/Business Banking

5 Ways to Keep On Top of Your Accounting

A small business lives or dies by its cash flow. If you’re not staying on top of your accounting, you could be making significant mistakes that can derail business growth. Failing to reconcile your business bank accounts, not keeping track of income and expenses, or waiting to apply payments to open receivables leads to incomplete or incorrect accounting information.

Business accounting doesn’t have to be an onerous task. With the right mindset, tools, and support, you can stay on top of your accounting and keep accurate track of your business’ income and expenses. These five tips will help you manage your numbers even if you’re not a ‘numbers’ person, and keep careful track of your accounting data.

Five Ways to Handle Small Business Accounting

  1. Hire an accountant: Some business owners have neither the time nor the inclination to complete their own accounting tasks. For these business owners, hiring an accountant makes sense. Look for a local accountant so it’s convenient to meet with your accountant on a regular basis. Make your accountant’s life easier by collecting all of your paperwork in a folder or envelope, and organizing it before your meetings. Keep track of all expenses, save receipts, and include bank statements and other payment indicators. To find a small business accountant, ask at your Chamber of Commerce or local business meetings, look through local listings, and schedule interviews and appointments with a few to find someone who has the skills and experience you need for your small business accounting needs.
  2. Purchase and use accounting software: There are many excellent small business accounting software packages on the market today. Each can be customized for your business needs. Accounting software makes it easier and simpler to track expenses, apply payments to open receivables, and track customer expenses. If you aren’t sure how to set up your books for the year, speak with a local accountant. Some are certified by accounting software providers such as QuickBooks to teach and manage the software packages and will set up your system for a nominal fee. This service may even be free of charge if you use the same accountant for your taxes and end of year accounting, depending on who you work with. While QuickBooks may be the popular software, there are plenty of alternative options to choose from to fit your business needs.
  3. Set reminders: Common small business accounting mistakes include not updating your books regularly, failing to send invoices on a timely basis, and leaving open invoices unpaid. Set weekly or monthly reminders for accounting tasks. Block and hour or two to update your books regularly and track down unpaid invoices. A simple calendar reminder on your smartphone or in your calendar tool on your computer can help keep you up to date and on-task with your accounting needs.
  4. Set and keep an invoice schedule: Make sure you establish a schedule to invoice customers or clients. Each business owner must evaluate and determine a schedule to invoice customers, but make it a routine to keep your cash flow even and regular. A service provider may send invoices upon completion of the service. Others may choose to invoice customers on the last day of the month or the 15th. The schedule itself does not matter, but having a schedule does. The more you can make invoicing a simple routine, the easier it is to stay on top of it.
  5. Organize your paperwork: By far the biggest hurdle many small business owners have to leap is staying organized. This can be especially problematic for businesses on the go, such as lawn care companies, mobile food trucks, and others who work in a non-traditional office setting. Many items can be organized and stored on your laptop, smartphone or a cloud-based file system such as Google Docs, but others involve paper receipts. These should be stored in a central location until you are ready to tackle your accounting. You don’t need a fancy storage system; a shoebox or an envelope can suffice. Just be sure to use it regularly and store it in a safe place until you are ready to input your data into your accounting software or drop it off at your accountant’s office.

Professional Advice Is Invaluable

Even if you choose the do-it-yourself route and handle your own basic accounting, a yearly ‘checkup’ with a professional accountant or CPA is highly advisable. Small business accountants are both numbers-ninjas and business strategists. They can advise you on how to use accounting software, the latest IRS rules, changes and requirements, state taxation laws, and other issues pertinent to your accounting needs. With a good accountant by your side, you can be sure that your business’ financial information is handled competently.

Will Your Business Need Financing in the New Year?

As you plan and set goals for your small business in 2017, one area to look at is financing. Will you need additional funding at some point in the New Year? If the answer is yes, how will you raise the money? Take a closer look at the two primary means of raising capital — equity financing and debt financing — and what you need to know about each.

Equity Financing

In equity financing, you give up a piece of your business (equity) in return for an investment of capital. Equity investors may be private investors, venture capital companies or even your friends and family.

Angel investors are the most realistic source of investment capital for most small business owners. Angels are private investors; some invest individually, while others form angel groups to pool their money. Generally, angels are experienced business people, former business owners or professionals. In addition to the capital they can provide, they can also offer much needed business guidance and expertise.

If your small business has strong growth potential in an industry such as technology or healthcare, you may be able to get venture capital. Venture capital firms tend to focus on businesses with a track record of success and potential for rapid growth with a high return on investment. They make large investments, but in return, will want to have a strong say in your business and possibly even take over management.

If you plan to seek capital from investors, it’s important to make sure the business structure you chose will allow what you want to do. For example, if you operate as a sole proprietor, you won’t be able to take on equity investors, since there is no separate “company” to invest in.

A general partnership, C corporation or limited liability company (LLC) form of business all enable you to sell shares in your business. However, if you have an S corporation, the number of shareholders you can have is limited to 100, which could be a problem. In addition, the S corporation form limits what type of person or entity can be a shareholder or owner, which could cause problems either in raising capital or transferring ownership of shares down the line.

While taking on investors may seem like an easy solution to getting the money you need, you should think carefully before giving away equity in your business. Depending on the amount of equity they control, investors can make it more difficult for you to make decisions about your business without their input. Your relationships with investors, even those you are currently close to, may change in the future, leading to unforeseen difficulties. If you give up too large a stake in your business, you may eventually lose control of it altogether.

Debt Financing

As the name implies, debt financing means taking on debt that you need to repay at some point. Typically, this means a bank loan. However, debt financing can also take the form of loans from friends and family, credit unions, or alternative financing sources or even taking credit cards advances.

Business loans can be secured or unsecured. Secured loans require you to put up some collateral, such as business equipment or your house, to obtain the loan. Unsecured loans don’t require collateral, but are often more difficult to get and have higher interest rates and fees.

If you’re seeking a bank loan, the best place to start is with a bank that makes Small Business Administration (SBA) loans. SBA loans are partly guaranteed by the SBA, which makes banks more willing to lend to small businesses they otherwise might consider risky borrowers.

Other sources of debt financing include:

  • Equipment financing: If you are purchasing business equipment, the company that makes the equipment may have financing options available.
  • Invoice financing: Invoice financing companies advance you money based on the amount of your outstanding invoices.
  • Factoring companies: Similar to invoice financing, factors purchase your outstanding invoices for a percentage of their value, and then take over collecting on the unpaid invoices for you.
  • Merchant cash advances: If your business makes most of its sales via credit cards, such as an e-commerce business or retail business, you may be able to get a merchant advance based on the amount of your average credit sales.

The Right Choice

To make sure you’ve selected the right form of business for your financing needs, it’s best to discuss it with your attorney and accountant before making any decisions. If you need to make changes to your business structure before seeking financing, start now so you’ll be ready to go after the capital you want in 2017.

Applying for an EIN – FAQ

We are excited to bring you another post in our monthly FAQ series!

This month, we are discussing an integral part of business formations – EINs. An EIN (Employee Identification Number) is also known as a Federal Tax ID Number or FEIN. Whether a corporation or LLC, obtaining an EIN is an important part of starting a business!

Check out our CEO Nellie Akalp‘s answers to your burning questions below:

Q: What is an EIN?

A: An EIN (Employer Identification Number) is like a social security number for businesses It’s how the IRS identifies your company and tracks its activities.

Q: Who needs to get an EIN?

A: Your business is required to get an EIN if any of the following apply:

  • Your business is structured as a corporation or partnership
  • You have employees
  • You have a Keough plan
  • You file any of the following tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms
  • You’re involved with certain organizations as defined by the IRS

In addition, you’ll most likely need an EIN in open to open a business bank account and credit card.

Q: I’m a sole proprietor without any employees, can I get an EIN?

A: Yes, if you don’t fall into any of categories listed above, you’re not required by law to have an EIN for your business, but you still can get one. The main advantage in filing for an EIN as a sole proprietor is that you won’t need to give out your personal social security number to clients, vendors, and other business contacts.

 

Do you need help applying for an EIN or have a questions regarding the process? Call the CorpNet.com team today for a free business consultation at: 888.449.2638

                               

By | October 6th, 2016|Business Banking, Business Filings, FAQ, Starting a Business|0 Comments

Is a Long-Term Business Loan the Best Choice to Fuel Growth?

Three girls in formal clothes holds a meeting by reading the information on the tablet

A long-term business loan is a good fit for many small business financing needs. If you’re looking for capital to invest in a new building, a big ticket purchase such as a new lathe for a manufacturing plant, or anything else for business use that will likely be depreciated over several years of useful life, a long-term loan could be the appropriate way to finance those longer-term investments in business infrastructure and equipment. Many times those investments are needed to facilitate future business growth.

However, a long-term business loan may not always be the best, or even the only, choice for financing growth.

Growth can also be financed in other ways. While many growth initiatives can be described like the long-term investments mentioned above, many times fueling growth involves taking advantage of short-term opportunities—which might not be the best use for a long-term small business loan, unless you can confidently predict the repeated need for capital for such short-term opportunities. Some of the growth opportunities that might be a good fit for a shorter-term solution include:

  1. Ramping up for a new contract. Sometimes new contracts or new customers require a short-term infusion of capital to get things up and running. It might require a business owner to prepare for new employees, update equipment to facilitate the new contract, purchase additional inventory, or bridge a potential cash flow gap created by a short lag between when you need to deliver on the contract and when you start getting paid. This might be a use case where short-term financing could make more sense than a long-term business loan.
  2. Purchasing quick-turnaround inventory at a discount. This could be another good fit for short-term financing. While it might make sense to finance equipment that will be depreciated over the course of several years with a longer-term loan, it might not make sense to make payments on inventory that will be sold over the course of a few months for several years into the future. Sometimes the accrued interest costs of a long-term loan can negatively impact that inventory’s ROI.
  3. Repairing or updating light business equipment or facilities. Depending upon the nature of your business, this could include updating an older machine with new technology to accommodate new quality control requirements or refreshing the décor or adding additional dining space in a restaurant to accommodate more customers. Many business owners turn to short-term financing to accommodate this type of growth.

The above examples of short-term growth initiatives are representative of some of the needs a business might face facilitating opportunities for growth. Fortunately, small business owners have more options than ever before to encourage growth—choosing the right financing simply requires matching the right loan terms to the loan purpose. In addition to traditional sources like banks, credit unions, or the SBA, depending upon the nature of the growth initiative there are other sources of capital, like online lenders, that could be a good fit.

Loan purpose should drive the decisions about loan term. Evaluating loan purpose before you start looking for a small business loan to finance growth will not only help determine the loan term—in addition to a thoughtful consideration of your current business and personal credit profile, it will help you identify the funding sources where you’ll most likely find success. It will also help you identify how much you should borrow and where you may need to improve your profile.

Accessing capital to fuel small business growth can be a big challenge for many businesses. What’s more, the world of small business lending today requires you to become savvier about your options so you can match your business needs with the right loan.

Once you’ve chosen the right loan for your business needs, it may be time to revisit your business structure and incorporate or form an LLC. Call us anytime at 888.449.2638 for a free business consultation!

Ty Kiisel is a contributing author at BusinessLoans.com, a new resource full of content addressing all aspects of business financing for small business owners. Ty has over 25 years of experience in the trenches of small business, and provides personal anecdotes and valuable tips to help small business owners become more financially responsible.

Image: Adobe Stock

5 secrets behind effective invoicing

Entered InvoiceFor many entrepreneurs who start a business, having customers who pay on time, every time, would only happen in an alternate universe. While you can’t eliminate the hassle of nudging customers to pay, you can make invoicing less stressful.

Invoices detail how much money a customer owes for goods or services provided by a business. Small-business owners use invoices for accounting and tax purposes, as well. When customers let invoices slide past the due dates, maintaining cash flow can become a challenge for business owners.

To help set up your business for success, here’s how to invoice more effectively.

1. Lay out your expectations in writing

Provide a quote to your customers before any transactions occur — and do it in writing. A conversation is fine for an initial agreement, but follow up with more specific terms, including an estimated cost, time frame for delivery of your product or service and the kinds of payment you accept.

Once you’ve provided a service or product, the invoice should detail exactly what a customer needs to know to make a payment, such as:

  • An itemized list of the goods or services provided — including costs, taxes and totals.
  • Specific payment instructions with an address to send a check to, credit cards that are accepted, or directions for using PayPal or another online payment system.

2. Use invoicing software 

If Excel is your only invoicing tool, you’re missing out on the benefits of automating. Invoicing software can reduce mistakes because you don’t have to manually enter billing information. This feature will come in handy with repeat clients. You can send invoices digitally to streamline the process.

3. Track invoices consistently 

Software can make invoicing more efficient, but remember to keep a digital or paper trail. Create a chronological, numerical system to assign your invoices and stick to it. A system is only useful if it’s consistent. This organization also will be a big help when tax season arrives. 

4. Send out invoices immediately

As soon as the services have been provided or goods delivered, send your invoices while you’re still on the client’s mind. If you want to get paid faster, offer the ability to make online payments at your website or via a mobile app. Some businesses send email as well as snail-mail invoices as an extra reminder.

5. Be clear about payment terms and follow up 

To increase the odds of getting paid on time, lay out clear directions for the payment due date. You can ask your client to pay by a specific date or within a number of days, typically 14 to 30 days after the date of the invoice.

Consider charging an interest fee on late payments, but be sure to disclose the interest fee in your written agreement with a client. To motivate clients, you could offer discounts for paying early or by check instead of credit card.

Before you expect the payment, send a written reminder that payment is due and note the day it is due. If the date passes, follow up within a week and include any interest fees that are part of the new payment.

If you end up with a slow-to-pay client, always remember to be polite in your interactions. A simple “please” and “thank you” can go a long way toward maintaining a business relationship. If an invoice slips badly, consider reaching out to the client to see if you can arrange an alternative payment plan.

Anna Helhoski is a staff writer at NerdWallet, which provides clarity around decisions that help you start or grow your small business. We provide clear unbiased information, entrepreneur-focused advice, and tools for small-business loans, tax and legal issues. We also connect you with experts who can answer questions about growing your small business.

Now that your invoices are in order – call CorpNet to get your business legally set up. Incorporate, Form an LLC, File a DBA and more! 888.449.2638

Image: Adobe Stock

5 Tips To Help You Secure A Small Business Loan

Female hand filling documentHave a great idea for a small business but need money to launch the idea? Getting a lender to give you a loan isn’t as easy as filling out an application. Rather, many lenders are selective in which business loans they approve. Here are five tips to help you secure the small business loan you need.

Create a Business Plan

Expect the unexpected by creating a solid plan. Your best chance of securing a small business loan is to create a strong business plan before you start filling out loan applications. Small business ideas are a dime a dozen and lenders aren’t going to approve a loan application without first assessing how well you’ve developed your business idea.

A few of the basics to include in a business plan include your overall business idea, how you plan to make money, how many expenses you expect to have for the first few years and more. The more details you can flesh out regarding the business idea, the better. A well rounded business plan will show lenders that you’re a serious entrepreneur and that you’re committed to making your business idea a success. Continue reading “5 Tips To Help You Secure A Small Business Loan” »

By | September 15th, 2015|Business Banking, Business Finance|0 Comments

How to Get Paid on Time

76_2560058Due to current economic conditions, it’s likely that collecting on your accounts receivables is becoming more and more of a challenge. Strengthening your collection procedures may allow you to improve collection rates and shorten the aging days of your accounts receivables.

The following suggestions will help your business improve its cash flow and tighten up its credit and collections policies. Some of the tips discussed here may not be suitable for every business, but can serve as general guidelines to give your company more financial stability.

Define Your Policy. Define and stick to concrete credit guidelines. Your sales force should not sell to customers who are not credit-worthy, or who have become delinquent. You should also clearly delineate what leeway salespeople have to vary from these guidelines in attempting to attract customers.

Tip: You should have a system of controls for checking out a potential customer’s credit, and it should be used before an order is shipped. Further, there should be clear communication between the accounting department and the sales department as to current customers who become delinquent. Continue reading “How to Get Paid on Time” »

By | January 10th, 2014|Business Banking, Business Finance|0 Comments

Creating a Banking Relationship

609_3424129Money is the key to keeping your business going. You may be in an early stage, just planning or incorporating your business, but you should have thought through the issue of money, including how you’re going to make it, keep it coming in, and keep that cash flow increasing over time.

In the past, banks were a natural choice for loans, as most people had their own personal accounts in a bank and had relationships with the bankers there. While some of that has changed, there’s still a lot to the idea of creating a relationship with your banker, according to Jay DesMarteau, Head of Small Business, SBA, Restaurant, & Government Banking at TD Bank, one of the 10 largest US banks, with branches in 15 states and the District of Columbia. Continue reading “Creating a Banking Relationship” »

By | March 20th, 2013|Business Banking, Business Finance|0 Comments