Poor financial management is a major reason why many small businesses fail. Even if you entrust your bookkeeping and accounting work to a professional, as the owner of a business you still need to understand the basics of financial management in order to make sound decisions.

The Basics of Bookkeeping

Good financial management starts with keeping good financial records. Even if you hire a bookkeeper, it’s important to understand the fundamentals of bookkeeping in order to supervise your bookkeeper properly, as well as being able to make well-informed decisions about budgeting, borrowing and other important choices.

For bookkeeping purposes, every business transaction you make should be documented by a check, receipt or sales invoice. These transactions should be entered into a journal, which can be a chronological record of sales and cash receipts, cash disbursements or other special entries.

Information entered into the journal should also be entered into a ledger. While journals provide documentation of transactions on a chronological basis, the ledger categorizes transactions according to which accounts they impact. Your company’s general ledger reflects your business’ balance sheet, revenues and expense accounts. The general ledger is completed at the end of each accounting period, when the information from your journals are categorized and posted into your general ledger.

In the double-entry accounting method used by most businesses, each transaction will impact two accounts, as every transaction will consist of a debit and a credit. One account will likely be a balance sheet account, while the other will be made into an income or expense account.

As an example, if you ran a plumbing business and charged $1,000 for a service, the service would be entered twice, once as a $1,000 invoice in the debit section, and once as $1,000 as income in the credit section. Once the fee was paid, you’d write up the $1,000 in your accounts receivable in the credit section, and $1,000 in the cash section of your balance sheet, a debit section.

When an accounting period ends, all of the account balances are added up and entered into the general ledger to produce a trial balance. In the trial balance,  the debit balances in your ledger sum should be equal to the sum of the credit balances. If they don’t balance out, you’ll need to investigate to see where the errors lie.

When you or your bookkeeper are done with the journals and ledgers, and you’ve come to the end of a financial period, you will need to close the books for that period.

Basically, this occurs when all entries have been posted to the general ledger and a trial balance has been prepared and checked and necessary adjustments have been made.

You’ll need to prepare a balance sheet, a summary of your company’s financial balances, and/or an income statement. Also, after all this is complete, you’ll then need to prepare closing entries for your general ledger by reflecting the profit or loss of the business in relation to the owner’s equity in the company. After that, you’ll start a new financial period with books set back to zero.

The Income Statement

The income statement, also called the profit and loss statement, summarizes your company’s profit or loss over a time period, such as a quarter or year. The statement reflects all revenue and expenditures over the time period.

Businesses typically use income statements to keep track of how much they make and how much they spend to help them gauge the business’ operating performance. A small business owner can use their income statement to see where cost overruns may be in their business, such as excessive phone, utilities or other bills. They can also help business owners see what products or services are hot, and what percentage of sales they account for, as well as help business owners determine their income tax liability.

Most income statements have three basic sections, the heading, revenues and expenses. The heading gives basic information about the business, such as name and address. The revenues section lists the money made by the business over the pertinent time period. The statement can lump all revenues into one, or break down revenues into a number of categories such as a line by line reflection of revenue from each store or product. The expenses section works the same way. Small business owners may want to use a very detailed income statement, as it can guide them to where their profits lie and what aspects of the business need help.

The Balance Statement
The balance statement is a good bit more comprehensive than the income statement. It may be the most complete reflection of the health of your business, showing all of the assets and liabilities of your business, such as property owned by the business, debts owed by the business etc.

There are many software applications that can help business owners do their books and create income and balance statements. It’s advisable for business owners who want to handle their own books to invest in these applications, as they can make the process less confusing and easier. Having good income statements and balance sheets are important, because they’re often looked at by banks when they’re deciding whether to approve a loan or line of credit.

Once you have a detailed income statement and balance sheet, you can use these informational tools to cut costs, identify areas in your business that need support and create long term plans based on your knowledge of the historical performance of your company.

For example, if your income statement reveals that you’re spending an exorbitant amount of money on utilities, you could use that information to start an energy savings program in your business. Or, if you see that one product line is generating most of your sales, you could beef up promotion of that product.

Bookkeeping and basic financial management provide essential informational tools to small business owners playing the profit and loss game. Be sure to understand the rudiments of bookkeeping to help put these tools at your disposal.

Finding the Right Credit Card Processing Company for Your Business

There are big differences in what Credit card processing companies charge for monthly fees, transaction fees, and statement fees. Some of the fees are flat, per charge or per month rates, and some of the fees are a percentage of the sale.

You need to compare not only the fees of the credit card processing providers, but what cards they accept, and what type of service they provide. Your business may not be open 24 hours, but if you have questions or problems, you may want to contact the processing company after your business hours.

Then you need to access where and how you will be taking the credit card numbers from customers. If you have a physical store front or presence, and an online store, then you need to make sure the credit card processing company offers merchant accounts that give you the flexibility to do both. You may even want to use your cell phone to process a credit card if you ever go out to client’s homes or businesses.

One problem in finding the right credit card processor is that banks will often refuse to offer merchant accounts to the small business without having a third party handle the transactions.

Besides having different fees, these processing companies can also have slightly different rules governing the use and handling of credit card transactions. There are other steps involved if you have online credit card purchases. You shopping cart will have to interface with an online gateway system. So the shopping card you have or choose has to work with the online gateway system of the credit card processing company that you select.

Applying for a Merchant Account

To get an account with a credit card processing company you will have to apply. You may have to accept an in person visit to your primary place of business, whether that is your home, a retail store, restaurant, or any other type of business location. This representative of the credit card processing company may take a picture of your office to prove you are located at the address you have given them. Some companies will allow you to send them this picture instead of taking it in person.

Other things you may need to provide include:

• A copy of your business license or the DBA (doing business as) certificate
• Profit and loss statements
• A copy of your previous years’ tax return

All processing companies require both deposit and withdrawal access to your bank account once you are approved. This will allow them to make the deposits of all transactions and if there is a chargeback, it will allow them to withdraw the funds.

Credit Card Processing Machines

There are portable machines, wired machines, dedicated machines and dial up machines. There are apps and physical options you can add to your cell phone to process credit cards. You need to figure out when and where you will want to process credit card transactions. Then a quick look at processing offers will show that there are many companies that offer a free Terminal, free set up, discounted or free applications fees, and other options that include online reporting of the day’s transactions.

Summary

Finding the right credit card machine or terminal, means you have to first find the right credit card processing company to meet your business needs. There are many options available and understanding your business requirements will help you make the best choice. The credit card processing companies vary greatly in their rules, the fees, and their offered services. Besides comparing the pricing, the terminals or credit card processing machines, and the services, you should also look for reviews on the processing company to see what others say about the service they provide.

Once you have picked a processing company, you can see what type of machines they provide, if they offer any free or through a promotional discount. Some companies will allow you to purchase your own machine, but then they will not service the machine. The credit card terminal will go hand in hand with choosing a processing company.

According to the Small Business Administration, traditional lenders such as bank still make up about 65 percent ($694 billion) of the money loaned to small businesses in 2009. Banks and credit unions are attractive lenders because they are likely able to offer you lower interest rates and fewer strings attached than some of the other sources of credit. They also may be able to point you to some government loan and grant opportunities for your business.

Here’s a few tips for understanding and managing your business debt:

Know your loans

There are a variety of financing options available from banks and other lenders. Understanding the different types is key to choosing the option that’s best for you.

Installment loans are traditional loans that give the lender the full amount when the loan is signed and that are paid back in equal monthly, bi-annually or quarterly payments over time. Some installment loans are adjustable rate loans, which means the interest rates can rise or fall over the life of the loan. With interest rates at historic lows, taking out an adjustable rate loan at this time is a terrible idea.

Balloon loans are loans where the borrower pays back only the interest on an installment basis and then pays back the principal on the loan in one large sum at the end of the loan. These loans are most appropriate when the business must wait until a certain date for payment from a client for its goods or services.

Line of credit loans set a maximum amount the borrower can access at any time. The borrower makes monthly payments on the interest and is free to pay back the principal as he or she sees fit. Most line of credit loans are extended for 12 months and must be renewed at the end of the period. Some lenders require that the line of credit loan be repaid for 7-30 days at the end of each 12 month cycle. These loans are best for businesses that may need temporary access to credit for operating expenses.

When taking out a loan, be sure that you understand all of its terms. Ask questions about fees and repayment terms and be sure that you’re aware of any factors such as adjustable rates or late payment penalties that could increase your payments. Also, if you’re able to secure a Small Business Administration loan, do it. SBA loans have a number of advantages, including lack of a prepayment penalty, meaning that if you pay the loan off early, you won’t have to pay an interest penalty.

Borrowing against the equity in your home

Small business entrepreneurs can use their homes as collateral for financing, however, should the business fail this can result in them losing their homes. Typically you can borrow up to 90 percent of the appraised value of your home, less any outstanding mortgages.  Most lenders’ maximum repayment period for these type loans is 20 years.

A good guideline to keep in mind — Typically, your mortgage payment and home insurance shouldn’t eat up more than 28 percent of your income, while these payments and all other debt shouldn’t account for more than 36 percent of your income.

In addition to your home, you may also be able to take out a small business loan on the cash value of your life insurance policy or on your retirement account. Again, be aware of the risk involved in borrowing against these assets.

Credit cards

Many small and home-based businesses start out with credit card financing. Using a credit card for neccessary start-up capital can be a good option for business owners who can’t get loans or credit elsewhere, but because of the high interest rates involved can carry significant risk for the business owner if the venture does not turn out to be profitable.

If you’re planning on starting a business using your credit cards to fund start-up costs, take a minute to peruse the latest credit card offers you’ve received in the mail. Some credit card companies offer 12 months or more of zero interest when you open up a new credit card account. By taking advantage of these offers and using zero interest cards to fund your start-up (and by quickly repaying the amount borrowed) you may actually get more favorable access to credit than you would have had you gotten a traditional loan.

Before using a credit card to fund your start-up, make sure you understand all the terms of the credit card agreement, including interest, borrowing limits, late fees and penalties to avoid making costly errors. Also be sure to avoid penalties by making at least the minimum payment on time each month.

Making payments

After borrowing money to start up or expand your business, be sure to meet your payment schedule. Missing payments can damage your credit, making it harder for you to secure additional financing. It can also result in penalties and possible default on your loan. If you have multiple loans, be sure to pay off the ones with the highest interest rates first, as this will result in you spending less on your debts over time. Also, you may eventually want to consider consolidating your loans, as this can result in lower interest rates and monthly payments.

Refinancing

Refinancing may help you lower your interest rate and/or your monthly payments on your loan. Once your business is up and running you may be able to get a more competitive rate than what you originally received, particularly if you financed your business through unconventional means such as by credit card debt. Shop banks and credit unions to see if you can get a better rate, but be sure to understand all the terms of a refinance agreement, as there may be hidden charges and fees.

Increasing revenue and cutting costs

If the debt situation at your small business is getting uncomfortable, you need to start looking at ways to improve your cash flow. Look at every item on your budget and look for costs that you can cut. Increase your business’

exposure through aggressive, low-cost marketing such as using social networking and e-mail lists to reach customers.

Debt-to-equity ratio

An important figure for small business owners to know when considering their debt is their debt-to-equity ratio. This ratio is calculated by dividing the business’ equity/net worth by its debt/total liabilities. The ratio gives business owners a good idea how much of their business is owned by the owners and how much is owned by its creditors. Established businesses should seek to maintain a 1 to 1 ratio, as letting the ratio drop below this balance will likely make it more difficult to obtain credit if needed.

Reducing personal liability

When seeking financing small business owners may want to consider the benefits of incorporating or forming an LLC, as it can reduce their personal liability should the business founder. Having corporate or LLC status can help business owners avoid losing many of their personal assets should the business go into bankruptcy or become hard-pressed to make debt payments.

By handling your debt effectively, you can make the most out of your borrowing opportunities to start and expand your business, and avoid the pitfalls associated with high debt.

It’s not surprising in the current economic climate that many individuals and businesses are delaying or trying to avoid paying debts they owe. However, you have bills of your own to pay and should be dilligent in collecting money owed to your business. And collecting debt actually saves your customers money in the long run as collecting the money owed to you will prevent you from having to raise prices to cover your losses from bad debt. According to collection industry sources, the debt collection industry saved the average American household $354 last year in money they would have spent on higher prices had the industry not collected nearly $40.4 billion in debts last year. Clearly, making sure your debtors pay up on time can help you keep your prices low as you are not forced to compensate for losses caused by unpaid debts.

Have policies in place

Good debt collection practices start in your company’s policies for billing and debts. It’s important for you to have solid policies regarding billing and customer debt, and making sure that they’re followed by yourself and your employees. Having written policies helps employees and customers understand what the rules are, and provides helpful documentation should you have to take a debt collection case to court.

If possible, avoid bill collection issues by insisting that customers pay for products or services rendered at the point of sale. While this may not be practical for all businesses, the more you can cut down on outstanding bills, the less you will have to handle debt collection issues. Your policies concerning billing and payment should cover which customers can be issued credit, when payment is due, how bills will be processed and sent to customers and what steps will be taken to address delinquent bills. Your policies should also cover checks, and what steps will be taken if a customer writes a bounced check to your business. Be sure to be aware of your state’s laws regarding checks and debt collection when crafting your policies.

Contacting the debtor

When it becomes necessary to collect a debt, you should first attempt collection by contacting the customer and informing him or her of the debt and his or her repayment options. This will typically occur 30 days after the account becomes delinquent. Be ready to provide information such as the amount of the debt, when it was incurred and when it is due to the customer.

Keep the call friendly and professional and avoid making threats or providing misleading information to the customer, however, you may inform them of the legal remedies available to settle unresolved debts. The Federal Fair Debt Collections Act puts limitations on debt collections activities, regulating when debt collectors can call debtors, how often they can call and forbidding abusive or harassing activity. Familiarize yourself and any employees who may be involved in debt collection activity with the law and what it forbids. Violating the law may damage your case in court if you pursue the debt through litigation and could open your business to a suit from the debtor.

Typically, the FDCA:

- Allows debt collection calls only between 9 a.m. and 8 p.m.

- Forbids threats of violence or physical intimidation.

- Forbids discussing debts with neighbors or employers.

- Forbids contacting the debtor at work if the debtor requests not to be contacted at work, or if the employer has a policy against debt collection calls.

- Forbids failure to cease communication at the debtors request. If debtors request the debt collector to cease a conversation, the collector must comply.

- Forbids causing frequent telephone rings to harass or annoy the debtor.

If the debt remains unresolved, follow up with contacts at the 60 and 90 day mark. If these efforts are unsuccessful, you will likely need to consider turning the debt over to a collection agency or attorney, or you may pursue it in small claims court on your own.

Take them to court

Small claims court is a low cost option that business owners can pursue if they feel they can handle the process on their own and is perfect for small-dollar diputes. In most jurisdictions, all you need to do is contact the small claims court and request paperwork to file an action.  Most of the time, the paperwork is simple and many courts will help guide you through the process. If you can handle the debt this way, you don’t incur costs involved with hiring an attorney or debt collection agency. Filing fees for small claims court are usually inexpensive, and by obtaining a judgement you get a legal remedy to the outstanding debt.

However, there is a limit to the dollar amount you can pursue in small claims court and you will be expected to understand the law regarding small claims and produce evidence and documentation to pursue your claim. Another drawback is the amount of time you will spend getting your documentation together and in court, as the wheels of justice can often grind slowly. In many cases, it may simply not be worth your time and money to pursue a small debt in small claims court when your time and resources can be better spent elsewhere.

Call in the professionals

Hiring a collection agency is another tactic you can use to collect unpaid bills. Delinquent debts are typically turned over to collections agencies after the 120-day mark. Collections agencies will pursue the debt by sending letters and making phone calls, and can also report the debt to credit bureaus. Often the prospect of having their credit score damaged by a negative report will prompt debtors to pay their unpaid bills.

The downside of using a debt collector is that they will typically charge a commission on the debt they recover for your business. The debt collection process typically takes 90 days, and the age of the debt affects how successful the process will be, as older debts are usually less likely to be successfully pursued. Many companies choose to hire debt collection agencies on a retainer basis, paying the collector a fixed monthly fee for his or her services. This can help to reduce costs and keep you from wasting time hiring collectors case-by-case.

If debt collections by yourself or a debt collection agency are unsuccessful, you may want to consider turning the debt over to an attorney. An attorney can file suit in court to collect the debt owed and pursue enforcement of a judge’s decision in the matter by mechanisms such as liens against property or wage garnishment. Attorneys will charge a fee for their services, however this amount can often be passed on to the debtor.

When turning over a debt to a debt collector or attorney, be sure to provide all the information you can about the debt, including documentation of efforts to reach the debtor for collection. Also be mindful of the statute of limitations in your state regarding debt collection, and avoid waiting too late to pursue action.

In some cases, particularly in cases where little money is owed, or the debtor is completely unable to pay, it may be worthwhile to either settle the unpaid bill for a lower amount or write it off. Hounding indigent persons for small debts may generate bad publicity for  your business that the amount owed does not justify.

Collecting unpaid debts is a big concern to small business, as having large sums of money unpaid can severely impact your business’ ability to pay its bills and turn a profit. However, overaggressive debt collection can put you afoul of the law and create a negative public image for your company. By being professional and being reasonable in your debt collection practices, you can stay on the right side of the law and also collect the money that’s rightfully yours.

Once the decision has been made if the business credit card requires a personal guarantee or not, then you can check out options as to percentage rate, promotions, or reward programs that are offered by different banks, in order to get the best small business credit card for your organization.

No Personal Guarantee

A personal guarantee means that the owner of the business guarantees that the business credit card payments will be made. This card is attached to and based on the owner’s credit history. If payments aren’t made, the owner promises to make the payments personally. If payments are late, then the owner’s credit history will take the hit.

Without a personal guarantee the credit card is based on and reported to the business credit history. The business is responsible for the payments and the bank can’t come back on the owner’s financials.

In order for a small business to get a credit card without a personal guarantee, there are several steps to take. Some of these steps you may have already completed, but many small businesses skipped straight to opening without actually setting up a business. This is especially true of home-based businesses or those who are freelancing.

It is important to note that the steps will take some time, often as much as a year to complete. You may need to get an interim small business credit card with a personal guarantee while you work towards completing these steps. To get a small business credit card without a guarantee you have to legally establish a business, and then establish some form of business credit before you apply for a credit card.

You can start this process long before you open a business or if you are already in business and have completed a few of the steps then just finish the process. If you don’t need a business card right now, then you might consider starting the process so that the card is available if you ever need it.

Here are the steps to separating your business from your personal financials so that you can get a business credit card without a personal guarantee:

• Incorporate Your Business – the business needs to be incorporated or your need to form an LLC. To view the options for incorporation or why you would form an LLC you can check online sites or speak to a lawyer. Without incorporating or an LLC, the business and personal finances are one and the same. This means any business loss or profit is reported on personal tax returns.
• Get an Employer Identification Number (EIN) – Once you have legally filed as a business, get an employer identification number in the business name. The EIN comes from the IRS. It makes it possible for you to file business tax returns that are separate from the owner’s personal tax return. An EIN is like having a social security number for your company. It proves to vendors and lenders that you are an established business and is an important step in getting a small business credit card without a guarantee.
• Get A Business Bank Account – Now that you have a legal name, and an EIN, open a bank account in the business name just as it appears on the corporate paperwork. Use the bank account to pay for business items and to deposit company monies.
• Get five merchant or trade accounts – by asking for small levels of credit, even $100, at local stationary stores for business cards, brochures, or even signs, at office supply stores, or other sources. You may be able to get the business cards cheaper online, but an online store probably won’t give you a credit account. Make sure you verify that the merchant reports payment history to credit bureaus. The whole point of doing this is to get a credit history built up under the business name.
• Check with Credit Bureaus – a few months after you established the vendor credit accounts, call and check with Experian, Equifax, and Dun & Bradstreet to ensure that they have your business listed and that the vendors have reported your payment history. The credit bureaus should be able to find you by business name or by your EIN. Track the credit reporting for a couple months. Make sure you pay the vendors early or on time.

Apply for a small business credit card after four or five months of credit reporting. You should be able to apply for and receive a business credit card under the business name. Check the bank where you have a business checking account and see what their requirements and options are for a business credit card.

The first step is to make a detailed list of what you need the accounting software to do. Start with the most important function, and move down the list for the one that is least important for your accounting needs. Make sure you understand your hardware, for instance that you know how much memory you have available and what operating system you run.

Know What You Need

If you have some specific requirements, say for a type of report, it is better to find a business account software package that does the needed report as a standard item, as customizing will typically cost more. If there are accounting software programs specifically tailored for your industry, they may provide the best fit. While industry-specific software may be more expensive than generic options in the beginning, this type of small business software may save you time and money in the long run.

Once you have created your list of needed functions, you can use it to compare the accounting software that you are interested in buying. Make sure you also compare the cost of training, maintenance and upgrades, as well as if there is a charge for customer support. Once you’ve compared pricing you will know how much to budget for the first year based on what you can afford.

At the low end of the scale will be the generic small business accounting packages like QuickBooks  or Peachtree. At the mid range you will find small business accounting packages such as Microsoft Dynamics GP (formerly Great Plains) which also offers some business management options.

Often the small business accounting package that you need will be dictated by how many employees that you have. Some of the programs will handle tax reporting, payroll, supply chain management, project management, and more.

The more functionality the small business accounting program has, the more it will cost. But if it handles 90% of the items on your list versus 50%, it may be worth buying one that you don’t have to customize or that will force you to do many of the reports or activities by hand.

Some software has to be downloaded to your computer, and some accounting programs are available in online versions, that you need use of the internet to access. Think how this might affect the business in either way. The online version can be accessed at home, while one loaded on a computer requires access to that one machine or the network. But the online variety means you need an internet connection to get to it.

Online Comparisons

Compare small business accounting software online. Check out reviews on accounting society websites or industry specific professional associations. If you have questions about the software you can also post those in these locations.

There are also websites like PC Magazine or CNet that will also have comparisons. Check several websites to make sure you have an unbiased overview.

Typically accounting software will offer a free trial of their online program for a month or more. This will give you a chance to compare and play with several programs that you are interested in. You can check out how easy the accounting program is to use, and count and compare the steps to perform each function on different programs. Pay the bills and get samples of reports during your trial period to see if this software works for you.

Tips for Selecting the Best Small Business Accounting Software

Invariably you will have questions, so buy something well known and from a reputable, known firm. Otherwise you may not be able to find help when the time comes. It will also make it easier to find a bookkeeper or accountant who already knows the program.

You may want to hire an accountant for the first month or so to set up your business accounting system. Or set it up yourself and have an accountant review what you’ve done.

Learn to Use the Accounting Software

Once you’ve made the choice, make sure you learn how the program works and all its capabilities. Make sure you take the time to get trained, taking an online class, going to a training held by the store you bought it from, or see if the community college has a class you can take. The more you know, the more the best small business accounting software will do for your business.

It’s also a good idea to join an online or local users group that will give you an opportunity to ask questions and learn new applications and different ways of doing things.

Accepting credit cards has never been easier. Technological advances and the Internet has made it possible to accept credit cards through the Internet or have the credit card processing machine access the merchant network via the Internet instead of telephone lines. This makes processing the credit cards much faster than in the past.

Fees

Many small businesses avoid accepting credit cards because of the fees associated with the process. However, the number of people who use plastic solely and don’t carry cash mean that not accepting cards could be costing much more money than the fees associated with accepting cards.

Credit card processing fees range from 2.5 to 5.5 percent of the sale. This gap in the lower end of fees to the high end of fees means that the business owner must research the different credit card companies in order to find the one with the best rates. While this may seem like a negative aspect of accepting credit cards, there is no risk involved with credit cards such as having a check bounce or having to wait for the check to clear the bank in order for the funds to be accessible.

Getting Started

It is easier than ever to start accepting credit cards. There is more than one way to accept credit cards in today’s world. One is to use the typical method of a credit card terminal and having merchant status set up with the various credit card companies. The second is via the Internet and one of the many gateways that allow for credit cards to be processed and deposited into an account, such as PayPal.

The following information details the traditional methods of setting up merchant status. If the small business has a predominantly online presence then PayPal and other options can be easily implemented.

The first thing a business must do is acquire merchant status and have a merchant account at one of the many banks that issue certain credit cards, known as acquiring banks. This step can be done by either working with one of those banks or setting up an account with a credit card processing company, an option that eliminates some of the steps involved in getting started.

Setting up a merchant account is not simply a matter of filling out an application and everything falls in place perfectly. In much the same way that credit card applications are checked for credit worthiness, the merchant application is checked thoroughly to ensure that the credit card company is not going to lose money on charge backs.
The credit card companies will verify that the business is solid. This is simply to determine if the company has many refunds to customers which in turn would mean lost money to the credit card company.

Compare Merchant Accounts

It is important to compare merchant accounts when starting out. Many small businesses make the mistake of thinking they should simply stay with the bank that they do business with currently. However, the fees that are charged for merchant accounts may be much less at other banks. The services that are offered with the merchant account should also be compared. The business owner should be prepared to ask for better rates and negotiate with the provider.

There are some things that should be considered when comparing the offers, such as:

• Rate of the fees and how it is assessed.
• Software or hardware provided such as the processing terminal, paper for the machines, support should it go down, Internet access to the account and more.

The comparison of various services should be made and listed so that an overall picture is seen. This allows the business owner to make a decision that is based on facts and not guesses.

Integration with Current Programs

Small businesses considering credit card systems need to also remember to take into account their current accounting software and whether or not the system they are considering will work with it. This shouldn’t be a difficult part of the process since practically all business accounting software has built in components that are designed work with credit cards.

Watch Business Grow

Once a merchant account is established and the credit card company has set up the equipment, it is time to start accepting credit cards and watch business grow. Advertise that credit cards are accepted by putting the credit card logos on all marketing materials and invoices and business will increase dramatically. Credit cards are the number one form of payment in business and should not be overlooked when setting up accounting practices.

Small business retirement plans are one of the best ways to save for retirement and at the same time defer tax-deductible money. The EGTRRA or Economic Growth and Tax Relief Reconciliation Act of 2001 provides many incentives for small businesses to save money for their golden years of retirement. This act literally allows small businesses to choose between saving the profits they make for later use in life and sending them to the IRS in the form of taxes, not a difficult choice to make.

Small business owners typically make their decision on a retirement plan based on how the plan will benefit them. Employees will benefit from having a retirement plan but the bottom line is that the selection of which plan to choose will ultimately be based on how the owner of the company will benefit. The good news for employees and business owners is that the new tools put in place by the IRS and the government has made it possible for both employees and owners to win.

Plan Choices

Understanding the different types of plans is the next step in the process of choosing one that will work for the business and the employees. There are several types of plans to choose from that will be explained below.

SEP (Simplified Employee Pension)

The Simplified Employee Pension plan or SEP is, as the name implies, the simplest retirement plan for a small business and self-employed people to set up. It is also the easiest of all the retirement options to maintain. An SEP can be set up by self-employed individuals who have no employees but pay taxes on earned money. The SEP is considered an Individual Retirement Account and if a small business chooses the SEP then it is a group of IRAs.

The SEP is a good choice for the small business because all of the contributions to the SEP are considered tax deductible. Additionally, the earnings of the plan are tax free until they are withdrawn from the account. If withdrawal occurs before retirement age, or 59, there is a penalty assessed on the money of 10%.

The SEP has both good and bad points that must be considered. One of the negative aspects of the SEP, for many people, is that these accounts do not allow loans to be taken from the account. These accounts also do not allow salary deferred contributions. There is also a limit on the amount of money that can be contributed in one year which may change annually and should be determined before the start of the plan.

The Individual 401k

The individual 401k is another by-product of the 2001 EGTRRA tax measure. This is an ideal option for the small business owner who has no employees or whose spouse is the only other employee. This type of retirement plan has higher contribution limits that are determined by the revenues that the business generates. For example, the contribution is typically maxed out at 25% of the payroll.

The Individual 401k is more flexible than the SEP and allows for loans to be taken for emergency situations and even has a contribution makeup plan that allows funds to be continued to catch up to the yearly limit if they are over the age of 50 and need to get their funds caught up.

Professional Advice

There are many other options that can be explored when searching for a retirement plan for a small business. However, the best advice that any small business owner can adhere to is to seek the help of a professional accountant or tax consultant. This will ensure that every possible option is explored and that all financial strategies are considered. Professionals who deal in tax codes and laws will be better equipped to point out the advantages and disadvantages of every option.

Small business owners have an important choice to make when putting together a retirement plan, regardless of whether the plan is for their own retirement or for a small group of employees. This decision should be made only after education and due diligence of the many options available.

There are two main options that can be selected from and then several options within those choices. The two main choices in accounting are hiring an employee and purchasing accounting software or paying an accounting firm to do the work. The differences between software and professional services are looked at herein and should help the small business owner make a decision.

In-House Accounting with Software vs. Professional Outsourcing

There are many difference in having an in-house accountant and hiring a professional accounting service to handle those tasks. Once these differences are understood, it will be easier for a small business owner to make a decision on which direction to move with their business.

Cost: The cost of using software and keeping accounting in-house must be compared to the cost of using a professional service. At first blush, many people think that hiring a professional company to handle the finances would be much more expensive; however, there are multiple expenses involved with having accounting software in-house and someone to work with the software and keep the accounting up to date. Some of those costs include:

Cost of the software: this can range from a few hundred dollars to several thousand dollars depending on how robust the software needs to be and how many features the business owner wants. Professional accounting companies tend to have the best software available and are usually able to provide documents to the business owner in whatever format is needed.

Training: This could be training involved in the software if the business owner is going to handle the finances or training a new employee on the software and the business practices. If the employee doesn’t work out, then there will be more money spent training another employee.

Employee Costs: Payroll, SS taxes, workers comp insurance, sick days, missed time that costs the company money and any other benefits that might be offered to the employee.

These costs can add up to substantial amounts of money. However, a professional service has these costs built-in and because they handle multiple accounts, the costs are not as evident or as high.

Risk: There are many different types of risks involved with accounting. First, no one is perfect and mistakes do happen. If the mistakes happen with an employee using software in house, the small business owner has to absorb those costs; however, when mistakes are made by professional services, they have to take responsibility for it and cover the money that is lost. These companies are insured for this type of mistake.

Another risk that can be cut is the risk of embezzlement. No one can provide 100% assurance that embezzlement won’t happen; however, professional services have insurance that will ensure any money that is embezzled is returned. On the other hand, when a professional service handles the finances, the small business owner has less of a hands-on role in the finances and must rely solely on the outside company to do things they way they want them to.

Laws: Professional service companies that specialize in accounting are often more up-to-date on tax laws and other changes that can affect the accounting department.

This can save small business owner money simply by not having to continually send their employee to educational seminars in order to stay on top of changes. However, many of the accounting software programs that are available today are able to keep up with changes through updates that are downloaded via the Internet.

Updates to accounting software programs are an important part of choosing the software. The program should be able to access updates on the Internet to keep the tax laws, payroll laws and other financial laws correct in the system so that the financials will be correct and the business owner won’t have to worry about tax problems and more.

Reliability: While having an in-house employee as an accountant does allow for closer monitoring of the billing and other financial tasks, it does not solve the problem of reliability. When someone is absent in a professional accounting firm, there is usually someone who can step up and fill in so that the work is complete. However, when the employee is an in-house employee, it can be difficult if the employee is absent, particularly if no one else in the business is able to use the software and fill in the gap.

Choosing between software that is used in-house and a professional services company is a decision that should be made after careful consideration of all the facets of each one. Ultimately, the choice will be one based on budget and how much oversight the business owner wants to have on the accounting.

getting their ventures off the ground. Investors can supply needed capital and,
in some cases, advice to new business owners as they start their business.
However, to get investors involved, you have to get them interested.

According to the Entrepreneurship in the United States
Assessment, angel investors typically roll about $23 billion per year into
businesses, and about 50,000 to 57,000 businesses receive funds from angel
investors each year. If a bank loan or other financing isn’t the route you want
to take in building your business, turning to investors is probably your best
option for raising money to start your business.

Here’s a few tips for making your proposed venture more
attractive to investors:

Present a solid business plan. Your business plan is perhaps
your most effective pitch to investors. Be sure that it’s concise and complete,
and shows that you’ve made a serious study of your proposed new business, the
money it will need to get started and the potential risks involved for yourself
and your investors.

Do your homework. Investors will be impressed by
entrepreneurs who know their market, product, financials and can explain
specifically how their products or services can take advantage of opportunities
in the market and differ from their competitors. Be ready to answer questions
about projected earnings and growth and how investors’ money will help your
business grow.

Get some skin in the game. Investors are more likely to be
impressed by entrepreneurs willing to put some of their own personal assets
into their business. It shows dedication and confidence.

Be willing to listen. Most angel investors are more willing
to contribute money to business owners who are willing to listen to their
advice. As angel investors are typically experienced entrepreneurs, this advice
is very likely to be well-thought out and sound. While you may not ultimately
decide to follow an investor’s advice to the letter, at least be willing to
hear them out and consider what they have to say.

Get a partner. If you have a reliable friend or associate
who has started businesses before or is skilled at securing meetings and
commitments from investors, consider bringing him or her in as a consultant or
partner. You’ll get the benefit of both his or her experience and contacts.
Just be sure to clearly outline the relationship in writing, to avoid conflict
over leadership and finances.

Once your business gets started, you’ll hopefully make many
sales, but to get there you must make this first, most important sale to
investors. By following these tips, you’re more likely to get meetings with
investors and impress them with the potential of your business.