Lazy Man and Money

8 Tips for Organizing Your Business Finances

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[The following is a guest post by Annie Davis]

Keeping accurate, up-to-date financial records helps business owners know whether their company is on solid footing. Besides good record keeping, there are ways to organize finances in a way that helps your business in both the short and long-term.

Here are 8 tips for managing your company’s finances that will help reduce accounting problems.

Choose a Framework

Decide what kind of company you have so you can register it properly with the federal government. This also determines how taxes on your business get calculated and assessed. Educate yourself on what it means to be an LLC, as opposed to a sole proprietorship.

Also, check out the C-corporation and S-corporation options to see if either of those are a better fit for your business.

Set up Accounts for Checking and Savings

Just as you need personal accounts for your checking and savings, your business needs the same kind of set-up. Choose a local bank, or a national bank with branches nearby. This allows you to pay vendors, employees, the utility company, and others.

Don’t Mix Business and Personal Finances

For accounting and tax purposes, it’s better to keep separate accounts, one for your business and one for your personal finances. The law doesn’t need you to keep them in different accounts if you’re a sole proprietorship, but there are benefits to doing it. For example, if you decide to put your business up for sale, it’s a simpler process in terms of determining its assets when business finances are not mixed with personal funds.

Use Software to Track Funds

Traditional financial software such as QuickBooks from Intuit and GnuCash, an open-source option, give you powerful tools for organizing, tracking, and sorting your company’s finances.

Just as workflow automation software improves day-to-day financial matters, the financial software you use improves your understanding of how your company’s performing over time. From printing reports to keeping tabs on cash flow, these software packages allow you to support a strong grasp on your company’s financial health.

Monitor Bills and Pay Them

Flickr by SalFalko
Just as you diligently pay bills on time as a private citizen, do the same as a business owner. Take advantage of automatic bill pay, when it’s available. Ask vendors for a discount if you use an automatic payment option, because you’re ensuring them that they’ll get your payment on time. Just be sure to end those payments when you no longer make purchases from that vendor.

Likewise, regularly check statements for any credit cards tied directly to your business. Watch for potential abuse by employees, billing errors by the credit card company, and changes in terms and interest rates.

Organize Accounts and Debt

Flickr by Hakan Dahlstrom

For whatever reason, your company may have open accounts that it never uses. It’s wise to check for these accounts regularly and close them. Keep a list of all the credit card accounts, savings, checking, IRAs, CDs, and other accounts you have tied to your company.

Also, follow the amount of debt your company has. Check out the possibility of consolidating debt to a low-interest credit card.

Know When to Involve Professionals

Don’t just visit your CPA when it’s time to pay Uncle Sam. Your CPA can offer advice on how the long-term financial landscape looks for your business. Plan to meet with a CPA a couple of times a year to check your financial records and discuss the next couple of quarters.

Make it Easier to Receive Payments

One part of organizing your finances is deciding how you’ll accept payments. Will you accept personal checks, if the payer provides a valid driver’s license number and current address? Do you let customers pay with credit cards, practically a necessity in a world where cash exchanges are on the decline?

If you’re looking for ways to accept credit cards, there are several devices that attach to smart phones and let you swipe cards. These tools are increasingly popular with small businesses looking for a fast and easy way to accept major credit cards. In addition, consider letting customers pay online through services such as Paypal. Having convenient ways to pay increases the chances you’ll get paid for your product or service.

By getting more organized, you’ll have a better sense of how well your company is doing financially. From cash flow to debt, you’ll get a clear picture of where your company’s strengths and weaknesses are in terms of its finances. In addition, you’ll enhance your company’s profitability by making it easy to pay your bills on time, accept payments, and track financial performance.

Credit Cards and Average Daily Balance Interest Calculation

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The following is a guest post from Bank Free Credit. Bank Free Credit provides tips, reviews, and information about banking, credit, and getting stuff for free. The site also has an extremely attractive WordPress theme that you may recognize.]

For over 20 years I’ve had credit cards… and I’ve never paid a fee. That statement was entirely true until this past month. I always use credit cards as a tool… a way to get a couple percent back on things that I would have bought anyway. Over the years, it’s added up to thousands and thousands of dollars. This last month, I gave up some of that money, more than I expected.

Over the years, I’ve moved from a method of sending in a physical check to paying online. There are some pros such as saving the price of a stamp. The biggest pro though is setting up the credit card company to withdrawl money from my bank every month, so that I’m never late with a payment. I realize that it is potentially dangerous to give credit cards this kind of access to my bank, but I grant financial institutions some leeway on not robbing me blind. For the most part, the transactions are done by computers and they are infallible, right?

This has worked out extremely well and I highly recommend everyone automate their credit card payments this way. So how did I pay a fee? I signed up for two American Express cards around the same time, the AmEx Blue an AmEx Fidelity for their great rewards (that’s a whole different article). I thought I had set up autopay on both cards, but it seems like one didn’t fully go through. I firmly believe it was an error on my part where I probably set up the same card twice.

This lead to me to getting a bill with an interest charge on it. There was also the associated late fee (double jeopardy rules should apply). With a call, I was able to get AmEx to sympathize with me. They said they’d make it so that it never happened. My credit report wouldn’t be dinged and the late fee would be taken away. I didn’t realize until I looked at my next bill with an interest charge that interest charges weren’t included in that. To get those removed, AmEx has to own up to making an error and they didn’t.

The thing that I didn’t understand is why I had an interest charge two credit card periods when I was about 3 days late in paying. When I discovered I was late, I even overpaid a small amount as a sign to AmEx that I was more than capable of paying. It turns out that there’s a curious and unexpected thing that happens when you are late with a payment that spans over two billing cycles: both cycles are considered to be considered late. It doesn’t matter that I paid off the balance in the cycle, by being late for one day it triggers the interest calculation. I would have thought that I’d have an interest charge for a pro-rated couple of days, but that’s not the case.

The interest calculation is another curious and unexpected thing. The interest charged is based on the average daily balance of the bill. So even though I had paid in full, and even more than in full, future charges on that card for that billing cycle was raising my average daily balance and incurring interest on it. So if I had made a really big purchase like a $2000 laptop (to collect the reward points as I usually do) near the beginning of the cycle (after I had paid the balance down to zero) the interest calculation would use that daily balance and continue to penalize me. Doesn’t seem to make sense that I could be penalized after paying balance in full, right? I guess some law-makers missed that one.

It makes me wonder if I can use this loophole to trigger and interest payment, give them so much money that I have a negative balance daily balance, and get the AmEx to give me a negative interest payment leading to a check in my favor. With my luck, they’ll just consider a negative daily balance the same as zero (for that day) and I’ll get charged the late fee, the interest for the day or two before the big payment to get negative took effect, and get my credit wrecked in the process.

Anyone else have a credit card, “A ha!” moment? Let me know in the comments.

6 Debt Management Tips for Avoiding Personal Insolvency and Bankruptcy

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[Editor’s Note: The following article was written by Ian Chase on behalf of Solve My Debt. They pride themselves on being the go-to-experts for high quality debt management. They also suggest that you take positive action today against your debt problems and get in touch with the team for expert help.]

When debt is piling up and bankruptcy seems inevitable many people give in to the stress and ignore their problems until a creditor forces bankruptcy upon them. The feeling that you’ll never get out of debt can be overwhelming, but with a long-term debt management plan and the right techniques it is possible to slowly and gradually reverse the downward debt spiral and avoid personal insolvency and bankruptcy:

1. Compare Total Monthly Income to Current Financial Obligations

First you’ll need to get a picture of just how bad your debt situation is by calculating how much income you’re reliably bringing in every month and comparing it to the amount of money you’re spending on recurring financial obligations (i.e. – debt repayments, rent/mortgage, insurance, electricity, transportation costs, food, etc.). You’ll probably find the need to do some restructuring and budgeting just to make recovery a feasible possibility.

2. Track and Allocate Expenditure with a Comprehensive Budget 

Your budget should be a constant work in progress, changing along with the dynamics of your life. To make next month’s planned budget more accurate and effective it is best to track every cent of income and expenditure this month, so you’ll have something to reference. At the end of the month create categories for miscellaneous expenses that you normally wouldn’t add to your budget, as it is these unexpected and unrecorded purchases that usually push people over the spending limits of their budget. After a few months of budgeting you should no longer feel a sense of financial uncertainty because all of your wants and needs will be adequately planned for.

3. Create a Debt Calendar and Reschedule Problematic Payment Due Dates

Making payments is only half the battle in getting out of debt; if you want to avoid late fees and potential damage to your credit score you need to make payments on time. Unfortunately, sometimes your pay periods don’t mesh with payment due dates, especially if you get paid monthly or every two weeks, which is why creating a debt calender will help you get sorted out. Look for the payment due dates that fall on days during “income droughts” when you won’t be expecting any payments. In most cases you’ll be able to reschedule payment due dates so that they fall near pay periods by simply calling the creditor and asking.

4. Consolidate Debts Wherever Possible

Debt consolidation is the process of signing over some or all of your debts to a single lender who would then charge you a centralized monthly payment on one date for all of your monthly repayments. This not only reduces the stress of dealing with multiple creditors it also puts your repayment obligations together at one time of the month and helps you minimize the possibility of having several offenses on your credit report.

5. Devote A Bank Account To Your Debt Payments

Open a checking or savings account that will be designated to hold all of the money used for your debt repayments. Your primary concern every month second only to living provisions should be to ensure that the account is loaded with enough funds to cover your upcoming payment obligations. This not only helps with discipline it also makes accounting easier.

6. Examine Financing Options

If repaying all of your debts with your current income doesn’t seem practical you may want to consider financing options that could give you the assistance needed to repay secured or otherwise urgent debts. Although this practice would be causing you to create a new debt, and you would probably be stuck with higher interest rates, it would get the current creditors off of your back and allow you to postpone or avoid personal insolvency and bankruptcy.

5 Mistakes People Accidentally Make That Hurt Their Credit

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[The following article was written by Logan Abbott. Logan is a personal finance expert with over a decade of experience writing for MyRatePlan Credit Cards. He is also the editor of MyRatePlan.com.]

I’ve been writing about personal finance and credit cards for years, and one of the countless pieces of information that I’ve gleaned is that the credit building process is largely misunderstood by a lot of people. Credit scores are important because they represent a huge factor when trying to make a large purchase that requires a loan. For example, if you are trying to take out a mortgage to purchase a home, or a loan in order to purchase a car, the first thing a creditor will look at is your credit score.

One of the most common queries I’ve gotten over the years from clients and friends alike centers around how to improve one’s credit score, and how to keep the score maintained once it’s at a healthy level. This post is going to explain the five most common pitfalls people encounter whilst trying to build their credit scores.

  1. Using more credit than you have available. Not surprisingly, going over your credit limit is the easiest way to harm your credit score. This happens more often to people with lower credit limits, but it can happen to anyone who is not paying attention to their spending. If you are prone to spending a lot without realizing it, I encourage you to start keeping track either with a pen and paper that you keep in your wallet, or with one of the many personal finance smartphone apps currently on the market (my favorite is Mint). Taking this one step further, the general rule for building credit is to use less than 30% of your available credit limit. So, if you have a $10,000 credit limit, then you would want to use less than $3,000 worth of credit per month.
  2. Paying late. Besides going over your credit limit, paying bills late is the second most common way that people hurt their credit scores. Any late payment to a creditor that reports to the major credit bureaus can and will hurt your score. This includes credit card bills, car payments, mortgage payments, cell phone bills, and more. In order to avoid paying your bills late, I recommend setting up direct deposit with your creditors so that they can automatically deduct the funds from your checking account. If you are not comfortable with this, then there are other ways to be alerted of impending bills such as setting up text or email alerts with your credit card company to alert you before bills are due.
  3. Applying for too many lines of credit all at once. Another common mistake that people don’t realize can hurt their credit score is applying for credit too many times within a small time-frame. For example, some people make the mistake of applying for a credit card that requires better credit than they have, and then get denied. Instead of finding out their credit score and then applying for a credit card appropriate for them, they go on an applying spree and get denied from several credit cards all at once. These multiple hard inquires on their credit score ends up dragging it down.
  4. Not monitoring your credit score. One of the easiest ways to make sure your credit score stays healthy is to monitor it constantly. I’m not talking about sitting at your computer staring at it all day, what I mean is signing up for a credit monitoring service such as Citi Identity Monitor. These services are generally very cheap or free, and will alert you if there are any changes to your credit score or identity theft attempts. In addition, many services provide customized suggestions on how to improve your credit score, and highlight which factors are currently dragging your score down.
  5. Closing really old credit card accounts. Many people don’t realize that your credit score draws from years and years of your credit history. If you close one of your old credit cards, then you are effectively wiping the positive factors associated with that account from your credit score, as well as shortening your credit history. In addition, closing an old credit card usually lowers your overall credit limit, which increases your utilization rate, which can also lower your score. If your old credit cards don’t have an annual fee, then there is really no point to closing the accounts. However, if you are being subjected to a high annual fee each year for a credit card you don’t use, then that’s a good reason to close the card.

4 Best Ways to Survive a Tough Economy

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While I’m experiencing a second delay at the airport, I’ll pass along this guest post from Anthony Alexander. He is a freelance writer who enjoys sharing his financial experiences with others. In these rough economic times Alexander feels it is important to share all the tips and advice possible to help others.

Tough times in the economy usually equate to tough times for individuals and families who are trying to get by on limited funds, a low level of job security, and a rising cost of living. There are some great strategies you can implement if you are trying to survive in this tricky situation and here are 5 tips to help:

Don’t Buy What You Can’t Afford

Expensive Property
You can’t afford this, can you? via Jimmy Harris

It may sound like an incredibly obvious statement but ‘don’t buy what you can’t afford’ is actually one of the most important rules to stick to during financial uncertainty. We have all gotten used to being able to finance and borrow for items which are outside of our current means, but in the midst of a tough economy this is a very bad idea. Your credit card is not your friend and can land you in a lot of trouble if the card limit exceeds your monthly spare income level.

Only Buy if You Can Afford to Pay in Cash

It is all too tempting to take out a loan to pay for a new car or get a mortgage for a new property, but if the economy takes another downturn you could end up paying the bank back more than your house is actually worth. As a general rule, if you can’t afford to make a purchase with cash, it is likely that you cannot afford it full stop. If we have learnt one thing from the last recession it is that spending more than you are earning and hoping that you will be able to keep up with repayments is a really bad idea. Just because finance options may be available it doesn’t mean they are a good idea.

Get into a Long Term Mindset

If the current economic situation is improving month on month, do not assume that this is the end of hard times. Things can change quickly in today’s global economy so it is best to be prepared for change. What does this really mean? If you are currently earning more than you are spending, instead of splashing out on new things which you can do without, plan for the future and put aside as much as possible each month. A good portfolio will help to ensure that you have enough savings during harsh times. Using an investment company like Fisher Investments overview is a great way to start.

Creating a Budget to Keep Spending Under Control

Creating a sensible and realistic budget will ensure that you know exactly what money is coming in, what your overheads are, and what spare cash you may have each month. It is extremely important to stick to your budget and not to overspend as this is where problems begin to occur. It takes a lot of self discipline but if you can manage to overcome your spending urges you will be in a much stronger financial position. One of the most surprising things you will notice is how much you can save by making little changes such as taking lunch to work, getting rid of the extras on your mobile bill, and disconnecting your landline if you don’t use it regularly.

A tough economy makes life difficult for everyone but if you secure your own financial security by following the tips above you can ensure that you do not end up in a mountain of debt that you are unable to pay off. Sensible spending and saving is the key to your own financial stability and you are in control of this.