3 Important Things to Consider When Starting a Business

You can find hundreds, if not thousands, of articles written by highly skilled and talented people who tell you exactly what it takes to get your business up and running. Although helpful, most of them are more or less the same. Starting a company is no easy feat and no matter how many articles you read or how many people you talk to, it’ll be a fight that you personally have to cater to.

A business is like a baby, you have to support it the right way, you need certain tools and abilities to help it develop, and most importantly, you’ll need to manage your money in a way to continuously support it. Here are the three most important things to consider that’ll make or break your SME, and what it takes to succeed in each.

Understand Cash Flow

Whether we like it or not, money is one of the most important things in the world. We use it to fulfill our basic needs, to buy whatever we please, and overall to keep the world moving. To many of us, our business IS our world, so it is important to know the basics of cash flow to keep our business running.

Understanding the concept of cash flow is important for your SME to continue functioning. Cash flow problems are one of the biggest reasons small companies run out of business, and recognizing errors early on can prevent that from happening to your business. Cash flow is the amount of money coming in and out of a business. Without adequate cash, it becomes hard to pay wages, suppliers, and rent so it’s essential for every business owner to know how to properly manage it.

When more money is coming into your business than going out of it, you would be in the better position to pay expenses and bills as you are having “positive cash flow” at hand. It is the same with the opposite. Many starting businesses borrow money from banks or lenders to cover overdrafts. If your money is going more out than in, you can apply for loans that can assist in covering cash flow shortages and expenses.

It’s especially important to have a working capital when your business is new as the starting expenses are high and you may not have as much revenue or sales at the start. Loans aid in covering the basics as you get your SME started on the route to a fresh new positive cash flow situation. The best way to manage your cash flow is through a cash flow report so you can see your changes in cash and what business activities affect it negatively and positively.

Pick a Great Support Team

Your company is only as good as the people who are in it. You most likely want your SME to be successful (otherwise you wouldn’t be reading this article), so it’s vital that you have a great support team. As the leader of your business, we naturally want to be the best and “smartest”, but hiring employees with that mindset keeps your business from standing out.

It’s better to have someone who always dedicates time to continuously improve and grow with whatever they’re doing, over someone who chooses to stay within their comfort zone and area of expertise. Of course, it’s human nature to continue with what you’re comfortable with (we are all guilty of doing that), but when starting a new business or when wanting to expand your SME, people who have the drive to go the extra mile should be favored.

Anybody can develop skills and learn new abilities if they’re committed, but you cannot forget that you’re hiring the person, not just their skills. To have a strong support team, it’s crucial that your morals, values, and beliefs coincide and mesh well with each other. It’s always good to consider in the point of view of outside customers;  “if this business hired this person, do I really want to support the business?”. Keep in mind, you hire for the skills but you will be working with the person, so try and choose those who will help you grow your business with you.

Understand Your Market

Understanding your market is one of the key things to consider that can make or break your SME. You can come up with the most creative, unique and innovative product ever, but your business won’t go anywhere if there is no market for it. Identify a target market. Who are you trying to sell to and what exactly would they be looking for? Before even creating your service or product, it’s important to research and learn about the exact needs of the public and what kinds of thing your business can do to fulfill them. There are many different ways to find out what customers are looking for such as surveys, focus groups, interviews, and observations. It’s a vigorous process but essential if you want to succeed.

Knowing your market is one thing, but actually marketing towards them is a whole other field. Once you discover who you’re reaching for, it’s time to learn how you’ll reach them. Creating a specific message and vision for your target market allows them to have a preview of what you’re trying to do. Instead of having a vague general message, addressing how certain needs will be met allows the audience to envision what it’ll do for them in their personal situation.

It further allows your business to keep developing your market down the road by focusing on how to cater to the specific demographics within your target market. For example, if you’re targeting just men, then consider how to advertise to the different age ranges to make it more personalized for your customers. Marketing your business is one of the most crucial things to consider when starting your SME; who are you catering to, and why are you catering to them specifically.

Building a business from scratch is one of the toughest challenges you can take on, and although it involves a ton of work, the end result can be beyond your wildest dreams. To get on the path to success, though, you must always consider three things; understand how to manage your cash flow, pick a talented support team, and know your market well. In the end, your business is yours alone and it’s up to you to make the right decisions for your SME, but remember, our company and blog is here to support you on your venture to the wonderful world of being an entrepreneur.

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4 Payroll Financing Options for Payday Emergencies

One of the most unsettling feelings you can have as a business owner is to find yourself low on funds when it’s time to run payroll. While it’s very stressful, the first thing you should know is that this happens. Second, there are payroll financing options created just for small businesses who’ve gone through the exact same thing.

New businesses often struggle with cash flow. An established business could suddenly be hit with a large, unexpected expense or for some businesses it’s because your outstanding invoices haven’t come in as quickly as needed. In fact, this post was inspired by conversations with several SlickPie customers.

If not having enough money to make payroll was really rare, these payroll financing options would never have been created. (Note: While it’s good to know you have options, it’s even better to not have to use them.)

What you should do once you realize you can’t make payroll

To start, you should figure out how much time you have before you need the money for your payroll. This will help you determine which payroll funding option is the best for your business. Using free expense management software like SlickPie can help you take care of that.

Then, you should also communicate with your staff and let them know what’s happening and that you’re looking for a solution. Even if it’s only one day before payday.

If you’re worried about causing panic by telling your staff that you have a cash flow shortage, think of how much worse it will be if you “surprise” them on payday. Consider that, in the United States alone, 71% of workers said it would be hard to pay the bills if their checks were even a little late.

If things get down to the wire and you’re using a payroll provider, you should also give them a call to let them know what’s happening. If you’re making an honest effort to solve the problem, you’re less likely to get listed as a credit risk for insufficient funds. Depending on your provider, they might also be able to offer suggestions. Again, we emphasize, this happens to a lot of small businesses.

What you need to know about payroll funding for small business

Because payroll financing requires a quick turnaround, the best options are short- to medium-term loans, a business line of credit or invoice factoring. Sometimes you may hear one or all of these options classified as payroll loans. All are conveniently offered by online lenders.

If you’re wondering why a traditional small business loan is usually not your best choice when you’re looking for payroll financing, it’s because of the lengthy application and approval process that’s required.

Using short-term loans to fund payroll

A short-term payroll loan will help you finance your payroll within two to three business days or sometimes as little as one business day. If you choose this option, plan to pay the loan back within 12 months and expect to have a higher interest rate.

Using medium-term loans to cover the cost of payroll

If you have up to five business days (a week) before you need payroll financing, you can look into a medium-term loan. With a medium-term payroll loan, you’ll have a longer application and approval process. However, as a result, you’ll have up to five years to pay the amount back. Your interest rates will also be a little lower than with a short-term payroll loan.

Using a business line of credit to finance payroll

If you think there’s a good chance you might have to use payroll financing more than once in the near future, you might want to consider a business line of credit. More of a long-term solution, a business line of credit provides you with a set amount of money that you can access as need. You also only pay interest on the money you take out.

While business lines of credits are available through traditional banks, they’re much more time-consuming and harder to qualify for than if you apply for one by going through an online lender. Depending on the online lender, you may also be approved in as little as one business day.

Using invoice factoring to cover payroll

If you’re a business-to-business company, you may also be able to sell one of your unpaid invoices in order to finance payroll. This is called invoice factoring. What a purchaser (factor) will do is offer to buy your invoice at a percentage of its value. The factor then gives you the money and collects their funds when the invoice is paid by the customer.

Although the invoice faction is a well-established funding option, there are several variations on this model. When you search for a company that offers invoice factoring, make sure you understand how it works and what the terms will be.

As the main variable in qualifying for invoice factoring is the quality of your invoice, invoice factoring is also a good option for new business-to-business companies who may not have an established credit history.

Do your homework researching payroll financing options

Even if you’re in a hurry, you want to research your payroll financing options, comparing:

  • Approval time — how long it takes to get approved.
  • Time to receive funds — how long it takes to get the money after approval.
  • Available amounts — how much you can get.
  • Payback period — how long you have to pay the money back.
  • APR — annual percentage rate (interest rate).

You’ll also want to find out what financial and business information you’ll need to provide in order to qualify, such as a credit history, annual revenue and how long you’ve been in business.

How to avoid needing payroll financing in the first place

Again, no one ever intentionally plans to have a gap in their cash flow. In business as in life, we all learn as we go. This is why learning how to read and understand your business financials is so vitally important.

Small business owners come from a range of backgrounds, including varying levels of financial knowledge. But, if you know that accounting isn’t your strength, find a trusted accountant and bookkeeper to help you manage your books. With cloud-based accounting tools, like SlickPie, this process is even easier than ever before.

Even if reading financial statements doesn’t come naturally, every bit of knowledge that you give yourself makes a world of difference. By regularly reviewing how the money flows in and out of your business, you’ll get a better understanding of the ebbs and flows unique to your business.

For instance, if you run a seasonal business and through monitoring your financials, you know that March is always a slow month, you can then plan ahead by setting funds aside from peak periods, adjusting inventory and reducing shifts for hourly workers.

One final tip — always pay your payroll taxes

Whenever you use a payroll financing to solve a shortage of funds, make sure you also pay your payroll taxes. Payroll taxes are the sums that employers take out of employee paychecks, such as income tax and various social programs, depending on the country.

As payroll taxes are taxes, you’ll only be adding to your woes if you fall behind on your payments. The tax authorities in charge are not lenders and interest on late payments compounds quickly.

If you’re already taking on interest from a loan, you don’t want to make things worse by falling out of grace with the tax authorities. When you have to use payroll financing, borrow enough money to cover every aspect of your payroll. That way you only have to pay interest to one entity instead of several.

An ounce of prevention is worth a pound of cure — but’s also good to be prepared

While everyone wants to avoid mistakes or cash flow shortages, they happen. No matter how rigorous you’ve been with your financials. Knowing that there are payroll financing options, like short- and medium-term loans, a business line of credit or invoice factoring, is the first step in being prepared — should the worst ever happen.

If you’re startup or micro-business looking for free online accounting software, check out SlickPie.

This article is intended to be informational only and does not replace the expertise that comes from working with an accountant, bookkeeper or financial professional.

For more small business advice, see some of our top posts:

Simple Bookkeeping Tips to Help Small Business Owners

The Advantages of Starting Your Own Business

 

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Blockchain in Accounting?

Lately, technology seems to be advancing at an astonishing rate, and it can be tough to keep up. If you happen to run your own business however, staying up-to-date with the all of the goings on in the tech world is not merely suggested, it is practically considered a necessity. Sure there are some industries that may be more reliant on technology than others, especially accounting. When it comes to accounting, mistakes are simply not an option and you must have speed and efficiency on your side.

By implementing certain forms of modern technology you actually have the potential of greatly enhancing your accounting business. Accountants have to perform a wide range of services, based on everything from providing simple advice and guidance, to filing taxes and tracking business expenses and receipts. Many in the accounting world therefore, are looking for ways of enhancing their services, and with Blockchain, they may very well have found their solution.

What is Blockchain? – Though the term perhaps sounds unusual to some of you, Blockchain is considered by many, to be a form of tech that is revolutionary, in every sense of the word. Blockchain is basically a type of digital record which records each and every single transaction carried out with cryptocurrencies, the most recognizable of which will probably be Bitcoin. Every single ‘block’ in this digital chain is comprised of digital coding that contains date regarding the transaction.

This data is then recorded, in chronological order and will join the next transaction ‘block’ on and on, forming the Blockchain. You see, every single transaction is recorded and will have a link to the previous transaction carried out before it, along with a timestamp detailing the date, time, and year of the transaction. It is basically a digital accounting leger, with the added bonus of being virtually 100% secure.

The benefits of Blockchain in accounting – Now that we’ve provided a brief overview of what Blockchain is, we’ll now look at some key ways in which Blockchain tech can benefit the accounting industry:

Blockchain is incredibly secure – First and foremost, when it comes to accounting, Blockchain instantly proves its worth because of its security. You see, as all entries into this ‘ledger’ are sealed cryptographically and distributed, it will be virtually impossible for an individual to falsify them, or destroy them. This means that, when it comes to business accounts, Blockchain makes it virtually impossible for an individual to commit, or suffer from, fraud.

Blockchain will automate the auditing process – When it comes to accounting, auditing is, by far, the most time-consuming and complex part of the job. By implementing Blockchain technology; however, auditors would be able to automatically verify the most important data behind a business’ financial statements. This basically means that a great deal of time would be saved on performing the audit, not to mention the fact that costs would also reduce as well.

Blockchain is traceable – Another great thing about the Blockchain is that it provides audit trails which are fully traceable. As mentioned, every single transaction utilized via a form of cryptocurrency will be stored on, and will become a part of, the Blockchain itself. Not only that, but there will also be a clear timestamp for that particular transaction, which again, would help speed things up and would simplify things greatly.

Check out this insightful infographic by GetApp:

Infographic: https://lab.getapp.com/the-future-of-accounting-software-infographic/ 

Cover image: Storyblocks