/Business Finance

2017 Financial Goals for Small Business Owners

If you are a small business owner, you should be setting goals as early as possible so that you are not caught behind the eight ball as the year goes by. Sweeping changes are expected in 2017, and you’ll need to be ready. For example, it’s predicted that 2017 will be the year that video finally overtakes text as the No. 1 form of communication on the internet. 2017 will also mark the rise of the independent mobile commerce culture, and, of course, virtual reality is on the immediate horizon.

Here’s how to prepare for the changes ahead.

Target Your Niche Even More Precisely

In order to grow your business, shrink your marketing. The major search engines, like Google and Bing, continue to reward localization and punish wide-net marketing strategies. There is also more competition in 2017 than ever before, including premium prices on the best keywords. You will need to stretch out your long-tail keywords even further and delve more deeply into a local or niche culture in order to get that organic traffic that drives the highest conversion rates.

Bother People

Many small business owners believe that the advent of new communications technologies means an automatic influx of customers. Even with the hands-down best product on the market, this is never the case. More robust communications only means more noise as potential consumers are bombarded with a deluge of advertisements and indirect marketing. In order to stand out, you have to personalize your messages – even going customer by customer. You cannot be afraid to bother people, and rejection cannot bother you.

Create an Emergency Fund

The businesses that are prepared for emergencies well ahead of time will be the ones that have a strong chance of thriving in 2017. Make sure you have access to an emergency budget just in case the market gets a bit unpredictable and your business takes a hit. If your funds quickly run out and you find yourself managing debt some time in the next year, then make sure you look into debt management plan (DMP) options. A DMP, which is usually offered by a counseling service or financial services company specializing in debt management, will help you tailor a solution to your situation and create monthly payments within your budget.

Shore up Your Free Business Listings

Before you get into all of the advanced marketing strategies for 2017, you need to have all of your basic bases covered. Make sure that you have a business profile on all of the major search engine business platforms. Competitors today have no problem cannibalizing your listing and driving traffic away from you if you do not. Also, make sure that your NAP is exactly the same on all of your business listings, abbreviations and all.

Automate Your Social Media

You actually need to spend less time on social media if you are going to be successful in 2017. This does not mean that your customers see less of you – only that you spend less time actually producing your messages and opening lines of communication. There are simply too many automation tools that you can take advantage of to stay on social media all day. The longer that you stay on social media for business, the more likely you are to gradually drift over into wasteful clicking that will eat away at your workday.

Stretch Your Budget

If you are a small or midsize business, your money will be moving in many different directions at once – marketing, operations and administration – and you will need to learn how to use financial leverage in order to keep everything afloat. There are certain credit card strategies that you can take advantage of in 2017 if you have the right partner. The financial industry is finally beginning to catch up to new technology, and bankers are happily doing more business with their best customers through these new avenues. Make sure that you understand the wealth of new techniques that are now at your disposal.

Prepare for the new year by taking control of your small business finances. By using even one or more of these strategies, your business will be able to face any and all of 2017’s challenges.

What Every Small Business Should Know About 1099s

Every year when tax time rolls around, I field questions from business owners about whether or not they need to send 1099s to their vendors. As common as 1099 forms are, they remain one of the most misunderstood Internal Revenue Service (IRS) requirements.

To make sure you understand the circumstances under which the IRS requires issuing 1099-MISC forms to vendors, I’m going to provide some basic “must-know” information here.

What Is A Form 1099-MISC?

You must issue an IRS Form 1099-MISC to each person you’ve paid $600 or more in services (including parts and materials), prizes and awards, rents or other income payments. The 1099-MISC only applies to payments you made in doing business; it does not apply to payments made for personal purposes.

To Whom Do You Need To Send A Form 1099-MISC?

If your business paid more than $600 to a vendor or sub-contractor [individual, partnership, Limited Liability Company (LLC), Limited Partnership (LP), or estate], you are required to send a Form 1099-MISC to document what you paid them throughout the year. In general, anyone who worked for you—other than your employees—will need a 1099 from you.

Also, unless an exception applies to them, you need to issue a 1099 to your landlord if you are paying rent for business purposes. You must also issue a 1099-MISC to your attorney if you paid for legal services that amounted to more than $600 during the year.

Are There Any Exceptions?

There are. The list is rather long, but most commonly these types of vendors do not get 1099-MISC forms:

Also, you don’t have to send 1099-MISC forms to vendors to whom you made your payments via a credit card, debit card, gift card, or a payment network like PayPal. The onus to report vendor compensation is on those payment companies.

How Do You Figure Out If A Vendor Needs A 1099 From You?

I recommend before you request vendors to do any work for you, ask them for a completed W-9 form. The W-9 will give you all the information you need for filing taxes. It supplies a vendor’s mailing information, Tax ID numbers, and business structure (so you’ll know if the vendor is incorporated or not and does or does not need a 1099).

When Is the Deadline To Send 1099s?

By January 31, 2017, you must do two things to comply with your 2016 tax year 1099 obligations:

  • Submit Form 1099 to each vendor (reflecting what you paid that vendor in 2016).
  • Submit a copy of the Forms 1099 you sent to each vendor, along with a Form 1096 that discloses in total what you paid to all vendors who received 1099s from you.

Make sure you check on your state’s rules, too. Some states require they also receive your 1099s.

What Happens If You Miss The Deadline? 

Sending the required 1099-MISC forms late (or not at all) could cost you. The penalties vary depending on how far past the deadline you wait to issue the forms. If your business had gross receipts of $5 million or less, the amount you’re smacked with could range anywhere $50 to $260 per form (for tax years 2016 and 2017). If you’re caught intentionally not providing a payee with a correct statement for tax year 2016, you could face a fine of $520 for each form not submitted (that amount will increase to $530 for tax year 2017).

Where Can You Get 1099 Forms?

Unfortunately, you cannot download 1099 Forms from the IRS website. You can, however, order them from the IRS site and have them mailed to you, or you can pick them up at an IRS service center, post office, or another location that supplies them.

Eliminate Headaches—Do It Right From The Start!

Whether you’re in the early stages of launching a startup or already running a small business, I recommend you talk with a tax professional who can share more details about 1099s and the other aspects of filing your tax returns.

Starting a business or ready to change your current business structure? Contact us about making the registration process hassle-free and as fast as possible. We’re here to handle all of your legal document filing needs!

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.

How to Handle Payroll for Your First Employee

Business is booming, and it’s time to hire your first employee. Finding great talent, hiring someone, and making sure that all of your new hire paperwork is in order is often a steep learning curve for entrepreneurs. Fortunately, once you go through the on-boarding process with one employee, you’ll be ready to handle many more as your company grows.

Do You Really Need to Hire an Employee?

First, you’ll need to determine whether or not you truly need to hire a full-time or part-time employee or whether contract labor or a freelancer can do the job.

Understanding the difference between the two main categories of employees versus independent contractors is critical, since mistakes can lead to hefty IRS penalties for not paying the appropriate employment taxes. An independent contractor has more autonomy in how they work, where they work, and how they complete each task, while an employee works directly under your supervision on set tasks, at the time and place of your choosing.

You cannot keep someone as an independent contractor status and treat them like an employee. The IRS takes a dim view of this approach since some companies use it to avoid paying unemployment taxes and other benefits. You must also be quite clear about job hours, since there are different insurance and tax requirements for part-time versus full-time employees.

Consider how you’ll track employee hours. If it’s just one employee, it may be easy to note when they arrive at work and when they leave. If you plan to expand your workforce, a computerized tracking system may needed to accurately track hours for benefits and payroll.

Once you’ve settled upon hiring an employee, create a job description for the position. Include roles, responsibilities, requirements for the job, and a list of tasks associated with the job itself. This will guide your hiring process and help wanted ad, too, so it’s an important task.

Finding Great Help

You can hire locally through newspaper or online classified ads. You can also place ads on job boards such as Indeed, Monster, and other sites. Base your job posting on the description. Receive resumes, review them, and interview the three most promising candidates.

Congratulations! You’ve found your candidate and extended a job offer. If they accept, it’s time to begin the hiring process, step by step.

The Hiring Process, from Start to Finish

There are certain legal and tax rules you must follow when you hire a new employee.

  1. Obtain an EIN: An EIN, or employer identification number, is a number used on many legal and tax documents. You apply for an EIN on the IRS website
  2. Register with your state’s labor department: You must register with your state’s labor department to pay the appropriate unemployment compensation taxes.
  3. Purchase Worker’s Compensation insurance: States require employers to carry Worker’s Compensation insurance to cover their employees in the event of an accident or injury on the job. Each state sets its own policies regarding Worker’s Compensation insurance, so check with your state’s labor department for the rules for your state.
  4. Set up your payroll system: You can set up your own payroll system or work with online payroll software to handle weekly payroll filing needs.
  5. Complete forms: Each employee should fill out a W-4 form, the withholding allowance form, and an I-9 form with verification of eligibility for employment. Photocopy proof of eligibility, such as driver’s licenses, etc., and return the originals to your employee.
  6. Report the employee: You must report employees to the state’s hiring agency. The state then checks against records of people who owe for child support.
  7. File IRS Form 940: You’ll need to complete IRS form 940 each year to report federal unemployment tax.
  8. Set up personnel files: Setup files for your new employees that includes copies of their resume or job application, employment verification, IRS forms, and emergency contact information.
  9. Sign up for benefits: If your company offers benefits, review them with your employee and ask them to enroll.
  10. Finish the process: Create an employee manual and hang up required “Employee’s Rights” posters. Follow all OSHA workplace safety regulations. Get your new employee the tools they need to do their job – a desk, computer, cash register, car or whatever else you need. Then welcome them aboard!

Other Considerations

Depending on your business needs, you may need to include in your hiring process an NDA. NDA stands for “Non Disclosure Agreement”. It is a legally binding contract that prevents employees from sharing trade secrets with anyone else. This protects your business if you have any important information that you don’t want getting out into the public.

Nontraditional Ways to Get Small Business Financing

Wooden Blocks with the text: FinanceSmall business owners who encounter trouble securing traditional loans have an ever-increasing array of alternatives to choose from.

Established banks working through the U.S. Small Business Administration offer the lowest interest rates on small business loans, but it’s tougher for entrepreneurs to obtain financing if their business is too new or too risky. Nontraditional lenders have stepped in to provide easier-to-obtain business loans for such entrepreneurs. The terms of this type of financing can vary widely, but expect to pay more for this speedier, easier option.

If you’re looking for a new source of cash for your business, consider these nontraditional financing possibilities.  

Online Lenders

Online lenders are unregulated, nonbanking companies that provide a range of financing options to small businesses. Loans from online lenders are easier to get because they use a combination of traditional underwriting metrics and nontraditional factors, such as accounting data and social media performance. Financing decisions are delivered more quickly than with traditional loans, but the tradeoffs for that convenience include higher interest rates and fees. Online lenders typically offer term loans, lines of credit and accounts receivable financing.

Peer-to-Peer Lending

A peer-to-peer lender acts as an intermediary between you and a third-party individual or institutional investor. It’s a type of online financing in which the lenders match borrowers with investors who are looking to earn a rate of return for their loan. After an investor agrees to fund your loan, the lender will transfer the amount directly to your bank account. You’ll then repay the lender according to the terms of the loan. The lender, in turn, will repay the investor. It’s an increasingly popular option among small businesses for its ease of approval. However, that simplicity will come at a price in the form of a higher APR. Continue reading “Nontraditional Ways to Get Small Business Financing” »

By | February 11th, 2016|Business Finance|0 Comments

How to Raise Your Prices in 2016

Blue arrow report growthIf one of your New Year’s resolutions is to increase profits in 2016, one easy way to do that is to raise your prices. But before you do, read on, because increasing prices isn’t something you want to do haphazardly.

First, Increase Value

While it depends on what you sell, I’m willing to bet that your customers shop around a bit to find the best price on comparable products or services to what you sell. Am I right? So raising your rates isn’t going to win you any friends. But if you also raise the value of what you offer, people will be willing to pay more.

What I mean is: what additional value can you offer that your competitors don’t? Maybe you offer free one-on-one support for the first year with your business services, where your competition charges for it. Or you add a free gift with purchase. There are countless ways to add value to what you’re selling. Spend some time looking at what your competitors offer to find gaps that you can fill with your own value.

Test Out Different Price Points

The conundrum with pricing is that if you charge too much, people won’t buy. If you charge too little, everyone will buy, and you’ll be swamped with orders but left with little profit. It’s a challenge to find the perfect price point.

I suggest testing out a few different prices by setting up landing pages for each, then promoting each. Maybe you test the $10 price point through a Facebook ad, share your $15 price page on other social media, and then try out the $20 price on a banner ad on a high-end website. Continue reading “How to Raise Your Prices in 2016” »

By | January 5th, 2016|Business Finance|0 Comments

Are You Looking for a Business Loan in All the Wrong Places?

Finance ConceptYou could be. One of the biggest challenges for small business owners in need of financing is looking where the odds are in their favor. The Federal Reserve Bank of New York has said the average business owner spends 33 hours trying to secure a loan. I’m convinced much of that time is wasted looking in the wrong places.

This is not a dig on banks. For the right borrowers and the right loan purpose, the bank is a great place to get a loan. I’m a big fan of the role community banks can play—although that role has decreased as more and more small banks either disappear or are consumed by bigger banks each year. The bank just isn’t the right place for every small business loan. In fact, some may not be able to work with new or young businesses, businesses that aren’t doing $1 million or more in revenue, or are looking for loan amounts of under $250,000.

Even the SBA has recognized this and spent much of this year courting the two largest credit union trade organizations to encourage their member credit unions to do more smaller-dollar small business lending. However, banks, credit unions and the SBA aren’t the only options for a small business owner today. In fact, there are probably more opportunities for financing today than ever before—provided you know where to look and understand the qualifying criteria.

What’s the Best Source for You?

BusinessLoans.com, an educational resource launched by OnDeck, recently released what we call the Fundability Quiz to help small business owners weigh their options and get a better feel for where they might find success looking for a loan. Twelve very straightforward questions, designed to address some of the key data points most lenders are looking for, will walk a potential borrower through some of the criteria that will not only help them find the right places to begin their search, but even more importantly, help them identify where they won’t have much success and where they might be wasting their time. Continue reading “Are You Looking for a Business Loan in All the Wrong Places?” »

By | December 18th, 2015|Business Finance|0 Comments

Small Businesses & Retirement: What You Need to Know

Top view of male hand assembling the word Retirement with white cards over textured rustic wooden desk.

Did you know that 68 million employees don’t have a retirement savings plan at all? This is often due to the fact that their employers — often small businesses — don’t offer employer-sponsored retirement plans. And small businesses aren’t eager to offer retirement plans for employees, either because they don’t know how to go about doing it or they can’t afford to.

But that may soon change. Illinois is leading the pack with recent legislation that will make it easier for small businesses to offer retirement planning to employees without a lot of paperwork.

Why Hasn’t This Happened Sooner?

Illinois isn’t alone in its concern over this topic; about half of the US states are considering similar plans. But what’s held them back is fear of being sued under the federal Employee Retirement Income Security Act, which puts the U.S. Department of Labor in charge of regulating retirement plans.

Illinois’ plan will reduce liability for states and employers and make it easier for other states to follow suit. It’s still early days, and the guidelines likely won’t be implemented until sometime in 2016. The retirement savings plan will be provided by the state, not employers, which takes the pressure off of them. Continue reading “Small Businesses & Retirement: What You Need to Know” »

By | December 14th, 2015|Business Finance, Managing People|0 Comments

15+ Online Resources for Startup Funding

PC01107If you’re contemplating getting funding for your startup, start by researching your funding options. Once you’ve decided which financing option is best for you, use the following resources to do your homework, find the best company to work with, and position your business as an attractive investment.

Small Business Loans

By far, the most popular type of small business loans are those backed by the Small Business Association. Banks and lenders that offer SBA loans are currently offering loans with interest rates between 4 and 10% and 25 year terms. You can take out an SBA loan for:

  • Starting a business
  • Working capital
  • Purchasing property
  • Equipment, fixtures, Inventory
  • Lease-hold improvements
  • Refinancing debt

The SBA offers general small business loans (through its 7(a) loan program) as well as those targeted to businesses with specific needs, like real estate and equipment loans, microloans, and disaster loans. The SBA also offers grants and other financial assistance. Continue reading “15+ Online Resources for Startup Funding” »

By | December 9th, 2015|Business Finance, Startups|1 Comment