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3 Essential Metrics for a Smarter Marketing Spend

The only way to get smarter about how to invest your marketing dollars is to document and measure what’s happening now in your business.  What you’ve measured, you can then improve. 

Marketing Spend

The first step to measuring what you spend on marketing is to aggregate all of the costs.  They may be in one account or several.  Some of the places to look for marketing expenses include:

• Advertising – for online or print ads, trade shows, sponsorships, and other advertising costs
• Dues and subscriptions – for membership fees to networking and professional associations
• Education – for marketing training
• Marketing – for obvious reasons
• Office supplies – for graphics subscriptions and fees
• Payroll, salaries, and wages – for allocation of employee time spent on marketing projects
• Printing and postage – for flyers and direct mail
• Professional fees – for marketing consultants, coaches, designers, and writers
• Software/Technology – for marketing software and apps
• Travel – for trade show or conference attendance

Once you have aggregated all of these costs, you’ll have a good idea of what you’re spending on marketing and you can calculate the first metric, marketing spend.  The formula is

Total marketing costs / total gross revenue = Marketing spend

This gives you a percentage. 

Most companies spend five to ten percent on marketing. Higher growth companies will spend close to ten percent, and stable growth or slow growth companies will spend close to five percent. Large companies will spend more, from nine to 12 percent of gross revenues, than small companies.

CAC – Cost to Acquire Customer

Probably the most important metric for marketing is how much it costs on average to acquire one customer. To compute this, count the number of new customers for any period of time, and use this number in the following formula:

Total marketing costs / number of new customers = CAC

A more granular version of CAC is CPA, cost per acquisition. Unlike CAC, CPA is measured by campaign or marketing channel, or the source of how the customer was acquired. Example marketing channels include email marketing, social media, and paid ads, to name a few.  

Revenue per Customer

Revenue per customer is a good measure in many companies.  It can tell you how much, on average, a customer will spend at your company over a period of time, adding up all of the orders, projects, visits, or engagements for that customer. The formula is simple:

Total revenue for a period / total number of customers for the same period = Revenue per customer

A similar metric that’s valuable is how much a customer will spend at your company in their lifetime. That’s called CLV or customer lifetime value.  Use the same formula above but compute it based on the longest period of time you have records for. 

When you can compare revenue per customer or CLV with CAC, you can determine how much you can afford to spend to acquire new clients. 

The team at P.T. Anderson Accounting can help you calculate these metrics so you can become wiser about how to invest your marketing dollars. 

How the New Tax Law, CARES, Impacts Individuals

IRS and Congress have given individuals a number of ways to build up their cash reserves and/or pay less in taxes. Here are a few opportunities for taxpayers.

Stimulus checks from the IRS

Many of you received stimulus checks in the last month as a result of new laws designed to help you weather the economic downturn.  These Economic Impact Payments are not treated as income and you will not owe taxes on your payment. 

If you were eligible for a larger payment than what was received, the IRS will provide an opportunity on your 2020 return (filed in 2021) to make an adjustment to get any additional money you were due.  Conversely, if the IRS finds that someone received a larger payment than what they should have, the taxpayer will not be required to pay it back.

Dipping into retirement

Taxpayers have the ability to withdraw up to $100,000 from retirement accounts without paying the 10 percent penalty if the distribution is COVID-19 related (you need it to care for spouse and dependents or you experience adverse effects of quarantine/not allowed to work) from January 1, 2020 through December 31, 2020.  Income is included over a three-year period, unless the taxpayer elects otherwise.  If the amount is repaid, it is treated as a trustee-to-trustee rollover. 

Not dipping into retirement

Required Minimum Distributions (RMDs) for retirement accounts have been suspended.  If you are normally required to take a minimum distribution from your retirement account, you can skip it during the 2020 year. 

IRS payments for back taxes

If you are on a payment plan with the IRS for back taxes, you can suspend payments between April 1^st and July 15^th.  Interest on the amount due will continue to accrue.

Tax payments for 2020 taxes

Payment due dates for Q1 (normally due on 4/15) and Q2 (normally due on 6/15) estimated tax payments have been adjusted to July 15, 2020.

Deadlines

Since retirement contributions are tied to the tax return due date, the deadline for making a contribution to your IRA for 2019 has also been extended to July 15, 2020.

HSA and Archer MSA contributions for 2019 must be made no later than July 15, 2020.

Student loans

Federal student loan payments are suspended through September 30, 2020 and will not accrue interest during this time period.

Employers can offer to pay an employee’s student loans and other educational assistance up to $5250 without the benefit being taxable to the employee. 

Charitable contributions

Charitable contribution deductions will be reported differently on the 2020 tax return.  In the past, a taxpayer would have to itemize their deductions in order to get a tax break from making a charitable contribution.  For 2020, you can deduct up to $300 in cash donations without having to itemize your deductions.  Additionally, the maximum limit of how much a taxpayer can deduct has been eliminated.

For more information, please contact the team at P.T. Anderson Accounting.

5 Signs You Need to Upgrade Your Accounting System

To maximize profits in your business, all of your business functions need to run smoothly, including your accounting department. Your accounting system is at the core of your accounting function. If it is old or lacks the features you need, your business may suffer.  Here are five warning signs you can look for to determine if it’s time to upgrade or replace your current accounting system with something more cost-effective. 

1. Not enough users

If your current system limits the number of users you can have in the system at any one time, this could be a major enough reason in itself to switch to a larger option. Luckily, most accounting software companies include an accountant user for free, so at least this type of user doesn’t have to count toward your total requirements. 

If you’re not sure how many users you currently have a license for, we can help you check on that. It might be as easy as buying more licenses if you’re not at the maximum capacity.  But if you are at maximum, it may be time to look for a better accounting system with room for you and your business to grow. 

2. Outdated

 If your accounting system runs on desktop-based software that’s upgraded every year and you have not paid for or installed the upgrades, then your system is outdated.  If it’s been sunsetted, that means the software vendor no longer supports the software. You are at major risk for the software crashing, getting buggy, getting hacked, or worse, permanently breaking. 

The cost of getting the system current may be better spent looking for a new alternative, or moving to a cloud-based system where updates occur automatically. 

3. Lack of functionality or scale

It is commonly the case that your business has grown so much that it’s outgrown your original accounting solution. That’s good news!  It’s time to find a solution that will scale better for your business. 

You might be missing important features that are costing you more time and money than if you were on a system that offered those features. Common time-wasting activities in accounting include too much time spent on data entry and/or Excel spreadsheets to make up for what the accounting system can’t do.

4. Lack of reporting and analytics

If you’re unable to receive the reports and analytics you want to run your business better from your current accounting system, it may be time to switch. With better data comes better decision-making and if lack of data is costing you money, then it’s time to find a more robust system.

5. Lack of integrations

Thousands of apps exist to expand accounting systems’ core functionality. If your current accounting system lacks integration capabilities or does not have apps that are built to integrate with it, you may be missing out on additional functionality.  This include mobile apps; it’s quite common now to do much of your accounting work from your mobile phone.  Does your current accounting system have any of these red flags?  Contact P.T. Anderson Accounting so we can help you find a best fit for your accounting needs.

New Tax Deadline Is Official — July 15, 2020

Both the IRS and Treasury have announced that the deadline to file AND pay your individual federal income tax for the tax year of 2019 has been extended to July 15, 2020. 

Many states have extended their deadlines as well; please check with us to determine the deadline applicable to you if you live in a state that requires state income tax filing and payment.

If you cannot file your return by July 15, 2020, we can help you file an extension until October 15, 2020. The payment is still due by July 15, however. 

If you are due a refund, we encourage you to file as soon as possible so you can get that cash influx as early as possible.

For a while last week, we relied on a tweet from Treasury to document this news. But news releases were posted over the weekend to both the IRS site: https://www.irs.gov/newsroom/tax-day-now-july-15-treasury-irs-extend-filing-deadline-and-federal-tax-payments-regardless-of-amount-owed and Treasury: https://home.treasury.gov/news/press-releases/sm953 documenting the changes in deadlines.

There’s a lot to worry about right now. If one of the things you’re worried about is your taxes, let us take that worry off your plate so you can focus on other things. P.T. Anderson Accounting is here to provide assistance and guidance for you.