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Small Business Accounting Explained

Below we give you some tips on how to make small business accounting more bearable for you.

First, you should make a list of all accounting tasks to perform in your business. Once you have your list, small business accounting is less stressful and takes less time. You will only have to perform one or more tasks at regular intervals (daily, weekly, monthly …).

We also recommend that if do not know a lot about small business accounting, learn the basics.

Small business accounting is a specific jargon and all sorts of words and concepts reserved for the experts. Do not be discouraged if you do not understand them all. Get used to the most basic concepts directly related to successfully improving your small business accounting. Ultimately, the goal is that you increase profit. It is the primary goal of any business. Request help from a professional if you want, but do not miss the basic concepts.

In contrast, it is a mistake to become a super fan of small business accounting. The company does not come down to accounting. There are firms and professionals who do this very well. This is not the job of an entrepreneur to be a know-it-all of Management or Accounting.

The third golden advice is to separate your personal finances from your business finances.

It is a bad idea to mix your personal account and your business account. Separate them completely: even if you’re the sole shareholder in the company, even if only your money is put into the pot. This separation enables you to plan, predict, without confusing personal cash and professional cash. This allows a lucid view of the true accounts of the company.

Finally, you must be consistent.

It may be hard to get used to at first but we recommend that once you create an accounting system for you, you should stick to it no matter what. Remember to register everything, forget nothing, and be consistent. If you are not consistent you will start doubting your own system later which will not help you when you want to evaluate your business performance at the end of the year. It is a good idea to meet with your accountant to have him or her verify the information. 

Scheduling for Your VA Business

Once you get established with a few clients, it’s easy to find your schedule either keeping you insanely busy or insanely bored. There doesn’t seem to be much in the middle, which is your ideal. So this month I’m offering tips on how to schedule your workload out.

First of all, never go over 30 hours a week with scheduling your clients. So make sure you account for that in creating your hourly rate. Why? Well, two reasons. One, this allows you the opportunity to be flexible with your ongoing current clients if they need more from you one week than they do normally. They will appreciate that and their loyalty to you will increase.

Also, it allows you time for one time projects that might drop in sporadically (and with minimum charges on those they usually turn out to be very profitable). This also gives you time to handle some of your own business administrative functions (billing, record keeping, etc.) during normal business hours so you are not up late at night or weekends when you should be spending time with family.

Next, make sure your contracts all state that normal business requests must be scheduled 48 hours in advance. This way, when someone calls and says, “Heather, are you available to work with me on a project on Friday?” on a Wednesday, you can open your calendar and schedule appropriately.

Many clients will try to treat you like an employee–requesting same day if not immediate turn arounds. This is your time to remind them that while you do try to process same day requests, you do require a 48 hour notice for all normal business requests and that rush fees can apply if they need things done sooner.

Now, I’m pretty flexible with most of my clients, because I understand that things DO come up as a surprise now and again. So most of the time I don’t charge a rush fee for doing work the same day or in less than 48 hours from request unless they either are abusing this by constantly wanting things done same day or I’m really that busy that I can’t process their requests same day unless I work until midnight. Those two times, I will actually tell them that if I do their work I will require a rush fee in addition to normal hourly rates.

Always keep an electronic and a paper copy of your calendar. Technology is great, but you never know when it will decide not to function anymore! Even if I know a phone call or project will only take 30 minutes or so, I go ahead and block an hour in my schedule just in case something goes wrong or the client requests changes afterward.

This is a good rule of thumb to keep yourself out of a quandary and it gives you the opportunity to get up and stretch your legs or get some fresh air or a cup of coffee between projects. Believe it or not, these little “breaks” even if just for a minute or two will help keep your mind fresh all day.

Keep moving toward success

Invoice Factoring and Accounts Receivable Financing for Small Business

Small Businesses are still suffering from a lack of available capital for expansion, purchase of new equipment and for just making payroll until a client pays.

First a little background. Factoring, or the act of selling invoices at a discount, is a financial product that has been available since the birth of merchant and customers. There are many factors in the world and many focus on specific industries or even segments within industries. Like Temporary Staffing, Trucking, Software Developers, Coders, Oil and Gas services and more.

Accounts Receivable financing, another name for Factoring, requires a small business owner to sell an invoice for an advance against that invoice. The factor will typically provide an advance of between 70-95% of the face value of the invoice depending on a few things. First, the strength of the Account Debtor or the person that owes the small business money, for a service or product. The Account Debtor is typically another business.

The process for starting to factor is much like obtaining a commercial bank loan or home loan, expect that Factors will work with clients who aren’t bankable or able to secure financing from a traditional community bank, credit union, or national bank. A basic application is completed and information is provided for the underwriting of the invoice and client. These documents will usually include the businesses financials, information on the account debtor, a background check, and documents related to the invoice, contracts, purchase order and more.

Once all the documents are gathered the factor will complete its due diligence and underwrite and quote factoring the invoice. The underwriter will also recommend a term for factoring, since you will be putting your future invoices up for security in the event the invoice doesn’t pay, or some other calamity prevents the payment of the factored invoice.

Factoring can be expensive, and it can also be very reasonable. When comparing the cost of financing, merchant advance loans, credit cards, and other typical small business financing, factoring may actually be a bit cheaper. Again the cost to factor is based on the risk and likelihood the invoice will pay the factor. The cost is also determined by the credit, collateral, character of the small business requesting the factoring.

The easiest way to look at factoring is figuring its cost on a monthly basis. It’s not uncommon for a factor to offer very attractive rates or at least advertise them online .35% to5.55% but the reality is those are 10 day rates or something near that. A typical factor will charge between 1.5% for the highest quality factor to over 5% for risky invoices that have a higher risk profile.