THE ULTIMATE GUIDE TO

SMALL BUSINESS

FINANCIAL MANAGEMENT

INDEX

Table of Contents

Gain Financial Awareness Through Cash Flow Forecasting

Discover More Revenue in Your Existing Customer Base

Enhance Billing Processes to Increase Customer Satisfaction

The 5 Easiest Ways to Shrink Your Business Spending

Acing Accounts Payable and Receivables Management

The Best Accounting Decisions Your Business Can Make

12

Mastering Small Business Tax Management

14

5 Tricks to Build Business Credit Fast

17

Creative Ways to Finance Your Small Business

20

The Smartest Investments for Your Small Business

22

Introduction
Owning and operating a small business is a continuous uphill battle. Youre
fighting the big guys to keep your business alive, tackling new obstacles each
day, and staying busy trying to make your business successful. Knowing this,
many people tend to focus on the percentage of small businesses that close
shop each year, but its actually more valuable as a business owner to look at the
other half of that statistic: the small businesses that are successful each year. By
doing this, youll find they all have one thing in common - healthy finances. Cash
is the lifeblood of your business, and without a good grasp on your finances, your
business will not be able to live up to its full potential. Thats why PaySimple and
Funding Gates have teamed up together. We both love small businesses and are
on a mission to help them master their financial management. So weve put our
minds together and compiled a much-needed weapon in your small business
arsenal: The Ultimate Guide to Small Business Financial Management.

CHAPTER 1

Gain Financial Awareness

Through Cash Flow Forecasting
Whether your business is just starting out, going through some changes, or has been around for many years, having a good
understanding of your financial position (especially your cash flow) can make a huge difference in your daily management and how you
approach the future of your business. Starting to fill out a blank spreadsheet with projections may seem intimidating, but it has less to
do with pure math, and more to do with how much you know (or can find out) about your business, the market, and other factors that
influence the numbers.
We are going to walk through the 6 steps to make an accurate financial projection, so grab a pencil and lets get started!

1. Put on Your Honesty Hat

Before you start, in order to get the most helpful and accurate forecast, you first need to be

completely honest and realistic with yourself. No one else needs to see these numbers, so you dont need to pump them
up to impress anyone. And there is no teacher to grade you at the end of the day, so if it ends up being wrong, you can take
it as a learning experience and use the information to adjust future projections.

2. Set Your Structure and Think About Your Revenue/Cost Buckets

Open up Excel (or use our handy worksheet

below), and determine the following:

Time Frame. Are you making an annual, quarterly, or monthly projection? If this is your first forecasting exercise, it
might make sense to start with a 6-month plan, as its long enough to give you a good sense of what your business
will do, but its short enough that you wont feel locked in if something changes in Month 2. If you are creating
a business plan, or looking for lending, you will probably need a monthly forecast for Year 1, and then 2 years of
additional annual forecasts.
Potential Market Size. If you already have historical information about how many customers you can service or
members in your base, that is the best place to start. However, if you dont, you need to think about your business
model and your total opportunity. For example, if you have a day care center, do you know all you can about the
neighborhood you are in? Are there particular businesses you can partner with to reach their employees (and
ultimately, their kids)? Do most people work 8-5 or 9-6 or something else? This basic information can help to guide
your sales projection and revenue potential. The local chamber of commerce is a good place to head if you need
additional information or want to talk to a knowledgeable resource.

3. Build a Conservative Revenue Projection

Think realistically about the time you have available to sell to or service

your customer base as well as the price and discounts you have for signing up. There are only so many hours in a day you
can be open or employees you have to run a business, so make sure you are using accurate factors.
Lets continue with our hypothetical day care center. Say you have 4 full-time staff. Two are in charge of infants or toddlers
(i.e. can handle 4 children each), and two who watch the Pre-K kids (and therefore can handle 8 each). You know that
you are already at capacity for the infants/toddlers, but you still need to ramp up on the Pre-K level, so you can build that
up over the first 2 months. You multiply the number of staff you have, by the number of kids you have, by how much you
charge per kid per day and then by how many days you are open (remember, if you only work on weekdays, its not going
to be 30).

Revenue
Source

Infants/
Toddlers
(example)

Month 1

Month 2

Month 3

Month 4

2*4*#weekdays
* ($/kid/day)

2*5*#weekdays
* ($/kid/day)

2*6*#weekdays
* ($/kid/day)

2*6*#weekdays
* ($/kid/day)

Month 5

Month 6

2*7*#weekdays 2*7*#weekdays
* ($/kid/day)
* ($/kid/day)

Total
$XX,XXX

Total Cash
Revenue

By setting the projection up like this, you can add lines for additional services easily (say you want to launch an after school
program in Month 4), and you can granularly track the results as well as help inform future decisions around staffing.

4. Dont Underestimate Costs

After the previous step, you are probably feeling good about all of the money you are going

to make, but you still need to do the cost side of the equation. Start with all of your fixed costs (rent payments, etc.), and
then move to your variable costs. You can use your revenue projection to guide the rate for the variable costs (e.g. adding
or subtracting a staff member). It can be easy to forget something, so be diligent in your notes!

Costs

Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Total

Salaries
Variable
Costs
Rent
Other
Fixed Cost
Total Cash
Revenue

5. Understand Your Profit/Loss

Once you have both charts filled out, you add a few extra lines to summarize the data and

see what it nets out to. If you are in the green, awesome! You can start to build a game plan to use or save it. If you are in
the red, you might need to look over your plan again and see where you can cut some costs, build some additional revenue,
or think about building a case for a loan.

Total Revenue
Total Costs
Net Profit/Loss

6. Have Someone Check Your Work

We know we said you dont need any one else to see it, but sometimes it helps to

talk through your assumptions and ideas with an advisor or consultant. The best is to find someone in your industry that
you trust to review the plan. He or she can help you to talk through the risks, the assumptions, and the excitement you
have around where your company might be going. If you dont have a good resource, your local chamber of commerce, or
the Small Business Administration can help you to find someone.
Bonus steps! You have this beautiful, completely validated spreadsheet exercise over, right? Wrong. There are two key things you
should do with your forecast and projections.

7. Plan for the Future

With this information at your fingertips, you can set out your next steps. Is there a month where

you might have some extra cash? Maybe you can pay off a little more principal on a loan, or possibly spend a little more on
marketing to see if you can grow your customer base. By building out the strategy around the numbers, you can continue
to hit your projections and build a solid foundation for the future.

8. Dont Set It and Forget It

Keep re-evaluating or comparing your actuals to your projections each month. Did you

come close, or is there a new normal you need to adjust to? By keeping in tune with your projections you will be able to
evaluate whether or not the past week or month was an anomaly or a new data point to inform a revised forecast.
By starting with an honest and thorough assessment of your business, combining conservative revenue projections with
accurate cost expectations, and understanding the final outcome, you can build a financial forecast that can help your
business succeed.

CHAPTER 2

Discover More Revenue In

Your Existing Customer Base
Now that you have established your basic expectations for the upcoming year through the exercise in Chapter 1, you might realize that
its time to dig deeper to identify ways to grow your revenue or shrink your costs. In the next few chapters we will look into ideas that
increase the revenue side and shrink the cost side of the equation.
The first step in analyzing your client base is thinking about it as a portfolio a mix of revenue opportunities made up of differing
behaviors and benefits. Studies have been conducted at every business size showing that by evaluating an existing customer base, an
organization can use the data to grow revenue without acquiring a single new customer, among other benefits. In this chapter, well
touch on the three main benefits of customer portfolio evaluation; revenue, marketing, and new customer acquisition.1 Every business
owner knows that keeping a good customer is more valuable than acquiring a new one. But lets take that notion a step further. Not
only is keeping a good customer critical, but an existing client base is prime location for revenue opportunity.
On a piece of paper, draw two intersecting lines through the middle to divide the page into 4 equal quadrants. The y-axis is going to be
your Satisfaction line and the x-axis your Revenue line.

Now take a list of your client base, either in a spreadsheet or printout, and using two different columns, begin scoring each account 1-5
based on two factors: revenue and satisfaction. 1 is the lowest revenue or satisfaction and 5 is the highest.
Satisfaction

Revenue

ABC Enterprise

Cole Co.

5
1 - http://www.coreconnex.com/2008/10/17/client-portfolio-basics-part-1-of-3/

Now, going back through the list you have scored, each client should fall into one of the four quadrants. Any score of 3 falls into the left
or bottom half of the divider.

Quadrant 1: The Revenue Opportunities

Analyze this quartile of your customers to think about ways you could better serve each of them. Chances are, there is even more
revenue opportunity than what the account is currently yielding. If youre unsure of the exact reason for the low level of satisfaction,
ask. Customers will always appreciate a candid conversation and an authentic attempt to fulfill specific needs. You cant be everything to
everyone, but sometimes a manageable tweak in service is worth the time and energy to keep a high-revenue account.

Quadrant 2: The Cream of the Crop

High satisfaction paired with high revenue these customers are the best of the best. Break this list down into sub-categories and
leverage the data behind it to source similar clients. Sub-categories could include:

Demographics

Geography

Industry

Services/Goods Purchased

Source How did they find you (or vice versa)?

Find the similarities in these clients and youve found a gold mine for new acquisition targeting.

Quadrant 3: The Red Flags

You may need to ask yourself if youre already spending too much time servicing these accounts. This quadrant may be the example
of clients not worth signing in the first place. Always consider if energy spent servicing a low-revenue, unhappy client could be better
spent elsewhere, like keeping or attaining a high revenue opportunity.
All customers are NOT created equal with limited amount of time and energy in a day, its best to evaluate services alongside
opportunity. Its not worth running around like a mad person to service a small opportunity client. Keep your services consistent unless
a high revenue opportunity deems it necessary to make modifications to win (or keep) the account.

Quadrant 4: The Marketing Opportunities

Theyre happy, but they just dont have the revenue opportunity of other accounts. Thats okay! Leverage these relationships to build
out your marketing assets, including:

Feedback Surveys

Case Studies and Testimonials

Social Media Sharing

Lead Referrals

References

Online Reviews and Ratings

Youll likely want to balance marketing assets with a sampling of larger accounts (to win other large accounts), but you can derive a lot of
other assets from this easygoing client list. With a strong knowledge of your existing customer base, youll be able to take advantage of
key opportunities while tuning into the most profitable targets to offer your services.

CHAPTER 3

Enhancing Billing Processes to

Increase Customer Satisfaction
In Chapter 2, we identified a group of customers who have high revenue contribution, but arent completely satisfied. One way to
potentially increase your customer satisfaction is to look at your billing processes to see if there are ways to tweak them to make it a
more seamless experience. If you are struggling with collecting payments from your customers, then maybe you need to re-examine
how and when your customers actually prefer to pay you.
How do you begin to make it easier? Here are three As to ease the process.

1. ACCEPT More Payment Types

Over the past few years, customers have shifted their preference for payment types

beyond cash and check, but they still stay with more traditional methods (credit and debit cards). A recent TSYS Study
showed for eight out of ten respondents, debit or credit was their primary choice. Credit cards trump debit for higherincome customers because of rewards and discounts, while middle-income folks decide depend[ing] on the time of the
month if paydays going to quickly roll around. 2

2. ACCESSIBILITY for Paying

Technology has made customers expect more out of all of their vendors and business

partners even the mom and pop shops and small business owners. Being able to provide payment acceptance online,
over the phone, or even by swiping a card on a mobile device has become a standard practice for businesses and is
expected by customers. Making all of the ways to pay available for your customers can help to reduce the opportunity for
payments to be late.

3. AUTOMATION of Processes

Over 28% of customers stated that they registered a credit card and 21% a debit

card with an online retailer over the last year in order to make payments and purchasing easier.3 By storing customer
information and setting up an automated schedule for payments, you can make it not only convenient for your customers,
but also easier to manage your incoming billing.
By accepting all payment types and making it accessible and automated, you can reduce the hassle around the payment
process and ultimately make your customers happier by giving them what they want.

2 - TSYS, 2013 Consumer Payment Choice Study, 2013, pg 4

3 - TSYS, 2013 Consumer Payment Choice Study, 2013, pg 10

CHAPTER 4

The 5 Easiest Ways to Shrink

Your Business Spending
In order to survive, a small business must learn to be thrifty. But how can a business keep within budget, without at the same time
risking the overall integrity of their business? To help you on your quest to save money, here are five of the easiest ways your small
business can cut costs, without compromising the quality of your actual goods or services.

1. Go for Bundled Packages

Your Internet and phone packages can be one of the larger (and most necessary) monthly

expenses for your small business. If you are not already using a bundled package, call your service provider to find out
how to combine these costs to receive major savings. Many cable and telecom providers run occasional promotions and
(interestingly enough) do not let the existing customers know about these promotions. Call and ask them if you have been
missing anything. Be persistent. Also, fees can change and different providers can have special offers at different times of
the year. Always be shopping for better prices. By aggressively chasing better offers, you will be in a better position to pay
the least amount for Internet and phone.

2. Look for Cheaper Software

One of the easiest ways to cut costs is with the software you are using for your

company. Most likely, there is always a cheaper version of what you are using. If youre paying a lot in licensing fees for
your accounting, inventory management, CRM or marketing software, there are great SaaS (Software-as-a-Service)
applications on the market. You can find many online versions of what you need available for a low monthly cost or even
for free. Take a look at your software and find out how much you are paying for each program. Pick the most expensive
software packages you are currently using and look for alternatives.

3. Go Green

Another great way to shed costs is to go green. Not only will you save money, but you will be conserving paper

and electricity, which is an effort we should all be contributing to. So, where do you begin?
Have an energy savings plan for all electronics. Turn off lights when you leave your office or if youre not using a
particular part of the office space, keep the thermostat down, and put all computers and printers on energy-saving
mode.
Print less. Encourage your employees to print only the pages they need (instead of the entire document) and learn
to love the scanner. Trying to save a webpage? Print it as a PDF file; this creates a new electronic document that you
can save on your desktop instead of printing.
Cut back on supplies. Instead of giving everyone their own set of supplies, set up an area for community supplies.
Include things like staplers, scissors, envelopes, and binders.

Reuse your electronics. Instead of always buying the newest models of electronics, take a look at what your
employees really need and try to solve the problem by, say, buying more memory or a new monitor, before going for
a completely new machine.
Automate your payments. Instead of waiting to get an invoice by mail and then sending a paper check, automate
your bills to save on postage. They will send you emails instead of mail and you can pay with a credit card. Although
this doesnt cut immediate costs, this can keep you from paying late fees.
Credit Cards. With a credit card you can take advantage of points or cash back rewards. Just be sure to pay off the
balance before latest accrues!

4. Consider Joining a PEO

Did you know there are opportunities out there to join forces with other small businesses to

create one large human resources conglomerate? They are called Professional Employer Organizations (PEOs). PEOs
enable you to cost-effectively outsource many of your HR responsibilities. They oversee your companys health benefits,
workers compensation claims, payroll and payroll tax compliance. They deliver these services by effectively pooling all
the employees of their clients and getting better pricing and better deals from benefit providers. Here are some of the
advantages:
Timesaving on administrative human resources work (i.e. on-boarding papers, employment eligibility verifications,
workers compensation, payroll paperwork, etc.)
No more hassles about compliance, risk management and employment practices. They keep you entirely up-to-date.
You get access to incredibly comprehensive benefit packages that give you access to such things as health insurance
rates that keep you competitive in the labor market.

5. Join a Buying Group

As we discussed above with PEOs, small businesses receive awesome discounts when they come

together as one. This same idea can be applied to purchasing office supplies and equipment. How? Look into joining a
buying group. The thought is, as you are buying in larger quantities, you get bulk pricing you would not otherwise have
received. With the combined buying power of your group, you can meet the enormous purchase minimums you could
never afford on your own. Sometimes, you even get better payment and freight terms and with certain-sized orders,
wholesalers will waive the freight altogether. If you are already a member of a purchasing group, speak with your groups
administration to consider joining BizUnite, a great marketplace between top Fortune 500 suppliers and over 70 buying
groups in the US.

There are nearly 30,000 cooperatives that operate in 73,000 locations across
the country. In total, these co-ops own over $3 trillion in assets, and they
generate over half a trillion in revenue.
- National Cooperative Business Association

CHAPTER 5

Keep That Cash Flowing: Acing Accounts

Payable and Receivables Management

When youre a small business, cash flow is king and ensuring you have complete control over the cash entering and exiting your
business is the key to success. Here are our favorite tips and tricks on managing both your accounts payable and accounts receivable.

Managing Accounts Payable

Accounts payable are, simply put, the money you owe someone else. Whenever you are working with a variety of vendors, it can be
really difficult to keep up with whom you owe what. If you allow this to turn into a passively managed administrative task, it could mean
that your relationships with these suppliers can suffer. It can also mean that you spend more time than necessary paying. Here are
some tips to help you streamline the process.

1. Manage Accounts Payable on a Daily Basis

Even with software like QuickBooks, the data entry doesnt do itself. If

youre the type to set bills and receipts aside until you have time to do them, consider moving it to a process that is more
actively managed. Entering a few lines of expenses or a new invoice at the end of the day when youre closing up shop can
save you hours of trying to remember what you bought and when.

2. Create Consistency

You should establish a basic accounting workflow whether it is for yourself or someone else. This

ensures that everyone who invoices you is entered into your accounting system the same way and can expect a certain
level of service. Once you start a new vendor relationship, ensure that you have a W-9 on file for them and that checks are
always issued from original invoices. If for some reason you have a copy, or amended invoice, those invoice numbers and
dollar amounts should follow each other such that you pay what is owed, but can also track what a vendor says is owed.
In addition to what is entered into the accounting software, maintain paper copies or scans of invoices so that you have a
record on hand to go back to.

3. Break Down Expenses on a Regular Basis

Another part of actively managing vendor relationships is

understanding cash flow at a deeper level. Are you taking advantage of any discounts offered by vendors? Are you
consistently late on certain relationships? Are vendors constantly late providing you with invoices? Adding a qualitative
layer to your cash management can ensure that you arent wasting money.
Look for ways to cut a better deal on services, either by asking for a discount outright or looking for competitors that may
be cheaper. Breaking out your expenses on a quarterly basis can help you plan ahead and make sure that you dont fall into
the trap of passively paying for something you no longer need.

10

4. Get Two Signatures

This may be a little harder if youre a one-man show, but it is worthwhile to have multiple eyes

on a balance sheet before doing a check run. Keeping the number of check runs to two per month can make things easier
to track for both you and anyone helping. If youre taking in invoices, tracking expenses and then writing checks, its much
more likely that youll make an error. Software can help guard against that by creating audit trails and helping with the
math.
Consider also employing a CPA at least on a quarterly basis to give the books a once over, almost like a shadow audit.
Many larger enterprises maintain shadow audits, and it is worth the cost to do so for small businesses as well.

Managing Accounts Receivable

Accounts receivable are, simply put, the money someone owes you. Its about accessing the cash youve earned. Its not always the
easiest of processes, but its one of the most important. Here are our favorite tips on managing open invoices.

1. Get Organized

If you are going to excel at accounts receivable management, you have to start from the very

beginning. Be diligent in every step of the process but, most importantly, in whom you decide to extend credit. Net terms
arent for everyone. Start by setting up a professional credit application that gives you a chance to get as much info as you
can on these customers. Use this info to vet them so you are making proper credit decisions. Once youve decided to move
forward on credit with a customer, be sure you have a contract that clearly states the terms you are operating on and that
the customer knows when they must pay you. Also, be sure you are using top-notch invoicing software so you have an
excellent way to keep an eye on your accounts and get your invoices to customers as seamlessly as possible.

2. Watch Your Language

When it comes to invoices, the wording you choose to include can literally affect the time

frame in which you receive the check. For example, by including a please or thank you, you can increase your chances
of getting paid by over 5%.4 If you avoid jargon such as net terms and be more specific with a phrase like 14 days to pay,
youll get paid faster.

3. Start Early

Dont just wait for the customer to pay. Create a system that allows you to remind customers when they

have a payment around the corner. If it is a week before payment is due, and you still havent received the check, shoot the
customer a friendly reminder email simply reiterating the due date and how you accept payment.

4. Remind, Remind, Remind

This seems silly, but your customers might not know their payment is late if you dont

tell them. Believe it or not, some of them havent paid because they just simply forgot. Its your job to make sure this isnt
the case. As soon as the payment is past due, get a reminder letter in the mail. However, dont just use a generic letter. Be
crafty and sculpt the letters language to be appropriate for the situation. If somebody is a chronic late payer, you might
want to step up the severity; whereas if its someones first time, keep it friendly.

5. Collection Call

After you have sent the letter and have received nothing, its time to get on the phone with the

customer. You must not let your emotions get the best of you and you cannot let the customer run the conversation. You
need to prepare for the call and be ready to accomplish your goal. To do this, follow these tactics:

Be specific

Be positive

Be professional

Be in control

...But be flexible

Be committed to finding a solution

4 - http://www.freshbooks.com/blog/2010/03/02/the-best-invoice-payment-terms-to-help-you-get-paid-faster-and-more-often/

11

6. Prepare for Excuses

The hardest part of the collection call is listening to the customers different excuses for not

paying. No matter what, you have to be prepared to battle these. Although (in some cases) it is easy to sympathize,
accounts receivable management is about action and you must require some from the customer. Get acquainted with the
most common late payment excuses and learn how to respond to each one. Practice makes perfect and helps you get paid.

7. Installment Plans

When you do come across a customer who seems to be in a financial hard spot and you really would

like to help them out, installment plans are key. Having a customer pay you back in smaller amounts over time is MUCH
better than a customer not paying you back at all. It gets cash in your pocket immediately and says a lot to the customer, as
you are doing them a favor. Work with the customer to create a payment plan that works for both of you. Ideally, it would
be great to always receive all of your money up front, but in those moments you cant, be creative in how you can help the
customer pay you.

8. Finance Charges and Rewards

Incentives go a long way, no matter what you are doing. Consider this when it

comes to accounts receivable management. Are you adding finance charges for late payments? Are you giving customers
a discount if they pay early? Whether it is to have consequences for paying late or rewards for paying early, give
customers a little push to get that cash to you on time (or early). Its worth it, especially to see what kind of effect it has
on your payments. If you are considering adding a finance charge, check your states usury laws to make sure you are not
overcharging.

9. Outside Resources

You still need to know when to turn for help. There are many things you can do to help with

late payments or delinquent accounts. Consider reporting late payments to the credit bureaus, which will affect those
customers credit scores. Knowing you are reporting will certainly motivate them to pay next time. If you have particularly
large or repeatedly delinquent accounts, consider calling a debt collection lawyer to help take legal action. And if you
need cash fast, look into receivables factoring, which will help you get your hands on cash while a factor pursues your late
payment.

43% of small businesses have customers who are more than 90 days
late on payments.
- Rocket Lawyer

12

CHAPTER 6

Dollars & Sense: The Best Accounting

Decisions Your Business Can Make

When youre running a small business, one of the most important decisions you will make is how you manage your accounting. Having
all the records you need, tracking expenses and revenues, as well as the systems in which you choose to do this are going to make a
huge impact on your year-end financials. Below are a few tips on successfully tackling your small business accounting.

Organization Leads to Success

As a business, its important that you work with an accountant (which we talk more about in the next chapter). However, the amount
you spend on an accountant as well as the success they have depends a lot on how you organize your financial data. Its important that
you begin preparing this data correctly today. Here are a few tricks to do so:
Align Reporting and Accounting. Your reporting and accrual accounting should be on the same timeline. If you
conduct your accrual accounting monthly, you should also report on your finances monthly. This helps save hours
down the road that you would have spent on reversals or corrections.
Communicate Your Goals. Its important that whomever you have helping with your accounting understands what
your long-term financial goals are. Understanding where you want to be will help them deliver the best advice.
Digital Files. A good routine to get into is keeping digital files of all of your financial statements. Many times
statements that were once available online wont be after a certain time, so for easy reference, download all of
these files to have on hand immediately if the need arises.
Correctly Categorize Expenses. For both budgetary purposes and in case of a future audit, its crucial you
diligently categorize expenses. Be as granular as possible when tracking these categories. Its important that you
can paint an exact financial picture of where your money is being spent.
Reconcile Each Month. If you reconcile your records each month, it will make it much easier to ensure that
expenses do not fall through the cracks. Its also much easier to spot discrepancies when youre viewing your
records in smaller chunks.

13

Finding a Software That Works For You

Choosing accounting software is an incredibly important purchasing decision. If you want to run a financially sound business, Excel
simply isnt an option. There are many options available, though, from something free and simple like Wave Accounting, to more
complex systems like QuickBooks or Sage Peachtree. Ask your accountant or financial consultant what might fit your needs best, and
get references from any friends running their own businesses.
Business owners, as of late, are specifically evaluating if software that is hosted on desktop or in the cloud is a better fit. QuickBooks
Desktop is the #1 small business accounting software, as some businesses arent comfortable with the idea of their information being
stored in the cloud. However, cloud-based accounting allows you to access your books anytime, from anywhere and easily work with an
accountant.
If youre interested in making the change to the cloud, you can actually still use desktop software, but instead host it on a server with a
company like Right Networks or Cloud9 Real Time. Many people do this because they find that desktop software such as QuickBooks
and Peachtree are more sophisticated and detailed than their online counterparts.
However, if your accounting is simple, embracing online accounting software is a great option. Youll enjoy how easy it is to access the
software and there will be less stress involved, as you dont have to set up a server along with the software.
Just remember: there is no right answer. Every business is different and its up to you to evaluate what satisfies your needs.

Small businesses pay 44% of total U.S. private payroll and create more
than half of the nonfarm private gross domestic product (GDP).
- Small Business Administration

14

CHAPTER 7

Mastering Small Business

Tax Management
Taxes: One of lifes certainties, dreaded by most everyone (except for some accountants). But, taxes dont have to be a painful part of
managing your business. Here are 4 quick ways to make taxes a breeze for your business this year:

1. Keep Complete Records for a Minimum of 6 Years

IRS Studies show that poor records, not dishonesty, cause most

small business owners to lose at audits and face fines and penalties. If you start with the spreadsheet you used in Chapter
3, you will already have one document available to guide your record keeping throughout the year. By tracking your actual
revenue and expenses that occur in conjunction with that document, it will become the basis for what you owe in taxes, as
well as what you would need if you were audited.
Also, to protect yourself, you should back-up your information with bank statements, receipts, and invoices. There are a
bunch of online systems that can help to manage all of these documents and the IRS accepts scanned documents as long
as the details are legible. All of this information needs to be stored electronically or in a safe, dry place. If you are audited,
generally they will go back 3 years, but it can be up to 6 if considered a substantial understatement of income, according
to the IRS.5

2. Separate Business and Personal Expenses

In order to minimize mistakes and keep your sanity, its best to make

sure that all business expenses are made through a business bank account either via check or debit card. That, plus
keeping notes on what the purchase was for and how it affected your business, can reduce headaches when you are filling
out your tax forms this spring.

3. Make Quarterly Estimates and Payments

When you worked for someone else, taxes were already withheld from

your paycheck, but now that you are your own entity, the burden shifts. But how much do you pay? There are obligations
based on Medicare & Social Security (the Self-Employment Tax) as well as income tax. Depending on how it nets out, you
might need to pay each quarter. The IRS has created this handy flow-chart to help you to decide if you need to pay an
estimated tax quarterly.

5 - http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/IRS-Audit-FAQs

15

Start Here
Will you owe $1,000 or more for
2014 after subtracting income tax
withholding and refundable credits
from your total tax? (Do not subtract
any estimated tax payments.)

Yes

Will your income tax withholding and

refundable credits be at least 90%
(66.66% for farmers and fishermen) of
the tax shown on your 2014 tax return?

No

No

Will you owe $1,000 or more for

2014 after subtracting income tax
withholding and refundable credits
from your total tax? (Do not subtract
any estimated tax payments.)

Yes

No

Yes

You are NOT required to pay

estimated tax.
You MUST make estimated tax
payment(s) by the required due date(s).

4. Hire an Accountant

As you add more employees, more expenses, and more revenues, the complexity of your tax

situation can escalate significantly. It can be completely worth the additional expense to have a professional guide you
through the issues or penalties, or the intricacies of the different types of corporation filings and subsequent withholding
information. Additionally, the fees associated with tax preparation are tax-deductible, so its even more worthwhile. If you
dont want to hire an accountant, make sure to use legitimate resources from IRS.gov or Turbo Tax so that you are looking
at the most accurate and up-to-date information.

Changes for the 2013 tax year:

The home office deduction has changed from a % of square feet of the home
to $5 per square foot up to 300 ft. This will make it easier to calculate for
most people.
The self-employment tax rate reduction that was under effect in 2011-2012
has ended and the rate returns to 15.3%
Deductions for business mileage goes up 1 cent/mile to 56.5 cents.

16

CHAPTER 8

Tips and Tricks to Build

Business Credit Fast
The benefits of solid business credit are immense for small businesses. But, what is business credit and how can your business ensure
your credit is solid?
The first step in understanding business credit is to know how it differs from personal credit. Business credit is rated on
creditworthiness, such as payment history, revenue and amount of total credit. And similarly, as an individual, your credit score is based
on factors such as the payment habits you demonstrate on your personal credit cards, bank accounts, utility and telecom bills, as well
as any other debt and data reported to the credit bureaus. However, laws are different between consumer credit and business credit.
With consumer credit there are laws that allow you to challenge anything on your personal credit report. You can have negative entries
removed and are entitled to the Fair Credit Reporting Act. Business credit reporting laws are a lot less flexible.
Additionally, scoring is different between personal credit and business credit. In personal credit, it is measured with a scoring system
called the FICO system. In business credit, there are 3 major bureaus that score your credit, and all use a different scoring system.
Those bureaus are Dun & Bradstreet, Experian and Equifax. The business credit report also covers things that personal credit reports
do not such as Business Verification, Business Public Records, Collections Management, Data Management, Data Reporting, and
Billing Tracking.

Building Business Credit

Understanding that you cannot solely rely on personal credit to successfully manage your business, its important you take the proper
steps to help your business build a healthy credit score. Here are a few quick tips:

1. Get on the Credit Map

Before you can even have business credit, you have to get yourself listed with the major credit

bureaus. Be prepared to provide your contact information (basic address, years in business, etc.), your entity information

and your financial information.

A great place to begin is with Dun & Bradstreet. Simply visit their site, see if your business is already listed and if not, enter

your information and apply for a free D-U-N-S number (which is D&Bs separate credit file number for businesses). This is

the number companies will most likely ask for, but be sure to register with Equifax and Experian as well.

2. Use a Business Credit Card

If youre using a personal credit card for your business, stop. Immediately. Get yourself a

business credit card, which is the easiest way to start having visible financial behavior. When looking for the right card,

check for the interest rate, credit limit, fees associated with the card, rewards and incentives.

17

3. Pay on Terms with Vendors

A great way to build your credit is through your vendors. However, this is only beneficial if

you are getting net terms from vendors who report their payment experiences. Credit bureaus usually require around 4
vendor lines of credit to accurately assign you a credit score.
Not all vendors report your payment history. In fact out of half a million vendors in the U.S., less than 6,000 of them supply
payment data to a business credit bureau. So either you do business with a vendor that reports your payments to the
credit bureaus or you can always purchase one of Dun & Bradstreets trade reference programs, which lists companies
that report data to the bureau.
It is important to keep in mind that it is not just about whether the companies are reporting but also how often they report
and what kind of data is being reported. Its crucial that the actual credit limits that your company is approved for are
displayed on your report, not just the amount you owe. This has a dramatic impact on how lenders view your companys
creditworthiness. It can also affect the size of the credit limit recommendations that business credit bureaus list on your
file. So what if your vendors are NOT reporting your payments to the credit bureaus? Ask them to. Sometimes they just
need a bit of encouragement to see there are benefits to reporting customer payment performances.
Another trick is to get a credit account with large retailers, office, logistics and energy companies. Many companies
including UPS, FedEx, Office Depot, Home Depot, Staples and Exxon Mobil report their credit accounts to the credit
bureaus.
When operating on trade credit with vendors, always try to pay before the due date. If your vendor reports payment
performance, early payments (not just on-time) will actually improve your business credit score (which isnt the case for
personal credit). For example, most business accounts have net 30 terms, meaning you have 30 days to pay your invoice
after receiving it. If you can, try to pay it within the first 10-15 days.

4. Know the Importance of Your Personal Credit Score

Its very important that, as a business owner, you also work at

maintaining a healthy personal credit score. Youd be surprised how many creditors check a business owners personal
credit score along with their business financial history. How a person can handle their personal finances is a great
indicator of how they handle their business financials. Heres how to keep it up:
Pay your bills on time. This is a good habit to develop. One month of late or missed payments can hurt your score
more than youd expect. Remember, this applies to your credit cards, your utility bills, etc. All late payments affect
the score. If you dont have money for the whole payment, at least pay the minimum.
Try to find a resolution. If a company is threatening to turn your account over to collections, call them immediately.
Try to reach a solution with them, such as paying in installments, which will keep them from turning to a collector.
The company will appreciate your initiative and the chance to avoid paying the collection agency fee (and it also
keeps the late payment from affecting your score).
Dont carry a big balance on your credit cards. How much money you owe on your credit cards in relation to your
total credit limit is a huge factor that affects how your score is calculated.
Dont own too many credit cards. Its best to pay off debt on one credit card rather than transferring it to another
credit card. Remember: ratio of card balance to credit limit is key. If you close one card and transfer the balance to
another card, you run the risk of increasing that ratio, which directly affects your credit score!

18

Be cautious of automated billing. If you do not monitor your automated payments, you could run into some credit
trouble. For example, if the credit card your supplier has on file expired, and the supplier tries to deduct funds
through automated billing, your account could become delinquent. Be careful about the details and the transactions
of all your recurring payments.
Correct blatant mistakes. Access your credit score regularly to make sure there are no mistakes. Review your
reports from multiple bureaus to check for accuracy at least once a year. It will help you be aware of mistakes. But
remember, changing this mistake can take 30 days to 3 months, sometimes even longer.

5. Monitor Yourself

Just like you are monitoring your personal score, you should do so with your business score. Always

be aware of what your report looks like to the people who will be asking for it. Monitor your actual business score, but
also keep yourself well informed on all credit transactions. Keep records of terms you have set with vendors, in case of any
discrepancies. Always check your credit balances and loan balances regularly. Ask your employees to give you a hand and
alert you if they receive any odd mail, emails or notifications that hint at something that could affect your business credit.

Your payment performance to your vendors is the single most important

indicator of your creditworthiness.
- Dun & Bradstreet.com

19

CHAPTER 9

Creative Ways to Finance

Your Small Business
When youre a small business, cash is often needed to get off the ground, as a bridge during troubled times, or to grow and expand
your business. However, getting the cash you need from traditional lenders isnt easy in todays economy. Non-traditional lenders have
sprung up in response to this, ensuring small businesses get access to the cash they need. Here are a few of our favorites:

Small Business Administration Loans

There are a variety of loan programs available to small businesses through the Small Business Association, but a few popular ones
include the 7a and 7m loans. The 7a Loan program is perhaps the most common loan for small business owners. Some of the core
eligibility requirements for receiving this loan include being a small, for-profit business and operating in the US. You also must be able
to demonstrate your need for financial assistance (and that the loan will be used for business purposes) as well as seeking alternative
financial resources, including personal assets prior to asking for this loan. Anyone who owes money from a previous financial debt will
be deemed ineligible.
The 7m or micro loan program is another great option for business owners. This loan is ideal for aspiring business owners who dont
have good credit built up. It is also good for those who dont have much experience with business and who may have been previously
denied business financing by bigger banks. Small for-profit business and non-profit childcare centers may be eligible for this loan.
The funds received from a 7m loan may be used towards the purchase of inventory, supplies, furniture, fixtures, machinery and/or
equipment but they cannot be used for real estate purposes.

Credit Cards
Credit cards are risky. While they can certainly cause a lot of fear in small business owners and create a sense of danger, when used
properly they can become a valuable form of financial assistance. The key to staying out of debt with credit cards is to only use them
when it is absolutely necessary. If you have some essentials you need to buy before your pending loan comes through, a credit card
can be a good option. Try not to spend more than you can afford with your credit card and make sure to pay off any outstanding debts
as soon as possible. Credit card debt has the potential to damage your credit score and make it difficult to receive loans in the future,
which could severely impact the success of your small business or startup. Credit cards are great for use once in a while, but proceed
with caution.

Crowdfunding
Crowdfunding is becoming a more popular way to raise money for small businesses and startups. It is easy to get started with
crowdfunding, but the amount of success you have depends entirely on how much effort and time you put into it. If you can get enough
people interested, this may be a stress free and easy way to earn some extra cash for your small business. All you have to do is create
a company profile, decide what kind of rewards youd like to offer for raising x amount of money, and work on promoting your cause to
help generate interest and donations.

20

Peer-to-Peer Lending
Different than crowdfunding, peer-to-peer lending allows people who are looking to borrow money to connect with those looking to
invest or lend. Its a new way for borrowers to access cash and investors to make returns without a middleman.

Invoice Factoring
A great way to leverage your current assets when you need cash is through invoice factoring. When you participate in receivables
factoring, you are essentially selling your accounts receivable to a factor for less than the original invoices value. Factors buy these
invoices at a discount then collect the full payment from your customer. After this transaction, you have immediate cash, and the factor
has an impending profit to make from the payment. When purchasing the invoice, the factor pays you a percentage of the invoice
paid value, known as the advance. The advance typically amounts to 70-85% the value of your invoice. The factor then holds onto the
remainder as a reserve, which is paid to you upon fulfillment of the invoice, minus any factor fees or charges.

Online Lenders
As technology has changed just about every industry, you can be certain that its also had its effect on the lending industry. Online
lending institutions are now easily available and small businesses can simply fill out applications online to go through the approval
process.

Family and Friends

Many of your family and friends will be proud of your decision to start a small business and eager to help it get off the ground. However,
make sure not to take advantage of their kindness and your close relationship. Remember it is still a loan, and you should be able to
provide a repayment plan or basic agreement so they feel good about giving you support in this time of business need. Dont forget to
remind them of the rewards you are willing to offer in return for their help!

Small businesses rely heavily upon owner investment and bank credit,
averaging about $80,000 a year for young firms.
- SBA Office of Advocacy

21

CHAPTER 10

The Smartest Investments

for Your Small Business
Its a conundrum that every business owner faces how to manage expenses on a shoestring budget and also make sure those
expenses are smart investments.
A smart investment is one that pays itself back (and then some) over time. It could be a new employee, software, or even an IT system.
The paying back part is whats tough to consider, and it shouldnt just be measured in dollars. All too often business owners dont
consider their own time as an actual cost, but just like a budget, time is a finite resource. As the driver and lifeblood of the business, you
dont want your time tied to tasks that dont drive value.
So, how do you decide? The best place to start is to recognize the internal skill strengths of you and your staff. Those areas that are not
covered by internal skills could be covered by one of the following areas, which are also the most common areas for smart investments.

New Employees
The first step in deciding if a new hire is necessary is not to simply evaluate your level of stress and workload, but to evaluate HOW
youre spending your time. Are there a lot of administrative tasks bogging you down? Or, are you spending an excess amount of time
researching areas that are not your expertise? If either of the above is true, you may be able to solve the need with outsourcing or
software see the next two sections.
However, if the need is ongoing, there are no tasks that can be outsourced or replaced with software automation, and you feel like you
should have hired someone six months ago, a new hire is probably in order and will add value to the business.

Outsourcing
There are areas that can and should be outsourced when they are consuming an excess amount of time, or you feel like the output
(whether done by yourself or staff) is not of high quality. Here are some common outsourced areas that can really give you a bang for
your buck.
Marketing Strategy. If this is not an area of expertise, youre looking to grow, but you dont have the cash to hire
a full-time marketing employee, look at some marketing consultants or agencies that specialize in small business
services. A complete marketing plan with a clear target market will most certainly pay for itself over time.

22

Accounting. Unless you are a certified CPA and love this work, hire an accountant. An accountant will be an expert at
tax laws and bookkeeping, while helping to keep you organized not to mention recognizing commonly missed (and
valuable) tax deductions.
Web/IT Service. If you have some experience here, you might be able to manage it yourself or by using a cloud-based
system. But, if you find yourself struggling to keep your website up or the Internet connection humming, you might
need to call in an expert. Again, do some price shopping to find consultants that specialize in low-budget small business
services.

Software/Systems
Business owners who spend half of their days organizing files, updating spreadsheets, hand-mailing invoices, and reconciling client
records likely do not have time to focus on customer acquisition or strategy. These are administrative tasks that could be drastically
simplified, improved, and even automated to help run the business smoother, and in many cases improve customer experience.
Billing/Receivables. With all of the great technology advancements over the past several years, there is a plethora
of receivables management, invoicing, and payment software available that are priced and specialized for smaller and
mid-size businesses. Make a list of your needs and do some research. You will likely find that the sum of the monthly
expenditures is well worth the automation and timesaving in your or your staffs day.
Marketing Tactics. If you have a marketing strategy in place, you can often execute the strategy with a few pieces of
software or investing in online advertising. Check out email marketing software like Constant Contact or MailChimp,
search engine marketing platforms like Google Adwords, or even all-in-one solutions like Hubspot.
Sales Tactics. A CRM is an invaluable tool for managing a sales pipeline, and it keeps your client and prospect
information in a secure location, often accessible from any device. The main player Salesforce has some lower budget
offerings, but you can also research less complex and inexpesive solutions like SugarCRM.

Congrats on finishing the Ultimate Guide to Small Business Financial

Management! Just remember, reading this guide doesnt make you a financial
guru, but putting what youve learned into action can. Having a strong financial
structure for your business can enable you to focus on the reason you started
your business: to do what you love. Therefore, we encourage you to begin your
financial makeover today. Best of luck on your road to financial success!

23

ABOUT

Over 19 of the 26 million small businesses in the US are in service-related industries. In the
past, most payment solutions have focused on servicing enterprise-size or retail-focused
sectors and do not meet the needs of businesses that provide services to clients, members,
students, donors, patients, and customers. Software solutions have been expensive, dont
integrate with invoicing and customer management tools, and dont provide the level of
service a business with limited resources needs.

PaySimple provides a customer-centric, complete solution tailored to the needs of servicerelated businesses. Its cloud-based software promotes the businesss ability to foster client
relationships by enabling access to pay by any method electronic invoice, recurring billing
schedule, in person, over the phone, or by online payment via credit card or echeck. And,
it syncs all activity with the customer management tool. Its real-time tracking of activity
then provides data insights to a businesss best customers as well as overall cash flow
performance, enabling business owners to drastically save time running their businesses
while improving their customers payment experience.

Learn more about PaySimple at www.paysimple.com or by calling 800-466-0992. Follow us

on Facebook, Twitter, LinkedIn and Google+.

ABOUT

Over 20% of the $2.1 trillion accounts receivable debt in the US is delinquent, and 1 in
2 small businesses in the US consider accounts receivable management to be the most
challenging aspect of their cash management activities. But, maintaining positive cash flow
is vital to the success of small businesses, and managing accounts receivable correctly helps
unlock the cash flow needed to grow. Thats why Funding Gates, the company behind the
FG Receivables Manager, is set on making collections the easiest part of running a small
business.

The FG Receivables Manager is the first ever CRM for receivables management, allowing
business to track, organize and manage their receivables all in one place. Working as an
online credit department, the app replaces the need for spreadsheets and notepads,
enabling businesses to log call notes and details, send payment reminder letters and even
send accounts to a collection agency with just a click of a button.

The top receivables app on the Intuit App Center, you can find out more about Funding
Gates at www.fundinggates.com or by calling 888-370-6026. Follow us on Facebook,
Twitter, LinkedIn and Google+.