How Much You Should Raise Your Prices
Few business owners enjoy breaking the news of an upcoming price increase. However, when you own a business you have to deal with ever-increasing costs. Although inflation is an unpleasant part of life, it is still part of life.
Price increases are inevitable for a sustainable business. If you want to stay afloat, you’ll have to do them – and regularly. Read on for some tips on how to determine how much you should raise your prices.
Company costs
The type of business you run will determine how much it costs to stay in business. If you’re service-based, you will need to consider what it takes to keep your employees. You’re not likely to deter your customers by increasing prices if you have great people who deliver a service they value.
On the other hand, if your business sells physical products, there’s more to the equation. You have to determine how much more it’s costing you to provide the product. Then, calculate how much more you need to charge to get the same amount of earnings you were before.
No matter what type of business you run, it truly is a numbers game. You’ve got to stay profitable to continue providing goods or services. So calculate the difference and raise your prices accordingly.
Bottom line
There are plenty of other things contributing to profits lately, such as supply chain issues and record low unemployment. When considering a price increase, take a look at your bottom line. Did you make more money this year, or less? If you’re like a lot of businesses, the answer will likely be less.
Delve into your numbers to understand how much money you’re making, and how much money you would like to be making. Plan your price increases so that you can get from point A to point B.
When it comes to shrinking the gap, consider whether you’d rather do one large price increase, or several small price increases. If you need cash right away, you might be tempted to just do one big increase and get it over with. Beware, however, that this tactic has the potential to scare off customers and send them to your competitors in search of a better price.
Weigh the potential loss of customers against the revenue from a price increase. Ideally, the increase will cover the few customers who might go elsewhere.
No matter how you do it, make sure you communicate your intentions kindly and clearly. If you have a loyal customer base, they will likely understand and continue coming to you.
See what your competitors are doing
Do your research to find out what your competitors are up to and how they’re handling price increases. Check in with them regularly to make sure you’re staying on par. You don’t want to become too cheap or too expensive.
If you don’t raise your prices along with the crowd, you run the risk of becoming the cheapest option. That tends to cause a reputation of having the worst quality. Get too far ahead, and you’ll price yourself out of the market.
Consider the rate of inflation
Once you know how much you need to keep up with costs, maintain your bottom line, and match your competitors, look at the rate of inflation. A good rule of thumb is to increase your prices by 5-10% yearly to keep your real earnings the same. However, it’s been a wild year inflation-wise and this percentage may vary.
Final thoughts
It can be intimidating to raise your prices because you don’t want to lose customers. However, if you don’t stay on top of it, you risk losing profits or in the worst case scenario, your business. Do your research to make sure your price increases are fair and communicate them well. That way, you can continue to provide excellent services and products to your customers for years to come.
Contact us today or call (888) 857-5750 for expert guidance on determining the right price increases for your business. Ensure profitability while effectively communicating changes to your customers. Stay competitive in the market. Get in touch now!
Employee vs Contractor – What You Need to Know
Depending on the nature of your business, you may have workers who are employees or contractors, or you may have both. Each has their merits, but it’s important to review which are which in order to meet your tax obligations.
When you have an employee, you must withhold income tax as well as report on additional benefits. Contractors generally look after their own tax obligations.
It’s against the law to treat an employee as a contractor. Significant penalties apply if you do, so it’s important to get it right.
The simplest way to remember is:
An employee works in your business and is part of your business.
A contractor is running their own business.
But how can you be sure that you’ve got an employee or a contractor on your hands, especially with remote work blurring the lines between employees and contractors?
Does there come a point that you should actually be hiring a worker as an employee, when you thought they were a contractor?
There are six factors to consider:
1. Ability to subcontract or delegate
An employee is not able to subcontract or delegate the work. They must perform the outlined tasks themselves. If they can’t do the work themselves for any reason, say a prolonged illness, and someone else does it, this is substitution. Your business would then pay the other person to carry out those activities.
A contractor can delegate the work as long as they’re not obligated to do it themselves as per the contract. If your contractor can’t work, they would arrange for another qualified person to do it. You would pay your contractor as usual, who would then pay their subcontractor.
2. Basis of payment
An employee is paid a set amount per period of time. The most obvious example would be an annual salary or hourly wage.
Some employees are paid piece-work rates. They receive an amount per successful sale, or per the number of pieces produced. A commission basis would be a price per item structure.
A contractor, however, is paid an agreed-upon price in exchange for a predetermined result. Some contracts may specify the amount to be paid in increments as stages of the project are completed. But the key takeaway is that a contractor is paid when the agreed-upon result is achieved.
3. Equipment, tools, and other assets
If your business is responsible for providing the equipment, tools, and other assets required to perform the job, that’s characteristic of an employee.
If the worker is providing these items, they are likely a contractor.
4. Commercial risks
Employees do not bear commercial risk and they are not liable for correcting any defects in the work at their own expense. Instead, your business takes this responsibility. The worker will be paid for the time required to perform the task to completion.
A contractor assumes the commercial risk. They are responsible for fixing any mistakes on their own time. This extra work would fall under the umbrella of the terms set at the beginning of the project. Your business does not have to pay for any extra time taken or materials used, unless otherwise specified in the contract.
5. Control over the work
Employees have to complete the work the way the employer specifies. What work is done, where it’s done, how it’s done, and when it’s done are all up to the employer. The employee then completes the work as required.
Contractors are not subject to the same rules. They decide when and how the work is done, so long as it meets the obligations laid out in the contract. For example, a contractor could choose to work three 10-hour days to complete a job, rather than working four 8-hour days.
6. Independence
An employee works within a business. They complete tasks as required until they leave the job.
A contractor operates independently and may have any other number of contracts on the go with other companies. They can freely accept and refuse other work. Their obligation is complete when they deliver the specified outcome.
Final thoughts
It can be confusing to make the determination between an employee and contractor, but it’s important that you do so in order to meet your tax obligations and play by the rules. Contact us online today or call (888) 857-5750 to learn more about your tax obligations for employees and contractors. Don't risk penalties - reach out to our experts now!
Why Cybersecurity Should Be a Top Priority for Accounting Firms
Whether you run a high-volume accounting firm with hundreds of clients or a new startup, having strict cybersecurity policies in place is a must to provide the best services to clients, protecting both their important data and yours.
That’s why the Quickbooks ProAdvsiors from Accountants 2.0 has collected some important information here about why cybersecurity is so important!
Preventing Financial Loss
One of the foremost reasons to invest in cybersecurity solutions is to prevent costly financial losses due to cyberattacks, ransomware attacks, and data loss. Studies have shown that some companies are forced to pay up to $50,000 dollars to ransomware attackers. Additionally, if your data is compromised and customer information is leaked, you can face legal actions and in some cases, end up bankrupt.
Reducing the Threat of Legal Representation
As mentioned above, cyberattacks and other issues can result in the threat of legal action, which can be detrimental to your company’s bottom line. Many customers will take legal action if any of their personal information is exposed, which can lead to lengthy lawsuits that cost thousands to hundreds of thousands of dollars.
Minimizing Loss of Consumer Trust
If your company falls victim to ransomware or another type of cyberattack and such a scenario is made public it can cause untold damage to your enterprise’s reputation. Current clients can share negative reviews that explode on social media and stop potential clients from considering your accounting firm.
How Can You Secure Your Accounting Firm?
Above are just a few of the negative aspects of suffering a cyberattack. However, there are some ways you can secure your accounting firm and safeguard your company and client data such as:
Using Cloud-Based Accounting Services:
By implementing cloud-based accounting services with stringent security measures, you can minimize the chance of data loss and cyberattacks. You can also retain previous versions of files to restore your system to a time before a data breach.
Backup All Your Business Data:
Regularly backing up all of your data is key to maintaining a strict cybersecurity policy. Keeping multiple copies both on backup devices and the cloud will ensure your enterprise is well-protected.
Strong Passwords & Deep MFA:
By implementing strong passwords and deep multi-factor authentication processes, you can make it much more difficult for cyber attackers to enter your network.
Maintain a Strict Internet & Wi-Fi Policy:
For those using your company network, implementing strict policies regarding internet and Wi-Fi usage is a must. Often, this will include using a VPN whenever employees are accessing your system to keep your connection private.
Contact our Quickbooks ProAdvisors today for Cloud-Based Accounting Services & more!
For more information about how we can help your accounting firm protect its most important data, contact us online today or call (888) 857-5750. We also specialize in accounting for startups, bookkeeping services, and much more so get in touch today!
Annual Information Returns for Corporations in Canada
Are you a corporation in Canada?
Do you know that you must file an annual information return every year? It's important to do this so that the government can keep track of your business and understand the ownership and management.
5 Advantages to Using Electronic Onboarding
The process of onboarding employees is often lengthy, but it’s important. New hires need to learn your company’s culture, policies, and procedures. You also need to get some critical information from them so that they can legally work for you.
The onboarding process is typically long and a little dry. It may include training, equipment distribution, benefits orientation, and security policies, just to name a few.
There are many benefits to switching this traditionally paper-heavy and arduous process online. Read on to learn 5 great reasons to make the switch.
1. Make a great first impression
Some surveys suggest that up to 50% of new hires leave their new role within a few months. Switching to an electronic onboarding system is one way to combat this statistic.
When you create your onboarding content, you have a chance to knock that first impression out of the park. You know it will be a consistently great first impression with every employee, too.
It’s a great opportunity to decide how you want to come across to your new hires. You can then finesse the content until you have it right. Imagine if you could make a perfect impression every time you spoke to someone for the first time. Electronic onboarding allows you to do just that.
2. Save time
We all know how much effort it takes to onboard new employees. Often, the first day on the job is spent almost entirely on paperwork. The content is dry and the day is boring. This isn’t the best introduction to your company culture.
By switching to electronic onboarding, your new employees can do that “pre-boarding” work before they arrive. They can use the device of their choice and remain in the comfort of their own home.
When they arrive at work, they can jump right in to spend time connecting with their new colleagues and learning the actual job.
It’s a huge time-saver for your HR department, too. Instead of pushing papers for the first few weeks, deploy the content with the push of a button. You’ll also receive an alert if something is incomplete.
The automation of electronic onboarding means that nothing will be overlooked. Instead of filling out forms, your HR employees can spend time getting to know your new hires.
3. Increase engagement and accountability
When your onboarding process is electronic, you can easily see if anything is incomplete. Knowing which modules aren’t done yet makes it easy to follow up with an employee.
It can also give you some valuable insight about which parts aren’t working so well. If a lot of people get stuck on the same module, it’s a good indicator that it might need some improvement.
Onboarding content can be quite dry, but it’s critical. It’s helpful to know who’s done what, and what content needs some more attention.
4. Custom content
There is a lot that goes into learning a new job, and not all employees will need the same things. With electronic onboarding, you can send the necessary paperwork to all employees. And then you can send role-specific modules to those who need it.
Tailoring everyone’s onboarding to their needs saves time, money, and paper. There’s no need for everyone to go over everything. Delivering just the necessities for each employee keeps interest and engagement high. It takes less time, too.
5. Protect data
Employee privacy is a top concern. With electronic onboarding, you eliminate the risk of losing any personal data. With so much paperwork to complete, it’s easier than you might think to lose track of a sheet every once in a while.
It also protects your company’s data. When an employee takes a paper packet away, there is always the risk that it could get lost. When everything is online, it stays secure. That protects everybody’s interests.
Final thoughts
There aren’t any real downsides to switching to an electronic onboarding process. If you’re interested in saving time, money, and energy, while also driving up employee engagement and retention, it’s a good idea to consider making the switch.