Category Archives: Finance

Fintech is Bridging the Big Bank Gap

Big banks have always been averse to risk.  They also tend to view small and medium-sized businesses as high-risk, choosing to restrict investment, in terms of both lending and services, for the SMB market. A 2015 credit survey by the Federal Reserve found that smaller institutions were 18 percent more likely to approve a small business loan than big banks, while SMBs that did work with big banks reported an uninspiring 51 percent satisfaction rating.

While banks are not always helpful to SMBs, there are other options for the services they deliver.  The good news for SMBs is that everything from small business loans to payments, payroll to point of point of sale suddenly has competition in the form of fintech.  Fintech is creating competition in a financial services market which would have seemed highly inhospitable to budding providers just a few years ago.  Some fintech companies are thriving providing specialized, effective services, from lending to payments and everything else SMBs need to thrive.

Fintech Trends

Competition Benefits Many

Some of the results are stunning, with fintech companies that were themselves small businesses rapidly expanding into the service vacuum left by big banks.  Companies shaking up the SMB lending market include Kabbage, which has processed over $1.6 billion in SMB loans, and Lendio, which secured $20 million in funding in October. Sweden-based payments provider Trustly is processing transactions at an annualized run-rate of over €3.5 billion.

Clearly, their market is large, and investors see continued growth.  So who are their customers?  Trustly’s Chief Commercial Officer, Johan Nord, sees them as regular SMEs, with an appetite for growth, that want a a cost-effective, easy, and effective system for payments.

“Trustly’s technology allows SMEs to expand from one country throughout Europe at no extra cost, effectively making them pan-European,” Nord says. “It is all managed through one agreement for all markets, thereby reducing administrative costs. Since Trustly manages the entire payment process, it enables instant and painless refunds for merchants. It affords SMEs other functions too, such as enabling payments to be delayed until certain criteria have been met or splitting payments between different providers in the value chain.”

For the most part, fintech companies have not not fought the big banks for their traditional lines of business, like big business credit, and residential mortgages, but there have been fintech entrants even to those markets, in addition to those supplying under-served or newer markets like eCommerce.

Micro-lending  innovator Muhammad Yunnus won the 2006 Nobel Peace Prize, and fintech has brought this disruptive financial innovation to a range of markets, including SMB loans.

Competition from fintech not only increases the availability of financial services, it can also promote lower prices, and create new services through tailoring or packaging for specific markets, as well as innovation.  Fintech can also deliver other benefits, like speed, security, and convenience.

What Fintech Brings to the Table

Applying technology to financial industry challenges often means using innovations in encryption and other areas of security, or algorithms which help analyze opportunity and risk.

Some of the specific benefits of fintech vary between different financial services, and some are more or less common to the type.  Technology can lower barriers and costs, and enable new or different service models, including tailored solutions.

Just in lending, social lending and algorithmic credit assessment have increased availability for small and medium-sized businesses.  New models of financing are also enabled by fintech.

Peer-to-peer lending platforms lower the scale barrier that has blocked many SMBs around the world. Companies like US-based Funding Circle or Prosper Marketplace have facilitated tens of thousands of peer-to-peer business loans.  SMBs are benefiting not only from access to financing, but in some cases from superior rates, spurred by both the removal of intermediaries and competition for early market share.

In payments, fintech is deeply connected to ecommerce and international commerce, enabling cross-border sales without creating major challenges related to transaction speed or currency conversion.  By enabling ecommerce for SMBs, fintech holds the key to rapid growth for companies slowed only by the size of their local market.  A company successfully serving a local niche may simply repeat that success in numerous similar markets in different locations if it can manage to take payment and deliver the product or service from a distance.

Importance of Business Services Procurement to Profitability

For many small and medium-sized business owners, the same kinds of scale issues that make borrowing harder also present cost challenges.  There are very few opportunities for SMBs to cut costs without sacrificing the quality of core products or services.  Getting a slightly better rate, or a slightly more efficient service, can be the difference between good margins and no margins.

Savings can be found in competitive areas of the business services market, and in emerging services that do something in a new, more efficient way.  While fintech has increased direct competition with the big banks face in a number of services, fintech can also reduce the number of steps in a process, as Trustly does by providing a bridge directly between customer’s banks, and the merchants they want to pay.

“For SMEs new Payment Initiation Service Providers (PISPs), like Trustly, offer the efficiencies that comes with new and innovative electronic payment solutions. Trustly’s service enables consumers to pay for goods and services online directly from their bank accounts, without the need for middlemen such as a credit or debit card, with bank level security to and from anywhere in Europe. The product is free for consumers, and has the added safety feature of not storing any of your valuable details, and for SMEs, such as e-merchants, it eliminates risk and fraud issues. The Trustly user interface can be integrated into the merchant’s web page and visiting consumers can pay from their local bank using their traditional login details, on any device.”

Those efficiencies, from avoided fees to middlemen to fraud reduction, all save businesses money.

Since all of the money saved in business expenses is either added to the bottom line or redirected into funding other areas, finding ways to receive the same or better business services for less money is a huge opportunity.  At this point in the development of the market, SMBs are positioned to join the front line, benefiting from that opportunity, with fintech.

With a little extra time to shop around, you can take advantage of new and improved market for financial services.

  • Big Banks Cut Back on Loans to Small Business
  • FinTech v. traditional banking: It’s not a zero-sum game
  • The Big Banks Are Becoming ‘Dumb Pipes’ As Fintech Takes Over
  • Top 10 Fintech for Small Businesses

– For SMEs new Payment Initiation Service Providers (PISPs), like Trustly, offer the efficiencies that comes with new and innovative electronic payment solutions. Trustly’s service enables consumers to pay for goods and services online directly from their bank accounts, without the need for middlemen such as a credit or debit card, with bank level security to and from anywhere in Europe. The product is free for consumers, and has the added safety feature of not storing any of your valuable details, and for SMEs, such as e-merchants, it eliminates risk and fraud issues. The Trustly user interface can be integrated into the merchant’s web page and visiting consumers can pay from their local bank using their traditional login details, on any device.

– Trustly’s technology allows SMEs to expand from one country throughout Europe at no extra cost, effectively making them pan-European. It is all managed through one agreement for all markets, thereby reducing administrative costs. Since Trustly manages the entire payment process, it enables instant and painless refunds for merchants. It affords SMEs other functions too, such as enabling payments to be delayed until certain criteria have been met or splitting payments between different providers in the value chain.

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.

  1. Equity-based – These types of sites reward investors with a stake in the company.
  2. Donation-based – Contributions could be tax deductible and go toward funding a specific cause.
  3. Lending-based – Investors are repaid over time and may even be paid interest for their investments.
  4. 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.

  1. 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.
  2. 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.
  3. 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?
  4. 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.

Let’s Learn About 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.

Information About Selling Business Or 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.

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?

Small Business Grants

Wouldn’t it be nice if a person or entity would give you money to grow your business? The truth is, that isn’t likely to happen unless the funders are your friends or family. There are plenty of grants available for a small subset of business that are in certain industries. Here’s the truth about grants that you should know.

1. Small business grants are hard to find

If you’re a small business owner or you will be soon, you’ve probably heard of the United States Small Business Administration or SBA. The SBA is the government agency in charge of helping you find success as a small business owner. However, according to the SBA it, “does not provide grants for starting and expanding a business.”

The federal government has grant programs along with some state and private organizations but most fund non-profits.

2. Grants are specific

If you’re hoping to find something similar to a loan but you’re hoping not to pay it back, that’s not how grants work. Grants are often designed to foster growth or serve the public good. If an organization can give somebody money to fund research that may someday cure a disease or clean up the environment, that’s money well spent in the grantor’s eyes.

There’s very little good that comes from giving small businesses money for general growth.

3. Strict reporting requirements

If you receive grant money, expect very specific rules on how you can spend the money. And expect the paperwork to take a significant amount of time. Grantors know better than to give a business money and forget about it. Not only do they have a fiscal responsibility to their donors, raising more money requires convincing their donors that the money won’t be wasted.

4. The money may not be free

Before you go after grants, you’ll want to have some money saved of your own. Grants are often awarded based on matching funds. For every dollar the grantor gives you, you have to put up the same amount either through cash or financing. They want you to have “skin in the game” as well.

5. Grant writing is an art

Grant writing is tough. It takes a lot of time and there’s an art to completing the request. Many people looking for grants hire a grant writer for help. If you’re not the greatest writer and/or have no experience writing grants, get some help—at least for the first couple.

6. There’s a TON of competition

People in the grant business know where to look to find offers that might pertain to them. Because of the amount of competition you might be perfectly suited for the grant but don’t get it because so many others are too. Don’t make a business plan around getting grants.

How to Find Grants

But what if you are the type of business or organization that grantors look for? How do you find a list of grants? Start with the SBA’s Loans and Grants Search Tool. Here, you can research different funding options that might apply to you. You can also try grants.gov for a long list of government-funded grants.

For other opportunities, visit the website or call groups and organizations related to your industry. If you’re a woman, for example, you could call you state branch of the Women’s business center and research Amber Grants to get started.

Sometimes the biggest stumbling block in obtaining funding is finding the grants that apply to you. This is where old-fashioned networking becomes one of your allies.

Consider an SBA loan

It’s not a grant but the SBA can help you get a small business loan. By going through certain SBA-approved banks, you can get a small business loan guaranteed by the SBA. This guarantee allows lenders to lower their lending standards. If you’re just starting or were turned down for a traditional loan, go to the SBA’s website and research the types of guaranteed loans available to you.

Calculate Your Net Worth

Do you know how much you’re worth? Most people don’t but as a business owner, your personal net worth may be important. Although your business is probably legally separate from your personal assets, a bank that considers giving you a business loan will likely ask for personal collateral if your business has little real value. Calculating your net worth gives you an accurate picture of how much of your personal worth you’re pledging to your business. On a more personal level, having a clear picture of how much you’re worth helps with financial planning. Do you have enough saved for retirement; where is your debt and are there assets that could help you pay it down it down faster? What percentage of your net worth is in liquid investments and is it allocated appropriately? Your net worth is more than a single number—it’s an entire report full of important data.

Terms

Before diving into the calculations, you need to know a few terms:

Asset- Any property with real value. Real estate, a car, and jewelry or art are a few examples.

Illiquid Asset- Something that can’t be converted to cash quickly without a substantial loss. Remember the housing crisis that left people underwater on their homes? Homes became an illiquid asset for many.

Liability- Something you owe—a debt.

Liquid Asset- Something easily sold for profit. Stocks might be the best example.

Personal Property- Something you own that is movable—boats, cars, collectibles, and furniture are examples of personal property.

Real Property- Property permanently attached like a home, a barn, or detached garage.

Gather the Information

Probably the toughest part of calculating your net worth is gathering the information. Some of the information might be an estimate. Unless your real property was appraised recently, you won’t know it’s current value without paying an appraiser. In the case of your home, look up recent sales of similar homes in your neighborhood and use those as a guide for estimating your home’s worth. These are called “comps” or comparables in the real estate business.

If you have jewelry, some jewelry stores have appraisers on staff or they can recommend somebody.

For assets like your car or some collectibles, look at online guides that list their value. If you haven’t dug into the value of a 401(k) from a past employer or the cash value of a life insurance policy, set up online accounts with the firms holding these investments or call and request a current statement.

If you’re going to invest time into calculating your net worth, do the legwork to compile the most accurate data. The more you estimate, the more inaccurate your final calculation will be.

The Calculation

Calculating your net worth is simple once you have the information. It’s simply your assets (what you own) minus your liabilities (what you owe). Add everything you own including:

  • Money in savings or checking accounts
  • Actual cash
  • CDs or treasury bills
  • Annuities, bonds, mutual funds, pensions and other retirement plans, stocks
  • The cash value of any life insurance policies
  • The value of real and personal property
  • Anything else that you own that has sellable value.

Next, add your liabilities

  • Loans—car, mortgage, home equity, second mortgage, boat
  • Credit card debt
  • Medical bills
  • Student loans
  • Personal loans
  • Taxes due
  • Any other debt or outstanding bills

Subtract your total liabilities from your total assets. Now you know your net worth.

RELATED: How to Get Paid What You’re Worth

What’s Next?

Once you do the work the first time, the calculation is easier the next time around. If you haven’t already, use a free service like Mint.com to keep many of the numbers up to date in one place. Instead of having to compile the value of each of your investment accounts, credit cards, and everything else, you simply open Mint and copy the numbers into your spreadsheet.

In fact, Mint tracks the estimated value of many of your personal and real assets and gives you your net worth based on the information it has. It won’t be perfect but it will be pretty close.

Overpaying At Everyday Business Expenses

You’re a small business. You probably don’t have the money-is-no-object budget of big businesses when it comes to every day expenses. In fact, you’re probably trying to pinch pennies while providing your employees the tools they need to do their best work. So how do other business owners save money on—well—everything? Here are a few ideas.

Don’t Hire. Contract!

Gone are the days where you have to bring on a part-time “employee.” Employees need an office and/or equipment, you’re on the hook for a portion of their taxes and insurances, and you have to invest a considerable amount into training.

Instead, hire a contractor or freelancer. They’ll require some training but outside of that, all you pay them is the cost of the job. No taxes, no worker’s comp. insurance—just a fair wage for outstanding work.

But be careful. The IRS has very strict rules when hiring a contractor. For the most part, you can’t have any control over their schedule, you can’t act as their manager, and you shouldn’t provide them with any type of company uniform, among others. If you break the rules, they’re an employee. If you’re not sure, use IRS form SS-8 to figure it out.

Cut the Office Supplies

Nobody is saying not to provide paper for the copier but if you’re still following the old playbook of stocking your closets with binder clips, post-it notes, and boxes of pens, there’s probably not a need. Technology has made offices much more paperless. Those to-do lists that were once kept on post-it notes can now be saved on an app. Filing cabinets have been replaced with Dropbox and Google Drive, and there’s no need to print everything out.

You also don’t need swanky, high-end desks. If you have an IKEA close by, head there and buy desks on the cheap.

Teleconference your Meetings

Is it essential that you’re all in the same room to hold a meeting? How about a teleconference? There are plenty of conferencing platforms on the market and some are pretty expensive but if you only have a few people in the meeting, consider Google Hangouts. For meetings of 10 or less, all your people need is an Internet connection. It’s completely free and easy to use.

If you need a more robust platform, platforms like GoToMeeting will cost $50 per month for up to 100 people but that’s still cheaper than flying people to one location.

Speaking of Technology

First, Internet. Depending on your type of business, you may not need business-class service. If you have a lot of employees or they’re doing high-end computing tasks that actually require a robust service, then business-class speed is a necessity. But if you only have a couple of employees and they’re performing basic computing tasks, you can probably get by with a slower speed at a lower price. Don’t buy more than what you need.

Second, no need to upgrade your equipment every time something new comes out. Purchase every other software update instead of each one unless there are large amounts of security updates. No need to buy the newest iGadget either. On the other hand, don’t be cheap. New features and faster, more efficient hardware could be a cost saver. Buy and update, skip an update, buy an update—that makes for a reasonable upgrade cycle.

Don’t be Too Loyal

In business, loyalty to vendors can be a plus but don’t be too loyal. That insurance agent you play golf with might not have the lowest rate. The vendor you’ve done business with for decades may not be the best deal. At least once per year, compare prices and don’t be afraid to do some haggling. Loyalty means giving your current vendors the opportunity to match prices. It doesn’t mean paying more for the same product.

Stop Paying Finance Charges

There’s no way around it—if you’re paying finance charges, late fees, or bank charges, you are throwing away money unnecessarily. If you’re paying annual fees on a credit card, unused gym membership fees, and strange fees from a vendor, it’s time to cut these out. Every business ends up having a bit of money bleed. Audit your books regularly. Ask questions about every charge, regardless of how small it is, and refuse to pay unnecessary fees. You can’t avoid taxes but fees are negotiable.

Advertise Online

Advertising takes a lot of time and research to get right. That doesn’t mean you should pay for a mailing and hope it works. Online advertising gives you more control over the audience that will see your ad and you can spend as little as a few dollars each day if you want to. Carefully measure your advertising efforts and use the platform that converts the most people.

Partner with Other Businesses

Businesses are finding creative ways to cut expenses by sharing. Businesses sometimes rent a large office space and move in together. They can then share Internet service, other utilities, and office equipment. Companies like Uber have made “sharing economy” a household term. There’s no reason your business can’t take advantage of it too.

Small Business Money Mistakes

Of all the roles a small business owner takes on, often the most challenging is managing the business’s finances. The reasons are many, but most small business owners don’t have a background in business finance, and at least at the start, are more focused on bringing in business and serving the customers than they are on record keeping and financial planning for their business. As a result, many work long and hard at their businesses with only mediocre success to show for their efforts. Others fail completely. You can improve your chances for success – and your profitability — by being aware of and steering clear of these common small business money mistakes.

Insufficient Cash

Insufficient cash is one of the leading causes of business failure. Startups often overestimate how quickly they’ll start making money, and underestimate all the expenses they’ll incur. But startups aren’t the only businesses prone to failure due to insufficient cash. Once you have a steady flow of business you can run into cash problems in a couple of ways. One is a failure to realize the difference between cash flow and sales. You can have plenty of sales on record, but unless you get paid in advance for those sales, you’ll have expenses to pay before you collect from your customers. If one or more of your big customers pays late, or doesn’t pay at all, you may not have the cash to pay your bills on time.

Growing businesses can have a similar problem. You ramp up to be able to serve bigger customers or a wider areas, and before you start earning income from the growth, you need cash to pay your growing staff, growing payroll taxes, and other growing overhead expenses.

Still another problem for an existing business: existing cash flow may make the business owner miss or ignore falling profits and growing debt. To avoid cash flow problems take pains to accurately estimate all your costs and allow for the time it can take you to get paid. Get invoices out on time, stay on top of collectibles, and reassess your cash position at least quarterly, if not more often.

Waiting Too Long to Seek Credit

The worst time to look for a business loan or line of credit is when you most need it. If your business is paying its bills late and is on the brink of failing, finding funding will be difficult or impossible. The time to seek funding is when your business looks solid enough to convince a lender you will be able to repay what you borrow.

The type of credit to seek will depend on the type of business you run, the purpose of the funds, and the size of the loan. Depending what you need, funding sources include traditional banks, online lenders, credit card cash advances or purchases, and specialty lenders. (For major projects, check with your local economic development agencies for suggestions on funding.) Interest rates and terms vary widely, so give yourself time to find the best funding source for your needs. And don’t get discouraged if local banks turn you down. Check with the major online lenders to see if they’ll work with you and how their rates and terms may compare with other options.

Mixing Business and Personal Funds

Whether you are starting a new business, or you’re running an established business, mixing personal and business funds is a recipe for disaster. Assuming you are the sole owner and you buy business supplies with your personal credit card or use a business check to pay for a personal purchase, you’re going to have difficulty keeping track of how much money the business actually is making or losing throughout the year.

You’ll also have a big headache at tax time trying to separate out the business and personal purchases to determine what’s deductible on your business tax form, and what your profit or loss is for the year. The headache will get a lot worse if you get audited and the IRS believes you have purchased goods or services for personal use and deducted them as business expenses. If you have business partners or investors and mix business and personal expenditures, you’ll have even more problems on your hands.

Finally, if you don’t clearly separate business and personal expenses (using separate banking accounts and credit cards for each), you’ll find it difficult or impossible to get a business loan if you ever need one.

Even if your business is only a part-time operation with few profits, you should have a separate checking account and separate credit card for the business. You may need to take out the credit card in your own name when you’re starting out, and that’s ok, as long as it’s used exclusively for business purchases.

If there are times when you have to use personal funds for your business – or vice versa – the correct way to handle the situation is to make a formal transaction and document it. If you have business partners, get them to sign off on the transaction, too.

Not Staying on Top of Recordkeeping

Let’s face it. Recordkeeping is a big pain in the neck. As a business owner your focus is usually on winning business and making sure the customers get it in a timely fashion. Along the way there are so many things to do that it’s easy to let recordkeeping fall by the wayside. Receipts for inventory or other purchases get shoved in a folder, envelope, drawer, or the proverbial shoebox, until such time as you “get around” to recording them. Invoices for items you’ve purchased on credit maybe wind up in your inbox – with dozens of other pieces of paper. Mileage records for business travel may wind up on the back of a receipt or napkin, or stuck in a note on your smart phone. Check stubs from people who still pay you that way wind up in the same folder or drawer, and credit card payments show up in your bank account based on the credit card used to make the purchase, with no convenient way of matching any one day’s credit card receipts to specific purchases made.

As a result, whenever you get around to actually putting the expenses and income records in an accounting program or spreadsheet, you’ll waste a lot of time trying to remember what each thing was for. You may also have misplaced some of the records. Worse, if you haven’t been keeping all your accounting up-to-date, you may find out months down the road that you’re losing money because the cost of your supplies went up and the number of hours your employees worked went up, but you never raised your prices.

The only way to avoid these kinds of recordkeeping disasters is to do you recordkeeping weekly or more frequently. Either you have to take the time yourself to enter all the data into an accounting program or spreadsheet or you need to delegate the job to someone else. If you have someone else manage all your financial records, you need to review their work weekly, looking to be sure income and expenditures are properly documented and be sure that nothing looks strange. Employee theft is a big problem for small businesses, and often the thief turns out to be a trusted, long-time employee.

Under-pricing

Determining the right price to charge for products or services is seldom an easy decision. Charge too much, and you could lose sales to a competitor. Charge too little, and you won’t make much profit – or worse, you’ll lose money.

Small businesses – particularly those just starting out – often charge too little. Sometimes they rationalize that the low price is a way of “getting their foot in the door.” Sometimes the price is low because a new business owner isn’t taking into account the cost of his or her own labor, or hasn’t accurately determined all of the costs that have to be considered in setting prices.

A fencing company, for instance, has to figure in not only their costs for the fencing, but also the costs of labor, advertising, office expense, vehicle maintenance and repair, and other overhead costs when deciding what to charge customers. An independent consultant may have fewer overhead or labor costs to consider, but has to pay close attention to what her target annual income is, how many clients she’ll actually land and be able to serve during the year, and how many hours of work time will be billable vs unbillable and what her advertising, networking and other promotional expenses will be.

Established small businesses sometimes underprice their goods and services because they’re afraid to raise their rates. They worry if they increase their prices their customers will go elsewhere.

Let’s Learn About Mobile Payment Security

Consumer technology is supposed to make things easier. Credit cards are the payment method of choice for so many because they’re fast, easy, and safer than carrying cash. Arguably the biggest advance in the technology of payments is mobile payments with a smartphone. Due to its marketing budget, the best-known mobile payment method is Apple Pay but despite the company’s status as a household name, it’s technology is relatively new and unproven compared to more established players in the field like PayPal and Square.

Technology allowing you to pay using only your smartphone is very new and because of that, cybersecurity is a concern for both consumers and the business owners accepting these mobile payments. But most experts advise not to worry.

Mobile payments use NFC or near field communications. It’s kind of like Bluetooth but the differences make NFC more appropriate for mobile payments. Bluetooth signals have a range of about 30 feet while NFC is limited to about 4 centimeters. Because of the short range, the signal is more secure. If a hacker wanted to intercept your data during the transmission from your phone to the payment terminal, they would have to position a device within 4 centimeters of your device.

Second, Bluetooth technology takes longer to connect the two devices and uses more battery power.

The newest mobile payment technologies have multiple levels of encryption. Apple Pay, for example, doesn’t transmit your credit card information. Instead, the credit card processor receives a special number that is valid for only one transaction.

How to Stay Safe

No technology is absolutely safe and regardless of how secure, it’s only as secure as the person using it. Most security concerns come from older but still popular mobile payment gateways like PayPal and Square. Here are a few ways to stay safe:

1. Don’t use public Wi-Fi- If you’re entering credit card information on your phone, either through manually typing the numbers or swiping the card. You never know who is on these networks and the chances of somebody getting your financial information is higher.

2. Don’t store passwords on your phone- Rest assured, as soon as somebody figures out a better way to authenticate your information, passwords will be a thing of the past. They’re already inconvenient but to combat that problem consumers often do everything they can to make them assessable and trouble-free.

But the more convenient you make it for yourself, the easier you make it for a cyber thief to get their hands on your information. Don’t store your passwords on your phone unless they’re encrypted.

3. Strong passwords- Along the same lines, your password should have no link to you personally. Don’t use your birthday, your son or daughter’s name, your street, or anything else linked to you. That information is publically available and hackers know where to find it.

4. Use a Password on Your Phone- If you’re using your phone to do financial transactions, you must have a password—not the month and year of your birthday either.

5. Stay mainstream- Only use apps from official company app stores and well-known companies. Unless you’re an IT expert that understands the under-the-hood details of cell phones, stay away from jail breaking your phone or any app that relies on a jail broken phone.

6. Have a device locator running on your phone- There are apps for all phones that allow you to track the location of your phone if it’s lost or stolen. Make sure it’s turned on and correctly configured.

7. Don’t link to your mobile device to your debit cards- Let’s say somebody gets a hold of your phone and uses it to make payments. If you have the security features of your phone activated, that will be difficult but if it happens, you will immediately dispute the charges because you’re monitoring your bank and credit card accounts with an app of some sort. (hint)

If it happens, you don’t want the thief emptying your bank account. That would mean you have no money until the problem is resolved. That’s why you don’t use your debit card. Use a credit card. At least the only thing you lose is access to your credit card for a brief period.

8. Examine the payment terminal- You don’t have to be a mobile payment expert. If the machine looks tampered with or there are any other items around it, don’t use it. Devices the size of strawberries have been created in labs that can steal data transmitted through NFC but to date, no real reports have surfaced.

What is real are devices being attached to gas pump readers as well as terminals in other stores that can steal your information.