Categories
taxes

A Guide to Properly Prepare for This Year’s Tax Filing

As most U.S. taxpayers will readily agree, tax time is not very much fun. This is just as true for individual taxpayers as it for businesses, although the potential mounds of paperwork, receives, W9s and the like that many businesses have to wade through make them much less enviable. Even now with the tax season approaching, many people simply do not take appropriate steps to ensure that their tax filing will go smoothly. This leads to needless headaches and a lot of frustration. By simply taking the time to organize your tax information, the task quickly becomes much less difficult.

As you are receiving those W-2s, 1099s and other tax documents, take the time to create a guide to help you prepare for filing taxes.

Organize Your Tax Documents

The following should be included in any basic guide, so take a look at them and consider them important steps on the road to better tax filing preparedness.

  1. Get those tax documents organized: It makes sense to get things organized as soon as you can so that you can more easily identify problems and errors in the tax documentation. Most of the documents, including W-2s, 1099s, 1099Bs, 1098s and interest/dividend reports, should have been sent to you in January. Be sure you contact the appropriate company if you have not received them by now. Organization is essential to reducing errors and cutting down the time needed to get tax forms filled out. Additionally, it is a good idea to keep all of your documents together in a designated container or form of storage.
  2. You should do relevant tax code research: It is not uncommon to see changes to the tax codes on a yearly basis, including the issuing of different tax credits and other deductions. This makes it important to keep up-to-date on this type of information in order to ensure that you are taking advantage of all of the benefits available to you and that you receive the deductions and credits that you’re eligible for. A good starting point for research is the IRS website.
  3. Make an information checklist: Prior to doing your taxes, be sure you have taken the time to put all of the relevant information you have on a checklist in order to ensure that you do not miss any steps in the process. While lists may vary some, here are some of the more common pieces of info you’ll need: your social security number; your bank account numbers and routing numbers; your tax documents (W-2s, 1099s, etc.); additional tax data, such as property taxes, self-employment tax, estimated taxes, interest paid on school loans or mortgage, and so on. You may need EFTPS info if you plan to file electronically.
  4. Get help when needed: In some cases, doing your own taxes may simply not be worth it. After all, the tax code is notoriously hard to understand. Few of us want to dig through hefty tax documents to find out what’s necessary to file. Instead, it may be better to contact a tax professional to help you avoid errors and resulting penalties.

Keep Informed

The most important thing to remember is that being properly informed about tax filing will drastically help you when it comes time to file. If you want to be better prepared, then heed some of the instruction presented in this short guide. If you need more help, talk to an expert and enter the tax season with a plan and the confidence to get the process done right.

Categories
credit

Why Every Small Business Needs a Merchant Account

If you have a small business or even run a website on Ebay, then a merchant account may give you the ability to process credit cards and debit cards, which gives you the convenience of never having to turn away a paying customer because you can’t process their payment. There are many companies that offer merchant accounts for businesses. Below is some information on what it actually is and how you can sign up with a provider.

Why every small business needs a Merchant Account

A merchant account is essential for any company that needs to process credit or debit card payments. Not anyone can open a merchant account – only legitimate business organizations with suitable qualifications can open a merchant account. Because society is quickly moving to a cashless monetary system, you are leaving sales and income on the table if you don’t have the ability to process debit cards and credit cards for your small business – especially if you do business online!

Where to get a Merchant Account

Small business owners can get a merchant account from independent sales organizations (ISO), or member service providers (MSP), and merchant banks. Merchant banks are different than your standard investment bank because they make investments in small businesses with their own capital. ISO’s and MSP’s are licensed and accredited brokers of credit card services which maintain contracts with banks to process and handle credit card and debit card transactions. These independent companies provide various services to vendors including debit and credit card processing equipment, product sales & client service, settlement management, paper storage and other essential business services. North American Bancard for example, is a company that provides all these services.

Before selecting your merchant account provider you should confirm the independent sales organization’s credentials. A qualified ISO must be accredited and sponsored by a verified financial institution and all affiliations must be declares on all legal documents. One tip is to verify the ISO you choose is sponsored by an FDIC insured financial institution.

Businesses should also compare costs between the various merchant account providers before making their selection. But be sure to compare apples to apples and take equipment rental or purchase prices into consideration. For example some merchant account providers, such as North American Bancard, offer businesses free equipment, service and support, in addition to guaranteeing the lowest processing rates.

Processing Payments with a Merchant Account

The proliferation of online services and payment options has changed the merchant processing landscape in recent years, allowing merchants and businesses to accept credit and debit card payments online. Some merchant account providers offer online payment processing, but you find it better to go through a dedicated e-commerce site that specializes in these services.

Even with the increase in online shopping, the vast majority of payments are still accepted via a credit card terminal, similar to those you would see in a store like Wal-Mart, or your local grocery store. Credit card terminals permit clerks to slide the credit and debit cards through the terminal to read and process the transaction. Some of the more advanced credit card terminals can process gift cards, allow cashiers to manually enter credit card numbers or expiration dates, and even verify and process checks. The information is then securely transferred to the merchant bank or third party vendor via a secure phone or Internet connection.

In addition to processing credit and debit cards more quickly, credit card terminals offer less expensive rates for processing transactions and are safer for customers and businesses alike, because they reduce the need to keep credit card numbers on site and diminish the threat of credit card number theft and identity theft.

Who Needs a Merchant Account?

Almost any business could benefit from utilizing a merchant account. Whether your company is a fortune 500 company or a two person family based business, if you process credit cards or debit cards, or would benefits from accepting these forms of payments, then you can benefit from using a merchant account. Since many people no longer carry much cash, accepting credit and debit cards can be more convenient, safer, and quicker than having someone write a check, and it’s certainly better than missing out on a sale!

Categories
banking

Money Markets versus Savings Accounts

It’s typical for people to want to invest their money or just save it; sometimes investing in CDs and Bonds seems a little scary and savings accounts may seem like the safe way to go. If you just want to start a savings account and have a chunk of money to put away, it’s a good idea to think about interest rates and your options when saving.

Simply Saving

A standard savings account requires little to no minimum balance but the interest rate, depending on the economy, is  typically less than 1%. So even though you’re usually not paying or at least not paying much to invest your money, you’re not making much money in a standard savings account. Financial institutions pay you interest rates to keep your money in their  accounts to they can lend it to other people but mainly, standard savings account rates are so low that the money you‘re putting away is literally just sitting there while the financial institutions are making a higher interest rate lending your money out and meanwhile, giving you a lower interest rate in return. Sounds kind of crazy when you think about it, huh?

Simply Money

Money Markets Accounts (MMAs) are becoming the trendy way to save, especially now when interest rates are at an all-time low. There are a few standard stipulations to MMAs, but the perk can be two to three times the interest rate than a standard savings account. Banks and credit unions are the easiest places to start a MMA account and the minimum, depending on the interest rate, is usually around $1,000. The higher the minimum, the higher the interest rate – so if you’re minimum account balance is $2,500, you’re interest rate, depending on the bank and economy can be as high as 3%. It really depends on how much money you’re willing to put away and not have access to. If you think about it, it’s an even better way to save than a savings account because you can take as much money out of a standard savings; an MMA discourages you from being able to drain your account for an impulse purchase because you have to keep that minimum balance.

For example: If you have $7,000 you do not want to spend and $3,000 of it you’re adamant about not touching for a long period of time, than find a bank that has a minimum of $3,000 and deposit your entire savings. This way, you’re making  interest on all of your money at a much higher rate with a minimum deposit you have no intention of touching in the first place. Additionally, the restrictions and higher minimum on MMAs discourage your from making regular transactions on your account like you would do with a typical checking account.

How is this possible?

MMAs are slightly different than a standard savings where banks and credit unions are lending money to approved borrowers. An MMA is money that is invested in government and corporate markets, which means as a MMA investor, you’re getting paid the current interest rate in the money market and not from current bank interest rates. Being able to invest money with higher rates has a slight downfall because banks have to restrict how much money is being taken out of the market. Financial institutions can sneak around the legal restrictions of these accounts by structuring it like a savings (so you get interest)  instead of a checking (where you get low to no interest). Because of these restrictions, money markets are structure like savings account regulations – with withdrawal limits (usually 6) and total transaction restrictions per month.

Where to go to find a Money Markets or Savings Account

Many times and depending on the financial institution, MMA and savings accounts have the same or comparable interest rates; in some cases it can be just as profitable to put your money in a standard savings. But for the most part, a MMA will have higher interest rates if you know where to look. Bankrate.com and Consumerismcommentary.com give you current information on which banks and financial institutions are giving the highest rates on MMAs and Savings Accounts. If you’re going to put your money in a bank, do a little research and see what bank will give you “more bang for your buck.” Now that’s money in the bank!

Categories
credit

Eliminate Credit Card Debt through High Interest Savings Accounts

After the recent economic meltdown, many Americans have started depositing money in their savings accounts. But unfortunately, people who are knee-deep in debt are not quite well versed with the concept of eliminating their debt by using a high interest savings account. Instead, they take out credit card debt consolidation loan to pay off their outstanding dues. Now, you must be wondering if high interest savings account can be utilized to pay off the owed amount to lessen your financial obligations.

Reason behind choosing high interest savings accounts

Savings accounts with online banks, regional banks, credit unions and community banks often give high interest on the savings accounts. Therefore, you can rely on these accounts to pay off your insurmountable debts. An online search will help you to find banks that give high interest on the savings. You can eradicate your credit card debt with the high return from your these accounts.

Use Debit Instead of Credit

You can use the cash in your account through a debit card offered by the high interest savings accounts. Instead of exhausting your credit card limit try out your debit card to buy things. Limited cash in your hand will restrain you from over expenditure. Along with that you will start a good habit of spending within your budget once you start using your debit card. Avoiding the use of your credit card and focusing on paying your arrears will help to wipe out the piling debts.

Know how your savings accounts can eliminate your credit card debt

Profitable returns that you earn from your high interest savings account can be used to pay off your debts. Using your debit card will help to depreciate the credit card balance growth. The high interest savings account can be an effective solution to eradicate your debts. But remember, closing your accounts might have a negative effect on your credit report. It may also affect your ability to get a loan in the future. Therefore, you need to be more responsible while using the credit card so that you do not incur debt burden. Occasional use of the card and paying off the balance on time will help you to avoid mounting bills. You can be less reliant on your credit card if you possess a high interest savings account that will manage your financial situation with ease.

Categories
credit

Building the Perfect Credit Profile

There’s a lot of advice available online about building the perfect credit profile.  Every financial advisor, weekend blogger, and credit repair service seems to have the one solution that’s guaranteed to work for your credit report.  How many credit cards you need, what types of accounts are best for your score, how many inquiries you should have – the list goes on and almost always looks different.

Here’s one more ingredient to the massive stew of credit advice available online, while at the same time diluting out all of the unnecessary “tips” to help you build the perfect credit profile.  Hope you brought a bib, things could get messy.

Take a breath

The first piece of advice might seem a little unconventional, but hear me out: Don’t worry so much about your credit profile.

If you’re fretting over your credit scores to the point that you are eyeing your credit score through a microscope every other Friday, do yourself a favor and stop.  Generally speaking, consumers who obsess too much over their credit profiles could only be harming themselves – especially if they’re prone to opening credit accounts one day and closing them the next if they don’t see an improvement in their scores.

They could also be the type of consumer who reads all those finance articles that offer conflicting opinions on managing credit (seriously, ask any 5 of them what the best way to get out of debt is, and you’ll somehow wind up with 6 different answers, but I digress), and so wind up following all their differing tips and screwing themselves over.

What your credit report needs

Folks, here’s exactly what your credit profile needs to be the best it can be:

  • A mortgage.
  • A car loan.
  • No more than 4 open, good credit cards.

Your creditors and lenders are looking for more than just a high score when they pull your report; they’re looking to see how good you are at handling money.  That doesn’t stop with paying your credit card bills on time (although you certainly want to keep paying them) – it also extends to how well you handle various types of accounts.

Your credit report should include a mixture of both revolving credit accounts (the credit cards) and installment accounts (a home loan, car loan, or even your student loans), all in good standing.  This shows lenders you’re good at handling different types of financial accounts, and makes them more likely to agree to a loan application.

Credit cards and your credit report

How many credit cards you should have for your credit report to look its best is a tricky subject.  Opinions vary wildly on how many cards you should actually have, as well as what types of cards they should be, what your balances on each of them should be, etc.

For my part, I recommend you always keep at least 4 good credit cards open.  If you’re unsure what types of cards to get, I recommend you stick with Visa and/or MasterCard – preferably through your bank.  If you don’t have any cards open in your name, look into opening secured credit cards with your bank.  They work just like regular credit cards, but require a deposit to activate and are available to just about anyone.

Once you’ve got your 4 cards, my advice for making the most of them is to use 2 cards sparingly, and to carry no balance at all on the other 2 cards.  Charge a tank of gas or a trip to the grocery store to the latter 2 cards every once in a while to keep them from closing due to inactivity.  This helps keep your credit utilization down – something creditors love to see on your report.

I recommend using your 4 credit cards like this because FICO – the firm who assigns you the credit score most used by creditors – looks at not only your individual credit accounts, but your cumulative profile as well when determining your credit score.

Categories
saving money

Four Common Cell Phone Plan Mistakes: How to Avoid Them

It seems almost everyone has a cell phone nowadays, so it seems being able to obtain a good plan to go along with it should be fairly simple. While you may have to do some calculations to determine what exactly you need your plan to cover, they are pretty basic and certainly nothing that would require a finance degree. Yet for some reason, when it comes to finding a phone plan, most people are unaware of how to find a phone plan that fits their needs. Due to this lack of knowledge, people end up settling for a plan that doesn’t suit them and find that they are unhappy with it in the future. However, at this point there is little the person can do, since most companies require people to stay under contract for at least a year, if not two, or pay a penalty. Read on to discover the five most common mistakes people make when purchasing a cell phone plan, so you can avoid making them yourself.

4 Common Cell Phone Plan Mistakes to Avoid

One of the biggest mistakes that people make when they are searching for a cell phone plan is simply not knowing what the plan entails. Oftentimes people go with the first plan that they see and do not thoroughly consider all aspects of the plan. However the California Student Public Interest Research Group (CALPIRG) points out that when shopping for plans, people should make sure to be looking at the price of the plan as well as what the plan includes, such as the number of daytime minutes, roaming charges, and how many long distance minutes the plan allows. The buyer should then compare the different plans they have an interest in and chose the one that best fits their needs. Asking friends about their plans can give you a good idea of what you may want to look for as well.

Secondly, most people are unaware of what will show up on their bill when they purchase a phone plan and are surprised when they receive a bill in the mail with unexpected or unrecognizable charges. According to CALPIRG, billing mistakes are the number one complaint people have about their phone plans, and in many cases the person is being charged for things that they were told were included in the plan. In order to minimize the chances of having billing related problems, then the person must understand their bill and make sure that the charges correlate with their initial contract on the plan.

The third mistake that people make when purchasing a cell phone plan is being unaware of what they need in terms of minutes and data. As such, people may feel forced into getting an unlimited plan and paying hundreds of dollars each month, only to realize that they are spending tons of extra money on unlimited minutes that they do not need when the bill comes at the end of the month. On the other hand, others may get the cheapest plan available and then go over their minutes and end up with huge overage charges. So what can you do to prevent this? According to an article on Computerworld by Bob Brewin, the best way to accommodate this problem is to view your plan and then adjust it according to your needs. In this case the problem is finding a carrier that will allow people to switch their plans without incurring a fee.

Finally, people often end up picking a certain plan just because it includes a free phone. Most of the research that has been done on this suggests that people who buy plans that come with the free phone people are actually paying more for their plans in the long run. Carriers use this tactic to offset the price of the phone that is supposedly “free.” To avoid this, it is recommended that you find a phone that you want, and then choose a plan that suits your needs.

While good cell phone plans do exist, it can be tricky to find the perfect plan for you. In order to make sure that you are getting the most out of your cell contract, ensure that your carrier will allow you to change plans without incurring fees. Yet most importantly of all, write down exactly what you need in a phone plan before even going to the store, that you way you can make sure you’ll find something that meets your needs and you can avoid having to switch plans altogether.

About the author: Kate Manning is a business major who has worked under others and as a self-employed entrepreneur. She currently owns and manages her own business in Washington State.

Categories
investing

Choosing an Investment Option: What to Look for

The simplest answer is often the right one and this is also true for the features of a good investment option. When you are choosing an investment option you should be looking for an investment which returns more money than you originally invested, and which doesn’t require more of your time than you’re willing to invest.

This sounds very simple, but becomes decidedly more complex when you look at just how many different ways there are to increase your investment. Therefore, you should start your search for good investment opportunities by speaking to people who are well and truly entrenched in the industry – this includes brokers, friends who are investors, your financial planner or anyone with pertinent inside information to seek personal advice and a greater understanding of how investments work.

You may think you have to look for a long term investment, or one which is high risk, but a good investment is simply one which yields you more money than you started with. At the same time, you don’t always know how much your investment is worth because you don’t find this out until you sell it. Therefore, while there is always a risk involved because you never know when you will be liquidating your investment, and at what sort of profit, there are several criteria you can look for.

What to Look for in an Investment

1 – Secure initial capital

This is where the risk is involved, because if your initial capital is safe, and you come out of your investment with the original amount you invested, you’ve lost nothing but your time. However, if you lose your initial capital, then you have lost both your time, and your means to accumulate more passive income through investments.

Therefore, a good investment option will strike the balance between risk and reward, based on your financial situation, and the amount you are investing. If you are investing $100 you may opt for a riskier investment option than if you were investing $100,000 because you can afford to lose your initial capital in the first instance.

2 – Profit

Keeping in mind that inflation can be as much as 4% each year, for your investment to make a profit, it must be returning more than 4% annually. As a result, property investment can be a good choice if you are looking for a reliable property because values always increase over the long term.

While the property market fluctuates, there is usually no bad time to buy an investment property because prices are going to go up. The best property investment you can make is a swift one, so that your property can start accumulating capital growth and equity as soon as possible.

3 – Liquidity

Where property investment offers you strong profits for the future, if you want to get rich quickly from your investment, or easily liquidate it for cash or other investment options, you should look elsewhere because the time it takes you to sell your investment can eat into your profits.

However, when you invest in shares you can easily log into websites where you can buy and sell shares in a matter of minutes. Plus, the market for shares in large blue chip companies is strong and plentiful so there is little risk of being stuck with shares you don’t want or need.

4 – Benefits

While there are opportunities to make short term gains with some targeted buying and selling of investments, you’re often in it for the medium to long term. Therefore, you should also look for other benefits, besides the increase of your initial investment, to tide you over.

With property investment for example there are a myriad of tax benefits you can take advantage of because all of the expenses such as your loan interest, rates and maintenance are deductible on your tax, and you can also claim depreciation on items such as the hot water service of the property.

The costs associated with shares are also deductible, including the interest you pay on your margin loan if you have borrowed to invest. You can also reap tax benefits from franking credits, or imputation credits because the companies you are invested in have already paid tax on their profits, and so investors receive franking credits on their dividends. Your share dividends can be a way to supplement your income as many large companies pay their share holders monthly or quarterly dividends for each share.

There can also be significant benefit in having a diverse investment portfolio, scattered across property, shares, bonds and cash, and even simply making sure your shares are invested in a wide range of companies. This ensures that if one of your investments suffers a loss or fails, your overall investment profitability and return won’t be affected. This is also quite easy to achieve because in many cases you can buy small share parcels of just $500 to diversify your investments.

5 – Cash flow

The level of cash flow you need to achieve from your investment will depend on your financial situation, and the amount you are investing. For example, if you are investing in property with the aim to benefit at tax time, you need to still remember that your investment loan repayments must be paid each month, before you receive the benefits back.

Therefore, make sure you carefully analyze your budget and projected returns, remembering you may not always be able to rely on investment income to maintain your cash flow.

6 – Legitimacy

One way above all that you can ensure you are making a good investment, which will secure you good returns with manageable risk is that you are investing in a legitimate venture. There are countless scams circulating which promise investors big returns on their initial outlay, but if you don’t do your research, you are putting that initial capital at a very big risk, for not reward.

A long established, yet still popular investment scam to watch out for is a Ponzi scheme, where the scammer collects funds from new investors as part of an investment syndicate, and instead use those new funds to appear to pay returns to existing investors, without every actually investing anything.

You can easily find information on legitimate investment options because information about shares for example is available on the news, the television, the newspaper and financial websites. As a result, you can maintain an accurate picture of the value of your investment. Plus, when companies are listed on the stock exchange, they are required to report regularly to their shareholders through announcements, where they share details of their full and half year financials, and anything else which could affect share prices such as acquisitions and divestments, while also responding to any queries regarding movements in their share price.

Categories
investing

Do Online Brokerages Really Give You the Best Deal?

For many years we’ve seen the mass advertising conducted by online stock brokerage firms. They offer another avenue for trading stocks and other financial products, often at a comparatively lower rate than in-person brokers and firms.

Several of these online brokerage companies have become household names. But given the regular ups and downs of the stock market, do these firms really offer you the best deal in terms of your overall investing experience?

What Services to Expect – And Not To Expect

When discount brokerages first made the scene into the financial services market, they readily admitted that they offered “no frills” service, in return for little or no investment advice and very low cost trading options.

However, with the advent of more firms offering online share trading, the products and services offered have expanded. For example, where once you could only trade individual stocks, these online firms now offer more research and tools for trading, as well as updated news about the market and investing trends.

As an online investor, you will likely also have access to an online investing “community” where you can interact with other investors. And, some online brokerage firms offer national service centers and even local branch support. So in effect you could be getting the best of both worlds.

Does Convenience Come with a Cost?

As good as some of the services offered sound, however, there could still be a “cost” to you. For example, although you have access to service centers and branch support, you may not work with or speak to the same person more than once. This means that there may not be one particular advisor assigned to your account who is looking out for your specific and personal financial needs and goals.

Calculating Your Needs

One popular tool offered by many online investment firms is a calculator designed to help you determine how much you need to invest over time to reach a certain amount of assets in your portfolio. This tool could help to offset the lack of personal investment support, and for those who prefer to take control of their own investment accounts, this tool is a great feature. However, for those who do not wish to follow the market’s every move, then it may not matter what the results of the calculations are if you are unable or unwilling to take the time to act on them.

How Much Advice Do You Need?

The lower cost and convenience have made it possible for just about anyone to control their own investments with online brokerages. As some will tell you, however, even though these firms provide access to research and advice, you may still have to take the time to dig for exactly what you need. If this is something you are not prone to doing, then placing your funds with a full service brokerage that provides real time human advice may be your better option.

Research is Key

Most online trading firms do offer a good amount of access to market research. You will often have access to real time market information and quotes, as well as analysts’ opinions of whether a specific stock or fund has a Buy, Sell, or Hold rating. Again, if you have the time and desire to track your own investments, this research is a must. However, all the information in the world won’t help if you do not or cannot take the time to read it and make the proper buying or selling recommendations.

What to Look Out For

Just like most advertising, take the online brokerage firm commercials you see at face value. For example, an online investment firm that offers trades for “as low as” $7 may only offer this price to someone who makes a certain amount of trades per month or opens a specific type of account at the company.

Therefore, be sure to read all of the fine print before opening an account and handing over any funds. Often it’s too late to back out if you later discover these requirements.

Tips to Invest Successfully Online

With the wide myriad of pros and cons to investing with an online brokerage firm, what it really comes down to is the time you have to spend monitoring your accounts. Similar to many other products and services, if you have the time and the desire to spend on your investing activities, then working with an online brokerage may be just the thing for you. If not, however, your higher commission dollars may be better spent with a full service broker who will regularly monitor your funds and take the appropriate actions when necessary.

Categories
banking

Simplify You Banking and Financial Needs

If you are a small business owner, chances are you are very busy trying to run a company or companies, balance your family and personal life, and have some time for leisure and relaxation. In order to be able to accomplish all of this without getting overworked and overwhelmed, you must be smart with you approach you finances.

Use Bill Pay: If you are not using online banking tools like bill pay, you are missing a primary opportunity to save time and money. Two basic types of bill pay are available. First, you can pay bills through your business checking or savings account through your bank, or you can pay through your utilities and services providers (i.e. mortgage company, heating, power, & light company).

Usually, these services can be automated, so you do not need to worry about missing your bill payments. This will save you time and will potentially save you money because you do not have to mail in payments. Another advantage of using bill pay is that it cuts late fees because your payments are always on time.

Caution: When using bill pay, make sure that it is working properly during the first couple of months. Also, make sure that your service providers or bank are billing you correctly and are not charging you fees for the billing service.

Consolidate Banking Accounts: Simplify your life by consolidating your bank accounts. Instead of trying to juggle multiple accounts, research and find out which bank or credit union can best meet your needs for your business, investments, and personal banking. This will allow you to take more control of your finances and avoid unnecessary time and money spent that is associated with trying to run accounts with multiple bank.

It is very important that you make an informed decision when selecting a bank for your various needs. Understand the rewards and fees associated with different financial accounts, as there can be a lot of variance in services and charges offered.

Use Remote Deposit: Remote deposit is a service offered by most banks and credit unions for businesses. Once you sign up with the financial institution, you receive a scanner, which allows you to scan customer checks and deposit them into you banking account. This can be done from the convenience of you office or home.

The advantage of this is that you save time, money, and gain convenience, since you can deposit check from your offices or home. Also, since this is all done online, your company will have access to all records online. This will help as you run reports to and answer customer service inquiries about payments. Some financial institutions have developed apps for smartphones like the iphone, which enable you to scan and deposit checks anywhere by simply taking a picture of the check and processing it through smartphone app.

Think Smart by Using the Free Tools Available.

As you look to simplify your schedule and banking related duties, take advantage of the many free tools that are available. The list above is just a sample of numerous opportunities, and it is up to you to explore them, and take action.

Categories
banking

How to Create a Business Cash Flow Statement

Cash flow statements are extremely useful for a business to get a complete picture of all money coming into the business and all money going out of your business during a specific period of time.  When organizing your small business finances, you should create a cash flow statement annually at a minimum, but businesses of all sizes benefit from creating cash flow statements on a monthly or quarterly basis.

A common misunderstanding of cash flow statements is that it will show the same number as the “net income” from the Profit and Loss Statement.  This is not the case, because your net income on the P&L will show non-cash information, like depreciation and physical assets, and because net income is calculated from net sales – not actual cash payments.

How to Create a Business Cash Flow Statement

What Cash Flow Statements Are Used For

Business owners can rely on cash flow statements as the guideline for creating their budget.  It will show you where your income has been generated and where the money went.

If applying for a business loan, a lender will ask for a cash flow statement to analyze your ability to repay the loan.

If your business is publicly traded, you are required to create cash flow statements and follow the Generally Accepted Accounting Principles (GAAP).

How to Create Your Cash Flow Statement

There are three sections in a cash flow statement which can show the net change of cash coming in and out of your business during a specific period of time:

  • Operating Activities
  • Investing Activities
  • Financing Activities

Find your beginning cash balance – how much money do you have in the bank and in hand at the start of the month or period you’re creating a cash flow statement for?  For example, if your business has $1400 in the bank and $600 in petty cash, you’re starting cash balance is $2,000.

How much money came into the business –  include all income to the business from sales and  other business activities; including payment for old debts.  If you brought in $5,000 in sales and $350 from old debts people owed to you, your total cash in for the period is $5,350.

How much money went out of your business – include all expenses and purchases.  You’ll probably have salaries, rent, utilities, supplies, loans, taxes, etc.  If you spent $3000 in salaries, $500 for rent, and $220 for office supplies your total cash out would be $3720.

Calculate the cash flow – subtract the total amount of your cash out from your total amount of cash into the business for the period you are analyzing.  In our example, you would subtract $3,720 from $5,350 for a net change of $1,630.  If you have a negative number from this calculation, your business is operating at a negative cash flow and is in trouble.

Find your ending cash balance – add the net change you just found when calculating the cash flow to the beginning cash balance to get your ending cash balance.  In this example, it would be $3,630.  This becomes your beginning cash balance for the next period.