Starting A New Business? Beware of Any Old Business Debts

     Making the move from a sole proprietorship or partnership to an LLC or Corporation is a smart business move.  It protects your personal assets from being threatened against business debts.  Unfortunately, any old business debts accrued before the conversion means your personal assets can still be threatened from that time.  Often if you don’t pay off your old debts before forming the new corporation or LLC, or pay them down in a timely fashion after the conversion, creditors could potentially go after your newly formed business to pay off your old debts.

What’s in a name?

     Being adamant about only using your new corporate or LLC name for business transactions is essential.  Sign all contracts and checks under your new name.  In order to fully establish all that’s required to retain the benefits of LLC status, call the bank where your business holds an account to learn exactly how to endorse your checks.  It is usually using the company’s name, or your current position.

     Its also a very crucial step to change your letterhead, any marketing materials, business licenses and permits, etc. to clearly state your new status.

Notify Clients and Suppliers.

     As soon as the conversion to a corporation or LLC is completed, your new priority is to send a notification letter to your customers, suppliers and clients notifying them of your new business structure.  Make note in the letter that business conducted moving forward should be done using your new name, which can be the same as your old, just tacking “LLC" or “Inc." to the end.

Formalities, please.

     It is important now to distinguish your new corporation or LLC as a separate entity from you.  One of the main guidelines is to have regular meetings as per your structure’s bylaws or operating agreement and to document these meetings.  Following the formalities of your business operation deters creditors from potentially claiming your new structure as a sham to avoid them.

Build your Business’s Credit

     It may be hard to get a credit line or take a loan out from a bank without making a personal guarantee, which is something you want to avoid.  Unless you can prove to the bank that your cooperation or LLC has enough assets to cover the debt, they may want to have your personal signature.  Just as you would work to build your personal credit, you can establish your corporation’s or LLC’s credit.  You can either take out a couple business credit cards, or establish a trade lines of credit with your suppliers.  If a vendor won’t work with you without a personal guarantee, you can usually find someone else who will, especially if you can offer an upfront payment for the first few transactions.

     There are a few ins and outs to operating as a corporate or LLC business structure.  As long as you are aware of the regulations and operate accordingly, you can enjoy the benefits of a corporate or LLC structure and your personal assets will remain protected.

6 Best Business Invoicing Practices

     When starting your own small business, invoicing plays a vital role in the life-blood of your company.  It's how you make money and make an impression on your clients.  It can also be one of the hardest things to keep up with.  Invoicing takes practice, a rhythm.  Here are 6 tips to avoid getting off schedule in creating and sending invoices as well as tracking down late-payers so you have time to focus on other aspects of running your company.

1.    Make your invoices as professional as possible.  If you send out handwritten scribble on invoices you’ve ordered for $.20 in bulk, some of your clients may be less inclined to pay you as promptly as other, more official looking requests for payment.  Be proud of your brand; have it printed on your invoices.  Make sure the amount owed is very clear and easy to understand.  Be detail oriented down to the color, font and wording of the document.  Be clear, plain and very official.  If you feel the necessity to include legal jargon, have a lawyer help you translate what you’re trying to say in plain english.

2.     Invoices are official records, so what’s on it must be correct and follow standard business practice laws.  If you’re an LLC, an LLP or other limited company you must provide your business’s registered address and phone number.  If you have one member or executive's name listed, you must have them all listed.  Make sure your document follows all of your local and state business requirements.  One of the benefits of purchasing an  accounting system for your business is that all of these things can be done for you.

3.    Stay organized by using invoice numbers.  Secondary to the total amount due, keeping your invoices organized and easily referenceable is key.  You can use a unique sequential number for each of your clients, or use a chronological method of organization where the date part of the sequence of numbers.  Assigning your client with their own customer number at the beginning of the sequence gives you a secondary way of referencing a specific client’s invoice.  Two examples for customer number 47 that had their first invoice on February 2, 2015 could be 0047-02022015-01 (Customer number, date, sequential number) or 0047-0001 (customer number, sequential number).

4.     Choose a clear payment structure.  Asking for a deposit before you begin your work, or even asking for the full payment upfront helps reduce financial risk to your business and is easier on your cash flow.  There is nothing legally stopping you from requesting a payment upfront.  If at the end of your services your client refuses to pay either the full or partial amount, you’ve lost your leverage to stop work until payment is complete because it’s already finished.  If you’re worried about losing clients by requesting a hefty sum upfront, offer your client a satisfaction guarantee or their money back.

5.   Be clear about your payment terms.  Your client should be aware and understand your payment terms when initially signing a contract with you, but make sure you remind them on your invoice.  Make sure your deadlines are clear on your invoices to remind your client of the importance to make a payment by that date.  You should also make clear and unquestionable any late penalties or fees you plan on implementing if the payment requirement is not met.

6.     Be prompt.  Not only is it efficient business practice to send out invoices as soon as the work is done, but if you’re lackadaisical about your invoicing practices you might run the risk of sending your client the impression that they can be as haphazard with their payment.  Do your book keeping and invoicing at least once a week.  Make it easy for your clients to pay you by including the different payment methods you accept by providing account numbers, online links, etc.  If you are using an accounting system, consider one that sends out automatic email alerts for late payments.  That can help you save even more time.

     Keep the cash flowing in your business by streamlining your invoicing process.  Making sure your client has no questions or doubts about how much, when and how they need to pay you is key in keeping your business afloat.  Efficiency is indispensable in invoicing practices to keep you and your client happy.  Follow these invoicing principles to help you achieve maximum cash flow and organization.

Streamlining Your Business

Congratulations! Your business has made it another year.  Your effort was spent finding out what works, what doesn’t, what you can offer, what’s cost effective, how to handle bumps in the road, the right size staff for your budget and company, and the plethora of other things on your plate this past year.  Now it’s tax season and you’re stressing about everything you didn’t keep up with, record and document.  I’m sorry, its gonna be a doozy.  However! And there is a however.... The Silver lining is another year’s experience.  Whether that’s a tacky or blindly optimistic approach, now that you have the major kinks out of your plan and a few more things figured out, this year is the time to fine-tune your operation. 

Start with the Basics

Assess your bank.  One of the major things you have going for you as a small business owner is your cash.  Many entrepreneurs and people in general don’t have a clue how much they’re paying in service charges to the bank every month and exactly what they’re paying for.  Request an analysis statement that breaks down your generic monthly service charges.  You can then decide whether or not you need them, and if you can reduce costs in this area and take your savings and cash flow to the next level.  It might even be beneficial for you, if it’s within your budget, to request other services your bank may provide to keep your finances organized.  However, if you have taken the step to have someone else do your accounting for you, those services may already be rendered by him or her.  Banks are still business and don’t like losing clients, so small negotiations with your banker could have positive results.

Make a Comparison. It’s great that your company has grown and is continuing to, but do you know how your business stacks up to growth within the industry?  Before you do a whole lot of legwork, your accountant most likely has all the industry statistics and data comparison points on file that a lot of entrepreneurs aren’t taking advantage of.  Have these numbers available for your future strategy meetings and make your bench mark this year!

Automate It.

 

Be advanced.  Do you have small bills that stack up every month?  Instead of paying a $20 dollar monthly bill, pay $120 in advance for 6 months and save time paying all your little bills, not to mention saving money in stamps and accidental late fees!  The little bit of effort has a big payoff in stress and time management.  If your business has busy seasons and slow seasons, it’s a good idea to implement this tactic during the slow seasons when you have a little looser of a belt.  That way it’s already taken care of when your belt tightens again.

Use your (other) brain. Most likely your phone is a priceless asset in time management and helping you keep track of your company day to day.  What about month to month?  Save yourself the stress of remembering dates and funds or late invoices.  Do you have an accounting package that handles your bills?  Automate the process.  Your accounting software can generate invoices, send email alerts of late payment notices to your clients and handle electronic transfers (along with your bank).   

Keep it on Schedule.  Making a schedule for multiple employees can be a nightmare.  Did you know there are software packages that make scheduling less of a headache?  Asgard System's Time Tracker, TimeClock Scheduler and TimeCurve Scheduler among others, are a few software options that have to ability to track employee hours, alert you of any scheduling conflicts and even make payroll easier in some cases.  Some of these websites offer free trials as well.  You can spend more time building your clients than laboring over the schedule on a weekly basis.

Accounting in the New Millennium

Well, the "new" millennium is about 15 years old now which is pretty insane but with it came a myriad of updates as far as technology is concerned. Remember when the first cell phone came out? That thing was huge and the battery lasted at best a couple of hours. Fast forward fifteen years and we have mini computers in all of our pockets capable of doing everything from video calling, word processing and most importantly let us check our Facebook! Yes, we tend to use our electronic devices for all sorts of unproductive things but believe it or not we can get a lot of stuff done with our computers, tablets and smartphones! This is especially true if you own a business or are self employed. I have put together a list of a few of my favorite services to facilitate everyday accounting and taxes, I am all about automation. Let’s dig right in:

Small Business Workbench

One of the hardest things to do when you have a small business is budgeting. Understanding your cash flow and capital to hire and spend accordingly is difficult, this online tool helps your predict how much money you’ll have in the bank based on your previous sales history. Basically it does all the math so businesses don’t have to, it helps them make projects into the future helping them better manage their expenses. Sometimes it’s not as simple as looking at a business’ bank account but instead it’s about understanding how much money is coming in, out and how much money will be available in the future. What’s great about this is that it is cloud based so all your information can be accessed from multiple and various types of devices at any time as long as you have an internet connection.  

http://www.sbworkbench.com/

TaxMate

One of the main reasons why we even keep track of cash flow, other than try to figure out if we’re a profitable business, is because we are required to by law. Well sorta, taxes are one of the biggest burdens that a business owner has to deal with. Sometimes an accountant or employee handles all the numbers but business owners need to ensure everything is accurate to avoid serious consequences. Taxmate is a free app that helps you “predict” how much you will owe in taxes. Although taxes are typically a little bit more complicated than what an app can handle, TaxMate is a great way to have a ballpark figure as far as taxes are concerned allowing you to better manage your sales. 

http://www.taxmateapp.com/

Hiveage

Do you have a smaller business? and by smaller we mean under twenty employees. Some businesses just need a bit of help managing their everyday accounting needs, specifically invoicing, taking payments, keeping track of mileage, managing teams among other tasks. There are different tools that accomplish this same process but Hiveage aims to offer more functionality than some of the other services out there that only do one thing at a time. Hiveage is also very affordable since you only pay for the features you need and as your business grows, you can add more features. The core of Hiveage is actually free, so it’s a win win since you get to try it out without investing too much in it. 

http://www.hiveage.com/

I have only really scratched the surface with these services, there’s plenty more and I will be covering some of them in the upcoming weeks. You can always reach out to me personally if you have any other questions

Stephen

stephen@accountingworkssolutions.com