In both business and personal deals, you’re going to end up with payment breakdowns. When you can’t afford the entire amount of some purchase in cash or credit immediately, you have to start deciding what will get paid when, and keep in mind there are often interest rates involved.
When you have home loan payments, when you’re dealing with tax brackets, and when you’re working with credit cards and credit ratings – these are all times when it’s essential that you understand how payment plans work for and against you. In a broader business setting, it’s also important to know where bankruptcy fits, because it’s not that uncommon of an occurrence.
Home Loan Payments
As far as personal deals go, learning about home loan payment breakdowns is vital. As far as business goes, you have to understand the financials behind renting a commercial building, renting a warehouse for storage, or maybe even renting an office in a part of a larger building. Money can get somewhat complicated, but ultimately it’s always going to come down to a series of payments established at regular intervals over a longer period.
Currently, the tax bracket system is under review. The type and number of deductions that you can take may change before too long. But, as much as possible, as an intelligent businessperson, you have to research tax brackets and then figure out where you fit. Ideally, you’ll find every opportunity that you can to list all of the potential tax deductions that are available to you. There are many cases where if you pay particular bills more quickly, like loans, for instance, you can get additional deductions on your taxes for that activity.
Understanding Credit Cards and Ratings
Almost everyone knows what a credit rating is. But not everyone knows what it necessarily means to you as a businessperson. The better your credit rating, the better chance you have of getting a larger business loan at a lower interest rate. That’s the bottom line, and that’s the reason why it’s crucial to utilize good credit practices as early as you can in your business career.
Where Bankruptcy Fits
Not every business deal goes well. If you get behind on payments, ultimately you may end up having too much interest to handle, and you can reach a point where there’s no money to pay the people that gave you loans. At that point, you have to consider filing for bankruptcy. This isn’t necessarily the end of the world. It does leave a black mark on your credit for a while, but if you managed to start another business that succeeds, then you can ultimately pay off what you owe, and return to a good credit standing.
7 Ways to Cut Costs in a Small Business
Cutting costs in a small business doesn’t have to be complicated or time consuming; the trick is knowing where to look. What may appear small costs on a daily or even monthly basis will add up over time to a significant amount. If you can put yourself in a budgeting mindset, you will be able to identify the must-haves from the nice-to-haves and the essentials from the luxuries.
Of course, cutting costs is not always about not spending money; it can also be about learning to spend your money in smarter ways. Here are 7 ways you can cut business costs and, ultimately, increase profits.
1. Embrace Technology
Technology and business software have moved on considerably in recent years enabling us to streamline efficiency and modernize our operation on a whole new level. Online payment services, accountancy software, online conferencing services, social media platforms…there are a huge number of ways to make your business more efficient and easier to manage.
2. Go Paperless
If you’re still printing and posting your communications and marketing materials, you should try and move as much as possible online. You can send communications and invoices via email and can keep your company’s key data in a more secure virtual Cloud storage system rather than a filing cabinet. You’ll save on the cost of paper, ink, envelopes, and postage, and also make your operation more environmentally friendly through reduced waste.
3. Try (Or Do More) Online Marketing
For most businesses, online marketing is no longer an option; it’s a necessity. From a website optimized for search engines to informative blogs and engaging and entertaining social media marketing, online advertising can yield great results in terms of brand awareness and sales with minimal costs.
4. Stick to a Budget
You can’t make business decisions without a budget; you need to know exactly what is coming into your business account every day and what is coming in, so it’s important to get the right system which enables you to do this. Stick to a strict, cost-reducing budget as much as you can, and you should reap the benefits very soon.
5. Switch Utility Suppliers
A quick and easy way to save money is to switch your business utilities, supplier. There are lots of suppliers out there and changing to a cheaper tariff could save you a significant amount of money each month. It may also be worth considering swapping a traditional phone line for mobile phone contracts or virtual phone systems which use an internet connection rather than a landline.
6. Consider Cheaper Premises
If you can be flexible about where you run your business from, you should consider whether you could be saving money by making a change. You may be able to downsize to smaller premises, sharing office space or even working from home. If you have employees, they may be able to telecommute.
7. Buy Second-hand or Refurbished Equipment
You may be able to reduce business costs by opting for refurbished furniture and equipment rather than brand new items. Many brands offer a good range of their products at discounted prices.
Making Something Out of Nothing: Business Grants Can Make Your Business Grow
Money. Most people need some, others need a lot. For the very few, they can never have too much money. And for these people, business is the way to their pursuit of happiness and success.
But as you all may already know, much like the pursuit of any dream, the road to success is paved with rough terrain and unexpected detours. But all that comes later on in your journey. The old adage remains true here — taking the first step is the very first step.
In business, that first step often translates to whether or not you’re able to generate funds for the business i.e. capital. And that, my friends, is often when many would-be entrepreneurs become disheartened. Because, whether you want it or not, setting up a business is going to require a significant amount of money, something that not everybody has access to.
Unless, of course, you’re able to secure money from a different source.
There are many ways to raise money, but crowd sourcing and business grants seem to be the most popular method as of late. And it’s only rightly so. But between the two, business grants are more secure and they are also more predictable.
With crowdsourced funds, you’re banking a lot on how well people are going to react to your proposal. You’re going to have to convince a lot of people to get the money you need. With business grants, you only need to convince the grantor that your idea has merit — this is not as easy a task as it seems!
What Is a Business Grant?
According to the Balance.com article, “small business grants are small amounts of seed money that further the goals of federal, state, or non-profit organizations.” The main difference between a business grant and a loan is that those who are given small business grants are not required to repay the amount of the business grant.
However, while this may seem like free money to the uninitiated, the difficulty lies in being able to convince grantors to entrust money to you.
This is because grantors are more careful in awarding their grants. For reference, the Federal Government does not award grants to help businesses start or expand. The only businesses that are awarded Government grants are those that yield the most success and in certain industries like medical research, science or environment.
Furthermore, there are many types of grants for specific business types.
Exactly How Important Is A Business Grant?
For a lot of businesses, a grant can mean the difference between success and failure. You may have the most brilliant idea but if you don’t have the resources to make that idea come into fruition it won’t mean much. This rings true even when you’re sure that you’re going to have a very profitable business venture.
A prime example of a business that could quite possibly benefit from a small business grant is Alte, a company that seeks to retrofit existing public transportation fleets with hybrid drivetrains which are more efficient as you put more miles on your vehicle.
Approximately 62 billion dollars is spent on new vehicles every year. Alte’s hybrid power trains could provide a better alternative to fleet owners as these hybrid drive trains would preserve the longevity of their vehicles.
Not only would fleet owners be able to get more use out of their vehicles, but the company would also be earning about 2 billion dollars of revenue every year. The only problem is that the company needs 130 million dollars to start production, a venture capital amount that could be easily solved by a business grant.
So, as you can already tell, business grants have the power to alter the fortunes of a startup. There are many ways to secure a business grant and sometimes you can even get one through a contest, such as this Fedex small business grant contest.
Brexit, Business & The Markets
No matter how you try and look at it, the word ‘uncertainty’ will always come to mind when discussing Brexit. Everyone is uncertain of how things will pan out when Brexit actually happens, and the UK leaves the EU. How will this affect exchange rates? What will it mean for small businesses?
There are more questions than answers as we can only really speculate based on predictions and things that have already happened. As such, we’ve tried to create a summary of everything that you need to know about Brexit, business, and the money markets.
The Current Brexit Timeline
Before we begin, it’s a good idea to see where we are in the Brexit timeline. Research from DailyFX – In June 2016 the UK public voted to leave the EU. This was followed by the triggering of Article 50 in March 2017 to show the EU that the UK will leave in 2 years. Fast forward to March 2019, and we’re currently in the midst of a deal being drawn up that parliament will vote for or against. If they agree, we leave the EU and go into a transition period that takes the UK up to December 2020 when the government and EU agree on the future relationship. If no deal is approved, then the UK just leaves the EU without a deal.
Why is all of this important? Because it’s having a crazy effect on the money markets – particularly the exchange rates. Not only that, but business owners have no clue what this will mean for them.
Uncertainty From The Beginning
We can only speculate about how businesses will function after Brexit, but there’s no denying that confidence is at an all-time low. Everyone is predicting a period of financial uncertainty because some big companies may cease investment in UK goods, which is bad for all businesses in the UK. Then, there are the EU Trade Regulations that could start charging the UK when trading with countries from the EU. As such, it becomes more expensive to purchase raw materials for small businesses, which could put a lot of people in a dangerous situation.
Everyone was uncertain from the moment Brexit was announced, and things appear to be even worse right now.
Problems In The Money Markets
If you look at the currency exchange markets, there are recent indications of problems for GBP. Specifically, the GBP/JPY pairing is trading in the red in Asia. Experts say this is thanks to the current negotiations about the Brexit deal. Nobody really has a clue what’s going to happen, which creates further uncertainty in the money markets. There’s been a lack of progress, which is why GBP is falling in value.
So, the easiest way to summarise things is that Brexit is currently hurting the markets. A lack of control over the situation from the UK government leads to growing fears from markets all over the world. This creates a lack of faith, hence the decline of GBP. As for business confidence, things aren’t much better. We can’t say for sure what will happen when the UK leaves the EU, but we can say that nobody is very optimistic.
How to Set Up a Payroll: A Simple Guide for Startups
When you start a new business, there will always be a great deal to think about. But there is one thing you cannot overlook.
If you can’t get a grip on your payroll process, you could lose the talent you worked hard to acquire. Your employees work for you in exchange for compensation for their time and talents.
When you start out, you’re not going to be a payroll expert unless you’ve worked intimately with a payroll in the past.
Do you need to learn how to set up a payroll? Continue reading to find out more about how to do so.
Tips for How to Set Up a Payroll
Setting up payroll may not be as easy as it sounds. Many new entrepreneurs find themselves with a fundamental misunderstanding of the payroll process. The steps you need to take are as follows:
Employee Information and W-4s
In order to complete the necessary tax information, you need to have your employees’ information. This includes each employee’s social security number (SSN) or tax identification number (TIN).
Each employee should fill out a W-4. This will determine how much money you should withhold from each paycheck. You will withhold less money for those workers who have more allowances or dependents.
Employer Identification Number (EIN)
Every employer must have an EIN. You may need to apply for one with the IRS. This will serve as a sort of SSN for your business.
Know Your Dates
There are a few dates you need to keep in mind. You need to know when you pay your employees, when you pay your taxes, and when you file.
Mark your calendar and never forget these important dates.
Calculate and Withhold Taxes
Make sure to keep track of how much in taxes you should withhold from your employees’ paychecks.
You can use an IRS withholding calculator to determine how much federal and state tax you should withhold.
You may need to submit monthly tax deposits on the federal, state, and local levels.
Prepare and File All Tax Forms
Some startups may choose to issue paper checks, even though the direct deposit is readily available. This is because paper checks may be cheaper for the time being.
Each paycheck should come with a paystub, which outlines employee wages, time, and withholdings. You may find a paystub generator to be a useful tool for this process.
Payroll Processing Doesn’t Need to Be Hard
At first, you may think payroll is an intimidating and overwhelming process. You’ll find there’s more to it than you originally thought.
There is more to learn about handling your business finances. From how to set up a payroll to managing your cash flow, you must know it all!
It’s time to sit down and do some necessary homework. To learn more about managing your finances, visit our section on accounting and finance.
5 Things That Increase Your Risk of Getting Audited by the IRS
Running a business can be stressful enough, and the last thing that you want is to be audited by the IRS. Even when a business has nothing to hide, it can be intimidating to handle an IRS audit.
More often than not, the idea of getting audited is more serious than the event itself. Most audits are done through the mail and, as long as you are honest, may work out in your favor. Keep in mind that it is important to seek professional help if you are struggling with your taxes.
That being said, below are five things that may put you on the IRS’s radar.
Making More Money
According to IRS statistics from 2016, if you show a significant increase in income from one year to the next, your chances of getting audited can increase from 0.65% to anywhere from 1.7% to 5.9% depending on your reported income. In addition to the increase in potential auditing by moving into a new tax bracket, sudden increases in income – especially for self-employed individuals – will be red flagged by the IRS, even when they are legitimate.
Filing Income Tax When It’s Unnecessary
If you file an income tax when you had no taxable income for the year, especially if you previously had, you are at higher risk of getting audited. While you are required to file a return regardless of how much income you made, the absence of income will raise eyebrows in the IRS.
Not Reporting All Taxable Income
All taxable income is required to be reported to the IRS, especially if it is traceable. The IRS recieves copies of all tax forms that you receive. Anything paid to you by other entities such as salary payments (W-2s or 1099s), dividend income, and interest paid is tracked by the IRS. Tax professionals can review your files before you submit them to ensure that you are not missing any pertinent information.
Improper Use of Reported Income
If you report income that was used for purposes other than stated, you increase your chances of getting contacted by the IRS. This typically happens when people invest money into an idea.
By not paying or purposely underpaying taxes, you are at perhaps the highest risk of getting audited. There are many clues the IRS will look for to find individuals who are participating in tax evasion. Some of the red flags include claiming 100% use of assets (such as a vehicle) for business, deducting business travel and meals, taking higher-than-average deductions compared to other businesses in your field, or anything else that could be seen as stretching the truth. This is especially true with individuals who are self-employed.
For some individuals, there is nothing more terrifying than getting contacted by the IRS. In reality, these routine audits should be nothing more than a formality that you have to engage in as a working professional. Audits are nothing to be concerned about for an honest taxpayer.
Startups and Small Businesses Need Financial Health Checks
It doesn’t matter how successful or great your business is, if you’re not properly managing accounting and finance, you putting your business at risk.
Healthy financial habits a must for all business owners and a regular ‘health check’ required even if you think everything is in working order, tweaking the system for improved efficiency will improve the bottom line.
As a small business owner, you have a lot of responsibilities to manage. Perhaps the most important task you have to attend to is managing finances. This can feel like an overwhelming task, one you might not want to attend to, but, if you do nothing else, stay on top of your organization’s finances.
If you’re feeling clueless about money management, here are few helpful tips for your startup or small business.
101 Money Management in 2019
Your company’s finances have different components, some of which can be managed less frequently than others. Look at all the financial tasks you need to attend to and then determine which ones can be handled less often. Start from the beginning.
Always pay yourself first
After handling all of the duties that come with running a company, small business owners frequently forget to pay themselves. By paying yourself, you’re effectively budgeting out that allotment, helping to ensure that your personal and business finances are on the right track.
Stay ahead of day-to-day tasks
Tasks like invoicing can often get put on the back burner, leading them to pile up. Send out invoices right away and follow up on payment. You will also want to properly manage accounting, whether investing in software, or outsourcing the task entirely. Doing this can also give you a realistic idea of costs, and areas of overspend.
Develop a good billing strategy
Unpaid invoices can be lead to cash flow problems, so it’s important to develop a strategy to decide how you will deal with invoicing. You might want to offer a discount for customers who pay in full, or change their payment terms if they’re having trouble paying their bill.
Keep an eye on your books
Looking at your books regularly can help identify any impropriety that might be occurring, or areas of spending that you need to monitor more closely.
Spread out tax payments
It may make more financial sense to make monthly tax payments, instead of quarterly ones. By making monthly payments, you can account for this in your regular monthly business expenses.
Investigate return on investments
Just as important as tracking expenditures is paying attention to the return you’re getting on your investments. This can show you which investments are bad or ones that will lose money.
Planning ahead is quite possibly the most important thing you can do as a business owner.
Always be looking ahead to stay on top of problems before they start. It’s never too early to start thinking about the future. Save as much as possible and be sure to continue investing in your business. Good habits now mean best practices later.
Failure to keep on top of business expenditures, and to keep an eye on money in vs. money out can spell trouble for any business, and none more so than startups.
Financial mismanagement can lead to insolvency, requiring the business owner to declare bankruptcy, which may tip you personally into bankruptcy. See this article on chapter 7 bankruptcy by Jason P Provinzano. If it comes to this, you’ll have no choice but to engage a bankruptcy lawyer, to get you the best outcome. However prevention is far better, so to prevent the worst from happening develop good money habits and practices now so your business can grow and prosper for years to come.
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