Blog
Working Capital In Your Business
In simple terms, working capital can be defined as the current liquid assets available to a business on a day. Operating capital or working capital is also added to a company’s worth in addition to the fixed assets such as owned property or equipment while calculating their net worth. A working capital deficiency arises when the current liabilities of the company are more than the current total assets of the company within a fiscal year. Adequate working capital is the most essential factor for growth of a small business. It is very difficult for a small business to grow without availability of adequate working capital. It is generally seen that small businesses need working capital as they mature to move to the next growth phase. Working capital finance allows small companies to move to the next stage of business without stressing the existing cash flow of the business. Working capital finance arrangements can be both short-term and long-term. All of these arrangements work in different manner depending on the requirements of the business. Working capital can be used by a business to fulfill their contract obligations, expand facilities or to fulfill various purchase orders. There are different types of working capital financing available to small businesses. It is very important for a small business to know about different types of financing available. Sooner or later, a small business is going to need working capital finance to grow further. Working capital finance is a win win for both the lender and the business. The business wins as it gets the money needed for growth and the lender gets to lend the money against collaterals which can be quickly liquidated in case of default. The article below describes, in detail, various types of working capital finance available to small businesses. Hopefully, this will help you in deciding the best type of working capital finance arrangement for your small business. Accounts Receivable Financing As the name suggests, it is the finance offered against the receivables of the company. It is also commonly known as A/R financing. The receivables in this case serve as the collateral against which the finance is provided. It is a very innovative form of financing as it frees up the capital tied up in receivables for immediate use. It also transfers the risk of default of account receivables to the financing company. The money raised in this manner can be used by the business to run the daily operations of the business and concentrate on their core business of providing goods and services instead on spending time on collecting receivables. A/R financing is also one of the most popular form of working capital finance for small businesses as the money available with this form of capital financing is usually enough to take care of their day to day operations. Purchase Order Financing It is another innovative form of working capital financing. It is commonly known as P.O. financing. It is usually a short-term arrangement. Under this form of financing, money is provided by lenders to businesses that need money to fulfill the big purchase order placed by government agencies or national retailers. When a producer receives a large purchase order but does not have the required funds to purchase the raw materials, purchase order financing comes to the...
read moreReduce The Cost of Running Your Business
5 Easy Steps to Reduce the Costs of Running Your Business – As the owner or manager of a business you are in a unique position to save yourself money–sometimes lots of money–by reducing costs and creating new processes that cost less. Better yet, it doesn’t necessarily need to cost you time or effort to create these savings. In fact, in most cases, it’s almost always just a matter of making smarter choices when you decide where to put your funds. Below is a list of five ways you can almost immediately cut business costs and improve your bottom line. 1. Use Technology. Technology can allow us to save considerable amounts of money and build our business in new ways that weren’t possible only a few years ago. Better yet, these time and money saving technologies are available to practically everyone to benefit from. From teleconferencing services to online payment options, to open-source type software and remote desktop applications, technology has proven itself as a way to save costs and even make money. It might seem at first like a contradiction, but it’s not: cut your software. Technology can be very tempting with all of the savings it offers, but when we become infatuated with it, it can become another noose around our necks. There are so many different brands and capabilities of software available that it doesn’t take long before applications can overlap and duplicate each other, resulting in many unnecessary costs. Instead, before you are tempted to buy another software package, ask yourself, “Do I already have software that already performs this function?” If you do, don’t buy it. Another option is freeware, which is available on the internet and costs nothing. Freeway doesn’t often perform all of the functions that a fully functioning piece of software does, but sometimes the freeway brand will work just as well, and costs you nothing. 2. Ditch the landline. It has been said so many ways but so many businesses still have the unnecessary cost of landlines when they don’t need them. Small businesses would do just as well with cell phones, and virtual phone lines, or VoIP, instead of traditional landlines. Not only would businesses cut the expense of having landlines by cutting them out, but with cell phones, you can be assured that you will never miss an important call. The next time you are tempted to call a meeting with staff members that are scattered across the country or around the world, why not hold a virtual meeting with everyone where they already are? Virtual meetings can be held over the telephone or with video direct connections that will be just like meeting with anyone in person. And when you consider the savings you will realize from not booking plane and hotel reservations for your meeting, you will be glad you chose to make it virtual. 3. Go paperless. The costs of paper, ink, mailing supplies, and postage seem so small when you first consider them, but when you compare the cost of email, paper is no bargain. Creating paper and moving it around can add up to a huge expense. First, encourage your employees to think before they print. This goes for the copy machine as well as printers, ink, mailing supplies and so much more....
read moreClosing the books for 2013
It is that time of the year again when business owners must prepare to close the accounting books and ready for the upcoming tax season. We are here to help! Below is a checklist of items that will help to organize this daunting process. Not all items may apply to your business: 1. Accounting Books: If you are handling your own accounting books, it is important that all transactions from each corporate account are booked correctly. Any uncategorized transactions should be coded correctly or given to your accountant with enough details so he can correctly record the transaction. 2. 1099 Recipients: Be sure to collect the current mailing addresses for all of your independent contractors who are eligible to receive a 1099. Any individual that you paid more than $600 in the calendar is required that their payments be reported on a Form 1099 MISC. These individuals should have signed a W-9 along with a photo ID that you have filed with your records. If you are missing any of these forms, it is important to contact this individual so they can sign a new form W-9 complete with their Tax ID and Photo ID. 3. Inventory: If your business carries an inventory, it is important that you complete a physical inventory of your merchandise. An accurate inventory valuation will ensure that you are reporting your profit margin accurately. 4. Account Statements: All bank, credit card, notes, and other loan statements must be gathered so your year end balances are reconciled. All corporate account balances including credit cards and loans must be reported properly, especially if your tax return requires a balance sheet. 5. Payroll: All final payroll amounts must be booked properly by the end of the year. Payroll liabilities and wages are reported with the funds are paid, not when the pay period ends. All payroll that is to be reported in 2013 must be paid by 12/31/2013 or it will be reported in 2014. 6. Cash Expenses: Be sure to record all cash expenses that are business related so you are sure to receive those deductions. Cash expenses cannot be relied on by bank or credit card statements so it is important that you maintain a file with the receipts to support your deductions. 7. Retirement Contributions: If you are involved in a retirement program, speak with your accountant or financial advisor on the deadlines to make contributions so you receive the credit for 2013. 8. Tax Deposits: If you are required to make tax deposits each quarter, please be advise that you must make your 4th QTR 2013 tax deposit by January 15th, 2014. If you normally pay taxes at the end of the year, you may be required to make an estimated tax deposit. You can accomplish this by mailing in a check along with a Form 1040-ES voucher, or via EFTPS if you have registered to pay federal taxes electronically. 9. Equipment purchases / property improvements: Some equipment and property improvements may be eligible for a section 179 deduction in 2013. This may be the final year for such deductions, or may be much more limited in future years. If you have any equipment or other fixed asset purchases, speak to your accountant regarding their qualification for the deduction. If your business...
read more