Becky’s Bytes: Four ways to avoid underestimating and overbooking your time

In the late 1970’s, psychologist Daniel Kahneman proposed that when planning a task, humans budget their time optimistically. It happens with yardwork: You plan an hour to weed the garden, it takes two. It even happens at Office Administration Associates: We budget an hour for a new client’s payroll, it invariably swells to two.

The weeding gets done and the payroll gets posted on time.  Nothing fatal about that optimistic time management flaw, until it becomes your business plan. When you underestimate the time, you’re likely double-booking your time because there are few days when you have only ONE project or client on the calendar.

Here are a few tactics to avoid erring on the short side of the time you budget for a project:

1)      Use past experience as a guide, not as a rule. the phrase “it always took an hour, except when…” really means that we should budget the time for the exceptions.

2)      See the small picture. The big picture is that it takes me 15 minutes to get from appointment A to appointment B because Google Maps said so. Google maps doesn’t account for you grabbing your keys, getting out of the building, finding a parking spot, etc. The 15 min. is the big picture, the other steps are the small picture.

3)      Automatically ‘pad’ your best-guess time estimate based on 1) and 2) by an extra 15 minutes. The 1957 book by Northcote Parkinson gave us Parkinson’s Law: Work expands so as to fill the time available for its completion. It holds true 60 years later despite all our time-saving gadgetry.

4)      Delegate what you can. Small business owners who succeed are the ones that embrace the idea that they don’t personally have to do everything. They hire pros to help with the tasks (marketing, office management, equipment maintenance, etc.) that take time away from client-facing or client-servicing roles. There are enough hours in a day when you aren’t trying to take on everything.

We’re all busy. If they plan properly, no entrepreneur has to be late or miss deadlines – both of which are customer-service suicide.

Photo by Catalin Petolea, used with permission.
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Becky's Bytes: Celebrate the upcoming National Small Business Week

 

More than half of all Americans either own or work for a small business, according to the U.S. Small Business Administration. The Administration's annual National Small Business Week is April 30 to May 6 to recognize that we create two out of every three new U.S. jobs. It's our chance to talk up each other, and sharpen our own skills. Here are five ideas to improve the value we offer to all consumers.

1) Use Small Business Week as an excuse to learn about the trends, technology and marketing tactics that can help take your small business to the next level. Enroll in an online seminar, or a live and local one. Tech is a game changer, and an ever-changing game. So is marketing. Even if you just refreshed your skills with a seminar or meeting last year, that was 365 days of innovation ago.

2) Look at your recent tax filing. Did you pay too much? Did you plan too little? Taxes – property, personal, and/or payroll – are predictable aggravations for any small business owner. If you found April 18 or the last year-end to be particularly stressful, your accountant has helpful suggestions. So does your office professional.

3) Outsource what you can. The timing of Small Business Week couldn't be better to evaluate where you stand as a business. You're one third of the way through the year. How much of that four months have you spent actually doing what you set out to do? If you spent a quarter of your time chasing invoices or selecting insurance or managing payroll or marketing, any of these can be outsourced so you'll spend 100 percent of your time on your trade, rather than 75 percent.

4) Attend one event or open house, or create your own. The SBA has a list of events at the link above. Local Chambers of Commerce hold 'Business After Five' events. I personally know of one that very week at Yerkes Observatory on Geneva Lake. If there isn't an event in your town, consider hosting your own open house or networking get-together for your local peers. It can be hard to step away from the daily demands of running a small business—use Small Business Week as an excuse to take a little break and connect with fellow small business owners.

5) Join a Chamber or service organization. Never underestimate the powerful networking possibilities that exist in Rotary, Kiwanis, Lions, The U.S. Junior Chamber (Jaycees) or a local Chamber of Commerce. Sorry if I missed one: It wasn't an intentional slight. Each group puts you elbow-to-elbow with possible customers and provides an undeniable measure of community goodwill.

Image by Paulus Rusyanto, used with permission.

Can I dump any of these old tax records yet?

Photo: Patpitchaya. Used with permission.

You and I are in the full-on, tax-season sprint between Groundhog Day and the filing deadline. The big question pops up as you try to find a place to store the newly ended year's financial receipts while you're staring at a room full of boxes of prior years' money records, 'Can I get rid of any of this old stuff yet?' Other versions of the same question:

• How do I know how long to keep records?
• Why do I need all this paper?
• Can't I just shred it?
• Can I just convert it to digital images?
• It's all in my QuickBooks, so I don't need the receipts any more, right?

All the questions and....so many rules. The simple answer from an office management point of view is that it is less expensive to store it then it would be to re-create in an audit. You throw out an old box and you could be throwing away hours or days – or longer – tracking down a duplicate somewhere. So, err on the side of caution. If you are ever in the position to try and find room in the budget to pay attorneys and accountants to defend an audit, the storage bill won't even compare!

Audit's are time consuming and expensive, especially if you end up in a position of defending a position that you can't prove. An auditor can do his/her best to create an estimate of what happened based on their best assumptions, and it's up to you to prove it differently.

For example, if you move money between accounts, they possibly could be viewed as two deposits , not a deposit and a transfer of the same money. The end result if the transfer isn't clear is that it could be counted as unreported income. The paper trail, even in the digital/paperless age, is still important! Just because it's entered into your software doesn't mean you won't need that dead-tree receipt (or at minimum an image of that receipt) in the future.

My general rule of thumb – always check with your CMA or CPA as they know your specific business situation – but generally, if in doubt, keep records at least seven years. Minimum. If you signed it, definitely keep it. There are some things like prior audits, prior returns, property transfers, and other vital documents, you keep forever! There are record types which generally are not audited after four years, but unless you hear it from the CPA, keep everything an extra couple years. You'll avoid headaches in the unfortunate event of an audit.

Set up your partnership in six and a half (relatively) easy steps

Photo: Ambro

Twice in the last month or so, OAA has assisted Wisconsin partnership startups with what they need to do to form a limited liability corporation, or LLC. OAA is an LLC, which combines pass-through taxation (like a sole-proprietorship) with limited liability (like a corporation). We don’t provide tax or legal advice, but when a client asks, here's what I recommend: 

1.  GET AN ATTORNEY: Organize the LLC by creating an operating agreement with an attorney - this is essential so that you all have the same understanding from the beginning.  You never need a contract when things go well, but it's when they don't go so well, it keeps the playing field level and gives a "way" to dissolve, if needed. Saving hundreds by cutting corners on this step now can cost everything later.

2.  FILE LLC WITH DEPT. OF FINANCIAL INSTITUTIONS (DFI) & ELECT A REGISTERED AGENT: Most likely the attorney will do the initial creation of your LLC with the DFI.  But this is something you can do yourself.  If you know how the LLC needs to be organized, the attorney will determine this when creating the operating agreement, as a member-managed or manager-managed LLC, you can save attorney time by filing the LLC with the DFI yourselves.  It is a pretty straightforward online form.  The DFI charges $135 to create the company.  It's not a bad idea to have the attorney do the initial filing. However, he or she does NOT have to be your registered agent - for ongoing mail and correspondence.  When an attorney creates the LLC often they will name themselves as registered agent.  Be sure you are your own registered agent.  This way YOU will get the notices for your annual report and can file it or contract it out, as you wish.  DFI charges $25, at this time, for annual reports.  When you file with the DFI you will get "Articles of Incorporation.”

2B. FILE FOR SALES TAX NUMBER: This is the half-step. Skip it if you’re selling a service. If you’re selling goods rather than services, you will most likely need to file for a Sales Tax number with the State of Wisconsin because you will have to charge and then pay the sales tax on the product you sell direct to a customer. You won’t need to charge tax on items you sell to a wholesaler or retailer, but they’ll want your Sales Tax ID.

3.  SET UP A BANK ACCOUNT:  After you receive your Articles of Incorporation, use this information to obtain a bank account. Keep the income and expenses separate from your personal banking!!

4.  SET UP YOUR BOOKKEEPING/ACCOUNTING:  You will need to determine who will do your bookkeeping and select a CPA. If you want to do it "in house" I can help you set up the books, help you find a bookkeeper, or consult.  It's important to set this up correctly from the get-go to avoid future problems.  Employing someone? Anyone to whom you pay more than $599/year as a contract worker will get a 1099 from you at year end. Keep clear records and get a W-9 from anyone to whom you pay money before they get their first payment, if you can. 

5.  GET AN INSURANCE POLICY:  I have yet to meet a business or business owner that doesn’t need a BOP (Business Owners Policy - a general business liability insurance policy).  It’s a litigious world, we’re just doing business in it. 

6.  UNDERSTAND WHAT YOU DO WELL AND FIND THE RIGHT PERSON TO HELP WITH THE THINGS YOU DON'T.  In my experience with small business, owners have a "trade" a "skill" or an "idea" but that doesn't mean they are a good business owners and they get into trouble by not "knowing" they were supposed to do something.  Find people you trust, but don't give any one person all the keys to your business.  Checks and balances and frequent reporting are important.