If your accounts receivable balances are edging up and getting older and older each month, then it might be a good time to bring out the aging reports.  But what if we looked earlier in the cycle to see what we could do to collect the sales even sooner?  Let’s take a look at five potential changes you can consider making that will speed up your cash flow, reduce aging receivables, and possibly reduce lending costs in your business. 

1.  Get paid in advance. 

Getting paid in advance manifests itself in a number of ways:

• Prepaid gift cards
• Deposits
• Prepayment plans
• Monthly or project retainers

If it’s common to get paid in advance in your industry, then all you need to do is focus on doing more of it.  If it’s not common in your industry, I encourage you to see how you might apply one of these ideas to your industry.  You may be able to invent an entirely new way of doing business within your industry.

2. Increase your cash-equivalent payment choices.

If you’re not already able to take the following forms of payment, then it’s time to sign up for:

• Credit cards, especially MasterCard, Visa, Discover, and American Express
• PayPal
• Wire transfers
• Cloud-based bill payment systems

If you have overseas clients, being able to easily accept wire transfers keeps it simple if the client does not maintain a bank account in your country’s currency.  And although most wire transfers still need to be handled manually, you can systematize and automate the process as much as you can by having written procedures for your clients. 

Offering a cloud-based billing solution such as Bill.com eliminates the physical writing of checks, and you can approve and send payments from anywhere, even if you are on an airplane.  The efficiency cannot be beat. 

It’s surprising how many business-to-business payments come through PayPal, so if you don’t have this one as an option, you might want to consider it. 

3. Streamline your time and billing system.

If you can bill faster, you can collect faster.  Take a look at your processes and identify the bottlenecks in your billing system.  Is it the partner who keeps the invoices on their desk for days before they are approved to be mailed?  Is it an antiquated time system that is not real-time?  Is it duplicate data entry that can be streamlined?  Once you’ve determined your bottlenecks, you can take action to eliminate them.   

4. Implement eCommerce. 

An online shopping cart can help clients serve themselves and cut way down on your customer service.  Today’s online shopping carts can handle one-time payments, recurring payments, and variable bills.  The best of them offer a portal for clients to update their own credit card expiration dates, respond to declined card messages, and basically serve themselves.  It’s quite fun to come into the office each morning and find loads of cash sales already in your cart from the night before, without any help from you or your staff. 

5. Card on file. 

For long-time clients, it makes sense to set up automatic approval on a monthly basis by having their card on file.  Most busy and successful clients will appreciate the time savings when using this method, and you will have more control and be able to get paid faster.  You can also use a hybrid of this method – semi-automatic approval – where a simple email exchange approves the current month’s amount. 

Try one or more of these five tips to speed up your cash flow, simplify collections, and lower the amount you need to borrow from the bank to finance your business.

It’s that time again … time to send your estimated taxes in to Uncle Sam.

So what are estimated taxes and why would you have to pay them? When you bring home a paycheck, your employer has withheld income taxes from your paycheck. But when you’re self-employed, a landlord, or even an investor, you are earning income that has never had taxes withheld. Rather than settling up all at once on April 15th, the government wants you to turn over 25% of your estimated tax liability at four points throughout the year. In fact, you will have to pay an “estimated tax penalty” if you fail to do so and owe Uncle Sam $1,000 or more when you do your taxes in April. So, start making those quarterly estimated tax payments and save yourself from all those nasty penalties!

Need help remembering those due dates? Sign up for my quarterly newsletter here. It comes out just four times a year, just in time to help you remember those quarterly due dates!

Did you know that the IRS can now require you to produce your QuickBooks file if your business is being audited? Yikes! This started happening in late 2010 and the practice is only going to grow. How to protect yourself in the event of an audit?

• Review your own books!  It only makes sense to go through your own books first and see if there are any red flags.  Checks to the dog walker?  Credit card charges for the day spa?  Believe it or not, I’ve seen these and more on the books of businesses.  Better for you to go ahead and re-categorize these transactions as “Owner’s Draw” or “Advance to Shareholder” now, rather than waiting for an auditor to find them.
• Back up your QB file at the end of each year so that each year is in its own QB Backup file.  Previous years should be “condensed” first so that the only data the auditor can see is the year under audit.  This prevents any “fishing expeditions” by your friendly IRS auditor!

Could your small biz use a bookkeeper?  It sure could, if :

• You are frequently paying late fees for missing the due dates on your credit cards.
• You have independent contractors and aren’t sure how to track their payments for 1099 reporting at year-end.
• You have to check with the bank to see how much money is in your account.
• You check caller ID when the phone rings to see if it’s another collection call.
• You’re not entirely sure who owes you money.
• Your year-end tax bill was bigger than you expected.
• You have to pay a CPA to prepare financial statements so you can get a new bank loan.
• You would rather be selling or consulting or doing-what-you-do than crunching numbers!

If you’re ready to hand-off the stress and strain of your bookkeeping, give us a call!  We’d love to help!

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The Wall Street Journal recently featured an interesting article on How to Succeed in the Age of Going Solo. Whether you consider yourself a freelancer, consultant or “solopreneur,” this article contains great tips for surviving through those first, rough years.

The best take-away that I found in this article is to “think like an entrepreneur” by treating your new solo career like a true business:
* Have a business plan
* Use a reliable system to track your billable time, your outstanding invoices and your overdue receivables.
* Whether using Excel, QuickBooks, or pen-&-paper, have an idea of what your cash flow looks like and when you might be facing a cash crunch.
* Keep good records of your business expenses and possible deductions. You can’t deduct it if you can’t prove it!

NASE, the National Association for the Self-Employed, has published a short list of the tax changes for 2009 that affect self-employed taxpayers.  The complete list can be found here, on their Web site.  According to the NASE national tax advisor, Keith Hall, “The earlier a business owner can get organized, the more likely he or she will have the time to investigate eligibility requirements for additional tax benefits.”

Major changes affecting 2009 returns include:

• Making Work Pay Tax Credit – This $400 tax credit, or $800 if married filing jointly, is available for offsetting earned income, including self-employed income.
• Standard Mileage Rates – The rate for 2009 is 55 cents per business mile.  This rate will be dropping to 50 cents per mile for 2010.
• Self-Employment Tax Changes – The tax rate for self-employed business owners remains at 15.3 percent, though the income threshold has increased to $106,000.  All net earnings from self-employment of at least $400 are subject to this tax.

NFIB, the National Federation of Independent Businesses, is offering a no-cost webinar entitled Year-End Tax Tips for Small Business.  Check it out to learn helpful hints to lower your tax burden, learn what is and isn’t deductible, and avoid the top tax mistakes made by small business:

Register using Promo Code sst444