Tag: small business

Small businesses and small business owners

Slow-Paying Clients: 5 Strategies for Dealing with a Difficult Accounts Payable Department
Slow-paying clients have always been a concern for small businesses, but the pandemic brought concerns to a whole new level. While most small businesses have net 30 payment terms, around a quarter are now waiting 20-30 days past the due date for payment, according to a recent YouGov survey. Moreover, nearly one-third believe delinquent payments are putting their business at risk of closure.

If your business is dealing with a difficult accounts payable department or struggling with slow-paying clients overall, these five strategies will help.

1. Have Customer Credit Policies

Each time you allow a customer to pay after goods or services are delivered, you’re extending them credit. Unfortunately, many businesses don’t look at it this way and extend everyone the same level of credit or don’t have policies in place to determine who qualifies for which terms. Begin by creating an established policy that includes the items outlined below.

Who Sets the Policies

One person on your team should be responsible for setting credit policies and maintaining written documentation. Ideally, this person will work with the team to ensure all bases are covered.

How Pricing Overrides Are Handled

Sales teams are often allowed some wiggle room with pricing. However, it can cause billing confusion if there are no written guidelines on who can override your regular prices, to what degree they may override them, and how overrides are documented.

How the Extension of Credit is Handled

Your policy should include who on your team determines the creditworthiness of each client, including how much credit each client qualifies for and how long they can wait to pay.

The Full Approval and Denial Process

You must have a standardized way of assessing credit risk, as all accounts should be handled the same way to avoid legal concerns and minimize the risk of bad debts.

Policy Review Plans

Documentation should include when the policies will be reviewed and who is responsible for evaluating and revamping as needed.

Training

Everyone on your team will need training on your policies to ensure they’re applied in a uniform way. Map out your training process and keep a written log of training dates.

2. Ensure Customer Data is Complete and Accurate

Incorrect information can result in billing and payment delays, so customer data should be confirmed with each order. Your CRM or order management software should also include the terms for each customer, including the total allowable balance they’re allowed to reach and any relevant payment terms.

3. Implement an End-to-End Electronic Invoice and Billing System

Going digital is essential in the modern age. For customers, this means having access to an online portal where they can view and pay their invoices when it’s convenient for them—without having to speak to an agent. They’ll appreciate it and likely pay faster.

For the business, using an electronic system is priceless. You can automate repetitive tasks, eliminate manual entry and the errors that come with it, and free your team from having to manually process each payment.

It’s also a good idea to reevaluate your invoicing process. Many companies only send batch statements at the start or end of the month. If you switch to sending an invoice immediately after goods or services are delivered, cash flow naturally improves.

4. Create an Airtight Collections Process

Once you’re set up with a digital billing and invoice system, collections become much easier too. For example, you can automate reminders to pay, so it’s easy to let clients know when their due dates are approaching and when they’ve missed a deadline.

Just as you’ve set up processes for determining credit and billing, you’ll want to set up collections processes too. These should include the items outlined below.

Billing Intervals

Consider the full timeline, including initial invoices, notices to indicate payment is due soon, and overdue notices.

Payment Plan Requests

Sometimes even customers who traditionally pay on time will request a payment plan. Having a written policy is good for customer relationships and can help ensure you get some of the cash trickling in. These types of arrangements are typically best handled by an accounting department, as an accountant will be in a better position to map out a plan that benefits your company without letting emotion creep in.

Interest Accrued for Delinquent Accounts

It’s common for a late-paying customer to pay interest or fees on overdue invoices. Identify what your charge will be and ensure it’s properly documented and shared with customers. The latter will increase the likelihood of timely payments and cover your expenses for overdue ones.

Discounts for Early Payments

Businesses can often speed up payments by offering a small discount for early payments or pre-payments.

It’s worth noting that more than half of all small businesses believe their delayed payments are deliberate, per the YouGov survey. Using a mix of late penalties and early payment discounts discourages this practice.

When to Work with Debt Collectors

Determine in advance when it’s appropriate to hire a collection agency. Many work on a contingency basis, meaning they don’t get paid unless they collect from the customer. However, some have fees that can exceed the balance if it’s small, so you’ll need to identify the right criteria for your company and current setup.

When to Leverage Invoice Factoring

You may also want to incorporate invoice factoring into your collections process. Using this method, your invoice factoring company advances you most of the value of an invoice right away and then waits for payment from the customer. You’re able to use the cash in whatever way benefits your business most and the client can benefit from more relaxed terms. Working with a full-service factoring company like Charter Capital can help bridge some of the gaps in your technology and processes too, as you can benefit from free client credit reports and receive free collections services. That way, you can make more informed decisions about extending credit and are freed from chasing payments too.

5. Have Effective Tracking and Reporting Systems in Place

Having the right data makes it easy to see if your current processes are working for you and where issues are occurring. A few KPIs to track include:
- Average Days Delinquent (ADD)
- Days Sales Outstanding (DSO)
- Percentage of Current A/R
It’s also a good idea to track the habits of individual clients and set a threshold for the total number of allowable late payments. Because late payments cost your business money, there may be a time at which it simply doesn’t make sense to continue the relationship.

Reduce the Strain of Slow-Paying Clients with Help from Charter Capital

Charter Capital can provide you with same-day cash for your unpaid B2B invoices. We also offer perks like free customer credit checks and will follow up on invoices for you, plus have a digital invoicing system that makes processing a breeze. Best of all, most businesses qualify. Request a complimentary rate quote to learn more or get started.
April 28, 2022
4 Effective Goal Setting Tips for Small Businesses
Setting small business goals is one of the best things you can do to improve the strength of your company and overall odds of success but creating goals in a way that gets results isn’t always easy. We’ll walk you through the basics and cover various goal-setting strategies on this page, so you can start creating effective goals on your own right away.

Benefits of Setting Goals

Fewer than 20 percent of people say they write down their goals in vivid detail, yet this simple step makes a person 1.2 to 1.4 times more likely to reach their goals, according to research presented in Forbes. Experts say there’s a neurological reason for this.

Writing things down increases the likelihood that the information will be logged in long-term memory. By encoding it this way, we’re more likely to remember and act on the information. Keeping the visual representation of your goals where you see them daily helps too.

When you have small business goals, you also have:
- A greater sense of direction.
- Clearer focus on what’s important to your small business.
- Greater clarity in your decision-making process.
- More control over your future.
- Increased purpose and motivation to reach your goals.
- Greater personal satisfaction.
4 Effective Goal Setting Tips for Small Businesses

Once you’re ready to set small business goals, these four tips will simplify the process and increase the likelihood of meeting them.

1. Remember There Are Many Types of Goals

It’s helpful to think of your business objectives in a broad sense before deciding what goals to set. There are three main types: outcome, performance, and process. Work with all three to achieve your overall goals or big-picture goals.

Outcome-Related Goals

Most people think of outcome-related goals at first. These relate to the end of an event or the “win.” It’s usually easy to create outcome goals and identify when they’re met, but factors that lead to success with outcome goals aren’t always in your power. For example, a small business owner might set a goal of opening a second location but stall out in the purchase or financing process.

Performance-Related Goals

It’s a little easier to find success with performance goals because most of the factors involved are within your control. For example, maybe you want to increase sales by 20 percent this quarter. You can increase marketing and advertising, launch a new product, expand your business, or do other things to help ensure you reach your goal.

Process-Related Goals

Process goals relate to addressing strategy, workflow, and other areas that can help you reach your desired outcome. For example, maybe you want your sales team to close more deals. Rather than focusing on the number of deals to close, you might give them process-related goals that will set them up for success, such as contacting five additional leads per day.

2. Consider the 4 Cs of Setting Goals

Another thing to consider before starting to set goals are the Cs. Sometimes referred to as the three Cs or four Cs of goal setting, and used interchangeably, the items covered below can help you frame out goals in a way that leads to greater success.

Complexity

The number of contributing factors involved in reaching a goal impacts your success. Limit the number of working parts to increase your odds.

Challenge

Set small business goals that are a bit of a reach. If you set goals that are too easy, they won’t have the same impact, motivate you as much, or get you excited. It’s easy to become discouraged if you choose goals that are too hard to reach too.

Clarity

It’s also easy to become derailed if the goal or steps required to reach it are ambiguous. Make sure everything you envision and write down can create a clear path for someone else, even if you don’t plan to share it with anyone.

Commitment / Closure/ Completion

Create a full roadmap for your goal with regular check-ins to keep yourself committed, and what it will take to meet your goal. You may also want to consider what steps you’ll take if you meet roadblocks along the way and when to reevaluate your goal.

3. Conduct a SWOT Analysis

Short for Strengths, Weaknesses, Opportunities, and Threats, a SWOT analysis helps ensure the goals you set are more strategic in nature. That way, you’re not only more likely to be successful but will conserve resources as you move forward, too.

It’s helpful to include others in your SWOT analysis as each person will have a unique perspective and may uncover things you don’t think of alone. Consider enlisting your business partner(s), key employees, mentor, consultant, or close friends and family members.

Doing a SWOT analysis is simple. Just draw a two-by-two grid on a sheet of paper and add a SWOT category to each quadrant. Then, list out items that fit within each category.

Strengths

Create a list of your business’s strengths. These can include things your company does well, resources you possess, tangible assets, or qualities that set you apart from competitors. For example:
- Better pricing.
- More features.
- Bigger network.
- Larger team.
- Loyal customers.
Weaknesses

Create a list of things that make it difficult for your small business to be competitive. This may include resources you don’t have or things your company lacks. For example:
- Lack of capital.
- Low brand awareness.
- Inadequate supply chain.
Opportunities

The opportunities section should include external things your business can take advantage of to gain a competitive advantage. For example:
- An emerging need for your products or services.
- Lack of competition.
- Underserved markets.
Threats

List things that have the potential to harm your small business in the threats section. For example:
- New regulations that impact your small business negatively.
- Changing economic conditions.
- Changes in consumer behavior or attitudes.
4. Use the SMART Goals Framework

The SMART Goals framework is one of the most popular methods for setting goals. The letters stand for Specific, Measurable, Achievable, Relevant, Timebound. Use it in conjunction with the above steps to build out goals to increase odds of success.

Specific

A goal that’s specific includes a variety of details such as:
- What’s being accomplished.
- What steps are involved.
- Who is responsible for each step.
Measurable

Make sure it’s clear when you reach the finish line by quantifying your goal. For example:
- Boost sales by 20 percent.
- Open a second location.
- Have each sales rep reach five new prospects per day.
- Have each sales rep close one deal per day.
Achievable

The Cs are helpful when you consider what’s achievable. Is the goal you’re setting within your reach and control? If not, select a different goal.

Relevant

Consider your big picture. How is the goal you’re setting now contributing to it? If it’s unclear or doesn’t flow into the big picture, select a different goal or adjust it so it does.

Timebound

Decide what the cutoff point is for your goal. It’s a good idea to have both short and long-term goals. Your big picture is likely a long-term goal or several long-term goals. The short-term goals feed into it. Apply strategies for staying focused on business goals, like breaking these down into smaller milestones, to help ensure you reach your goals on time.

Get the Working Capital You Need to Meet Your Goals

If a lack of working capital is holding your small business back from meeting its goals, invoice factoring can help. It’s like getting an advance on your unpaid B2B invoices. To learn more or get started, request a complimentary rate quote from Charter Capital.
April 1, 2022
Factoring for Business: Enhancing Cash Flow & Growth

Run Your Business More Effectively: Many business owners only hear about invoice factoring services when they face cash flow issues and need a source of financing for working capital. However, it’s a valuable financing tool for overall cash flow management and long-term growth. We’ll go over the basics of the factoring process and discuss the advantages of factoring in business below.

The Factoring Process Explained

Also referred to as receivable financing, invoice factoring converts outstanding customer invoices your slow-paying customers might ordinarily pay in 30, 60, 90, or more days into constant cash flow your business can use right away.

Signing up with a factoring company, sometimes simply called a “factor,” is the first step. Once the relationship is established, you’ll send unpaid B2B invoices to your provider. They’ll advance you a portion of the invoice’s value, then wait for the payment from your customers. You can spend the money on whatever you feel benefits your business the most. Once your client pays, the factoring company will send you any remaining funds minus a nominal factoring cost.

Benefits of Factoring: Running Your Business More Effectively

By now, it’s clear to see how invoice factoring services can help you overcome cash flow challenges by accelerating payments or dealing with cash flow issues. Now let’s look at the benefits of invoice factoring in terms of the broader business landscape, particularly in managing late payments and improving cash flow management.

Advantages of Factoring and Flexible Funding Solutions

You can factor on-demand in most cases. So, you can choose to factor once and then never again, sign up and wait months to factor your first invoice, factor all your invoices, or just send in invoices occasionally as you need cash flow accelerated.

Think of invoice factoring for small businesses as an ace in the hole. It’s not just a business loan alternative, but a cash flow factoring strategy that allows for an improved cash flow, giving you the power to seize growth opportunities whenever they arise. For instance, security businesses can greatly benefit from tailored factoring for security companies, ensuring they can manage operational expenses like payroll while maintaining a steady cash flow.

Factoring Promotes Constant Forward Movement

Many traditional business funding solutions create debt, along with interest and long-term repayment terms that can stall momentum. It’s easy for growing businesses to get trapped making minimum payments without reducing the balance. Invoice factoring offers a different path—advancing cash based on your unpaid invoices and repaid by your clients, so there’s no debt to carry forward. This makes it especially valuable in industries with long billing cycles. For example, accounts receivable factoring for service companies makes it easier to maintain steady cash flow between invoicing and payment, allowing these businesses to meet expenses and keep scaling without relying on credit.

Streamlined Approval Process: The Ease of Qualifying for Factoring Services

If you’ve ever applied for a bank loan, you know it’s a lengthy process. There are credit checks, digging into your business and often personal finances, then weeks or months of waiting. The invoice factoring process is not a loan, so you’re not forced to jump through the same hoops. You can find out your rate the day you apply and even get paid for an invoice the day you submit it. This simplicity is one of the key advantages of factoring in business.

Making Informed Decisions About Your Clients

Factoring companies put more weight on the credit history of your clients. While you’re still free to work with whomever you wish, your factoring company will provide insights about creditworthiness, so you can take on more work for clients who are financially responsible and mitigate credit risk by limiting work for those with weaker histories.

Reducing Administrative Burden with Factoring

Some factoring companies, like Charter Capital, offer free collections services. You’re relieved from the task of chasing payments from customers, eliminating any labor or other expenses associated with late payments. This contributes to a more steady cash flow.

Speeding up Payments With the Factoring Process

Factoring companies have systems in place that encourage faster payment. For example, it’s common for factoring companies to provide clients with ways to pay their invoices online. They’re more likely to have multiple communication methods as well, so clients catch their statements sooner. Little things like these increase the speed of payment overall, alleviating concerns about cash flow, so money comes to you quicker.

Strengthening Client Relationships

When you work with a factoring company, you have more freedom to extend terms that are favorable to your clients. They’re balancing cash flow just like you, so having more flexibility in payment can reduce strain on the relationship for you both. This often makes it easier for clients to place larger or more frequent requests, which creates extra revenue for you, contributing to a more steady cash flow. To illustrate this point, consider how a business like a staffing agency works. In a typical arrangement, the staffing agency covers all the expenses associated with finding quality talent and pays workers weeks or months before the client pays them. Maintaining this type of relationship is crucial for the staffing agency’s health and growth but is undeniably financially difficult for the agency. By partnering with a staffing factoring agency, the business can continue providing payment terms that work for its clients while improving cash flow.

Increased Bargaining Power with Vendors

First and foremost, stabilized factoring cash flow makes it easier to keep up with your vendor payments, so you’ll develop better relationships with them too. In addition to this, you may be able to work out better deals with your vendors, thus enhancing your business growth opportunities. For example, you’ll be in a better position to qualify for bulk discounts. Sometimes vendors will sell stock at a discount when another client cancels their order as well. Because you can tap into cash as you need it, you can jump on these opportunities as they arise.

Building Better Credit

Factoring doesn’t build your credit by itself, but it can help you address all sorts of situations that influence your credit, like making timely payments. Companies often use their factoring cash for growth-related expenses as well. For example, it can help you purchase the supplies necessary to accept a large order, purchase new equipment, or hire more employees. As your revenue grows and stabilizes, banks will look more favorably at you when you want to borrow.

Streamlining Processes with Value-Added Factoring Services

Although many factoring companies simply offer factoring services, others go above and beyond to support their clients. At Charter Capital, we offer perks like digital invoice processing, so managing invoices is a breeze. Your client credit reports are free too.

We also offer industry-specific perks. As a freight factoring company, for example, our clients can tap into a free load board and fuel discount cards.

Focusing on Core Business Functions

You have a lot of jobs as a business owner. Chasing payments and constantly rebalancing things to make sure you have the cash to cover payroll and other vital expenses don’t have to be among them. By entrusting your collections and invoice processing to a factoring company, you’re able to focus on your core business functions and build a healthier company overall. This is one of the major advantages of invoice factoring.

Run Your Business More Effectively with Invoice Factoring by Charter Capital

With decades in the industry, full-service solutions to help your business thrive, and competitive rates that keep more money in your pockets, Charter Capital is America’s leading invoice factoring company. If you’d like to run your business more effectively through factoring, start with a complimentary rate quote from Charter Capital.

March 21, 2022
Business Partners’ Buy-Sell Agreement: What is it & Why is it So Important?
Business Partners’ Buy-Sell Agreement : Creating a buy-sell agreement is one of the most important things you can do to protect your rights to your business, ensure the longevity of your company, and avoid burdening your loved ones if you should ever become unable to continue managing it. It’s as essential as creating a will. Yet, just one-in-ten business owners have taken this crucial step, according to Forbes research.

On this page, we’ll go over what a buy-sell agreement is, how it works in various scenarios, and what to include in yours.

What is a Buy-Sell Agreement Between Partners?

Sometimes called a buyout agreement, a business prenup, or a business will, a buy-sell agreement is a legally binding agreement that stipulates how a business owner’s share of a company is reassigned if he or she leaves the business. It can address a variety of trigger events, such as:
- Death, Permanent Disability, or Incapacitation: Ensures ownership stays within the company and saves the deceased owner’s family from having to sort out a business they don’t understand and/or don’t want.
- Retirement: Ensures there’s a plan in place to end the partnership agreement amicably when one partner is ready to retire.
- Exit: Helps avoid conflict if a partner wants to sell or leave for any reason.
- Involuntary Seizure: Because ownership of a company is an asset, judges can sometimes rule that an owner’s stake be awarded to another party or sold. For example, a spouse might get some or all of an owner’s share in a divorce. Courts will sometimes get involved in debt-related situations or bankruptcies too.
Cross-Purchase Agreements vs Redemption Agreements

There are two common types of buy-sell agreements: cross-purchase and redemption. Although business partners can choose just one method, a mix of the two can be used as well.
- Cross-purchase: The remaining owners purchase the available share.
- Redemption: The business entity purchases the available share.
Can a Sole Proprietor Enter into a Buy and Sell Agreement?

Oftentimes, people think of buy-sell agreements in terms of partnerships or closed corporations, but they’re just as important for sole proprietorships too. In these cases, a key employee is usually given the option to purchase the business. It ensures there’s a continuity plan in place and that the business will continue to operate even if the business owner has passed away.

What Happens if You Don’t Have a Buy-Sell Agreement?

If there’s no buy-sell agreement in place and a sole proprietor passes away or becomes incapacitated, the business usually passes to the spouse or next of kin. It may also be given to the owner’s guardian to manage. It’s treated no differently than any other personal property owned by the individual.

The same is true in the case of death or incapacitation in a partnership. However, these arrangements also have challenges with retirement, exit, and divorce situations too. If the parties involved cannot agree, and the new owner has the right to sell, he or she may do so against the other partner’s wishes. If the situation prevents a sale, it may become a court matter. In these cases, judges often rule that the business must be dissolved or sold, debts paid, and any proceeds be split accordingly.

What if the Partner or Key Employee Can’t Afford to Buy the Available Share?

Buy-sell agreements typically address this through life insurance policies. Those who will purchase shares take out a policy on their partner. That way, if the business or share would ordinarily pass through to a relative or an estate, the intended shareholder can purchase it.

What Should a Buy-Sell Agreement Include?

Buy-sell agreements can be customized to the needs and wishes of business owners and will vary based on factors like the number of owners, as well as the type, size, and strength of the business. For that reason, it’s always a good idea to touch base with an attorney to ensure everything is addressed properly. A few things that are routinely included in buy-sell agreements are outlined below.

Valuation Clause

It’s important to determine how the business valuation will be handled ahead of time. Sometimes business owners determine a buyout price in advance or create their own valuation strategy. As a business grows, a valuation expert is usually brought in at the time of sale, and the purchase price is set at fair market value.

Buyer Limitations

Some contracts offer remaining partners the right of first refusal, meaning the remaining partner or partners need to be offered the available stake but don’t necessarily have to take it. Others get a bit more detailed about who the departing party can sell to. For example, a partner may only be allowed to sell to a private party rather than a corporate entity.

Payment Guidelines

In some situations, such as retirement or permanent disability, it may be better for all parties involved for the departing owner to have a slower exit. Rather than pay in one lump sum, the partner buying out the departing partner may make payments over a set period of time. It can reduce the strain on the buying partner while giving the departing partner a source of income.

How Can I Create a Buy-Sell Agreement?

There are lots of buy-sell agreement templates online. These can help if you’re in a bind and want something on paper fast, but it’s generally best to have an attorney draft a buy-sell agreement for you. That way, you can be sure it’s tailored to your company and doesn’t leave any ambiguous terms that might create loopholes or make it difficult to transfer ownership later.

Get the Cash Your Business Needs Today with Invoice Factoring

If slow cash flow is impacting your ability to create or execute a buy-sell agreement fairly, invoice factoring can help. It instantly turns your unpaid B2B invoices into working capital, so you can take care of whatever your business needs and focus on the way forward. Request a free Charter Capital rate quote to get started.

Disclaimer: The information provided in this article does not, and is not intended to, constitute legal or accounting advice; instead, all information, content and materials available are for general informational purposes only and may or may not be up to date. You should seek appropriate counsel for your own situation
March 4, 2022
7 Proven Ways to Manage the Impact of Inflation on Small Businesses
Nearly a quarter of small business owners say their greatest concern is inflation, according to the latest National Federation of Independent Business (NFIB). With the current inflation rate sitting at 7.5 percent—the highest it’s been since 1982—per the Bureau of Labor Statistics (BLS), it’s no wonder businesses are feeling the strain. What’s behind this shift and how can you protect your small business from inflation? Let’s take a look.

Primer: How Does Inflation Work?

The dollar in your pocket doesn’t buy what it used to. That’s generally to be expected, and it isn’t always a bad thing, but the growing pains can sting depending on how you and your business are impacted. There are two types of inflation: demand-pull and cost-push.
- Demand-Pull Inflation: The demand for goods and services exceeds production ability.
- Cost-Push Inflation: The rising price of input goods and services increases the final price.
How is Inflation Measured?

The most common way to measure inflation is through the Consumer Price Index (CPI). It uses a standard set of consumer goods and services, known as a market basket, and measures the change in pricing over time. For example, BLS readings from January 2022 showed a 27 percent jump in energy prices over the previous 12 months. There was a seven percent rise in food prices over the same period. Medical care approached a three percent hike.

A jump in a single area or even a few doesn’t necessarily signal inflation. Rather, the overall cost of goods and services must be rising for the definition to be met. Generally speaking, inflation rates:
- Below 2.3 percent is low.
- Between 2.3 and 3.3 percent is mild.
- Between 3.3 and 4.9 percent is high.
- Above 4.9 percent is very high.
The U.S. Federal Reserve monitors inflation, sets a target of around two percent, and adjusts monetary policy if inflation veers too far from its two-percent target. In other words, it’s normal for last year’s dollar to be worth 98 cents today.

Why is Inflation Skyrocketing Now?

The cause of the inflation surge may not come as a surprise to most small business owners. Simply put, the country is experiencing a mix of both demand-pull inflation and cost-push inflation. On one hand, consumer demand for certain products and services skyrocketed amid the pandemic. Conversely, supply chain disruption caused the price of input goods and services to climb.

7 Proven Ways to Protect Your Small Business from Rising Inflation

Before we dig into the most common ways to protect a small business from inflation, it’s important to note that you should always bring your personal finance professional onboard before making any financial decisions. What works for one business may not work for another, and certain strategies are only appropriate under specific circumstances.

1. Understand How Inflation Affects Small Businesses

While there are generalities associated with inflation, it can still impact businesses in unique ways. For example, many, if not most, businesses will see less revenue because consumers must make their dollars go further. However, businesses producing essential goods aren’t impacted to the same degree.

Another aspect is the decision of whether to raise prices. Whereas large companies with brand recognition can often get away with a price increase, smaller businesses usually absorb increased costs to retain customers.

2. Budget for Inflation

Take a hard look at your expenses to see if you can cut back or reduce costs. A few options include:
- Connect with suppliers to see if you qualify for better pricing or bulk discounts.
- Take advantage of prompt pay discounts from suppliers/vendors and consider asking for same if not already being offered.
- Renegotiate rent if your landlord is willing or move.
- Cut back on discretionary spending.
- Sublet unused space in your office or warehouse.
3. Invest in Assets That Beat the Effects of Inflation

While it’s important to keep cash on hand to run your business, any cash you hold will lose value in a period of inflation. Many traditional investment devices are the same. For example, traditional bonds and CDs aren’t generally good choices during periods of high inflation because they’re priced based on the fixed interest paid. Options with variable interest are generally better because they can rise with inflation.

The best bet, however, is appreciation-oriented assets, or assets that grow in value. Stocks, real estate, and raw land are common examples in the business sector. Options like cryptocurrency, rare art, and fine wine are leveraged as well.

4. Use Debt to Deal with Inflation

Employees usually receive wage increases to ensure their salaries keep up with inflation. By that token, a typical consumer could borrow a dollar today and then pay off their debt later with their higher wage. Small businesses, of course, do not get automatic wage increases to keep up with inflation, but many business owners are raising their prices to cover their increased costs. It works the same in this sense. If your prices rise due to inflation, any debt you take on will likely be easier to pay off.

Bear in mind, however, that interest rates and fees tend to increase as borrower demand rises. Interest rate hikes are one way the Feds try to correct inflation extremes too. In these cases, lenders, rather than the borrowers, tend to come out on top.

5. Conduct an Energy Audit

Energy is almost always one of the first, fastest, and highest to climb. You can reduce your burden by performing an energy audit and acting on the items discovered. For example, installing insulation and performing maintenance on your heating and cooling systems are generally affordable and can have a lasting impact on energy costs.

6. Invest in Growth and Diversify

It’s often said that the best way an individual can fortify themselves against inflation is to invest in personal and professional development. Doing so can help a person develop new skills and become more marketable. As a small business owner, you may want to take some additional business courses or pick up new skills and knowledge you can apply to your company to help propel it forward.

It’s a good idea to apply the same concept to your business as well. Can you reach a new market? Diversify with different products? The broader your company’s reach is, the less it will be impacted by economic shifts.

7. Collect Debts (Invoices) Promptly

When you invoice your clients after goods or services are delivered, it’s essentially giving them an interest-free loan. During periods of high inflation, the money you collect later will be worth far less than it was worth when you delivered. Look for ways to improve your accounts receivable process, such as shortening payment terms or incentivizing prompt payments.

How Small Business Owners Can Accelerate Their Cash Flow with Charter Capital

As a small business owner, the cash you have in your hands today and how you manage it determines how your company weathers inflation. If slow-paying clients are preventing you from growing, investing, or fortifying your business against inflation, factoring can help small businesses by providing immediate B2B invoice payments. To learn more or get started, request a complimentary rate quote from Charter Capital.
February 22, 2022
7 Ways Business Leaders Can Prepare for Success in 2022

7 Ways Business Leaders Can Prepare for Success.

Business leaders face challenges unlike anything else seen in the past. From absenteeism related to COVID-19 through supply chain issues and morale, what it means and what it takes to lead effectively has changed dramatically over the past couple of years. As you prepare for the upcoming year and beyond, addressing these seven areas will help you carve a path to success.

1. Nurture Relationships with Your Team

One-in-four employees quit their jobs last year, according to a CNBC report. Often dubbed “The Great Resignation,” the massive shift is causing businesses across the country to lose their most tenured employees. Unfortunately, researchers say companies are treating the losses as they did before the pandemic, with recognition programs and compensation reviews. Today’s employee isn’t dealing with the same challenges. They want work-life balance and flexibility at a micro-scale, researchers say.

Exit interviews can help business leaders gauge what’s happening on a larger scale and implement helpful programs, but it’s essential to be tuned into employees and their needs. Leaders must have the flexibility to accommodate before losses occur as well.

2. Invest in Development

More than half of all employees consider career growth and opportunity more important than salary according, to Forbes research. However, just one-in-five would recommend their company’s learning and development opportunities. Creating a solid learning plan for employees with clear progression paths can be a serious game-changer for businesses today.

However, it’s important to note that leaders require development too. Given the large shifts in the workforce, it’s essential to home in on skills that can help stakeholders lead through inspiration and address areas like diversity.

3. Forecast and Be Ready to Pivot

Constant economic shifts mean businesses must be running their numbers far more often and be ready to pivot as new information emerges. This ensures the business is agile enough to reduce budgets quickly as needed, yet can also seize opportunities to gain a competitive edge in stronger times.

4. Evaluate Your Client Experience

Customer loyalty has taken a nosedive in recent years, and outlets like Gartner say the single most important thing businesses can do to improve loyalty is focus on the customer experience. That doesn’t necessarily mean giving customers all kinds of bells and whistles or rewards, but simple things, like ensuring each connection with customer service delivers real value. Because of this shift, more than 80 percent of brands are increasing their investment in loyalty by five percent or more this year per Forrester.

While Forrester leans more toward the use of loyalty service providers and big data to help companies identify their weak points, smaller businesses can run their own internal surveys to identify what their customers want, areas in which they excel, and areas for development. It’s helpful for leadership and employees to go through various customer processes as well, as this can help your team identify friction and opportunities for improvement.

5. Leverage Tech, but Stay Human

Certain forms of technology improve the customer experience. For example, 46 percent of shoppers confirm inventory online before going to a store, according to Google research. Almost 60 percent say they research online first to ensure they’re making the best possible choice. Yet, 70 percent want the ability to shop in person too. These statistics show how important it is, not just to be both online and in-person, but for both experiences to work hand-in-hand to help the customer. Known as omnichannel, it’s one example of how technology can benefit your business.

On the flip side, sometimes technology can be a major flop for businesses. Such was the case for a major telecom company that leverages sophisticated tech to help gauge the seriousness of a customer’s concern before attempting to assuage. As reported by Forbes, the company ignored the long-term customer’s requests to match a competitor’s offers until the customer was already changing providers. Had a human been responsible for making the decision the first time, the story might have had a much more positive resolution.

6. Take Care of Yourself

Executive burnout is being referred to as “The New Pandemic.” Two-thirds say they’ve suffered from burnout in the past year, according to research presented by Digiday. More than three-quarters say managing their people has made them feel overwhelmed. While most employers recognize this upward swing in mental health concerns with their employees and have enacted policies to alleviate it. Unfortunately, 84 percent say they feel at least partially responsible for employee burnout rates per BenefitsPro. Furthermore, experts say leaders often don’t have the permission or language to ask for help when needed. If you’re the one at the top, you have the right and obligation to put these systems in place for yourself and your managers.

7. Become a Visionary Again

Chances are, you got where you are today by dreaming of the impossible and painting that picture vividly for those around you. It works! Inspired employees are more than twice as productive as their counterparts and the ability to inspire consistently ranks among the most important leadership traits, according to research compiled by Inc. magazine. But, between the burnout and the constant pivots caused by the pandemic, you may have, understandably, lost some of that spark.

Take some time to consider what ignites you most about your company and career. Get it in writing and spend time each day meditating on it. Make this year your year to dream again and share that passion with your people. They’ll start to dream alongside you again too.

Be Ready to Seize Opportunities by Accelerating Your Cash Flow

At the end of the day, all these lessons for business leaders require working capital. If your business is experiencing rapid growth and it’s impacting your ability to seize opportunities, invoice factoring can help. It’s like getting an advance on your B2B invoices. Your customer gets their standard payment terms, and you can get cash as quickly as the day you send your invoice. To learn more about invoice factoring and find out your rate, contact Charter Capital for a complimentary rate quote.

January 19, 2022
6 Leadership Secrets Every Small Business Owner Should Know
Leadership Secrets: Leadership skills are essential for all aspects of your career, from securing a job to advancing your career. Even if you have been in a leadership role for several years, leadership development programs that help you build vital skills around effective leadership can assist you greatly in your professional development and advancement. New business owners have a steep learning curve as they try to make their mark. Thankfully, you don’t have to create your own long list of failures to uncover the wrong ways of doing things! Many entrepreneurs have already taken care of this before you and, when you apply their wisdom to your own entrepreneurial path, you can shorten the learning curve and come out ahead that much quicker. Below, we’ll cover six leadership qualities and secrets of people who have consistently come out on top for you to draw from when you need a new source of inspiration or are trying to build business strategies that really work. However, first, we should break down the qualities of a good leader.

Characteristics of a Successful Leader: The Foundation of Business Success

There are many different leadership styles, and the one that you use should suit your personality and your business goals. Look at what you prioritize and decide how you would like to lead. Some of the most common leadership styles are autocratic, transactional, transformational, democratic, and empathetic leadership. Despite the many different styles, the important leadership traits remain relatively constant. Effective leaders:
- Are good listeners and communicators
- Constantly look to learn and improve
- Are service-driven
- Are accountable
- Are focused
- Are self-aware
- Are ethical
- Have a high emotional intelligence (EQ)
- Encourage strategic thinking, innovation, and action
The leadership traits and styles you embody significantly influence your team’s morale and your overall business growth. You are, first and foremost, a mentor and should lead by example.

Below Are Six Leadership Secrets To Help You Become A Better Leader:

1. Innovation Keeps Businesses Alive

“I have not failed. I’ve just found 10,000 ways that won’t work.” –Thomas Edison

When we think of Thomas Edison, we typically consider his best innovative ideas and many contributions to modern life, such as the incandescent light bulb, phonograph, and motion picture camera. What doesn’t get nearly as much press is how many times he didn’t hit the mark while working on his inventions and improvements. Thankfully, he saw these mishaps as a bit of a blessing rather than a failure and used what he learned to continue developing his ideas and eventually coming up with the perfect solution. This mindset was one of the many things that made him a successful leader.

When you apply the spirit of innovation to your company, think beyond new business trends and products. Consider ways to keep your team motivated, such as sponsor or mentorship programs as well as alternate paths up the company ladder, college courses employees can take that will benefit you both, and other things that might create a dream work environment. If you’re struggling for inspiration, check out publications like Harvard Business Review, Forbes, and Inc. for leadership tips, or see what other business leaders are saying on social media.

2. The Power of Effective Communication

“You can have brilliant ideas, but if you can’t get them across, your ideas won’t get you anywhere.” –Lee Iacocca

Perhaps best-known for innovative ideas like the Mustang, Lee Iacocca was a major driving force behind the success of Ford Motor Company for more than three decades. Ultimately pushed out by Henry Ford II for being too bold, Iacocca no doubt understood the importance of effective communication all too well.

Iacocca didn’t flounder, though. Instead, he was immediately picked up by Chrysler. Though the company reported a $159 million quarterly loss the day his CEO appointment was announced, it made a cool $723 million the year he left.

“Listening can make the difference between a mediocre organization and a great one,” Iacocca said. He didn’t simply share his ideas with others. He attributed his success to open communication with employees and customers alike. Having an open line of communication helps build trust and professional relationships with your employees, which ultimately results in higher office morale, increased performance, and better productivity. Keep in mind, true leaders know that listening is the key to effective communication; prioritize listening to your employees and approach their concerns with empathy, compassion, and professionalism.

3. The Value of Seeking Advice

“I think it’s very important to have a feedback loop, where you’re constantly thinking about what you’ve done and how you could be doing it better.” –Elon Musk

Elon Musk may come across as a confident take-no-prisoners entrepreneur, but he’s well known for soliciting the advice of those around him. “Don’t tell me what you like; tell me what you don’t like,” he’s said. It’s perhaps because of this trait that he’s become known as one of the biggest innovators of our time.

The culture around him may not have always been this way. Prior to a 2016 SpaceX launch, Musk reportedly asked for the top ten risks of the mission. It was the 11^th on the list that led to a fiery end to the launch. “If people are going to be afraid, I’d rather they’re afraid of what will happen if they stay silent than being afraid of what will happen if they speak up,” he said. “We’re not going to have a culture where the messenger gets shot. We’re going to celebrate the person who called a potential threat or risk to our attention.”

Since then, Musk has made it part of his company’s long-term goals to foster open dialogue at every level. To help your company build bonds or friendships that encourage free sharing, consider teamwork activities in place of team meetings from time to time. As people get to know one another better, more sharing and challenging of ideas tends to occur organically.

4. The Impact of a Clear Vision

“Build the castle first.” –Walt Disney

Walt Disney was turned down by 300 bankers and financers when planning Disney World, according to Forbes. They didn’t think he had an idea that would pay off or a sustainable business model. But, Disney had a grand vision of what he wanted to achieve, and he stuck with it despite the naysayers. When he finally got to start bringing his idea to life with his own cash reserves, Disney reportedly told his crew to build the castle first. He believed that by starting there, others would see the big picture and start to share in his vision too.

This wasn’t the first or the last time Disney applied this tactic, either. When he was afraid he wouldn’t get buy-in for Snow White, the animator literally acted out every scene and every character to get the team excited about creating it.

As a leader, the worst thing you can do is put yourself in a bubble or create barriers between you and your team. Your vision, and your passion for seeing it through, are contagious!

5. Perseverance Will See You Through

“I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.” –Steve Jobs

It’s easy to look at what Steve Jobs accomplished with Apple and think he had an easy path, but the real story is quite a bit darker. While he was indeed co-founder of Apple in 1976, a title he shared with Steve Wozniak, Jobs was forced out of the company in 1985. The above quote was made that same year as Jobs launched his new company, NeXT Computer, later acquired by Apple, thus bringing Jobs back into the fold.

Jobs contended that the enormous workload a new entrepreneur carries results in 18-hour days, seven days a week, during the early stages. “You’ve got to have an idea, or a problem, or a wrong that you want to right, that you’re passionate about,” Jobs continued. “Otherwise, you’re not going to have the perseverance to stick it through.”

As a small business owner, it can be difficult to cope with the burden of your new life but remember that almost nothing is forever. Businesses even come back from bankruptcy. A few examples include General Motors and Marvel Entertainment. Even Apple hit a serious low in 1997 but was brought back from the brink. Whether you’re struggling with cash, people, products, or something else, you can push through it and come out stronger.

6. Attract Fresh New Talent Through Social Media

“Social media allows you to make your jobs more human. Tell talent about the people behind the products. Trust your recruiters to be your digital warriors.” –Celinda Appleby

You may not have heard Celinda Appleby’s name before, but she works in a space known as “recruitment marketing,” serving as the Director of Global Talent Attraction for Visa with an impressive resume that includes the likes of Nike, Oracle, and HP. While she doesn’t necessarily dig in the trenches of social media to find new talent, she uses various platforms for employment branding, showcasing how an employer has a culture, growth opportunities, and incentives that job searchers will find irresistible. Other tactics she keeps in her wheelhouse include choosing the right platform for the demographic and using employee-generated content often.

As you explore the options, LinkedIn may be a great place to start, but don’t limit yourself. You may find your target demographic is more active on Facebook, Instagram, or another social media site. Cut through the weeds and focus on what works best for you and your ideal candidates.

Don’t Let Cash Flow Problems Stand in the Way of Your Business Growth

Business growth can be hindered by cash flow issues, a common challenge that many businesses encounter, especially during peak times and periods of rapid expansion. But, if slow-paying clients are preventing you from innovating, attracting talent, or leveling up your business through any of the leadership skills outlined here, your company growth can stall. Invoice factoring will help by giving you an instant cash advance on your unpaid B2B invoices so that you can focus on the future. To get started, request a complimentary quote from Charter Capital today!
December 9, 2021
6 Common Challenges Startup Businesses Face
About a million small businesses launch every year, according to the U.S. Small Business Administration (SBA). More than three-quarters make it to the two-year mark, but certainly not without grit and the ability to overcome the multitude of startup challenges entrepreneurs face. Whether you’re already wrestling with issues or want to prepare yourself for some of the biggest challenges in the startup journey, you’ll walk away with the insights you need here.

1. Cashflow

Poor financial management is one of the leading reasons why startups fail. According to research presented by the National Federation of Independent Business, Inc (NFIB), eight out of ten business failures can be traced back to poor cash flow management. To be clear, this is distinct from profitability. New businesses can be profitable and still fail due to cash flow issues by doing things like failing to collect on invoices in a timely manner or overspending based on their available working capital.

Good bookkeeping is paramount here, particularly if you’re making good predictions about your cash flow. However, you still may find yourself in a bind if you face unexpected expenses or a large invoice goes unpaid for an extended period. Founders can also struggle during periods of rapid growth simply because you’re funding the cost of more orders, additional payroll expenses, and greater overhead with the limited resources you amassed before leveling up.

It’s imperative to have multiple funding solutions to fall back on when this happens. It’s also wise to think beyond traditional lending, as just 44 percent of small businesses that apply for loans, lines of credit, and merchant cash advances receive full funding per the latest Small Business Credit Survey. Consider applying for invoice factoring. It works by giving you immediate payment on your B2B invoices and has much higher approval rates. Plus, you can typically choose which invoices you want to factor, so you can set it up and not use it until you need a cash injection.

2. Partnership Decisions

Nearly 87 percent of nonemployer and 13 percent of small employer small businesses are sole proprietorships, meaning there’s a single person at the helm. Running a sole proprietorship may seem ideal if you’re not keen on involving someone in your business decisions or sharing the profits, but there are advantages to bringing someone else on board. For example, teams with more than one founder outperformed solo founders by 163 percent, according to First Round research. Seed valuations are also 25 percent less for solo founders, which can be a major sticking point if you’re trying to entice potential investors or making a case for other forms of funding.

If you’ve already worked successfully with someone in the past, choosing a partner is easy, provided that person is eager to work with you again. If not, you still have options.
- Connect with other entrepreneurs through local organizations to see if you can find someone who complements your skillset.
- Explore working with investors who have experience and connections in areas you don’t.
- Hire employees who might serve as cofounders and give them the opportunity to demonstrate their skills before bringing them on as an equal.
3. Hiring Suitable Employees

Hiring good employees is one of the biggest business challenges startups face. Unless you’re starting with a major chunk of cash, employee pay is typically going to be lower, there won’t be a swanky benefit package, and work/ life balance is often an issue. Adding to this, the most qualified candidates are all too familiar with the failure rates of startups, which can make them wary of even entertaining a conversation.

Thankfully, you can overcome many of these challenges by highlighting what you can offer good candidates, such as rapid career growth and positive company culture. You may also want to include perks like stock options or flexible schedules.

It’s also worth noting that your earliest people will need to wear many hats and serve specific purposes. Spend time evaluating your business plans and the types of people and skills you’ll need to get to where you want to go, then hire strategically to ensure each person is a good fit for your needs.

4. Fierce Competition

There’s undoubtedly fierce competition in every industry and learning how to deal with yours is key to business success. As a small business owner, it’s easy to get caught up in what each competitor is doing too. You may see one on social media and want to develop a following like they have or invest in product development to outdo someone else’s latest feature.

The thing is, you can’t outdo everyone at everything. Each competitor has distinct advantages that have helped them get where they are. Instead of focusing on what they’re doing well, look more at opportunities they’re missing or areas in which your startup has an advantage over them.

5. Finding Customers

Finding customers fast is key for startup businesses. Your survival hinges on it. But, what can you do when you don’t have a massive advertising budget like your competitors?

For starters, get familiar with your target market. Do research to find out who might use your products or services, what might motivate them to buy, and what stands in the way of them making a purchase. To start, you may want to focus on a group your competitors are overlooking or that you can make a unique case for.

You can also attract new customers through an educational blog. Share helpful information on topics your audience cares about on platforms like Facebook and LinkedIn depending on where your target audience congregates. Research shows it’s equally important for a CEO to have an online presence too. Not only does it build bridges with employees, but will help humanize the brand and it will help with PR concerns, per Forbes research. In other words, just being active online will help address many of the common challenges you face and it’s easy to do.

Ask for feedback as you grow your customer base as well. That way, you’ll learn more about what your prospects are looking for and identify ways to boost loyalty too.

6. Time Management

New startups are demanding and there’s only one you. Plus, you need time for sleep, family, and personal interests. Around 30 percent of entrepreneurs suffer from depression and 50 percent of those who hit that stage wind up with burnout, according to Entrepreneur magazine. Effective time management means giving yourself what you need to feel good and help your business down the path of success too. If you’re coping with small business problems, carving out the necessary time for things like sleep may fall low on the priority scale compared to something like making payroll, but when you manage your time effectively, you don’t have to choose. Consider these quick tips:
- Delegate as much as reasonably possible.
- Let go of the idea of perfection.
- Outsource specialty work, such as bookkeeping and legal contracts.
- Break up your longer projects into small tasks that you can accomplish in one sitting.
- Create a schedule that allows ample time for tasks and stick to it.
Address Your Financial Startup Challenges with Factoring

Find yourself short on working capital due to increased sales, certain times of the month, or during slow periods? Invoice factoring may be the easy-qualify, no-debt solution you’re looking for. Learn more and request a free Charter Capital rate quote now.
October 27, 2021
The Best Business Structures to Consider for Tax and Legal Purposes
Which business structure is best? There are several types of legal structures to choose from, each with its unique benefits and challenges. It’s a good idea to familiarize yourself with all the options when you’re setting up a new company so you can select the right structure for your needs and make sure it will suit you in the long run too. We’ll give you a quick overview of the options and some tips to help you choose the best one below.

Choosing a Business Structure That’s Right for You

First and foremost, your business structure impacts how much you’ll pay in taxes and how your taxes are paid, plus determines your personal liability for business-related issues. It also affects how you can raise money and the types of paperwork you file. With that in mind, there’s no singular “best” business structure. Instead, you’ll want to choose the one that aligns with your business needs.

Can My Business Structure be Changed?

Before we begin, it’s important to note that the ability to change a business structure depends on the structure you’re presently using. It works in a linear fashion. For example, if you start with a structure designed for one owner, you can change it later to include multiple business owners or to a more advanced level. However, if you’re running a corporation, you cannot change the structure later. You’d have to dissolve the corporation and create a new business. For that reason, it’s always a good idea to speak with an attorney and/or accountant specializing in business matters.

Different Types of Business Structures

Sole Proprietorship

Sole proprietors have total control and ownership of their companies. With more than 23 million sole proprietors across the United States, this is the most popular option for small businesses per Small Biz Trends. All assets and liabilities are exclusively yours and indistinguishable from your personal assets and liabilities. You’ll even pay taxes, under ordinary income tax rates, on your business earnings when you file your personal tax returns rather than paying taxes separately as a business. This is known as pass-through taxation or flow-through taxation.

It’s easy to file sole proprietorship paperwork. Your business will automatically be designated as one if you’re doing business alone as well. You can operate under a trade name or “doing business as” (DBA) name for professionalism or privacy too. However, raising money as a sole proprietor can be more difficult as banks and investors are a bit more hesitant to lend, and you can’t sell stock.

Partnership

Partnerships are the simplest business structure for two or more people. Though there are several types that vary in form and function, taxes are managed through personal returns in all of them, but sometimes there are additional IRS requirements.
- The general partner has unlimited liability and must pay self-employment taxes, but also typically has more control over the company than the limited partners do.
- Only certain types of professional service businesses qualify for this designation. The list varies by state but typically includes professionals like doctors, attorneys, accountants, and so forth.
- Limited Liability Limited Partnership (LLLP): There’s a gap between LPs (Limited Partnerships) and LLPs (Limited Liability Partnerships) that leaves general partners unprotected from business issues. In the past, some businesses would create an LLC to serve as the general partner to avoid the risk. Nowadays, some states allow the creation of an LLLP to serve the same purpose.
Filing partnership documents for any of these arrangements is comparatively easy. However, it’s always a good idea to have an attorney examine the partnership agreement to ensure there are no questions or misunderstandings about the rights, privileges, and profits any partner will receive.

Corporation

A corporation is a distinct legal entity from its owners and has its own rights. There are several types of corporations.

C Corporations: A C corp can own and sell property and sue or be sued. It’s also responsible for paying income tax. This is done when the profit is made and when dividends are paid to shareholders too. Corporations can raise money through the sale of stocks and usually have an easier time getting funding from banks and other sources. However, it’s more expensive to form corporations compared to other options. A C Corporation is not only subject to corporate income tax, but its owners must still pay personal income tax on profits (known as double taxation). Plus, there’s less flexibility for management as corporations are required to have a board of directors, and additional recordkeeping is involved.

S Corporations: S corps are the most common business structure for small businesses with employees. The biggest benefit to running an S corp over a C corp is that double taxation of profits is not an issue. Only shareholders pay taxes on profits received. However, there are additional requirements to file as an S corp, such as all shareholders need to be U.S. residents. There are limits set on how stocks are handled too. For example, there can only be a maximum of 100 shareholders, and owners can only get common stock.

B Corporations: Sometimes referred to as a benefit corporation, a B corp is guided by a societal mission. It aims to generate profit and provide some kind of public benefit. Taxation is the same as with a C corp. However, B corps can qualify for additional certifications that can shape public perception and sometimes qualify for special programs or discounts.

Limited Liability Company

A limited liability company (LLC) is similar to a hybrid between a partnership and a corporation, though you can also form one alone. Your personal assets are largely protected under an LLC, and double taxation is not an issue. Taxes on profits are paid by the individuals on their personal returns rather than at the corporate level. However, all members of an LLC must pay self-employment taxes and contribute to Medicare and Social Security.

Guidelines vary quite a bit at the state level, so it’s a good idea to check your local laws to see how they’ll impact your business before settling on an LLC.

Cooperative

Cooperatives are unique in that they’re owned and operated by a group of members for their own benefit. These members, known as user-owners, usually vote in a board of directors who make decisions for the cooperative. Any profits are split, and taxes are paid as a pass-through.

Best Type of Business Entity for Tax and Legal Purposes

There’s no single best type of business entity. But, again, each one comes with unique advantages and disadvantages, so you’ll have to familiarize yourself with them all and see what fits best with your business needs. The highlights are covered below.

Considerations Before Choosing a Business Structure

As you’re deciding which business structure to choose, consider the following questions:
- Am I ok with being held personally liable for my business debts or lawsuits?
- Do I want to retain total control of my company, or am I ok with a board making decisions?
- Does the option I’m considering minimize my tax liabilities?
- Will I be able to get the funding my business needs with this business structure?
Get the Funding You Need at Any Stage

Small businesses often have a difficult time getting the funding they need to grow based on the type of legal structure they choose. At the same time, it’s not always best for the business to move to a more advanced business structure, as moving can drain resources and reduce the amount of control you have over your business. If your company is struggling with funding issues, consider invoice factoring. It’s like getting an advance on your unpaid B2B invoices, except your clients pay the factoring company rather than you after you’re funded, so you don’t accrue debt and are free to move forward. To learn more, request a complimentary rate quote from Charter Capital.

DISCLAIMER: This article is not intended to provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
October 13, 2021
5 Reasons to Consider Using a Third-Party Payroll Service

5 Reasons to Consider Using a Third-Party Payroll Service: Considering using a third-party payroll service? You’re far from alone. Nearly half of all small-business owners describe processing payroll as “confusing,” “complicated,” and “frustrating,” according to a survey published by Small Biz Trends.

Yet, as much as a thorn in your side as it may be, payroll can’t be delayed. Nearly 70 percent of professionals say it would be very or somewhat difficult to meet their current financial obligations if their paychecks are even a week late, per the Getting Paid in America Survey.

Could payroll outsourcing be a better solution for your small business? Let’s take a quick look at who it works best for and reasons it might be time to find a good payroll company.

In-House vs Outsourcing: Which is Better for Your Business?

As a small business owner, you’re likely involved in every core aspect of your organization, from managing finances to overseeing your in-house human resources department. According to Small Biz Trends, a staggering number of business owners find themselves knee-deep in financial activities. But, as statistics show, a whopping 79 percent of them find the payroll process, especially staying compliant with payroll taxes, extremely time-consuming. This pain point often leaves many pondering the many advantages of alternative payroll solutions.

That means your choices generally boil down to outsourcing your payroll services or hiring someone and keeping the job in-house. Bear in mind, a full-time payroll specialist earns a little over $50,000 per year on average per PayScale, which puts having a full-time professional out of reach for most. In most cases, that would be overkill too, but you should still expect to shell out around $20 per hour as a base wage even if you’re not going full-time. Still sounds like a lot? Let’s look at outsourcing.

Considering these expenses, the benefits of outsourcing payroll start to shine. Third-party payroll services offer expertise and experience in managing payroll efficiently and can also handle tax withholdings, ensuring compliance with evolving tax regulations.

5 Reasons to Consider Using a Third-Party Payroll Service

Paying a third party to manage your payroll can be surprisingly affordable, with fees ranging anywhere from $25 to $200 per month, according to Chron. However, it’s not so much the upfront savings that make finding third-party payroll services a slam-dunk decision for small-business owners, it’s the five reasons outlined below.

1. Data Security

Whether you’re crunching numbers manually or using payroll software, you’re ultimately responsible for confidential payroll data. That means if your computers are hacked, or someone unintentionally leaks info, you may be legally liable for an employee identity theft that occurs. When you choose an outsourced payroll provider, they’ll have measures in place to keep data secure so you and your employees are protected.

It’s also worth noting that payroll fraud impacts 27 percent of all businesses, according to Forbes. Small businesses face double the risk as their larger counterparts in this respect. Common issues include having ghost employees on payroll and padding or falsifying hours. Payroll service providers can help protect you from embezzlement and fraud by using sophisticated software to monitor for the telltale signs.

2. Government Regulation Compliance

Different labor laws across cities and states are a major complaint for 70 percent of business owners, per Small Biz Trends survey data. With complex rules that change at every turn, it’s easy to underestimate your tax obligations. Not surprisingly, about a quarter in the Small Biz Trends survey have been taken to task by the IRS, with 15 percent being audited and 17 percent facing fines.

Stats from the American Payroll Association are a bit more grim, indicating that around 40 percent of small businesses face an average of $845 in IRS penalties annually, as reported by B2C.

On the bright side, payroll services providers have expertise in tax regulations. You can rest assured your tax filings are being handled appropriately and that withholding for things like Social Security and Medicare are accurate.

3. Save Time

Small-business owners spend nearly five hours per pay cycle just managing their payroll taxes, according to Small Biz Trends. All that calculating, filing, and paying eats away 21 days each year. Certainly, this is time better spent on all the other important aspects of your business.

Yet, this only speaks of the payroll process itself. Oftentimes, third-party payroll services will handle other HR tasks too. For example, they may help manage employee benefits and compensation packages or offer employee self-service portals so team members can monitor their pay stubs and request changes as needed. Many provide direct deposit too. With direct deposits, paychecks are automatically added to employee accounts, which saves them a trip to the bank and you the trouble of disbursing checks.

Consider all these additional time-savers when calculating the expense and benefits of working with a third-party payroll service, and you’re likely to see you’ll come out on top by a significant margin.

4. Reduce Payroll Mistakes

While up to eight percent of companies use traditional timecards, leading to errors, 82 percent of small businesses manually review their payroll processes, making in-house payroll management time-consuming. By outsourcing to third-party payroll service providers, companies gain access to professional payroll expertise. These providers streamline payroll operations, ensuring compliance with tax regulations and offering cost-effective, cloud-based solutions.

As businesses grow, the benefits of outsourcing payroll become evident, safeguarding against costly penalties and ensuring efficiency in payroll practices.

5. Recruiting Support

Ever hire seasonal or temporary employees? Or maybe do temp-to-hire programs? Sorting out the new hire details can be incredibly difficult, especially if your new hires are subject to different guidelines. An outsourced payroll company will take care of all the calculations and ensure you follow pay-related regulations, so you can grow your business confidently.

Benefits of Outsourcing Payroll for Small Businesses

For startups to established businesses, the benefits of outsourcing payroll to third-party service providers are clear. By partnering with these experts, companies free up valuable time, streamline their payroll process, and ensure data security. Such professional assistance guarantees compliance with shifting tax regulations, reducing the risk of costly penalties. These third-party payroll services provide cost-effective solutions and a team of experts equipped with cutting-edge payroll software, ensuring accuracy and timely payments. By leaving the intricate aspects of payroll in trusted hands, businesses can focus on core growth objectives.

Get Help Funding Payroll with Invoice Factoring

While third-party payroll service providers can take the headaches out of your calculations and streamline your processes, they’re not always a good solution if you’re short on cash and payday is looming. That’s where invoice factoring comes in. It gives you an immediate cash injection by turning your unpaid B2B invoices into working capital right away, so you’re not stuck waiting 60, 90, or more days for your clients to pay. To learn more, request a complimentary rate quote from Charter Capital.

September 3, 2021