One Simple Step to Help Streamline your Self Employed Finances

If you are self employed or a small business owner,  you have probably discovered that keeping track of your accounting and finances can be time consuming and occasionally frustrating.  Unless you are an accountant, you’re never really sure if you are doing things correctly.  Consequently, you procrastinate, which really just makes things worse at year end or tax time.  To combat the problem it is important to have tools in place to facilitate the process and make it less painful, which could include  accounting software and/or a bookkeeper as well as a good organization system for your documents, whether it is electronic or paper format.  Another very simple measure that you can take is to have a separate bank account for your business.
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10 Payment Alternatives to Help Small Businesses Get Paid Faster

One of the numerous ways in which technology has benefitted small businesses has been to increase the number of payment options available.  While  conventional methods of payment like cash and cheque still exist, there are also a variety of other options like debit cards, internet transfers and mobile payments that have greatly facilitated payment infrastructure and made financial management significantly more flexible.  Every business owner must wade through the alternatives and decide what type of payment options are right for their customers.  This is based on several factors including their industry, common practices, location and of course business specific considerations.  For example, a retailer will usually allow for payment by credit and debit cards, cash and possibly some form of mobile payment.  Conversely, a law office may not offer a credit card option, but request payments via cheque or bank transfer.

Some payment alternatives for small businesses to consider are discussed below:

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9 Factors that Affect the Value of Your Business

Blood, toils, tears and sweat go into building our businesse; however their values are very rarely a direct product of our efforts.  A recent bidding war between HP and Dell pushed the stock price of 3Par from $10.00 to $33.00 over a two week period.  The company ultimately sold for $2Billion.  It seemed that both HP and Dell decided that they needed a company that sold storage servers and were ready to pay far more than an independent valuation would have gotten 3 Par (the market had valued it at $700 million).  Of course most businesses are not 3Par, and most business owners need to take numerous factors into account when determining the value of their business.  Some of these are discussed below:
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4 Simple Financial Analyses to Help Measure the Success of Your Small Business

As the year draws to a close, many small business owners are taking stock of their business, basking in their successes and trying to comprehend their mistakes.  Unfortunately a big picture view does not always immediately reveal itself– a thorough understanding of your business requires at least some analysis and introspection.  You may be tempted to look at cash (or lack thereof) in your bank account or your net profit , however these are not always reliable indicators of success or failure , particularly when taken in isolation.  Every small business owner should identify the specific needs and constraints of their business to determine the optimal analysis  required to assess its financial performance.  Some general analysis that most businesses can benefit from are presented below:
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5 Notable Disclosures in Groupon’s Financial Statements and What They Mean.

Since Groupon first submitted its S-1 filing in June, 2011, there has been a wave of negative sentiment around Groupon’s  upcoming IPO.  Many analysts believe that not only is Groupon not a good investment at the approximate $20 Billion + that its IPO’s initial share price will value it at, but  is in fact on the brink of insolvency.  They are also some that do not believe that, in the long run, Groupon’s business model is profitable . 

In an effort to determine whether Groupon is in fact  a raging buy or, as alternatively presented, on the verge of insolvency, I have undertaken an analysis of their latest S-1 , which was filed with the SEC on August 10, 2011.  The document, which is required by all companies who want to file an initial public offering, comprehensively reviews its operations, long term viability, business risks (which are numerous) and its financial condition.  Some of the more interesting discoveries, as they relate to the 6 months ending June 30, 2011, are presented below:

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13 Ways an Effective Accounting System Can Improve Business Decisions

An accounting system can be an extremely powerful tool for business owners.  When well-structured , according to the specific needs of the business,  it converts raw data into a format that actually tells a story about your business and can allow for insights that are essential to optimum decision making (the magic of debits and credits).  The balance sheet is a snapshot at a specific date, while the profit and loss is more of a narrative.  It provides feedback on how your business is doing and communicates what you need to do in the future.  Some of the information that can be gleaned is discussed below: 

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9 Tips for Building a Sales Forecast

Having a dynamic, regularly updated sales forecast can be essential to the success of a small business.   By forecasting your sales revenue you are helping to control for its unpredictability, an inherent risk in any business venture, and prepare for the decisions that are essential to your business profitability.  Whether your sales are increasing, decreasing or static , it is always better when decisions are made proactively rather than reactively. 

Preparing a sales forecast can be as simple as you want it to be and does not necessarily require an accounting degree, particularly when your business is small (although an experienced accountant can certainly help refine and streamline the process).  Below are some tips to help you prepare your sales forecast:

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How Being Prepared for Bad Debts can Improve Cash Flow Decisions

One of the more unpleasant aspects of being a business owner is having to chase clients that do not pay.    It is simeltaneously frustrating, stressful and disheartening, while attempts to collect are an utterly unproductive use of time and can have a significant impact on cash flow, particularly if you are unprepared.

There are ways to mitigate the possibility and impact of bad debts.  Some of these include: 

  • Performing a credit check on potential customers
  • Charging a retainer, which is paid up front
  • Offering discounts for early payments
  • Allowing several payment options including credit cards which allows for immediate payments
  • Following up on delinquent receivables dilligently.

Regardless of your efforts to prevent them, incurring bad debts is often inevitable and ultimately, a cost of doing business.  Consequently, it is important to ensure that you are prepared.

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7 Reasons Why Debt is Good for Your Business

Debt is often perceived negatively. Debt can be “evil”, “crippling” and an “unforgiving master”( the last one from the Google query “Debt is…”;).   It suggests a lack of sufficient cash flow and an inability to fulfil your funding requirements.  It also an indication of increased risk, as if you are unable to service your debt repayments, it could have dire consequences for your business (see American Apparel).  There is however another side to debt.  The majority of large corporations have some level of debt.  It can be a great way for individuals to earn a return on their investment.  And of course it is an integral part of the engine that drives the world economy.  For small business owners, debt can actually provide some great benefits as long as it is managed responsibly.  Some of these are discussed below:

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14 Year End Organization, Financial and Tax Tips to Manage Your Personal Finances

As a chronic procrastinator I tend put all my non “attend to immediately” documents in baskets and boxes resulting in, at year end, a colourful array of documents.  There are letters, bills, invoices, receipts, statements and the occasional delivery menu that did not get filtered out.  The intention is to organize them, on a regular basis, in the near future.  In reality, this usually does not tend to happen until the end of the year.

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10 Year End Financial and Tax Tips for Your Small Business

As the end of the year approaches, some of us find ourselves overwhelmed by top 10 lists, the shopping masses and endless renditions of Winter Wonderland.  Businesses, on the other hand, tend to experience a slowdown, which makes it the perfect time for small business owners (when not partaking in holiday madness) to take a closer look at their overall business, financial and tax situation.  A thorough review and analysis of your business will allow you to optimize your current financial situation as well as prepare for the future. 

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How to Prepare a Business Budget

One of the primary challenges facing a small business owner is uncertainty about the future. (It is also what makes entrepreneurship exciting).  We may have an amazing product or service, but we can’t be sure whether this will actually translate into a profitable business model.  A budget is an excellent tool to manage uncertainty and, contrary to popular belief, can actually be fairly straightforward to prepare, particularly for small businesses that do not have to worry about different departments, product lines and geographic areas .

A budget, very simply, is a tool that helps you predict your sales, expenses and profitability as well as your cash flow needs.  It is based on estimates, which in turn are based on a combination of experience, history and industry knowledge. In terms of presentation, a budget should essentially mirror your financial statements and will include the following main categories:

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4 Metrics to Help Improve Your Small Business Cash Flow

In a recent study by TD Bank Financial Group it was determined that one of the primary challenges facing small business was cash flow (The other two were managing clients and government red tape).  This probably comes as no surprise to most small business owners, especially in the early stages.  Of course, the simple answer to this problem would be a limitless source of cash.  (Of course if we had unlimited funds, we may not find it necessary to endure the trial and tribulations of business ownership).  Since this is usually not possible, we need to do the next best thing: analyze our cash flow requirements and find the most cost effective and easily available solution for any shortfalls.  Even the most successful business can find itself shutting its doors if it is not able to manage it's cash flow needs. 

Below are 4 financial metrics, which if monitored regularly, can actually help improve your business' cash flow:

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What is your Net Worth?

There comes a point in many people's lives when they want to find out what they are worth.  This is much more difficult to quantify on a metaphysical level; however on a tangible level most people can figure out how much wealth they have created over time.  The definition of net worth is, very simply, the total of all your assets (what you own) less your liabilities (what you owe).
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