What Do Banks Look For When Deciding To Give A Business Loan?

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Your business is growing and you need more time in the day to do everything. A new team member would be great BUT you want to maximize cash flow and some of your cash is still on its way. 

What do you do?

It’s like the chicken and the egg because you need one thing to do the other. It might be time to look for a business loan at your local bank but you are not sure what they will ask from you. 

Today I want to share the top 3 things banks look for when giving business loans.

Number One: Credit History

We all understand the importance of having good credit but some of us might need help understanding one of the easiest ways to get there. Sorry, this will not be earth-shattering news. I was recently at a local networking event sponsored by US Bank and one of the panel guests from US Bank said the best practice for having good credit is using no more than 50% of your total credit utilization. She went on to say of course not carrying a balance month to month is also a great way to establish good credit. If you need help achieving this goal check out a goals coach courtesy of US Bank. 

Number Two: Business Plan

The banks want you to show them your plan before they show you the money. It makes sense and we see this even on popular tv shows like The Shark Tank. The sharks always start by asking about elements of the entrepreneur's business plan like asking about sales projections, who is their target market, and many other questions. It starts with your business roadmap. If you need help with getting started on this check out SCORE.org  for help.

Number Three: Financial Statements

Yes, the banks want to look at your business health through the lens of your financial reports. The financial reports tell the story of your business. The income statement tells the story of your sales, expenses, and what was left. The balance sheet tells the story of what you own, owe, and what remains as equity in your business. Additionally, banks look at the financial statements to locate trends in revenue, profitability, and cash flow. They are looking for strong healthy businesses that will be able to pay them back. If you need help with creating your business financial story I am always here to help.

To recap, you need money because there are only 24 hours in a day, and hiring a new team member is paramount. Additionally, you want to maximize your cash flow and use O.P.P. (other people's money:) to help grow your business. The banks are looking for 3 key things which are good credit, a solid business plan, and your financial story via your financial statements. My challenge to you is to take a hard look at your business and these three criteria to see if your ducks are in a row. If they are not in a row try scheduling 15 minutes per. day to work on them.

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What Services Can A Bookkeeper Provide For My Business?

The industry of bookkeeping and accounting has changed over the years. Traditionally a bookkeeper has been the one-stop shop for small business owners to handle all things related to the daily upkeep of their debits & credits. In recent years, the role of a bookkeeper has started to include taking on the role of business advisory with clients to explain what the numbers mean and how you can use them to help meet your business goals. 

A bookkeeper can provide the following services & more:

• Monthly bookkeeping management

• Weekly bookkeeping management

• Cash Flow Analysis

• Budget preparation

• Tech Stack Consulting

The list really depends on the unique needs of your business but the idea of a gray-haired lady or wired-brim glasses guy sitting in a corner with a paper ledger are things of the past. The 21st-century bookkeeper is utilizing technology to deliver real-time results for clients.

I hope this brief list sheds light on a bookkeeper's various services. Share in the comments below what current things you are struggling with related to your bookkeeping.

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4 Ways A Bookkeeper Can Help You In Your Business

You started your business because you were passionate about something and wanted to put your personal stamp on it. I know that sounds very general but at the root of every business owner's business is their passion for doing something that they could own. 

I am sure bookkeeping was not on your list:)

Many business owners might only see the QuickBooks Online commercials that pop up on t.v. during tax season and the thought of bookkeeping pops into your mind. I get it. Bookkeeping and accounting are not for everyone. You might have thought what can a bookkeeper help ME with? I have my spreadsheet and my shoebox and life is going fine.

Here are 4 ways a bookkeeper can help you:

• Help you get ready for tax compliance season - Yes this one is pretty popular from January to April but a lot of work needs to be done before these months roll around. 

• Help you get ready for tax planning -  If you are not already having tax planning meetings with your tax professional BEFORE you see them at tax time you could be missing out on many tax advantages. I can assure you that your tax professional wants clean books and a fresh copy of your financial statements to peruse while they chat with you about your tax strategies.

• Help you with managing daily & monthly operations - This is all the stuff that it takes to run your business financially. Let’s say you are getting very busy and want to hire some new team members. Do you have enough cash flow to support this? What do your monthly expenses currently look like? How much-projected revenue are you expecting to bring in? These are all questions that a bookkeeper can help you answer so that you don’t have to worry about hiring and then laying off your new team members due to a lack of funds. 

• Help with making strategic business decisions - Do you want to grow your business in different locations or provide new services? What is your goal for the business 5 years from now? In order to make your goals a reality it is important to look at the numbers and start creating a plan to make sure you hit those targets with no problem. 

The list of ways a professional bookkeeper can help you are endless and in my view depends on your goals. I hope this list answers your questions about what a bookkeeper can help you with. I would love to hear from you to learn more about your business and goals for the future. 

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Quick Tips To Stay Ready For Tax Time!

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Taxes - This word will make grown adults fold into the fetal position. It is filled with dread and stress. It has been around since the biblical days and it isn’t going anywhere. If you work for yourself then taxes can really seem scary. When you worked for someone else it was there problem to take care of and now it is yours.

No Fear

I know all things taxes can really put a damper on your day but I wrote a previous blogpost to help all the stress melt away and prepare you for smooth sailing during tax time. Check it out here.

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Are Your Finances In Shape?

We are almost halfway through the year. I am starting to see clients who are in need of cleanup bookkeeping help to be ready for the tax extended deadline in October. I am here and ready to help. 

It is always good to stay ahead of making sure that the books are in shape to take advantage of opportunities in addition to making sure you are ready for tax time. Last year, I wrote a blog post about this that has tips to help you navigate staying on track with your finances. 

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When Can I Start To Pay Myself In My Business

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You became a business owner to live the dream life. The one where you sleep in and take vacations when you want and earn a living from the fruits of your labor. This all sounds delightful, right? The reality according to a survey from Fundera is that 30 percent of small business owners don’t take a salary.

WAIT!

What happened to that vision of living the dream life? At least when an employer was a part of the equation a paycheck was delivered regularly. 

So what gives? 

Why are business owners NOT paying themselves? There could be many reasons, but one of the main reasons could be that they don’t know when they should draw a paycheck from their business. Here are a few factors to consider to help you decide to pay yourself:

1. Is your business profitable? If you look at your profit and loss statements and see a positive net income number, it might be time to start paying yourself.

2. What stage is your business in? If you’re in the early stages of your business then it makes sense to put everything back into the business to help it grow and press pause on paying yourself. However, if you are in a growth stage in your business, it might be time to earn an honest living and pay yourself.

3. If you are a sole proprietor for example and your tax bill is out of control then putting yourself on the payroll might be the way to go. Discuss your thoughts about paying yourself with your tax professional. They will be able to assess the best course of action to take depending on your entity type and tax situation. 

There you have it! 

I hope these factors will help you in your decision-making process.

It’s so important to know if your business is profitable or not. That is the starting point. The very next thing to do is talk with your tax professional to start planning when and how to pay yourself. You work hard and deserve it.

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Welcome To The Month Of April!

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April is here and the 1st quarter of the year is behind us. I hope that the year is getting off to a good start for you and that sales are pouring in. This month we will look at 3 reasons why knowing your numbers and the status of the financial health of your business matters. The 3 reasons are:

To help you to know if you can pay yourself and how much

To help you to know if it is a good time to hire new team members

To help you to know if you are making money or is it time to close down your business.

I am excited to dive into why knowing your numbers and the financial health of your business is crucial to being a successful entrepreneur. I hope you are ready for the journey.

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The Final Piece of the puzzle: Licensing & Tracking Your Business Finances

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The entrepreneurial journey can be exciting and rewarding. In the previous post I shared a few tips to help you get started on your journey. This week we will finish the tips list with discussing how to make sure you have the correct licenses for your business and my recommendation on software to use for setting up the tracking system for your business finances.

Licensing For Your Business

It is so important to get started on the right foot when you start your business and making sure that you are operating legally is paramount. According to Legal Zoom, “Virtually all businesses will need a license of some sort, and many will need to apply for a number of different licenses and permits. The types of licenses and permits your business requires will depend on where you live and the type of industry you’re in.” Check out their checklist to make sure you have the right licensing/permits for your business.

System For Tracking Your Business Finances

You are going to put in many hours and days getting your business off the ground and selling to your customers. You will have your own personal money that you will use to fund your business and hopefully a ton of customer sales. Once the money starts flowing in then you will most likely focus on how to keep the process going and taking a moment to see how financially well your business is doing might take a backseat. That is unless you get started on the right foot. My recommendation is to set up your business bookkeeping system using Quickbooks Online. This will help you to begin tracking your business finances correctly from the start. Once you have opened your business checking account then you are going to want to subscribe to Quickbooks Online and connect your bank to the software so that you can start tracking your business activity within the software. 

This is important so that when tax time rolls around you will have all your ducks in a row to get the most tax deductions possible. My suggestion is to start with their basic subscription called Simple Start and as your business grows then you can always upgrade to a higher plan later. Incidentally, I do not recommend the Self-Employed Subscription as it only tracks the Profit & Loss activity and you can’t upgrade to a higher subscription later. This subscription is basically geared towards working professionals who intend on doing a side-hustle and not go into business as a full-time entrepreneur.

The entrepreneurial journey is filled with ups and downs but getting started on the right foot will help you to be a successful.

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3 Tips To Stay On Top Of Your Finances!

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Greenback,Moolah & Dinero. These are all references to money. For many of us the profit and loss report is the most important financial statement that we want to see on a regular basis. Why? Because it tells the story of how much we made, how much we spent and what is left over affectionately known as the bottom-line. So how can we stay on top of our finances so that we can know how much money our business is making?

1. Use a bookkeeping system on a regular basis to keep fresh data flowing into your reports.

2. Look at your reports on a regular basis. If you have monthly bookkeeping done and don’t review your reports on a monthly basis then you won’t be able to measure how well financially your business is doing. If you don’t understand your reports a good bookkeeper can help you with that roadblock.

3. Spend some money on a good CPA who will help you to create tax planning goals for your business.

We are all in business for different reasons BUT the one neutralizer is that we want to make money. The bottom-line is the reason and by applying the tips above you will be on the road to financial success.

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More Reasons Why You Should Use Accounting Software To Track Finances

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The life of an entrepreneur is not for the faint of heart. The word busy is something that just comes with the territory. Nothing is more frustrating than working yourself to the bone but not having the information you need to make important business decisions. Here are a few more reasons why using an accounting software program like QuickBooks Online to track your hard-earned finances makes financial sense:

• It will arm you with information to determine if you can pay yourself

• It will help you to determine if you can start bringing on team members

• It will help you to pull reports to see if you are on the right track for your annual revenue goals

• It will help you to stay compliant with the taxman

If you have a special spreadsheet that you like to use to track your finances keep on using it BUT also use a professional accounting software system to track your finances so that you can pull reports to help you to make important business decisions. One day you might just decide it is time to ditch the spreadsheet.

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Follow The Rules Of The Road!!

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The key to building a solid foundation for your business finances is to follow the rules of the road. In the blog post last week we took a look at the chart of accounts in relation to building a solid foundation for your business finances. This week we will take a look at workflows in QBO. First, I need to ask the question:

Are you a rule breaker or rule follower?

 I know that I am equal parts rulebreaker & part rule follower:) 

When it comes to using QuickBooks Online I am definitely a rule follower. In order to ensure that you are getting the most out of the software, it is important to follow their predetermined workflows. One area that I see a lot of “rule-breaking” around is not using the workflow for receiving payments. The scenario can go something like this: your customers pay you and then you receive the payment and deposit the funds into your checking account within QuickBooks Online. 

This Is Great:)

You provided the service and your customer paid you. It sounds like everything is working okay UNTIL you try to reconcile your account and the money you deposited to your bank in real life isn’t matching what is showing in QuickBooks Online.

What Is Going On Here?

The problem is that the predetermined workflow was skipped and as a result confusion and frustration have taken hold. The proper workflow is to receive payments against the invoice and select the “deposit to” account undeposited funds. Next, the deposit that you made at your bank will show up in the bank feed and there will be a match that shows that you are good to go. In contrast, when the workflow is skipped then the funds you deposited into the checking account will not match what is shown in the bank feed because they are not grouped together which is how you made the deposit at your bank in real life.

I am a free-spirit and rule-breaker on something like eating more sweets than I need to. :)

But when it comes to QuickBooks Online following the rules is best because it can help you to build a solid foundation for your business finances and avoid frustration. 

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Are Your Business Finances Built on a Solid Foundation?

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As business owners we all want to make money and have the information we need to see if we are not doing so well. The ability to pull reports to make financial decisions about your business is one of the most important resources you have at your disposal. The information is only as good as the data that is in your accounting software. I am sure you are familiar with the terms “garbage in & garbage out.” This can happen if you don’t have the correct foundation set up in your QuickBooks Online software.

 I like to look at it this way

When you want to make a delicious sandwich what is the most important thing you must have first? 

Good Bread!!

If you have wimpy bread or cheap bread that doesn’t match the type of sandwich you are trying to make then it will be an epic fail and you will probably go to your favorite sandwich shop to buy the sandwich you want. But if you start with a delicious baguette or a good focaccia roll then you are on your way to building something quite yummy. Much in the same way this is how it works with building a solid foundation for your books in QuickBooks Online. The first step to building a solid foundation is to set up the chart of accounts correctly according to:

• Your entity type

• Your particular industry

• Your tax return (which goes back to your entity type:)

If you set up the chart of accounts according to the items above and use best practices then you are on your way to creating a solid accounting foundation for your business that will allow you to run reports and make sound financial decisions. It all starts with the “bread” for your books which is the chart of accounts. 

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Welcome To The Month Of April!

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I don’t know about you but the month of April just brings a smile to my face.

:)

There is something about watching the flowers come into full bloom and leaves growing back on the trees that just warms my heart. The weather here in Las Vegas is a comfortable 70'ish degrees right now and the sun is shining. In the next month or two, we will be on fire with the heat BUT that is later..lol

April goes hand and hand with spring cleaning and I have been doing a little bit myself these days. I have also been doing some spring cleaning in my business by taking a look at the overall health of my business and areas that I can make improvements. One area that I love taking a look at is my financial reports. This month I am going to focus on looking at the 3 major financial statements you should be looking at monthly and why they should matter to you. The 3 major financial statements are the Balance Sheet, The Income Statement (P&L), and The Statement of Cashflows. I hope you will join me on this financial journey and learn something that you can add to your business toolkit.

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