Category Archives: Finance

Top 7 Investment Tips for the Small Business

Running a business isn’t easy, especially when capital is low. Unfortunately, you can’t run a business on skill and determination alone. If you’re feeling a little shorthanded in the financial area for your business, it might be time to consider investing. Here are a few tips that can get the average small business owner started in the investing game.

1. Start with Penny Stocks
A penny stock is basically a common stock sold for less than a dollar on the market. It’s a highly volatile investment, but worth so little that it makes a great place to start for new investors. As a small business owner, you can get started trading penny stocks to learn the market and develop more skills as an investor. Once you’ve gotten the hang of things, you may choose to continue experimenting with penny stocks or move on to different investments.

2. Align Investments with Business Goals
As a SBO, there are many entities to consider with your business before making any kind of speculation. To begin with, you’ll want to take a closer look at your business goals, business plan, debt load, and financing. Investing should be a way to enhance income, not supplement it.
In other words, taking money needed for another part of your business in order to multiply your holdings isn’t smart. If the investment turns sour, you’ve lost money on both the investment and your business, which will make it difficult to recover, particularly if cash flow is low. Instead, keep your business’s best interests in mind when investing. Use surplus profits to make down payments on investments, and always remember that investing should not be treated like gambling.

3. Diversify Investments
As a general rule, try not to put all of your eggs in the same basket. That way, if one of your stocks devalues, you still have a chance to make a profit with one of the others. This reduces your overall risk as an investor and helps you to preserve your business interests.

4. Consider Mutual Funds
When making savvy investments, there’s a level of risk and return that must be considered, and there should always be a balance. If you’re just starting out, the lower the risk, the better – which makes investing in a mutual fund a great place to start.
In large mutual funds, hundreds of stocks are combined in one place, and a fund manager puts money in the fund to increase the growth rate. The risk of losing money in such an investment is extremely low, making it a worthwhile opportunity. With your stocks slowly growing, you can better understand the ups and downs of the market and prepare yourself for bigger ventures.

5. Keep Time on Your Side
Investing is in no way a get rich quick scheme, even though many amateur investors treat it that way. It’s a long-term game where the best returns come to those who wait. Even when things look bad in the market, it’s not always a sign that you should pull your money. After a bear market, the resulting returns tend to be much higher, but only for those who wait for the right time to sell. Trying to pull your investments out when the market is bad and put them back in when it’s good will cause you to miss some of the best returns.

6. Avoid Leverage
It’s true that leverages can increase your profits, but it’s important to remember that it can go the other way as well. It will amplify your losses just as much as your gains, and that’s a little too much to gamble when your business is at stake. If things go bad, the broker could actually issue a margin call, which would require the investor to put up extra cash to make up for the deficit.

7. Minimize Taxes and Fees
Unfortunately, trading and selling within a market setting isn’t free. There are often hidden fees and taxes you need to consider. These charges can amount to as much as 30 percent of your profits if you don’t get them under control from the beginning, so learn how to minimize your costs. Before you make an investment, look at the fees and taxes involved to determine if the fees are worth the risk.

Procuring and Managing Working Capital

Have you ever thought to yourself, “If I just had enough working capital, I could push my business in the right direction?” Well, the good news is that there are ways to bring in working capital from the outside and grow your business. You will need a strategy, though.
The In’s and Out’s Of Managing Working Capital
When looking at the health of a company, you can determine a lot by asking this one simple question: “How much working capital do you have?” The reason this question is so important is that working capital is a signal of a company’s operating liquidity. In other words, having enough working capital indicates that a company is able to pay for all short-expenses without tapping into other resources.

The amount of working capital your business has — to an extent — determines your credit-worthiness. If you have lots of working capital, you’ll be viewed as a stable and responsible business. If you’re running low on working capital, then there will be lots of question marks surrounding your financial situation.
How Much Working Capital Do You Need?
Every business needs working capital, but the goal isn’t necessarily to obtain as much working capital as you can. Having too much working capital may actually be an indication that you don’t have enough assets invested for the long-term. So, what’s the sweet spot — and how much does your company need?

Unfortunately, it’s impossible to provide you with an accurate answer. So much depends on your current situation, growth goals, cash flow, profitability, and more. Look at your operating cycle and get a firm grasp on how long it takes to turn the revenue produced from a sale into cash that can be used to grow the business and pay off expenses.
If your operating cycle is longer than it should be, then you need an infusion of working capital. If your operating cycle is quite short, then you may only need a small amount of additional working capital to tide you over.

Based on your operating cycle and current financial situation, develop three sets of projections: conservative, moderate and optimistic. Review them carefully with a business analyst and then determine what you realistically need. You can then turn your attention towards obtaining working capital to meet your demands.

5 Ways to Obtain Working Capital
When it comes to obtaining working capital, there are a number of options. Understanding how these options align with your business is the key to leveraging the right opportunities. Here are a few common ways businesses procure working capital:

1. Bank Line of Credit
A line of credit is one of the preferred options for businesses looking to procure some working capital. While a line of credit is often hard for a new business to obtain, companies that are well capitalized by equity (and have good collateral) can sometimes qualify.
With a bank line of credit, businesses can borrow funds when the need arises and repay once accounts receivable are collected from the short-term sales period. A line of credit is usually extended for a year and is expected to be paid off within 30 to 60 days of the funds being used.

2. Private Line of Credit
A line of credit is ideal for businesses, but most won’t be able to receive them from a bank. They require stacks and stacks of documentation and months of processing. The good news is that there’s an alternative.
A private line of credit works much like a bank line of credit, but requires fewer hoops. Many private financers promise faster approval processes, limited paperwork and decisions that are independent of personal credit. In other words, you get the same benefits of a traditional line of credit, but don’t have to spend months filling out paperwork and tracking down documents.

3. Trade Creditors
Have you established good relationships with trade creditors? If so, it’s not unheard of for a business to solicit help in providing working capital for short-term needs. For example, let’s say you typically pay your creditors every 30 days. If you receive a big order that can be fulfilled, shipped and collected in 60 days, you may be able to obtain 60-day terms from your supplier.
In order to obtain working capital from a trade creditor, you’ll need to supply them with proof of purchase orders. It’s also not uncommon for the trade creditor to file a lien on it for additional security. However, if you’re confident that you can collect, there shouldn’t be any problems.

4. Factoring
One option that businesses often aren’t aware of is factoring. Under this option, you fill an order, and the factoring company buys your accounts receivable and handles the collection process. This option obviously comes with less control — and is more expensive than other techniques — but is often used by new businesses with no other alternatives.

5. Short-Term Loan
Finally, you may qualify for a short-term loan. This isn’t typically thought of as an option for obtaining working capital, but it can serve the same purpose when a line of credit isn’t extended. These loans are frequently given out to handle seasonal inventory buildup. It’s not the first choice, but is better than nothing.

Tips for Managing Working Capital
There’s a time and place for monitoring long-term financial goals, but businesses must pay attention to short-term working capital in order to be successful. This is why working capital management is so important.

“Proper management of working capital involves trying to achieve a balance between minimizing insolvency risks and maximizing the return on your assets,” serial entrepreneur Ajaero Tony Martins explains. “It is also advisable for you to take note of the fact that while the long-term analysis of your finances is mainly focused on strategic planning, the process of managing your working capital deals with daily operations.”
With daily operations and short-term goals in mind, here are some helpful tips for managing working capital in your own business:

Focus on forecasting. Cash flow forecasting is the key to effective management of working capital. Always take into account the unexpected and be pessimistic whenever possible. Unanticipated events will always arise and you’ll need a built-in cushion to sustain these issues.

Handle disputes properly. Disputes with customers can end up costing you a lot of time, which directly impacts your ability to pay off your working capital. Always have concrete procedures in place for how to handle disputes. Not only is this important for your financial health, but it also plays a major role in customer service.

Create contingency plans. Even with pessimistic forecasting and plans for handling customer disputes, there need to be contingency plans in place for other unexpected events that put your business performance at risk. Create contingency plans for anything and everything.

Send out invoices sooner. Having trouble tracking down payments? Try sending out invoices as soon as possible. While 30 days has long been considered the norm for payments, don’t rule out the possibility of instituting 15-day terms. These terms are becoming more commonplace and can prevent cash flow issues.
How you manage your working capital will determine whether or not you have access to additional working capital in the future. Keep these tips in mind and never let down your guard; successful management of working capital requires acute awareness.

Special Strategies to Increase Your Bottom Line

When business owners strategize ways to increase profits, their energy is usually focused on how they can attract more customers to generate additional sales. However, working smarter — not harder — is the key to boosting the bottom line. Improving net earnings is directly linked to controlling costs, increasing productivity, marketing resourcefully and tightening credit terms.

Strategies to Increase Your Bottom Line
Train Employees to Increase Productivity
Well-trained employees who know the scope of their jobs and are held accountable for their productivity can save companies thousands of dollars each year. The time and money invested in training employees to be savvy customer service representatives, enthusiastic brand ambassadors and productive team members are returned in higher-quality products, increased output, happier customers and better retention rates. Along with training, productivity tracking programs can identify which employees are excelling at their jobs and which under-performing employees need extra support. Strong training programs focus on developing functional skills, improving company processes and streamlining strategic goals.

Market Smarter, Not Harder
Marketing smart requires paying close attention to the return on investment (ROI).
put into advertising channels. Many marketing professionals theorize that spending $100 to make a $50 sale is worth the effort since that one customer could potentially generate long-term business. However, low-value customers rarely return because they are always on the lookout for the next best deal.

When creating strategies to increase your bottom line and satisfy marketing goals, instead of focusing on growing sales by 20 percent during the next six months, look for ways to decrease the cost per customer acquisition by 20 percent. Target existing customers by offering enticing add-on goods and services that improve the quality of the company’s main product. These high-value patrons are more likely to purchase these additional items because they already believe in the company. This approach not only strengthens customer satisfaction but also boosts sales so that businesses are improving their top and bottom line.

Control Overhead Expenses
There are a number of unnecessary costly overhead expenses that often run good companies into the ground. Decrease an office lease by sharing space with another vendor or allowing employees to telecommute. Take advantage of software programs that automate routine tasks, such as accounts payable, email marketing and data storage. Every two to three years, seek out updated quotes for insurance, printing and supplies to ensure you are receiving the best prices. Budgets should also be reviewed annually to determine if cuts can be made to overhead expenses that do not affect employee performance or product quality.

Revise Collection Procedures
Late-paying customers can create serious cash flow situations that too often lead to the demise of a business. Having multiple delinquent client accounts is a sign that a company’s credit terms are too loose. Revise the general terms by implementing late fees or charging interest on unpaid invoices. Rein in the amount of credit extended to chronic late payers by requiring partial payments before a new project begins. Offering an affordable installment plan can also encourage clients to reliably send in a check for services rendered.

How To Trading Stocks Online

Stock trading, once the sole domain of Wall Street, has become easily and affordably available to all in the last 20 years, thanks to online brokerages. Prior to online trading, people relied on the services of a stock broker, who would make buy and sell orders on the customer’s behalf. Today, individuals are able to execute buy and sell orders themselves in a fraction of a second using computerized trading services.

While buying and selling stocks — which are shares of ownership in a company — can make you a fortune, it’s just as easy to lose that money. To become a successful trader, it is crucial that you become familiar with the tools of trading, the theory behind it and the daily reports that drive market shifts.

Stock market basics
Like all businesses, the stock market operates on a system of supply and demand. When you purchase stock, your hope is that other traders become more eager to own a share of that company over time. When the stock’s popularity increases, traders will compete to own it and bid up the sale price. In theory, a rising share price is the result of improvements in the firm’s value and potential, also known as its fundamentals. In reality, stock prices change for any number of reasons, only some of which investors are able to predict.

Researching and choosing stock
There are two main schools of thought regarding how to choose stocks. The first, called fundamental analysis, relies on the use of a company’s financial reports and public statements to analyze the health of the business. Balance sheets, income statements, yearly and quarterly earnings, and news releases from the company are all important tools for a fundamental analysis. Fortunately, those reports are easily searchable online, as are tutorials on how to read them, such as those offered by the SEC. Market and industry trends, media publications and historical analysis also play a role.

The second school of investing is called technical analysis. Technical analysts believe that swings in stock prices follow patterns that traders can learn to detect and profit from. Technical analysis is not as widely accepted or practiced as fundamental analysis. However, many traders use a combination of the two techniques to choose stocks. Choosing a company with sound fundamentals and then occasionally trading on a technical indicator is a safer strategy that relying only on technical indicators.

Before deciding to buy or sell any stock, you should thoroughly research the company, its leadership and its competition. Sites such as Yahoo! Finance offer excellent compilations of news stories, financial statements and stock price histories (called charts) that provide insight into the company. Stock sites also display professional analysts’ ratings of a given stock, indicating whether that analyst advises a trader to buy, hold or sell a stock. Examining the records of those analysts may help you assign value to their opinions.

Personal stock-trading services
Before you can begin buying and selling stocks, you need to decide which online trading service you want to use. Rob Beauregard, director of public relations for Fidelity Investments, says choosing your brokerage partner carefully can directly affect your bottom line.

“The best piece of advice for an online trader is to choose your brokerage partner with open eyes,” Beauregard told Business News Daily. “Know their pricing, service, investment choices, education and research resources, and securitypractices. No one should just rely on their gut instincts or the tip from their friend or neighbor anymore. The resources easily accessible to them to generate and validate investing decisions are too valuable not to utilize.”

When you’re looking for an online broker, consider the costs of each service the brokerage provides and the level of support you will need from qualified brokers. Business News Daily’s sister site Top Ten Reviews offers an overview of a number of trading services, with ratings for their fees, research tools, mobile access and investments offered.

As a beginning trader, you may wish to start with a company that can provide personal advice for your investments. As your skills grow, you may wish to ensure that the brokerage offers tools to engage in advanced trading, including short selling and margin trading. The following are popular services known for the quality of their services and support:

E-Trade
ShareBuilder
Fidelity
Scottrade
TD Ameritrade

Some companies, such as ShareBuilder, also offer functions similar to banks, with ATM cards that give you access to noninvested money, or the option to invest your cash in a money market fund to earn a slightly higher return than a traditional savings account.

If you prefer to be a do-it-yourself trader, you can make use of discount online broker services. These services allow you to buy and sell not only stocks, but also options, mutual funds, exchange-traded funds, fixed income funds, bonds, certificates of deposit, retirement accounts and more. You ultimately get to make the final decision on each investment and whether or not to buy or sell, and you don’t need a large sum of money to start.

Practice your skills
Learning to trade begins with education. Reading the news and financial websites, listening to podcasts and watching investing courses are all excellent ways to gather information. Joining a local investment club will give you the opportunity to discuss your education with more experienced traders. A list of some recommended resources is available at the end of this article.

However, reading is no substitute for experience. A zero-risk way to practice your new skills is with an online stock simulator, such as those available through Investopedia, MarketWatch and Wall Street Survivor.

Another option is to practice trading in the penny stocks market. Many companies offer stock shares valued at a penny a share, which makes it easier to practice leveraging the trends of the market and making a profit.

Tips for beginning investors
Online stock trading may be daunting for beginning traders, but with the right foundation and a gradual investment of funds, you can expect to see significant returns. Here are a few tips to help you make smart investment decisions.

Do not invest money you cannot afford to lose. Make intelligent decisions about what you can afford to invest, and begin slowly. Once you have realized gains from one or two stocks, you can begin to reinvest those gains — which have now become your principal — into other stocks and funds.

Diversify your investments. While stocks offer the attraction of seemingly easy money, they are unreliable sources of income. Consider investing at least a portion of your money in an electronically traded index fund, which holds many stocks. ETFs can be purchased and traded like stocks, but because they are diversified, losses in a given sector may be cancelled out by gains in another.

Don’t trade if you don’t have time to research. Stock trading should be approached as a part-time job. Like any job, your skills will suffer if they are not frequently practiced. In this case, “practice” means reading the latest news and financial reports on companies in which you are considering investing. If you do not have time to practice, consider investing in an index fund instead, or hand your investments over to a qualified professional.

Make a plan. Irrationality is the enemy of stock trading. Before buying a stock, consider what circumstances would lead you to sell it. For example, you can decide that you cannot risk more than 20 percent of your investment. Many brokerages have the ability to schedule buy and sell orders based on predefined criteria, such as a percentage drop (or increase) in your original investment. Scheduling limit orders takes the emotion out of your finances.

“Have a plan and stick with it,” Beauregard said. “Know why you are buying a particular security, how much to invest, what your expected return is, and have an exit strategy.”

Don’t buy high. Stock may be trending upward at an extreme pace, in which case you shouldn’t always jump to buy stock. Wait for opportunities to get a lower entry point.

Don’t give in to fear. Something many beginning stock traders deal with on a daily basis is the fear of losing money invested. While you may see stock values plunge for a company, don’t despair or pull your money out. Stock trading is a long-term investment and requires patience and perseverance.

End Year Payroll Mistakes

For a small business owner, year-end tax preparations are just one more headache to add to the already-busy holiday season. When you’re trying to do your own payroll, it can be even more difficult to keep track of all the documents to file, deadlines to meet and regulations to follow. But mistakes on your payroll, whether intentional or not, can really cost your business.

“There are many hard deadlines related to tax deposits and filings,” said Phil Noftsinger, CPA and president of business services provider CBIZ Payroll. “All of these come with painful penalties for noncompliance, so employers doing payroll in-house should make sure they are very comfortable with all of the deadlines and reporting requirements for year-end.”

“There can be hefty fines attached to incorrect filings, along with payroll audits,” added Shelley Ng, vice president of product management at payroll and HR solution provider Ceridian.

Noftsinger and Ng outlined four common but costly errors small business owners should avoid as they wrap up their payroll for 2014.

Improperly handling taxable gifts and rewards. Taxable business expenses, such as company property and life insurance, are typically reported at the end of the year, but other items, such as reward trips and employee gifts, should be taxed more closely to the time they were received.

“Tangible items provided as holiday gifts, or even items provided related to contests [employees] may have won throughout the year, fall into this category,” Noftsinger said. “[Also] tripping up many employers are the new ‘points websites that allow employers to deposit points into an associate’s account for him or her to spend through the website as they see fit. Once employees select an item for which to use their points, this becomes a taxable event and should appear on the associate’s payroll stub.”

Not researching legislative changes. Federal and state governments frequently change their tax legislation, rates and forms throughout the year, so it is critical that you understand these obligations, Ng said. She advised employers to research legislative changes and ensure that they’ve downloaded the latest versions of tax forms.

Ng noted that cloud- and Web-based payroll software are updated automatically through the service provider, but if you have local software installed, be sure that you have the latest version that reflects the legislative changes.

Missing ACA-related regulations. The rules regarding year-end reporting for health insurance have become more complex with the passage of the Affordable Care Act. Employee and employer portions of health insurance costs must now be reported on associates’ W2 forms — a rule that Noftsinger said employers may miss.

Incorrect employee classifications and calculations. The IRS has been cracking down on employers that knowingly or accidentally misclassify employees as independent contract workers. Ng emphasized the importance of providing everyone on your payroll with the proper tax filing form for their classification, whether it’s a W2 (employee) or 1099 (contractor/freelancer). Ng also noted that, for companies with out-of-state employees or multistate locations, employers need to be in compliance with state-specific filing rules and tax calculations.

“Set up your employees properly in their current state to ensure state taxes and unemployment insurance are properly calculated, and the appropriate tax form is generated for each employee,” Ng said.

If you’re considering outsourcing your payroll processing to an outside firm, Noftsinger advised finding a processor that you can trust.

“Hold them accountable to making sure your relationship is important enough to them to provide a quality service,” Noftsinger told Business News Daily.

Most important, as you take your business into the new year, be sure to maintain good habits and keep up your records and files right from the start.

“Don’t treat year-end as an event,” Ng said. “If you have good payroll, housekeeping and reconciliation processes in place throughout the year, you will mitigate headaches at the end of the year.”

Simple Ways to Open a Business Bank Account

Opening a business bank account is a critical task for a new business owner. Even if you are a sole proprietor, having a business account is the best way for you to keep track of your finances and your business records. Putting this simple barrier between your personal and professional finances helps to make day-to-day transactions easy to follow and document.

“It is just good accounting practice to keep your business [finances] separate from your personal, and setting up a business checking account is the first step to making this possible,” said Kevin Ravenscroft, president of Timberwood Bank in Tomah, Wisconsin. “You can track your income and expenses for IRS filing purposes, more easily identify potential business deductions from the IRS, maintain clear records for potential audits, and you may be able to limit your personal liability.”

Ready to open your account? Here are a few important factors to consider before you head to the bank. [Smart Business Banking: How to Get Your Finances In Order]

Choosing a bank and account services
Business banking is different from consumer banking, so the bank where you have your personal checking account may not necessarily be the right one for your business. When deciding where to open your business account, consider the financial institutions in your area. Talk with each of them to discover their specialty and see if it is a fit for your company. Some banks are small business specialists, whereas others focus on property or equipment loans.

Today’s business banking customers can also find lines of credit and cash management services in addition to checking accounts. Starting a relationship with bank personnel familiar with your field or industry gives you another resource for inquiries and the ability to tap into their experience and expertise when it is needed. They may have suggestions or be aware of programs that you did not know about to make your business bigger and better. However, be aware that some bankers might try to encourage you to use their products and services — even if you don’t necessarily need them — just to make more money. Be sure to do your research and ask questions so that you understand what you’re signing up for.

Business banking costs
Many banks offer business checking accounts for free, with a minimum balance requirement and a limited number of transactions. At JPMorgan Chase & Co., for example, business owners with revenues of up to $10 million can open an account with just $25. At First National Bank of Omaha, business owners can take advantage of a Business First Free Checking account that requires a $100 minimum opening balance but has no minimum balance requirement.

As your business grows, you may need to change the type of checking account your business uses. While enhanced accounts might also charge a fee, the benefits of being able to handle an increased number of transactions efficiently and having access to more bank services offsets the cost. However, David Ely, professor of finance at San Diego State University, cautioned business owners to keep the total cost of balance requirements and fees in mind.

“You’re not just looking at the terms of the deposit accounts, but also look at it in terms of fees,” Ely told Business News Daily. “Consider the cost of the full relationship.”

What you need to open your account
Documentation requirements for a business bank account vary depending on the type of business. Sole proprietors are considered more like a consumer, so required documents should be minimal: A tax ID and social security number are generally all you need. Corporations, however, need more documentation, including articles of incorporation and a certificate of good standing with the state.

If you are using a name other than your own, known as a “doing business as” (DBA) name, you need to register that name with the state and provide the form to the bank. You may also need to provide proof of address, usually a bill received at your address or some state communication addressed to your company.

By opening a business bank account, you can give your small business a firm foundation as it succeeds and grows. If you are unsure of what type of account you need or what’s required to open an account, speak with a financial professional in your area.

Learn More About Merchant Account

Credit cards don’t process themselves. This is where merchant accounts come in. A merchant account is essentially the middleman that lets businesses accept credit and debit cards in person and online.

Usually provided by banks and other financial institutions, a merchant account processes electronic payments by transferring funds between customers’ and merchants’ banks. During a sale, the merchant account works behind the scenes to withdraw funds from the customer’s bank and deposit them directly into the merchant’s checking account. The process works the opposite way during a refund.

Here is a simple explanation of how a merchant account works, what to look for in a merchant account and how small businesses can get one. For a more in-depth look at merchant accounts, check out our Credit Card Processing Buyer’s Guide, which will also help you figure out whether your business needs a merchant account and how to find the right one for your business.

How a merchant account works
When a credit card transaction is processed, information must be sent to a payment gateway to see if the cardholder has sufficient funds. For traditional transactions, this is generally part of the point of sale (POS) machine, which reads the cardholder’s data and checks with the credit card company to ensure the transaction can go through. This is known as a “swiped” or “card present” type of merchant account, which can include retail, restaurant or lodging merchants.

But in a “keyed” or “not present” transaction, this is done online by a payment gateway, which connects to the credit card company. These kinds of merchants can include mail order companies, telephone order companies or e-commerce/Internet merchants. When merchant accounts are set up, the same company, called the payment processor, can often set up the payment gateway in the same process.

Within the e-commerce category, there are a number of different kinds of merchant accounts:

Direct — applied for directly at a merchant bank.
Local — an account in one’s home country.
Offshore — an account outside of the country of the merchant, known as an international merchant account.
High-risk — for online businesses with a high percentage of chargebacks and returns.
Third party — connected via an additional secure payment gateway to a direct credit card payment processor, contributing to the work of the processor and sharing its expenses. Ideal for beginner e-commerce companies.
Generally, merchant transactions are not posted to the account at the time of purchase/refund. These transactions are usually posted in a batch during the merchant’s settlement process. Depending on the business, the settlement process can either be automated to occur at a specific time of day, or manually initiated. This is dependent upon the specific payment gateway.

How to get a merchant account
To get a merchant account, a business must apply and be approved. Credit card companies guarantee that a cardholder is entitled to receive a promised good or service; if such good or service is not delivered, then the cardholder is entitled to their money back. As one of the most basic consumer-protection principles, this also mitigates the risk that the credit card processor faces. The payment processor has the potential to lose money every time it processes a credit card transaction for your business. Thus, all businesses who want a merchant account must apply, and sometimes there is a fee associated with this.

It’s important for businesses to stay grounded in reality when applying for these merchant accounts. When applying, the prospective processor should be able to provide clear answers on the type of documentation required and how long the approval process might take. If the processor makes unrealistic blanket promises or statements, it would be a good idea to be skeptical and take a closer look at the company.

When applying for a merchant account, it’s important to have financial documents in order to leverage the best terms of approval possible. Having a strong processing history is another valuable tool that you could use to leverage your application. An old-fashioned cover letter will help explain exactly what your business does and why it deserves a merchant account.

Find a merchant account
From credit card processors to POS system providers, small businesses have many merchant account options to choose from. To help small businesses find the right merchant account, Business News Daily has done extensive research and analysis to find the best credit card processors and the best POS systems, where you’ll also find a roundup of reputable credit card processors and POS system vendors.

How To Choosing a Secure POS System

Choosing the right point-of-sale (POS) system is key to a business’s success. While factors like type of POS system, features, cost and limitations are all important considerations, it’s easy to overlook one of the most critical aspects of using POS systems: security.

Understanding POS security isn’t for the faint of heart. Not only are regulations complex, but keeping up with changes is a whole other beast. As a small business owner, however, dealing with POS security is a necessary evil if you want the convenience and benefits of accepting credit cards.

To help you make sense of POS security and better protect your business and customers, we asked experts to share their tips on what to look for in a secure POS system.

1. Is the POS system PCI compliant?

The first thing to look for is whether your new POS system meets the required regulations for accepting credit cards.

The first thing to look for is whether your new POS system meets the required policies for accepting credit cards. For instance, new credit card regulations require merchants to have EMV chip-enabled POS systems by Oct. 15. [Learn more about EMV].

There is also a huge change happening soon. Starting June 30, businesses are required to comply with version 3.1 of the Payment Card Industry Data Security Standards (PCI DSS). These new PCI 3.1 standards are mandatory, and any business that fails to comply could face steep penalties. Although vendors have taken the necessary measures, it’s your responsibility to make sure your business is truly compliant. [Learn more about PCI 3.1.]

“Any business that accepts credit card payments for goods or services must be PCI compliant,” said Tony Ciccerone, a Detroit-based territory manager for Heartland Payment Systems. This means that in addition to following the Payment Card Industry Data Security Standard (PCI DSS) rules for credit card processing, your POS itself must meet PCI standards for merchants.

This is important because if your customers’ information is leaked, you could be on the hook for financial damages, even if your company uses PayPal or some other third-party service provider to process your credit card transactions, said Vikas Bhatia, founder and CEO of cybersecurity firm Kalki Consulting. “Make sure to ask your service provider for proof that they passed their PCI DSS evaluations,” he said.

2. Update and maintain purchased technology

Technology is changing rapidly, and credit card payment processing systems are, too. When you choose your new POS system, ask the service provider about the maintenance schedule. An outdated system may put your business and customer credit card info at risk for a security breach.

That includes your firewall. “Consumer-class routers that are commonly used in SMBs generally include a firewall; however, it needs to be configured correctly in order to protect your network,” Bhatia said. It’s critical that you change the default login and password on every network device you purchase, including your new POS system, he added.

“The most advanced firewall is worthless if it has the default login and password in place,” Bhatia said.

In addition to ensuring your POS software is up-to-date, it’s important to check the changing PCI compliance rules regularly, to make sure your POS systems meet them, Ciccerone said.

“Visa and MasterCard, for example, change PCI rules and regulations about once a year,” he said.

3. Isolate your POS systems

When choosing a POS system, it’s also important to consider whether you can keep the system completely separate from the rest of your business technology.

“POS systems are often the weak link in the chain and vulnerable,” said Mark Bower, vice president of product management and solutions architecture for retail security tech provider Voltage Security.

Bower said POS systems often run a standard operating system and, therefore, are easy targets for attacks if they’re exposed to a malware delivery channel such as a browser, a compromised POS management system, patch system or — worse — from an insider.

“In use, POS systems should be isolated from other networks to restrict access to payment data flows, but often are connected to many systems,” Bower said.

4. Encryption services and fees

With security being such an important issue in electronic payment acceptance, it’s important to understand the encryption options available for a POS system.

Encryption is the process of changing information into a form that’s unreadable except to holders of a specific cryptographic key, according to the PCI website glossary. Using encryption protects your customers’ payment information from unauthorized access until it’s decrypted with the key.

Ask the POS salesperson if the system in question requires separate encryption services. Keep in mind that encryption could require an extra monthly fee. Also ask if they offer a system with end-to-end encryption, which can simplify the process, thus saving you time and money.

“Point-to-point encryption (P2PE) from the instant the card data is read, also called end-to-end encryption, addresses this risk by encrypting all the payment card data before it even gets to the POS,” Bower said. “If the POS is breached, the data will be useless to the attacker.”

Should You Know About Accounts Payable

Accounts payable are the bills and other debts that the business needs to pay. As a matter of fact, the only thing that a business pays that is not considered accounts payable is payroll. Everything else falls under the category, making it a critical aspect of your business.

“The accuracy and completeness of a company’s financial statements are dependent on the accounts payable process,” said Harold Averkamp, founder and author of accounting advice website Accounting Coach. “The efficiency and effectiveness of the accounts payable process will also affect the company’s cash position, credit rating and relationship with its suppliers.”

Implementing a dependable accounts payable system will produce accurate financial information you need to plan for both the short and long term. Here’s what you need to know about keeping up with your business debts.

Tracking accounts payable
Accounts payable, sometimes abbreviated as A/P, are tracked monthly for many small businesses, but as the business grows, it is better to make it a weekly task to take advantage of early payment discounts and resolve any credits due to inventory returns. It is handy to keep a record of accounts payable in case there are any payment disputes, to remind the business of current or outstanding invoices, or as proof of spending at tax time. These records can be kept manually or with accounting software.

Working with accounts payable requires a great attention to detail. Each invoice needs to be verified for accuracy, billing date and payment date, and then entered correctly in the general ledger or accounting software. Based on our research, here are some general tips to set up your accounts payable and help the process run smoothly:

Work from the original invoice whenever possible. Some invoices are sent electronically — print once and then file the email away to minimize confusion.

Use the same entering system every time. Each vendor has their own system of invoicing but assigning the invoice number in your system should be consistent. Determine the method, such as using leading zeros, and stick to it.

Enter every invoice individually. This includes multiple monthly invoices from the same supplier. In the event of a dispute, you will want to be able to track it down in your system easily.

Get invoice approval from the appropriate person before entering it. The person approving the invoice should be different than the one entering it. If you are a sole proprietor and do your own bookwork, this may not be possible, but still have a clear process for approval and entry. Keep solid records to support each one.

Look for early payment discounts to save money. It can add up by the end of the year. Some vendors offer a small percentage off the invoice if you pay it within a specified time frame from the invoice date, such as within ten days. If you typically only work with accounts payable once a month, consider a system in which you identify early payment discount opportunities when the invoice is received and pay those separately from the monthly pile.

Cash flow is important to a small business. A solid system of monitoring and paying accounts payable gives you a clear picture of your expenditures against your revenue, enabling better business decisions.

Know More About Accounts Receivable

Accounts receivable are the lifeblood of a business’s cash flow. Sometimes referred to as A/R, “accounts receivable” is the accounting term used to refer to the money that the business should receive from its customers for the goods or services it provided.

Your business’s accounts receivable are an important part of calculating your profitability, and provide the clearest indicator of the business’s income. They are considered an asset, as they represent money coming into the company. To determine profitability, add up all of your assets, including accounts receivable, and subtract your total accounts payable, or liabilities, which are what you owe to suppliers and vendors. If the number is positive, the company is profitable. If it’s negative, then decisions must be made regarding how to increase the assets or reduce the liabilities.

Why track accounts receivable?
If you do not keep track of accounts receivable, you may forget to bill certain customers or will not know if you’ve been paid. You may end up providing your product for free and negatively impact your ability to be profitable. The longer it takes to send the invoice, the less likely it will be that your payment will be sent. Keeping track of accounts receivable is also a great way to have documentation supporting proof of income at tax time.

Accounts receivable are best managed on a consistent and routine basis. In retail, each transaction is paid for immediately. With other industries, customers apply for a credit line, and orders are placed against the credit line. The customer is provided an invoice and payment terms with the shipped product, payable at a later date. Regardless of your system, ensuring payment is crucial. Here are five tips to make sure your business stays on top of its accounts receivables:

Communicate. In a 2013 Transworld Business article, Jason Stine, business development manager for collection services company CRF Solutions, advised regular and prompt communication with clients. Stay on top of transactions; more nonpayment errors develop in the first 60 days after delivery because of insufficient or incomplete customer contact, Stine said.

Create a solid internal process. Determine the process for performing accounts receivable, and stick to it. Pick a day of the week to create, print and mail invoices. Choose another day to print an aged accounts receivable report and contact customers who are beyond their payment term window. As your small business grows, you may need to split these tasks among different people to stay on top of all the accounts.

Confirm receipt of invoices. Many companies have had success in contacting the client a week after the invoice was sent, in order to confirm receipt. Things do get lost in the mail or accidentally deleted in an email inbox. A quick inquiry about receipt of the bill also provides the chance to ask for feedback on the product provided, demonstrating your excellent customer service skills as well.

Extend credit with moderate terms. With today’s technological advances, companies can receive payment before shipping an order or starting a service. With service-based companies and high-cost goods, however, that may not always be possible. In those cases, have the client apply for a credit line. You will be able to evaluate their payment ability and set a credit limit you’re comfortable with. It also provides an opportunity to be sure both parties are clear on the terms of payment and what happens if the account goes delinquent.

Document everything. Documentation of accounts receivable helps your bookkeeper with weekly or monthly inputs for financial statements and your accountant at tax time. From first contact, keep notes on the order, conversations and agreed-upon terms. In a worst-case scenario, that documentation will also be important should you have to pursue payment through a collection agency or court.

The funds collected through your accounts-receivable process is the food that fuels the actions of your company. Inconsistent and spotty attention to the task can starve a company’s growth, while a steady and smooth process results in a well-fed machine capable of achieving all of its goals.