|Posted on June 24, 2016 at 11:50 AM|
Do you want it done or do you want it done right?
By- CeCelia Bos
"Price is what you pay. Value is what you get." - Warren Buffett
Mr. Buffett made this quote during the 2008 annual report of Berkshire Hathaway Inc. While he was referring to the values associated with investments, this is still recognized in several areas of business decision making practices.
It amazes me how many times business owners know they need to get a project done but instead of focusing on the value the person brings to the table they focus on how much it is going to cost them. While all good business owners keep their bottom line in the back of their mind, great business owners understand that getting something done that requires another person to fix, isn’t worth the stress caused, much less the money that had been paid.
Real Life Scenario #1
When I first got started in business I had a client hire me to get his bookkeeping finished for the previous year because the people he had hired to do so, not only didn’t get it complete but didn’t get it completed correctly. Now, keep in mind the following points as we continue:
• He had already paid out almost $1500 for the previous individuals.
• This is the end of February.
• He wanted to file his taxes on time for the previous year.
During our initial conversation he informs me that one person was trying to do the work in QuickBooks Online. Another person got so frustrated with QuickBooks Online they started using spreadsheets. Finally, since business owner didn’t like either, he started using QuickBooks on his desktop. After an hour and half conversation during which we discussed price, best case and worst case scenarios, he signed a contract and provided a down payment so I could get started.
What a mess I found! Because of the missing entries, duplicate entries, triplicate entries and wrong entries it was determined that it would be quicker and more cost effective to recreate the desktop company and completely redo his book work for the year. This included several phone calls for clarifications. Several meetings to obtain additional documentation. Plus, several late nights to get it all done by April 1st so he could have financials he could understand and provide to his accountant for tax preparation purposes.
I turned everything over to this client the end of March with his itemized final bill which included the subtotal for all the work completed, deduction for the down payment previously provided and remaining balance. His reaction, “I’m not going to pay this. I gave you a down payment that should be all it should have cost me. I can hire anyone at $10 an hour to put the numbers in for me.” After I got over my initial shock, I smiled and responded with, “I seem to recall that’s what you did that caused you to need me to fix and redo everything.” I didn’t do any more work with him and the following year, sad to say, he was out of business.
Real Life Scenario #2
I was given a referral of a lady who had been having a family member do her books for the entire time she had been in business. A few days before taxes were supposed to be filed, the accountant contacted her and informed her she needed to “find more expenses” because there was going to be a $15,000.00 tax bill to pay if she didn’t. Needless to say, she was not a happy camper.
I met with this client and we looked at how the books were set up. We looked at the bookkeeping side of the business and discussed what needed to be done to get the business where the owner wanted it to be, get things back on track and how to not have this kind of “surprise” again. In the following year, we reorganized the Chart of Accounts, created a flow to track the receivables and payables and each month we discuss how the business is doing (with a previous year comparison) and what areas need to be watched to make sure there isn’t another tax bill like she had seen in the past. By bringing in someone like myself, the book work that took several hours each week compounded by a lot of frustration, is now done in under 2 hours per week. The reasons behind this is simple, a person was brought in who enjoys doing the bookwork, understands it and can provide the answers the owner wants.
By removing the stress of the bookkeeping, having someone who is able to provide the answers needed to understand the business and giving the owner the ability to focus on what they enjoy doing, the businesses Return On Investment was up 45% that year. The new year tax bill was pretty insignificant in comparison because plans and processes were put into place to help deter the tax ramifications for the increased revenue. But most importantly, the owner was ready for the tax bill instead of being surprised by it.
So why did I tell you these stories? Because one of the areas that most, not all, business owners hate is keeping tracking of their books. When they are ready, they do the smart thing and make the decision to hire someone to keep track of their receivables, payables, provide financials for review and other miscellaneous tasks. Upside, they will have several individuals that “apply” for this opportunity. Downside, how do they determine who is the best? It’s pretty simple, as a business owner you need to determine who gives you the best bang for the buck. In other words, who brings the most value to the table. As an independent contractor it’s amazing how many times I hear the following reasons for not moving forward with a contract.
• That seems awfully expensive.
• I will look at it closer when I get some time.
• We really can’t afford to do this right now.
• I haven’t gotten around to looking at your proposal.
• I found someone who will do it for $12 per hour instead of your hourly rate.
What does this really mean? Most of the time, it means that the business owner doesn’t understand the value that the contractor is able to provide. Most business owners believe bookkeeping is easy and anyone can do it. What isn’t realized, until it’s too late, is that a great bookkeeper brings the owner so much more. Not only do they do the basic entries, but they are able to assist their clients by making sure that the client understands exactly how their business is doing. They provide the business owners with an understanding of what the Profit & Loss, Balance Sheet and Cash Flow are showing. A great bookkeeper will not only set up the books in a way that the client will understand, but will also work with their accountant to make sure that everything is being done in a manner that provides the business owner with the most tax advantageous purposes.
As a business owner, you need to make sure that you are getting the complete value for the price that you are paying. It may seem like a great idea to hire a $10-$15 person to do your books. But if you pay them $1500 for the work they complete and it costs you an additional $750 plus to fix things, were they really worth it?