Simple Small Business Accounting Tips

It’s an easy area to overlook. As a business owner, you might look at making your website more effective, improving your management skills, company morale, conserving electricity, and getting the best prices on your raw materials but there’s one place that you might not think twice about.

Your accounting department probably isn’t an area you scrutinize. One or two people sit at a desk all day, shuffle paper, type a lot, and at the end of the day, if bill collectors weren’t calling you, you’re happy.

Or maybe your accounting department is you. You might not be an accountant by trade so you’re always looking for a way to make the act of money shuffling more efficient is welcome. We’re here to help.

1. Consider Lockbox Processing

If you receive a large amount of customer payments, you’re a prime candidate for lockbox processing. Instead of having payments sent to your business address, they go to a PO box where the bank processes the payments and deposits them directly into your account. The bank sends you electronic records of the transactions that are automatically entered into your accounting software.

If it seems a little complicated, it will be at first but the amount of time saved by not manually processing payments makes the investment of time and money worth the hassle.

2. Improve Credit Screening

A sale is only a positive for your business if you actually get paid. A customer who doesn’t pay becomes a bad debt and that costs your business money. If you’re shipping product on credit, do a credit check first. Invest in software that will automatically screen customers and put a hold on shipments if their credit looks questionable.

Ask for a deposit or ship COD to avoid the accounting nightmare of chasing down bad debt. Even if you recover the debt, you probably lost money anyway.

3. Rethink how you reimburse employees

The process is often cumbersome. Employees who amass travel and entertainment expenses fill out a form, include a stack of receipts, and submit for reimbursement.

The problem, however, is the errors. Mislabeled codes, addition errors and missing information mean more work for the people processing the payment.

Instead, use an electronic entry system that prepopulates information and allows the employee to scan receipts. All or most of the process becomes automated.

4. Use a purchase card

One employee spends $5 and needs reimbursed. Another spends $10 and yet another spends $7. How about the $29 invoice that arrived today? All of these small charges take far too much time for such a small amount of money.

Instead, give key employees and/or departments purchase cards. When they make a purchase, they submit the receipt or invoice and accounts payable matches the receipt to the statement. Instead of multiple checks, they cut only one for the month.

5. Use a standard chart of accounts

Instead of allowing people to code invoices as they would like, make everybody use the same account numbers. When processes are consistent across all employees and departments, the accounts people can process paperwork more rapidly.

6. Make new employees complete all paper work before starting

Allowing important employee documents trickle in makes it more difficult for HR and accounts payable. Send the employee all paperwork prior to their first day and tell them that it has to be submitted before they start working.

7. Collect or apply taxes immediately

Waiting to do something later invites accounting errors. When employees are paid, account for payroll taxes right away. Same with sales taxes. And pay estimated taxes regularly and on time.

8. Set up separate coding for ongoing projects

If you’re constructing a building, creating new technology or other project that is ongoing, set up separate line items. This allows you to pay bills as needed but gives the project manager clean, easy to generate reports of how costs compare to the budget. Entering costs of the project into the general ledger at a later date means processing the same invoices twice. There’s no need for that.

9. Download bank records daily

If you’re using software like QuickBooks or another higher-end package, downloading transactions from the bank daily is easy and automatic. Not only does this allow you to check for fraudulent activity but it makes generating monthly reports faster. Higher-level managers don’t want to wait until the middle of the month for financial statements from the previous month. Easily solve this problem by doing the work throughout the month while transactions are fresh.

Special Tips for Selling Your Business and Retiring

The majority of business owners are planning on the proceeds from the sale of their business to fund their retirement. However, the 2013 State of Owner Readiness Survey revealed that over 80% of business owners have no formal transition plan.

Historically, only 25% of businesses up for sale actually sell. Those odds are likely to become worse as millions of baby boomers attempt to sell their businesses over the next decade in the Exit Bubble®.

Combine the lack of readiness with the historically low success rates for selling a business, and you could be looking at the perfect storm for business owners. Below are five tips to increase your odds for a successful business sale:

1. Start planning NOW! It is never too early or too late to start planning the sale of your business. You’ll need to become informed on the emotional aspects to anticipate, and educated on the numerous tactical complexities of the business sale process. This will help put you on a level playing field with buyers and increase the odds of a successful sale.

2. Create a clear vision of what comes next. One of the biggest reasons businesses don’t sell is that business owners don’t have a vision of what they will do next. They can’t imagine not being the owner of “XYZ Company,” and the fear of the unknown causes them to walk from a deal at the last minute (cold feet).

For you, what comes next might involve working in a different occupation, dedicating more time to charity work or becoming a coach. Taking the time for this introspection early in the sale process greatly increases your odds of successfully getting to the closing table.

3. Be armed with the facts. It is natural that, as a business owner, you value your business higher than most buyers. You have spent years of blood, sweat and tears building your company and know it inside and out. Unfortunately, buyers don’t have that same level of understanding or legacy. Before buyers begin to ask questions, perform your own pre-sale due diligence on your business. View your business through the eyes of a potential buyer to identify impending issues and arm yourself with detailed facts about the business. Sellers who can answer detailed questions with facts and data (as opposed to opinion and anecdote) instill confidence in buyers and make the due diligence process easier.

4. Minimize surprises. Surprises are fun for birthdays but not when selling a business. When dealing with a potential buyer, it is human nature to want to avoid discussing a negative issue such as a troubled customer relationship. Especially for proud business owners who feel confident the relationship issues can be resolved. Buyers may not have that same confidence without the years of history with that customer. Instead, identify potential negative issues during your pre-sale diligence, and disclose them immediately while you still have negotiating power. Once you sign the letter of intent, a negative surprise in due diligence could result in a reduced purchase price or a failed deal.

5. Don’t take it personally. Due diligence is the most personal thing you will do in business, and it’s critical you don’t take it personally. Buyers routinely perform due diligence to confirm what you have told them and to find potential reasons to reduce the purchase price. This is standard business practice. Buyers question everything about the business and want facts to support the answers you have provided. You might feel like you are being attacked and a buyer is criticizing your business. By having a vision for your life after you sell, and by being prepared to answer the difficult questions, you can keep your emotions in check and get to the closing table.

You may not be planning to sell your business anytime soon, but you might find yourself needing to sell your business. An unexpected illness (yours or a family member) or a significant change in your financial situation may bring you to the negotiating table sooner than anticipated. Preparing yourself and your business now will increase your odds of a successful sale when the time comes.

How to Get Approved Business Loans for Start-Ups

Businesses have trouble securing financing at the best of times. Normally you have to have two to three years of solid financials before a money lender like a bank will even consider lending you money. Often you need to have a strong personal credit record to be eligible for a decent business loan from start-up. There are other lenders that offer business loans specifically for start-ups so the process is easier now than it was a decade ago. However, to stand the best chance of securing those much needed funds, follow these four steps to cement getting approved:

Be a homeowner
As a homeowner you will already have created a history of borrowing and are in possession of a large asset that can be used as security. Lenders are risk conscious. Business start-ups are in a high risk bracket. There is no way to tell if your idea will work, or you are a good money manager or if the execution of the idea will go to planned. They have to rely on your existing assets to pay the debt in the event of default.

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Include all your assets in your application
The level of borrowing you can secure is normally determined by the amount of security you can place against the loan. Being a homeowner is suitable as usually that is the biggest asset a person or a family owns. In a business, there may be more than one person applying so each person should list their assets as security to garner the highest loan possible.

Items that are considered assets include:

Cash
Property
Shares
Bonds
Vehicles

The higher your asset value the more money you are able to borrow. Be careful not to overextend yourself as you are liable to lose each asset you use as security against your loan.

Have a good income record
Have your old tax returns on record to demonstrate that you have had a good history of income. Even though starting a new business will affect this, if it is demonstrated that you are capable earner then it does make the lender less cautious.

Account exactly where the business loan will be allocated
This is vitally important to getting your loan approved at the maximum level. If the lender can see where exactly the money is going they can ascertain if your application is viable. If you just make an application of $50,000 with no indication of how you are going to spend it then you may well get rejected. If you make an application for $100,000, where the total is itemized you are likely to be approved:

$15,000 is for premises
$50,000 is for equipment
$25,000 is for inventory
$10,000 is for staff

From this quick list, the money lender can see that if you default they can retrieve money from equipment and inventory that will account for 75% of the total loan as well as the security you have put up.

Information About 4 New Ways to Self Fund Your Startup

Self-funding, or bootstrapping a startup company, means different things to different people. To the Silicon Valley serial entrepreneur who just sold his company to Google for $100 million, bootstrapping is just writing yourself a big check. To the newer entrepreneur who is lucky enough to have some personal assets, it may mean tapping into savings or a retirement account to come up with $50,000 to $100,000 to get things rolling. To others still – those who represent the vast majority of entrepreneurs – it means living on Ramen noodles and peanut butter sandwiches, calling in favors from friends who will work for free, and squirreling away a few hundred dollars at a time to keep the lights on.

Is it possible to self-fund a company if you don’t already have a fat bank account? Sure, but the amount of capital (or lack of capital) you have will influence the type of business you are in. Fortunately, because of cloud innovations that exist today, you won’t need nearly as much to launch compared with just twenty years ago.

Alternative borrowing: Banks aren’t the only game in town
While some entrepreneurs have a long and steady job history and excellent credit, most do not – the entrepreneurial mindset doesn’t really lend itself to working at the Post Office for 30 years and living around a steady paycheck. As a result, the majority of entrepreneurs don’t have enough savings or assets built up to go the true “back pocket funding” route, and instead look to borrow. A few visits to the bank and most will be quickly disappointed, especially as low interest rates have driven banks and traditional lenders to raise underwriting standards, eliminate smaller loan thresholds and focus more on established businesses. Even if you’re lucky enough to find a bank that is friendly to startups, unless you have an exceedingly high FICO score, you’ll be out of luck no matter how great your idea may be. You may be creating the next Google, but if you don’t have collateral and a high FICO, the bank doesn’t care – and it’s just not profitable for banks to make loans to small businesses any more.

“The new regulatory environment under Dodd-Frank doesn’t make it profitable or easy for banks to make loans to small businesses,” said B.J. Lackland, CEO of Lighter Capital. “Banks will eventually have to make some changes to address this new environment, but they won’t make major shifts until the regulatory doors open.”

Entrepreneurs may have to turn to a new crop of alternatives, the most interesting of which is peer-to-peer lending – an option that is often more expensive than the low-interest bank loans, but still less costly than the usurious payday loan firms. Once you do have some revenue coming in, factoring, or borrowing against receivables, may become an option, and that usually does not require the same sort of scrutiny a conventional loan carries. This option can be inflexible though, with fixed daily or weekly payments required. Revenue-based financing (RBF) is a more flexible alternative. According to Lackland, “Traditionally, tech startups had to sell equity to get growth capital as a result of having no hard assets (like equipment or inventory) for a bank to lend against. RBF fits the needs of tech entrepreneurs because it is a flexible instrument, doesn’t require hard assets, and combines many of the best aspects of debt and equity, since it’s non-dilutive yet aligns the interests of the entrepreneur and investor toward growth.”

Targeted loans: What makes you different?
It’s a common myth that the SBA and other government agencies have special business loans or grants for minorities or other under-served populations. While there are policies that provide easier access to contracts once a minority-owned business has become established, when you need cash to get started, everybody’s on a level playing field.

Entrepreneurs often find themselves in the “underserved” category, but may benefit from reaching out to local community organizations, community banks or online lenders who specifically offer loan products for borrowers who are underserved or in a minority class. Become knowledgeable of programs that target specific groups, businesses launching in distressed areas, or minority-owned businesses.

William Underwood, Public Relations Director at ezDinero Loan Solutions, noted, “Latino business owners and startup entrepreneurs in the U.S. have an impressive success rate in paying back small business loans, but are still often unable to obtain credit due to outdated scoring models, and the lack of interest on the part of traditional lenders in offering business loans of $50,000 or less, effectively closing the door on many worthwhile SOHO business startups.”

You don’t need as much money as you thought
According to Cary Landis, one of the architects of the NIST cloud computing reference architecture and founder of SaaSMaker, “It’s often possible to launch with a lot less capital than was required just twenty years ago, due to the existence of cloud-based software and infrastructure, along with platforms-as-a-service that allow you to more easily create and market your own apps.” Landis notes that newer startups are often “born-in-the-cloud,” operate virtually and often are able to operate with minimal on-premises equipment. “Besides the obvious cost advantage that comes from not having to operate your own servers, newer DevOps platforms are bridging the gap between IT and business, letting you get up and running quicker and with better apps that are more attuned to the business end of your startup.”

Don’t quit your day job
Entrepreneurs with little cash may need to bite the bullet and keep the day job while they launch their entrepreneurial effort. Kaleigh Wiese, co-founder of Garment Exchange, a peer-to-peer rental marketplace for women’s clothing, launched in March of this year. Wiese says, “We have found it beneficial to self-fund so we could access our potential users creatively and move rapidly and lean. Making decisions quickly has allowed us to get to our potential users quicker and allows for pivots along the way to start generating income.” In five short months, Garment Exchange has built up $40,000 in retail business, now allowing Wiese to begin late seed fundraising. By initially self-funding, Wiese was able to prove the concept, prove her dedication to the idea, and become a more attractive target to potential investors.

“To fund Garment Exchange, we have of course decreased our personal spending, but have looked for innovative side projects that would bring in residual income as we put our day-job income into the business. Some of our favorite side income sources have been renting out our cars on Turo and selling our expertise, like creating custom Snapchat filters. Moving quickly and thinking innovatively about bringing in side income has been such a success for us.”

More startups, less money
During the dotcom boom of the 1990s, startups were well known for landing multi-million dollar venture capital deals on the strength of a business plan written on a cocktail napkin, burning through those millions in the first few months, then going back for more – and getting it.

Venture capitalists aren’t doing that any more, and they don’t need to. The self-funded or lightly-funded startup is the foundation of the next wave of startup innovation – and lack of funds is no longer a reason not to launch.

Some Finance Tips For All Business Owners

I don’t know about you, but finances aren’t really my strength. I’m an entrepreneur — a big picture guy. I like to tackle big problems and develop big visions. I don’t like to sit around staring at a financial spreadsheet while I spend hours upon hours entering expenses by hand.

But whether we like them or not, finances are a necessary part of running a small business. To get some insight on effective procedures that entrepreneurs can adopt to improve their own accounting practices, I sat down for a quick chat with LessAccounting founder Allan Branch.

Here’s what he had to say on this critically important subject:

1. Don’t procrastinate.
One of the biggest mistakes Branch sees new entrepreneurs make is that they put off their bookkeeping needs. If you aren’t financially-minded, programs such as Quickbooks can make small-business accounting seem completely unmanageable, especially if all you need to do is send out a few invoices and track a few expenses.

The problem is, of course, that if you put off your accounting work, it doesn’t go away. It just gets bigger, and eventually you’re going to be faced with an overwhelming mess that you’ll need to sort out. The bigger the mess, the more you’re likely to procrastinate.

Fortunately, though, Branch argues that small-business bookkeeping is actually very simple. If you break everything down into small categories — categorizing expenses, paying employees, sending invoices — the whole thing becomes much more manageable and the compulsion to put it off lessens.

2. Understand your seasonal cash flow.
Another cautionary tip Branch gives to young startups is to understand seasonal cash flow — and that pointer comes directly from his personal experience. LessAccounting, for example, has major seasonal spikes that occur during tax season, followed by a slowing of conversions from April to October. It wasn’t an easy lesson to learn, but Branch eventually realized that he needed to maintain a three- to four-month cash cushion to help get the company through these slower periods.

You need to know your sales cycles as well. If you’re a business-to-consumer retailer that sells $20 items, your sales cycle is likely fast enough that having a cash buffer on hand is less of a concern. But if you’re a business-to-business company whose sales cycles last months, or even years, having extra capital in the bank can mean the difference between being able to weather the long periods before revenue from past sales manifests and having to fold early because your cash has dried up.

3. Focus on your core strengths.
One issue that both Branch and I see far too much is startup owners, particularly software-as-a-service providers, believing that they need to create everything from scratch. I get it. If you’ve already got a coder on your team, it can be seriously tempting to have him or her build internal apps and products rather than investing in existing solutions.

The problem with this approach is that it wastes your time. It might save you a few pennies at the end of the day, but the cash you’ll save is peanuts compared to what it cost you to take a key employee away from those activities that drive revenue for your business. Instead, it’s far more cost-effective to work with existing providers and use the tools that they’ve already perfected, rather than trying to reinvent the wheel on your own.

4. If you have to work 80 hours a week, you’re not profitable.
This lesson from Branch was an interesting one for me. I’m big on growth hacking (I don’t run a website called Growth Everywhere for nothing!), but Branch’s approach to business has been much more moderate. Of particular interest to me was his assertion that, if you have to work 80 hours a week to keep your business afloat, you’re not profitable.

Too many startup entrepreneurs blow through the earliest stages of their company’s growth by putting all their time and energy into their businesses at the expense of their health and relationships. While I’d argue that that’s fine for short periods, I get why Branch says that this shouldn’t be a part of your long-term financial calculations. It’s simply not sustainable.

If your company is only in the black because you’re working yourself to the bone, your numbers are going to take a major turn once you scale back your workload — if you don’t collapse from exhaustion first, that is.

Whether you choose to apply Branch’s “no growth hacking” philosophy to your business, make sure that your labor costs are fully accounted for. Undervaluing the time you invest in your business hurts everyone involved.

5. Ask for discounts.
Finally, here’s a fun tip from Branch: if you’re seriously tight on available funds but you want to take advantage of existing solutions, try emailing the founder and asking for a discount. It won’t work in every case, but you’ll be surprised by how often you can get free stuff just by asking.

Tips To Choose a Crowdfunding Platform

Crowdfunding has become the way to raise money for all kinds of projects in the early 21st century. Businesses, nonprofits, artists, and entrepreneurs of various stripes have all succeeded in running startup funding campaigns on one of the many crowdfunding platforms that have sprung up in recent years.

But crowdfunding isn’t as easy as simply signing up for a service and listing your financial needs. The first step is finding the platform that is just right for your business.

An Introduction to Various Types of Crowdfunding Sites

Like many other things, crowdfunding sites come in a lot of different shapes and sizes. There are crowdfunding sites for nonprofits and social causes:

Crowdrise
Rockethub
Causes
These are just a few. There are plenty more.

Crowdfunding sites for independent artists and people spearheading creative projects include:

Kickstarter
Indiegogo
Pubslush
If you want to start a business or find investors for your million dollar project, then perhaps one of these crowdfunding sites will be more your speed:

AngelList
Fundable
Somolend

The JOBS (Jumpstart Our Business Startups) Act of 2012 has opened up thousands of opportunities for entrepreneurs who need money for their projects. Before, startups looking for financial backing had to request financial assistance only from their internal networks or through connections made while networking. They could not advertise publicly that they were looking for financial backing. That has changed, and the change has created a new culture of crowdfunding that is just getting started.

A Survey of the Crowdfunding Industry

Crowdfunding is not just one class of individuals or set of organizations. It’s for everyone. In fact, many types of people from a variety of backgrounds have been successful in using crowdfunding to get the finances they need for their projects. This includes:

Artists
Small business owners
Serial entrepreneurs
Philanthropists
Scientists
There are four basic types of crowdfunding. You should be familiar with each of them.

Equity-based – These types of sites reward investors with a stake in the company.
Donation-based – Contributions could be tax deductible and go toward funding a specific cause.
Lending-based – Investors are repaid over time and may even be paid interest for their investments.
Rewards-based – Contributors receive something tangible for their money.
Some crowdfunding sites specialize in a particular industry or niche, such as WeCANNA, a site geared toward funding cannabis startups. Other sites, like Kickstarter and Indiegogo, are more general in nature and help people fund a variety of types of projects. Others may offer two or more of the above types of funding in a hybrid approach. Gofundme is a crowdfunding site where people can fund personal needs such as medical expenses and educational goals.

How to Get the Money You Need Through Crowdfunding

The first step to successful crowdfunding is to define your project and fundraising needs. Are you looking for angel investors or do you wish to fund a single project of an existing business? It makes a big difference in how you approach your funding campaign, so start by defining your project. Then follow these steps.

– Determine how much money you need to successfully implement your project. Don’t just guess. Get real financial data by securing quotes from contractors you will be dealing with, bids on building materials, and sound financial information on all other aspects of your project before you start asking for money. It might help to create a business plan.
– Before you start, let your network know of your plans. Ask members of your network if they can recommend any sites. Ask them why they recommend that platform. Also, be sure to ask what incentives would make them invest in your project. That will let you know whether you should be looking at equity-based platforms or rewards-based crowdfunding sites.
– Research the crowdfunding sites to determine which ones are a good fit based on the types of crowdfunding they specialize in and whether they target a specific niche. Also, find out if anyone else has been successful seeking funding for similar types of projects. Which crowdfunding source did they use?
– Interview someone from each of the crowdfunding platforms you are considering. Ask good questions that will narrow down the sites to one or two good fits for your project.

Keep in mind that crowdfunding isn’t for everyone. It’s still new. The most successful projects are based on a solid plan. Know what you want out of a campaign before you start one, and know what you have to contribute to potential investors.

Should You Know About Merchant’s Guide to Apple Pay

Apple has its hard-core fans and passionate naysayers, but few can argue that the company has a history of inventing technology that changes the way people go about their everyday lives. Not all of its technologies have the seen the success of the iPod, iPhone, and iPad but when Apple introduces a technology, people want to have it.

When Apple introduced the iWatch, it also unveiled Apple Pay. While not as technologically sexy as a futuristic watch, Apple Pay has the potential to change the way people make transactions. Any business owner who receives payments by credit cards should strongly consider Apple Pay or at least know enough about it to make an informed decision.

How does the technology work?

Apple Pay isn’t built on new technology. It uses NFC or near field communication technology to communicate with a payment terminal. Without getting too techno-nerdy, here’s how NFC technology works with Apple Pay:

When the shopper sets up Apple Pay, they enter their credit card information into their mobile device. Apple Pay then creates a device account number—a security code that replaces the card’s actual account number.
A shopper taps their Apple Pay capable device on the NFC payment terminal while touching a sensor.
The NFC terminal creates a security code for the transaction and pairs it with the device account number stored in the phone.
The codes are sent to the bank or payment processor, which sends it to another financial institution if needed.
The codes are matched against other codes to verify the transaction.
A notice of acceptance or decline is sent to the merchant. This entire process is almost instantaneous just like it is with traditional credit card transactions.
As you can see, Apple Pay, and other NFC payment systems operate by creating unique codes that require both the Apple device and payment terminal. Because the payment code is only used once, the payments are more secure—unlike traditional cards.

What do I need to accept Apple Pay?

You need an NFC-capable payment terminal. These cost between $500 and $1,000 per terminal. But here’s why it might make sense to make the investment. On October 15, 2015, a liability shift will take place. If your payment terminal isn’t capable of accepting EMV cards, better known as chip cards, you may be liable for any fraudulent transaction made at your store. For that reason you will probably want to upgrade your payment terminal anyway. You might as well spend a little bit more and purchase a NFC capable terminal to make sure you don’t have to upgrade again in the near future.

Is Apple Pay becoming mainstream?

There’s no doubt that it’s catching on fast. At a March 9 event to promote its Apple Watch, Apple CEO Tim Cook announced that 2,500 card-issuing banks and 700,000 merchants now accept Apple Pay. When the product was unveiled in September of 2014 only 6 issuing banks supported it and less than one-third of the current 700,000 merchants.

Consumers haven’t wildly embraced NFC payment technologies but Starbucks has seen impressive success with its app that allows customers to pay without using a credit card. As cardless payment systems become easier, expect impressive buy in from consumers. There’s no reason to believe that Apple Pay won’t evolve to become a major player in the payment processing market especially with the massive marketing resources Apple is putting behind it.

Is Apple Pay safe and secure?

That’s not an easy question to answer. Hackers will hack. They’ll invest considerable time into figuring out how to crack the system. There’s no way to say that any payment system is 100% safe. NFC payment systems have security vulnerabilities that are well documented but since Apple Pay doesn’t use the actual credit card number, the system might be safer than other NFC systems.

What about the security of having a credit card stored on a phone? Apple’s security technology is among the safest in the world. Hacking an iPhone is no easy task and since no information is sent or stored on Apple’s servers, there is no concern of a data breach coming from Apple.

How To Bookkeeping for Your Business

All businesses need to have a bookkeeping system in place. Bookkeeping is the process of recording and maintaining financial transactions for your business, and it’s a great way to generate a detailed financial overview for your business whenever you need it.

The first reason you need a bookkeeping system is it’s required by law. You need to keep track of your income and expenses for tax purposes. The truth is most business owners don’t understand how to keep a set of accurate books, and many don’t have the time; it’s a task that is usually neglected, which is a big mistake. Accurate bookkeeping will keep you out of trouble and give you an important tool to help your business succeed.

With a complete bookkeeping system in place you can manage the financial health of your company. You can analyze expenses and revenue for any time period and compare it to past results. You will also be able to create budgets that can be compared to actual results. Identifying key areas of over or under spending is vital to keep spending in places that will maximize business success.

RELATED: 9 Small Business Accounting Tips

Business owners should get in the good habit of reviewing their financial information on a monthly or, at a minimum, quarterly basis. What was revenue for the month? For the quarter? How does that compare to other periods? Who are your biggest customers? What is your inventory turnover rate? How much did you spend in marketing? What are the tax implications of your current profits? Review the aging of accounts receivable to identify past due customers (This is one area I see businesses struggle. It’s great to make that sale but unless you collect your money and collect it in a timely manner, your business will be in serious jeopardy. It’s about cash flow!) There are many other reasons to have an up to date accurate bookkeeping system such as financial statement preparation for lenders and investors.

So how do you establish and maintain a bookkeeping system?

There are a great deal of software packages available, some cloud based, that can get the job done: Quickbooks, Xero, Zoho books, Sage One, and Freshbooks are just some of the options available.

As businesses grow, many hire in-house bookkeepers; some are full charge (handle all aspects of bookkeeping) while others are area specific such as invoicing, accounts receivables, payables, payroll or some combination. Outside CPAs are often used to make adjustments, offer advice and prepare all the required returns.

Many smaller companies often hire a bookkeeper/accountant to help. A hybrid system is usually settled on where the company enter data such as invoices and expenses, and the accountant will do some bookkeeping clean up, make adjustments, book payroll, reclassify, offer advice, and do all the necessary filing, which may include payroll, sales tax, and corporate returns.

Your time is valuable and many small businesses should not try to handle all aspects of bookkeeping and tax compliance themselves. It’s often ineffective and could cost you down the line. A good accountant will be of great value. Take the time to find someone who will work with you – not just with your accounting needs – and who cares about your success.

While bookkeeping can be a hassle, it should be viewed as a key component of your business. It’s a great way to protect yourself legally, keeping your business compliant with current tax laws and regulations. Bookkeeping is also a smart technique for analyzing your business’s financial health. Knowing your financial numbers and ratios will help you create strategies that will strengthen your business. Because there are so many options available to you, setting up a bookkeeping system should be your first priority.

Choose the Best Credit Card for Your Business

Looking for a credit card for your small business? There are plenty out there. Every major issuer has a special card for small business owners.

The names might be catchy but how do you pick the right card for your business?

Do You Need a Credit Card?

Money isn’t pouring in yet. You have bills and expenses due today but that big check from a client is running late. A major piece of equipment broke but there isn’t enough money in your bank account to cover the cost. This is when a credit card becomes a lifeline.

As a young startup, you’re not likely to secure a line of credit from a bank or investor. Your best bet is seed money from family or friends but maybe you’ve exhausted that option or you don’t want to give up any equity in the company. A credit card is the perfect way to cover expenses when cash is running low.

Did you know that businesses have a credit file too? Your D&B (Dunn and Bradstreet) score is the business equivalent of a FICO score. In order to build your businesses credit score you have to utilize credit. Since credit is hard to secure at first, the best way to build your score is likely through the use of a credit card.

But be careful. Overspending can lead to disaster. Just as credit cards have driven families into bankruptcy, they can do the same with small businesses. Don’t use a credit card to buy what your business can’t afford. Use it to cover expenses until payments from customers arrive.

How To Find the Right Card

1. Be Realistic

Are you going to pay the charges in full each month? If you are, look at rewards cards. Getting a free flight simply by using your card is a great deal. There are some that offer travel rewards, cash back (in the form of statement credits), and other rewards.

But those rewards are small compared to the interest you pay if you carry over a balance. If you’re paying interest, you’re quickly wiping out any reward you receive.

If you’re going to hold a balance, first look at the interest rate. If you’re disciplined enough to not pay interest, look at the quality of the rewards.

2. Keep Yourself Honest

A credit card and a charge card are different. A charge card requires that you pay the balance in full after a certain period—often after one month. A credit card allows you to roll over the balance month to month. The American Express Plumb card is considered a charge card. It gives you 60 days to pay without any charges and offers a discount if you pay early. After 60 days, charges apply.

3. Look at the Terms

Do you travel outside of the country for your business? Make sure your card doesn’t have a foreign transaction fee. Most don’t but don’t pay up to 3% in fees because you didn’t read the fine print.

4. Be Careful of the Teaser Rates

That 0% introductory APR is certainly enticing but what happens after it expires? Before reading the pretty, colorful ad copy on the credit card’s home page, find the disclosure page—normally a link at the bottom. Read about the rates and fees and then go back and read about the card benefits.

5. Dig Deep Into The Rewards Program

After deciding which type of rewards program fits you the best (travel, cash back, etc.) read the fine print. If you’re looking for travel rewards, make sure the card company offers rewards for your airline of choice. If you’re already a super-double-diamond-high-roller flyer with a certain airline, you want a rewards program that works with that airline.

If you have a lot of vehicles, a credit card that offers bonus points for gas purchases is certainly a plus.

6. How Do Extra Cards Work?

How do you get extra cards for your employees and is there a fee? Can you set spending limits on employee cards? Some business cards come with an impressive list of ways to monitor and limit employee spending. Others are nothing more than an additional authorized user.

7. What are the Penalties?

You don’t plan to make late payments but what if it happens? Do you lose your rewards points? Is there a penalty APR that goes into effect? What is the late fee? Sometimes paying bills a little late is unavoidable. As you’re shopping for a card, compare those terms and conditions as well.

8. Beware the Annual Fee

Some cards have a lot of perks—concierge services, purchase protections, free insurance for your rental car, and more. But is it worth a hefty annual fee?

Learn More About Retirement Planning in the Gig Economy

In a previous article we looked at people who now work in the gig economy—taking contract jobs as a freelancer/small business owner rather than taking the more traditional route working as an employee for another business.

It’s not as simple as saying goodbye to your employer and setting out on your own. We looked at things like the self-employment tax and other tax considerations that significantly impact your earnings.

Along with taxes, there’s another consideration—retirement. Maybe you saved up a valuable nest egg before you left your previous job, but for many, they’ve barely started amassing a retirement savings. Because of this, you have to consider your retirement income before going all-in on the gig economy. Yes, you’ll receive Social Security assuming you pay fully into the system, but relying on a government program to keep you financially afloat in your later years isn’t the wisest strategy.

It’s All On Your Shoulders

In our last article we talked about how your employer paid part of your Social Security and Medicare taxes but as a freelancer you have to do it all on your own. The same holds true for retirement. Studies show that nearly 9 out of 10 employers matched a portion of the employee’s 401(k) contributions. That represented a large portion of your retirement savings but as a freelancer, you won’t get any employer match. It’s all on you to save enough to retire comfortably. If you’re 30 and haven’t saved anything, you will need to save about $649 or more per month depending on your income and lifestyle to retire with enough money to live comfortably on. You can estimate the amount you’d need from this calculator.

Have employees? This article may help you navigate their retirement options.

The IRA Dilemma

It’s easy, right? Just start an IRA, contribute as much as you can, and you’re set. There are a host of problems with that plan. First, an IRA comes with a $5,500 annual limit ($6,500 if you’re age 50 or older ) allowing you to contribute a maximum monthly amount of about $458 (or $541 starting at age 50)—not nearly enough if you’re significantly behind on savings. Your spouse can get an IRA, whether he or she is working or not, giving you an extra $5,500 to work with. That’s better but what about if you’re single?

The SEP

The Simplified Employee Pension or SEP is an option. You can contribute the smaller of $53,000 or 25% of your total compensation. Learn more about it in IRS Publication 560. But be careful. Don’t “forget” to claim all of those small-dollar clients that didn’t pay you enough to file a 1099. If you “forget” to claim it, it lowers your maximum.

SIMPLE IRA

The SIMPLE IRA plan for small employers is about as simple as anything involving the IRS can be. It works the same as a regular IRA but your yearly limit is higher. Instead of $5,500, you have a $12,500 limit. If you’re over the age of 50, you can contribute as much as $15,500. Again, Publication 560 will tell you everything you want to know.

Other Options

There are other ways to fund your personal retirement from your company but the SEP and SIMPLE IRA are the most common. There are also profit sharing plans and a self employed 401(k) plan where you and your company make contributions but these are a little more difficult to set up.

Taxes

Assuming you have some kind of formalized business like an LLC, any retirement benefits your company provides to you are a business expense. Your company can write that off as an expense in most cases. How that all works depends on some factors a tax expert will probably have to help you with but it is an expense like any other.

Effect on Pricing

Be honest—as a young or new entrepreneur have you wondered why your competitors are charging so much more than you believe the service is worth? You’re probably beginning to figure out that even a consultant working out of their home has overhead expenses. You have to pay taxes on your earnings and you have to fund your retirement and even insurance. That should drive your hourly rate significantly higher.

Think about it this way. Let’s say that you figured you have to save at least $500 per month for retirement and you’re going to pay about 30% of your earnings in taxes and you work 40 hours per week, and you charge $50 per hour. (For the sake of simple math.)

Just the retirement portion makes your hourly rate $52.50 and taxes add another $15 so now you’re at $67 without taking into account any other expenses. There are surely some other expenses your business incurs like licensing, continuing education, equipment, and more. It wouldn’t be surprising to see that number make it to $80 or more.