Small Business: Staying Afloat During Tax Season and Beyond
Maintaining positive cash flow while running a business is critical.
Tax season is an extra busy time for small business owners. About 70% of small business owners outsource their tax preparation to a CPA or other trusted financial advisors. The business retains the responsibility for preparing records and financial statements. The following are the top four challenges for small business owners during tax season according to the Small Business Accounting Report from Wasp Barcode Technologies
- Accounts receivables/collections
- Cash flow
- Managing receipts and paperwork
- Keeping their accounting software accurate
Tax season can be a burden to any business owner. Forbes suggests that there are 5 practices you can keep in an effort to stay on top of things.
- Prepare all year long. Record expenses, receipts and gas mileage daily. This will require 5-10 minutes of the day as opposed to hours at year-end.
- Forbes says “Don’t let ghost assets haunt your tax return”. According to Small Business Accounting Report, 70% of small business owners are unfamiliar with this term. Ghost assets are defined as “assets that can’t be accounted for because they are either missing or rendered unusable”. It is important to use software for inventory and asset management.
- Always check the new tax laws and be sure you are taking advantage of all potential deductions.
- Keep up with accounts, as well as income, expenses, and payroll. Hire a trustworthy accountant to do your taxes and review your books.
- Retirement Accounts such as IRA’s defer tax on the money you contribute until you take it out. Work with your accountant to set up smart accounts that will not create tax burdens.
Business owners face many challenges. Finding solutions to those challenges is key to staying in business. Maintaining positive cash flow is another of those challenges. Managing costs is an integral part of keeping cash flow positive. There are many business expenses affecting cash flow.
A large part of the expense of a business is overhead. Leasing office space is expensive. Always be sure you are utilizing your space and look for less expensive space if necessary. Office supplies are one of the most wasteful expenses in a business. Check supply inventory and order only items that are used weekly or monthly. Look at what you have and how long it has been sitting there. Reuse supplies such as file folders, paper clips, when possible.
Employees are the backbone of any business, but they also incur the most costs for a business. Make sure employees are trained properly and cross-trained when possible. Are there any employees that do not have enough to do? Look at combining positions and cutting back on employees. Office efficiency is key to keeping your business growing and keeping a positive cash flow.
Keeping cash flow positive is always a challenge and that challenge increases during tax season. Taking these simple steps will help to decrease challenges for small business owners.
Are cash flow issues creating problems for your small business? Invoice factoring could be the answer you’ve been searching for. Contact us today to learn how our award-winning factoring solutions can help.
Factoring, or accounts receivable financing is an alternative to traditional business loans. Businesses owners with cash flow challenges often turn to factoring to solve this problem. Factoring their invoices enables the owner to purchase inventory, make payroll and cover administrative costs while waiting for their customers to pay.
The factoring company buys the owners invoices funding a large percentage of the total invoice to the business within 24 hours. Upon payment of the invoice by the customer, the business receives the balance, called a reserve, less agreed upon fees.
It is important when considering factoring to understand that there are two types of factoring: Recourse and Non-Recourse.
Recourse factoring occurs when a business sells invoices to the factoring company and agrees to pay back monies from any uncollected invoices to the factoring company. This is beneficial to the business if they feel confident in their customer’s ability to pay. Rates for this type of factoring is generally lower since the factoring company is not assuming all of the credit risk.
Non-Recourse factoring follows the same concept of selling invoices, however, the factoring company assumes the risk of non-payment due to bankruptcy. The owner selling invoices to the factoring company is still liable if their customer does not pay the invoice for any reason other than bankruptcy. Rates for this type of factoring generally are higher, due to the factoring company having more risk.
When deciding on factoring, weigh the benefits of Recourse vs. Non-Recourse. A good factoring company will do due diligence and will have a thorough understanding of the invoices they are purchasing. Discuss the best options based on your customers, their creditworthiness and the value of the invoices. This will help you, the business owner to decide which type of factoring will be the most beneficial for your business.
Have more questions about recourse and non-recourse factoring? Give us a call or contact us by email to learn whether either of these options is right for your business.
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5 Startup Tips for Entrepreneurs
Your first few years in business will likely feel like on-the-job training as you face a host of unexpected events. That being said, having the basics covered from the beginning will help you navigate the often turbulent waters every entrepreneur faces. Here are some tips to help make the sailing a little smoother.
Startup Tip 1: Don’t Let Excuses Stand in Your Way
You can likely come up with countless reasons not to start your own business. What if the economy tanks? What if demand for my product or service suddenly drops? What if I don’t have the knowledge and skills needed to make a go of it? The list goes on and on.
Remember that every other successful business owner wrestled with these same questions at one time. Starting your own business involves risk. But every question you have has an answer, so don’t let them keep you from pursuing your dream.
Startup Tip 2: Focus on the Customer
Every successful startup achieves success by identifying a need and coming up with a better way to satisfy it. A lot of entrepreneurs fail because they complicate the simple solution without considering whether their prospective customers have a need the extra bells and whistles.
Once you’ve established your core business, you can always expand on it. Over time, your customers will let you know what additional products or services would be of value to them and they’ll look to you to provide them. The key here is to always be asking for feedback from existing and prospective customers.
Startup Tip 3: Consider Every Cost
Knowing the full financial cost of starting your business is essential. Do your homework and try to come up with an exact figure for everything – rent, supplies, labor, marketing, etc. – and then multiply that number by four. Don’t forget that you’ll be depending on the business to generate your personal income, so be sure to include that in the final tabulation.
Once you come up with a final number, create a budget that you can realistically stick to. In the beginning, you may have to take out a small business loan or borrow from friends or family. Once you have an established client base, you’ll have other financing options including lines of credit and invoice factoring.
Startup Tip 4: Be Patient and Prepared
Imagine you’ve quit your old 9 to 5 job, launched your startup and have no clients. Now imagine that you still haven’t landed any clients after three months. It’s a scary thought but it happens. That’s why you need to have a solid “Plan B” to get you through the lean, early months or even years. This could include taking a part-time position to generate money or dipping into your personal savings.
Plan B can vary from person to person depending on their particular situation, but every entrepreneur needs to have one, and winning the lottery doesn’t count.
Startup Tip 5: Keep it Legal
Of all the startup tips, this may be the most important. Failure to pay attention to mundane things like legal issues can have dire consequences. As a business owner, you may face myriad legal requirements including tax HR and liabilities.
Do your due diligence with respect to all local, state and federal laws. Depending on the size and type of business you’re starting, these may be easy to understand and comply with. Or they may be complex and odious. If the latter is the case, be sure to seek the advice of a qualified attorney. The money you pay might be a drop in the bucket compared to the fines you can face for operating a business that’s out of compliance with all the rules and regulations.
I hope you found this article helpful. To learn more about how accounts receivable factoring helps improve cash flow for startup businesses, call American Receivable at 1-800-297-6652.
A recent survey by Wells Fargo and Gallup found that optimism among small business owners is at an 11-year high. The survey, which was conducted between January 3 – 9 of this year showed a significant increase in the “future expectations” score which is an indication of how well business owners expect their companies to perform over the next 12 months.
Wells Fargo Managing Director and Senior Economist Mark Vitner said, “The economy ended 2017 on a high note, and many small business owners believe that strong momentum will carry over into 2018.” He went on to say, “We are encouraged by the breadth of the improvement this past year, particularly in quantifiable areas like sales and overall finances. The more broad-based the gains, the more likely those gains will be longer lasting.”
The Wells Fargo/Gallup Small Business Index which questioned 603 business owners, was conducted two weeks after Congress passed the new tax law.
Major Takeaways from the Small Business Survey
Fifty-two percent of business owners who participated in the quarterly survey said that their businesses had seen increases in revenue over the previous 12 months and 66% said they expect to see continued increases in the coming 12 months.
More than three-quarters of participants also said they expect their cash flow will be “very good or somewhat good” during the coming year, and 38% said they expect to increase their capital spending over the next 12 months.
Nearly half (46%) of business owners surveyed said they expect that credit will be “very easy or somewhat easy” to obtain and one third expect to hire more workers.
Small Business Concerns for 2018
When asked what challenges their businesses face, 16% said attracting new customers and finding new business top their list. Other concerns included hiring and retaining staff (13%), cash flow (10%), taxes (10%) and government regulations (7%).
Wells Fargo’s head of Customer Segments Andy Rowe said, “Our latest survey tells us that small business owners feel better about the economy and the future of their businesses. We are encouraged to see more business owners forecasting strong revenues, healthy cash flows, and increased capital spending over the next 12 months. These trends tell us that small business owners are more positive about the economy, and that optimism is translating into investment in the future of their businesses right now.”
I hope you found this article helpful. Visit https://wellsfargoworks.com/insights/press-release/small-business-optimism-hits-11-year-high to read more details about the Wells Fargo/Gallup Small Business Index Survey. If cash flow is a concern for your small business, accounts receivable factoring may be the solution. Call American Receivable at 1-800-297-6652 to learn more or click here to learn how factoring works.
Are you considering buying office equipment in 2018? As a small business owner, you know that equipment updates are essential if you’re to remain competitive. But investing in fixed assets can also create cash flow problems if the purchase is not funded and timed correctly. Here are some tips to help you properly time and finance your new office equipment purchases.
Prioritize Your Office Equipment Needs
Buying a new or used piece of business equipment can be exciting and that excitement can cloud your judgment. Before you even begin shopping, you should ask yourself (and your employees) the following questions:
- Is the equipment purchase really necessary at this time?
- Will purchasing the equipment prevent you from making other investments, or meeting your daily operating expenses?
- Will the new equipment increase productivity or reduce overall expenses?
- Are the tax advantages to purchasing the equipment?
If you find that the new equipment will really benefit your business, you should explore a variety of funding options including taking out a bank loan or line of credit, and invoice factoring.
Buying New or Used Office Equipment
For small businesses on a budget, there may be times when buying used makes more sense than paying full price for new equipment. Depending on the age and condition, you could save as much as 50% by purchasing used equipment so it’s a great way to reduce capital expenditures. Just make sure you thoroughly inspect the equipment to make sure it’s in good working condition, and keep in mind that in most cases you won’t have the peace of mind that a manufacturer’s warranty can give you.
Consider Outsourcing Instead of Buying Office Equipment
Before purchasing new equipment, consider how much use you’ll actually get out of it. While it might be convenient to own an expensive, laser office printer, is it really necessary for your day-to-day needs? If not, it might make more sense to lease a printer or outsource big printing jobs to a reputable commercial printing company. In short, you should avoid paying for equipment that exceeds your actual needs.
Make Sure You Have Room for the New Equipment
When purchasing large pieces of equipment, make sure you have ample space to accommodate it. The best way to avoid overcrowding your office or warehouse is by making accurate measurements of your available space to determine if you have enough room for the new equipment.
The best way to do this is by creating an accurate, scale drawing of your space. A simple pencil drawing with measurement annotations will do the trick. For greater precision, you might want to use one of the many free design tools available online. Check out this article for a list of options.
I hope you found this information helpful. To learn how our flexible factoring solutions can help your business grow, call American Receivable at 1-800-297-6652 or click here for a free quote.
The New Year is the perfect time to evaluate if you are getting the most out of your invoice factoring company.
Are you already factoring your invoices as a means of improving your means of cash flow? Yes? Congratulations! You are on a great path to growing and keeping your business successful.
Now, do you know if you are getting everything you deserve from your factoring company? If you paused, maybe it’s time to take a look at evaluating your terms with your current factoring company.
Factoring Company Protocols and Benefits
Each invoice factoring company has different protocols. To understand your benefits correctly, it is important to know what your factoring company is required to tell you per your contract. Below are some questions to ask yourself to determine if you are getting what you deserve.
• Is your contract transparent?
• Are there any hidden fees?
• Are you required to factor all of your invoices or are you allowed to pick and choose?
• Do you have a monthly minimum that you must factor?
• Are you receiving the best rate they can offer based on the volume and value of your invoices?
Why Choose Us for Your Invoice Factoring?
Working with a company like American Receivable, that is transparent about all of the costs your contract will allow you to capitalize the most for your business and provide a positive relationship with your factoring company. Click here to learn more about American Receivable Corporation.
You may also call us at 1-800-297-6652 or click here to receive a no-cost, no-obligation quote. In most cases, we’re able to provide funding in as little as 24 hours.
Today, many companies are outsourcing a large portion of their hiring activities to staffing companies. If you are a staffing company, you know that it while you might be able to cover your basic overhead, you can also run into cash flow problems waiting for a client to pay.
Working with a factoring company can help you and your business be successful without having to stress about your cash flow.
Benefits of Staffing Factoring
Receive Instant Cash
Often times, staffing companies can wait up to 120 days to be paid by their clients. These extended payment terms leave the staffing company crippled- without enough cash to make their next payroll! With factoring, you will be able to turn those invoices into cash immediately giving you the capital to continue to grow your business.
Staffing factoring allows you to maintain a constant cash flow to cover payroll thus allowing you the freedom to go after the bigger contracts and projects.
Take Advantage of Opportunities
Loans take time to get approved and often are laced with terms that do not fit your needs. Factoring is a quick and affordable solution that gives you the financing to take on those new opportunities.
Invoice factoring is an efficient way for staffing companies to stay successful and competitive. Selling your invoices for cash now instead of waiting for the client to pay will allow you the freedom to grow and improve your business in today’s lucrative market.
Interested in learning more about staffing factoring? Give us a call at 1-800-297-6652 or click here to submit an online application and receive a free quote.
We are excited to announce that our new and improved website is now live! Our new site has a fresh new layout for easier navigation for prospective and current clients as well as brokers. Our goal is to provide you with a quick and easy way to learn not only about our company, but also the financial solutions we offer. Along with these new features, we also made it quick and easy for prospective clients to receive a free quote and apply online.
We hope you find our new website to be user friendly and helpful for all of your financial needs.
Owning and operating a small business takes dedication and hard work.
As 2017 comes to a close, it’s a good time to take a look back at the business practices that worked well, and which ones need to be improved on.
Here are four tips to help you make the most of 2018.
Focus on the most important thing(s)
One of the biggest challenges with running a small business is distraction. This often stems from the need to wear many hats. Since you may not have the financial muscle to employ top talent, you’ll often find yourself being the accountant, lawyer, and marketer of your business at the same time. Studies show that such “multitasking” can seriously derail your progress and possibly even put you out of business.
So, in 2018, stop being a jack of all trades and put all your energy on what you set out to do. If need be, bring in other people with requisite skill sets to help in those other areas.
Get the right tools for your small business
Aside from hiring skilled talent to help you run the day to day tasks, in the upcoming year, something else that will help you accelerate your growth is using the right tools. Tools here refer any software or hardware that can help you solve problems more easily or cost-effectively.
If properly used, these tools will increase your efficiency and help you reach your goals faster. Remember, the keyword is – right.
Pick only what you need; tools that can truly help you grow. If you have to, find an expert to help you pick out the most appropriate tools.
Outsource non-profitable activities
In some cases, it may make more sense to outsource certain activities than to keep them in-house. If slow-paying customers are creating cash flow problems you may want to consider partnering with a Factoring company.
Accounts receivable factoring, also known as invoice factoring, allows you to receive immediate cash for your outstanding invoices in exchange for a small fee. Depending on your particular circumstances, factoring may be an attractive alternative to time-consuming in-house collections.
Stay ahead of the game
Lastly and most importantly, don’t let anything fall behind. From your finances to technology and talent-wise, don’t be left behind in 2018. The digital world is evolving at a dizzying pace. Things change pretty much every day. In 2017, for example, we saw a lot of movement in payment technologies. Social media too witnessed a lot of changes.
If you want to fast-track your growth in 2018, you can’t let such movements escape you. Collect data at every step and use this data to manage your finances and adjust your priorities.
We hope you found these tips helpful. Call or email us to learn whether invoice factoring is right for your small business. You may also click here to submit an application for a no-cost, no-obligation quote.
You need new business equipment. But, you’re wondering whether it makes more sense to lease or buy the equipment. Which is the better option and why? It all depends on circumstances. Sometimes it makes more sense to lease while on other occasions, you’d be much better off buying.
Below is a brief summary of the pros and cons of each option to help you make an informed decision.
Leasing Business Equipment
Advantages of Leasing
- Lower initial expenses: This option allows you to acquire assets with minimal initial expenses.
- Flexible terms: Leases are also easier to obtain and have more flexible terms compared to outright purchases.
- Upgrade equipment more easily: Leasing is one of the best ways to deal with the problem of obsolescence because updating equipment is solely the responsibility of the lessor.
- Leases are tax deductible: You’re allowed to deduct your lease payments on your tax returns as business expenses, effectively reducing the net cost of the lease.
Disadvantages of Leasing
- You don’t own the equipment: Unlike with purchases, leased equipment has to be returned at the end of the lease term.
- Obligation to pay for the entire term of the lease: You’re under obligation to make payments for the lease period even if you stop using the equipment.
- Higher cost: In general, leasing costs more. Monthly payments are always higher than if you were purchasing the equipment.
Buying Business Equipment
Advantages of Buying
- Ownership: When you buy office equipment, it belongs to you. This can be a major advantage if the equipment has a long life.
- Tax advantages: Section 179 of the IRA Code allows you to deduct the cost of certain newly purchased items in the first year.
- Depreciation deduction: Some types of equipment can also be depreciated to reduce your taxes.
Disadvantages of Buying
- High initial costs: Buying brand new equipment requires a lot of money. And, even if you plan to borrow the money, the bank will demand a 20% down payment. Couple this with the many financial restrictions that come with bank loans and you may find yourself in a dilemma.
- Getting stuck with obsolete equipment: This is especially common with high-tech equipment. With technology changing every second, you risk getting stuck with out-of-date equipment just months or years after purchase.
To arrive at the best decision, consider the cost-effectiveness and tax implications of each option, and proceed with the option that best fits your needs and budget.
Are cash flow problems keeping you from upgrading your business equipment? Invoice factoring provides an unlimited source of working capital without increasing your debt position. Call American Receivable at 1-800-297-6652 to learn more.