Money Management

4 Ways to Raise Your Small Business Credit Score

When it comes to test scores, salaries, batting averages, or pretty much anything other than golf scores – the higher the better. The same goes for credit scores. And a good credit score means a lot if you’re starting or running a business.

Why Your Credit Score Matters

A credit score is a way that financial institutions and lenders attempt to predict your future financial behavior. They look at your financial past- what types of loans you’ve taken out, if you quickly repay or default on a loan altogether, and if you’re consistent in your payments and even pay on time. Then based on their assessment they assign you a score between 850 and 300.

The higher the score the better of an investment you are, so your ability to take out new loans or work with lenders with better rates increases.

This can be essential if you’re looking to start a business or expand the business you already have. It even can come into play if you’re sourcing large amounts of raw materials or other resources for your business – many wholesalers are more likely to extend larger tabs to clients with higher credit scores because they know they’ve got a good financial history.

How Do You Increase Your Small Business Credit Score

Remember, you didn’t get your current credit score overnight, so raising your credit score isn’t going to happen that fast either, but you can always do things to help it improve.

Take a look at your current credit report – review you’re current credit report and look for areas that might include false information or items that have a negative impact. Verify your story to the best of your ability by collecting related paperwork and any bank or credit card statements. Then contact the credit agency and ask to work through these concerns.
Pay on time. Every time – Making sure you can pay your bills and that you do so on time is the best way to improve your business credit score. To do so, consider setting things on autopay, paying a little extra each time so you’ve built up a reserve and setting reminders on your phone so you can check to see that you’ve paid in full by the required monthly deadline.
Pay Down Your Debt – for most individuals and small businesses this can be a monumental task, but it is possible and it makes a great impression. If you’re looking to acquire a loan or are putting things on credit, go into it with a plan on how to pay it off. If you’re stuck with debt, take a look and see if you can consolidate it by using a debt snowball method. No matter what, pay the minimums so that your current schedule credit score doesn’t take a hit.
Improve your Credit Utilization Ratio– lenders take into consideration just how much you utilize your credit. The higher your utilization rate the greater the risk of not being able to repay your debts. So work to keep your credit utilization rate low, preferably under 30%. Lenders want to see that you can properly manage your debts and are much more willing to extend credit if there is a lower risk.

No matter what don’t give up. Pick a strategy and stick with it. Don’t get frustrated when you don’t get immediate results – like we said before, you didn’t get your current credit score overnight and you won’t undo it that fast either. Making wise financial decisions consistently will not only improve your credit score but also help your financial standing overall.

What to Do if Your Business is Operating at a Loss

It happens to everyone. Small businesses, entrepreneurs, and even giant corporations have products that fail, launches that never happen and spreadsheets that show tanking finances and little to no cash flows. It’s important to make smart choices but a savvy businessperson knows that even the best decision making can still sometimes lead to operating at a loss.

The important thing is to know how to come back from it.

So what do you do if your business is operating at a loss? We’ll, we’ve got 3 simple answers – but first lets talk about what operating at a loss really means.

How do I know if my business really isn’t making money?

Simply put, your business is operating at a loss if you’re spending more money than your business is bringing in. Most businesses, especially small businesses fall into this category at the beginning and many do so during periods of growth. Operating at a loss for a short period of time, really isn’t a problem if you’ve got enough cash flow to cover your expenses until your income starts to grow.

In fact, you’ve probably heard experts or even other entrepreneurs talk about cash flow problems – which is just a business-like way of saying they’re short on cash or that their money is tied up in product, office space, and equipment. The real issue comes when you operate at a loss for too long – but how is a small business owner or entrepreneur supposed to know when that is?

Well, if you projected start-up costs as you started out there shouldn’t have been many surprises on what your business was going to cost. If you did project start-up costs, you hopefully also put together a cost analysis that includes the general cost of rolling out your product/service or starting your business. In that same line of thinking you should be looking to estimate or project the number of sales you’ll be making. Where those 2 lines cross will be your break even point (where the income from additional sales is profit as opposed to covering the costs you incurred while setting up your business).

Understanding the technical side of things is good, but focusing on how you can bring in more cash flow is the best thing you can do.

So what do you do if your business is operating at a loss? We’ve got 3 simple answers.

No. 1 – Reduce Your Expenses

All businesses, even those that are strictly service-based or online, have some business expenses. One way to help free up some cash is to go back through your operating costs and see if there are places you can eliminate the expense or at least cut back significantly. Keep in mind that while cutting costs is an effective way to loosen up your cash flow, you won’t want to cut back so far that it’s difficult to do business or handicaps your abilities to provide quality service and marketing of your product.

No. 2 – Increase Your Sales

Before we talked about that line on your start-up projects that estimated the number of sales (and the associated revenue) you thought you’d bring in. When you’re tight on funds, looking to increase your sales is always a surefire way to increase your bottom line. Taking a hard look at your projected sales numbers will help you decide a couple of things:

whether or not you can do a promotion to drum up sales an still bring in more cash
if you’re hitting your sales goals and if those goals need to be raised to insure a steady cash flow
if you need to adjust the price of your product or service

If you’ve got employees, it might be the right time to introduce a little friendly competition and award the winner with the most sales a special prize – which may even be the bragging rights of having the top numbers or a coveted parking space.

No. 3 – Seek Advice from an Expert

We live in a world where the DIY approach is becoming more and more common. But there are times when seeking expert advice will make things simpler in addition to making sure they’re the best long term strategy. When it comes to operating a business at a loss, seeking expert advice from your accountant will ensure you’ve got all the financial answers you need. In addition, they’ll be able to help you turn your finances around so you’ve got more cash flow and even help you figure out what deductions you can take come tax time.

Remember, it’s normal to have cash flows be slow or even non-existent at first. Just keep up the good work and make sure you’ve got a handle on your sales numbers, your operating costs, and how they effect your bottomline.

Have more questions about operating your business on a loss? Send us a note – our experts are more than willing to answer your questions!

FAQs for Operating at a Loss in Business

1. How do I determine if my business is operating at a loss? Your business operates at a loss when expenditures exceed income. It’s common initially or during growth phases, manageable with sufficient cash flow until income increases.

2. How can I gauge when operating at a loss becomes problematic for my business? Monitor your start-up costs, project expenses, and sales estimates. Recognize your break-even point where additional sales generate profit, not just cover initial costs.

3. What strategies can help a business dealing with a loss? Reduce Expenses: Assess and cut non-essential expenses without hindering operations or service quality. Increase Sales: Revisit sales projections, consider promotions, adjust prices, and foster healthy competition among employees to boost sales. Seek Expert Advice: Consult with an accountant or financial expert to strategize, manage cash flow, and identify potential tax deductions.

4. How vital is it to focus on increasing cash flow during a loss? Increasing cash flow is paramount. Balancing operating costs and sales figures aids in ensuring financial stability and sustained business growth.

5. What should I do if my business continues to experience slow cash flow? Persistently manage sales figures, operating costs, and seek expert guidance to optimize finances. Maintaining vigilance helps weather initial challenges in business operations.

How to Write a Killer Business Plan in 5 Easy Steps!

Whether you are braving the pitch world to find a financer on Shark Tank, or you are striving to get your team organized, you need a KILLER business plan. What exactly does that mean? Is it just an outline? Is it a letter to a bank? Is it a report? I’m sure it has trendy business graphs!!…What else do you need? What EXACTLY are the “powers that be” looking for in a confident and solvent business?

There are 5 main parts business professionals (financial tycoons) are looking for and they really aren’t that hard!

What does the playing field look like in comparison with your business/product? There are 2 high-level ways to do this: SWOT and Porter’s 5 Analysis of your business. This basically is the business world’s way of asking: What is your business good at?, bad at?, what is the rest of the industry good at?, and how can your business create opportunities in the industry?
What is your company’s Mission, Vision, and Strategy? This seems simple, but the business world is looking for how your company messaging, purpose, organization, and plan of action are intertwined with the plan that you have to move forward. This shows your business will be able to follow through with the plan, make changes along the way, and work hard to achieve the plan you are proposing. They feel that if you are committed to something, it will show through the lifeblood and purpose of the company.
What does it mean to them? The mentality of a 5 year old definitely applies here, in a good way! When preparing to fund a business venture you need to think selflessly about your dream business. It’s hard. This is a time that is easy to become offended, brings up emotional memories, and takes strides of courage. Just remember, they need to know why it’s important to them and why people should care about your best invention ever.
What’s the Plan? You’ve buttered them up, explained the business, explained why they should care, now you need to bring the organizing PIZZAZZ! (Not JOKING) When investing in a company/idea, people need to see that your business has thought through contingencies and clearly and concisely can get from point 1 to point 10 and all you need is a little boost from them. This should have general steps that show you know your weaknesses and how to overcome them, test groups, adjusting and re-adjusting the plan, specific dates and milestones, prep prior to and post product launch.
Where’s the After Party? Why would they want more? They didn’t ask for more…but you need to show them you are prepared. Give them pre-launch survey results, a chart outlining the key milestones with dates assigned, and another simple chart that shows and how long it will take until the business is profitable and then what the profit will look like after breakeven and on into the next quarter/year. Sample flyers and mock ups of what they can expect and that show what success looks like are never overboard but just help to build the vision you are hoping they’ll catch.

That’s pretty easy! Make sure to go through your data and get it right, practice what you’ll say, their names and titles, etc. If you are just doing this for your company, it is a GREAT place to build team vision for the future. Rally your group around you, share the plan, hand it out to everyone that needs one, and say a few inspirational words, a GO TEAM, and then get to work with the follow through! I know your business will be successful as you are prepared. Don’t be afraid to make a bold move. You have amazing ideas and the world needs more amazing ideas these days!

Why You Should Create Passive Income Streams & How to Do It

Financial security is something everyone is working towards. Whether you know it or not, the mere fact that you have a job means that you’re interested in being able to put food on the table and keep that roof over your head. But what would happen if you lost your job and weren’t able to find another fairly quickly? How long would it take before there was no cash to pay the bills and you’d have to start drastically changing your lifestyle. For those that have multiple income streams, the threat of losing a job isn’t as terrible as those who rely on one source of income. Yes, they may have to make some adjustments in their spending habits, but they could easily rely on the other income streams to cover the bills while they look for another job. That sounds a lot more pleasant than frantically looking to find a job so you can keep a roof over your head.

If juggling multiple jobs seems over the top to you, don’t worry. Having more than one job isn’t the only way to create multiple income streams. Multiple income streams aren’t just for the hustlers, the online biz guys, or those that don’t like working for the man (big business or the typical 9-5 job). Multiple income streams are becoming more and more popular and are a great way to provide financial stability for anyone.

Ideas for Passive Income Streams

Interest from the bank ( look for high interest savings accounts, i.e. if you’re not getting at least 1% interest from your savings account, it’s time to start shopping around)
rental income on an investment properties
freelance income
extra shifts at a local store during the holidays
a side business
services you render to neighbors ( dog sitting, house sitting, yard services, etc)
dividends from stocks
something related to a hobby or passion – umpire for city league games, or teaching a pottery or gardening class at the rec center
marketing your skills – fixing computers, bikes, cars or massage therapy, hair cuts, etc.
participate in surveys and paid studies
flea markets (sell your stuff, or collect other’s people stuff and sell that)

How to get started

It really depends on what type of income stream you’re lookin to add to your setup, but these general rules ought to get you thinking on how to add a side business or even get you started investing.

Don’t quit your full time job or whatever you’re currently doing…just yet. You may want to cut back on your hours at your current job if you’re starting a side hustle or taking on ana additional part time job. You may even want to cut back the amount you’re investing in yoru current stock choices or funds, but whatever you do, the first step requires that you don’t move all your eggs to one basket (especially the new one).
Take advantage of your hobbies and skills. This is incredibly important if you’re looking to start a small business, sell online, or offer some type of service to friends, family, and potential customers. We recommend making al list of all the skills you have that might be of use to others. Do a little research online to see if there are licenses or advanced training you need to be able to offer these skills legally. Check out the going rates and pricing structures that others offering these services are using. If you’ve already got a side hustle, consider what products or additional services you could offer to increase your income. You might also want to consider what locations, events, or places you could market and sell your products and promote your business.
Set a plan on how you’ll start and grow your income stream. It seems simple enough, but we find that all too many people start something and don’t ever get far enough into the process to really see the fruits of their labor. Once you know how you want to get a income stream going, outline a plan for growing your income stream. Plans for growing your own business are vital to your success, but they also come in handy as you set out to start investing in rental properties or even the stock market. Knowing how much you’re going to invest, or how you’re going to build your customer base are necessary to make sure your additional income stream will be a success.
Integrating online casino winnings can be an additional passive income stream. By playing at safe and reliable online casinos like Ignition Casino or Neospin, players can potentially earn consistent returns. These casinos offer secure payment methods and regulated environments, ensuring a safe gambling experience.

What type of income streams do you currently have or are considering? We’d love to hear about them in the comments.

Lower Your Taxes by Implementing These 3 Year-End Contribution Ideas

During Q4, tax season seems like it’s lightyears away. But prepping for tax season now, can save you time and money come tax time. Here are 3 year-end contributions you might want to consider before you ring in the New Year, and how they’ll help your bottom line.

Year-End Contribution #1: Charitable Donations

No one will refute that it’s the season for giving. But did you know that giving can provide you with tax write-offs in addition to a host of warm fuzzies? It can. Charitable donations can impact taxes for the year in which they were given. To claim donations on your tax return here’s what you need:

Receipts are required from all IRS-qualified charities for any donations larger than $250 if you’re going to claim them.
You don’t always have to donate cash – household items, cars, boats, etc., can also be contributed. In such cases a specified amount can be deducted from such donations.
If you’re claiming donations to individual charities, you’ll need to itemize the deduction, rather than claim the standard deduction that is set each year by the IRS.

Tip: Even if you’re not planning to donate now, maybe you’ve donated sometime this year. Take a few minutes and pull out your books, calendar, and bank statements. Review them and gather the necessary paperwork so you’ve got it ready for tax time.

Year-End Contribution #2: Health Savings Account

Invest in your health. It’s something you’ll spend money on anyway, so why not put away some cash in your Health Savings Account (HSA). An HSA allows any unused money to rollover into the following year and when the money is used to pay for qualified medical expenses is tax-free.

Tip: Now is the time to check into HSA options if you don’t already have one. If you have it, but aren’t sure where you’re at, check into your balance, scheduled needed appointments, and see if you’re taking advantage of any employer matching opportunities. Even consider raising the amount you contribute each month so you’re building a reserve for those unexpected medical expenses that may crop up.

Year-End Contribution #3: Retirement Savings

It’s always a good time to consider investing in your future. In fact, it can provide you with a tax break now, and cash later. Any contributions made to retirement accounts are deducted from your taxable income, which can lead to reducing the amount of taxes you owe or possibly increase your refund.

IRAs allow for contributions to be made for the previous year right up until the tax-filing deadline. But if you’re looking to stash some cash into a 401(k) and take advantage of any employer matching, you’ll need to act before year end (Dec 31) or check out the specific requirements for your plan.

Tip: Talk to your accountant and see what type of suggestions they’d make when it comes to contribution to your retirement savings. They’ll have a handle on all the ins and outs and can help you strategically place your money so it’s working for you both now and in the long run.

So with these 3 suggestions in mind, what plans do you have to lessen your tax load before year end? If you’re got questions, lets talk.

FAQs for Year-End Tax Prep and Contributions

How can charitable donations impact my taxes?

Charitable donations can provide tax write-offs for the year in which they were given. To claim these deductions, you need receipts from IRS-qualified charities for donations over $250. Non-cash items like household goods, cars, and boats can also be deducted if itemized properly.

What documentation do I need for claiming charitable donations?

To claim charitable donations, you need receipts for any contributions over $250 from IRS-qualified charities. For non-cash donations, you’ll need to determine and document the fair market value of the items. Ensure you itemize these deductions on your tax return.

What are the benefits of contributing to a Health Savings Account (HSA)?

Contributions to an HSA are tax-deductible, and funds used for qualified medical expenses are tax-free. Unused money in an HSA rolls over to the next year, allowing you to build a reserve for future medical costs. Check your balance and consider increasing contributions to maximize benefits.

How do retirement contributions affect my taxable income?

Contributions to retirement accounts, such as IRAs and 401(k)s, reduce your taxable income, potentially lowering your tax bill or increasing your refund. For 401(k) contributions, ensure they are made by December 31 to take advantage of employer matching and year-end benefits.

When should I make contributions to my IRA or 401(k) to benefit my taxes?

IRA contributions for the previous year can be made until the tax-filing deadline. However, 401(k) contributions should be made by December 31 to take advantage of employer matching and reduce your taxable income for the current year. Consult with your accountant for specific deadlines and strategies.

Just Because You’re A Creative Entrepreneur Doesn’t Mean You Have to Live Paycheck to Paycheck

Taking the plunge into entrepreneurship, especially creative entrepreneurship, is intimidating. One of the scariest parts of entrepreneurship, is never knowing where your next paycheck is coming from. Which means most creative entrepreneurs live paycheck to paycheck.

But, what if you didn’t have to live paycheck to paycheck. What if you could be a creative entrepreneur without living on a fixed income. There are ways to stretch your paycheck so that you can stop living paycheck to paycheck and start building financial stability. We want to help you break the paycheck to paycheck cycle.

Start Saving

When you live paycheck to paycheck, you typically aren’t saving a lot of money. However, if you want to stop living paycheck to paycheck, building a savings is the first step.

Having three to six months worth of savings will help you stay out of future debt. Even if you have a great debt reduction plan you never know when you’ll have an emergency and need to make a payment that is outside of your budget. If you don’t have savings then you’ll end up creating more debt to cover the emergency expenses.

It may seem impossible to save money when you live paycheck to paycheck, but there are ways to make it happen. We’ll suggest a few as we go along.

Reduce Debt

Most people who live paycheck to paycheck are swimming in debt. They rely on credit cards to get through their monthly expenses. Like we mentioned before, unknown expenses can really hurt, especially when you rely on credit cards to cover those expenses.

We know what you’re thinking right now. “How am I supposed to pay off any debt when I live paycheck to paycheck?” There are ways to reduce your debt even when you don’t have an influx of cash.

If you have bigger loans, like a car loan or mortgage, see if you can restructure your loan and roll your debts into one payment instead of many payments.

Loan restructuring works because car loans or mortgages typically have lower interest rates than credit cards. If you have the equity in your car or home, you can get the money to pay off the credit cards. You can then make a bigger payment, at a lower interest rate, on the newly restructured loan.

This method can be complex, so speak with an accountant before you jump right into restructuring your loans. You should always understand what you’re doing with your money before you make a big decision such as this.

Build Wealth

There are two ways to increase your cash flow: reduce your expenses or bring in more money. Both options can help you break the paycheck to paycheck cycle.

You can determine what expenses you can reduce within your own budget. We want to talk about how you can bring in more money.

As a creative entrepreneur, this is easier said than done. You have to either find new clients and put in more hours or find a way to use your skills to create a passive income.

Work on Getting Consistent Clients

The hardest part of being a creative entrepreneur is that your clientele is not consistent. You usually work with someone once and then don’t hear from them again until they need your services. This cycle is what keeps you in the paycheck to paycheck predicament.

If you want to break that cycle, you need to change how you run your business. Try setting up packages that will commit clients to more than one service. Or you can use an email list to reach out to your clients and see if they are interested in other services you offer.

Whatever strategy you choose, try to generate new sales from your current clients so that you don’t have to work as hard to bring in more revenue.

Create Passive Income Streams

Passive income streams are a great option for creative entrepreneurs. With a passive income stream you create a product that you can sell to multiple people. Passive income streams are helpful in generating new revenue. It’s also great when you don’t have time to devote to individual projects.

As a creative entrepreneur you can sell photographs, printables, pre-made products. The main point is that you don’t have to spend a lot of time producing each individual product.

Ultimately, you can choose if you want to stop living paycheck to paycheck. you just have to make decisions that will lead you towards a financially free life.

Resources

Category: Money Management