Finance Info

Fixing your cash flow with your accounts payable

Having a healthy cash flow will help your business remain successful. You need to have a quality accounts payable process set up in order to fix your cash flow and to make sure you have plenty of money to operate your business. One of the best ways to fix your cash flow is to make sure you aren't paying your accounts payable the next day, you want to try and stretch them out as long as possible so you have plenty of time to actually acquire the funds from your accounts receivables to pay for them.

]]> Tip # 1 - Negotiate with vendors
The best way to lengthen the amount of time you have to pay your accounts is by working out arrangements with your vendors. Some of them will offer you up to 90 days to pay your accounts if you have been a good customer for their business in the past and if they can trust you to maintain your accounts without defaulting on them. Even extending to 45 days from your original 30 can be huge for your business and it can give you just a little bit of extra time you need to convince your customers to pay their bills so you can pass on the money to your vendors. Work out a dating term that is easy for you to manage for your business and will be able to help you have the time you need to acquire the money. Always ask about the dating terms before you start working with a vendor and try to get one that is longer.

Remember when you ask a vendor to extend payables to you; they are essentially paying for your order. This means you need to be able to pay it as soon as you can as they don't like to wait long for their money as it can easily eat into their cash flow money as well.

Tip # 2 - Talk about slow-paying
Another option many businesses turn to is a method known as slow-pay. Slow-pay is something you need to arrange with your vendors when you initially become one of their customers. Slow-paying simply allows you to pay the invoice late if your customers are not making their payments on time or when you have cash flow problems. If you foresee cash flow problems, tell the vendor as soon as possible so they can adjust for it. Just know that slow-paying is not something they will take to easily and you will need to avoid doing it often. If you do it more than 1 or 2 times, they may start to question your business books and they may stop doing business with you or they will require payments up front.

The economy is not favorable to a lot of companies right now. Even though it is starting to come back, a lot of businesses are still suffering from the recession and they are having a hard time. You need to be able to pay for you needed expenses like your utilities, rent, and payroll. However, you still need money to pay for your inventory. To reduce inventory costs, start placing smaller orders. While this may increase your markup costs, it may be the only way you can remain in business while you are trying to get your sales to go back up.

Try your best to meet your monthly payment obligations as best as possible to avoid damaging your business credit. You also want to avoid losing a particular vendor because of your inability to pay your accounts payable in a timely manner. Keep in touch with your vendors and let them know what is happening ahead of time instead of just defaulting on your accounts payable.

Finding a bank for your small business

One of the first things you must do when you establish a small business is to set up a business bank account. Depending upon your industry and personal credit rating, you may have a difficult time finding a good bank that will work with you. Finding a bank doesn't need to be a hard thing, especially since there are so many to choose from. You don't even need to use a bank as many businesses have found that credit unions are a better option.

]]> Look for a bank that offers urgent funds - This is important to small businesses because you never know when you essential equipment or machinery will break down. You need a bank that is willing to give you the money as soon as possible in order to ensure that your business will survive.

Credit cards - To establish business credit, you will need to acquire business credit cards. Does the bank offer business credit cards or will you need to look at other lenders? Having a business credit card with your existing bank is a great option because they can set up automatic payments for the credit card so you don't have to worry about missing a payment. Are you setting up a credit card method with the bank for your customers? When you choose to accept credit cards, you will be charged a fee for the cards. Check with the various banks to find out what their fee is on the credit card transactions so you can evaluate which cards to accept and which bank to choose.

Online banking - Just about every bank has online banking anymore. Online banking helps you to manage your books easier as you can go in daily to make sure they balance out. Always look for a bank that also includes online deposits and transfers as well. Scheduling the payments to your vendors can save you from late payments. It is also nice to have automatic transfer for your employees pay as well. Just make sure the transfer will be scheduled well in advance so they are paid in a timely manner and never late.

Experience - Some people choose a bank based on the number of years they have been in business. While this is a great way to know that they have a nice track record, it doesn't always mean you will be safe with the bank. Some banks overextended their mortgages and lines of credit and they have failed. Many of these banks have been around for hundreds of years. You must choose wisely when seeking a business bank and opt for one that meets your needs instead of basing the decision on age.

Interest - What is the interest rate like for your business bank account? This is a big thing to consider when you are choosing a bank. Some banks will charge large interest rates and it makes it difficult for you to afford to keep the bank account. Look for one that provides a fair interest rate on the credit card and also offers a nice APR for your savings account. Since banks and credit unions are very competitive against one another, look for a bank that has a low or 0 percent interest rate for new businesses for at least 1-2 years. This way you don't have to worry about another payment when you are just getting your small business up and running.

Meet with the bank manager and develop a relationship. You need to feel comfortable with the bank you have chosen and this will happen by having actual interactions with the bank and working with them.

Essential aspects of business bookkeeping

Tracking the transactions of your business is an important part of knowing how the cash flow looks and to make sure your business is strong and healthy. Bookkeeping is easy with all of the different software programs that are available now. In the past everything was tracked with a paper ledger, making it harder for you to maintain control over your cash flow and to ensure that your business is in the green and not the red.

]]> The new financial software programs will alert you when your inventory needs to be reordered and they will also alert you when it is time to focus on boosting your sales. Proper bookkeeping can be done by just about anyone as you don't even need to hire an official bookkeeper anymore. The financial software programs out there make it so much easier to use and mange that you can most likely handle all of the bookkeeping needs on your own.

Here are some of the essential aspects of bookkeeping you need to focus on in order to ensure you will maintain a stronger cash flow and that you will have a successful business:
1. Daily inputs. When it comes to the transactions, you need to record them daily. Make sure your outgoing numbers match up to those of your invoices and accounts payables. Also register with your bank to track the deposits and records to ensure that your balancing correctly. Most of the new financial software programs like QuickBooks allow you to register with your bank so the two programs will talk to one another and they will automatically take care of the balancing aspects of bookkeeping.
2. Receipts. When your employees do some shopping, always get a receipt. This is mostly for audits and to make sure the transactions are recorded. You need to hang onto the receipts for about a year or two. Depending upon the type of transaction (debit and credit) you can actually toss the receipt as you can pull it offline now.
3. Reduce the users. One way to make sure your cash flow is strong is to reduce the number of people that are using your bookkeeping program. When you have too many people inputting numbers, it can throw it off. Stick to one or two people to input invoices and transactions. Then you still need to monitor them in order to make sure everything is balancing and that it is accounted for correctly.

Bookkeeping is important to your business as it helps you stay focused with the needs of the business and it makes sure you are setting realistic goals. Bookkeeping also helps you to prepare for seasonal sales slumps and other problems. With bookkeeping you will need to make sure you are tracking it often and to make sure each department has a budget and is providing you with correct information. Here are some things to watch out for when you are focusing on bookkeeping:
1. Is your marketing department pricing products correctly? When they change the price of a product, you need to record it in your books. Make sure you are tracking the prices so you know what your markup cost is.
2. Are you able to stay one step ahead of your competition or can you successfully compete with a smaller budget? It's not always easy for every business to get out there and focus on building their sales when they don't have money to market. Look into some different marketing tactics to boost your sales.
3. Account for everything in case you are audited by the IRS. They will come after small businesses more than you think so you need to have strong financial records to keep them happy.

Discovering the difference between bookkeeping and accounting

Most small businesses assume that bookkeeping and accounting are the same thing. While they function closely and both deal with the business finances, they are two completely different entities. Much like sales and marketing, you need to take heed when you are dealing with the two in order to make sure your business books will come out correctly. This article will teach you about the basics of bookkeeping and accounting and it will help you to understand how the two work.

]]> Understanding accounting
We will start by explaining what accounting really is and what it's purpose is. Accounting is usually refereed to as a complete department. You may have several accountants that work for your company and they will manage the books of the company to ensure that all of the financial transactions are properly taken care of. The accounting department will manage your incoming and outgoing bills and they are in charge of making sure that your business does not have cash flow problems. The accounting department usually manages the bookkeeping methods of the company if you operate a small business.

Most companies have at least one accountant, even if they outsource to this person only for audits and tax reasons. Your accountant will check on the money of the business and they will oversee the department to ensure that everything is accounted for and that you aren't losing money.

The accounting department will manage your payroll and make sure your employees are paid on time. They will also be in charge of handling the W-2s, pension, retirement, and other accounts for the business. The accounting department is responsible for audits and they will work directly with the IRS in the event that your company is audited.

Your accounting department is also in charge of tracking the business assets and handling the depreciation of your business assets.

Understanding bookkeeping
How does bookkeeping differ from accounting? As you can see accounting is in charge of the overall financial outlook for the company. Bookkeeping is a little different as it is only in charge of the day to day transactions. Bookkeeping is merely a method to record all of the transactions that will be sent to the accounting department. It doesn't deal with the analyzing of the books or understanding of taxes and other important things.

Think of bookkeeping as record keeping. When a person comes to your store and makes a purchase, you will record this transaction somewhere that is bookkeeping. All of the little things need to be recorded in order for accounting to work properly. Bookkeeping usually involves a software program that has some type of ledger. The lender helps track the money that is coming in and going out of the business.

Bookkeeping may be done on paper, but it is harder to track. Having a software program is your best option as it is easier to use and you can include more information. This information may be vital to the accounting department if there is a problem and they need to get in contact with some of your customers or even the vendors.

There are 2 methods of bookkeeping, single entry and double entry. Single entry was commonly used in the past and it is just an entry in the book as credit or debit. Double entry allows you to include this entry 2 times. You will include it as a single entry and then again on the main account pages where you can double check your numbers to make sure everything balances correctly.

Every business handles bookkeeping and accounting in their own way. Determine which is the best for your business and get ready to head toward a stronger financial future.

Cut the basic costs

Running a large or small business can be challenging but it can be absolutely frustrating to watch money be wasted on simple things like office supplies. There are millions of dollars that are wasted each year on your office supplies simply because companies do not buy recycled paper, store-brand items, and other things. While you need to have toner, ink, paper clips, and many other essential office supplies, you can easily cut costs and save your company thousands of dollars a year.

]]> Start by researching online. Many of the online office supply stores are much cheaper from the big boys Staples and Office Depot. You can turn to these places when you are low on items but you will pay more for it. Comparison shopping is one of the best ways to start saving your company money and it's easy to do. Like your other inventory items, set a minimum level so you don't ever run out of toner, ink, paper, and other essential supplies.

Purchase in bulk. Don't be afraid to purchase your office supplies in bulk. Sometimes you can get reams of paper or boxes of paper for much cheaper at Staples, Office Depot, and Office Max than you can with a paper store. Always look at the cost savings of bulk, especially on supplies you know you are going to use like paper and ink.

Use the savings and discount cards. Some companies will offer you a store-savings card. These cards are a great way to save on office supplies because they usually offer a 10-20% discount for each purchase. Some companies have a rewards credit card which also provides you with discounts or at least cash-back incentives. Take advantage of the rewards cards as they can significantly reduce the amount of money you spend on office supplies and basic needs for the company.

Keep the local guys in business. The smaller office supply stores may be able to help you reduce your costs by offering you a direct-order catalog. This helps you to get your essential inventory in just a few days for free or discounted shipping. Some of the local office supply centers can provide you with better deals as they can give you trade deals, which is often easier for you to turn to instead of always using cash methods to pay for your office supplies. The one great thing about the local guys is that they can usually help you out with advertising and they almost always deliver when the big companies aren't there to help. Work out contract deals with the smaller guys and it helps you acquire custom orders and other things for a better price.

Don't always motivate your orders by price. The cheap pens don't have high quality ink and they will wear out faster. You must look at all the various options that are available and which one provides the best value for your price. Even cheap paper may not be the best if it continues to get jammed in your printers and fax machines.

Look for catalog ordering. A lot of companies have catalogs you can use to order their products. They are actually easier to use than their websites most of the time as you can flip through the catalog while you are eating lunch and mark all the items you need and compare their price and quality to others. Just make sure you are getting free or low shipping as this will need to be added to the cost of your office supplies and it can counter all of your great savings you have recently found.

Budget and sales forecasting help

Every company needs a little help with budgeting and forecasting from time to time. A budget helps you stay on track with the needs of your business and it helps you to avoid overspending and other problems. Forecasting is like a roadmap for the future. You will have an idea of what you need to do and how you intend to achieve the goals you have laid out. Budget and sales forecasting is an essential thing you need to do often to ensure your business is remaining healthy.

]]> Don't look upon a budget as a restrictive thing. You need it to have a plan as to what you need to do for your company. A budget should deprive your business of certain things like other companies will turn to. Instead it is a way to help guide your business into the future, not a way to restrict you from doing the things you want and need to do. Using a budget helps you to see the resources you have available so you can look for ways to use them. It also help you keep your business going into the future because you will be able to see how you need to watch your spending in certain areas and where you have more money. Budgets allow you to control your cash flow and to ensure your employees that they will be taken care of.

Some companies take days or weeks to create a budget. This is because they are thinking about it too much. A budget really doesn't need to take up this much time. If this is your first time creating the budget for your business, you want to keep the amount of time you spend on it to a minimum and just cover the basic needs of your business. This way you know how much you can spend and you can use forecasting to project the growth of your business.

How long have you been in business? Chances are you already have some form of a budget set up; it just needs a little adjusting in order to work properly. Use previous sales numbers and other things to find out how to forecast where your company is headed and how you can achieve it. Always do your research when you are forecasting for your business. This is the only way you can ensure that you are getting quality numbers. Be careful about being too ambitious with the numbers you come up with. While you want to set goals and push your sales team to work harder and head in the right direction, you could be hurting them by setting goals that they will not be able to achieve.

Ask yourself how much money you can accumulate in sales next year; base this number on previous years along with the state of the economy. The goal is to try and exceed this number. One way to help increase this number is by setting a higher price for your products or services. You need to be careful about pricing yourself out of the market, which happens to a lot of businesses.

How much money will it cost you to produce your products? What will happen if you need to purchase new equipment? How much money do you need to have in order to pay for the operating expenses of the business? How many employees do you have, will you need to hire new employees to help run the business? Calculate the amount of money you will spend on taxes as this is a large expense for many businesses. Setting up a budget is easy, just take into consideration your forecasting and start going from there.

Bookkeeping for survival

A business will not succeed without bookkeeping. You must have a system in place to track your business transactions to make sure you have enough money to pay for the needs of the business. How much money is coming in and going out of the business? If you don't know these numbers, you will struggle to sustain your cash flow and to manage a successful company. It is important to know how your business is doing financially so you can start boosting your sales and to prepare tax returns.

]]> Use a bookkeeping program like QuickBooks to manage your books. This program gives you the opportunity to track everything to make sure you are able to obtain business credit and to ensure that you have a strong financial outlook for your business. Evaluate the various bookkeeping programs that are available to make sure you have chosen one that can benefit your business. Since there are several to choose from, you must look at each one and determine which ones fit the needs of your company. Here are some things you need to look at with bookkeeping software:

Cost

Features

Users

Tax preparation

Every bookkeeping program is different so look into some that offer trial memberships and services. This is the best way to ensure you have selected one that is perfect for your business.

Once you have a program, train a few employees on how to use it. You will need at least 2 employees trained as they need to generate invoices for customers. Watch for the various levels of security with the program to make sure they aren't messing with payroll and other aspects of the business finances.

Operating without a good bookkeeping program is dangerous. How else will you know what your cash flow look s like and if you have a strong business credit rating? If you want to acquire business credit cards, you must be able to provide them with cash flow statements and other documents. If you aren't keeping good business records, you are going to be flagged as a high risk investment. Lenders want to work with a profitable company, not one that isn't organized properly.

Records are essential for marketing and sales. They allow the teams to see what their goals are and how they are doing. You need to have records for them to base their projections off. Operating without proper bookkeeping is a risk that you should not ever consider taking.

If you don't want to deal with bookkeeping, outsource it. There are a lot of freelancers out there that can manage your books from their own home. Of course you need to have a certain level of trust with this person and you'd better be able to purchase QuickBooks online or another bookkeeping program that you can both access.

The IRS will need to see your financial statements from time to time. If you do not have records to show them, you aren't going to be in business much longer. The IRS is notorious for their audited services and they always target companies that are not organized properly. If you don't have the financial statements they like, they will continue to audit you yearly until you get your act together. Avoid this process as it's expensive and time consuming. Get a good bookkeeping program now as it will set you off on the right track in the beginning.

It is vital to have financial records to operate a business. Make sure you are taking the right steps to ensure that your business is going to be strong and successful for many years to come.

All about getting a small business loan

Obtaining a small business loan, can be an overwhelming process. Charting the small business loan market can be scary your first time Many small business owners, dread the idea of having to go through it, however, most businesses need to obtain debt financing at some point. To make the process smoother and a little easier, there are certain things you can do, to expedite your loan.

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Establish a relationship with your primary bank-Many small businesses have different bank accounts at various banks, but there is generally one bank that is your primary. That is the bank you need to establish a relationship with. This is known as relationship banking, and it can be the cornerstone of small business financing. Another benefit is that a good relationship between small business owners, and bankers, allows for the free exchange of knowledge, and the ability to meet the needs of business. Relationships can be highly beneficial when it comes time to apply for a small business loan, or large credit line. It is important to remember that all banks are in business to make money, and all companies need to assess risk and make profits. A banker, who is informed about your business, can not only provide you with a small business loan, but also offer practical advice on financial matters. There are certain steps that will enable you to set up a relationship with your banker. These are-

1. Make sure that you set up a bank account, at a bank that deals with your size, and type of small business. 2. Make it a priority to manage the account effectively, and avoid overdraws, bounced checks, and low balances. 3. Try to borrow a short-term loan, and pay quickly to establish your business credit. 4. Always keep your bank informed of upcoming issues, missed projections, and missed payments. 5. Work to get to know your banker, and help them to understand your business.

Look at yourself-The best place to start when it comes to finding your first small business loan or line of credit is not with your banker, accountant, or lawyer, but with you. Keep in mind that the business is the owner, so it is crucial to realize that your personal credit history is an important aspect in getting a small business loan. The reality is that how good or bad your personal credit history, is can influence your ability, to get a small business loan. In the wake of recent economic crises, banks are carefully reviewing all lending practices, and trying to mitigate the risks. Because of this before you go into a financial institution for a small business loan, it is critical to know your credit history. There are several steps to this process. Here is a few of them.

1. Obtain your credit rating and credit history. You should obtain your personal credit history report from all of the three major credit companies. You have the option to order by phone, mail or online. 2. Know your history-You should also check your credit history from the big three credit bureaus for missing data, mistakes and omissions. For example, you may have canceled a $3,000 credit card limit years ago, but it can still be on file. Your bank may view this as available credit, and limit or reject, your small business loan. 3. Be sure that you can explain payment-If you can explain a late payment, and know why it is on your credit file, and then you need to offer your bank a reasonable explanation.

Be patient-It is important to understand at the beginning that getting a small business loan isn't a quick and easy process. You will need to know your business, and your own personal financial situation, in depth. Finally remember that even if you are told no the first few times, you have still have several options to pursue.

Advantages and Disadvantages of Equity Financing

There are several major decisions that must be made when you are starting a small business. One of the first ones is likely to be how to raise money, in order to finance your business operations. Keep in mind that you need to spend some time developing a business plan, no matter how you plan to obtain financing for your business. Then with business plan in hand you can then go forward with financing plans, for even a simple small business. One of the major ways that many people choose to finance their start up with is by using equity financing. However, it is important that you understand that advantages and disadvantages of equity financing.

]]> Perhaps you have some cash you want to put into the business yourself, so that will be your initial base. Then maybe you also have family or friends who are interested in your business idea, and they would like to invest in your business. While this may sound good on the surface to you, (and even if this is the best arrangement for you), there are factors you must consider before you jump in. If you decide to accept investments from family and friends, you will be using the form of financing that is called equity financing.

The first thing that you must be clear about is whether your family and friends want to invest in your business, or loan you some money for your business. That is a crucial distinction and clearly two different things! If they want to invest, then they are offering you equity financing. If they want to loan you money for your business, then that is quite different and is actually falls under debt financing. There are several advantages to using equity financing-

You can start up your business without the burden of debt. Most new business owners like the fact that they can use their cash, and that of their investors, when starting up a business, for all the start-up costs, instead of making large loan payments to banks, or other organizations, or individuals. You can get underway without worrying about paying back loans.

You can explain (using your business plan) that the money from investors is at risk, and help them understand that if the business fails, the will not get their money back.

Depending on who your investors are, they may be able to offer valuable business assistance that you may not have. This can be especially important, in the early days of a new business. You may want to consider angel investors or venture capital funding, just be sure to choose your investors wisely!

Before choosing equity financing for your new business, it is also important to understand that there are disadvantages, as well.

You must accept the fact that your investors will actually own a piece of your business, and how large that piece is depends on how much money they invest. While you probably will not want to give up control of your business, you have to be aware of that when you agree to take on investors. Investors do expect a share of the profits.

You must act in the best interest of your investors as well your own. Since your investors own a piece of your business, if you fail to do this, you could open yourself up to a lawsuit. In addition, if you make your firm's securities available to just a few investors, you may not have to get into a lot of paperwork, but if you open yourself up to wide public trading, the paperwork may overwhelm you.

Advantages and Disadvantages of Debt Financing

Many new business owners choose debt financing, if they decide that they do not want to take on investors, and want total control of the business. Debt financing is most commonly used in order to start up a new business.

]]> Most potential business owners try to tap their own sources of funds first, by using personal loans, home equity loans, and even credit cards. In addition, family or friends are sometimes willing to loan the necessary funds at lower interest rates, and better repayment terms. Finally, business owners turn to the next level of debt financing by applying for a business loan. However, before you choose debt financing, it is important to understand both the advantages and disadvantages of this business finance method. The advantages of debt financing are as follows-

This method of financing allows you to have the ultimate control of your own destiny, in regards to your business. You will not have investors or partners, that you have to answer to, and you can make all the decisions. You will also own all the profit you make.

The interest you repay on your loan is tax-deductible, if you finance your business using debt. This means that it shields part of your business income, from taxes and lowers your tax liability every year. In addition, there are many tax benefits available to small businesses. Keep in mind that you can apply for a Small Business Administration loan that has more favorable terms for small businesses than traditional commercial bank loans.

The lender(s) from whom you borrow money do not share in your profits. All they expect from you is to make your loan payments in a timely manner.

There are also significant disadvantages to using debt financing-

The disadvantages of borrowing money for a small business can be great. One of the major reasons is that you may have large loan payments, at precisely the time you need funds, for start-up costs. In addition, if you don't make loan payments on time, to credit cards or commercial banks, you can ruin your credit rating, and make borrowing in the future difficult or impossible. And most seriously if you don't make your loan payments on time, to family and friends, you can strain those relationships.

Because you are part of a new business, commercial banks may require you to pledge your personal assets, before they will give you a loan. You must remember that if your business goes under, you will lose your personal assets. Coupled with this is that fact that any time you use debt financing, you are running the risk of bankruptcy. The more debt financing you use, the higher the risk of bankruptcy. Many people find themselves in over their heads, rather quickly when using debt financing to start their business.

You could be open to serious liability. While many people believe that if you incorporate your business, your personal assets are safe, this may not be true. Even if you incorporate, most financial institutions will still require a new business, to pledge business or personal assets as collateral, for your business loans. Failing to repay means that you can still lose your personal assets.

Even after examining different types of business financing, many people are still left wondering which method is best for them. The answer is-it depends on the situation. Your financial capital, potential investors, credit standing, business plan, tax situation, the tax situation of your investors, and the type of business you plan to start will all have an impact on that decision. Carefully reviewing your business plan and consulting with professionals can help you make the best decision for yourself and your business.

Why cash management is important

It is crucial for small businesses, to understand how important cash management is to their survival. Surveys that are conducted of failed businesses, show that most failed companies, (up to 60%), say that all or most of their failure, was due to cash flow problems. Small business owners must understand that nothing matters more than cash. Making a profit is nice, cash flow is necessary; however, it is critical to understand that cash management is the key to business success.

]]> One of the major factors to poor cash management is that start-up businesses often find themselves short of cash, right off the mark. Small business owners need to realize that existing businesses can find ways to survive, if they can find ways to generate cash. The bottom line is that cash is the single most important element of survival, for a small business. Small business owners often say that an inability to control cash is their single biggest problem. One of the most important advantages of having positive cash management is that it gives a small business, security in unstable times. It also gives a business an opportunity to take advantage of strategic investments, or take advantage of opportunities to reduce costs. It should be noted that small businesses also have to focus on the concept of free cash flow in order to establish that cash cushion. There are several principles that can help small business owners focus on good cash management. Here are a few of them-

Realize that cash flow and profit is not the same thing. It is important to understand that financial accounting is not focused on cash flow. It is focused on net income or profit. You should also realize that over the long term, profit and cash flow, are approximately the same but the crucial difference is timing.

Timing is very important for a small business. For example, when you make a sale to a credit customer, you recognize that sale immediately on your income statement. That's called accrual accounting. However, you must understand that you don't get the money immediately. On your cash budget and your statement of cash flows, you don't show that credit transaction until you actually receive payment. When you look at this example you can see how the gap between profit and cash flow, could be very large. If you have rapid growth in credit sales, for example, profit could far exceed actual cash received. Situations like the one described above makes smaller companies very vulnerable to running out of cash.

You must understand what liquidity is and how it affects your cash management-There term liquidity is often used in combination with cash management. Liquidity is defined as a company's ability to pay its short-term debt obligations. In other words, if your small business has adequate liquidity, it can pay its current liabilities such as accounts payable. Most accounts payable are usually amounts owed to suppliers.

As a final note, it is important to understand that as the owner and manager of your small business, your goal is to squeeze all the cash out of your balance sheet that you can. Remember that not only do you want to get as much cash out of your business as you can; you want to keep it out in case of a potential or actual crisis. It should be noted that two of your current asset accounts are usually big drains on your cash. These accounts are inventory and accounts receivable. Inventory is the products you sell and accounts receivable are your credit accounts or those accounts that represent the credit you extend to customers. The balances in both accounts need to be converted to cash as soon as possible.

Why do you need a business plan?

Acquiring financing, investors, and partners for your business can be a challenge if you don't have the right type of documents ready. A business plan offers you the ability to teach others about your business so you can acquire the financing you need along with other things. A business plan is easy to create and it will easily help you establish yourself as a reputable company.

]]> Understanding a business plan
The first place you need to start with is understanding exactly what a business plan is. A business plan allows you to focus on the immediate needs and the future needs of the company. In the business plan you will outline what your products and services include along with information pertaining to your target audience. Market research information should be included along with a marketing plan and financial projections for the company. Even if you have been in business for awhile you need to upgrade your business plan to prepare the company for growth and development.

Choosing a business plan outline
Another important thing you need to understand is the outline for your business plan. There are several elements you need to include in the business plan. Here are a few key elements to include:

Summary

Mission statement

Keys to success

Market analysis

Financial analysis

Not only is it helpful for lenders to see that you have done a financial projection it is also helpful for you to see. This allows you to see your break even costs and you can find out if you need to start focusing on generating more income to sustain the needs of the business.

Make it specific
A business plan will change for each industry and for your particular business. Don't provide a general business plan to lenders and others; make sure you create a specific business plan. Financial history is a huge part of the business plan and you need to spend extra time on this to make sure you have all of the documents you need for the lenders. Here are the main elements that are important for lenders to see:

Cash flow projections. If you have cash flow statements already, use them to develop cash flow projections for the future. Future cash flow projections allow lenders to see that you can actually sustain the loan. Cash flow is vital to your business and without it you will have a hard time keeping your company afloat.

Plan for success. The other thing you need to have is a plan for success. How are you going to get the product out of your hands and into the hands of the consumers? A good marketing strategy goes a long way to show lenders how you will implement your business for success.

Business plan format
Now that you have all the documents ready, you can put together everything into it proper format. This is the order in which you need to organize your documents and include in the business plan:

Executive summary

Company description

Products and services

Market analysis

Strategy and implementation

Management structure

Financial plan

Preparing all of the documents individually and then organizing them together allows you to have all of the sections properly checked by others to ensure you have all of the right information in the business plan. Always have at least 2-3 other people check over your business plan to make sure you haven't missed anything. Lenders will notice if there are mistakes or other issues with the business plan and they will reject your loan.

What you will need for a small business loan

How you present yourself can often times mean the difference between getting the small business loan you need and going home empty handed. Small business owners who take the time to make sure they have the right loan documentation, and present themselves in the best possible way, are the most likely to get the funding they are seeking. Experts agree that whether you are seeking a small business loan to start a new venture, or improve your existing business, taking the time to polish your business plan, and gather documents to highlight your prior successes, may help make your business a more appealing candidate for a loan. Here is what you need to know about what you will need for a small business loan. Keep in mind that while each financial institution has its own review process, the following documents could emphasize your successes as part of the loan application process:

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Create a paper trail-You want to have a record to documents your business accomplishments. This will provide your lender with valuable insights into your ability to successfully execute your business strategy and accomplish your goals. You want to make sure that this includes loan repayment records. If you have successfully repaid a prior business or personal loan, showing the bank records may inspire confidence in for your lender, in your ability to repay your debts.

Credit reports-It is important to realize that you should review your credit report to verify there are no errors before meeting with your lender. This includes both your personal and business, credit report, (if you business is existing). Keep in mind that an up-to-date, accurate credit report demonstrates that you care about your credit worthiness.

Positive cash flow documents-It is important to understand that if you are seeking a loan, for an existing business, providing records that demonstrate a history of positive cash flow can lend significant weight to your perceived ability to cover your business-related costs, and repay your loan. For potential small business owners, who are starting a new business, it may be beneficial to highlight past successes, by providing a record of positive earnings, from a formerly-owned business, or a business you operated in the same industry. You should also keep in mind that providing an accurate, realistic, and thorough picture of how you will achieve positive cash flow in the future is also key, to swaying your lender to look at your confidently.

Details about industry expertise-For those small business owners looking for loans, they should be aware that it is important to include details showcasing your relevant industry expertise, as well as tangible successes that you accomplished while owning or operating a business, in your chosen field. You should include prior achievements of note. This may include: increased revenue growth, business expansion and securing new projects and/or clients. Keep in mind that your management team is also integral to the success of your business; so highlight their expertise and industry successes, as well. Experienced business lenders understand that they are investing not just in ideas, but in the people who will run the business. A positive track record can boost lender confidence in your business' ability to compete in your market sector. It is important to understand that by carefully tracking and summarizing your achievements, you can bolster the foundation upon which your future business goals are assessed. This is because your accomplishments can serve as a window, into the future performance of your business. When put together with thought and planning, these documents listed above, will illustrate how you are managing for success, and may help strengthen your candidacy for a loan.

What to do with a business finance loan

When you apply for business finance loans, you need to read through the application and make sure there are no restrictions or limitations on how you can use the money. Some of the loans out there state the funds can only be used for renovation or for the purchase of new equipment. However most of the business finance loan options will allow you to use the money for anything as long as it's going to help the business in some way. If you want to figure out to get a business loan and then figure out what to do with it, here are some tips that may help:

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The hardest part is getting approved for the loan. Once you have the money its pretty easy to spend it as you please but convincing a lender to offer it to you originally may be more difficult that you realize. In order to get approved for a loan you need to demonstrate financial control and worthiness to the lender. Here are a few things you need to check on:

Business credit score and personal credit score. Make sure you have high scores in order to show the lender that you can borrow and repay your debts in a timely manner. Controlling your spending and having a higher credit score shows lenders you have no problem acquiring debt and only borrowing what you need.

Cash flow statements. You need to show the lender that you have solid financial records. This helps them to see that you can take on more debt and repay it in a hurry.

Collateral. A great way to convince a lender to provide you with money is to offer them collateral. Collateral helps to reduce their risk and place it back on you. You do need to make sure you can repay the debt or you risk losing the collateral. Your home or even your car is a great option to use as collateral for the loan.

Tip # 2 - Research the right business finance loan
If you want to get the best interest rate and favorable loan terms you need to make sure you are working with the right lender. You need to shop around with a few different companies and check on their payment plans, interest rate, loan terms, and other things. This way you can be sure that you will get the loan at an affordable rate. Online lenders may be able to provide you with better loan terms and rates from the traditional lenders so make sure you contact a few online lenders as well.

Tip # 3 - Make a list of your needs
A big part of getting approval for the business finance loan is writing down everything that you need. You need to write down the cost of these items as well in order to show a lender how you plan to use the money and how much money you need. If the lender can see that you are going to use the money wisely, they will have an easier time approving you for the loan. Here are some things you can use the money for:

Payroll

Working capital

Equipment and machinery

Inventory and raw goods

Providing them with a detailed list is the easiest way to get approved for the loan in a timely manner. Usually the business finance loan options that are available include micro loans, small business lines of credit, credit cards, and personal loans. Typically the business finance options will offer you up to $35,000 depending upon your business history, credit rating, and financial background.

What makes a business sound?

Acquiring money for your business is essential but there are other things you need follow in order to make a business sound and ensure that it will last for many years. A solid business plan will go a long ways in making your business sound and allowing it to last for many years. A business plan allows you to acquire business loans, investors, and working capital for your company to become a success. Here are some other things that will help make your business sound:

]]> Value your customers
Without customers, you have no business. You need to work hard to acquire their respect and support. Quality customer service will come down to how you treat your customers. When they purchase your products or services do they feel appreciated? Do you work hard to satisfy their needs? Work with your employees to focus on treating your customers better and showing them the respect that they deserve. It's also important to market to your existing customers. Many businesses place a large emphasis on marketing to new customers that they forget all about the ones that help them stay in business. You need to send out thank-you mailers and other marketing pieces to your existing customers to show them how much you appreciate their support. What do you offer them as far as customer support goes? Do you have online forums they can use when you aren't open? What does your return policy look like? Do you treat your customers well when they need to return a product? Remember, they need to feel like they are right even if they aren't.

Hire the right employees
A big part of running a successful business is hiring the right type of people to work for you. Be very picky when it comes to hiring employees and make sure you put them through a rigorous training program. Spend more than a few days on training; try to spend a few weeks on training. As you help your employees from the get-go, they will have a much easier time integrating into their role within the company. This will allow them to become a better employee and it will also help them to provide your customers with better services.

Make a name
Part of running the business involves making a name for your business in your industry. People need to hear about your company and they need to understand what type of services and products you sell. Your competitors need to have a level of respect for your business even if they don't like you. Market your business correctly by attending events where your customers are and also building a network with your competition. Try out different marketing strategies until you are able to find one that you like and keeps your name out there in the industry.

Manage your books
To become a successful business you need to track your books. If you aren't watching your books closely you can easily lose control over your cash flow and wind up in a bad debt situation. Use a good financial program as it will help you to keep control over your books and prevent problems. A good program to use is QuickBooks. This program allows you to not only track your daily expenses, you can also send out invoices from it, build sales reports, and payroll. It's a great solution for any business and it's easy to learn and maintain. If you have a larger staff, it may be a good idea to use a payroll company to come in and manage your checks. Since you need to calculate the withholdings it can be difficult to do and it is time consuming. Payroll companies handle your W-2's as well.