Research from the Supreme Court on federal court filings show that bankruptcy filings are at their lowest levels in more than a decade. However, at the same time that bankruptcies — legal processes involving actors that can’t repay their debts to creditors — are declining, business debt is rapidly rising. In fact, the Federal Reserve’s recent financial stability report shows that leveraged lending is 20% higher than last year and flags a decline in protections for lenders against default.
This is important to be aware of because debt and cash flow — more precisely, the inability to effectively manage debt and cash flow — are the principal drivers of bankruptcy. If you want to understand the risk of selling your goods or services to someone on credit terms, understand the credit report first. Pay close attention to the credit score and credit limit, both of which will tell you a lot about a company’s payment behavior and the likelihood of it becoming bankrupt in the near future.
In my years helping companies manage credit, I’ve identified some red flags when it comes to debt management issues:
Initially thrilled about the idea of being their own boss and setting their own hours, almost two-thirds of small business owners end up working between 40 and 60 hours per week. That time isn’t spent doing what they love, either – the most time-consuming activity for small business owners is sitting in front of their computers answering email.
That overwhelming yet tedious task is taking a toll on founders; 72% of SMB owners said that they experience high levels of business-related stress. The business ends up running the business owner when it should be the other way around.
It’s time for business owners to take back control and reclaim their companies and their lives.
Below are the six biggest bureaucratic hurdles business owners face and how you, as a SMB owner, can cut through the red tape and get back to work doing what you’re passionate about.
If you can’t view all of your accounting and finance information – payroll, invoices, tax information – from the same place, you’re not operating efficiently. Having to log in to separate, siloed systems to enter the same information more than once proffers a dear price in terms of cognitive overhead. It may be time to re-evaluate your enterprise setup so that your efforts become seamless.
How to slay it: Use a single, intuitive interface to manage your administrative tasks. Sometimes, using too many “helpful” systems can end up complicating administrative tasks instead of simplifying them. Seek out software that lets you enter information once and only once, allowing you to operate efficiently from within one system. That doesn’t mean that you have to give up the business software you love, but it does mean that you need to find an interface that integrates with that software. …Read More
For many small businesses, tax season is a grueling time of year. It’s often associated with stress, record-combing and exhaustion. This is one of the key reasons why small businesses should be thinking about their taxes year-round and prepare long before it comes time to file. By folding tax planning into your overall business strategy, small business owners can tackle their taxes far more effectively (and may even end up with bigger deductions than they anticipated!). Here are some of the best tips for keeping taxes a priority for your small business 365 days a year.
One of the best ways to ensure your taxes are always a priority for your small business is by getting hold of business accounting software. There are many resources and valuable apps you can use to keep your small business in check and ensure an efficient tax filing process months before it’s time to begin filing. For example, Intuit is the parent company behind software such as TurboTax and QuickBooks. These tools can help you keep track of everything related to your business and taxes. By taking proactive measures to be more organized, you can make taxes a smoother process. [Are you interested in finding the right online tax software for your business? Check out our best picks and reviews.]
Aim to track all of your spending throughout the year so that none of your expenses are hard to pin down once tax season rolls around. It’s incredible how much you forget when it comes time to file. Noting expenses the day or week they happen ensures you don’t miss them at the end of the year.
For some, it helps to have monthly expense check-ins. For others, …Read More
Reducing your expenses does not take much time or require much effort. Here are five simple ways to make your small business financially more flexible.
Going green is a great way to reduce costs, and it’s helpful for the environment. Consider making these small changes to your office:
With changes in technology and in the workforce, hiring independent freelancers brings many benefits to small businesses. This can help you in several ways:
A few years back, SCORE conducted a poll asking entrepreneurs what was the worst part of owning a small business. A whopping 40% answered bookkeeping and taxes.
That survey wasn’t an anomaly. In that same year, TD Bank asked over 500 business owners that same question, with 46% listing bookkeeping as their least favorite task. A 2012 survey by Mavenlink had 41% of respondents giving that same answer.
So, it’s no wonder that so many small businesses put it off for as long as possible. If a person despises doing something, it’s not exactly going to jump to the top of their to-do list. Unfortunately, this can have a severely negative effect on a business’s performance.
So, what can be done to fix it? Short of miraculously developing a passion for accounting, what are some simple tricks to reduce the pain around bookkeeping?
One thing that has helped a lot of our clients is understanding why they’re doing their books in the first place. To be able to file their taxes? To provide records to a bank for a loan? To give something to their annoying CPA to get them off their backs?
Sure, all of those things are real reasons. But they are far from the primary purpose that bookkeeping serves.
Accounting is called “the language of business.” A business’s books are the truest reflection of its operations. They show the successes, the failures and the opportunities. They provide data on cash flow, receivables turnover, seasonality, and the profitability of different products and services. They give a snapshot of the business’s performance – all backed up by cold hard data. As a friend of mine bluntly put it, “If you don’t know your books, you don’t know your business.” They can and should be …Read More
You would be amazed to know that the subprime leads in America alone, is worth more than $1 trillion. Thus, it is necessary to understand how to convert these subprime leads to profits.
A subprime loan is a kind of personal loan, which is provided to a borrower that reluctantly applies for a subprime loan because of being rejected by the bank or private lender due to poor credit score. When banks and lenders do not facilitate people with a loan due to their highly risked income ratio, they look for the alternative and end up with money lenders and become high-risk borrowers.
The interest rate of a personal loan is between 8 and 34%. Usually, banks and credit unions offer personal loans at 20% interest rate. However, some private lenders can provide subprime loans at minimum 10% interest rate. Variations in the interest rate depend on the lender. With the enhanced competition and high expenditure ratio of the population, these lenders widen up the gate of opportunities to borrow money other than official financial institutions and sustain.
A personal loan is a facilitation of money to the borrower depending on their income level. Sometimes, personal loans can be as simple as signature loans or credit loans, which can go through banks or private lenders. Personal loans include credit cards and signature loans from the bank. Loans from online lenders and peer-to-peer lenders often are personal loans.
Editor’s Note: Looking for a business loan? Fill out the below questionnaire to be connected with vendors that can help.
It is evident that subprime leads are the best option marketers have to connect with customers who …Read More
How do you diagnose your business’s financial health? Knowing what to look for – or better yet, where to look – can be overwhelming. Let me help you sort through the sea of numbers that is your financial statement and offer a crash course of sorts. Here are the three main financial statements you need and an explanation of what critical information each reveals about your business’s overall health.
This report shows your financial position at a specific moment in time. With the rule of thumb that assets equal liabilities and equity, this is a good test to see if your numbers really do add up. A balance sheet also helps you determine net worth, which is the difference between what you own and what you owe. To calculate net worth, subtract total liabilities from total assets. Another benefit of a balance sheet is that it allows you to assess two other key performance metrics: debt and liquidity.
Debt. How successful are you at keeping your debt manageable? By dividing total debt by total assets, you can see the portion of your assets that are funded by debt. With any business, you may need to borrow money to make money; however, you don’t want to owe more than you can repay. This may be a good time to consider implementing tighter spending practices or debt reduction strategies.
Liquidity. How quickly can your assets be bought or sold? An asset can vary anywhere between money on hand to real estate, making it challenging to truly understand your business’s financial state. Some companies can be asset-rich, but cash-poor. Therefore, it is crucial to have sufficient liquid assets to cover any short-term cash needs.
Editor’s note: Looking for the right accounting software for your business? Fill out the below questionnaire …Read More
Even so, those time-consuming tasks end up taking up a substantial amount of a founder’s time. In a National Federation of Independent Business study, small business owners listed accounting and other administrative tasks as one of their top three biggest time-wasters and said they spend less than 15 hours per week on actual business services.
So, if you’re a barber, how can you spend less time going over the books and more time cutting hair? Or if you’re a yoga studio owner, what can you do to stop stressing about payroll? The answer is simple. It’s time for a universal, one-stop business operating system that makes it easy to automate back-office tasks and turn backlogs of data into usable small business insights.
With a standard operating system, small businesses often find that they need a long list of software add-ons in order to manage their day-to-day operations. A typical small business owner may use separate, siloed small business solutions for each administrative category. For instance, he or she may use QuickBooks for accounting, Gusto for payroll and Salesforce for customer relationship management. While each of these platforms provide valuable services, there are incredible inefficiencies which result from the fact that none of them have the ability to “talk” to each other.
In today’s world, where everything can be automated, logging into a half-dozen platforms to manually review and update each application that you use to manage your small business is indefensibly tedious and labor-intensive.
Additionally, building a tech stack from scratch to handle business operations is a gargantuan task even for the most tech-savvy …Read More
One of the worst situations a business can find itself in is discovering that a long-time, trusted employee has been embezzling money from the company.
Such a situation can have long-lasting negative consequences and is the reason why all employers should have a plan in place to deal with it should it ever occur.
The discovery of financial fraud within your organization is far from an everyday occurrence, yet how you respond can have a dramatic effect on whether you can achieve a successful outcome. In the absence of a fraud response plan, management is left to their own devices – sometimes with disastrous consequences. There are also a variety of risks to be avoided: from unwittingly compromising the evidentiary value of data, to making uninformed decisions based on underdeveloped evidence, to inadvertently tipping off the suspect – conducting a successful investigation can be a sensitive operation.
Your fraud response plan – a foundational element to anti-fraud policies – sends a signal that the organization will not tolerate fraud. Designed to outline the steps to take when fraud is suspected, a fraud response plan provides the framework for ensuring that allegations of fraud are handled prudently and systematically.
Bear in mind, the improprieties you discover are likely just the tip of the iceberg. Unlike a bank robber threatening you at gunpoint, concealment is the modus operandi of the fraudster. Your initial response should be one of discretion. Avoid the temptation to alert others or directly confront employees. Any information you gather should only be shared on a need-to-know basis.
Due to its sensitive nature, a fraud investigation should be a confidential undertaking. The oversight of any investigation should be assigned to a senior leader, or team of senior leaders, who understand the weight of the potential situation. …Read More