Innovation for our customers.

September 7th, 2010 by uio1
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The most annoying thing about being an independent contractor is when your customers don’t pay their bills on time so that you yourself can pay your own bills. But this is normal in business operations, it happens all the time. So it should be noted that this is nothing personal. Let us discuss some points to consider so that your clients are compelled to pay on time.    

Try motivating them with a discount strategy. If they pay earlier they get a discount of, say, 2 percent. It does work very well on everyone. Utility companies use this strategy and we always pay our bills on time.  It is guaranteed to effect behavior change from your slow-paying customers. If you have a big fish client who always pays late for, say, six months, then you can raise their bill by adding the amount of six months worth of interest. Of course, if they pay earlier you can carry over the excess to their next bill.

If possible ask to be paid in advance. After all, rendering a service should entail motivation. Thus, some clients wouldn’t object to paying cash in advance so that they are ensured that you will do a good job. But there are certain drawbacks to this, one of which is you are going to be carrying a lot of cash in your person. This would be a problem if your service was carried out overseas. You would have a hard time explaining to customs that you are not a drug dealer or a counterfeiter.  

Another drawback is banks don’t take lightly if you deposited a large sum of money (unless, of course, if you have a Swiss account). They would be asking a lot of questions about where it came from.

There’s another accounts receivable circumstance that may sound too good to be true but nevertheless can create some repercussions later. Sometimes some mistake happens in the Accounts Payable Department and they pay for the same job twice.  

If you value your clients enough, you would always provide them the best possible service. And if you value the integrity of your own business, honesty is always the best policy. Upon attempting to return the second check, you might be making them look bad by pointing out a mistake. If they would insist that they made no such mistake, you’d be placed in a tight spot. You have a choice to just take the check. But what if they find the mistake in their records? They would be thinking that you were dishonest. The best solution would be to deduct the check’s amount from their next bill and call Discount

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Recommendation debtor

September 5th, 2010 by uio1
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An accounts receivable manual provides accountants with direction and guidance regarding accounting transactions, procedures and reports that should be standard and uniform throughout any business or organization. It is an official document used for business accounting policies and is usually housed in a company’s accounting department.

An accounts receivable manual helps a company keep a system in place to handle accounts receivable in a timely and efficient manner. It explains what accurate data entry is, and how it is key to managing point of sales and payments. It explains how to reconcile accounts receivable ledgers to accounts receivable accounts. It also gives times lines for when transactions should occur, i.e. weekly, monthly, etc.

Accounts receivable manuals explain how to match beginning accounts receivable totals to the final accounts receivable totals, and how to post payments in a general ledger. It also outlines accounting staff responsibilities for internal control purposes. For example staff that is responsible for the management or collection of account receivable must not handle or be responsible for the processing of any receipts. Payments received in error or paid in excess of the invoice total will be refunded to the payer. No refund will be made if other invoices are outstanding on the customers account and attempts should be made to negotiate with the customer Application of invoices outstanding overpayment.

This guide will help each account. The accounting firm will one day need to know to help your business smoothly instructions refer to any good business foundation.

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The value of the item and what work

September 4th, 2010 by uio1
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Real estate for many people is still the ideal way of investing and earning profits. While there are no quick and easy ways to instantly and effortlessly get profit, there are ways for people to earn without having the enormous funds that are usually associated with purchasing homes, lots, and real estate in general. You may have heard of simultaneous closings in the real estate industry, and how it has helped generated income for people in the past. If you want to get into the activity, here are what you need to know about transactional funding and how it works.

Simultaneous closings

Buying and selling in the real estate industry is one of the general and most common ways of making a profit. Imagine that you have found an excellent piece of real estate property that you know would fetch an excellent price in the market, or which another investor or buyer is looking for. If you can own the property, the implications for you are good – you get the upper hand and will be able to sell the property to the other investors who need the lot. In the past, one of the easiest ways to make money out of these ideal situations is to undertake simultaneous closings, which are essentially back to back deals where you purchase property from seller X, which you will immediately sell again to buyer Y.

Quick flips and dry closings

Simultaneous closings allow you to earn without having to shell out your own money, since the lot you purchase from seller X is immediately paid for by the funds from buyer Y. This is otherwise called a quick flip, and is one of the most profitable in the industry in the past, since you are essentially making money the quick way. These transactions, which are called ‘dry closings,’ are one of the ways that the common man and woman has entered in the real estate playing field, without having to bear the brunt of the capital usually needed for real estate dealings – which could amount to as high as several million dollars, depending on the type of property that you are looking into.

New requirements

New requirements from the state and the federal officials have made simultaneous closings, quick flips, and dry closings more difficult. Today, these transactions are not illegal per se, but are undergoing much more scrutiny than it has faced in the past. What this means is that many title companies today no longer want to undertake the hassle of state and federal assessments and investigations, which can take quite some time and which may require more work out of the deal than is necessary. For more and more people, the question then is what to do when faced with the opportunity and the problem of simultaneous closings.

Transactional funding

This is exactly where transactional funding comes into play. Essentially, this is a type of service where investors like you are given the opportunity to use a type of loan called the bridge loan, that allows you to undertake the simultaneous closings safely and with the backing of money provided by the loan. The barrier of scrutinizing federal and state agents are removed since you are no longer conducting dry transactions or deals where money is transferred from the buyer to you, and from you to the seller. With transactional funding and the bridge loan under it, you are already conducting valid closings that give you the opportunity to make money out of opportunities in the form of simultaneous closings.

Funding source

With transactional funding programs, the investor such as you is essentially making use of the funds of the transactional funding company. You may use the transactional funding company’s name or your own company title, depending on the deals that you have chosen. There are fees, of course, for these types of services and using the loans, but since you do not actually put any money out on the table, the pros balance out the fees in the end.

The next Buy Bond welcomed the end of some products that you know by chance and control of acquisition and that you experience when you walk through the support of commercial transactions.

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In short, the money – and working capital.

September 3rd, 2010 by uio1
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A short-term financing alternative generally refers to business funding options that do not include traditional loans. Businesses usually seek out alternative financing when immediate working capital is needed for day-to-day operating expenses. These alternatives offer many benefits over traditional financing options.

One short-term financing alternative is factoring. Factoring means that a business sells its accounts receivables at a discount to another company. This company, called the factor, usually requires businesses to have been and currently be processing credit card orders. Most applications are quick and easy to fill out, allowing businesses to get the capital they need immediately. Once a business has been approved, the factor sends the funds needed. The factor then receives the payments on the accounts receivables for a specified amount of time.

Overdrafts are another short-term financing alternative. Banks usually offer overdrafts, which allow individuals to borrow up to a certain amount of money and only pay a set interest on the amount overdrawn. Individuals must go through the bank they have an account with in order to set up an overdraft account. Overdrafts are only recommended as sources for short-term capital, as they can cost more than a long-term loan. Credit limits have to be reset periodically, and exceeding the credit limit can subject a borrower to additional fees. Overdrafts are secured by a borrower’s assets; therefore, the bank can seize that collateral if the individual exceeds the credit limit or fails to make payments.

Short-term working capital refers to the funds needed to operate a business on a day-to-day basis. Businesses need cash to supply inventory and supplies, pay employees, and pay bills, including rent, utility, and loan payments. Working capital usually comes from revenue generated by sales. However, when a business is in need of additional funding, it can turn to financial companies for loans or advances.

A business can implement various management strategies in order to increase short-term working capital and to decrease the need for additional loans. One option is to give customers a discount for paying early, or charge a fee for late payments. This gives clients a reason to pay their accounts as soon as possible. Since most short-term capital comes from revenue, the quicker customers pay off their accounts, the more money a business has at hand. It’s also important to confront customers who have outstanding accounts.

A business can also improve its short-term working capital by reevaluating its employee management. Business owners might consider hiring temporary or part-time employees to save money. If the need arises, it is easier to lay off temporary and part-time workers than it is to lay off a full-time permanent worker. Instead of hiring many employees to handle few responsibilities, a business Owner is responsible for the existing staff may guide the owner, a secretary or assistant duties maintain share

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Form of bank check, you can avoid problems.

September 2nd, 2010 by uio1
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At the end of every month your bank will either mail you a copy of your statement or make a copy of it available online. This statement will show each deposit you have made along with all of the checks that have cleared and any debit card purchases and ATM withdrawals. Once you have this you will need to take the time to reconcile your checkbook and the bank statement to make sure that both figures match. The best way to do this is by using a bank reconciliation template that will help you to compare the two sets of figures.

This reconciliation form will also let you track any outstanding checks and deposits so that you can figure them into the balance in your checkbook and not end up thinking you have more money than you really do. By tracking every transaction in this way you can keep a much closer eye on your spending habits, which in turn can make it easier for you to set up and maintain a budget for your household. Most people find that if they do not take the time to reconcile their bank accounts every month they end up overdrafting their accounts, which can end up costing a lot of money in overdraft fees and bad check charges.

Another important aspect of using a template form to reconcile your account on a monthly basis is that it will allow you to spot any type of accounting error, both yours and the banks at a much earlier point in time and again could end up saving you overdraft fees and the embarrassment of having a check bounce or your debit card declined. This form allows you to list every transaction you have recorded in your checkbook alongside of the ones that the bank has a record of. Reconciliation occurs once you have matched all transactions and are left only with those that you show that the bank does not. By subtracting these from the balance you show, it should match what the bank shows.

If you are looking for a bank reconciliation template to make this task a lot easier every month you will find that there are several sites online that provide templates for you to download. Since this is a relatively simple process, you need to make sure that the template you choose does not overcomplicate the process. Most importantly you need to make sure you reconcile your account every month so that you can spot any problems that occur in their tracks before they end up costing you a lot of money.

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Finance receivables.

August 30th, 2010 by uio1
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Accounts Receivable Financing and Accounts Receivable Factoring are two terms that are interchangeably used, but there is a major difference between them. Although both refer to the concept of extending cash to an owner of a business in lieu of invoices and other Accounts Receivable, there are differences, no matter how subtle.

First of all, Accounts Receivable Financing is a loan in which the invoices are used as collateral. But this not the case with Accounts Receivable Factoring. Accounts Receivable Factoring is not a loan. It involves the selling of the invoices to the financing company at a rate less than the face value of the invoices. The financing companies then collect the money at the full face value from the clients. This means the business no longer has the responsibility of collecting the money.

But this is not the case in Accounts Receivable Financing. The process of Financing involves the extension of an advance on the percentage of each invoiceï¿bf½s amount. Also, the responsibility of collecting the money remains with the business house.

Both Account Receivable Funding and Financing companies charge additional fees for services rendered, but in case of Account Receivable Factoring, the fees charged are comparatively higher. This is mainly because the entire responsibility of collecting the money is with the financing company.

Companies providing Account Receivable Financing step in and work with companies who cannot get loans otherwise. Account Receivable Factoring, on the other hand, proves useful to business houses urgently in need of ready cash flow.

This said, both Account Receivable Factoring and Financing prove extremely convenient to companies who urgently require a cash flow to keep their business going.

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Working capital: funding options for small businesses.

August 29th, 2010 by uio1
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Introduction

Large companies have always had a number of options that they could depend on to raise capital for their businesses. The have always had access to a number of alternatives such as selling stock, issuing bonds, bank loans and accounts receivable financing among others. Looking at the other side of the coin, smaller companies, those that have between $20,000 and $500,000 of yearly revenues, have always had a challenge trying to find capital to operate their businesses.

The lack of access to capital has prevented many small businesses from growing and capitalizing on the many opportunities that are available to them. It is not uncommon for small companies to reject large deals or opportunities because they do not have the necessary capital to obtain the resources to service the account. However, even when small businesses do take on large contracts, they find that they are never paid immediately upon delivery of services. Most contract terms demand that the supplier provide 30 to 60 days for the customer to pay their invoice – in effect, forcing them to extend them with supplier credit. The lack of adequate capital resources, along with the necessity to offer commercial credit to clients, creates a “perfect storm” that prevents small businesses from growing and that is very difficult to avoid.

A number of these issues could be sidestepped if the company had immediate access to working capital. Working capital could enable the business to add employees and resources to serve new clients and larger contracts. It also enhances a company’s ability to extend 30 to 60 day payment terms to their customers.

This paper outlines the most common sources for working capital and provides an evaluation of each source. Each source has also been assigned a score, which summarizes the availability and flexibility of the source.

Scoring System

Each working capital source that has been evaluated has been given a score from 1 to 10. The following features where considered when assigning a score:

Accessibility to small businesses Requirement complexity (e.g. do they require significant financial reporting?) Flexibility Payment terms

A higher score indicates that the source of capital has a positive outlook on a number of these criteria and is available to small businesses. A lower score indicates that a particular source of capital may not be best suited for most small businesses.

Financial Options

Venture Capital – Score: 1

Many books and publications tout the benefits of obtaining venture capital to finance a new or ongoing operation. Venture capital is an option for small companies that have a seasoned management team and very aggressive growth plans, however, venture capitalists will rarely invest in small businesses that have no intention of going public. The venture capitalist objective is to invest in a company for a short period of time – say 5 years – and then cash out of the business while making a significant return on their investment.

Angel Investors – Score: 2

An Angel investor is a wealthy individual or group of individuals that typically invest in pre-venture capital companies. That is, companies that don’t meet the current requirements of a venture capitalist but that could meet their requirements with a capital and management influx. However, you should not rule out angel investors completely since there are angel investment groups who focus on the growth of certain communities and will invest in small businesses. The best way to find an angel investment group near to you is to search them on the Internet using a search engine such as Google (www.google.com).

Banking Institutions – Score: 4.5

Most small businesses owners will first approach their bank to try and obtain a loan or line of working capital. However, unless the business has been in operation for a number of years, has substantial assets and all the appropriate financial records, their chances of obtaining any financing are minimal. Banks, however, can provide lines of credit if the business owner personally guarantees them. This means that the business owner will be personally liable for the repayment of these loans. These lines of credit can provide the business with the needed working capital; however they can be very risky, especially if the business does not produce the expected results and the owner is unable to repay the bank. Business owners should use this method of financing very cautiously.

Credit Cards – Score: 5

Much like bank lines of credit, many business owners use their credit cards to fund their businesses. Credit cards offer the ability to make purchases or obtain cash advances and pay them at a later time. It should be noted that credit cards can be a very expensive source of funding. Although most credit cards have reasonably low interest rates for purchases, their cash advance rates can be as high as 17% to 19% due to greater delinquency rates. Furthermore, most credit cards will charge you 2% to 4% of the face value of a cash advance as a “fee”. Much like bank lines of credit, the business owner personally guarantees payment of a credit card. Thus, this method of financing can be very risky if the business does not produce the expected results and the business owner cannot repay the credit card company. Business owners should use this method of financing very cautiously.

Home Equity Lines of Credit- Score: 5.5

Business owners who are also homeowners have the option of tapping into their home equity to finance their ongoing business operations. Home equity loans and lines of credit have many advantages, such as low interest rates and the possibility of having some portion of it deducted from taxes . This method of financing gained a lot of momentum between the years 2000 and 2004 when interest rates where at their lowest point in decades and real estate was appreciating in value. A major disadvantage if this financing method is that it directly places the business owner’s home at risk. In fact, the business owner is placing a bet – with their home as the potential wager – that the business will succeed and will be able to repay the loan. Much like lines of credit, business owners should use this method of financing very cautiously.

Small Business Administration – Score: 7.5

The US Small Business Administration (www.sba.gov) provides a number of very viable options to finance business operations. Although the whole scope of SBA services is beyond the scope of this paper, the SBA provides a “Microloan” program. The program objective is to stimulate micro-enterprises and provides loans of up to $30,000 to small businesses. These loans are usually provided through a financial institution or a bank. They have higher interest rates than traditional loans, but their requirements are more flexible, making them more accessible to small business owners.

Founders, Friends and Family – Score: 7

Friends and family are one of the most conventional ways of financing small businesses. Many entrepreneurs have been able to leverage existing relationships and obtain funding, either as a loan or as a capital investment, for their businesses. Although this source of funding can be easier to obtain that others, it does have some inherent problems. First, the business owner runs the risk of placing the relationship in jeopardy if things do not go as expected and the business defaults. Furthermore, these transactions are usually done with little formality and without written agreements, further complicating matters. If you elect to use this funding option, you should consult an attorney and draw some formal documents that describe the intent and responsibilities of each party.

Accounts Receivable factoring- Score: 8

Accounts receivable factoring, also known as invoice factoring, has been a source of working capital for large companies for many decades. It is now becoming mainstream and available to mid-size and small businesses. Factoring enables a company to sell their slow paying accounts receivable to a financial company, who in turn pays for the invoices within a day or two. After the sale, the financial company waits to be paid for the invoices. A key feature of factoring is that the factor will take the credit strength of the business’ customers, as it’s main consideration. Until recently, accounts receivable financing was out of the reach of the small business owner. However, enhancements in technology have now turned this method of financing into a viable alternative for small businesses. This means that a small company with little or no credit can leverage a strong roster of clients, sell their invoices and get funding very quickly. Factoring should be considered as an option for businesses that sell products or services to other businesses, rather than to consumers.

Conclusion

Obtaining working capital for their businesses is one of the most important decisions that a business owner can make. Like all important decisions, it should be carefully thought out and deliberately executed. The old adage that “the best time to look for capital is when you don’t need it” is still true. You should spend some time researching the all available options for your business ahead of time, so that you can be ready to “tap” your war chest when the right opportunity arrives.

DISCLAIMER

This paper is written to provide small business owners with an overview of the financial options that are available for their businesses. However, this paper does not intend to provide financial or legal advice as only qualified professionals can do so. The author and Commercial Capital LLC disclaim all Liabilities arising from the use of information in this document. Please consult a professional before deciding major financial or personal business.

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Capital Factoring – option for joint ventures.

August 27th, 2010 by uio1
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In today’s difficult credit environment, companies are turning over every stone and looking in every nook and cranny in their efforts to obtain the commercial financing they need to grow and prosper.

Skip Green, the founder and president of Alden Green, Associates in Oakville, Ontario, has been helping companies obtain commercial financing for nearly two decades. The primary financing tools Green recommends are venture capital, private or angel financing, government guaranteed loans and grants-and factoring services.

Why VC Is a Tough Game

“Business owners often have a preconceived idea that venture capital is going to be the solution to their financing problems, but VC is a tough game,” says Green. “Investors are very cautious even in the best of times, and especially so today. They want everything on a silver platter before they’re willing to part with their money.”

Green doesn’t hesitate to recommend factoring services to companies when the circumstances warrant it. “Sometimes there’s a certain resistance when I bring up factoring, but the reality is that factoring services are often a better and cheaper way to obtain financing than venture capital. When business owners see this reality, I encourage them to give some more thought to factoring.”

Green left the banking world in 1992 to strike out on his own in helping companies raise commercial financing. He aligned himself with private investors who were looking for good growth opportunities and started playing matchmaker between them and companies seeking commercial financing. In 2004, he was talking with the owner of a wireless telecommunications firm headquartered in New York that needed start-up funding and quickly realized that they might be an excellent candidate for factoring services.

Unique Financing Challenges

The owner explains the unique financing challenges his company faced during its early years: “We work mostly on a project basis so we have to ramp up a large number of project managers, quality inspectors, field technicians and other employees very quickly. In effect, we build an army and then move it from city to city until a new wireless network is built.”

With potentially hundreds of job sites and thousands of employees, the company faced huge challenges in financing its operations in the beginning. “We reached a critical mass when accounts receivable were very high but aging and we still needed to make payroll.” He says the firm’s employees are its greatest expense, but also its greatest strength.

“The technician turning a wrench on the front line is our salesperson,” he adds. “Our people are our product and they need to be paid confidently, and factoring services enable us to do this. With factoring, we always have capital available to continue Growth and success. "

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Posted in Receivable Financing

Silver Construction Equipment – Options.

August 23rd, 2010 by uio1
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A few months back, I was contacted by a Construction company in MN who was looking to finance an excavator that they found through an affiliate of our company.  The owner had gone to his Credit Union to get the financing since he had been dealing with them for the better part of the last 10 years for his business financing.

To his disappointment his company was turned down even though he had existing financing with the Credit Union and not missed a payment in 5 years.

Now understand, this Equipment Loan was not an optional purchase that he wanted to do, it was a necessity as the equipment that was being replaced was not repairable and without the new excavator, he was forced to either turn away work or rent one for daily use.

The reason the Credit Union gave as to why they could not do the Equipment Financing for him was because of program changes.  The Credit Union even tried to get him personal financing for the equipment, unsuccessfully though.

Fortunately, the Vendor of the Equipment knew just what to do.  He had directed him back to the Internet Site that he had found the Vendor at and instructed him to fill in a Request for Quote for Equipment Financing.

Once the business owner did get in touch with a Commercial Finance Broker, the financing was all set up with a Specialty Lender within a week of receiving the complete application.

The biggest reason this happens is because Banks and Credit Unions are general Financial Institutions, not Specialty Lenders.  There is a big difference between getting a bank account or personal car loan when you have great credit and worked at the same well paying job for the last 5 years and being a Company looking for Financing on Specialty Equipment.

Even if you do get an approval at your bank, it may not be a bad idea to speak to a Commercial Finance Broker anyways as there are many Special loans are financial products that are best for you. In the worst case, you can compare allowed to view what is best for your business.

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