustrates which of your sentences are too clumsy and wordy and suggests alternative words and phrases that are simple, eloquent and make you sound like a silver tongued genius (which is the whole idea!).

You can type directly into Hemingway Editor or, if you don’t want to be bothered with its recommendations while you write, paste your draft text into the tool for edits when you’ve finished writing.

https://hemingwayapp.com/

5. Social Media Management—-Meet Edgar $29.99/ month

A social media management platform that allows you to create a library of posts that can be scheduled to appear on the accounts you choose and at a day/time you specify. In other words, if you’re creating content today that will be ideal for a campaign or occasion that will take place six weeks from now, you won’t have to remember to dig into the file (and hope you can find it), you just save and schedule and know your great content will show up where and when you like. You’ll also receive data that lets you analyze how your content performs on the various platforms you use.

https://meetedgar.com/

6. Email Management—-SaneBox $7/month

This handy tool works with every email platform and, by using Artificial Intelligence and machine learning, figures out which of your emails is important and which are not so urgent. Low priority emails are placed in a “SaneLater” folder, while important emails remain in your inbox to receive your immediate attention. Better still, you can learn which emails you’ve sent that have not received a reply, automatically save email attachments to your cloud filing platform and quickly unsubscribe from mailing lists.

https://www.sanebox.com/

7. Scheduling—Calendly free or max. $12/user/month

Regardless of your appointment-setting needs, your scheduling software should present your business in a professional light while simplifying the booking process on both ends. The best appointment scheduling apps offer the practical mix of flexibility and ease of use. They save you time (and headaches) by allowing clients to make appointments with you on their own, as well as cancel or reschedule as needed. At every touchpoint, provide a pleasantly efficient and memorable customer experience.

https://calendly.com

8. Online signatures—DocuSign $10/month (solopreneur)

Here’s an electronic signature platform that will speed-up and simplify your signature processes, all while providing better customer experience and document management. Electronic signature software allows you and your clients to quickly and easily digitally sign contracts or other documents. Whether you need to sign an IRS Form W-9 or authorize an electronic invoice payment agreement as part of client onboarding, your clients will appreciate, and be impressed by, digital signature capability.

https://www.docusign.com/plans-and-pricing

Happy Labor Day and thanks for reading,

Kim

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Close- Up: Revenue and Profit

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Does the thought of managing finances more complicated than your household budget fill you with fear and loathing? You are not alone! Many share that sentiment but in the world of Freelancing, getting your arms around the management of company finances comes with the territory. Outsourcing your bookkeeping and accounting functions can be a smart move that allows you to focus on client acquisition and retention or other things that only you can do, for example, but you cannot afford to be in the dark about what’s happening with your money. You can’t plan and execute a marketing campaign or an expansion strategy until you know how much money will be available to carry it through.

You can ask your bookkeeper or accountant to suggest a reasonable budget for your plan, but it’s better if you have the answer before you ask the question. In order to know how much money you’ve got, you’ll need to get comfortable with reading your Income Statement, also known as the Profit and Loss (P&L) Statement. The P&L details all the money that is earned (sales revenue) and expenses paid, e.g., rent, utilities, professional association dues, or payroll.

Financial management is a big topic so today we’ll limit our focus to money that comes into the business—revenue—and the money that remains after expenses are paid—profit. The two categories are very similar and are frequently used interchangeably by those of us who are not accountants or bookkeepers, but there is a subtle difference between the two and it makes sense for Freelancers to grasp what each term says about your entity.

Revenue

Revenue is money generated through the sale of products and services plus other money-making activities that take place within the business. The initial tally of revenue indicates what’s been generated before expenses are deducted. Calculate revenue by using this equation:

Revenue = Price x Quantity sold

Sales generated when clients pay for your products and services, along with other income streams if applicable, is classified as revenue derived from normal business operations. However, since a business may generate revenue from different sources (income streams) it’s useful to consider each line of business separately, so that you can scrutinize how each performs. When you separate revenue by source and type you’ll quickly see which is lucrative and which is lagging—and you’ll be positioned to make smart business decisions.

So if you begin to regularly teach a class in addition to your Freelance consulting work, you can record that revenue separately, as it’s own income stream. If you also sell a tangible physical product in addition to your intangible B2B services, you can record revenue from your tangible products and intangible services separately. Or maybe you own a restaurant? If so, you’ll separate and analyze each revenue source by categorizing your menu offerings: side dishes, main dishes, appetizers, nonalcoholic and alcoholic beverages.

As well, you can separate your revenue into operating and non-operating sources. Operating revenue represents sales from a company’s core business. For instance, in a restaurant, operating revenue is derived from the sale of food and beverages to customers.

  • Annual Recurring Revenue

Another category of revenue that you would be wise to record and examine separately is known as annual recurring revenue (ARR). ARR is revenue that is associated with subscription agreements or other contractually dependable, expected revenue streams. Documenting ARR is critical because it provides companies with a predictable revenue stream. There is nothing sweeter than money you can depend on!

  • Non-operating Revenue

Non-operating revenue is sort of like selling an add-on—it’s revenue earned from sources outside of the primary (core) function. So in your hypothetical restaurant, non-operating revenue might represent sales of loyalty program cards, gift cards, branded T-shirts, or mugs, for example. Non-operating revenue might be unpredictable or mostly seasonable (associated with Valentine’s Day, or whatever) and is considered nonrecurring. Selling an asset is also categorized as non-operating revenue. Maybe you bought a non-fungible token (NFT) art work that’s now worth big money and you’ve decided to sell?

Revenue vs. Income

For an intermezzo we can also consider income, which in the world of accounting is distinct from revenue, despite the obvious similarities—-both categories mean money in your pocket. Recall that revenue represents money earned from core business operations, that is, the sale of your products and services and also ARR and money classified as non-operating revenue. Income is the money that (thankfully!) remains after all fixed (operating) and variable (sales, marketing, professional development, etc.) expenses have been paid. Income has more in common with net profit, or earnings, than with revenue.

Profit

Profit describes the total gain (or loss) of money that a business has at the close of the period (e.g., month). As is the case with revenue, there are various aspects of profit to calculate and consider. Gross profit, operating profit and net profit are three metrics recorded on your P&L Statement. In general, profit is calculated by subtracting the total fixed and variable expenses, taxes and calculated amortization and depreciation values from total revenue. Calculate profit by using this basic equation:

Profit = Revenue – Expenses

  • Gross profit

The amount of money brought in from the sales of products and services, minus the acquisition or manufacturing costs of the products or services that were sold, is known as gross profit. The number reflects the Cost of Goods Sold (product or service acquisition or production costs, including direct labor) but does not reflect the impact of fixed or variable expenses. Calculate gross profit by using this equation:

Gross Profit = Revenue – Cost of Goods Sold (COGS)

The interim assessments of profit, in addition to gross sales revenue (also called the top line) allow you to scrutinize the numerous expenses incurred between the top line (gross sales revenue) and the bottom line (net profit) and expose points of profitability weakness (i.e., worrisome expenses) in the acquisition or production of the solutions you sell, all of your fixed and variable costs and even taxation, of your business. In fact, if your top line number is strong but your bottom line number disappoints, an adjustment of COGS or fixed or variable expenses could remedy the problem.

  • Operating profit

Operating profit is the next step in the P&L progression toward the big reveal that is net profit, the bottom line. It’s similar to gross profit but includes three more categories of expenses. Calculate operating profit by using this equation:

Operating Profit = Revenue – COGS – Operating Expenses – Depreciation – Amortization

Depreciation and amortization are also values you’ll want to understand as one who manages money, even if you outsource to a bookkeeper and/ or an accountant. Depreciation reduces the actual value of equipment or vehicles due to time or use—wear, tear and age. This calculation puts a numerical value on the asset’s cost versus its operating and residual value.

Amortization refers to the value of intangible assets, such as patents or trademarks and is calculated in the same way that depreciation is calculated. Both of these accounting methods exist to spread out the cost of assets over their useful lives and provide a more accurate picture of a company’s expenses and profits.

  • Net profit

Net profit is the final assessment of actual profit and it’s calculated by subtracting all fixed and variable expenses, plus taxes, amortization and depreciation, from your total revenue. Net profit illustrates the overall health and profitability of the entity. It is the final word and is found on the bottom line of your P&L Statement. You can calculate net profit by using this equation:

Net Profit = Gross Profit – Total Expenses – Taxes– Depreciation – Amortization

Differences between revenue and profit

These very similar values are calculated in different ways and each tells a somewhat different story. Revenue reflects your company’s sales and market share growth. Profit is the company’s indicator of financial health. Another difference between these two values is the potential for fluctuation throughout the year. Revenue is prone to fluctuate from month to month because it is subject to marketplace demand which, for example, can be seasonal. In contrast, profit tends to remain more stable over time.

Finally, net profit earnings may also be known as net income or net earnings. Net earnings may be the most important number on your P&L Statement not only because it comprehensively shows the company’s total earnings performance but also, the value is carried over to your company’s Balance Sheet and Cash-Flow Statement.

Thanks for reading,

Kim

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Get Aboard Your Onboarding!

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Signing a new client, or welcoming one who has returned, is a real vote of confidence. Winning a client’s business is a victory that validates your decision to become a Freelancer but as you know, bringing in a client is just the beginning. Before you take on the tasks specified in the contract, it makes sense to introduce your client to the next phase, beyond the sales process—the working relationship, where you show your bona fides and live up to your brand promise. Your client will feel even more confident in the decision to do business with your organization when you:

  • 1. Provide a coherent introduction to and efficient launch of the working relationship
  • 2. Reiterate the value that the client will receive from the product or service that was purchased
  • 3. Show the client how to get started with the product or review how your organization will begin to implement the service

You have a unique opportunity to achieve all of the above (and more) within the sliver of time between the contract signing and initiating the working relationship between your organization and the client’s. Onboarding facilitates that opportunity. It is how you formally welcome new clients, acquaint them with your organization and demonstrate that they are in capable hands. Onboarding reassures new clients by letting them know what to expect when working with you and your team. Onboarding can also be used to allow new clients to get comfortable with using your product or understanding how your service will operate.

Onboarding isn’t just about pleasing clients, however. It’s in your interest to skillfully deliver a seamless experience, from the first pre-sale touchpoint through the post-sale stage. Onboarding is a critical function and your organization must get it right. Do that and you set the stage for successful, long-lasting client relationships that will reflect well on your brand, promote client retention and create conditions that grow your client list and revenue.

Onboarding strategy

For the same reasons that you wouldn’t launch a marketing campaign without first creating a strategy, your onboarding process likewise deserves careful consideration. Because there is both an obligation and opportunity inherent in onboarding, it’s imperative to have a clear purpose for your objectives and desired outcomes. You need a roadmap for where you want onboarding to take your client and envision how that should proceed. Build an onboarding strategy that is specific to your product or service and the client.

Onboard to set expectations

While you made clear to your client the features and benefits associated with the product or service that was purchased, it’s nevertheless a great idea to reiterate during the onboarding process the value that the product or service provides to your clients and it’s also wise to prepare them for potential setbacks that could confuse or frustrate. That way, should they encounter a bump in the road, they’ll be able to take it in stride and not label a sticky point as failure.

Welcome email

Your first correspondence with new clients should be to congratulate their purchase and thank them for choosing you over the other options. Let clients know that you’re delighted to work with them. You can include a request for client information in your email, as shown below.

Client information

Once a client has agreed to work with you, it’s time to collect all the information you need from them to do the job. Consider automating this function to make it easier for and to demonstrate that your organization is tech-savvy. With the right form-building tool, you can quickly create and share digital forms that guide clients through the process step by step. The best tools allow you to add context to submissions via embedded video, text or attachments. They also allow you to send automated reminders for missing info. The info you might request or confirm includes:

  • Client contact information
  • Project details and goals
  • Project completion target date
  • Budget
  • Point of contact for client’s team and your team
  • Schedule a face-to-face meeting or videoconference call with your new client

Recognize onboarding as an opportunity to create a personalized experience for new clients. Each customer has a unique set of concerns and the more you tailor your solution to their needs, the easier it will be to nurture customer loyalty.

Confirm milestones, invoicing, payment format

If an electronic invoice payment system will be used, the client will send the payment registration form to you. Review of the scope and timing of the project deliverables, plus the associated payments or other payments can be discussed at the project kick-off meeting. Also on the kick-off meeting agenda are a confirmation of the project or product performance goals, client expectations for the product or service and ideal outcomes for using the product or implementing the service. You and the client can then discuss how you’ll work together to make them the client’s goals and expectations actionable and achievable.

  • Review and confirm project milestones
  • Review and confirm payments triggered when milestones are achieved
  • Review and confirm the invoicing schedule, if milestones are not used
  • Confirm the accepted payment methods—digital, credit/ debit card, check (electronic or physical)
  • Integrate info with your Client Relationship Management software (if applicable) to capture client data
  • Allow clients to view, comment on and sign e-documents

Check-in call

Although check-ins fall under the heading of a best practice, they should be a feature of your onboarding process. Your new client should feel like you care about his/ her progress and satisfaction with the performance of the product or service. Schedule a check-up call 30 days after beginning to work with a client. You want to make sure that no one has dropped the ball during the onboarding process and to ensure that everything is running smoothly on their end. Make it your practice to periodically check in to see whether and how your client is getting stuck, if that is the case, and either offer advice or assistance or—-happy day!—- celebrate success.

Thanks for reading,

Kim

Image: The Venice Simplon-Orient-Express, the most luxurious train in the world, travels from London or Paris to Istanbul.

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Staying Alive: KPIs Make the Difference

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You’ll recall the overview of the 5 stages of growth that businesses of every type or size experience, if they survive, as discussed in the April 11 post. Today we’ll explore how three standard financial statements can help business owners maintain the health of their venture and position it to survive long enough to pass through the growth stages and grow as intended. Actionable data—Key Performance Indicators— are waiting for you in those financial statements and the numbers will show you how to best manage your entity.

Math might not be your strength but little by little, you can learn to recognize and interpret the numbers and allow your KPIs to do their job and function as guard rails that will make you an astute decision-maker. Running a business is all about making informed decisions that help your business operate efficiently and grow successfully. Just as your primary care physician monitors numeric values associated with certain of your bodily functions—-vital signs, your personal KPIs—-you do the same for your business.

Because 70% of businesses will fail after 10 years and you don’t want it to happen to you, let that scary thought motivate you to keep both hands on the wheel and manage your business wisely. There are many factors to evaluate, including your client list and the sales of your products and/ or services, but today’s focus is the financial management that your monthly or quarterly bookkeeping statements allow you to do. BTW, those statements also make preparing your quarterly and annual tax forms are more efficient and less stressful process.

Basic 3 financial statements

  • Income (P & L) statement. The income statement, also known as the profit & loss statement, is also known as the profit-and-loss statement. It sums up the money you collected from operations plus any other gains, as well as the money spent over a specific period of time. The basic formula is: Net Income = (Total Revenue + Gains) – (Total Expenses + Losses). You want your net income to be positive.
  • Cash-flow statement. The cash flow statement shows whether your business can pay its bills. This will give you a sense of where your business’ cash will come from and where it will be spent. Here you can also see customers that may “slow pay” to decide if they are putting your cash position in jeopardy.
  • Balance sheet. Your balance sheet summarizes your company’s assets, liabilities, and owner’s equity (or investment in the business), providing a snapshot of the financial health of the business at a point in time.

Trend analysis

Looking for trends can help you determine which products or services to promote, keep in stock, or stop selling altogether. Certain of your products or services may sell more frequently during some seasons and less frequently during other times of the year. Special promotions, perhaps advertised by way of email marketing and social media, is just one smart decision that examining sales trends can lead you to make. Another smart decision you might make is to initiate a demand pricing strategy and increase the prices of popular products or services during the time of year that they sell the most.

Get an unfiltered look at what clients prefer to buy on the top line of your P&L, Gross Sales Revenue. While many obsess over the bottom line, because it shows the total revenue earned (or lost) for the month, quarter, or year, the top line should not be ignored. When the top line shows healthy sales, it’s obvious that you’re doing something right. After that, it’s a matter of controlling expenses. Keep an eye on the trends in top line sales data, it is instructive.

Analyze and interpret

Also monitor your expenses, fixed and variable. Fixed (operating) expenses include office rent, W2 payroll wages and utilities. Variable expenses are often sales related, such as marketing and professional development. Increasing expenses may mean that you’ll have to alter some other part of your business (for instance, increasing prices when expenses grow). If certain clients are making late payments , potentially causing you to make late payments to your creditors, consider requiring late or slow payers to make a deposit of at 25% or so on the project you’ll do and/ or increase your project fee for late paying clients.

As you become more proficient in your understanding of financial data and interpretation, you can also calculate and follow certain financial ratios that can provide guidance. On your Balance Sheet you can calculate Net Working Capital, which is your current assets less your current liabilities. This is the amount of money you can use to operate the business day-to-day and invest in growth.

The Current Ratio equals current assets divided by current liabilities. In general, a ratio of one (1) or less indicates that there is not enough available capital to pay your expenses, which is a real problem. If your Debt-to-Equity Ratio (total liabilities divided by total assets) is greater than one (1), it is understood that the business is carrying too much debt—literally at a dollar to dollar ratio. Credit card debt and perhaps also other borrowing as a means to grow your business or pay expenses is bound to cause lending institutions to see your company as a credit risk. Direct your resources to paying down debt.

Bookkeeping software

If you have few transactions in a typical month, you may prefer to record client financial activity in Excel and send invoices in PDF format. If you have several client bills/ month you may prefer to install bookkeeping software. Freelancers and small business owners tend to work with small business specific, cloud, industry specific, or open source software.

Bookkeeping/ accounting software usually fulfills several functions in addition to generating the basic financial statements on a monthly or quarterly basis. You’ll also receive a collection of services that may also include invoicing, inventory management, payroll, financial reports and customer relations management features such as tracking client interactions, sales history and maintaining contact info. To compare features and monthly costs of several software services, click https://www.business.org/finance/accounting/best-bookkeeping-software/

Thanks for reading,

Kim

Image: This photo is from an album Elstner Hilton compiled in Japan between 1914 and 1918.

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Survey: Freelancing in America 2023

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Freelance Forward, the annual survey conducted by Upwork, the largest Freelancing marketplace in the world, was released in December 2022. The survey of 3,000 American workers age 18 and above was conducted online September 21, 2022 – October 7, 2022. The survey demographics consisted of 1,164 Freelancers and 1,836 of the traditionally employed. Results of the landmark annual survey of Freelance workers continues to demonstrate the pronounced impact the cohort has on the American and global economies.

Year-over-year the number of Freelancers grows nationally (and internationally). According to the Upwork survey, there are 60 million part-time and full-time Freelancers in the country, comprising 39% of the U.S. labor force and in 2022, we contributed $1.35+ trillion to the U.S. economy. It is predicted that by 2027, Freelancers will comprise at least 51% of the American workforce.

In 2022, 51% of Freelancers, nearly 31 million, provided knowledge economy services, including., computer programming, software development, social media marketing, graphic arts, website development, IT, finance and business consulting. 23% of Freelancers hold a bachelor’s degree and 26% have earned a postgraduate degree.

The high tech and fintech sectors employ the largest number of Freelancers and they are also the highest earners. On average, men in those sectors earn up to four times more than their female counterparts.

68% of Freelancers have more than one employer or contract project (think more than one client). The diversified income streams make you are less vulnerable to the whims and fortunes of a single employer, unlike those who hold a traditional job. Freelancing, at least for some, is less risky than W2 employment. As was documented in the Upwork survey, most Freelancers see more opportunities available in the post-pandemic economy, with 76% concluding that they have more contracts available today than were available before the coronavirus shutdown.

The perceived increase in opportunities to work probably explains why Freelancers have a positive outlook regarding their income potential and contract opportunities. 77% of Freelancers feel optimistic about their anticipated 2023 earnings and 80% are optimistic about this year’s contract assignment opportunities. Moreover, 61% said that they make as much as or more money than they would if working for a traditional employer. 43% of Freelancers have increased their hourly rates or project fees over the last year, in response to increased demand or economic conditions.

Freelancers pivotal for small business

You may be happy to know that Freelancers are a great resource for small businesses. We provide on demand, only when needed, cost-effective expertise and assistance that helps small business owners to operate more efficiently and maximize revenue and profitability.

Survey results verify that small business owners and leaders are pleased with their experiences working with Freelance professionals and many plan to continue or increase their hiring of Freelancers in the future. In fact, 48% of U.S. businesses of every size hired at least one Freelancer in 2018.

  • 70% of SMBs in the U.S. have worked with freelancers at least once
  • 81% of these companies plan to hire freelancers again
  • 83% agree that freelancers have greatly helped their business

Major Global Freelancing Platforms

Below see a list of popular Freelancing platforms that are a conduit for your hard work, expertise and resourcefulness, wherever a good internet signal exists. Check out the full report https://www.upwork.com/research/freelance-forward-2022 .

  • Flexiple
  • Upwork
  • Turing.com
  • Freelancer.com
  • PeoplePerHour
  • SimplyHired
  • Toptal
  • TaskRabbit
  • 99Designs
  • Fiverr
  • LinkedIn
  • Designhill

Thanks for reading and Happy Easter,

Kim

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Third Party Payments and 2022 Taxes

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The Internal Revenue Service announced in December that it will delay by one year implementation of a new policy that will tax funds you receive by way of third-party payment processors. All entities using third-party payers to transfer funds derived from business activity must, at the close of the calendar year, report said payments on the appropriate IRS Form 1099 and send the documents to recipients of the payments, who will then include the amount of funds reported as part of annual income. The annual taxation threshold has been lowered to $600 for all types of 1099 income.

This new IRS policy was originally scheduled to take effect in 2023 and impact 2022 income, however, many who regularly receive funds through Venmo, Apple Pay, Samsung Pay and other peer2peer digital wallets apparently only recently learned that payments received would not only be reported on Form 1099-K but, alarmingly, will be taxed in the same fashion as 1099-NEC income.

Furthermore, because a significant number of personal financial transactions are also conducted on peer2peer platforms, users are concerned about both an unexpected tax bill and its accuracy. Can your electronic payment processor be trusted to recognize the difference between side hustle income and monies you received from friends to reimburse you for laying down your credit card when you all went out for drinks one night? Will the promised line of demarcation between business and personal fund transactions be consistently respected? Inquiring minds want to know.

Before the rule change, peer2peer payment services reported recipient income on Form 1099-K only when payments reached $20,000 and the number of transactions reached 200. If those conditions were met, the1099-K was required to be submitted to the IRS along with the tax return. The new policy has lowered 1099-K taxable income to $600 per year, aligned with 1099-NEC and 1099-MISC reporting income requirements. The number of payment transactions made will be irrelevant.

You’ve figured out by now that the tax law change will significantly increase the number of folks who will face a higher tax bill. Another loophole closes for the little guy! Still, the IRS has decided that the peer2 peer payments tax rule scheduled to expire on December 31, 2022 will instead remain in place until December 31, 2023 and the new ruling will apply to 2023 income.

Regardless of when the new IRS reporting rule takes effect, Freelancers and small business owners are not liking it. There is resentment that the tax change is specifically intended to crack down on suspected tax evasion within this cohort and others who toil in the gig economy, saddling you with more paperwork and headaches. The population that will be most affected often cannot afford to hire a tax attorney to defend themselves against suspected IRS or payment processor inaccuracies.

Venmo, which was bought out by PayPal in 2012, has been trying to prepare its customers for tax changes that could affect them. The company has emphasized that payments not specifically designated as being for goods or services will not be included on the 1099-K and that the company will not list individual transactions.

FYI, Venmo customers will be wise to familiarize yourselves with the differences between its business and personal accounts. Business users may be better off quittng that service, to avoid the additional fees charged, and instead track business transactions manually from the “friends” setting.

Finally, there is an intriguing twist to the story and a possible loophole has been revealed. Payment processor Zelle insists that the new IRS rule doesn’t apply to its bank2bank payment service, since its network doesn’t hold funds. The company is run by Early Warning Services LLC, which is jointly owned by seven banks (Bank of America, Truist, PNC, US Bancorp, JPMorgan Chase, Wells Fargo and Capital One). In fact, Zelle is included on users’ bank dashboards.

While Zelle offers a service similar to Cash App, Google Pay, PayPal and other peer2peer digital payment platforms, it was built as clearXchange, a peer2peer payment service created by and for its member banks. Zelle is an electronic network that manages automated clearinghouse (ACH) transactions.

According to Wendy Walker, chair of the Information Reporting Subgroup of the IRS Advisory Council, “ACH networks are not subject to 1099-K reporting.” She went on to say, in an email, that payments sent through its network “are not subject to this law” and that small business banking customers choose Zelle “because it makes it easier to complete digital payments where they bank, enabling easier bookkeeping and accounting by having the banking data at one source.” Ms. Walker seemed to infer that bank customers see a benefit in having money in their bank accounts that is not held by third parties.

OK. Of course, Congress could extend the law to include Zelle and similar “by banks, for banks” platforms. Stay tuned for updates.

Thanks for reading,

Kim

Image: © The New Yorker June 13, 2022. The End of the Year, Liana Finck, illustrator

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Waiting For the Call—Is Time on Your Side?

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First, the email arrives and you’re elated. The conversation you had was on the level and the project you were told about is real. They’ve invited you in (virtually or in-person) to discuss how your services could be utilized to produce the deliverables and achieve must-do objectives. Step two, the interview goes well, from your perspective. You’re not naive, but you feel confident about the possibility of being offered the contract.

But a week slips by and then two-—crickets. Uh, oh, this doesn’t feel good! Why haven’t they gotten back?

Unfortunately, this is a fairly common occurrence. There are any number of perfectly understandable and valid reasons reasons that delay the follow-up after an interview. It’s nerve wracking for Freelancers, though, who are anxiously awaiting a status update. It’s something that can wake you up at night. The wall of silence leaves you to twist in the wind.

Well, take heart—silence doesn’t always signal rejection. Why don’t we talk about a game plan to help you survive post-interview silence when it happens to you? There are proactive questions you can ask that might make the interview team less likely to resort to a news blackout. There are coping strategies that can help you understand why this sometimes happens. Life is about managing expectations and you can train yourself to keep calm and carry on, confident that you’re still in the game and can still win this thing. Here are a few things that you can do:

Questions that encourage follow-up

Communicate to the interview team that you want follow-up and not silence by saying something like this to the interviewer, “In light of the candidates you’ve met with so far, do you see me moving forward in the selection process?” However, bear in mind that you could be the first of two or more Freelancers who’ve been invited to discuss the project. You could be a top candidate today but later get knocked down the list tomorrow by more experienced competitors who come along.

Another question you might ask the interviewer is, “When will you review and compare the candidates and make a recommendation to the the decision-maker?” Below are four common scenarios that might cause you to encounter post-interview silent treatment:

  • Interview recap

When you speak with more than one interviewer, they will need to conduct a candidate recap and debrief. Candidates may or may not be interviewed on the same days, which means that interviewers can’t share their feedback with each other on the same days either. Furthermore, every interviewer is not necessarily on time with providing feedback; it could take a few days to align interviewer calendars and schedule the debrief meeting.

The unexpected sometimes happens—-in the middle of the selection process, the decision-maker or one of the stakeholders might go off on vacation, depart on business travel, or come down with COVID. The selection process would be put on hold and the Freelancers get to wait and wonder what’s going on.

  • Project spec change

The desired outcomes or deliverables, time table or even the purpose might change, perhaps in response to economic fluctuations that impact the prospect’s business. Sometimes, unfortunately, your hoped-for project may be put on hold or even canceled due to the changing economy or business needs. This scenario can happen fairly often, as there are fluctuations and uncertainty in the economy that could impact revenue. Companies may reevaluate what they need and cut budgets.

  • Making an offer

The decision-maker could be discussing how to finalize an offer to someone — but maybe not with you. If you’re not the number one choice, you may be number two and will need to wait, in silence. However, should the top candidate reject the offer, the second round pick usually gets the prize!

  • Ghosting

If you’re getting silence from your interview contact no matter how often you reach out, you are being ghosted and it’s probably for one of the above reasons. Ghosting is selfish and cowardly, unprofessional and unacceptable. It hurts. Remind yourself that it says more about the interviewer than it does about you. They did you a favor, you don’t want to work for such people anyway. Apply elsewhere.

On the other hand, If the interviewer stays in touch, it’s guaranteed that you’re in the top two or three. If you’re told something like, “We’ll have some decisions made next week” and the debrief time frame has passed, either the decision-maker has not made the decision, or s/he offered the assignment to another candidate and they’re waiting for a response before rejecting you (because you are the second choice).

Silence can speak louder than words. When interviewing for a project assignment, be bold enough to ask questions to obtain information on where you are in the selection process. If you were invited to interview but ultimately didn’t get the assignment, that means your resume demonstrates your experience and your interview skills are solid, but you weren’t the top candidate. The rejection may have nothing to do with you , it may be more about interviewer preference for a certain educational degree or certification, a specific competency, or a competing candidate’s superior interviewing skill.

Thanks for reading,

Kim

Image: “Like sands through the hour glass, so are the days of our lives.”

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When to Hire, When to Outsource

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Increased sales and plans for expansion are a happy and exciting time for business owners . But as we discussed in last week’s post the bear market is in the house and caution is highly recommended. Along with confirming that customers will spend the way you need them to, you’ll also need to ramp up your operation in one way or another to meet the increased demand for what you’re selling.

Each of those scenarios requires a different type of staffing strategy—-maybe part-time, maybe full-time; temporary/ seasonal; possibly W2 and on the payroll or maybe 1099NEC Freelancer? There’s also the option to not hire anyone (unless your opening additional locations, for example). To figure that out, you’ll also need to make a realistic assessment of how much more work you can coax out of your current staff, without provoking a mutiny. Below are potential questions to ask yourself plus solutions for increased staffing needs at your growing organization.

Start your decision process by defining what “increased sales” means for your company. Is the plan to add e-commerce to your website so that you can sell products or provide services online? Or have you signed a new client and you’ll provide services on an ongoing basis—- or maybe the work will be completed in 4 months, but will keep you very busy? Maybe this is turning out to be a reality hot summer and the lines at your ice cream shop are halfway down the block? Below are practical questions to ask yourself as you figure out the best staffing solution for your company.

What function needs to be done?

HR, IT, bookkeeping and social media management are services that are often outsourced to a fellow Freelance expert or perhaps to a large company that operates nationally. Your company’s need for one or more specialized skills or labor may be ongoing, but the frequency of need may not require full- time work.

You can hire part-time help, but what kind of working relationship should you enter? Can you afford to make a commitment to pay someone maybe 10 or 20 hours per week, every week, as a W2 employee? Are you confident that your revenue will support the expense?

If it seems reasonable to assume that you’ll have the cash-flow and you have a good relationship with a particular vendor and you’d like to maintain that, then make a salary and time commitment offer. You might propose W2 status to someone who’s worked in your organization as a 1099NEC (who will be very happy to have taxes taken out during every pay period and eliminate at least one source of quarterly tax filing), or hire a newly recruited person.

Do you anticipate short-term or long-term deployment?

Obviously, if you need labor or a skill set—-grant writing, meeting facilitation, website developer, or seasonal help (Christmas rush or summer help?)—-for just a few weeks or months, you hire 1099 NEC workers. The labor or skill set may be mission- critical because a lot is riding on its fulfillment, but you need it only for a special project or defined time.

But if sales at your bakery are up and the line for coffee and muffins is noticeably longer, then you’d be wise to hire one or more W2 employees to shorten the wait time, avoid over- working and frustrating your current employees (which could lead someone to unexpectedly quit and leave you in a bind) and maintain the positive customer experience.

Which costs more–1099NEC or W2?

There are costs and other downsides associated with both outsourcing and hiring permanent employees. Sometimes, calculating the costs, of dollars and other factors, can help you reach the most favorable. or least onerous, decision. Your HR/ payroll and benefits management service (which may be in-house or outsourced) can research the expenses associated with bringing in a W2 employee. A visit to indeed. com or Upwork can let you see the ballpark range of hourly or project Freelancer rates.

The bottom-line cost of hiring a 1099NEC Freelancer will be lower than the cost of hiring a W2 employee, but there are sometimes persuasive reasons to do the latter.

Calculate the time needed to get each choice up and running (onboarded)

The answer to this question has big impact. While you may have the money to hire a W2 employee and even prefer to install a permanent team member into a mission-oriented position, you may realize that hiring an experienced Freelance consultant to do the job will allow you to get things done much faster.

Your Freelancer will be a hired gun who possesses deep expertise, a pro who needs minimal onboarding and training to successfully produce the deliverables. Because your Freelancer probably concentrates his/ her work on just three or four related competencies, the quality of the work and knowledge brought to the table will be deeper and more specific. Going immediately to a Freelancer means you bypass the potentially time-consuming hiring process and obtain the skills or labor you need ASAP.

Do you want a boss-employee relationship?

Working with a permanent (well, more or less) team is a different dance. it’s a longer-,term relationship and it demands a different kind of leadership—more intense. If you enjoy this kind of stuff, you’ll get to help someone grow professionally nurtured by the training opportunities that you provide, through a combination of assignments that you initiate, skills building workshops that you make available and career development pep talks that you give.

Thanks for reading,

Kim

Image: The Stone Breakers (1849) Gustave Courbet (France, June 1819 – December 1877). The painting was destroyed along with 154 other paintings in February 1945, when a transport vehicle moving the art to the castle at Konigstein, near Dresden, Germany was hit by Allied forces (“friendly fire”).

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Get the Most Out of Your Meetings

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The ability to run a good meeting signals to others that you are a competent professional and a good leader. An on-point, crisply presented meeting that has the right agenda, invites the right people and results in a list of actionable items, will confer to you great respect, if not admiration. Your meeting facilitation skills can help you win a client, a promotion, or a raise.

Is the meeting necessary?

Before you reserve meeting space and plan the agenda, ask yourself a big question—-might the information or result you’d like to obtain be accessed by way of, say, a 15 minute phone call or a couple of emails? In other words, before you call a meeting, remember that meetings are expensive; they cost time and money. If your objective can be met through e-mail, videoconference call, or even a one-on-one discussion, skip the meeting altogether and conserve valuable resources.

If holding a meeting emerges as the most effective way to share or obtain important information or provide a forum for a group discussion and consensus decision-making then by all means schedule a time, choose a format or place (virtual, in-person, or hybrid), plan an agenda and round up the stakeholders and decision-makers.

Determine objectives

A clear objective will set the tone for the meeting and determine its agenda. The desired outcome(s) should be specific and measurable. If you’re expecting attendees to brainstorm their way to a solution or course of action, ask them to arrive with a list of ideas.

Schedule strategically

Schedule meetings for a day and time when those you want to be in the room are most likely to attend. In most cases, scheduling Monday morning or Friday afternoon meetings is inadvisable. You want meeting participants to be fully present and not overwhelmed with the work week or daydreaming about weekend plans. I’ve learned that it’s helpful to contact the most influential participants on your proposed attendees list and confirm their availability for a potential meeting dates and times.

Invite decision-makers.

The most effective meetings involve stakeholders to ensure that:

1). The decisions made will be accepted and not challenged or voided.

2). Decisions can be made immediately and they’ll be implemented.

As noted above, confirm a couple of potential dates and times to ensure the presence of heavy- hitters who have the power to green-light. If a key decision-maker is unavailable, ask a subordinate to attend. Ideally, this person will be able to speak for their supervisor, and–at the very least–take notes and report back.

Prioritize agenda

To ensure that high priority objectives are met are fully discussed, address the most important issues first. That way, if someone needs to step away or leave the meeting early, you’ll still have accomplished that which is most urgent or time- sensitive.

Stick to the agenda.

The agenda is a roadmap that keeps everyone on topic, guides and maintains the meeting’s pace and flow and in that way enables the full examination and assessments that facilitates good decision-making. It helps it to adjourn on time, with the desired results in hand.

Furthermore, the agenda discourages off-topic conversations that sabotage the attainment of meeting objectives and participants’ time. If an unanticipated topic surfaces and is deemed relevant, the meeting convener should politely but firmly interrupt the conversation and suggest that since the matter is important it deserves another forum, which can be arranged. Alternatively, the topic can taken up at the conclusion of the meeting after the agenda items have been discussed.

Wrap up, follow-up

At the end of the meeting, the meeting convener should remind participants of any decisions and deadlines and clarify any follow-up action required. All meeting participants should understand exactly what is expected of them. Schedule any follow-up meetings immediately. Send meeting minutes to all participants and to stakeholders and decision-makers who were unable to attend (but you’d like to keep them apprised of important actions and decisions).

Thanks for reading,

Kim