Tag: finance

To finance is to provide funding for a business.

10 Essential Financial Skills for Business Leaders

“’Tis skill, not strength, that governs a ship,” historian Thomas Fuller wrote centuries ago, yet the wisdom carries through today, especially in business. Just like a captain navigating unpredictable waters, your business success depends on the skills you master, not just the strength of your company’s offerings or the time you put in. Effective financial management is the helm of your “ship,” and therefore, developing and improving essential financial skills is crucial to navigating uncharted waters and challenging situations.

In this guide, we’ll walk you through the importance of building essential financial skills and key areas to focus on, plus provide actionable tips for getting started.

Why Developing Small Business Financial Management is Essential

Before we break down essential financial skills for business leaders, let’s take a quick look at some of the reasons upskilling must be a priority.

The Face of the Entrepreneur is Changing

Launching a new business has historically been a very mindful decision. It was the ultimate goal. Hopeful entrepreneurs would study as much as they could and take roles with other entrepreneurs as a way to build skills. In fact, nearly half of all Boomers running a business today launched it as their only initiative, Xero surveys show. Conversely, 67 percent of Gen Z entrepreneurs began their businesses as a side hustle. Although this allows more time to ensure the business is viable before going full force, it also means most new business owners are learning as they go. When it comes to financial management, there’s a big learning curve to overcome—one that can be difficult to address when you’re managing countless other aspects of running a business for the first time.

Financial Literacy is Declining

Financial literacy is fairly low in the U.S. The average person answered just 48 percent of questions correctly in the annual 3 TIAA Institute-GFLEC Personal Finance Index (P-Fin Index). This marks a steady decline from the peak score of 52 percent in 2020. Business owners are in the same boat, with little more than half rating their financial literacy as “high,” per Xero.

Few Small Businesses work with Financial Planning Pros

Despite a lack of personal knowledge, just 15 percent work with an accountant or advisor, Xero reports. Nearly two in five still manage financial matters on their own. This, unfortunately, means that most business financial matters are managed by someone without the ability to do so effectively.

The Hidden Costs of Poor Financial Planning and Financial Literacy

Poor financial planning quietly erodes business stability, leading to cash flow shortages, excessive debt, and tax liabilities that hinder growth. Without strong financial reporting and forecasting, business owners risk misallocating resources, facing regulatory fines, and losing investor confidence. Instead of proactively managing finances, many find themselves constantly reacting to problems, which weakens long-term financial health.

A key driver of poor financial planning is a lack of financial literacy. Nearly half of small businesses struggle with financial challenges tied to inadequate financial knowledge, according to Xero. This knowledge gap costs them an average of $118,121, QuickBooks reports. To avoid these costly mistakes, businesses should strengthen their financial skills by working with professionals or certified financial planners. A solid understanding of financial trends, problem-solving, and analysis builds resilience, ensures compliance, and supports sustained profitability.

10 Essential Financial Skills for Business Leaders

Strong financial decision-making relies on a mix of analytical skills, communication skills, and a solid understanding of financial concepts. Business leaders must be able to interpret financial documents, assess financial challenges, and explain key financial insights to stakeholders in simple terms. Developing these skills not only improves financial planning but also strengthens problem-solving in complex financial situations. The case for building financial literacy as a business leader is clear. Next, let’s take a look at some of the areas people often struggle with and what to focus on if you’re ready to learn.

1. Tax Planning and Compliance

Optimizing tax strategies is the biggest challenge for small businesses, according to Xero surveys. Closing this gap is a tall order, considering less than half are even confident they’re paying taxes correctly, per QuickBooks.

Rounding out knowledge in this area starts with knowing the best business structures for tax and legal purposes. Choosing the right structure for your business helps you limit tax liabilities. However, your structure also impacts how you get paid, how your business and personal taxes are paid, and special requirements for managing your business, which makes it foundational in everything you do. With this step addressed, you can move into more advanced tax optimization strategies, such as planning your expenses and maximizing your deductions.

2. Bookkeeping

Bookkeeping encompasses the day-to-day tracking of your financial transactions, including payables and receivables. Because of this, it has a trickle-down effect and influences many of the other areas outlined here.

Many businesses fall into common bookkeeping mistakes, such as failing to separate personal and business expenses or overlooking proper expense tracking. These errors create unnecessary stress and can hinder your ability to monitor cash flow and assess financial performance effectively. Conversely, developing bookkeeping skills allows you to understand your company’s financial health and make informed financial decisions. It also helps you ensure the accuracy of your books and compliance with regulatory requirements.

3. Forecasting

Many business owners take a relaxed approach to financial forecasting by ballparking cash flow in or coming up with seemingly plausible sales projections in their heads. These things can somewhat work when a business is very small, but the accuracy quickly diminishes once more than the first few customers are acquired.

True financial forecasting—the type that becomes increasingly essential and complex as a business grows—involves analyzing historical data, market trends, and external factors to create informed projections for revenue, expenses, and cash flow. These insights allow you to anticipate challenges, allocate resources effectively, and identify opportunities for sustainable growth.

4. Business Budgeting

Budgeting is a fundamental skill for managing business finances, yet it’s the second most common struggle for business owners, according to Xero surveys. While many small businesses start with informal spending plans, the lack of a structured approach can make it difficult to align financial decisions with long-term goals.

By developing a business budget, you can create a clear roadmap for managing resources, controlling expenses, and planning for growth. A well-crafted budget ensures that every dollar has a purpose, helping you avoid overspending while prioritizing key investments. It also serves as a benchmark, allowing you to measure progress and adjust strategies as needed.

5. Financial Statement Analysis

One of the most important ways to improve your finance skills is by learning how to read key financial reports—income statements, balance sheets, and cash flow statements. These documents offer a clear view of your business’s health and help guide smarter, strategic decisions.

By analyzing this data, you’ll uncover trends, spot issues early, and gain valuable insights into your company’s financial performance. For example, profit and loss reports help manage expenses, while balance sheets support debt and asset planning.

You don’t need to be an expert. Start with the basics, stay updated, and take a course or work with a pro to develop your skills. Strong financial analysis, paired with excellent communication, empowers you to explain results clearly and align them with your business strategy.

6. Credit and Debt Management

Managing credit and debt is a key skill for keeping your business financially healthy. Learning how to build business credit can open the door to better borrowing terms and even lower insurance rates. This often starts with simple strategies, like making early payments instead of just paying on time, to demonstrate financial responsibility and improve your credit score.

It’s also important to recognize the difference between good debt vs. bad debt. Debt that helps you grow, like investing in equipment or inventory, can be an asset, but relying on high-interest loans for everyday expenses can quickly become a liability. By managing credit mindfully, you can secure the resources your business needs while avoiding unnecessary financial strain.

7. Cash Flow Management

Effective cash flow management is essential for keeping your business running smoothly, but it’s also one of the top challenges for business owners, according to Xero surveys. Without it, even a profitable business can struggle to cover day-to-day expenses or plan for growth.

Avoiding common cash flow management mistakes, like failing to monitor cash inflows and outflows regularly, can help you maintain financial stability. Additionally, improving accounts receivable processes, such as by implementing clear payment terms or following up on overdue invoices, can keep your cash flow consistent and predictable.

8. Strategic Cost Management

Strategic cost management focuses on analyzing your spending to ensure it supports your business goals. Rather than simply cutting costs, the process involves identifying inefficiencies, eliminating waste, and redirecting resources toward areas that offer the greatest value.

This could include renegotiating supplier contracts, streamlining operations, or reallocating funds to initiatives that drive growth. By carefully managing costs, you can maintain financial stability while positioning your business for long-term success.

9. Risk Management

Just 38 percent of small businesses have a reserve fund, and 13 percent don’t have a plan for handling unexpected expenses, according to Xero surveys. While these may seem like obvious needs for a business, the lack of implementation highlights deeper issues. Misperceptions about risk, barriers to putting safeguards in place, or competing priorities often push risk management to the back burner, especially for smaller companies.

Risk management skills empower you to identify potential threats to your business, assess vulnerabilities, and create strategies to address them. By learning to anticipate challenges and prepare for them, you can build a more resilient business and reduce the impact of unexpected events.

10. Funding Option Assessment

Understanding your funding needs and finding the right solution can make all the difference in keeping your business moving forward. Yet, when tested on borrowing knowledge, the average American scores just 59 percent, according to the latest P-Fin Index.

Funding option assessment requires a clear view of when financing is necessary, what options are available, and how they align with your goals. Whereas traditional financing may work well for long-term investments, it’s not always ideal for short-term needs or speed. It’s also out of reach for many small businesses due to stringent qualifications. Plus, it can lead to loan stacking, which can create a financial hole that’s difficult to climb out of. Credit cards create similar issues. If the balance isn’t paid in full immediately, interest can eat away at your profitability.

Because of this, options like merchant cash advances (MCAs) and factoring are often favored for their accessibility and speed, though MCAs can have APRs that reach into the thousands and have unpredictable payback speeds. Conversely, factoring allows you to turn unpaid invoices into immediate cash, providing flexibility without debt.

By learning to evaluate funding options, you can confidently choose solutions that support your business’s growth while avoiding unnecessary financial strain.

5 Quick Tips for Building Essential Financial Skills

Now that we’ve covered what you should know, let’s explore how to build up your acumen.

1. Leverage Business Accounting Software

While it’s important to understand the logic behind your financial metrics and know how to perform calculations, that doesn’t necessarily mean you need to do everything manually. In fact, automating processes helps ensure accuracy and speeds up processes so you can focus on strategies to improve your numbers.

Use accounting software to simplify financial management and keep your records organized. Tools like QuickBooks, Xero, and Wave help with tasks such as expense tracking, invoicing, and generating financial reports. They can also be great resources for learning more about your company’s financial health.

2. Work with a Pro

Pros can handle complex issues, like financial forecasting or navigating compliance, and even basic tasks, like bookkeeping, for you. If you don’t have experience in a certain area, working with a pro will allow you to ensure the job is done right and help you understand how things should be done. Consider hiring a CPA, bookkeeper, or tax expert, or financial consultant when something is outside your area of expertise or simply commands more of your time than you have to give. A good advisor will save you time, ensure you’re complaint, and help you avoid costly mistakes, which often more than covers any associated costs.

3. Map Out Priorities and Focus on One Area at a Time

Focus on one financial skill at a time instead of trying to learn everything at once. Start by identifying where your business needs the most improvement, such as cash flow, budgeting, or forecasting, and dedicate your energy there first. This approach makes learning feel manageable and helps you build confidence. As you improve, you’ll see the impact in your business and feel more prepared to move on to the next area.

4. Learn in the Way That’s Best for You

Find learning methods that suit your style. Hands-on learners might prefer workshops or online courses, while others may enjoy books, blogs, videos, or podcasts for quick insights. Audiobooks are perfect for busy schedules, too. You can listen during your commute or while exercising.

5. Fit Lifelong Learning into Your Routine

Turn financial education into a habit by working it into your schedule. Listen to a podcast while walking the dog, read a blog post over your morning coffee, or set quarterly goals to tackle new financial topics. The key is consistency. Small efforts add up over time. Keep learning part of your routine to ensure you’re always sharpening your skills and staying ready to tackle new challenges.

Improve Your Small Business Financial Management with Invoice Factoring

Virtually all businesses require capital at times. Shortfalls can happen due to seasonality, rapid growth, and unplanned expenses. A gap isn’t always a sign that your business is unstable, but how you handle that gap can make a world of difference in your company’s stability and growth.

Invoice factoring closes those gaps by providing instant payment on your B2B invoices, so you get immediate working capital and are freed from tedious tasks like chasing invoices. Plus, you can set up your factoring account and not factor any invoices until the need arises, ensuring your business is prepared even in uncharted waters or challenging situations. To take the next step, request a free Charter Capital rate quote.

January 20, 2025
Handling Payment Delays as a Government Contractor
Government contracts can be challenging to win and navigate, but they’re also some of the most lucrative and dependable contracts you can have. On this page, we’ll walk you through why you may experience delayed payments and cash flow challenges and how government contractor factoring creates a financial bridge that allows you to bid on, accept, and manage these contracts more confidently.

Navigating Payments in Government Contracting

For the most part, the government must pay contractors on net 30 terms, as Wolters Kluwer notes. This means you’re paid within 30 days or less of submitting your invoice, but it doesn’t necessarily mean you’ll get paid when you expect. While prompt payment terms are intended to keep contract obligations running smoothly, delays can still occur due to missing documentation, incorrect banking information, or disputes over the services performed as specified in this contract.

Payment Terms Vary by Contract

As you explore government contract opportunities, pay close attention to the payment timing mentioned. There are many different payment timelines. For instance, some offer progress payments or pay by milestone, in which case you can submit your invoice as soon as you’ve met the requirements or milestones. Others, especially those involving tangible goods, may allow you to submit an invoice immediately after delivery. You’re also likely to see monthly billing terms on service-type contracts. This means that even if you’re promised net 30 terms, you may not get paid within 30 days.

To illustrate, picture a website development company that wins a bid for designing a new website for a government agency. It’s an expansive project with dozens of professionals that is expected to take a full year. Rather than paying out only at the end, the developer may have a milestone-based contract that provides payments as the company meets specific goals. Now, imagine it takes the developer 90 days to meet its first milestone, and it sends the invoice right away. Because the government has 30 days to pay, a total of 120 days may pass from the time the business makes its first cash outlay for the project until the day it receives cash.

Public Sector Contracts May Not Always Pay “On Time”

As you can see, this already creates a wide range of payment timelines, but there are lots of other reasons why a net 30 timeline may not always pan out.

Work Disputes

Occasionally, there may be a dispute about whether you’ve delivered services or goods as outlined in your contract. This must be resolved before the invoice is approved for processing.

Incorrect Invoicing

The 30-day timeline only begins when the government receives a “proper” invoice. Although there are many reasons why invoices get kicked back for non-compliance, a few of the most common issues include issues with:
- Dates
- Contract numbers
- Company name and address
- Contact info for the person receiving the payment
- Shipping and payment terms
- Details about the items or services delivered
The government has seven days after receiving your invoice to respond if invoice issues will prevent payment. Unfortunately, businesses can go back and forth quite a bit while issuing corrected invoices, which may further delay the payment.

Common Payment Delays in Government Contracts

Understanding the contractual provisions in a federal contract is essential for any federal contractor, as terms related to designated payment, invoice amount, and liability for overdue payments can impact how agencies make payments and manage obligations.

Navigating FAR Parts and Payment Regulations

Federal Acquisition Regulation (FAR) parts are essential for understanding the payment processes in government contracts. The prompt payment clause requires payment within 30 days of receiving a proper invoice, but various factors can still cause delays. Familiarity with FAR parts and specific clauses helps contractors navigate payment challenges and seek remedies for compensable delays.

Impact of Late Payment Interest on Cash Flow

Late payment interest is critical for managing cash flow. When the government delays payment beyond the due date, interest is owed. Contractors should track payment dates, delay periods, and notify the contracting officer promptly to claim late payment interest, thus mitigating financial strain.

Payment Delays Can Create Major Issues for Businesses

Many small businesses and startups are dissuaded from bidding on government contracts because they lack the upfront cash necessary to accept these projects, particularly when payment delays are likely.

Effects of Payment Delays

Government contractors experience a variety of issues when payments are slow, such as:
- Added expenses and time for chasing and resubmitting invoices
- Inability to cover their own expenses, such as rent and payroll
- Inability to continue working on the project due to capital needs
- Inability to seize opportunities due to limited capital
Strategies to Manage and Mitigate Payment Delays

Effective Contract Administration Tools and Techniques

Effective contract administration is vital for managing payment delays. Utilizing automated systems for tracking invoices and maintaining detailed records of communications helps prevent delays. Proactively addressing issues ensures timely submission and approval of invoices, avoiding administrative oversights.

Handling Termination and Late Payments

When facing termination or late payments, contractors must notify the contracting officer in writing, detailing delays, costs incurred, and impacts on performance. Understanding contract terms and documenting issues is crucial for seeking compensation and managing financial impacts.

Factoring: The Bridge Over Financial Gaps

Large and established contractors can often tap into loans and lines of credit when accepting bids. However, many are debt-averse and prefer not to. Moreover, liquidity solutions are few and far between for those in the early days of government contracting because they don’t typically meet the history and credit requirements. This is where a solution like factoring can help.

Factoring: A Reliable Solution for Government Contractors

Addressing Late Payment Issues with Factoring

Factoring provides a solution for late payments by offering immediate cash flow through the sale of unpaid invoices. This helps contractors maintain operations without waiting for government payments, especially when facing government-caused delays.

Benefits of Factoring for Federal Construction Projects

Factoring benefits federal construction projects by providing immediate cash flow, simplifying financial forecasting, and allowing contractors to cover expenses and continue work without delays. This predictability aids in better budgeting and planning.

Factoring Solutions Tailored for Government Contractors

Factoring is a unique funding solution in which your business sells its unpaid invoice to a factoring company like Charter Capital at a slight discount. The factoring company immediately pays you most of the invoice’s value and takes over responsibility for collecting the payment. You’re free to move forward without chasing payments or paying a debt back.

How Factoring Works

Factoring is a straightforward process for government contractors.
- Step 1: Win a government contract and go to work.
- Step 2: Send copies of the invoice to the government and your factoring company.
- Step 3: Get paid most of the invoice’s value immediately by the factoring company.
- Step 4: Keep working and growing your company. The factoring company will follow up on the invoice as needed and send you the remaining sum minus a small factoring fee once the government’s payment comes in.
Eligibility for Factoring

Unlike loans, lines of credit, and other traditional funding solutions, your creditworthiness and time in business aren’t a major consideration for approval. Instead, the factor is more concerned with the creditworthiness of your customers since they’re the ones paying the bill. This means getting approved is very easy if you’re working on a government contract. You may be able to factor invoices for many of your private sector clients, too.

Benefits of Factoring vs. Waiting

There are lots of benefits to leveraging government contractor factoring. We’ll explore a few below.

Immediate Cash Access

Your business receives payment right away with factoring. It’s typically sent as an automated clearing house (ACH) payment, which means it’s sent electronically and arrives in your bank account within 24-48 hours. However, factoring companies like Charter Capital can expedite it even more beyond this and pay you on the very same day you submit your invoice.

Continuous Business Operations

Factoring bridges cash flow gaps so you can cover daily expenses and grow.

Simplified Forecasting

With factoring, you always know exactly when you’ll get paid so that you can budget more confidently.

Planning for Future Contracts

Factoring doesn’t have to be all or nothing. You can dip into it whenever you need to accelerate cash flow. This often opens doors for government contractors as they explore opportunities – you can bid on the projects that suit you and not just the ones that pay out on your ideal timeline.

Eligibility and Benefits of Factoring for Government Contractors

Criteria for Factoring Approval

Approval for factoring primarily depends on the creditworthiness of the government entity. Contractors should ensure invoices are free from disputes and meet contract specifications to expedite the approval process and access factoring benefits quickly.

Factoring vs. Traditional Financing Options

Factoring offers immediate cash flow without adding debt, unlike traditional loans. It is flexible, allowing contractors to factor specific invoices as needed, which is particularly beneficial for managing federal construction contracts with varying payment schedules.

Practical Steps to Implement Factoring in Your Business

Selecting the Right Factoring Company

Choosing a reputable factoring company experienced in government contracts is crucial. Consider advance rates, fees, and payment speed, and ensure the agreement aligns with your needs to maximize the benefits of factoring.

Maximizing Cash Flow with Same-Day Payments

Same-day payments from factoring companies ensure funds are available immediately, helping contractors meet financial obligations without delay. This is especially beneficial for managing cash flow during government-caused delays.

Bridge Your Financial Gaps with Government Contractor Factoring

If it sounds like government contractor factoring may be what you’re looking for to bridge financial gaps, Charter Capital can help. We offer low rates, up to 100 percent advances, same-day payments, and don’t require long-term contracts. To explore the fit for your business, request a complimentary rate quote.
June 24, 2024
Bottom Line: Prepare Now for the Next Downturn

Not long ago, a well-known professional wrestler had a popular catchphrase he would shout out during TV promos. “That’s the bottom line, ‘cause Stone Cold Steve Austin said so!” This meant the audience could bank on what the hulking grappler had said would come true, usually to someone else’s grief. Stealing a phrase from Mr. Austin, what’s the “bottom line” on the current economy? And is there something coming that could cause small business owners grief?

Right now, as of mid-August 2019, the line looks encouraging. Unemployment stands at a low 3.7 percent. The latest small business confidence index has fallen slightly to 103.3, but still remains historically high. The annual inflation rate for the 12 months ending in June 2019 tallied a modest 1.6 percent. Even stocks continue to rise, with the current bull market now past its 10th anniversary, making it the longest on record. One small negative blip recently appeared when the Purchasing Managers Index fell to 51.2 in July, its lowest level in three years.

If there’s one thing certain about good times, it’s that they don’t last forever. Somewhere, sometime in the future a downturn in business or some other crisis will occur. As Austin would put it, “that’s the bottom line.” History has shown it time and again. Austin made a career out of sneaking up on unsuspecting opponents and applying his dreaded “Stone Cold Stunner” with devastating results. But unlike a clueless brawler, you don’t have to be caught by surprise. Here are a few heavyweight suggestions that may ensure that even when times do get tough, you’re still standing when the match bell rings.

Don’t Cut Advertising, Publicity and Marketing – It’s always cheaper to try to wrestle new sales from existing customers than to find new ones. As a result, many small business owners believe the first department to cut in a downturn is marketing. That belief can prove fatal. True, building upon and expanding existing client relationships is never bad policy, but not going after new customers is. Without new customers continually refreshing and growing the sales pipeline, an operation quickly stagnates and ultimately shrinks or even dies. A downturn is a great time to renew marketing, advertising and publicity. For one thing, your competition may be foolishly cutting back, leaving an opportunity for you to build market share at their expense. For another, customers may be using the downturn to search for new vendors and better deals. If you’ve cut back on or eliminated marketing, you may not find them nor they you.

Recession-Proof Your Personal Credit – Just as a homeowner prepares for winter by weatherproofing a house in the fall, wise small business owners use prosperous times to ensure their personal credit can withstand tough economic times. Small business loans are hard enough to get as is, with nearly 50 percent getting denied. Those loans are even tougher to secure in a recession, as banks keep money close and become risk averse. This means you may have to use your personal credit to keep your business afloat. Do what you can now to boost your credit rating and available credit lines.

Manage Inventory, Vendors and Debt – When you’re in a hole, the first step in getting out is to stop digging. In a downturn, excessive inventory, costly vendor contracts and excessive debt can tag team your business, making a bad situation even worse. As a recession begins, take steps to reduce inventory, renegotiate vendor contracts or seek out new ones, and pare down debt. These actions will turn your organization in to a lean, mean fighting machine able to better withstand a downturn.

Focus on What You Do Best – When times are good, businesses naturally expand into new areas and diversify their offerings outside their primary area of expertise. This is a good and healthy thing. But when times get bad, these extras may drag you down. Every business has a core competency that forms the basis of their business and sets them apart in the marketplace. Focus on this strength during a downturn. If you’re a widget maker that does event planning on the side, event planning probably distracts you and wastes resources better spent on the real center of your business and earnings.

Protect and Improve Cash Flow, the Lifeblood of Your Company – It’s no revelation that in tough economic times, access to money tightens. The best way to keep your business off the mat in a recession is to keep a healthy stream of cash coming in. This means, as mentioned in the first tip, to resist the urge to drop marketing efforts that identify new customers. It also means ensuring those who have done business with you pay you for your products and services in a timely manner. In an economic downturn, businesses will naturally try to delay paying expenses and invoices if possible to keep funds on hand. A 30-day invoice can quickly turn into a request for 60 or 90 days, greatly impacting your cash flow and harming your small business’ ability to function.

In a recession, one proven method to improve cash flow and protect your business is to engage the services of a factoring company. The factoring company can fund you the amount of your outstanding accounts receivable invoices upfront, giving you the cash you need today to run your business today, and eliminating the worry and hassle of slow pay collections. You’re left free to run your business.

Invoice factoring is a convenient alternative to a traditional bank loan or fee-laden online loans. Factoring gives you the money you need when you need it with no long-term obligations. You can also get cash quicker through invoice factoring – usually within a day or two. To learn more, simply call toll-free 1-877-960-1818 or email [email protected].

August 15, 2019
Here Comes the Tax Man – Six Tips to Get Ready for the Big Day

Should five per cent appear too small
Be thankful I don’t take it all
‘Cause I’m the taxman, yeah I’m the tax man
Tax Man (Beatles, 1966)

Few people celebrate April 15. No one sits around the table to carve turkeys and watch football. There aren’t any fireworks displays and ice cream socials. Santa Claus doesn’t come down a chimney and leave any presents.

Quite the opposite happens on April 15… that’s when the Tax Man comes and takes away.

We all know taxes are a necessary part of living in a free and democratic society. You don’t get something for nothing, not even in America. Someone has to pay for the roads, the national parks and the aircraft carriers. And that someone is you and me. But with apologies to the Beatles, the Tax Man doesn’t have to take it all. Just because taxes are necessary, that doesn’t mean there aren’t things you can do to lessen your bill when it comes due.

1) Organization Saves Time… and Often, Money

Here are six helpful tips you may want to consider when preparing your taxes. Of course, Charter Capital is not a tax service and we don’t give tax advice. Consult your tax attorney for information regarding your specific situation.

Believe it or not, throwing receipts and other important documents into a cluttered drawer or file folder and then forgetting about them until April 14 is not a good idea. A better one is to stay organized. Each time you have new receipts or documentation, carefully file them by topic that day rather than waiting for them to pile up. When your tax files are organized, it saves valuable time for the tax preparer (especially if that tax preparer is you). Organized files and complete documentation can also help you better take advantage of eligible tax incentives you may otherwise miss because you can’t find the needed receipts or papers. Finally, it can make tax preparation easier, faster and less frustrating, lessening the possibility of having to file an extension or having to pay late fees because you or your preparer couldn’t complete the task in time.

2) Pick the Right Entity for your Business

Just because you own and operate a small business doesn’t mean you can’t take advantage of an entity change. Big businesses aren’t the only ones with the fancy abbreviations at the end of their names. If you currently file as a sole proprietor, consider switching to an LLC. Doing so may enable you to eliminate some of the self-employment tax and several other benefits.

3) New, Larger Equipment Deductions May Cut Your Tax Bill

Recent tax law changes now offer bigger deductions for equipment purchases. Small businesses are now eligible for federal tax deductions of up to $1 million – nearly twice the previous amount. If you’ve purchased new or used equipment for your business and placed it into service before the end of the year, you may be entitled to this deduction. The new tax laws also offer two additional breaks for small businesses. One is a 100 percent bonus depreciation deduction for certain types of equipment bought and placed into service after Sep. 27, 2017. The other is a 40 percent bonus deduction for certain types of equipment purchased before Sep. 28, 2017 and put into service during 2018. To see if you qualify, check with your tax attorney or the IRS. Speaking of that…

4) Don’t Be Afraid to Ask the IRS for Help

Most people would understandably not be thrilled were an IRS agent come knocking on the door. But, believe it or not, the IRS does try to help taxpayers and offers many tax preparation tools of which you may not be aware. The agency has many self-help topics online here. The site also discusses many of the new tax laws and how they may affect your business here. It would certainly be worth a few moments of research to look over these webpages before starting your taxes. You may find information on deductions that could be of great benefit and savings.

5) Donate Unused Inventory – Clean Out the Warehouse and Cut Your Taxes

One often overlooked and easy to take advantage of deduction is to donate unsold and unused inventory. Donating inventory helps two groups at the same time. First, a charitable organization gets free items to help them in their mission. Second, you save money by no longer having to pay to store the items and you can get a tax break. Do note that donations of good worth more than $500 have stringent reporting rules you must follow.

6) Procrastination Never Pays Off – Don’t Wait to Start Your Taxes

If you’re the type of person who thinks you work best under a tight deadline, you may be doing yourself a disservice by waiting until the last minute to start preparing your taxes. Unless you use the EZ form (and who does that for a business), filling out tax forms takes time, patience and concentration. If you start late, you may learn to your horror you can’t find a needed document and may not find it on short notice. You also may be more prone to mistakes, such as mathematical errors to forgetting to take advantage of a tax benefit for which you qualify. Finally, you may not be able to finish in time, which could lead to late penalties. The best advice is to follow the Boy Scout motto – Be Prepared – and give yourself plenty of time to do the job… and do it right.

Usually on April 15, you’re the one giving. But for this tax season, here’s something just for you: a bonus tax tip to help you ensure you’re getting the maximum benefit for your buck.

7) Get a Handle on Your Cash Flow to Estimate Your Taxes Ahead of Time

One way to better prepare for taxes is to forecast your cash flow. Doing so allows to estimate taxes ahead of time and anticipate eligible deductions. Build a model of your accounts receivable and accounts payable. Factor in your annual budget and anticipated sales. This will help you not only at tax time, but in developing a forecast you may also find it easier to run your business so that it will grow and prosper.

A good way to improve your cash flow, whether at tax time or any time of the year, is invoice factoring. This method of cash flow recovery allows you to “sell” your accounts receivable invoices to a factoring company. This company pays you upfront for the outstanding invoices by giving you the cash you need today and eliminating the worry and hassle of slow paying collections. This leaves you free to run your business.

Invoice factoring is a convenient alternative to a traditional bank loan or fee-laden online loans and risky crowdfunding. Each of these sources require a long-term contract. Factoring, however, gives you the money you need when you need it with no long-term obligations. You can also get cash quicker through invoice factoring – usually within a day or two.

If you would like to learn more about how invoice factoring works, simply call toll-free 1-877-960-1818 or email [email protected].

* Although we are pretty much experts in small business finance, Charter Capital does not provide tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax or legal advice. You should consult your own tax and legal advisors before engaging in any transaction.

April 10, 2019
Still Looking For Financing?

Many Small and mid-sized companies that are looking to grow are still running into difficulties when looking for financing: Loans are still hard to come by and can be more costly than before the recession. Commercial lending is still weak and small business lending remains flat. This indicates that securing a lending source is as difficult as it has ever been.

One study suggests that less than a third of small businesses that desire credit would qualify for traditional or SBA-backed loans. In the wake of a devastating financial downturn, banks have continued to tighten their lending practices in order to lower risk levels and comply with tougher regulations. This leaves millions of small and mid-sized businesses without a source of financing to grow or add new employees.

As the economy continues to struggle toward recovery, it is increasingly important for small and mid-sized businesses bolster their finances. Since it is well known that small and mid-sized businesses power the economy, it is possible that an increase in lending to this market segment could help further improve economic conditions and job growth.

Even if we are in the beginning of a period of economic growth, the fact remains that any rebound from the recession may be muted and difficult to see in real terms. Even though economists see recovery, it is still not strong enough to have any real impact on small businesses today.

Companies that are still looking for some form traditional bank financing are better off looking for private asset-based funding. During times like these, asset-based financing (such as invoice factoring) has come to the aid of the small business sector many times by providing the badly needed financing that traditional lenders are currently unable to consider.

Dealing with an uncertain economy is never easy, especially for small businesses. Unlike their larger counterparts, small businesses rarely have the resources to monitor and take corrective action for every trend and issue. And even those owners who have weathered numerous business cycles may be faced with new circumstances that confound their otherwise successful instincts and knowledge. But a predictable source of financing can certainly ease this pressure.

September 9, 2018
Blockchain. Bitcoin. Big Deal… or Just Big Hype for Small Business?

Blockchain itself has many types of uses beyond cryptocurrency.

“Two bitcoins, four bitcoins, six bitcoins, a dollar… all for blockchain, stand up and holler!”

It’s unlikely varsity cheerleaders are going to do that routine along sidelines anytime soon. However, there are a lot of people rooting for the increasingly popular blockchain and bitcoin, and headlines about these technological phenomenon now fill the news.

If you don’t know what either of these does, you’re rapidly becoming a minority. Both are sweeping the business world. First because each offers a revolutionary new way to conduct commerce, and second because they have become the “next big thing,” much like the dot.com bubble of nearly 20 years ago. Are blockchain and bitcoin appropriate for small business? And will this bubble, like all other bubbles before it, burst?

Let’s start with a few simplistic explanations. Blockchain began as technology that allowed digital information to be shared, but not copied. As far as the business world goes, blockchain serves as a ledger or spreadsheet of sorts, to record value. Unlike a paper ledger or an Excel spreadsheet, Blockchain resides on the Internet. As such, it can be used to verify and record endless transactions – initially monetary transactions, but eventually any type of transaction involving something of value. A key selling point is that by utilizing Blockchain, users never have to go through a bank, credit card, etc.

Blockchain is digital, however it is not housed in any single server or database. Rather it utilizes peer-to-peer network sharing (remember Napster, an early example of peer-to-peer?). This means, essentially, that blockchain is everywhere. It is truly public and transparent, and its files are continuously updated and reconciled. As for security, proponents say that its decentralized nature protects it from hacking and interference (blockchain also employs encryption). It is not controlled by a single entity that can be corrupted and it has no fixed location that can be compromised or fail.

Bitcoin is an outgrowth of blockchain. More accurately, bitcoin is, itself a blockchain. Bitcoin is what is more accurately known as a cryptocurrency – a digital currency in which encryption techniques are used to regulate and verify the transfer of funds, operating independently of a central bank. According to one source, bitcoin has been in existence since 2008. However, only in recent years has it grabbed the attention of the business world, and in particular, investors.

Trading in bitcoin has seen a rollercoaster of activity, with dazzling highs and terrifying falls. It is definitely not an investment for the faint hearted. At the moment, many respected observers claim the bitcoin market not only has all the trappings of a classic speculation bubble, but that the bubble may have already burst.

This article is not about bitcoin investing. However, with the incredible volatility surrounding bitcoin trading, many concerned national governments are considering cracking down on both Bitcoin and other cryptocurrencies. This could put its future in doubt. One of the touted benefits of bitcoin is that it is not regulated or controlled by any entity. If that were to change, who knows what could happen?

This article is more concerned with whether utilizing blockchain and bitcoin are a good idea for a small business. On those subjects, the results are mixed. Bitcoin is a cryptocurrency that is an outgrowth of blockchain. In other words, bitcoin is just one feature of Blockchain. Blockchain itself has many types of uses beyond cryptocurrency.

Blockchain, for example, can be employed to bring products and services to market cheaply and quickly. It can also help reduce data storage and security costs, easing the economies of scale problems that often hinder small businesses. Best of all, in terms of our discussion, it can help enforce contracts, particularly so-called smart contracts or cryptocontracts. These are computer programs stored on blockchain technology that directly control the transfer of digital currencies or assets between parties under certain conditions. Smart contracts can be of help in paying employees, paying bills, filling orders or invoicing.

Smart contracts can offer small businesses several advantages over regular legal contracts drawn up by a lawyer. For one, they are quicker and cheaper to execute as they cut out intermediaries and third parties. As they are stored electronically, there is backup, meaning the other party can’t claim to have lost it. Finally, they are encrypted to provide safety. Here is an example of how to set up a smart contract.

Of course, bear in mind that few, if any, systems are perfect. Such is the case with a blockchain smart contract. Obviously, with any type of computerized, electronic technology, bugs can impair programming. Human error can also occur during coding. Lastly, at the moment, there are almost no government regulations regarding smart contracts.

So, are blockchain and bitcoins an effective solution for your small business? That’s ultimately a question only you can answer. As with any business decision, it requires proper due diligence and careful consideration. There is a lot of hype and cheerleading going on about blockchain and how it’s the next “big thing” in business. Sometimes it can be deafening. We’ve presented some advantages and disadvantages to blockchain, bitcoins and smart contracts to get you started on making an informed decision.

March 2, 2018
Fixing the Problems Facing Small Business is Good Business

If you’ve watched television, listened to talk radio or read a newspaper in recent days, you might have noticed it’s election season. And of course, as with every election, candidates from every political party are making lots of promises about the economy, taxes, the middle class and jobs. Some candidates have elaborate 10-point plans. Others offer little more than glittering generalities. But there’s one area most candidates consistently overlook, and it’s one area that can have the greatest impact on the economy, the middle class and job creation: small business.

Where the Jobs Are

When a large company lays off hundreds of workers or implements a hiring freeze, that makes the news. It’s a dramatic scene to see people walking out of a tall office building or huge factory carrying their belongings, headed for the unemployment line. But when small businesses stop hiring, there’s scant mention, even though statistics show it’s small businesses, not large ones, where you find the most jobs.

Many Americans don’t realize that small businesses (companies employing 500 or fewer workers) make up an astounding 99.7 percent of all businesses in America, according to the Small Business Administration. More than half of all U.S. workers are employed by small businesses, and these firms create two out of every three new jobs each year.

So, in order to fix the economy and provide more jobs, shouldn’t politicians focus on small businesses first?

Problems Facing Small Businesses Today

Warren Buffett is one person who definitely understands the important role small businesses play in the American economy. Wait, isn’t Buffett, chairman and CEO of Berkshire Hathaway, one of the biggest big businessmen in the country? Yes, he is. But Buffett has used his unique knowledge of how to build successful businesses to identify several problems keeping smaller firms from growing.

Joined by two other prominent business leaders – Lloyd Blankfein, chairman and CEO of Goldman Sachs, and Michael Bloomberg, founder of Bloomberg LP and former mayor of New York – and Harvard business professor Michael Porter, Berkshire Hathaway recently opined in USA Today that four areas are currently hampering small business across the country.

Capital: Unlike large public companies that issue stocks to raise capital, small businesses rely on banks for funding and loans to grow. Thanks to increased regulation, banks are becoming more hesitant to issue loans, and when they do, it’s often for less than the small business needs. Buffet and partners contend that more lenient and generous loan practices would lead to more small business hiring, investment and growth, both for the firms involved and the economy as a whole.

Regulation: Small business owners are experts in the products and services they provide. But these entrepreneurs have to spend more time complying with government regulations and less time growing their companies. While regulations serve to protect the consumer and the environment, they also create complexities that stifle small business innovation. Buffet and his partners call for a streamlining of regulations, to make it easier for businesses to understand and comply, as well as to help small business to open faster and expand more quickly.

Skills: Many small businesses, particularly those in the manufacturing sector, report a gap between the skills needed from employees and the skills currently available in the workforce. Buffet and company urge government, higher education and employer cooperation in worker development. Targeted community college curriculums, training programs and internships could close the skills gap.

Technology: While technology is one area where prices traditionally fall as innovation creates more efficient systems, technology still represents a major investment hurdle for small businesses. Technology can lead to greater productivity, but in order to access it, companies need funding to buy it and workers with the skills to use it.

Addressing these issues won’t be an easy undertaking. But coming up with workable solutions to each of these four problems would go a long way to providing a path to growth, jobs and a healthier economy.

Alternative Financing Options Can Help Solve Some of These Problems

Small businesses already have one unique avenue for financing and funding help. Cash flow is always a concern for any company, but more so for smaller businesses, which as mentioned above, have less access to capital than their big business counterparts. Getting every dollar for services rendered is critical.

When an invoice is unpaid or is slow to be paid, it denies the small business owner money to re-employ elsewhere and to grow. Invoice factoring is one means available that can speed payments and improve a company’s cash flow. Basically put, an small business owner can factor an unpaid invoice to a third party and receive immediate funding that can be put to use then and there to grow the business, hire new workers or invest in new technology. Invoice factoring is one painless means available right now that can address the issues Buffet and his partners bring up to fix the problems now facing small businesses across the country.

Calvin Coolidge once said, “The chief business of the American people is business.” And when small businesses prosper, the American people prosper.

August 11, 2016