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10 Things Every Small Business Should Do To Be Successful in Today’s Tough Market Conditions

Posted on December 1, 2019 in Uncategorized

The news about the recent economic problems and the looming double dip recession has been tough. The on-going Eurozone economic concerns have triggered a complete collapse in consumer confidence not seen since the original 2008 recession. The consumer confidence collapse coupled with the growing anxiety around global debt has led to a restriction of credit made available to small businesses as worried banks reduce their perceived risk to bad loan repayments. With consumers keeping hold of their money and credit becoming harder to access it is no wonder that small businesses are struggling. This article talks about the important role and benefits accounting software can play in allowing small businesses to navigate through these hard economic times.

How can accounting software help small business?

Business must be lean and financially sustainable to survive through the current business climate. Small businesses with large overheads and complex financing structures should work on re-organising the business to regain control of their long term economic futures. Now is not the time for reckless investment in the pursuit of growth that only adds increased debt and inflexibly that could ultimately lead to the businesses downfall. Now is the time for prudence and tight financial management that allows a business to be financially independent. Accounting software can be central to supporting small businesses become financially independent and below investigates how.

1) Complete focus on cash flow

A business owner should be 100% focussed on the financial health of their business. This means having a thorough understanding of the businesses cash flow position. There is nothing more important in a small business than its cash flow position and as result should be very tightly managed. One of the difficulties for small businesses keeping on top of cash flow is the organisation of receipts and invoices. An accounting software package easily compiles all of the relevant financial information and presents easy to understand dashboards and reports of company performance. Once provided with the required knowledge of the company’s performance appropriate action can be taken to improve the company’s performance.

2) Focus on customer satisfaction

In times of economic hardship competition is notably increased in every sense. As customers are more considered with their buying decisions small businesses need to ensure that every aspect of their proposition is appealing to the customer. Margins are widely squeezed across all industries in the hope of enticing hard-up customers and therefore the only real differentiator to attract business is customer service. An accounting software package does not only improve business productively it also helps structure all customers and suppliers into an easy to manage database. This structured knowledge allows staff to provide a more tailored service to clients.

3) Look for ways to cut costs

In this economic climate any investment that doesn’t directly add value to the top line should be cut. Accounts Payable features with an accounting software package detail every penny that is spent in the business. This allows a thorough review of expenditure to take place to ensure that savings can be made where appropriate. For example costs could be cut down on paper, postage, transitioning to direct debit payroll. These cost cuts would allow the business to reduce its operating cost without cutting expenditure that generates income into the business.

4) Consolidate Suppliers

Businesses can also use accounts payable features within their accounting software package to streamline its supply chain. Many businesses needlessly have similar supplies from a range of suppliers. Buying in bulk is always a more economical way of doing business. Condensing suppliers with larger orders is more commercially viable in reducing supply costs. Generating reports by independent supplier will provide valuable information regarding the profitability of each supplier contract.

5) Negotiate better rates with long standing suppliers

In addition to the consolidation of the supply chain there may also be an opportunity to renegotiate rates with long standing suppliers. The longer the relationship between a business and a supplier the more appropriate it would be that the business qualifies for a rate that reflects the loyalty of the relationship. Reducing the costs of the supply chain can make a significant and welcome difference to a small business P&L during tough recession times.

6) Continuously look for ways to reduce non value adding admin work

In any small business the time of employees is one the company’s biggest assets and therefore spending time on non-value adding activity should be minimised wherever possible. An accounting software package ensures that people are not tied up managing basic bookkeeping tasks and completing quarterly and end year financial reports. Managing a business’s financial affairs can be very admin heavy if not managed in the correct manner. Having efficient software to automate these admin tasks allows staff to focus their attention on growing the business and generating income.

7) Streamline payroll and human resource management

As already discussed people are a huge asset in any small business. An accounting software system can help provide detailed information around staff costs in addition to hours worked and absence information. Having detailed information about staff costs allows a business to more accurately plan for the future and correctly budget for human resources. Also from a financial perspective large fines are imposed on businesses that make mistakes on Tax and National Insurance contributions. Having automated software negates the risk of mistakes occurring at a time when fines cannot be afforded to be taken.

8) Streamline billing and invoicing

Not being on top of your receivables can literally be the difference between success and failure in today’s challenging business environment. An accounting software package allows a business to fully manage and organise its invoices and payments deadlines around the businesses bills and costs. This way invoice payments get received in advance of bill payments ensuring cash flow is never a problem. Having effective and well organised billing and invoicing ensures that a business income remains consistent.

9) Assertive debt collection techniques

Even if a business has streamlined invoice and billing processes there will still be some customers that do not pay on time. All of the structure and process in ensuring invoices are aligned with business costs will have been wasted unless good debt collection processes are adopted as well. Businesses should know when to make phone calls, send written communications and when work with debt collection agencies in order to optimise income collection.

10) Know you financing options

The Accounting software package allows a business owner to have detailed forecasts of predicted income and expenditure over the short, medium and long term. Having a longer term view of capital expenditure allows more intelligent decisions to be made around company financing. As a rule of thumb last minute loans tend to be expensive as owners run out of time and simply need to pay bills. All forms of business financing from credit cards to structured loan agreements should be reviewed in line with long term accounting forecasts to ensure that the best suited finance is in place at the best possible price.

It has never been more relevant for a small businesses to invest in an accounting software package. The benefits run much deeper than simply allowing businesses to keep accurate and timely financial records. Accounting software enables a business to self-analyse every business process in the eyes of profitability and business return. Businesses that adopt the mind set of accounting software by definition embrace the notion that all company expenditure should be controlled and used to drive additional revenue for the business. These lean businesses will be financially sustainable and able to withstand these hard economic times in order to be well positioned in the market to capitalise when consumer confidence returns.

Settle Your Small Business Taxes With a Peer-To-Peer Loan

Posted on November 29, 2019 in Uncategorized

Like the saying goes, “The only things certain in life are death and taxes.” Unfortunately, small businesses know this saying all too well.

Unlike employees who look forward to their refund every April, small businesses loath the approaching spring, knowing they will have to pay Uncle Sam its share of their profits. Each year, small businesses struggling to turn a profit in an increasingly competitive business environment must pay taxes in order to keep their doors open.

With dwindling profit margins and tightened lending restrictions, however, many small business owners find themselves between a rock and a hard place when it comes time to pay the tax man. Although a business may have steady sales and revenue or thousands of dollars in inventory, banks and traditional lending institutions simply aren’t handing out small business loans like they were in year’s past, leaving small business owners with few funding options to pay their tax bill.

Thankfully, peer-to-peer lending, or social lending, has solved this growing dilemma. These modern social lending marketplaces have connected millions of borrowers with individual investors. Borrowers receive low-interest, fixed-rate loans that can be paid off in two to five years, while investors are able to benefit from decent returns in an economy with sinking bond and savings rates.

Thus, it’s a win-win situation for both small business owners in need of immediate funding and investors looking to make a small profit while helping others.

From Desperation to Exultation: One Man’s Venture into Peer-to-Peer Lending

John Mitchell is an Ohio-based small business owner who found himself in such a predicament just last year. As the owner of the only hardware store in a small town, John’s store flourished the first few years it was open.

After getting his inventory levels, pricing models, and management just right, he decided to expand his business by opening a second location in a neighboring town. John sunk all of his profits into opening his new store, which meant he was short on funds come tax time. However, knowing the success of his business, he thought he would simply get a small loan from the bank that housed his accounts and provided him with the initial loan he used to launch his business four years earlier.

Unfortunately, he witnessed first-hand the effect the recession has had on lending regulations as the banker he’s known for years denied his loan application. If he couldn’t get a loan there, where could he?

On the brink of despair, John took to the Internet to research loan options. After digging through forums and trying a few different searches, he ran across peer-to-peer lending. In less than a week after going through the quick and easy application process, he received a personal loan at a low rate for the amount he needed. A week later, John sent a check for the full amount to the IRS, and less than eight months later, he was able to pay off the loan with the profits from his new store!

If you are a small business owner who has found yourself in a similar circumstance, peer-to-peer lending can do the same for you as well, but how does peer-to-peer lending work?

How Peer-to-Peer Lending Works

A breakthrough product or service emerges every generation, and in the early 2000’s, the emerging breakthrough was social networking. From helping in the organization of overthrowing political regimes to staying in touch with friends and family members, social networking has had a profound effect on our daily lives. Now, it’s changing the small business financing landscape as well.

Peer-to-peer lending is a modern social networking solution for small businesses in search of a way of securing alternative funding. The goal of peer-to-peer lending sites, such as Prosper and Lending Club, is simply to connect individual investors with those in need of funding, and these sites are becoming an increasingly useful tool for small business owners who are unable to secure funding from traditional lenders.

Rather than jumping through endless hoops only to be denied by a bank, small businesses can receive funding via peer-to-peer lending in no time at all by following three simple steps:

Step 1: Create a Profile and Loan Listing

There are a myriad of peer-to-peer lending networks to choose from, so your first step is to research the best ones and create a profile and loan listing on the site you choose. The loan listing is essentially a cost-free ad that indicates the amount of money you need and your desired interest rate.

Step 2: Let the Bidding Process Begin

After your listing goes live, investors have the opportunity to begin bidding on your listing, providing you with the interest rate and loan amount they are willing to offer you. A major advantage of this bidding process is the fact that it can intensify as more and more lenders begin competing for your business.

When this happens, interest rates will begin dropping, potentially allowing you to obtain a much lower interest rate than you expected. It’s important to note, however, that your credit score, income, and debt-to-income ratio plays a role in the lending decision process.

Step 3: Funding and Paying Back the Loan

Another benefit of borrowing from peer-to-peer lenders is that you can accept several bids to receive your requested loan amount. For instance, if you ask for $10,000 in your loan listing to pay your business taxes, you can acquire the amount from collecting $2,000 from five different borrowers.

This makes it much easier for borrowers to receive the money they need. However, instead of making five separate payments, you would only make one payment, because the peer-to-peer lending site is responsible for dispersing the money to lenders until loans are repaid in full. They simply charge a small fee for this service.

With increased lending regulations, banks are tightening their purse strings more than ever before, making it much more difficult for small businesses to receive the funding they need to expand their business or even pay their taxes. Thankfully, peer-to-peer lending has proven to be a worthy competitor in the small business lending marketplace. If you are a small business owner and find yourself unable to pay your taxes as April approaches, or backed taxes for that matter, a peer-to-peer loan is an ideal option.

10 Good Reasons Why Small Enterprises (Small Businesses) Fail

Posted on November 27, 2019 in Uncategorized

You’ll agree with me that there are so many small businesses which have contributed a lot to the growth of economy. They have created employment opportunities for many families although some remain to be small throughout their operational life.

It is obvious that those who are starting new ventures have objectives to achieve. And to mention each business has got its own objectives to achieve such as maximization of profits and sales, minimize costs, maintain a certain level of production and labor force etc.

Failing of a business opportunity is what an entrepreneur won’t want to happen. Inasmuch as we agree with the fact that there are firms which have succeeded, we should also accept the fact that a good number of them have failed even before two years lapse after they commence business.

If aspiring entrepreneurs addressed the reasons why small businesses fail, then they will not fall to be victims of the same causes of failure. This is because they’ll be in a position to identify these causes and fix them before it’s too late.

Now you may be asking yourself as to why some businesses remain to be small throughout their operational life despite some of them making profits or are capable of growing.

4 Reasons Why Small Business Remain to be Small

1.) The owners of these businesses prefer not to expand their businesses. Some sole proprietors do not want to be bothered with the challenges of managing a big business. They don’t want to employ people to assist them in running their businesses but instead they prefer to be assisted by their family members.

2.) The nature of the product/service the business is involved in doesn’t allow expansion. There are people offering products/services which make it difficult for their business to grow.

3.) Lack of capital for expansion. There are small businesses which are viable and have the potential of growing but they lack enough capital. Such businesses have the challenge of securing funds from financial institutions. Lack of capital plays a negative role in hindering the growth of small businesses.

4.) Very low demand. If the business has a very low demand for its product or service, then at the end of the fiscal financial year/trading period the business won’t realize profits, and if it does, it’s very low, therefore the chances of it expanding are very minimal. Just to mention, realization of inadequate profits as a result of very low demand hinders the growth of small businesses.

However, there must be a starting point and as such, every business starts as a small entity and it gradually grows to a medium entity and eventually it becomes a big business entity which is either a private limited company or a public limited company. Note that a partnership business can also grow to become a big business.

Reasons Why Small Businesses Fail

1.) Wrong Reasons For Commencing Business: People who start a business for wrong reasons haven’t succeeded. Just because another person is making high profits in a certain line of business doesn’t mean that you will also make the same amounts of profits as him/her if you start the same business.

2.) Poor Business Management: When there is poor management of the business it becomes difficult for such a business to succeed in its operations. Finance, marketing, purchasing and selling, planning, hiring and managing employees is what most new business owners fail to execute effectively thus making their small businesses to fail.

3.) Lack of Commitment: Starting a business requires someone who is committed in ensuring that it succeeds. Neglecting the business will cause the business to fail. Many small businesses have failed because the owners didn’t take their time in monitoring performance and in marketing them. Some business owners leave their businesses to be managed on their behalf by incompetent people who lack book keeping knowledge and the knowledge of managing a business.

4.) Lack of Finances: Small businesses have failed because of lack of adequate finances. Some of the owners underestimated the amount of capital required and as a result of this underestimation some ended up running out of operating capital thus ending the operation of their businesses.

There are those who have no reserves which has led them not to be able to take care of loses and disasters when they occur thus making them to quit business.

5.) Over-Expansion of the Business: This has led to failure of many small businesses. This happens when there is borrowing of too much money beyond what the business requires so as to expand the business. Moving to markets that are not profitable is also over expansion of the small businesses.

An ideal expansion is the one that is driven by customers due to their high demand for the products and services which leads to high sales thus the business experiences good cash flow.

6.) Location: The place where the business is located is critical in determining its success. Small businesses have failed because of them being located in areas that are not ideal for business. They should be located in areas that are accessible, populated with people and has demand for their products and services.

7.) Personal Use of Business Money: This is the biggest challenge facing many small business owners. They withdraw money meant to operate their businesses to meet their personal wants and needs. If they continue to withdraw money from their businesses without returning it, their businesses will eventually run out of finances therefore forcing them to end the operations of their businesses.

8.) Lack of Delegation: Small enterprises have failed due to owners not delegating some of the duties to their employees. They think that if they delegate them, then their employees will not perform these duties as they would personally perform them. When such owners fall sick or are away from their businesses, then the operations of some tasks will be paralyzed till they resume to work.

9.) Not Diversifying: Small enterprises which have only one product/service to offer are prone to fail easily compared to those that have a variety of products/services.

10.) Procrastination and Poor Time Management: Postponements of tasks which the small business owners feel to be unpleasant to perform has made the small businesses to fail. An example of such tasks include following debtors to pay their debts (debt collection).

Time management remains to be a challenge for many people who own small businesses. If important tasks like delivering products to customers, purchasing stock etc are not handled in the appropriate time, then the business will lose its customers.

The above are not all the reasons why small businesses fail, there are more reasons.

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