The difficult decision of whether or not to discount a service to close certain sales is an issue every service based business faces. Service businesses often have extra capacity as employees are not billing 100% of their time, and customers (and potential customers) know that the lack of complete utilization means there may be room to haggle over price. Reducing the price to close a deal is often tempting, however, it is rarely a good idea for three reasons: The Short Term Benefit is Outweighed by the Potential Long Term Damage The decision to discount a service is typically driven by whether or not the short term need for cash warrants the discounting in hopes of landing a client. While short term cash concerns seem like the most important issue for a business, the long term damage to the brand is far more important. Most service based businesses rely on… Read more!
Sales commissions are often a difficult thing to balance and manage for any startup company. The sales people want their commissions yesterday and the business is afraid if they do not pay the sales commissions immediately the sales people will stop working. However, a business needs to understand the process of generating revenue, entering deposits, reconciling books, calculating commissions, transferring funds if necessary, and finally paying the sales people their commission. A business generates revenue from clients and looks to pay sales people a commission for bringing that business to the company. In a perfect world money would be paid by the customer and the sales commission would be immediately deposited into the sales person’s bank account. However, the reality of the situation is that money does not typically enter a company on a single day. Revenues typically trickle in over a 30 day… Read more!
Last week I wrote about the bookkeeping process for businesses and the importance of managing that process. This week we have been working with a client on a project which has a bookkeeping process that requires a large amount of data entry, and more difficult has been the processes which manage the paper inside the business prior to it reaching the bookkeeper for entry. While many businesses are working toward becoming paperless other businesses are required to manage paper invoices through a managerial approval process before the bookkeepers can ever enter them. Invoices which arrive on paper must be kept in order, signed by appropriate managers, and organized for handoff to the bookkeeping department. Making sure the invoices are received, approved, and organized often requires multiple parties all doing one or more tasks in a timely manner. The process seems simple, but for business… Read more!