small business

Home > Archives for small business

How To Create a Budget for Your Business

Do you know where every dollar of your business goes? Business owners who don’t have a budget, likely don’t know.

A budget is the road map of your business – it tells you where you’re going with the business & what’s needed to get there.

Budgeting 101: before you can make money, you need to know how to spend it. A budget allows businesses to track cash on hand, operating expenses, and now much revenue you need to grow (or to keep the lights on). By committing these numbers to paper, you are more prepared and increase your changes of success. It enables you to anticipate future needs, and to be flexible when unplanned expenses or revenue shortfalls occur. By having a budget in place, you take a proactive stance on your business, not a reactionary one.

According to the U.S. Small Business Administration, a budget can be used to indicate some of the following:

  • The funds needed for labor and/or materials.
  • For a new business, total start-up costs.
  • Your costs of operations.
  • The revenues necessary to support the business.
  • A realistic estimate of expected profits.

Components of a Budget

A budget should, at the very least, be comprised of your business’ revenue, expenses, profits, and cash flow. This allows you to know how much cash you have for capital investments, such as tools, equipment, facilities, etc. The SBA defines the basic budgeting components as:

  1. Sales and other revenues – best basis for this is your last 12-month trend of sales, plus any anticipated future growth
  2. Total costs and expenses – broken down between fixed (i.e. rent) and variable (i.e. raw materials)
  3. Profits – Subtract your costs from your revenues

Creating the Budget

There are many free online tools that can help you get organized and get started. If you are overwhelmed by the idea of doing it on your own, consult your CPA or any local consulting resources. The hardest part is creating your first budget, since you’re starting from scratch. Once you have one, updating it each year is much easier to do. So, a vendor can get you started, and then you take it from there. Good luck!

A Quick Tutorial on Small Business Loans

Your news feed is full of headlines touting stock market performance and how the President’s tax cuts are going to help the economy.If these headlines continue to prove to be true, small business lending will continue to thrive in 2018. For the first time since before the start of the Great Recession a decade ago, big banks are now approving one quarter of the loan applications they receive. (Forbes, 2018)

According to the latest Biz2Credit Small Business Lending Index, loan approval rates at big banks climbed two-tenths of a percent in October, up from 24.8% in September.

So, with banks loosening up capital, SMBs now have more facilities available to them to get started or to grow. Banks, both large and small, provide small business loans, mainly to more mature and established businesses. For those just starting out, you’ll have a better chance of getting a loan from a traditional bank with an SBA-backed loan. SBA loans reduce the risk for the lending bank, making it easier for businesses to obtain approval and funds.

Alternative lenders, such as peer-to-peer, private investors, and direct lenders, offer additional channels for businesses to obtain funding beyond the banks. Alternative lenders are not subject to as much regulation on what they lend as traditional banks, so they are more flexible, have less borrowing criteria, and have much higher approval rates.

How Do I Get a Small Business Loan

You’re going to have to provide ALLOT of documentation. You will fill out an application, and then provide the requested information for underwriting. Below is a list of the most-commonly requested information:

  • Personal Information
  • Personal Background
  • Business Plan
  • Credit Report
  • Income Tax Returns and/or Financial Statements
  • Bank Statements
  •  Loan Application History
  • Collateral
  • Purpose for the funds (what will it be used for?)
  • Debt Schedule
  • Business legal documents, such as Business licenses and registrations, leases, formation documents (such as articles of incorporation or LLC filing), copies of contracts you have with any third parties, franchise agreements, and so on.

Once you receive loan terms from lenders, you need to determine which option best fits your business needs. Businesses typically analyze each lender’s eligibility requirements, loan options, costs and reputation. In the end, you want a lender that is most likely to approve your loan, offer terms and costs that fit your budget and cash flow needs, and offer good service during approval, closing and repayment.

Choosing Small Business Accounting Software

You’re just getting started. You’ve formed your business, have your product, and now you need to manage the business part of your business. What software should you choose?

There’s no shortage of software options available for small businesses. But which one is best for you?

Small business software has come a long way in recent years with the migration of most solutions to the cloud. There are some that still provide desktop options but most services are online.  Double-entry accounting is a complicated system governed by many rules, so a simple, understandable user experience is critical here – especially as SMB owners wear the CFO hat for their business as well.

Here are the features and services most considered when choosing a SMB accounting solution:

  • Ease of Use: How easy is it to navigate? How friendly is the user interface? Investments have been made in recent years to make the software tools much more visually appealing and intuitive to follow. Desktop solutions are less graphically rich as the online versions, and the cloud solutions utilize desktop functionality such as drop-down boxes, icons, and lists to improve the ease of use.
  • License Model: What is the subscription model? Desktop software is the most expensive, likely a few hundred dollars upfront. If yougo this route, make sure you really like the product as “returns” are unlikely. The cloud model is pay as you go just for the license tier you need, which is the least expensive and allows you to scale seats and features as you grow and transactions become more complex.
  • Data Management: If you have high transaction volumes, the ability to import large amounts of data may be of large importance to you. Each solution has their own tool – evaluate the ease of use and how it validates data before it overwrites anything in your system.
  • Add-ons: As your business grows, cloud solutions have thousands of add-ons that integrate with the base package to provide additional services such as payroll, inventory, expense management, and so on. Desktop solutions also have capability for add-ons, but is more difficult due to the need to install on local hardware.
  • Mobile: Cloud solutions have mobile capabilities, allowing SMBs to manage their business when out of the office. Desktop solutions do not allow for these capabilities.
  • Support: You don’t also want to be the IT help desk, so ensuring the software comes with good vendor support is critical. Most cloud solutions offer 24/7 support, and they can easily troubleshoot due to having access to your data and setup as well. Desktop is trickier, as it is local and depends on your local setup and installation.

“Accounting is the language of business” — Warren Buffet

Double-entry accounting is likely the most arduous concept in your business. SMB software providers have developed their software to cut down on the jargon as much as is possible, allowing users to successfully manage their business transactions even if they’re not CPAs. Competition is dense in the world of SMB accounting software, and it can make your decision harder. Top get you started, here is a list of the top 10 SMB accounting softwares, as rated by PC Magazine:

  1. Quickbooks (Intuit)
  2. Freshbooks
  3. Xero
  4. Zoho Books
  5. GoDaddy Bookeeping
  6. Kashoo
  7. Sage
  8. Wave
  9. OneUp
  10. AccountEdge Pro