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Online Bookkeeping Solutions Blog

The Online Bookkeeping Solutions Blog is an timely collection of interesting and helpful information for those companies who want to outsource their bookkeeping solution and utilize bookkeeping services by subscription. Outsource your bookkeeping to a cloud based solution backed by experienced CPA's.

Loan Denied? 5 Alternate Financing Options

Ray Kirschner - Wednesday, November 30, 2011

As a business owner, one of your worst fears may be not getting the finances to keep your business running. However, being denied a loan from the bank does not mean you are out of options. In fact, following are multiple alternative financing options worth exploring to keep your business alive and thriving, as well as the benefits and drawbacks of each options.

1. Factoring

By this process, a business essentially sells its bills for cash. Accounts receivable are sold to the factor at a discount in exchange for immediate cash. Factoring combines working capital financing, credit risk protection, accounts receivable bookkeeping and collection services.

PRO:
This is a good, fast solution for a small business owner who is in need of cash. This is especially useful when the business needs money to maintain operations, but incoming cash is stuck with a client.

CON:
Factor companies that buy accounts receivables are concerned only with their money. They do not care about the business’s reputation or relationship with the client.

HELPFUL TIP:
Choose a factor company that is also considerate when dealing with clients. If you have a longstanding relationship with the factoring company, they will be far more likely to pay attention to maintaining good client relationships on your behalf

2. Lease Back Programs

If a business owns pricey equipment, it can find a lender who will buy the equipment for a lump sum and then lease it back.

PRO:
The business can still use its equipment, while increasing its cash flow.

CON:
By purchasing new equipment and then leasing it, the business ultimately ends up paying more for the equipment.

HELPFUL TIP:
If your business can write off lease payments instead of depreciating the equipment, your equipment costs may be offset by tax savings.

3. Purchase Order Financing

This is a good option for businesses that fear losing a sale because they won’t be able to fulfill a customer’s order in time. A financing agent advances money against a signed purchase order for finished goods to help fund fulfillment of the order.

PRO:
This financing option depends more on the credit standing of the business’s customer rather than its own.

CON:
The financial agents who provide the advance will likely take a cut of the profit, usually in the range of 4 percent or less.

HELPFUL TIP:
This arrangement is particularly helpful if your business is an import-export firm that must pay for raw materials upfront, but wait to get paid for finished goods.

4. Merchant Cash Advance

Some independent finance companies give merchants a lump sum upfront in exchange for a share of their future credit-card sales.

PRO:
Unlike a loan, there are no due dates or fixed payments, and it’s faster to get approved.

CON:
While there’s no traditional interest rate, providers will take a significant cut, generally 15 to 17 percent of credit-card receivables.

HELPFUL TIP:
This arrangement is best suited to retail, service, or restaurant businesses that do frequent credit card transactions.

5. Microloans

A good solution for small or midsized companies, microloans tend to be less in amount, but can run as much as $150,000. The money loaned is often enough to provide working capital for a month, which may be just enough to help the business survive.

PRO:
Microloans are granted to businesses with lower credit scores than banks accept, and don’t require as much paperwork.

CON:
Interest rates are higher than those of bank loans, generally ranging between 12 and 18 percent.

HELPFUL TIP:
Click here for 14 sites to help you get a loan for your small business.

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Salesforce for QuickBooks 2012

Ray Kirschner - Wednesday, October 19, 2011

It’s hard work to maintain customer relationships, but it can become much easier with Salesforce for Quickbooks 2012. The capabilities of this new feature can drastically improve the way client relationships are developed, managed, and grown.

One of several new QuickBooks 2012 features, Salesforce for QuickBooks allows you to share financial data with your sales reps by providing them with up-to-date accounting information in the cloud for any customer they are working with. This streamlined flow of financial information means your sales reps have a more holistic picture of your customers, and can therefore provide better client service. And, better client service results in happier customers, which results in more business for you!

In addition to being able to view financial information, sales reps can also use Salesforce for Quickbooks to see any customer’s transaction history and patterns of behavior, allowing them to analyze what information is relevant to the customer. This empowers your sales reps to find more opportunities to offer up relevant services and products to your clients. By allowing sales reps to see the gaps within a client’s history, they are able to pitch better targeted solutions that result in your business closing more sales.

Salesforce for Quickbooks automatically creates a transaction in QuickBooks when a deal is closed in Salesforce. This benefit prevents users from having to enter data into two separate systems. This speeds order processing and reduces double data entry. This ultimately leads to increased efficiency and thus lower overhead costs for your business.
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QuickBooks 2012 Calendar: A Better View

Ray Kirschner - Wednesday, October 5, 2011

Earlier in this blog, I discussed the importance of using a financial dashboard to help manage your day and to get a clear picture of your business’s overall health. The new calendar feature on QuickBooks 2012 offers the benefits of a financial dashboard by providing you an overview of your day’s to-do’s, while giving you access to the status of your current financial data – all in one place.

The default view of the QuickBooks 2012 calendar, available in Pro, Premier and Enterprise, has three sections:

1) The actual calendar gives you access to an automated view of your day’s to-do’s, appointments, and invoice and billing deadlines. This provides you with stronger, faster insights to help propel your business forward.  You can access the calendar from the Icon bar or from the Company menu. You can change the calendar view to weekly, daily or monthly by clicking on the calendar view.

2) The Transaction Detail Pane, located below the calendar, provides a summary of all transactions entered on a specified date. Transactions for that date are listed by transaction type. You are also able to see the amount, number, due date, and other specific information associated with each transaction. You can select the date and filter the calendar to show specific types of transactions by choosing the Transaction Type from the Show drop down list.

3) The Past Due Pane, located on the right side of the calendar, shows your past due transactions as of today, plus your to-do’s for that day. You can use the QuickBooks 2012 Calendar to add To Do activities in QuickBooks using the Add to Do icon.

The benefits of the new calendar feature in Quickbooks 2012 are multiple. Not only will it help manage your schedule on both a daily and weekly basis, but also it will help you more clearly identify know any overdue payments you need to track down, as well as keep you up-to-date on all your business’s pending transactions. Hopefully the QuickBooks 2012 new calendar feature will help you save time, be more organized, and revert focus from accounting details to overall business growth decisions.
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Portray Your Finances Properly And Procure The Loan

Ray Kirschner - Wednesday, September 7, 2011

When you’re trying to get a loan, the numbers on your year-end balance sheet and income statement tell a story. Problem is, this story may not be representative of your actual financial situation, which could end up derailing your loan. This can happen for a variety of reasons that follow.

Your balance sheet offers a snapshot view of your assets and liabilities on a particular date, and may not reflect your actual fiscal year accurately. Atypical events at year-end may cause your balance sheet to look out of whack. For example, large year-end purchases will inflate both your inventory and your accounts payable, while a large sale at year-end will inflate your accounts receivable. Without knowing about a year-end event, a lender might question the stability of your business.

Another thing to watch-out for if you are trying to get a loan is accepting extended payment terms from a significant supplier at the end of your fiscal year. It could suggest that you do not have enough cash to cover your bills or that you’re not paying them on time.

Your potential lender will be looking at your Debt to Worth ratio. If your business assets are held in a separate entity, the ratio could appear too large, which makes lenders nervous. Furthermore, if your balance sheet contains assets that have significantly depreciated, the Debt to Worth ratio will look worse than it actually is – even if those assets still are valuable.

Your income statement may also cause you to appear more high-risk than you actually are. For example, acquiring a big new contract, while a good thing for your business, may cause lenders to fear that you won’t be able to fulfill the risks associated with taking on this contract, and that other customers may go neglected. Furthermore, unless you continue in subsequent years to sign equally sizable contracts, your numbers will appear to be trending downward.

Taking on one-time expenses, such as renovating your office, may also make your income statement appear to be on the decline. Also, if your business switches from cash to accrual accounting, this will heavily impact your financial statements the year the change occurs.

If you want to get a loan, you need to make sure your numbers are not misleading the lender. If any of the aforementioned scenarios apply to your business, don’t worry. The solution is usually pretty easy. Simply explain the unusual activities in the notes section of your year-end statements, thereby giving your lender an accurate picture of your business’s health.
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Developing KPI’s For Your Business

Ray Kirschner - Wednesday, June 8, 2011

Earlier in this blog, I introduced Key Performance Indicators (KPI’s) and explained them from an overhead perspective. Now, I will get more specific with how you can work to develop effective KPI’s that will impact your business results.

Think about this. You can only manage what you can measure. Here are a few basic themes that your KPI’s should incorporate.

  • Raw data. How many products sold per month?
  • Comparison. What percentage are sales up or down from the same time last year?
  • Indicator of actual business performance against a goal. How many sales of an item were desired this month v. how many were actually achieved?
  • Progress measure. What percent complete is the item?

When this data is put in a graph, it becomes a financial dashboard, providing a strong overview of the business’s health.

To develop appropriate KPIs for your business, remember to keep your ultimate end goal in mind. For example, a mall cafe providing lunches to workers in nearby offices will need to serve its customers quickly and efficiently to meet its overheads and make a good profit. So they don’t encourage customers to linger. Customer turnover is an important goal in their business plan. To measure that, the appropriate KPI would be number of customers per table per opening period.

However, a street front restaurant in a high-traffic area may decide that high customer satisfaction will bring in the repeat and higher-spending customers it needs. In this case the goal is to encourage repeat business by eliminating any reason for customer complaint. Since customer satisfaction is a critical success factor, a suitable KPI might be the number of customer complaints.

Customer loyalty is a very important attribute and one that is hard to measure. Customer surveys can be used to track indicators of loyalty by asking the right questions. For example you may want to ask the likelihood to refer on a 1 to 10 scale. Team bonuses can be structured based on your attaining certain KPI achievements.

Tip to create successful KPI’s: Write down four things about each chosen KPI:

  1. A name for it
  2. A definition of what it involves
  3. The actual method you will use to measure it
  4. Your goal, or performance target for this KPI

 

 

 
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Use KPI’s To Score Your Business

Ray Kirschner - Wednesday, January 26, 2011

Key Performance Indicators (KPI’s) help an organization define and measure progress towards its goals.

A business won’t grow without a methodology for measuring its successes and areas to improve upon, which is why establishing KPI’s is critical. After all, you can’t improve what you can’t measure.

KPI’s begin as business goals. The only way you can create the future of your business is to have a vision for it, through the goals you’d like to achieve. A good KPI program allows a business to measure its performance against pre-determined benchmarks that ultimately track back to the organization’s original goals and strategy.

KPI’s are highly quantifiable by nature – they must be if they are to serve of any value to the business. If you set a goal that fails to be quantifiable, then you aren’t truly getting a measure of your business goal’s success. For example, if a goal is to “increase new customers,” then there must be a KPI that distinguishes between new and repeat customers. Otherwise that KPI is useless.

When setting KPI’s, keep top of mind the type of organization you run, as your KPI’s should be developed around this. An organization that desires to be the most profitable company in its industry will have KPI’s that relate to profit and fiscal measurements, while an organization less focused on profit, for example a school, may set KPI’s focused around graduation rates, attendance, and enrollment.

It is best to set a fairly small amount of KPI’s from an overhead level so as to stay focused on the business’s primary goals. If the business has different departments, then they too can have their own unique KPI’s, related to their departmental functions, but ultimately laddering up to organizational goals.

KPI’s should be used on an ongoing basis not only to improve areas of poor performance, but also to uncover positive results in order to achieve continuous growth.

Based on the type of business you have, what do you think would be some good KPI’s to put into place?

 
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Start Your Day Off Strong – Review Your Financial Dashboard

Ray Kirschner - Thursday, December 9, 2010

It’s 8 a.m. Monday morning. After a nice, relaxing weekend, it’s time to get back to work. Your mind might be in a million places but you need to focus on your business. You grab a cup of coffee and turn on your computer, but where do you begin? You run an entire company and there are many intertwined and complicated financial situations that you oversee. You need to know where your company stands, what the latest finance reports really mean, and what overall issues take precedence and need your attention.

As an entrepreneur, chances are you are quite knowledgeable in the area of finance. But that doesn’t mean you have the time for complicated math or to analyze the complex web of finances that comprise your company’s day-to-day operations. This is exactly why a financial dashboard would benefit you.

Just like your car’s dashboard gives you a visual snapshot of your engine’s performance, operations, and warns you of any problems, a financial dashboard gives you a quick and real-time view of your company’s “financial engine.”

A good financial dashboard has the capacity to provide you with an organized, visual display of pertinent information about where your company is at, in real-time. It does the complicated math, the financial and operational analysis, and alerts you of any potential business problems, so that you can be proactive rather than reactive.

So again, imagine that it’s 8 a.m. Monday morning and you are turning on your computer to start the week. You turn on your financial dashboard. In 30 minutes, you ingest your business’s key operational and financial measurements in an easy to read graphic format, with a one paragraph analysis and explanation from the finance team. You review a high-level overview of sales, costs, productivity, and financial highlights from the previous week. And, in the same 30 minutes, you are alerted of any red flags that could potentially jeopardize your business, thereby enabling you to be proactive, rather than reactive.

Knowing that your business is in good health, your day is already off to a strong start. You can proceed to your 9 a.m. meeting worry-free and confident about the performance of your company – thanks to your financial dashboard.

Stay tuned for a future post on how to best customize a financial dashboard to meet your personal needs.

 
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