Hi everyone! I am Anita Campbell, the person behind this week's Ask the Expert. This week I'd love to answer your "big picture" questions. Are you looking to start a business and want to know about creating a business plan or a budget? Or perhaps you want to grow your existing business, and have questions about planning for growth? Or what if you want to understand key trends in your industry and how they might affect your business? I can help with these kinds of questions and much more.

What is the best way to get a business started? Should a small business create a Blog to post on the QuickBooks website?

• QB_Lady (May 22, 2006 4:59 pm)
• artisticbaby (May 23, 2006 7:26 am)

Hi QB Lady,

I have some unconventional advice: the best way to get a business started is to "get started."

Most people will not give you that advice, but I think the best thing is to just start doing things to make your business take shape -- read and plan and work on it. Otherwise you may harbor a dream of a business but never act on it, and the years go by.

All that said, there are some key things you will want to do to make sure you dot the i's and cross the t's, and to plan appropriately. Assuming you are from the United States, go over the Federal government's website Business.gov, to:

http://business.gov/phases/launching/

That website has an excellent outline of the basic steps for launching a business.

Check also your own state's resources. Many states have similar websites that outline various licensing, tax and other requirements you will need to follow -- usually offered by the state's Secretary of State or Commerce Department.

The QuickBooks Community Forum also has an entire section on starting a business with tons of helpful links and resources:

http://www.quickbooksgroup.com/forums/startingbusiness/

One of the items on the Business.gov website is writing a business plan. I urge you, even if you are digging in and have launched your business already, to step back and take the time to outline a business plan, with financial projections. Have a clear understanding of where your sales will come from, how much you can expect in sales, and what kind of expenses you will incur to get those sales and run your business. Finances are the foundation of a successful business and you need to have a good handle on them, both from a planning standpoint and as you run the business, from a bookkeeping and accounting standpoint.

Finally, about starting that blog.... :) Get your business started first -- blogging is really a marketing activity and may be one of the tactics you do to marketing your business.

Good luck!
Anita

Hi Anita,
  I would like to grow my business. I am in insurance and financial services. My office is located in a growth area with lots of competition for getting new customers.

I have just started a direct mail marketing effort and I would like to know how I should measure return on investment?

Also, I would like to know what realistic expectations I should have for the number of times I should send a mailing piece to a prospective customer? I have hear marketing people tell me I need to send something every 6 weeks up to a year to really see the effect of direct marketing.

I look forward to your response.

• artisticbaby (May 23, 2006 8:21 am)

Hi RRTahoe,

Congratulations on the desire to grow your business! For a business like yours, direct mail can be a valuable marketing technique.

The best way to measure return on investment (ROI) is very simple: determine how much business you got from the direct mailing, as a percent of the total amount you spent on the direct mail campaign.

Here is an example:

You send out 10,000 mailers at a cost of $2 each (including bulk postage). Total cost = $20,000.

Two percent of the recipients actually respond favorably to your mailing, and of those you end up closing 20% (40 new customers). If you average $300 in revenue from each of those 40 customers, your return is $12,000. That is a 60% return on your investment of $20,000 (not counting labor costs for any follow-up and closing sales).

Here is an article from Marketing Profs that perhaps explains this calculation in more detail:

http://www.marketingprofs.com/Faqs/showfaq.asp?ID=137&CatID=10

Of course, to track ROI you will need some way of tracing new customers to your mailing, such as by use of a discount code or by asking a new customer how they heard of you.

I usually recommend direct mailings 4 times a year, in part because direct mail can prove expensive for a small business. Usually the reason given for doing frequent mailings of every six weeks is the idea that people receiving the mailing will remember your business when their family and friends need a referral or when their own insurance comes up for renewal.

Local market dynamics can differ and the best thing is to test -- do another mailing six weeks after the first mailing and see if your conversion rate and/or your close rate decline dramatically with the second mailing -- or if they increase or stay about the same. And if you really want to test, do a third mailing, this time spaced farther apart, say 3 months apart. This kind of testing will tell you a lot about the value of repeat mailings and their frequency for your market.

Good luck with it!

Anita

I am having some trouble with the owners equity account. For some reason, when this company was set up, the person had set up a owners capital- other account, which owners draws is a sub account of that. when I try to take out the capital and put it into retained earnings it is minusing it from the owners draw account. I am quite confused as to why this is happening? Any ideas?

Thanks

• artisticbaby (May 25, 2006 8:55 am)

Hi Kristina,

Thanks for your question about the owner's equity account.

I would need a little more information to answer your question:

The "Owners Capital - Other" account -- could you tell me what type of account this is? Could it be something other than an Equity account? There are 5 "Other" accounts: Other Income, Other Expense, Other Current Liability, Other Asset, and Other Current Asset.

It's normal in QuickBooks for a transaction that affects a sub account to appear on the register for a parent account (and thus affect the balance) You seem to suggest that the opposite is happening. Could you provide detailed information about the setup of these accounts (Type, Name, relationships) and the Journal Entry being entered?

Also, I might add that normally "Retained Earnings" is a "special" account in QuickBooks, designed solely for the purpose of rolling over net income from year to year. While journal entries to this account are allowed, QuickBooks does warn the user that this type of entry is not recommended.

Please provide some additional information and I will see what I can do to properly diagnose and answer your dilemma.

Best,
Anita

My husband wants to start a car shop to modify and enhance the performance of vehicles. He is very talented and loves improving cars' capabilities. Unfortunately, he does not have a business degree, and is not an expert on keeping and ordering financial records.

He wants to use an outside company to handle his finances, but I believe we can handle them on our own. What do you suggest?

• artisticbaby (May 25, 2006 9:12 am)

Dear TMLong,

I strongly advise a combination approach to handling finances.

First, there is no substitute for the business owner digging in and understanding the finances intimately. Even if your husband has no experience with finances and accounting, I encourage him (and you) to get close to the finances and be hands on. That's a fundamentally important part of running a business.

Second, in your case it makes sense to have an accountant or other financial advisor to assist you. Talk with an accountant in your local community sooner rather than later. Or check the Resources section here at the QuickBooks Community site to find one: http://quickbooksgroup.com/webx/resources/ An accountant can assist you in setting up QuickBooks for your business, help with closing the books on a regular basis, answer your questions, assist with tax planning, and similar activities that will be invaluable. Most accountants are happy to work with you on a retainer basis covering a certain number of hours or certain actvities each month, or as needed.

Good luck,
Anita

Hello Anita,

I downloan account activity from Citibank online. Citi updated their website, since then Quickbooks does not allow me to download the activity to my Citi Account in Quickbooks. I tried creating another account and merging them, but since they both download activity from the internet Quickbooks doesn't let me merge them. What do you suggest I do? Is there another way to merge the accounts? Can I change a setting to have the activity downloan to my original Account?

Thanks

Jonathan

• artisticbaby (May 26, 2006 9:51 pm)

Hi Jkadoch,

I actually sought out some help for your question. Here is the answer:

The last thing you want to do is have two "similar accounts" enabled for Online Banking. In this case, I would disable the Online capabilities for both accounts, merge the second into the original and walk through the entire setup process again.

The majority of the time when something like this happens, it is on the bank's end.

Best,
Anita

know you can download activity from banks, etc. can you also download activity from a university sap system for a department that uses qb.

• artisticbaby (May 26, 2006 9:53 pm)

Hi Billydonxx,

Unfortunately, the short answer is "no." Unless that Bank/ Credit Card/ University is on the Available Financial Institutions list, it will not work.

Best,
Anita

How can we improve our cash flow. We are a small business and cash seems to always run out even though the A/R is a good figure. I am not sure if cash flow problems indicate that our sell price is not high enough therefore the COGS is higher than we originally figured.

Please, any advice on this topic would be great. Thank you,
Ruth

• artisticbaby (May 26, 2006 10:22 pm)

Hi Ruth,

Without knowing your exact situation and seeing your financials, it is impossible to know the precise problem you keep encountering.

That said, let me give you some general pointers. Cash flow problems often result from one of the following: (1) prices not high enough; (2) expenses too high for the volume of business to sustain; or (3) poor A/R collection or lengthy A/R cycles.

For the pricing and expense issues, please take a look at this excellent Pricing Tutorial by the Small Business Administration: http://www.sba.gov/library/pubs/fm-13.txt

Finally, it could be a situation where pricing is fine and expense levels are OK, but you just are not bringing the money that is owed to you in the door fast enough to sustain the business. Take a look at things like your average receivables collection time -- you may be able to speed this up by offering techniques such as discounts for early payment, charging late fees for late payment, or even by more aggressive invoicing and collection calls.

Good luck,
Anita