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Cash Management

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Cash Flow Cycle Thumb.gifGood cash flow is essential for small business success. Is yours as effective as it can be? Learn how to manage operational costs and monthly payments now and prepare for the financial challenges ahead with our new infographic.

 

Click here to view the Creating a Balanced Cash Flow Cycle infographic. 

You can also download a PDF version for
printing by clicking here.


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Avoid the cash flow crunch.  To help, we’ve compiled our newest and most popular cash flow content for you.  Click here.

Cash Flow Tips Thumb.gifFrom managing monthly payables and receivables to planning for the road ahead, maintaining good cash flow is important. Explore ways to optimize yours with the 10 handy tips provided in our new infographic.

 

Click here to view the 10 Cash Flow Tips for Small Businesses infographic.  

You can also download a PDF version for
printing by clicking here.

 

Managing Receivables.pngSpeeding up your receivables by a week or even a few days can have a long-lasting impact on your cash flow. Find out helpful tips in Managing Receivables, the first of two guides in our “Small Business Guide to Cash Flow Management” series.

 

Click here to download Guide #1: Managing Receivables (PDF).

 

 

 

Also, click here to read Guide #2 on Managing Payables.


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Become a cash flow guru. To help, we’ve compiled our newest and most popular cash flow content for you.  Click here.

Payables Thumb.pngMaking sure cash inflow exceeds outflow begins with your payables being carefully planned and reliably predictable. Learn how to maximize your cash outflow in Managing Payables, the second of two guides in our “Small Business Guide to Cash Flow Management” series.

 

Click here to download Guide #2: Managing Payables (PDF).

 

 

Also, click here to read Guide #1 on Managing Receivables.


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It’s all about the cash flow.  To help, we’ve compiled our newest and most popular cash flow content for you.  Click here.

Rising confidence is sparking a rise in equipment investment. Leasing may be one way to keep your company’s growth goals on track.

 

Leasing the equipment your business needs can be a strategy for managing your company’s cash flow and reserving its liquid assets for other areas of investment designed to hit your expansion and growth targets. To make the most of this resource, you need to understand current funding options and trends so that you can determine why and when leasing makes sense for your small business.

 

According to a forecast by the Equipment Leasing and Financing Association, “U.S. businesses, nonprofits and government agencies will spend nearly $1.5 trillion in capital goods or fixed business investment (including software) this year.” That figure represents an all-time high, and the majority of those assets will be acquired through financing, ELFA predicts. The association adds that this uptick in activity will reflect companies’ moves not only to replace older equipment, but to “aid in expansion” as “capacity utilization rates in some industries reach or surpass levels historically known to spur business investment.”

 

A more competitive cash flow strategy

William G. Sutton, CAE, ELFA’s President and CEO, notes that leasing can be particularly beneficial for you as a small business owner if your funding options for large purchases are limited. “The ability to make monthly payments, rather than large cash outlays up front, is a key benefit that can help small businesses maintain cash flow and greater certainty in budgeting,” he says. “One of many benefits is that small businesses can often acquire more and better equipment than they could have without financing—including the latest technology to remain competitive and meet their clients’ needs.”

 

In the short term, this approach can leave your cash reserves available to invest in research and development, marketing, and increased staffing or outsourcing that may be required to optimize your expansion and growth.

 

A secondary and longer-term advantage is that leasing can help you to strengthen your company’s credit position and establish the credit record that you’ll need to borrow for future growth. This can be particularly valuable if you’re a sole proprietor or owner of very small companies and are still in the process of building a credit history for the business that is independent of your personal credit record.

 

More trends to watch this year

ELFA is monitoring ten major equipment leasing trends for 2015. Visit ELFA’s Equipment Financing Advantage website to access an article and infographic about the top ten equipment acquisition trends of 2015 and its Ten Questions to Ask reference, which is designed to help map your company’s equipment leasing strategy.

 

Among its forecasts:

 

•    Improving market conditions will continue to increase credit supply and demand for equipment acquisitions.

•    Eyes will be on short-term interest rate increases.

•    Advances in the use of technology will drive innovative financing options.

 

In addition, the association is following economic "wild cards" that could have an impact on equipment acquisition decisions. On one hand, it is possible that global economic weakness could spark caution about business investment; on the other, “GDP growth from low oil prices, a potential surge in the housing sector and sufficient capacity utilization could have firms ramping up capital expenditures.”

 

 

Bank of America, N.A. engages with Inc.to provide informational materials for your discussion or review purposes only. Inc. is a registered trademark, used pursuant to license. The third parties within articles are used under license from Inc. Consult your competent financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

 


There are all sorts of ways that business owners measure success. It could be the number of units sold, the amount of seed capital raised, increases in website traffic, more conversions, increased buzz about their business, or any other number of things.

 

In the end, there is only one real measure for success in for-profit businesses: profit. After all, if you don’t make a profit, no other metrics matter. Profit is a simple concept in theory – it is nothing more than the difference between your wholesale costs and your retail revenue. However, there is nothing simple about it.

Steve-Strauss--in-article-Medium.png

More specifically, the variance between what it costs you to buy or make a product and what you can eventually sell it for is called your profit margin. Ideally, that will be a fairly big number, expressed as a percentage. For instance, if you can buy a widget for $3 and sell it for $5, your profit margin is a healthy 40% (you make $2 on every $5 sale, 2/5 = 40%).

 

Some businesses, like restaurants or discounters for instance, typically have a very low profit margin (in the single digits). They make up for a low margin with volume sales. Other businesses sell less, but at a greater margin. Either way, the question almost all small business owners have, whatever their margin may be, is how can they increase their profits?

 

Here are three ways to increase your profits. They are:

 

1. Increase your prices: No, you probably don’t want to raise your prices, but take a look at the big picture: People are your customers for all sorts of reasons. There are things you do as well, or better, than your competitors. It might be your:

 

  • Location
  • Prices
  • Products
  • Value
  • Convenience
  • Selection
  • Expertise
  • Reputation

 

You will notice that price is only one of many different things mentioned in this list. The reason is because, unless your essential value proposition is that you are the least expensive (which is unlikely), then people choose your business for many reasons, price being just one.

 

Overall, while no one likes raising prices, and the fear of losing customers as a result of a price hike is a legitimate concern, it is equally true that all businesses raise prices. Consider this: When was the last time you stopped patronizing a business simply because they increased their prices? Right, that doesn’t happen very often.

 

Click here to read more articles from small business expert Steve Strauss

 

So, if you want to make more money, and especially if you want to increase your profit margin, then consider charging more for your products or services. If you are still worried that it will turn-off your customers, test the new prices first before rolling them out across the board.

 

Celebrate-Article-Vert.gif2. Sell more: If you don’t want to increase your prices but still want to increase your profits, then your second option is simply to sell more. Selling more means you will make more. Yes, this is self-evident, but it is also a fact.

 

One way to do this is to do an 80-20 analysis. The 80-20 Rule states that 80% of your profit (or sales) come from 20% of your products or from the top 20% of your customers. So the question to answer is this: What are your top 20% products? Who are your top 20% customers? That small percentage of products and customers account for the vast majority of your sales.

 

Once you know the answer to that, then the path to more sales should be evident: Concentrate on those sorts of valuable products, find more of that type of customer, and you will make more sales that will make you more money.

 

3. Decrease your overhead: Think again about that profit equation I mentioned earlier: Profit is the difference between costs and sales. The first two ways to increase profit have to do with increasing sales. The other way relates to the first part of that equation – decreasing your costs. Selling the same amount at lower costs yields increased profits.

 

The challenge is figuring what to cut, and then how to cut it in such a way that it doesn’t eat into sales. Cutting overhead must be done with a scalpel and not a cleaver. Be judicious. See if you can find a cheaper supplier, or if you can reduce labor or insurance costs. Buy in bulk. Give employees an incentive for keeping costs down.

 

Increasing your profit is certainly possible, but it will require keeping close tabs on your margins and finding ways to alter the profit equation to your advantage.


About Steve Strauss

Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest,The Small Business Bible, now out in a completely updated third edition. You can listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss.

You can read more articles from Steve Strauss by clicking here


Bank of America, N.A. engages with Steven A. Strauss to provide informational materials for your discussion or review purposes only. Steven A. Strauss is a registered trademark, used pursuant to license. The third parties within articles are used under license from Steven A. Strauss. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

Video Replay of the Live Google Hangout: Tips for Small Businesses During Tax Season

 

 

The panel discusses strategies small business owners can keep in mind all year long to ease the burden during the April crunch time.  Topics include advice for surviving tax season, organizational tips and recent tax changes to be aware of.

 

The panel is moderated by Carol Roth and you will hear from:

  • David Solis, National Sales Executive, Bank of America Small Business
  • Ebong Eka, CPA and Small Business Expert
  • Steve Strauss, Small Business Columnist, USA Today

Taxes_Infographic_Thumb.gifEven though the majority of small business owners across the country have their taxes prepared by an accountant or other tax professional, it’s still a time-consuming task. Business owners spend nearly two billion hours a year in their efforts to stay current and compliant with ever changing tax regulations.

 

These are just a few of the highlights from our small business tax filing outlook. When it comes to the cost of getting their taxes prepared each year, a little more than a quarter of small business owners spend $10,000 or more, while nearly half spend $5,000 and above. Read on for tips on overlooked deductions, and the impact that the Affordable Care Act is having on tax filing.

 

Click here to view the infographic.   You can also download a version for printing by clicking here.

 

 


Jerry (opening a mail package): “Hey, what happened to my stereo – it’s all smashed up!”

Kramer: “It looks like it was broken during shipping. But I insured it for $400.”

Jerry: “So we’re going to get the post office to pay for my new stereo now?”

Kramer: “It’s a write off for them.”

Jerry: “How’s it a write-off?”

Kramer: “They just write it off.”

Jerry: “Write it off what? You don’t even know what a write off is, do you?”

Kramer: “No. I don’t. But they do.”


Many people don’t understand the ins and outs of the tax code and it’s not surprising. Federal, state, and local taxes can be very complicated (write-offs included.) Nevertheless, it’s true that when it comes to taxes, you as a small business owner have two duties:

  1. To pay whatever it is you owe, and
  2. To figure out how to legitimately reduce your tax bill to the extent you legally can.

Steve-Strauss--in-article-Medium.png

Here are our top tips that help you do both of those things:


1. Deduct all expenses that are “ordinary and necessary”: The higher your expenses are, the less you will show as income, and the less you show in income, the less you will pay in taxes. Some tax expense deductions are obvious – advertising, labor, rent, and so on. But others are less so and thus are even more important because they can be overlooked:

  • Home office deduction: By some estimates, less than half of the eligible small businesses run from home take the home office deduction.
  • Business debts
  • Startup costs: Expenses incurred before you open the doors can be deductible.
  • Trips that combine business and pleasure.

 

2. Make sure you pay all taxes for all employees. More than almost any other tax, the IRS comes down hard on missed employee-related taxes. These include:

  • Withholding.
  • Matching.
  • Unemployment tax. You need to also pay federal and state unemployment taxes.


Click here to read more articles from small business expert Steve Strauss


3. Make sure to pay all sales taxes to all entities. Where I live, a giant mattress chain store just went out of business. Why? They didn’t pay sales tax to the next-door state where many of their customers came from. Having what the IRS calls a “presence” in a state is the rule. 


4. Get your quarterlies in on time. The self-employed have estimated taxes due four times a year: April 15, June 15, September 15, and January 15.


5. Charitable Contributions. Charitable contributions typically “flow through” to the individual tax returns of shareholders (unless yours is a C corporation.)  These are the basic charitable giving rules:


6. Avoid the dreaded audit: No one wants an audit. Here are a few tips that can help you avoid one:

  • The charitable organization must typically be a non-profit. See “exempt organizations.”
  • In general, donations of property can be deducted only for their fair market value.
  • Pledges to give cannot be deducted until the contribution is actually paid.
  • Avoid payroll tax problems at all costs. Payroll tax debts are taken seriously by the IRS and must be avoided if you want to avoid an audit.
  • File on time
  • Don’t over-deduct: This is a red flag. If it’s not “ordinary and necessary” don’t deduct it.
  • Don’t do your own taxes: At some point, most small businesses outgrow do-it-yourself tax planning and software. A good accountant and/or bookkeeper is a necessity.

 

About Steve Strauss

Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest,The Small Business Bible, now out in a completely updated third edition. You can listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss.

You can read more articles from Steve Strauss by clicking here


Bank of America, N.A. engages with Steven A. Strauss to provide informational materials for your discussion or review purposes only. Steven A. Strauss is a registered trademark, used pursuant to license. The third parties within articles are used under license from Steven A. Strauss. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.


David-Solis3.pngBy David Solis, National Executive, Bank of America Small Business Centralized Sales

 

With so much demanded of them every day, small business owners are often experts in multitasking. Though they’ve learned how to juggle the numerous demands of running their business, tax season can still be a struggle for small business owners, as it requires additional attention and expertise. With recent changes to tax laws, filing 2014 taxes promises to be difficult. There are several things to keep in mind as you’re preparing your taxes this year – including credits and deductions, new tax rules around the Affordable Care Act and the importance of staying organized. Below are some items to keep in mind to ease your burden this spring.

 

Tax Credits from the Affordable Care Act

Many small business owners are concerned about the different impacts of the Affordable Care Act on their taxes. For example, if you’re paying health insurance premiums on behalf of your employees, you are eligible for a tax credit for those premiums. Also, if you have a business with 100 or more employees, you must provide health insurance to 70 percent or more of your full-time equivalent employees, or you’ll face a tax penalty. Be sure to pay close attention to such changes when filing this year.

 

Notable 2014 Tax Breaks

Two important tax breaks have been extended this year for small businesses. One is a $500,000 maximum deduction for the price of any qualifying equipment or software that you purchased or leased in 2014. “Qualifying equipment” can include software (such as your accounting or marketing software), computers, office furniture and/or business-use vehicles (such as a delivery van). In addition, you can depreciate 50 percent of the cost of qualifying equipment. That means you can deduct the cost and then receive an additional deduction from depreciation. Combined, these two tax breaks can result in significant savings for a small business.

 

Utilize the Appropriate Resources

Trying to do taxes on your own might not save you as much money as you think. Bookkeeping and filing taxes takes time—time that you could be spending growing your business, developing new products or services or helping clients. Should you choose to work with an accountant, finding the right one and developing a good relationship with him/her is crucial. Finding the right accountant is something you should consider talking to your small business banker about, as they often work closely with accountants in local communities and could connect you with one that specializes in your industry or size of business.  Theycan help you stay on track with your taxes, including quarterly estimated tax payments, all year long—kind of like a personal trainer for your finances.

 

If you think you’re up to the task and choose not to work with a CPA, there are plenty of do-it-yourself options during tax season. The more straightforward your business is, the more it may make sense for you to use tax preparation software.

 

Stay Organized

Staying organized throughout the year can save small business owners a lot of headache during tax season. This means keeping a detailed log of all travel and other expenses as they are incurred. Use whatever method works for you, whether it’s hiring a secretary, using an excel spreadsheet or handwriting the information in a notebook. Proper documentation will make tax preparation simpler, increase your money-saving options and avoid any upsetting surprises.

 

Want to learn more about tax-saving strategies? In March’s Bank of America Small Business Social Series, a panel discussed tax season and tips for small business owners. The Google+ Hangout was moderated by CNBC’s Carol Roth and included David Solis from Bank of America, USA Today’s Steve Strauss and Ebong Eka, CPA and small business tax expert. They discussed strategies for surviving tax season.  Click here to watch the video replay.

New entrepreneurs are a hearty, impressive group of people. Typically full of enthusiasm, optimism, and a willingness to do whatever it takes, they will jump into their new adventure sure of many things, unsure of a few others, and sometimes with an unwillingness to admit the difference.

 

And while that can-do attitude is great to have when you leave a job and start a new business, some things simply cannot be overcome by sheer force of will, and one of those things is the nitty-gritty analysis needed to figure out just how much it is going to cost to get your new venture up and running.

 

This info is critical to know because:

  • It will establish how much money you need to raise before you get started
  • It will help you figure out a budget and timeline for getting to profitability

 

Steve-Strauss--in-article-Medium.png

 

So, just what are those startup costs actually going to entail? They can roughly be broken down into two broad categories: Assets and Expenses. Let’s look at each:

 

1. Assets: You need to make a list of what you will need to buy to launch this business, and then estimate (to the best of your ability) what each one of these assets will cost. For example, if you are going to start a nail salon, you will need to account for the cost to build the stations, purchase the nail polish and other inventory, the cost for signage, and so on.

 

Assets businesses might find on this list include:

 

  • Computers and printers
  • Displays
  • Office supplies
  • Desks, chairs, filing cabinets, office furniture
  • Product packaging

 

Click here to read more articles from small business expert Steve Strauss

 

2. Expenses: There are two types of expenses to account for when you start a business – one-time startup expenses and ongoing expenses. For this analysis of startup costs, they need to be treated differently:

 

One-time expenses:

 

  • Legal and accounting expenses
  • Licenses and permits
  • Website creation
  • Remodeling / decorating
  • Deposits

 

Ongoing expenses:

 

  • Marketing, advertising, and related materials
  • Rent
  • Taxes
  • Insurance
  • Debt repayment
  • Utilities, Internet, phone
  • Wages
  • Salary of owner
  • Supplies

 

Once you have all of these numbers, the real trick is figuring out how to put them together in such a way that you really know what it is going to cost to get started.

 

The first few categories are pretty straightforward. Simply come up with a grand total for the assets you need to buy, as well as for your one time-expenses. For the sake of argument, let’s say that assets will run you $10,000, and that your one-time expenses are $10,000 too -- $20,000 total.

 

The real trick is that last category – ongoing expenses. A good rule of thumb is that it will take you at least six months after you begin your venture to start turning a profit. Of course, it could be more or less, but that’s a good figure to play with as that is how long it may take to market and advertise your business, get some customers, generate income, and get paid.

 

As such, you need to estimate what your ongoing expenses will run you for the first six months. Let’s say that it will cost $5,000 a month to run your business. That means that your startup expenses will break down like this:

 

Purchase of assets:                     $10,000

One-time expenses:                    $10,000

Six months ongoing expenses:  $30,000

 

Total:                                              $50,000

 

$50,000 is how much money you will need to open the business, outfit it, and have enough money in reserve to pay yourself and keep the doors open until you turn a profit roughly six months later.

 

Word of warning: Don’t underestimate these numbers. One of the worst things you can do is start a business and run into a cash crunch a couple of months down the road because your forecast was too rosy. Be conservative.



About Steve Strauss

Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest,The Small Business Bible, now out in a completely updated third edition. You can listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss.

http://www.smallbusinessonlinecommunity.bankofamerica.com/people/Steve%20Strauss/content

You can read more articles from Steve Strauss by clicking here





Biz_Debt_body.jpgby Iris Dorbian.

According to statistics compiled by the Small Business Administration, about half of small businesses close within five years. Of the reasons cited, insufficient cash flow and debt are among those commonly listed. Clearly, for small business owners struggling to survive and stay financially afloat, getting rid of debt should be a top priority.

But the question is how? Although the economy has been gaining considerable momentum since the dark days of the recession, there are still many business owners who are suffering the aftereffects of having taken out loans during that period to pay their bills or increase their cash flow.

The following are five suggestions courtesy of Debt.org., an Orlando, Florida-based site that offers people information on relieving debt. These takeaways should help small business owners eliminate or significantly reduce their financial burdens. 

1. Do a monthly budget

This will help you calculate just how much money you need for your business and how much can be earmarked for paying off your debts.

2. Cut costs

Sometimes just trimming excess expenses from an operating budget is enough to get a business through troubled times. Are there membership fees to groups and organizations that you no longer need? Cancel them so the money isn’t coming out of your account every month or quarter. If there is equipment that your business no longer uses consider selling it. If you do need it down the line, it might be more cost efficient to lease or rent it.

Biz_Debt_PQ.jpg3. Speak to creditors and/or vendors

If you owe them considerable money for past services rendered, try to speak to them about arranging to increase your credit line, reduce monthly interest rates, or restructure your repayment options.

4. Consolidate loans

Dealing with one creditor rather than several can lighten your financial burden and save time. Research loan consolidation companies that can help you navigate the process without tacking on additional fees.

5. Offer marked down items to customers

Not only can this elevate your profile within your community and attract customers, both new and regular, to your business (you can promote a big sale or discount at your store through print/digital media as well as word of mouth), but it might be a good way of generating extra income that can allow you to stay on top of bills.

Hiring_Accountant_body.jpgby Erin O’Donnell.


Nick Kaptain admits he didn’t know the difference between a bookkeeper and an accountant in 2009 when he launched Adlava, a web design, video production, and digital marketing firm based in Las Vegas. He hired a part-time bookkeeper and assumed that was all he needed.


“It was hard enough to focus on getting business and staying afloat,” Kaptain says. “Here was someone I could pay for 30 minutes or an hour a week to manage all my transactions.”


But as the tax year ended, Kaptain realized he had made some poor financial choices, such as not spending money on expenses that would have been tax-deductible. The company wound up with a large tax bill as a result. Kaptain realized his bookkeeper wasn’t equipped to offer the kind of long-term financial planning he needed.


His takeaway from the experience: “Definitely hire a CPA. They know more about tax strategies and can help prepare you over the course of the year.”


The difference between bookkeepers and accountants

The bookkeeper and the accountant have complementary roles, but they are not interchangeable. A bookkeeper deals with transactions – entering account data, paying invoices, and balancing the books. An accountant will use that data to run more sophisticated analysis of your business’s financial situation and outlook, and help with tax planning. Online tools such as QuickBooks and Bill.com make it easier for these professionals to share information in real time when they’re not in the same location. As Kaptain says, “The bookkeeper knows what the accountant wants to see.”

 

After starting up and operating a small chain of wine shops in Brooklyn, New York, Jason Richelson created ShopKeep, a point-of-sales system for small businesses that funnels data into online bookkeeping software. Retail businesses in particular have a lot of cash transactions that need to be entered daily, Richelson says. That’s the job of a bookkeeper, he says – to handle the data entry that’s time-consuming for the business owner.


When Richelson was running his wine company, the Green Grape, it grew from one to three stores quickly. And the company’s bookkeeping needs grew as well. “We were used to getting one or two deliveries of inventory a day, and then it was 20,” Richelson says. The growth also meant more employees and more paychecks to cut, which meant more work for the bookkeeper.


Using an accountant from the beginning

For the most part, a bookkeeper can’t offer guidance on taxes, acquisitions, or exit strategies. Issues like these require the expertise of an accountant. The question then becomes: when do you need an ongoing relationship with an accountant for your small business? And how often should you meet?


Tax accountant Andrew Poulos, principal of Poulos Accounting & Consulting in Atlanta, says an accountant can be useful from the beginning in an advisory capacity. They can help entrepreneurs choose the right kind of structure and entity for their business, and can advise whether to classify workers as employees or contractors. Poulos says many business owners make early mistakes in these areas that are easy to avoid with the proper guidance.


“The one place you don’t want to cut corners is the accounting aspect,” Poulos says. “Unfortunately, we live in a day and age where tax laws are complex, and it doesn’t take much to get it wrong.”


A business owner may discover that it makes sense to incorporate as an LLC or an S Corp because it’s more favorable than paying the self-employment tax rate. Poulos says it’s also helpful to have an accountant set up payroll tax withholding– a task that many business owners fumble.


An accountant can also help a business set up its initial metrics, says Michael Paull, a CPA who has served as advisory chief financial officer to companies in multiple industries. “A lot of business owners like to grow into the need for an accountant,” Paull says. “But there’s certainly a benefit to starting with one.”


Growing into the need

Some business owners are comfortable checking in with an accountant a few times a year. Poulos recommends two to four consultations a year at minimum in order to stay on top of your tax situation. “If you come to me once the year is closed, I can’t do any tax planning for you,” he says.


Accountants also have the analytical skills that can help improve operations or identify growth opportunities, Paull says. For instance, a business owner may have a good sense of which products sell quickly and which move slowly. But he or she may not realize what’s happening with inventory in the middle. An accountant could recommend products to drop or to bundle, or suggest price adjustments.


“A good accountant is a thought partner. They can bring best practices to your business,” Paull says. “An accountant is in a good catbird seat to have a handle on costs and the market. They may see an opportunity that a business owner wouldn’t.”


Hiring_Accountant_PQ.jpg

It’s also important for business owners to see that accounting needs are dynamic, not static, says George Malina, partner-in-charge of the accounting services practice for Sikich LLP, a professional services firm specializing in accounting, technology, investment banking and advisory services, based in Naperville, Illinois. Certain occasions call for more hands-on involvement, Malina says, such as when a merger or acquisition is being considered, or when the business is being passed on to the founder’s children.


A worthwhile expense

Small business owners with limited cash flow may hesitate to pay for more than a couple hours of bookkeeping a month. But accountants say their time is a small investment with the potential to save big money in the long run.


Accounting mistakes can be expensive, Poulos notes. Compare the expense of meeting with a financial adviser a few times a year – maybe at $100 an hour – to the cost of a tax audit, which can average $3,000 in accountant’s fees alone.


Malina says business owners who try to handle their finances alone are also giving up the opportunity to generate income. “Just do a simple calculation,” Malina advises. “If you’re spending 10 hours a week on bookkeeping and accounting, and you’re not even sure it’s right, what could you do with that time that would be more valuable?”


Finding a good fit

The business owner and the accountant should have a close working relationship. So it’s important to find someone who’s not only trustworthy but also compatible with you. Start by asking fellow entrepreneurs for recommendations on both bookkeepers and accountants, and consider whether hiring an individual or a service is a better fit. Poulos advises using only a licensed professional: either a CPA or tax accountant who, like Poulos, is an enrolled agent licensed by the U.S. Treasury.


Kaptain agrees that hiring professionals helps you look professional, too. He values the input he gets from both his bookkeeper and his accountant. Just as importantly, he’s comfortable with them.


“I ask my bookkeeper and my accountant for advice on all types of things. It’s nice to have strong relationship for that,” Kaptain says.


Disclaimer: Since the details of your situation are unique, you should always seek the services of a qualified professional for advice specific to your business.

The first few years in business can be challenging for many reasons, including money. It may take a while to learn about your industry’s business cycle for instance, or to figure out which promotions will bring in reliable income, or how to budget, and so on. Many small businesses go out of business early in the game because of such money issues and money mistakes. Learning how to deal with the finances of your business is a new – and critical – skill that you must master if you are to become an established, long-term business and a successful business owner.

 

Here are the five most common money mistakes new entrepreneurs make and how to avoid them:

 

Mistake #5: Investing in marketing without a plan. Back in the day when I was still practicing law full time, I had a client with a big problem. He had created a new, improved back support. Ergonomic, comfortable and affordable, it really was a “better mousetrap.” So my client raised some money, hired some friends, created a partnership, and away they went.

 

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One day, the VP of Marketing got an idea – if they advertised in one particular national magazine, their sales would go through the roof. The partners didn’t like it, but the VP was adamant. One day, on his own, he signed a contract for a $60,000 full-page ad.

That one decision almost put them out of business.

 

The problem was that the idea had no merit standing alone. Sure, it might have worked as part of an overall marketing strategy, with different elements that supported the ad, but that wasn’t the case. The moral of the story is that you need to create an overall marketing strategy before you sink any of your precious capital into one particular idea.

 

Mistake #4: Hiring people you don’t need. Many entrepreneurs will hire staff they can’t afford and don’t need because they think it’s necessary in order to look successful. That’s a big mistake. Labor costs can cripple any business, especially a new business.

But, that said, there are ways to bring in the help you need, affordably:

  • First, if you really need an assistant, hire a virtual assistant and only contract them for specific tasks.
  • You should also consider using independent contractors for projects rather than direct hires. You can always go back and offer a job to someone you used as a contractor if he or she was truly spectacular and if your revenue can support their salary. 
  • Along the same lines, a recent trend in business is to hire someone full-time as a temp employee, on a trial basis. If the employee passes the temp test, then you can bring them on on a more permanent basis.

 

Click here to read more articles from small business expert Steve Strauss

 

Mistake #3: Not hiring an accountant. Most entrepreneurs stay away from even consulting with an accountant in the beginning because of the cost. This is the one area where you should not be cheap. Having an accountant on board will help make sure that the books are set up properly and that you meet all of your tax obligations.

 

Additionally, your accountant can help set up your accounting software system, such as QuickBooks. He or she can also give you some pointers about how to best use the software. Thereafter, because most software is now stored in the cloud, you can share your books online with your accountant, thus saving you time and money.

 

Hiring an accountant doesn’t cost, it pays.

 

Mistake #2: Spending too much on overhead. One of the first pieces of advice I ever got when starting my first business was, “keep your overhead low.” It remains one of the best pieces of advice too, even now. For instance, don’t rush to rent office space or equipment that you can’t afford as it will do nothing more than create a strain on your budget. A shared office (like Regus, for example) will still give you a great space, with affordable access to assistance and equipment.

 

And the No. 1 mistake new entrepreneurs make too often is . . .

 

Mistake #1:  Not having a budget. Mistake #2, high overhead, comes from Mistake #1, not having a budget. The problem for many people is that they start a business without much more than a lot of enthusiasm and a strategy like, “come up with an idea, build a store, launch a website, and take orders.” That won’t keep the doors open too long. What will keep them open is a sound plan and budget.

 

Think of a budget this way: What is your ideal plan for your money? What do you need to spend your business capital on? And what would you like to spend it on? That’s all a budget really is – your plan for your money. So make a list of business expenditures, track your expenses for three months, and then re-prioritize your assets once you see where you should be spending your money.

 

You just created a budget, and you will likely stay in business for the long haul as a result.


About Steve Strauss

Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest,The Small Business Bible, now out in a completely updated third edition. You can listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss.

http://www.smallbusinessonlinecommunity.bankofamerica.com/people/Steve%20Strauss/content

You can read more articles from Steve Strauss by clicking here


As I mentioned in Part 1 of this piece, Get your business funded, this is a great time to get your business funded – something I’m actually surprised that I’m writing down on paper. After all, it wasn’t too long ago that the Not-So-Great Recession made finding and getting the money you needed for a business a very difficult task. But the silver lining of the recession is that new funding options came along as a result, and what we see today is a much more robust funding landscape.

 

Consider some of the many ways available today to fund your business:

 

Bank loans: As I like to say, banks want to lend you money. They are in the business of lending money. But more specifically, they want to make smart loans to responsible people, so you have to show your banker that a loan to you and your business is just that – a smart decision.

 

So that is where you start – meet with a banker early in the process. My friends here at Bank of America have hired a lot of small business bankers in the past few years, and I suggest that you meet with one in your neighborhood to get the process started. Many people wait until they think they have everything perfectly in place to meet with their banker. I would suggest a different method – get to know your banker early in the process, so they can guide you through it and perhaps suggest ways for you to improve so that you are an optimal candidate when the time comes to request a loan.

 

Credit cards: There are two ways to do this:

  1. Many entrepreneurs have funded their business using their own personal credit cards. The beauty of this is that you don’t need anyone else to say yes. As long as you have a solid plan for paying off the loan (to yourself) in a timely manner, this is a great way to go. The danger, of course, is when you don’t stick to that plan, and you put yourself – and potentially your family – into debt.
  2. If you have a business credit card, using that to fund your business is also a viable strategy for the same reason — you are free to use the card as you wish, when you wish. If you don’t have a business credit card, this should be a good reminder to get one.

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Microloans: Maybe you need a smaller loan, or your credit isn’t great for whatever reason. In that case, you might want to consider getting a microloan. Depending on the institution, these loans can be very micro, or not so micro at all:

 

  • CDFIs (Community Development Financial Institutions): CDFIs are nonprofit financial institutions in various underserved communities that make small loans. A CDFI loan, for example, might be as small as $2,000 or as big as something in the hundreds of thousands. Google CDFI in your area to find some lenders near you.
  • Accion: Accion is another nonprofit that makes microloans to small businesses. I have heard of Accion loans in the hundreds of dollars, and of course, there are much bigger ones too.
  • Kiva: Kiva is a peer-to-peer lending platform that facilitates microloans between individuals and low-income entrepreneurs. Up until recently, Kiva worked mostly in third world countries, but it has now come to the U.S.
  • The SBA: The Small Business Administration also makes microloans up to $50,000.

 

Crowdfunding: Of the new funding mechanisms that resulted from the recession, crowdfunding tops the list. Using a platform like Kickstarter (or Indiegogo, or a hundred others), a small business can appeal to strangers to help fund the dream.

 

There are essentially two forms of crowdfunding. The first is equity-based, where you sell a piece of your company (the equity) to an investor for the funding you need. This is more challenging for most small businesses. The second is a rewards-based system, where you give someone a reward for their investment in your business. For example, a restaurant may name a dish after a crowdfunding investor in exchange for a $500 investment in the business.

Click here to read more articles from small business expert Steve Strauss


Angel investors: An angel is what it sounds like – a person willing to invest in your business. Angels come in all forms: everyone from a stranger you meet through networking to your best friend’s dad.

 

Whatever the case, angels all want to see the same thing: a plan for success. They want to know that they are making a smart investment. As such, you need to have some sort of business plan ready for them to see. As with a banker, your job is to show the angel that investing in you is the right move.

 

Partners: Maybe you don’t have the money, but a potential partner does. You can offer to team up using your idea and sweat in exchange for their money and partnership. Just be sure that you like working together and are on the same page about the vision and direction of the business.  I’d recommend trying a few projects together before partnering on a business.

 

Business plan competitions: Many communities around the country are now creating competitions with cash prizes in an effort to lure and incentivize entrepreneurs.  A Google search can help you find one in your neighborhood.

 

So yes, today there are a lot of ways to Get Your Business Funded.


 

About Steve Strauss

Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest,The Small Business Bible, now out in a completely updated third edition. You can listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss.

http://www.smallbusinessonlinecommunity.bankofamerica.com/people/Steve%20Strauss/content

You can read more articles from Steve Strauss by clicking here



 


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