3 Tips for Startups to Achieve Financial Success

Guest post by Courteney Reed, Financial Industry Analyst at Credit Card Insider

Successfully growing a business is no small feat. It takes a great team, determination, and often a decent helping of luck. With so many things to contemplate, it is often hard to find a place to start seriously investing in your startup’s growth. Here are three suggestions:  

Separate your business and personal finances

As a business owner, you need to apply for an employer identification number (EIN) via the IRS website. This allows your business to build a credit profile and maintain a record of business transactions. Until you file your business as a separate legal entity, you could be held personally liable for all financial activities.

The sooner you establish your credit profile the sooner your business begins to build credit. Opening a business credit card and using it responsibly can help you track your expenses and profits, build your credit scores, and simplify tax filings. Conversely, mixing business and personal expenses on a personal credit card can quickly eat up your credit limit, causing a drop in credit scores and making it harder to apply for personal credit, such as car loans or mortgages.  

Consider these advantages of using a business credit card:

  • Separation of business and personal expenses
  • Higher credit limits than personal cards
  • Rewards like cash back, miles, points, and warranties
  • Potential to increase business credit scores for better business loan terms and high-tier business credit card rewards
  • Better cash flow management, allowing 20-30 days to pay business costs without interest

Finance To Fit Your Needs

Successful businesses often use outside funding to plan ahead for their business needs. Here are three tried and true options worth considering:

Small Business Loans

Small business loans provide access to capital before revenue streams begin flowing. Plus, by successfully managing a business loan, you’re increasing the potential of securing bigger business financing when it’s time to expand your company. Finding the right business loan may take time but you’ll have working capital you need to get off the ground.

Venture Capital Funding

Financing investors provide funding to startup companies that are believed to have long-term growth potential. This type of funding usually comes from wealthy investors, investment banks, and other investment companies, and ownership of a business is divided between the investors and the proprietors of the business. There are different platforms that provide a database of different investors looking to invest in new companies or promising business ideas, making it easier to find investors interested in your market niche.

Alternative Lenders

Alternative business funding is capital offered to small business owners by “non-bank” providers. Alternative lenders are particularly attractive to small business owners who don’t have an established business credit profile. 

Most lenders have their applications available online, making the approval a quick process. Their interest rates are typically higher, but if you need money in a timely manner, alternative lending might be the way to go. Typically lenders extend loan repayments from 6 months to a year, but depending on the type of loan you choose, you may not have to pay the money back until you actually draw from the provided funds.  

Leverage Software to Increase Efficiency and Reduce Costs

After getting approved for more financing, you’ll need to stay on top of all the financial details. The right software can help streamline multiple tasks and increase your team’s performance and overall efficiency. Here are three tools for keeping your finances in order:  

Effortless HR

Payroll management is often a burdensome task, especially as your business grows in manpower. Effortless HR is an HR tool that enables employees to self-manage their payroll preferences, time off, and access any other necessary information without the assistance of an HR employee.

Quickbooks for Finances

Quickbooks is simple to use and helps you keep track of all basic business transactions. Plus, they regularly roll out updates to their online platform for flexible financial management.

Dropbox

A cloud storage solution is a must-have for organizing and sharing important files. Depending on your specific needs, Dropbox contains tools that benefit secure record keeping and flexible collaboration.

Conclusion

The path to growing a successful business is not a concrete one. However, these three tips can begin to increase your financial literacy and day to day expense management in a simpler and more productive way. Seriously considering these recommendations will give your business a better chance of success and expansion in the future.

Is Your Data Secure? A Cybersecurity Checklist for Accounting Firms

By Zachary Rimlinger on June 20, 2018 

As data moves from client to firm and vice versa, it needs to be protected in transit and on the devices being used to access it, whether it’s your employee’s laptop or smartphone. In addition, your firm’s employees may need to receive and access that data digitally. While sharing documents via the cloud can make it easier and faster for everyone involved, it does add an additional layer of risk in exposing client data.  Also, a frequently forgotten channel of communication that needs to be protected is mail. As a conduit for important documents, it also requires a unique set of security practices.

Protecting client data is an ongoing challenge especially due to the varied ways your clients wish to provide documentation and access to their data. Considering all of this, here’s a checklist to get you started on ensuring client data is safe and secure, no matter how it’s being shared or accessed.

  1. Conduct an annual cybersecurity audit and assessment.  Preferably, this should be done by an outside firm and done annually. Expect the firm to review things such as password policy, privacy policy, agreements with vendors and contractors, data backup, and disaster recovery plans and network security. 
  2. Review every phase of your business processes, whether it’s client onboarding or a standard service such as filing taxes on behalf of your clients.  Review which employees are involved in the various stages and ensure that you have security guidelines in place at every step. You’ll want to ask:
    • Has each employee been required to review and agree to your company’s policies for accessing and sharing company data?
    • If employees are aware of your BYOD (Bring Your Own Device) policy? (And if your BYOD policy is comprehensive.)
    • Does your IT require that passwords are changed regularly? 
  3. Review the security policies of any cloud-based apps or premise-based solutions your firm is using to ensure that:
    • Vendors and providers are PCI compliant
    • Each cloud-based provider you are using ensures business continuity whether there is an outage or disaster
  4. Protect data on premise. A network firewall should be installed, updated and tested annually. Firewalls prevent unauthorized users from accessing your network by filtering incoming and outgoing traffic and data based on a set of rules. They also provide an additional layer of security that can make it more challenging for hackers to make a malicious attack on your network.
  5. Mail can be at risk of a physical breach of your mailbox or run the risk of getting misplaced or damaged in your office. Once you’ve set up cloud security, consider moving your mail and important documents into the cloud as quickly as possible. When choosing document management providers, be sure to dig into their security policies. 

A final tip: if you’re still unsure of where to start, or want additional information, search for a reputable cybersecurity auditing firm in your local area. Ask for a list of customer references you can call to find out what their experience was with that firm or look for customer reviews or ratings on their Facebook page. This allows you to get more familiar with the different approaches that you can take to protect your business and client data. Three things to ask for are quotes and approaches around: cybersecurity audit, updated plan, and annual support. 

Earth Class Mail at Xerocon Atlanta 2018

By Eric Romoff on May 30, 2018

We’re excited to announce that the Earth Class Mail team will be attending Xerocon Atlanta next week. This conference brings together Xero partners and customers and will feature speakers, training sessions for accountants and bookkeepers, and opportunities for social gatherings. We’re looking forward to participating in this unique opportunity to celebrate our customers in the area and delve into the changes that are taking place in the the cloud accounting industry.

Earth Class Mail’s native Xero integration  

As a trusted resource in the modern accountant’s playbook, our office mail automation platform offers a native integration with Xero, one of the leading cloud accounting solutions. You can learn more about our native Xero integration on our website or by contacting us at 210-802-5211.

How to find us

If you’d like to connect, please join us for a happy hour at the conclusion of Xerocon Day 1 (Wednesday, June 6th) between 5-7pm for drinks and appetizers. Attendees will have the chance to meet other accounting professionals and learn about upcoming new services.

For event information and to RSVP, see our Eventbrite page. And if you’d like to get in touch before, please reach out at [email protected] or via my direct line at 210-802-2908. 

See you in Atlanta!

Rise of the CFO-for-Hire

By Eric Romoff on April 18, 2018

Increasingly, companies are outsourcing the role of Chief Financial Officer (CFO), also known as CFOs-for-hire, and interim, or contractual, CFOs. It may seem odd that companies, from large firms down to small- and medium-sized businesses, would contract out an executive position. But understanding the challenges and opportunities this trend presents can help you evaluate potential payoffs for your business. 

Benefits

  • Lower costs. With permanent employees, benefits, opportunities for training and career advancement, and other aspects for retainment should be top-of-mind considerations. Having an outsourced CFO, however, sidesteps some of these factors because the position is either temporary or such logistics are handled by the CFO’s parent company (when there is one). And because you may not boast the payroll to accommodate in-house accounting, small and medium-sized businesses benefit from this exponentially more than their larger counterparts.
  • Minimize off-peak periods. Outsourcing gives greater flexibility to hire a CFO according to a business’s peak season. If a company doesn’t need a full-time CFO during off-peak periods, they’re under no pressure to hire one. Maximize payroll, and profit, by limiting overhead and keeping overall costs low.
  • Flexible commitment. Taking a test drive before finding a full-time financial executive might not be the worst idea. Depending on your particular arrangement with your outsourced CFO, it might be easier to make changes if they’re not living up to expectations. 
  • Trained professionals. By looking outside your own walls, you can rest easier knowing your next CFO comes vetted by a home agency. This puts your financials in the hands of trained pros, leaving you more time to focus on scaling your business.

The perks of contracting an outside CFO can be great, but below are some challenges to prepare for along the way.

Challenges

  • Longer onboarding. Syncing workflows and work styles with that of a CFO-for-hire’s parent entity can take more time than hiring and onboarding an in-house employee. This is especially true when it comes to establishing communication procedures. Both your company and a parent agency or independent CFO will have their own way of working, and acclimating an interim CFO to your set of processes will require an extra dose of patience. 
  • Less control. When working with a CFO for hire, you forgo some leverage that comes with managing a full-time team member. Some motivators for high performance, such as opportunities for long-term career advancement, don’t exist. Often times, the client company won’t exert direct control over the CFO, instead having to coordinate with the home agency to voice concerns.
  • Limited independence. Outsourced CFOs typically don’t make considerable financial decisions on your behalf. While you can still expect to save buckets of time by outsourcing financial leadership, meaty financial decisions will still fall squarely in your lap. Of course, you’d want to be working with someone whose expertise you trust and who is able to push back and provide financial reassurance when needed. 
  • Vulnerability. Increased protection against the mishandling of money is definitely a pro of outsourced CFOs if there’s a quality agency or parent company with skin in the game. But the risk remains that a hired gun may mishandle sensitive financial data. You might get the sweats wondering if an outsourced CFO is engaged in Tom Foolery. 

Conclusion

It’s important to also consider how a nontraditional CFO might fit with your company’s team makeup, structure, and culture. But ultimately, only you will know if an outsourced CFO will positively impact your company’s bottom line. That’s the thing about the for-hire business: testing the waters is a built-in feature. Whether you want to use sporadic financial advice, or put feelers out for a good match that can eventually become in-house, you can shape outsourcing to fit your company’s specific needs. 

QuickBooks Online 2018: What You Need to Know

By Matt Goldman on April 4, 2018

For 30 years, Intuit’s QuickBooks has been a leader in accounting software, especially for small- to mid-sized firms. It’s also popular with individuals seeking to get a grip on their finances. One reason QB has prevailed so long stems from how Intuit innovates their core programs by continually adding new features along the way.

Intuit offers both a desktop version of QuickBooks and an online, browser-based mode. To stay ahead of the curve, Intuit’s online version rolls out new features on a regular basis, and that’s held true for 2018. Here are a few of the latest updates for QuickBooks Online 2018 and how to use them.

New Reports

QuickBooks Online 2018 comes with more reports than ever before. Certain reports, such as Trial Balance and General Ledger, were previously only packaged in QuickBooks higher-tier pricing plans. But with the release of the 2018 version, every tier—Simple Start, Essentials, and Plus—now offer all three reports, a huge upgrade for Simple Start users.

Another new report is the 1099 Transaction Detail Report, which assists business owners in coordinating taxes with freelancers and contractors. It highlights applicable tax data needed for filing a 1099, thereby reducing the hunt for disparate strands of info. In addition, the program automatically assesses whether the requirements for a 1099 have been satisfied, if information is missing, and/or if any data is inaccurate.

QuickBooks Invoicing for Gmail

Another new feature of QuickBooks Online 2018 is the QuickBooks Invoicing for Gmailcapability. Rather than toggling back and forth, you can forward invoices directly from within Gmail. But can an email program actually craft a reliable, sophisticated invoice? With Invoicing for Gmail, you have the power to send the same customized invoices that you can send from QBO through email, complete with customization. It also allows you to offer convenient online payment to clients, whether by credit card or bank transfer.

Not only can you pull up all your customers on Gmail, but the invoices that you create in Gmail save automatically into QBO, turning Gmail and QBO into best friends. From Gmail, you can also retrieve your products, services, and past invoices to include in your invoices.

If you need to know when you sent an invoice, Invoicing for Gmail has that covered. Knowing when it was viewed by the client? Check. When it’s paid? Yep. In the end, this new feature saves you time and makes the process of invoicing clients easier than before.

QuickBooks Capital

Another handy addition to QuickBooks Online for the 2018 version is QuickBooks Capital. This is a loan service that determines if users qualify for a loan based on the information already entered into users’ QBO accounts. Not content to leave it at that, however, QuickBooks Capital takes it one step further by populating the entry fields in the application form. Basically, it does everything but forge your signature.

What People Are Saying

Some of the critiques coming in about the program deal with its ease of use. More than a few reviewers have noted that existing users shouldn’t have a problem getting the hang of the software or its recent updates. New users, on the other hand, might find the program cumbersomeand require more time to learn than they otherwise would like.

Some have also noted the lack of certain popular functionality, such as project managementand the inability to track inventory. Depending on how you intend to use QBO 2018 and other tools you might already be leveraging, these deficiencies might not matter to you. For instance, if you don’t house or ship inventory, or your inventory is very limited, you likely can make do without it.

Overall, QBO 2018 has garnered stellar reviewafter stellar review. Praises being sung include the value it delivers for the various price plans, the way it can streamline workflows, and its option for Progress Invoicing (this article provides instructions for setting it up). If its cloud- and browser-based portability appeals to you, and if your work doesn’t require accounting tools on the scale of a large firm, it’s probably worth a look.

Technologies to Make Accounting Processes More Efficient

By Matt Goldman on March 19, 2018

Accountants, like everyone else, are constantly barraged by new programs offering a suite of features and tools that promise to make the workday a breeze compared to the old days. But which technologies can actually make a difference? After all, can’t you duplicate the functionality you need with some fancy formatting to an Excel spreadsheet and call it a day?

If only it were that simple. To raise your numbers-crunching game and work more efficiently, consider leveraging this newfangled tech. This list will get you up to speed:

Zapier:

Zapier connects apps and sends data back and forth between them by setting up “Zaps”, or automated digital tasks that function more-or-less like old-school macros. Zapier works with hundreds of different apps and can automate nearly any task.

Furthermore, Zapier can automatically generate an invoice whenever you fill out a form, including every time you receive a payment. Then, like magic, it can save your invoices back to your accounting software, presto-chango, storing all of your client’s transactions for future review. 

Client Portals:

Portal technology such as Clinked.com are secure, cloud-based accounts that enable you and your clients to safely store, transfer, and download files. Everything is guarded with bank-grade, end-to-end encryption for the ultimate in proven security. To further increase safety and protection, Clinked gives you permission controls that let you determine who can download what.

One of the best things about Clinked and programs like it? You cut out the hassle of sleuthing for lost attachments, files, or emails that go missing in cyberspace. Everything stays neat and tidy in central storage, removing one more migraine for both you and your clients.

Basecamp:

Project management tools like Basecamp upgrade not only your workflow but the overall synergy of your team and firm, too. You can view everything on a single page, whether it’s the work of the entire firm, specific teams, or even individual projects.

Basecamp employs a raft of tools to see your jobs through, including:

  • To-Do lists of completed and unfinished tasks 
  • Message Center to communicate with other members 
  • Campfire Room to host quick informal chats 
  • Docs & Files organizer to index all team materials 
  • Schedule for posting deadlines 
  • Automatic Check-ins to generate feedback from your team 

Basecamp is also very fluid, letting you customize projects according to its respective needs rather than being shoehorned into a one-size-fits-all approach. Each project is an adventure!

Recount:

Many professionals have decried the rise of AI within the accounting world, specifically the ethics of handling sensitive client data and the likelihood it could replace certain jobs in the industry. 

Still, others believe it a matter of time before AI is accounting’s new normal. One such program jumping on the AI revolution is Recount, a financial analysis tool that lets users securely upload client data. From there, Recount identifies trends, pinpoints issues, and make informed predictions of what might happen next with their clients’ finances.

Best of all, these tasks are automated and fulfilled within a matter of seconds. This may prove to make Recount and other AI-based accounting tools an indispensable–and perhaps inevitable–part of crunching numbers.

Once you pass the learning curve, these products reward you with fewer mundane tasks, increased organization, improved search, upgraded security, and more time to focus on the work that matters. Whether you’re in a team of five or a firm of 50, the above programs represent only a few of the means by which you and your colleagues can improve your working experience. Not to mention increase overall client satisfaction.

Small Business Credit Building – Part 2

In Part 1, we reviewed the table stakes for getting past that first underwriting stage in the SMB loan qualification process. You’ll need to go through those steps at a bare minimum just to comply with automated qualification requirements.

This edition is all about establishing a business credit history in preparation for a loan.

It’s a lot like building personal credit history – there are credit reporting bureaus, payment history, credit utilization, and account age factors to consider.

A few key differences:

  • Unlike personal credit scores, which range from 300-850, business credit scores usually range from 0-100 (Equifax is different). 80+ is considered “very strong”.
  • Experian, the largest business reporting bureau, will open a report for your business based on public records data. As soon as you complete your corporate formation and get any vendors reporting, they will open a file on you.
  • Certain ratings agencies, like Creditsafe, will provide credit limit recommendations – that is, advising on how much credit your business should have outstanding at any time.

Let’s jump right in…

Establish A Business Credit Profile

There are actually several credit reporting bureaus that you will need to actively manage, and it’s all part of building up the right business credit profile.

It’s not unlike personal credit building, except that business credit is much more precise in its tracking. For example, personal credit reporting is based on 30 day increments.

So if you pay your personal credit card bill 29 days after it’s due, you’re on time. If you pay 10 days before it’s due, you don’t win anything.

With business credit, reporting is done to the day. Paying early actually has a marked advantage, and paying late by even a day will hurt you.

Experian Smart Business credit file

Experian is the biggest and easiest to get started with. Their reporting guidelines for vendors are the most open, so you can build up a history quickly.

Setting up your Experian Smart Business Report is free. They are used by a wide variety of lenders to make decisions.

The majority of commercial banks, leasing companies, business credit cards, and many trade vendors report activity and trade lines to Experian. 

If you can’t find a file for your business yet, one will be available within 30 days of the first payment reported.

There’s a very detailed FAQ on the Experian Smart Business Report here.

Creditsafe business credit file 

Creditsafe is the largest global business credit agency, but new to the U.S. scene.

Regardless, over 10,000 creditors and lenders already rely on them for evaluating business loan qualification. There’s a very strong chance your lender will look at this report as well.

Unlike other bureaus, Creditsafe also provides credit limit recommendations to lenders. That is they recommend the total amount of outstanding credit that your business should have at anytime. 

Dun & Bradstreet DUNS number and open file

D&B tends to be considered the go-to source for Net-Terms credit reporting data. Which is great if you have access to trade lines with vendors.

D&B won’t issue a DUNS# or D&B rating until you interact with them directly. You’ll need to first request a DUNS#, the free path takes 15-30 days for them to setup.

You can also sign up for their credit builder product to expedite everything, and get access to your PAYDEX score as an added bonus.

You’ll have another score to monitor here. Unlike the other credit bureaus, D&B uses a PAYDEX score to provide instant creditworthiness feedback to lenders.

A PAYDEX score of 75 is considered, by many, the minimum to be qualified for the best business financing opportunities.

If you just pay all of your business trade and credit lines on-time, that is within the terms established for each line, you will get a score of 80.

PAYDEX rewards you for paying early, averaging payments 30 days earlier than required is the only way to reach a perfect 100. It’s also worth noting that each credit line is weighted, so frequent big payments will carry more weight than infrequent small payments. 

Equifax Small Business credit file 

Most U.S. banks and business credit cards underwritten by banks report to Equifax. Equifax is typically slower to open a file on your business than other bureaus.

Like the other bureaus, your Equifax Small Business Credit Risk Score is determined heavily by timely payments. Equifax is not very open about all of the factors that go into the score though, so it is a bit of a black box.

The score itself is on a scale of 101-816, with higher equal to less credit risk.

The Equifax report also provides lenders with a Business Failure Risk Score. On a scale of 1000-1880, with higher scores equal to lower risk. This score is paired with a “class”, 1-5 with 5 being most risky, and a percentile.


Money in the bank

Your business banking history is tracked, scored, and relevant to your creditworthiness. It’s commonly called a “bank rating” and you’re graded on a graduated scale.

The bank rating scale is based on the average balance in your account for the last three months, and it takes into consideration any adverse history such as bounced checks.

Lenders want to see that you have enough cash on hand to service debt, that you’re using it responsibly, and that you’re keeping a cushion.

A “low 5” rating is usually what lenders want to see when you’re applying for a loan. To be in that range, you need at least $10,000 in the bank on average for three months and no adverse activity on the account.

This tends to be a non-negotiable condition for lenders.


A line of credit from a vendor

Well, you actually should aim for at least 5. That seems to be the magic number to establish your business and ease lenders’ concerns.

A line of credit from a vendor is basically the ability to pay a vendor on Net terms, usually 15, 30, 60, or 90 days. That means, you get something from the vendor and the net balance is due X many days after you receive the vendors service or product.

It’s actually pretty easy to set these up for common business purposes. Frankly, you might have some already and not even know it. Many business supply companies, like Grainger, will extend small trade lines of up to $1000 to any real business with an EIN and a DUNS#.

The key factor to remember here is that these are only impactful if use the trade line consistently, monthly, and pay it down in full each month…on-time.

Business credit cards

Revolving credit accounts are a powerful tool to build your business credit rating, just like they are with personal credit. 

Once you have your credit files open and vendor trade lines reporting, you can begin applying for business credit cards.

The business credit cards you want are just those that report to your business credit profile, and are in no way linked to your personal credit file. 

Not all business credit cards will report to just your business credit profile, so be selective. Some may require a personal guarantee, which is OK to provide in the beginning. 

A business loan from a bank

You might be asking yourself, “do I need a loan to get a loan?”. The answer is no, you don’t.

BUT, if you want to expedite building your business credit history AND increase the odds of securing a more substantial loan amount with better terms, then this is important.

It’s not a catch-22, you can get a low-value business loan pretty easily when it’s secured. That means you place a deposit with the bank in an interest bearing account like a Certificate of Deposit, in turn the bank will give you a loan for the exact value of the deposit.

You pay it off, then you close the CD and recover your payments. The net cost to you is just the difference in interest rates between what you earn on the CD and what you pay on the loan. Secured loans tend to carry low interest rates as well.

To take full advantage the loan has to be in your business name and using your business EIN, with payments coming from your business bank account. Early payments help expedite your credit building as well.

If you think this feels like cheating, it’s not. Secured business loans are common, here’s an offer page at Bank of America.

There are lots of legitimate reasons for a secured loan, and building your business credit is one of them.

Wrapping It All Up

Taking the above steps will get you on track to secure a more substantial business loan within as little as 1 year. In the next article, we’ll discuss a Small Business Administration specific requirement, the SBA business plan.