The sales funnel is a great relationship-building framework that will take an individual that has never heard of your business and guide them along the way until they become a happy and loyal customer.  Sales funnels are a graphical representation to illustrate these customer experiences as they can often be challenging to visualize. We will take you through these individual stages while detailing the advantages of developing a sales funnel for your organization. 

How Sales Funnels Work

Today, many business sales cycles are long and don’t deliver a new customer right out of the gate. There is so much competition and opportunity to set yourself apart from others. One has to explain, shape, even mold the users to comprehend how you are different and what you can deliver where others fall short. By utilizing a sales funnel or sometimes called a marketing funnel, you are offering your potential customers a map to learn about your organization. The funnel provides all the tools and data necessary to take them through the process while nurturing a relationship with your business. This journey begins when they first learn about your company until they become dedicated customers. A sales funnel is composed of three stages: awareness, consideration, and conversion. As we move down the funnel, our number of leads decreases because we aim to target those more likely to convert, which inevitably reduces the pool.

Know Your Audience

Before defining the funnel stages, it is important to understand the way your business acquires new customers. Maybe your prospects find you on social media, paid ads, or by a google search that utilizes search engine optimization (SEO). The important thing is to understand where they originate.  Creating a sales funnel works most effectively when you understand your target audience’s habits.  Once traffic origin is confirmed, the sales funnel stages will guide prospects through a series of data and communications that makes it easy for them to learn more about your company. 

Awareness

Prospects at the first stage typically don’t know much about your products or services. This stage is called the awareness stage, which is at the very top of the funnel.  Awareness content should have a very low barrier of entry and will appeal to a broad audience. Adding materials such as a landing page or infographic that is simple to follow can help entice your target audience.  It is crucial to include a call to action or CTA, which will make this newly formed association more solidified and urge them to continue down the funnel.  A great approach is to provide free content in exchange for an email address. Providing free beneficial information could be in the form of a video, blog article, or ebook. Those who complete an action at the top of the funnel will move on to the next stage. 

Consideration

The consideration stage represents the middle funnel. We now produce content that should align with the users’ interests. Here we lean into cultivating the relationship by earning their trust and drilling down on their pain points.  Retargeting ads are a great way to increase brand awareness. Retargeting is serving an ad to an individual who has already seen your business and has been previously marketed to in some fashion. A retargeting ad could be as simple as an email that answers common questions. Include additional product features along with successful case studies. Make sure to include your next CTA.  It might even be the right time to introduce a special offer and let them know how you can help them alongside their journey. The goal for the mid-level funnel is to get prospects to take the next step and for you to gain authority in the subject you are representing. 

Conversion

The conversion stage or bottom of the funnel is the last stage where prospective customers go before they convert. By now, these individuals are more familiar with the brand, offerings and recognize how you provide value.  At this stage, these prospects are more likely to have the intent to purchase. It is crucial to make the final action as easy and seamless as possible. You want the idea of becoming a customer to be the next logical step. Time to get direct and specific about what you do and what you can provide. Create price comparisons, testimonials, and information around common objections. Leave multiple CTAs and easy buttons to connect, like social media and website links. Now is a great time to schedule a demo, set up a free trial, and get them set up. 

Summary

The continued follow-up with potential buyers is a great way to organize traffic and increase conversions. The sales funnel creates a process around those interactions. As your business continues to drive strangers through your funnel with multiple campaigns, perfecting and optimizing, you will be able to identify what messaging is working for your audience and what isn’t.  As you develop a relationship throughout the customer experience, it makes their eventual conversion easy and expected and your sales more predictable. Why? Over several weeks, months, even years, your prospects have become fully educated on your business offerings and how your organization is aligned with their needs.   Lastly, make sure you are tracking your results throughout the entire process. Understanding metrics such as cost per acquisition (CPA), lifetime value (LTV), and conversion rates will increase your sales funnel success.    Learn more tips and tricks in how to simplify your financial management system and other ways to increase your sales and revenue; visit the FINSYNC blog. 

There are so many acronyms used in the accounting world today. Even with formal training, it can be difficult to recall them all.  SG&A and P&L are two common acronyms fundamental to understanding a business's finances. In product-based manufacturing or drop shipping setting, these two terms go hand in hand with managing your cash flow and setting your business up for success.  Your organization may need to understand how these two terms are related, report on them regularly, and get ahead of the challenges that may result if calculations show the company is tracking favorably against projections. 

What Is SG&A?

Direct costs, which are associated with a companies' core business, are always under observation. They are highly controlled and constantly analyzed since they directly impact the product or service.  Indirect costs, when not managed, can be like transferring feathers in an open truck bed. Your money is constantly blowing away little by little without ever noticing. The worst-case scenario could mean a lack of return for your company.  Selling, General & Administrative (SG&A) expenses are the costs a company incurs to promote, sell, and deliver its products and services and expenses involved in managing the entire company. These expenses are different from COGS but you won’t see necessarily see them in a service-based organization.  Also known as operating expenses, SG&A is the overhead required to support operations. These expenses include rent, advertising and marketing, administrative costs, sales commissions, and utilities.

Profit & Loss

Operating expenses do not include the direct costs of producing goods or acquiring goods for sale, which are calculated separately as cost of goods sold or COGS aka P&L (profit and loss).  P&L statement shows how much revenue a business generated, the cost incurred to create this revenue, and the other expenses necessary for the business's operations. COGS represents how much it costs to produce a product or service. Examples include direct expenses such as raw materials, direct labor, and shipping costs. These expenses are recorded in the profit and loss statement that summarizes the revenues, fees, and overhead incurred during a specific period.  Operating expenses are very important, but the individuals within these departments are not directly involved in making the final product or service. Therefore, these operating expenses are not directly what the customers are purchasing.

Calculations

To calculate SG&A, use the formula below to add together selling expenses and general & administrative expenses.   SG&A costs are typically the second expense category recorded on an income statement after COGS. Also found in the financial statements is the ratio of SG&A expenses to sales revenue. This calculation is another way of understanding the financial health of a business.   The SG&A sales ratio gives an organization a big picture of your business expenses compared to the money coming in. If this ratio increases over time, it may be more challenging to earn a growing profit. 

Challenges

Overall, operating expenses should be stable year to year, or in a growing business, they should be declining. If this number increases, it sends up a big red flag to lenders, creditors, and potential investors. This number evaluates how companies effectively utilize their cash. When operating expenses grow too large without a corresponding rise in sales, businesses need to start cutting costs. Cutting out non-sales salaries can usually be done without impeding manufacturing, which is often why company layoffs can increase overall profitability.  After defining the need to reduce SG&A expenses, there should be an assessment of the company's main accounts. It is important to scrutinize each account and prioritize the areas with the greatest reduction potential. Additionally, monitoring the administrative areas, replacing suppliers, and even renegotiating contracts can impact your organization's profit over time.

Final Thoughts

It isn't always apparent whether your business is losing or earning money. Sometimes you may receive large bundles of capital at once, and it can feel like your business is prospering. Only to find out later that your business is in a cash-flow deficit. Monitoring and understanding your SG&A within a product-based setting in addition to COGS is vital because it affects your bottom line. In conjunction with adopting more efficient budget management, reducing these expenses can boost an organization's financial results.   Take control of your small business finances today with FINSYNC’s all-in-one accounting solution. 

For businesses to thrive, they need to cultivate a safe and rewarding work environment, making employee retention a key differentiator in today’s competitive landscape. The Bureau of Labor of Labor Statistics reported that 2.9% of the entire American workforce quit their jobs in August 2021. This percentage equated to 4.3 million individuals and represents the highest month ever recorded to date.    The “Great Resignation” shocked many employers because it was contrary to traditional management’s relationships with labor markets. Therefore a company’s ability to hold on to its talent is of utmost importance.  Learn the definition of employee retention and the benefits and cost savings of low employee turnover. In addition, you will learn how to accurately calculate your business retention rate and develop a strategy to monitor and improve the length of time your employees remain within your organization. 

What Is Employee Retention

Employee retention refers to the organization’s ability to prevent employee turnover. The retention rate is a percentage of employees who remained with the organization during a fixed period. Individuals may resign from their employment due to a variety of different factors. When looking at retention, we focus mainly on the voluntary reasons an employee has left an organization.  Retention strategies tend to focus on preventable turnover. The first step to building a system for retaining employees is to discover the reasons behind their leaving during their exit interview.  Voluntary resignations can include the following:

• • No clear path to advancement
  • Low morale
  • Boredom
  • Feeling overworked
  • Low pay
  • Lack of benefits
  • Unhappy with management
  • A need for better work-life balance
  • Dissatisfaction with company culture
  • The desire to make a change

Exit interviews provide valuable insight into your employee turnover. Recording and categorizing these reasons can help you determine if your employee retention strategies need improvement. 

Costs of High Turnover

Gallup estimates the cost of employee turnover to be more than $1 trillion a year to replace individuals who voluntarily leave. The costs associated with recruitment, training, and loss of productivity equates to one-half to two times the position’s salary.  Losing highly productive employees can lower morale and decrease efficiency, especially if the increased workload falls on the remaining team members. This vacancy can easily affect your bottom line.

Benefits of Employee Retention

Besides the high cost of turnover, retaining good employees has other benefits. Here are a few examples:

• • Higher employee job satisfaction - this goes hand-in-hand with employee retention. Worker happiness and fulfillment affect the individual commitment to their team and organization.
  • Better customer experience - employees who have been with a company a long time will develop relationships with specific customers. These individuals are more familiar with troubleshooting and more able to implement the company’s core values.
  • Lower recruiting costs - by focusing on retention, recruiting costs a business will have to eventually payout are lowered. Expenses include recruiter fees, airfare, and accommodations for the potential candidate, and training and onboarding once hired.

Calculating Employee Retention Rate 

Employee retention rate is the percentage of workers a company can keep consistently, long-term employed within a fixed time period. This rate is different from employee attrition, as the attrition rate shows the percentage of employees a company lost and did not replace. Some experts believe that a worthy goal for a retention rate is above 90%, and this number will vary across different companies and industries. 

Improving Retention Strategy

Developing your retention strategy for your company should be at the forefront of your goals. Besides more apparent techniques like hiring people that want to stay longer and performing exit interviews, here are some brief points you can incorporate into your retention strategy.

• • Promote from within - many surveys revealed that employees leave due to feeling stalled in their careers. Lack of salary increase, training, and skill development impede career advancement. Promoting from within rewards current workers and makes them feel valued.
  • Provide childcare - the pandemic has made childcare a family problem and a business issue. One survey found that 20% of workers had to cut back or leave their occupation due to lack of childcare. Set your business apart and provide a childcare subsidy, remote team abilities, or a flexible schedule to allow various drop-off times. 
  • Implement internal rewards - everyone from the CEO to the interns craves validation. Not just from a direct manager, but shout-outs to co-workers, project leaders, and service providers can increase hard work and make individuals feel recognized and appreciated.
  • Earn the trust of your employees - employees perform better when they trust the people who are giving them their work. Building personal connections, creating transparency and radical candor in communication are great ways to build trust. Also, implementing an unlimited PTO policy is a strategy many companies implement to instill confidence.
  • Encourage feedback - you don’t have to wait until an employee’s final day to receive feedback. When employees don’t feel their complaints are addressed, they assume the company is not interested in improving. Ask your employees for their opinion on a specific project or the business as a whole. Sometimes being heard can go a long way to encouraging great employees to stick around. 

Creating a successful employee retention strategy takes significant effort. A great place to start is to identify the most pressing issues and where you can make the most impact out of the gate.  Also, add your own unique strategy points. Perhaps your culture would benefit by allowing individuals more creativity, less micromanagement, or maybe they would benefit from more training.  The data suggest that the labor shortage will increase rather than decrease, and retaining your best employees will become harder and harder. Adding just a few key strategies will enable your company to attract and keep top talent while building employee engagement and preventing unwanted turnover.   Learn more about how FINSYNC can support your business by simplifying your cash flow management. 

It sounds like living the dream if you are permitted to take as much time off work as you wish. However, there are a few particulars to review before you begin offering unlimited PTO at your organization. Unlimited PTO became a trend that started in the tech industry within the last decade. Currently, this trend has become more commonplace, with companies competing for top talent due to the "great resignation."  But what does it mean to have unlimited PTO? This article covers the pros and cons, and strategies to create the perfect paid time off policy for your business.

What Is Unlimited PTO?

Paid time off (PTO) is a benefit an employer provides their employees to receive payment when they take off work for vacation, personal days, holidays, and sick time.  A company's PTO policies establish the guidelines that determine when and how an employee can receive payment for time off work. Unlimited PTO means that employees can take time off at their discretion and utilize it whenever needed. Manager approval is often required to ensure there aren't too many employees requesting it at the same time during high workload demands. 

Pros of Unlimited PTO

• • Great Recruitment Tool - Even though unlimited vacation is gaining popularity, many organizations still haven't implemented it. Therefore, those with this competitive edge show they value and trust their employees.
  • Saves the Company Money - Unlimited PTO began with silicon valley start-ups. Tech companies wanted to keep employees' vacation rollover off the books while providing an extraordinary benefit. Now many organizations are taking advantage of not paying out unused vacation at the end of the year or when employment ends, simplifying cash flow management as less liabilities are accrued.
  • Less Paperwork - Monitoring paid time off creates a lot of work in approving requests, tracking, and reporting. When a business incorporates unlimited PTO, all administrative burdens go away—removing the additional tasks and paperwork for managers and human resources. 
  • Boosts Morale - Employees feel more satisfied when given the autonomy to take their leave as they wish. If your employees are engaged, you might see up to a 21 percent increase in profitability.

Cons of Unlimited PTO

• • Employees May Abuse the Policy - When a business has established unlimited PTO, there is the risk of employees taking advantage of the policy. Some may use more time off than others without fear of their employment ending. Most studies suggest this is very uncommon; however, some individuals may exploit this policy.
  • Not Truly Unlimited - Obviously, under this policy, workers cannot take off months at a time. If this consistently happened, unlimited PTO would become a costly failure. Because of this fear, many organizations have developed specific parameters around appropriate use. Requiring manager approval, 4-6 week limits, or making it performance-based are all stipulations you may want to convey in your policy.
  • Might Lead to Burnout - By far, the most common problem associated with unlimited vacation is that employees end up self-limiting the amount of time they take off. Underuse can be a bigger problem than overuse. The worst-case scenario is that employees end up getting paid less with no value attributed to their PTO while companies gain more of their employees' productivity. Overall if employees do not take enough time to rest and recharge, there is the potential they will suffer burnout at work.

Solutions

Businesses should be transparent about using unlimited PTO within their organization before hiring. At the same time, job seekers should try and get precise details about the company's policy prior to starting their employment. Many companies will encourage employees to take time off to prevent employee burnout. Some will even make it mandatory, such as two-week vacation minimums when working in this environment. 

Conclusion

A successful unlimited vacation policy can have a positive impact on your employees. You can build a culture of mutual trust which will boost both productivity and morale. A genuine interest in employee well-being and happiness motivates these employees to work harder. An unsuccessful unlimited vacation policy lacks guidelines around how much time off to take. Employees that are unsure how many days is "too many" will likely default to less or follow the norms set by individual managers, who might not be taking enough time off themselves. Finally, companies need to ask if they're making these changes for employees or their bottom line. If employees use 100 percent of their PTO and the employer wants to reduce their small business expenses, then perhaps such a program makes sense. However, if the main reason to offer unlimited vacation is a marketing tool for recruitment but is severely underutilized, you might want to consider a different approach.   Learn more about FINSYNC’s reliable cloud-based payroll management to pay your employees, contractors, contributions, and taxes online

Net income is the key metric used to determine an organization's financial health. Many consider this number the most significant of all financial indicators because it determines whether your company has made a profit.   Fortunately, you don't have to be a CPA to master the basics of net income. In this article, you will begin to understand the scope of net income, the calculations involved, and what it can tell you about your business's bottom line. 

Understanding Net Income

Net Income (NI), also called net earnings or net profit, is the total amount earned in a period minus expenses. Examples of the type of expenses include:

• • Salaries
  • Insurance
  • Equipment
  • Rent 
  • Utilities
  • Advertising and Marketing
  • Depreciation
  • Taxes

All revenues and expenses are recorded at the top of the income statement, also called the Profit and Loss or P&L. Once all expenses have been subtracted from revenues, a company will see their profit remaining, the net income.  NI is also used to calculate an organization's profit margin. This metric is net income expressed as a percentage of revenue. Following this percentage month after month is a good way to track whether a business is becoming more or less profitable over time. If your net earnings increase over each period, you are likely on the right track. However, if your NI is going down month after month, it might indicate you need to start cutting costs. 

Gross vs Net

The key to simplifying NI is by comparing and contrasting gross versus net. Whether you are looking at revenue or income, the gross number is always larger than the net.  Gross profit signifies the total amount of money a company makes minus the cost of goods sold. COGS are expenses incurred to produce the goods that a company sells. These expenses include raw materials, labor, packaging, and utilities in a manufacturing facility. Gross profit does not include other costs associated with marketing or selling activities, administration, taxes, etc. Gross revenue is the aggregate sale price of goods and services over a period of time. Gross revenue is also known as total revenue or the top line, as this is the starting point from which other financial metrics are calculated in a P&L.  Lastly, net revenue is how much gross revenue remains after deducting commissions, sales, losses, or returns. Knowing your net revenue can help you understand what discounts work in your business, for example.

Operating Income

The last of the three standard income calculations is operating income. Operating income is a more conservative approach than gross income as it also subtracts operating expenses. Like GI and NI, operating income is another way to view profitability and success. All three forms of income are crucial when applying for financing. Banks and lenders typically look at your business's income with and without expenses to predict a company's future performance before approving a loan.

Calculations

Sometimes it is easier to differentiate between these terms by looking at the equations.

Net Income

Gross Income

Operating Income

You may need to do additional calculations to find your business's total revenue.  These equations give a different perspective of the business's finances and differ depending on which analysis you are running.

Conclusion

Revenue alone will not give you a comprehensive representation of your finances. It would be best to incorporate NI to fully understand your organization's profitability. NI and GI reveal a different perspective and thus can affect actions you might take as a business owner. Gross income can indicate the revenue generated year over year and give a perspective on how your business is doing. However, net income will tell you a slightly different picture of how much you are making after expenses are factored into the equation. Even though net income is a critical metric within all three financial statements, it is not an indicator of cash flow. NI includes non-cash items like depreciation and amortization. Therefore, creating a separate process for your cash flow management is highly recommended.     FINSYNC - Allow our accounting software to calculate all forms of income and more for your organization.   

All businesses operate with a major constraint: money coming in must equal or exceed money going out. It might take months or even years to accomplish this goal, which is why understanding your company's cash flow is critical.  There are two main methods of measuring cash flow in your organization: operating cash flow and free cash flow. Both are prominent metrics to compare your business with competitors within the same or similar industries.  This article explains the difference between these two common metrics and how to calculate the cash flow for your own business. After all, understanding these measurements determines whether your company is generating the cash it needs to invest in its future.

Operating Cash Flow

Operating cash flow or OCF is the cash a company generates from normal business activities within a certain period. This measurement shows how much money is generated from business operations without considering factors such as interest or investments. Normal business operating costs include the Cost of Goods Sold or COGS, expenses that directly correlate with the income from selling those same goods. In addition, less directly-correlated expenses such as marketing, advertising, rent, insurance, and administrative overhead are also part of operating costs and fall into a grouping typically referred to as Sales, General and Administrative or SG&A.  OCF keeps track of all money coming in and going out and is recorded in the company's cash flow statement. Sometimes OCF is listed as "cash flow from operating activities" and represents the cash impact on a company's net income.  If your company requires a small business loan, many lenders will look at your OCF to ensure you bring in enough money to pay your bills and ascertain your ability to repay the loan. 

Operating Cash Flow Calculation

The operating cash flow formula can be calculated two different ways under GAAP or Generally Accepted Accounting Principles. 

Direct Method

Indirect Method 

Net Income: Net income is how much your business earns from its operations. Find net income by taking the company's total revenue minus all expenses.  The indirect method is a lot more complicated, but it gives more information. 

Free Cash Flow

Operating cash flow has its limitations because it doesn't take into account the cost of acquiring and managing fixed assets such as machinery, software, furniture, and vehicles.  Free cash flow or FCF measures how much cash a company generates from normal operations minus any cash spent for long-term fixed assets. Understanding how much money you have left over after paying for everything is valuable because you can assess how much money you may reinvest back into the company.  It also has the potential to identify red flags in your accounts receivable process. For example, if revenue increases but free FCF is not, it could mean customers are not paying invoices on time.

Free Cash Flow Calculation

FCF can show you how much you have after paying interest expenses during a period. However, it will not reflect newly acquired, or old debt recently paid off. Free cash flow is a measure of financial performance, similar to earnings, and although it can be useful, it’s not a part of any of the core financial statements included in GAAP reporting.

Summary

Operating and free cash flow are essential metrics for financial health and sustainability. While they each tell you different information, together, they illustrate a more significant picture representing your financial health. As sales increase, so do your operating costs, which makes understanding cash flow more powerful. Without proper cost controls and tight cash flow management, increasing sales may not improve net income. Regardless of which method you choose for your organization, it is vital for management to assess these metrics in order to have a clear awareness of money generated. This data will help determine if a company can hire more staff, purchase better equipment or software, and invest in growth overall. FINSYNC can help simplify your cash flow management with our all-in-one innovative software. Gain control of your financial management today.

It is vital for businesses to regularly keep track of the number of employees a company loses within a certain period. Reduction of the workforce due to attrition could permanently alter the workflow and culture of the entire organization. Attrition reduces an organization's workforce due to retirement, resignation, or removal without a plan to replace the occupancy. Also referred to as downsizing or churn rate, attrition is the gradual reduction in staff numbers.  We will discuss the causes, consequences, and prevention of attrition and how it differs from other forms of staff shortages and reductions. Additionally, using the rate calculator, you can determine if attrition is a problem for your organization. 

Causes of Attrition

Attrition can be good for an organization because a business can decrease labor costs without dismissing staff. Therefore, it is essential to understand the causes and different types of downsizing that may arise. There are two main types of company attrition: 

1. Voluntary - occurs when an employee leaves on their own accord. Examples can include any of the following.

• • New opportunity
  • Professional reasons
  • Personal reasons
  • Demographic relocation

2. Involuntary happens when a company decides to remove staff members and positions. This decision is due to the following reasons.

• • Layoff
  • Retirement
  • Death of an employee

When an employee exits, sometimes the reasons are beyond a business's control. However, based on 150,000 exit interviews, 68% of employees left a company due to controllable factors. More importantly, 72% claim they were unhappy with the quality of the retention effort. This data suggests that business leaders are missing the mark when it comes to meeting the needs of their staff and not providing overall job fulfillment. 

Consequences of Attrition

Unless your company is prepared when employees retire or quit, a dwindling workforce can be costly, especially if the individual's history with the company is long-term.  If an employee has been with the company for years and decides to resign, the organization can lose a wealth of knowledge and experience. Seasoned employees are more familiar with the company's best practices, policies, and objectives. The combined costs of recruiting, interviewing, training, and loss of productivity equates to anywhere from one-half to two times the individual's annual salary. Even when 52% say their manager could have prevented their departure. Another repercussion of an employer not backfilling a vacancy could be a significant workflow increase to the employees who remain after the departure. Production could suffer, particularly if other staff members widely relied on the role.  The added workload to the established team could result in a decrease in overall company morale. Most notably, when the remaining employees have similar feelings and opinions about the company's response. 

Calculate Employee Attrition Rate

Understanding a company's attrition rate can be a key performance indicator (KPI) for the business overall. The following is a formula for measuring the number of employees who have left compared to the average number of employees within a company, multiplied by 100. A high churn rate means a company frequently loses employees, while a low rate indicates employees stay longer.  If your company churn rate is consistently high, you should investigate and develop a strategy to retain your workforce.

Turnover and Layoffs

Other forms of employee exits are turnover and layoffs. Although these terms are similar, they both have distinct differences. Turnover refers to a scenario in which an employer replaces employees who have left the company. Like downsizing, turnover can be voluntary or involuntary, and backfilling the role is the primary differentiation.  Layoffs are an entirely different situation. When a company is in a challenging financial crisis, it must dismiss employees (who may be performing as directed) with no immediate plan to re-fill those positions.  Laying off employees results in attrition as long as the company doesn't hire as many new employees as were laid off. 

Preventing Attrition

Since we have concluded attrition can be costly and demoralizing for an organization, it is within the employer's best interest to listen and research the reasons behind a resignation or termination. Figuring out why employees are leaving an organization is critical. Understanding this valuable component is why many businesses decide to perform an exit interview with each individual who leaves the organization voluntarily or involuntarily.  Lack of job satisfaction is one of the most common factors for employee attrition. Employees want to enjoy where they work. Another way to prevent attrition is to provide an excellent work-life balance. Allowing benefits such as working remotely and a flexible schedule can go a long way to enhance employee retention.  Finally, employees need to have a manager that is willing to go to bat for the benefit of their staff. Good communication is crucial and should be the main priority for a business to enhance team connection and make an employee feel valued.  Besides recruiting the best people for your company, you also have to nurture and engage your talent to prevent them from leaving. Taking these steps will decrease your employee attrition and provide a better overall job experience for the entire organization.   FINSYNC continues to support your small business with updated accounting and business knowledge to help you grow, scale and succeed.  

Generally Accepted Accounting Principles or GAAP is the industry shorthand for a set of accounting standards and procedures followed by most businesses in the United States. A business that needs to be evaluated by third parties should strongly consider using GAAP to streamline those evaluations. GAAP standards are utilized by both public and private companies to stay abreast of their financial performance and for tax purposes. These ideals improve clarity and consistency in communicating a business's financial situation. If you believe your small business may eventually be subject to GAAP, you may want to adopt these values as early as possible. If you have intentions of selling someday, you should strongly consider conforming with GAAP. Understanding the individual principles will assist you in vetting the right people to advance you on this path.   This article walks you through each of these concepts so you can determine how best to apply these within your organization.

Principle of Regularity

The principle of regularity states that GAAP compliance happens throughout the entire accounting period. Individuals cannot pick and choose which accounting methods they use period by period for their financial statements. Accountants must adhere to these generally accepted accounting principles provided by the Financial Accounting Standards Board or FASB. Then they must ensure these procedures remain consistent thereafter. 

Principle of Consistency

The accounting team should adhere to the same practices across all internal income statements during all accounting periods. This process ensures consistency when comparing multiple periods.    Accountants must explain any variability in this process within the footnotes of the income statement.

Principle of Sincerity

Accountants should remain unbiased with the utmost goal of providing an accurate and objective depiction of the company's financial health. An objective perspective provides great significance to an organization. Many businesses choose to employ independently audited financial statements.

Principle of Permanence of Methods

The principle of permanence requires identical financial reporting methods applied throughout each accounting period. This principle aims to increase clarity around a business's financial statements and prevent switching methods to get more favorable-looking results.

Principle of Non-Compensation

Per this principle, accountants must report all positive and negative values within the financial statements with complete transparency without attempting to hide debts behind assets or costs behind revenue.

Principle of Prudence

Financial data should be gathered and reported "as is" without speculation or adjustments. A prudent or conservative approach ensures the company's financial performance is not inflated.

Principle of Continuity

Accountants who are producing financial statements that conform with GAAP work under the assumption that the business will continue its operations indefinitely.  This assumption means that assets are priced at their historical value or original cost rather than their current value.

Principle of Periodicity

All financial entries are distributed across the appropriate accounting periods. This principle prevents stretching periods or numbers to adjust the final numbers within a financial report. For example, if your business provides a service like auto repairs. You may complete the work on the car in November, but the insurance doesn't pay until December. If you are an accrual-based company, the revenue for the job must show up in November on your financial statements because that's when your business earned this money.

Principle of Materiality

A material event is anything that affects a company's financial standing. Therefore accountants must provide full financial disclosure and report all financial data to the best of their ability. The materiality principle also allows the accountant to use leeway to GAAP principles and use their best judgment when recording a transaction or addressing an error.

Principle of Utmost Good Faith

This principle comes from the Latin phrase "uberrimae fidei." It means accountants and business managers should act in good faith by honestly recording transactions and collecting financial data.   Although optional for non-publicly traded companies, GAAP is viewed favorably by banks and creditors. Most financial institutions will require annual GAAP compliant financial statements as a part of their debt covenants when issuing business loans. These principles are important because they provide an accounting team with the framework for reporting and analyzing data. It keeps all organizations on a level playing field for benchmarking. On the other hand, if each business reported its financials differently, it would be challenging to compare metrics. On a final note, as a small business owner, it is essential to understand the basic concepts involved in these common accounting principles to understand e your accountant's viewpoint. This information will help interpret the bigger picture and detect potential hurdles when considering any changes further down the road.     At FINSYNC we know the decision to hire good accountants is crucial. This is why we have personally vetted a network of thousands of accountants and bookkeepers.

The world of accounting has many moving parts. Many businesses follow an accounting cycle to keep track of the books and remain on a consistent schedule. There are eight steps involved in this cycle. Upon completion, a company can ensure that every dollar is accounted for and reflected properly in the financial statements.  Here is a checklist to use every month or at the end of an accounting period. Once completed, you can move on to the next period with a fresh, clean slate.  

1. Transactions

We kick off the process by identifying and analyzing the financial transactions. These transactions include all monetary movement in and out of the organization.  Activities would include but are not limited to receiving payment for an invoice, paying for utilities, selling products, purchasing equipment, and payroll.  

2. Journal Entries

Journal entries are records of the initial transactions. Often, a bookkeeper manages and records these daily transactions and puts them in chronological order.  Journal entries are a comprehensive way to keep track of money in and out of the company.   In double-entry accounting, there must be two entries for each transaction. When a credit occurs, there must be a resulting debit.   

3. Posting

Each journal entry is organized and summarized in the general ledger. The general ledger is a record that categorizes all of the transactions into one of the accounts (categories) listed below:

• • Assets
  • Liabilities
  • Equity
  • Revenue
  • Expenses

When posting to a general ledger, it is crucial to match the transaction with the correct account and subaccounts such as rent, marketing, loan payments, etc.  

4. Trial Balance

At the end of an accounting period, a trial balance assures that all debit and credit totals are equal. Thereby running this common report makes discrepancies easy to identify.  The trial balance brings to light the unadjusted ratios for each account and subaccount posted in the general ledger.  When the total for all credits do not equal the total debits, a mathematical or recording error was made somewhere earlier in the process and must be fixed in order for “the books to balance.”  

5. Worksheet

Unfortunately, many times the first calculation of the trial balance will produce a discrepancy. Meaning, the credit total does not equal the debit total. Therefore, adjustments need to be calculated until these equate. Adjusting these entries is also called the worksheet analysis. Here is where we can identify when payments aren't received or a transaction wasn’t recorded. These discrepancies must be identified and eventually corrected before the period ends.  

6. Adjusting Journal Entries

Once discrepancies related to cash transactions have been identified and entry adjustments recorded, it is time to recalculate a new trial balance. You’ll then want to add any journal entries for non-cash transactions such as a deferral or depreciation. Once the trial balance is complete and the credits and debits balanced, you can move forward with producing financial statements.  

7. Financial Statements

Now that the accounts are adjusted and recorded correctly in the general ledger, we are ready to create the financial statements.   Financial statements include the following:

• • Income Statement
  • Balance Sheet
  • Statement of Cash Flow
  • Statement of Retained Earnings (optional)

The insight you and the company's management will gain from these financial statements will aid in planning the next steps.    

8. Closing the Books

The last step in the accounting cycle is closing the books. Closing ties up all loose ends and occurs at the end of each accounting period. Accounting periods could be every month, quarter, year, or other consistent timeframes. After the books are closed out, the cycle starts all over again with the new period. New revenue and expense accounts start over with zero balances. In the most basic terms, the accounting cycle is the process for ensuring the accuracy of the books. This process demonstrates all money going in and out is accounted for and balanced. Errors made throughout this process typically occur. Therefore having a procedure for identifying and examining these errors is recommended for all organizations.    Ready to alleviate the burden of bookkeeping? FINSYNC has an extensive network of bookkeepers and accountants. We will match the right person based on your budget, industry, experience, and more. 

Nothing prepares us when a loved one passes away. The grief and sadness that accompany this death can feel overwhelming, making it difficult to perform our duties, which is why many companies provide bereavement leave. A small business may not already have a policy regarding bereavement. Therefore, it is crucial to be prepared before a tragedy strikes. This article covers definitions, challenges, and a list of family members typically covered under bereavement leave. 

What Is Bereavement Leave?

Bereavement leave or compassionate leave is a paid-time-off category that employees can use following the death of a close friend or family member. Employees must deal with the emotional distress of the loss. They often need to communicate with other family members, make funeral arrangements, and work out any legalities that require their attention. Compassionate leave is designed to give staff the time they need to focus on their tragedy.  There are no laws that an organization must pay bereavement leave to their employees. Oregon was the first state to require companies to pay for this leave. Other states like New York and Illinois are following suit. However, most states are not required to provide paid or unpaid time off.  Nevertheless, a majority of businesses do have a policy in place that provides payments during this challenging time. The last thing an individual in mourning wants to worry about is getting paid during this much-needed respite or their job stability once they return. 

Those Included in Bereavement Pay

Companies are encouraged to determine which family members are covered by their bereavement leave policy. Immediate family members and loved ones frequently included in the guidelines include:

• Spouse
• Parent, including:
  • biological parent
  • adoptive parent
  • foster parent
  • parent-in-law
  • step-parent
  • parent of a same-gender domestic partner
  • a person with whom the employee has or is in a relationship in loco parents or the individual or organization legally responsible to take on some of the functions and responsibilities of a parent.
• Child, including:
  • biological child
  • adopted child
  • step-child
  • foster child
  • child of a same-gender domestic partner
• Grandfather
• Grandmother
• Grandchildren
• Domestic Partners

The following are less frequently included:

• Siblings
• Aunts and uncles
• Nieces and nephews
• Individuals with whom the employee had an extended close relationship
• Individuals who live in the same home

Some employers may require proof that the individual has died. Examples would be to provide a copy of the obituary, funeral program, or death certificate.

Length of Time

The amount of paid bereavement leave varies among organizations and employee pay grades. For example, salaried employees may have more benefits than hourly or contract employees.  A common length of time off in the United States is 3-5 days.  The International Foundation of Employee Benefits Plan, or IFEBP, conducted a study and determined that 94% of companies provide some bereavement leave option. The length of time offered fell into three separate groups. The number of days and percentage of organizations that offer these types of benefits are listed below.

1. Death of a spouse:

• Two days – 2%
• Three days – 56%
• Four days – 5%
• Five days – 29%
• Six or more days – 5%

2. Death of a child or parent:

• Two days – 3%
• Three days – 60%
• Four days – 5%
• Five days – 27%
• Six or more days – 3%

3. Death of an extended relative

The IFEBP reported that most businesses offered one day of bereavement leave to attend the funeral of an aunt, uncle, niece, or nephew.

Challenges 

If an employer does not offer bereavement leave, employees have a few other options to explore. An individual can use their paid time off if available, take an unpaid personal leave of absence, or consider working remotely. Fortunately, many companies understand the importance of their employee’s mental health, which brings forth an opportunity for business owners to step up and show compassion for their team members.  As a business, if you do not have a formal bereavement policy, it is time to consider one. These guidelines ensure that leave is granted fairly and equitably among employees. Managers will be able to offer immediate support by explaining the procedures and circumstances involved. Once a bereavement policy is established, the business can operate without too much interference, while the valued co-worker can take off the time they need to move through their grief.    Implement FINSYNC’s payroll platform and pay your employees and contractors with ease and accuracy.