Finding Industry Averages for Small Businesses to help with Benchmarking, Ratio Analysis or Planning

You can add value for your clients by providing reports with key financial ratios compared to industry averages.   This benchmarking can help clients see how their business is doing compared to others and identify areas for improvement.  Plus, it is a great way for you to deepen your relationship with the client enhancing your position as their trusted business advisor.  In this post, I’ll show a couple of ways to get industry averages for free or some lower cost options if you choose.

RMA Industry Averages from OneSource in ReferenceUSA

Login to the library website (look at  for details about the ReferenceUSA database and how to access it)  and go to the ReferenceUSA database and click on the OneSource database as shown below.

If your library does not have the OneSource database, you might want to check with some other libraries.  In my area, only one out of three local public libraries subscribe to the OneSource database.  After this section, I will show you other ways to get industry averages if this does not work for you.

Once you are in OneSource, you want to search for the appropriate industry.  As shown below, I searched for restaurants.

The search results provide me with more details to select the specific type of restaurant – whether it is full service or limited service (see image below).  Look through the search results to determine which most closely matches your client (or whatever).

When I click on the NAICS code in front of Limited Service Restaurants, I get the screen below where I can click on the Market Research Report to get the industry averages.

When you first see the pages with the averages, it is somewhat overwhelming so let’s break it down and first analyze the headings.   RMA provides the two pages of averages—one based on assets and the other based on sales of the companies.  This helps to compare companies of similar size.  In the image below, on the right you will see this page is based on sales and the column headings indicates the range of sales.  For example, in the image below for companies with sales < $1 million you would use the averages in the first column on the right (for the current period) and $1-3 million in sales would be the 2nd column.    Note there is no breakdown based on sales (or assets) for the historical averages.

There are averages on both sides of the page – the left is historical and current data is on the right.  You can see the period dates in the column headings.

In the image below, you can use the ratios in the section labeled Income Data (circled in blue in the below) to calculate the ratios for Gross Profit, Operating income and net income.  Then, in the Ratios section, there are several other ratios provided for you such as the Current and Quick Ratios, Debt/Equity and more.  You can use the ratios provided to calculate the Accounts Receivable and Inventory turnovers and days in receivables and/or inventory.

There are 3 averages for each ratio.  For example, looking at the Current Ratio below for <$1 million in sales (i.e. the first column) the top number (1.9) represents the top 25% while the bottom (.2) is the lowest 25% of the companies that comprise the averages.  I usually use the middle one (.7) – which is the median or average.

If you cannot access the OneSource database via a library for free you may want to go to the library (as discussed below).  If you choose, you can get reports from RMA for $135 for non-members as shown below.  Here’s the link

http://www.rmahq.org/RMA/RMAUniversity/ProductsandServices/RMABookstore/Downloads/StatementStudiesSIC/

 

If you would like to read more about the ratios, how they are calculated, etc.  here is the link to Financial Ratio Benchmarks – Definitions of Ratios which is a 15 page document which is helpful.  Here’s the direct link: http://www.rmahq.org/NR/rdonlyres/15D21745-3F7C-478D-86EE-061F5E9AD888/0/Definition_of_Ratios_200910.pdf

RMA Industry Averages at the Library

If you cannot access the OneSource website to get the industry averages online, then you can go into your library.  Most libraries have the book RMA (Risk Management Association) Annual Statement Studies in the reference section.  It will save time if you know the NAICS Code before you get there.  You can look up the NAICS code online (http://www.naics.com/search.htm).  Otherwise there usually is a book of NAICS Codes in the Reference section of the library.  Don’t forget to take change to copy the industry averages.

Note:  Some people may remember using SIC codes. The Standard Industry Classification (SIC) codes have been replaced with the North American Industry Classification (NAICS) codes   http://www.naics.com/search.htm

Free Industry Averages from BizStats

You can get industry averages for free from BizStats (www.bizstats.com) too but they are somewhat dated (i.e. old).  You would want to click to see the financial benchmark reports as shown below.  However, I’d suggest you check out the other stats they have available too.  The stats on risk show what percentage of firms are profitable or not for an industry and more.

BizStats allows you to select whether the entity is a C or S Corporation or Sole Proprietor as shown below.

Next you need to indicate which industry.  Also, notice you can purchase the BizMiner Micro Firm Profit & Loss Profiles with more information for $69 (for a 3 year report or $99 for a 5 year report).

Then you will see the average for the industry selected.  The nice thing about the averages from BizStats is there is more detail by expense account.  For example, you can see the % of sales spent on advertising, insurance, etc.  The bad thing is the information is from 2007.  However given the current economic conditions it may not be a bad idea to use ratios from a few years ago since that may be more ‘normal’.   Below you will see all the financial benchmarking averages available for free.  Remember there are other stats in the website which you may be interested in as well.

I usually use averages from both RMA and BizStats to get as much information as possible.  Industry associations and organizations may provide industry specific averages (like sales per square foot for retail, etc.) which are useful as well.  Keep in mind that you really only need to look up the industry averages for a client once a year.  Clients like to see how they compare to their competitors.  Plus, it provides a great consulting opportunity to discuss the numbers with clients, what the ratios mean and what they can do to improve the profitability of their business.  I find this is a good way to differentiate myself and add value for the client.  I hope it will help you too!

Please Join Me at the Ultimate Accounting vCon — it will be a GREAT conference you won’t want to Miss!

It is exciting to see so many CPAs, accountants, bookkeepers, QuickBooks ProAdvisors, consultants and others who have already registered to attend the Ultimate Accounting vCon next week (May 16 and 17).  Sandi Smith Leyva and I (Michelle Long) have been finalizing the presentations and materials and all I can say is WOW!  We have soooooo much great information, resources and ideas to share with you that will help you grow your business and serve your clients better that it is amazing!  It’s not too late to register to join us and you will be glad you did!  All the sessions are recorded so you can listen to them later as needed.  Hundreds of your peers have already registered — don’t get left behind!  Read more

Time Sensitive – If you want to Grow Your Accounting or Bookkeeping Business, Do Not Miss This GREAT Opportunity!

We’re thrilled that many of you have already registered for our Second Annual Accounting vCon on May 16 & 17.  You now have immediate access to some amazing case studies, a BONUS checklist, a BONUS “Dear John” sample letter for clients you need to fire (will be posted ASAP), hundreds of motivated and upbeat peers, and that’s all before the conference even starts!

It’s not too late! Read more

QuickBooks Tip: How to Edit a Payment that is already Deposited

If you discover that a payment you entered into QuickBooks was applied to the wrong customer, then you need to edit the payment.  However, if the payment was already deposited into the checking account in QuickBooks, then you cannot edit the payment.  So how do you fix it?  I created this quick video to show you how to edit and correct the payment and maintained the cleared status of the deposit if you have already reconciled the bank account. Read more

QQube Version 5.1 Released

QQube™ 5.1 – the most complete data warehouse for QuickBooks – has been released.

According to founder Chuck Vigeant M.Ed., ‘this is the most efficient, most powerful release to date.  We made over 60 improvements, additions, and fixes from version 5.0 including refresh algorithms that are up to 90% faster in certain cases.  This was an ambitious agenda for the last two months, and we succeeded.’  ‘We were excited about the 5.0 release, but soon realized that we needed to make improvements to make it a better customer experience.’  Read more

QuickBooks Tip: Clean up and Fix Undeposited Funds

One of the most common mistakes people make with QuickBooks involves Undeposited Funds.  Do you have a growing balance in Undeposited Funds?  Do you have lots of payments in Undeposited Funds?  Have you tried to fix it with a Journal Entry and discovered the payments are still showing up to be deposited? (you can’t fix Undeposited Funds properly with a Journal Entry in QuickBooks). Read more

6 Steps to Easier Profits and Better Service in Your Accounting or Consulting Practice

Having your own business is hard work, but there is a smart way to serve clients well and make the income you want without putting in hundreds of hours per week.  The skills and tools you need to move from one level of income in your practice are different from the ones it took to get where you are.   Stop relying on peers who are at or behind your level of income and start relying on mentors like Michelle and Sandi who have already been where you want to go and are fully dedicated to serving the accounting profession. Read more

FREE Webinar Wednesdays with Michelle Long and Chuck Vigeant

Starting May 1^st  Michelle Long, MBA, CPA and Chuck Vigeant M.Ed. will bring you weekly webinars of 90 minutes to explore advanced features in Excel (Week 1 and 2) and provide deeper knowledge of the information that QQube provides in the area of Job Costing, Inventory Management, and Financial Analysis (weeks 3 thru 5).

All webinars are free, start at 11:00 am central time and will be recorded.  Space will be limited to accommodate questions and answers within the planned 90 minute time slot.

NOTE:  If you cannot attend the live webinar, register anyway so you receive the email with the link to the recording.  You will not prevent someone else from attending the live webinar. Read More

Do you know the secrets to easier profits in your accounting practice?

It’s super-easy to grow your business as big as you want and without struggle.   All you need to know is the right set of skills.  Unfortunately, they’re not accounting skills – they are practice management skills.  And that’s one secret to growing a business that most entrepreneurs never learn.  

There is a second secret:  that it’s not that hard to learn these practice management skills.    The problem is most people don’t know that that’s what will help them leapfrog their revenue and serve their clients better.  Read more

Intuit Innovator Contest – Implementing QuickBooks Online

I’m thrilled to say that I was a winner in the Intuit Innovator’s contest last fall and I finally won an iPad!  I submitted a quick (2 minutes) video of how I helped a national fraternity implement QuickBooks Online for their chapters.  In the video, I discuss the needs of the fraternity, the challenges they faced and how QuickBooks Online met their needs.  Check it out:

Grow with QuickBooks Online Certification

QuickBooks Online continues to increase in popularity with about 40% of new QuickBooks users choosing QuickBooks Online.  Are you Certified in QuickBooks Online yet?  If not, what are you waiting for?  Join the ProAdvisor Program and get certified so you can innovate with your clients too!  There aren’t as many people certified in QuickBooks Online yet so it is a great way to differentiate yourself and can help you grow your business.

 

Intuit Brings Back Color to QuickBooks 2013 with R6 Update

Intuit invests in input and feedback from QuickBooks users and accounting professionals to help with product development and enhancements.  They strive to help us save time, improve productivity and delight us with QuickBooks.  They do a lot of research, beta testing, and even visit businesses and accounting offices to learn more about what we want and need.

However with millions of users and accounting professionals, it is inevitable that Intuit cannot please everyone all the time and sometimes they may not get something quite right.  That appears to have happened with some of the appearance changes in QuickBooks 2013.  In another blog post, I discussed several of the changes in appearance to QuickBooks 2013.  Many people commented here, in my Linkedin Group (now with 24,000+ members), Intuit Community Forums and elsewhere about things they did not like in QuickBooks 2013.  Again, Intuit listened to our feedback and in the R4 update we were able to add color to the icon bar and a flag to differentiate different data files as explained in this blog post.

Intuit didn’t stop there.  Many people said the flag was too little and didn’t help differentiate files enough.  Now, with the R6 update, differentiating company files with color is back in QuickBooks 2013.

As excerpted from the blog post by Jacint Tumacder (Intuit Product Manager):

With the launch of QuickBooks 2013, we made many thoughtful choices around the use of color to improve navigation. For example, we used darker colors to recede particular areas, and introduced color contrast and font size differentiation to help you know where to focus and navigate through the workflow. While many of you told us you like the new visual design in QuickBooks 2013, a number of you also told us that you have the following issues:

• The black & white icon bar is hard to read
• Can’t use color to differentiate company files
• The prominent use of black has too much contrast

Well, you spoke and we listened. In QuickBooks R6, we’ve re-introduced color schemes. If the default colors QuickBooks uses have too much contrast for you, you can now choose from 14 color schemes to find one that better suits you. Customizing the color scheme in QB 2013 changes the color frame for ALL windows in QuickBooks, including the program window frame making it even easier to differentiate between companies, especially when you have two companies open at the same time.

Here’s what it looks like.

BEFORE … QuickBooks with the Black & White Icon Bar and Default Color Scheme

AFTER … QuickBooks with the Colored Icon Bar and Blue Color Scheme

Where to Find the Preference for Switching to the Colored Icon Bar and Changing Color Schemes

After updating your file to R6 go the menu bar and select Edit, Preferences, Desktop View, and the My Preferences tab.

Thanks Intuit for listening to us and giving us back color to help differentiate data files!

Other Changes in R6 Update

• Resolved QBW32.EXE Fatal Application Exit error (Unrecoverable Error 02700 80318)
• Improved performance.
• Added Windows 8 support for the QuickBooks Attach Documents scan manager.
• Added Monthly payroll item limits.
• Click here for complete details on the R6 update.
• Click here to read Charlie Russell’s comprehensive article about the R6 update.

Display issue with Classes

After updating to R6, a few people indicated they could no longer see the class field (and some couldn’t see the customer:job column too)  on forms like Write Checks.  Intuit investigated and determined it was an issue with the DPI settings for the screen resolution.  Details on how to fix it are in this support article.

Additionally, on the sample file (Rock Castle Construction) I discovered that all transactions became unclassified for some reason.  However, I haven’t heard of anyone else seeing this problem so it must be something weird with my computer and/or file.  Let me know if you encounter it too and/or submit a bug report (under Help > Send Feedback Online > Bug Report).

Quick Survey on QuickBooks 2013

Considering the latest changes included in the R6 update, please answer this quick question.  I will share the results of the survey in a future blog post.  Feel free to include your comments in the survey or in the comments for this blog post.

The Deadline is Friday, February 22, 2013

Just a quick note to let you know that Sandi Smith Leyva’s Accountant’s Accelerator program is closing to new members on Friday, February 22, 2013.

As an affiliate for Sandi, I personally know dozens of her clients and the great results they have had from the program. If you are looking for solid, proven ways to build your practice, serve clients better, and work smarter, then this program delivers. Here is just a little taste of what you get:

Read more

QuickBooks Tip: Solving PDF problems with Windows 8

When using QuickBooks with Windows 8, many people experience PDF related problems like emailing forms, previous bank reconciliation reports or saving as PDF.  Only QuickBooks 2013 with R4 update or newer is supported with Windows 8 and you shouldn’t have these problems.  If you have PDF related problems using QuickBooks with Windows 8, it is often resolved by following these steps (thanks to Arvind from Intuit Tech Support): Read more

Early Bird pricing deadline for Ultimate Accounting vCon is today

Just a quick reminder that Friday, February 15, 2013, is your last day to get the early early bird registration rate for the Second Annual Ultimate Accounting vCon May 16-17, 2013.

If you’ve already registered, thank you!

Save $70 off the regular price right now:   http://accountingvcon.com/register/

Our all-new 2013 content will include hot topics like estimating, packaging your services, dealing with trouble clients, analyzing client’s needs, how to monetize the new products you see, how to identify consulting opportunities, and much more. We’re including more hands-on demos, case studies, and checklists to help you grow your business.  Read more

QuickBooks Online for iPad App Now Available

Helps Small Businesses Work More Productively, Wherever They Are

With today’s introduction of QuickBooks Online for iPad, small businesses that are mobile by nature will no longer have to save the books for last. Rather, they can get more out of their workdays with an app that helps them work more productively, wherever they are.

“As a wedding planner, I spend 70 percent of my time away from my  desk meeting with clients and vendors. At the end of the day, I used to  sort through my meeting notes, map out next steps, track payments and  expenses, and follow up with invoices,” said Sadie Waddington of Locally Grown Weddings  in San Francisco, Calif. “Now, I save time by catching up on accounting  during the four hours I commute on public transit each week using  QuickBooks Online for iPad. The app also helps keep me more organized  and look more professional in front of my clients and vendors.”

Click here to watch a video of QuickBooks Online for iPad.

Now available in the App Store, QuickBooks Online for iPad brings the world’s No. 1 small business cloud accounting solution  to one of the world’s fastest-growing computing devices. It packages  the most useful on-the-go business tasks in an easy-to-use, friendly app  with a native iPad experience, including integration with the Camera,  Contacts, Push Notifications and Location Services.

“Managing a small business is a different game today than it was a  few years ago, due in large part to the proliferation of smartphones and  tablets,” said Dan Wernikoff, senior vice president and general manager  of Intuit’s Financial Management Solutions division. “We found that  more than 20 percent of QuickBooks Mobile for iPhone  users access the app through iPads. And, customers like Sadie told us  they need more than mobile point solutions – they need an all-in-one app  that lets them work in a whole new way, and that’s what we created.”

Get Started Quickly

Starting an account and learning to use QuickBooks Online for iPad takes just minutes.

• Sign up requires only a username and password.
• Guided setup walks new users through customizing and sending a sample invoice, a common task in QuickBooks, in a couple of minutes.
• Pulling in contact information from other sources is effortless. Users can download customer information from Contacts, Gmail, Yahoo or LinkedIn, and customer pictures from Facebook.

Provide Better Service

QuickBooks Online for iPad empowers small business owners to complete important tasks as they occur, which allows them to provide better customer service and get more time back in their days. It lets them:

• Create and send professional estimates and invoices on the spot to get paid faster.
• Get estimate approval by electronic signature from the customer to expedite jobs.
• Capture photos and notes to remember important project details, and for fast reference when completing forms or answering customer questions.
• Quickly access and browse a complete history of customer interactions, including notes and sales transactions, in the Customer Feed.

Organize Finances in one Place

QuickBooks helps small businesses organize their finances all in one place so they have business insights at their fingertips, and are prepared for tax time. Users can:

• View interactive reports and charts that provide at-a-glance snapshots of income and expenses, or more detailed views.
• Take photos of receipts and enter expenses to be organized for tax time.
• Stay on top of business updates at a glance with the Activity Feed. Users can check recent activity, and focus on what requires action, such as upcoming invoices or overdue accounts, with the “Needs Attention” view.

Financial Management on Many Devices

QuickBooks Online for iPad is the newest addition to the QuickBooks Online suite. Through a singular QuickBooks Online account, a business can access and interact with its data from a computer, iPhone, iPad, or Android devices. Data automatically syncs between devices and users, so small businesses can manage their finances anytime, anywhere.

More than 400,000 companies and 1.3 million individuals subscribe to QuickBooks Online globally, making it the world’s No. 1 cloud accounting solution for small business. Small businesses can easily customize QuickBooks Online by turning on Intuit Payroll, Intuit Payments and a host of third-party apps as their business needs evolve.

Pricing and Availability

QuickBooks Online for iPad is free to download in the App Store. QuickBooks Online subscribers in the United States can start using the app with their account login information right away at no additional cost. New users can instantly create a QuickBooks Online account through the iPad app and sign up for a monthly or annual subscription through In-App Purchase. After a 30-day free trial, QuickBooks Online for iPad starts at $12.99 per month or $124.99 per year, and includes access to QuickBooks Online on the Web and QuickBooks Mobile on a smartphone. Visit http://quickbooks.intuit.com/mobile/ for more information.

The QuickBooks Online for iPad app is available for free from the App Store on iPad or at www.appstore.com/QuickBooksOnlineforiPad.

QuickBooks 2013 Give Away – Prizes are now on hand!

Have you been waiting for the QuickBooks 2013 give away?  Well, I’m thrilled to say that the prizes are now on hand and ready to be given away!  Stay subscribed to my blog so you won’t miss a chance to win!

This week, a blog subscriber will be chosen at random to win QuickBooks Pro 2013 (MSRP $249.95).  Watch for an announcement at the end of the week! Read more

Women CPAs Host Virtual Accounting Conference

The Second Annual Ultimate Accounting vCon will be held on May 16-17, 2013 in the comfort of participants’ own offices.   The all-virtual, cloud-based Ultimate Accounting vCon (which is short for virtual conference) is the brainchild of Michelle Long and Sandi Smith Leyva, two popular accounting industry speakers.

Michelle Long, CPA and owner of Long for Success, runs the 21,500-plus member LinkedIn group called Successful QuickBooks Consultants, is a popular QuickBooks speaker and trainer, and is author of two books, including “Successful QuickBooks Consulting.” Read more

Get 50GB of Storage Space FREE from Box

What’s better than free?  Box will give you 50 GB of free storage space and all you have to do is register!  What a great way to have offsite backups of your data, share files with others, and more.  Just remember to not put the QuickBooks working company file (QBW) in Box or other file sharing services. Read more

5 Killer Ideas to Transform Your Accounting Practice

Do you need help with estimating and pricing your accounting services?

Do you want to learn more about offering higher value services?

Are you looking for new ways to improve your accounting services?

If so, we’d like to let you know about a complimentary webinar presented by thought leaders Michelle Long and Sandi Smith Leyva that will begin to answer these questions and more.    Read more

8 Simple Steps to Accelerate Your Accounting Practice, Free CPE, and Final Call for Accountant’s Accelerator 2013

If you:

• Are actively growing your accounting practice, starting a practice, or repositioning your services
• Struggle with time management and how to get everything done even though you’d like new clients
• Want to develop your business management skills so you can move from being a technician to a business owner
• Feel uncomfortable or lack confidence when it comes to marketing or selling

Then I’d like to invite you to a complimentary webinar on Tuesday, February 19, 2013 full of simple and low-cost tips, answers, and ideas to help you in these areas.

“8 Simple Steps to Accelerate Your Accounting Practice” Read more

Focus on Referrals

It’s that time of year again – tax season. Only accounting professionals truly understand the grueling busy season, which usually means little time for sleep, meals, or family and friends. Many will have their nose to the grindstone with their sole focus on getting the work completed. Who has time for networking or marketing during busy season? If that is how you think, then you may be missing a great opportunity for referrals! Read more

QuickBooks Tip: Tie out the Profit & Loss by Job to the Profit & Loss Report

If you use QuickBooks for job costing, then you should assign a customer:job to each transaction (including admin or overhead as a job).  However, sometimes transactions are not assigned a job.  If you compare the standard Profit and Loss to the Profit and Loss by Job you may discover the totals do not agree.  This quick video demonstrates how to compare the reports and identify transactions not assigned to a customer:job. Read more

Transform Client Relationships from Transactional to Consultative

Accountants, CPAs, Bookeeepers and others who want to start or grow their accounting practice will find this free webinar contains valuable and beneficial information.

Join Ian Vacin (Vice President of Marketing & Product at Xero), Michelle Long (CPA, MBA – Owner of Long for Success) and Steve Chaney (CPA – Owner of Chaney & Associates) as they share proven strategies and experiences on how accounting professionals can leverage modern cloud solutions to transform their relationships with clients from transactional, hourly relationships to consultative ones that place the accounting professional back as the Trusted Advisor.  Specifically, learn the process (with easy to follow steps) to move your once a year clients (like write-up / tax clients) to be monthly paying consultative relationships.  Gain perspective on the process, the conversations,and the outcomes of these new relationships and revenue streams. Read more

Accounting Professionals — Add Profits to Your Practice with Concur

One of my New Year's Resolutions is to focus on helping accounting professionals grow their business and improve profitability.  Adding Concur to your 'toolbox' for your firm or clients and joining the Concur Advisor Program is one way to add profits to your accounting practice. Read more

Busiest Day for Expense Reports Exposes Potential Two Billion Dollar Waste for U.S. Businesses

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