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Reinventing your business during a crisis

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Reinventing business meeting

Reinventing your business during a crisis

Even if your resources are limited, you may emerge stronger and better to rebuild your business during a crisis and propel it ahead.

Reinvention occurs on a regular basis. Many firms are reinventing their business during a crisis to reflect current consumer trends, while others are undergoing complete transformations, from the way they operate to how they service customers. The reality of our environment is that change forces us to reinvent and transform ourselves on a regular basis. If you choose to remain stationary, you risk losing your significance.

But what if we’re in the midst of an economic crisis? Isn’t it impossible to alter a firm at such a risky time? Organizations are at a fork in the road due to significant resource restrictions. On the one hand, they are aware that the longer they remain stationary, the worse things will become for their company. On the other hand, despite it putting a drain on resources, reinventing your organization is the only way to ensure its survival.

How a business reinvents itself during a crisis is critical, as it determines whether it will be able to weather the current storm and survive. This is why reinventing your business and transforming your people are so important. Although transformation is not an overnight process, it must begin at some point, and now is the moment to do so.

 

Here are some tips to help you reinvent your business:

1. Everything stems from the people, the business’s beating heart.

The first step is to determine where your people stand in relation to the current problem. Everyone reacts to change in their own unique way. Keep in mind that other elements such as the existing manner of working, the organization’s processes, and, of course, personal events might have an impact on your employees.

At this juncture, your employees’ mindsets, resilience, learning, and agility are critical. These characteristics constitute the cornerstone of development, and while some are innate, they may be cultivated in everyone. We will be doomed to fail if we do not build these foundations. While agility and resilience are important, encouraging people to learn helps them stay alert and prepared to face new difficulties. So take this in mind when you are facing a crisis where you need to reinvent your business.

 

2. Examine your company’s current state in regard to its clients.

At this point, a good question to consider is: Are my products and services meeting my customers’ changing needs? While the answer may be “no” for some, even those who say “yes” may face difficulties. This is because, in a crisis, people’s behavior — and, with it, their consumption behavior — alters, as we’ve witnessed during the ongoing Covid pandemic. You might need to consider changing your products or service when you reinvent your business during a crisis.

 

3. Define focus with insights from employees and clients.

There are numerous strategies to reinvent your business during a crisis in order to retain your employees and meet customer demands. Adjusting the business model, switching to alternative products, or changing the way you serve consumers are all examples of this. This is a critical initial step in the process of revamping your company.

However, we cannot really attain everything we desire for our businesses. We need to refocus on a few focus points and accomplish them well while resources are tight.

 

4. Set short- and long-term objectives.

We can define the goals after we’ve defined our focus. The most effective means to track our progress toward those goals. When reinventing your business during a crisis, the most important goal is to get out of it as quickly as possible. Long-term goals, on the other hand, are critical for the business’s long-term viability.

It is also critical to design and implement a recovery plan at this time. This should include a strategy and specific actions for resuming operations as quickly as possible. The situation will not persist indefinitely. When it’s over, businesses must be prepared to ensure that the competition does not gain the upper hand.

Take all of the lessons acquired from the crisis as well. Apply what you’ve learned to your company’s future strategy and culture. Today, for example, must be the first day of embracing agility as a key component of its culture.

 

5. Finally, and most critically, reallocate resources to maximize efficiency.

While it’s admirable to want to seek out fresh chances and seize them, this may not be feasible. This is owing to the fact that you are working with restricted resources as a result of the crisis. You must also reinvent your people to focus on the goals at hand, a process known as reorganization.

Change is difficult for everyone, let alone an business with a large number of people to manage. Change, on the other hand, provides us with the opportunity to pursue something even greater and better than before.

A crisis can be destructive, but it cannot last indefinitely. The most essential thing is to make sure you’re ready to bounce back stronger and better than before when the crisis passes.

 

Conclusion

One way you can reinvent your business is to reduce employee overhead by outsourcing the highly technical aspect of your business -like bookkeeping- to industry professionals. Doing so helps you get far more control of your business finances and it helps you see a clearer picture of your business’ financial health. Lucky for you FAS is in the business of helping small businesses! Send us a message and we’ll discuss how we can help you see your business’ financial health clearer.

 

Get in touch with us now!

 

Tax Credits and Exemptions Overview for 2021

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year end tax review

Tax Credits and Exemptions Overview for 2021

Individuals and families need to know about the Tax Credits and Exemptions provisions that are in place for 2021. There are some important changes from the current law that will impact filers in ways both large and small. Here’s an overview of the Tax Credits and Exemptions for the tax year 2021.

 

Personal Exemptions

The Tax Cuts and Jobs Act suspended personal tax exemptions for tax years 2018 through 2025. Personal exemptions will be subject to the “standard” deduction.

Standard Deduction

This tax-filing season, make sure you have the right information to accurately prepare your taxes by knowing the available tax credits for you. The standard deduction has increased under the Tax Cuts and Jobs Act. For married couples filing a joint return in 2021, the standard deduction is $25,100. While the standard deductions for singles and married individuals filing separately is $12,550. Heads of households get a deduction of up to $18,800.

In 2021, the standard deduction for senior citizens will be slightly higher. The additional standard deduction for blind people and senior citizens in 2021 is $1,350 for married individuals and $1,700 for singles and heads of households.

 

Income Tax Rates

For the upcoming tax year, the top tax rate of 37 percent affects individuals whose income exceeds $523,601 ($628,301 for married taxpayers filing a joint return). Marginal tax rates for 2021 are as follows: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. While the tax rate structure remained similar to prior years under tax reform (i.e., seven tax brackets), the statutory tax-bracket thresholds increased significantly for each filing status.

 

Estate and Gift Taxes

In the year 2021, each individual is allowed an exemption of $11.70 million for estate, gift, and generation-skipping taxes, with a top tax rate of 40 percent. The annual exclusion for gifts is $15,000.

 

Alternative Minimum Tax (AMT)

For income earned in 2021, the exemption amounts for single filers increased to $73,600, for heads of household to $114,600, for married filers jointly to $114,600, and for qualifying widows or widowers and married taxpayers filing separately to $57,300.

 

Pease and PEP (Personal Exemption Phaseout)

Under the Tax Cuts and Jobs Act (TCJA), the Pease limitations on itemized deductions have been eliminated and the personal exemption phase-out has been repealed.

 

Flexible Spending Account (FSA)

Flexible Spending Accounts are subject to a $2,750 cap in 2021 (same as 2020) and only apply to salary reductions made under a health FSA. The term “taxable year” as it applies to FSAs refers to the plan year of the cafeteria plan, which is typically the period during which salary reductions are made.

 

Long-Term Capital Gains

In 2021, taxpayers with taxable income below $40,400 for single filers and $80,800 for married filing jointly continue to pay 0 percent capital gains tax. For individuals whose income exceeds $445,850 ($501,600 married filing jointly), the rate for both capital gains and dividends is capped at 15 percent.

 

Miscellaneous Deductions

For the 2018-2025 tax years, the Miscellaneous Expenses category on Schedule A of your federal income tax return has been eliminated. As such, no expenses related to tax preparation, moving (other than moves due to military orders), job hunting or unreimbursed employee expenses like tools, supplies, required uniforms, travel, and mileage can be deducted.

Note: Business owners can still deduct business-related expenses on Schedule C.

 

Individuals – Tax Credits

Child and Dependent Care Credit

The Child and Dependent Care Tax Credit was made more generous in 2021 by the American Rescue Plan Act of 2021. The new parameters allow you to claim tax credits up to $4,000 for one qualifying person and $8,000 for two or more qualifying persons. If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) to work or look for work, you may qualify for the credit.

Many more taxpayers will qualify for the tax credit this year and for many who were not previously eligible, the amount of the tax credit will be higher than in previous years. However, taxpayers with an adjusted gross income over $438,000 will not be eligible for this credit, even if they have claimed it in the past.

 

Earned Income Tax Credit (EITC)

For the tax year 2021, the maximum earned income tax credit (EITC) for low, and moderate-income workers and working families increased to $6,728. This is up from $6,660 in 2020. The maximum credit for taxpayers with no qualifying children is $1,502.

The maximum income limit for the EITC in 2020 was $57,414 for married couples who file jointly and $51,464 for taxpayers who are single or head of household. The credit varies by family size, filing status, and other factors. The maximum tax credit is available to joint filers with three or more qualifying children.

 

Individuals – Education Expense

American Opportunity Tax Credit and Lifetime Learning Credit

If you are claiming the American Opportunity Tax Credit, the maximum credit is $2,500 per student. The Lifetime Learning Credit remains at $2,000 per return. Your modified adjusted gross income (MAGI) must be $69,000 or less ($139,000 or less for married filing jointly) to claim the full credit for either.

Student Loan Interest

In 2021, you can deduct up to $2,500 in student-loan interest if your annual income is less than $70,000 (single) or $140,000 (married filing jointly). The tax credit cannot be claimed if your income is more than $85,000 for single filers ($170,000 if married filing jointly).

 

Individuals – Retirement

Contribution Limits

For 2021, the elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is $19,500 (same as 2020). For persons age 50 or older in 2021, the limit is $26,000 ($6,500 catch-up contribution).

Retirement Savings Contributions Credit (Saver’s Tax Credit)

In 2021, the adjusted gross income limit for the saver’s tax credit for low and moderate-income workers is $66,000 for married couples filing jointly, $49,500 for heads of household, and $33,000 for married individuals filing separately and for singles. The maximum credit amount is $2,000 ($4,000 if married filing jointly). As a reminder, starting in 2018, the Saver’s Credit can be taken for your contributions to an ABLE account if you’re designated as the beneficiary. However, keep in mind that any distributions you receive from your ABLE account may affect the saver’s tax credit.

 

Conclusion

Having to file an annual income tax return can be quite a burden for individual taxpayers. If you didn’t think you would have a lot of personal expenses to deduct this past year, think again. You still can save yourself some money by making sure your exemptions and credits aren’t going to waste—and the easiest way to accomplish that is by checking the IRS table. You can also have an experienced Enrolled Agent do your taxes for you. This way, you can rest assured that your tax preparation is done right and that no stone is left unturned when it comes to your credits.

 

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Top 3 tax issues for Canadians moving to the US

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US and Canada flag puzzle pieces

Top 3 tax issues for Canadians moving to the US

The US and Canada have an undeniably close connection. For the most part, we share the longest unguarded border in the world, and as many as 90% of Canadians live within 100 miles of the border. Further a quarter-century into NAFTA, it is no surprise that our economies are highly intertwined.

Despite the amicable relationship of both countries, there are still some tax issues that arise. Some are well known and are resolved immediately and some tax issues are less known despite the frequency with which they arise for unsuspecting Canadians. Despite the tax treaty between the US and Canada, the domestic tax systems of each country are remarkably different, and cross-border tax planning is critical to avoiding these top 3 tax issues for Canadians moving to the US.

 

Tax issues and rules to keep in mind:

  1. Canadian Departure Tax

Moving to the US bears a lot of important tax issues to remember when planning a move from Canada to the US.

Upon Canadian residency termination, Canada will impose a deemed disposition of most assets, the deemed disposition is commonly known as “Departure Tax”. This deemed disposition is a crucial tax issue that often results in a significant tax bill in the year of departure. This is a tax that would have been payable at some point, but without actual proceeds to pay the tax. US-bound migrants are wise to consider the extent of the departure tax well in advance in case pre-departure tax planning can reduce the Canadian tax bill.

Furthermore, pre-departure planning is necessary to ensure that one’s financial status is ready to be subjected to US tax rules. Understanding the US tax treatment of foreign investments can reveal areas of improvement that should be made prior to leaving Canada. So take this tax issue in mind when finalizing your move down south.

 

  1. Taking Title on US Property

Canadians have continuously ranked among the top international real estate investors in the United States for the past decade or more. The volume of purchases is enormous, whether for personal vacation usage or as an investment plan to earn rental income and capital profits. How to take title is a critical topic that discerning Canadian purchasers need to be answered.

Of course, the answer to the question depends on a variety of criteria, including the property’s planned use, estimated holding time, source of finances, and the buyer’s net worth. Furthermore, there are numerous possibilities for obtaining title, including personal names, corporations, partnerships, and trusts, all of which have various arrangements.

The standard model is that when it comes to title structure, there is no one-size-fits-all solution. As a result, prospective Canadian buyers of US real estate should seek assistance from a tax professional who is familiar with the interactions between the Canadian and US tax systems in order to obtain the best structure.

 

  1. Will and Trust planning when children already live in the US

When a beneficiary of a Canadian estate or trust resides in the United States, it’s critical to understand the income tax issues of the will and/or trust. Many particular provisions have been implemented into US tax law to combat the practice of utilizing offshore firms to dodge tax on US citizens. However, because these restrictions are frequently broad in scope, they can have an impact on otherwise innocent US individuals who are beneficiaries of Canadian trusts.

When naming a US resident as a beneficiary of a Canadian trust, it’s important to remember that money accumulated within the trust is taxed at much higher rates when it’s eventually transferred to a US taxpayer. Even capital distributions from a trust might be taxed as regular income in the United States if not properly reported. Information reporting and income inclusion must be properly timed to avoid needless taxation or double taxation of payments to US beneficiaries, which requires proper trust structuring.

Furthermore, if a US person is listed as the executor of a will or the trustee of a trust, the trust will be subject to additional US income tax reporting responsibilities, which can make estate planning more difficult. When creating an estate plan or administering an estate, Canadian people with US beneficiaries should seek experienced cross-border tax advice.

 

Final note for top 3 tax considerations

Moving to the US as a Canadian can unravel a world full of tax issues surprises. Not to mention the stacks and stacks of tax rules and guidelines that must be kept on top of your mind to ensure that your move to the US is fully compliant with both the US and Canadian tax laws. Need some advice with your taxes as a Canadian living in the US?

 

Get in touch with us!

Tips to Wade Through Holiday Tax Pitfalls

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Tips to wade through holiday tax pitfalls

Tips to wade through holiday tax pitfalls

The holiday season is here and people are hustling and bustling all around. Trimming the spruce, checking off shopping lists, wrapping gifts, and celebrating with loved ones. Taxes are the least of everyone’s worries. Even though it is the perfect time for people to look at their financial tips to wade through holiday tax pitfalls.

Taking the time to take a closer look at your tax-planning list, and checking it twice, could help you steer clear of the holiday tax pitfalls and minimize tax liabilities at year-end. As our gift to you this holiday season, we’ve listed down the most common holiday tax pitfalls and along with it are some tips to help you wade through it!

 

  1. Count your kids

Most people with children don’t file for their child credit tax which could serve them well. If you’re a taxpayer that has kids, it will do you well to inform the IRS that you are raising children. The child tax credit has doubled for the past years for each dependent under the age of 17, making this a critical tax savings area for clients with children. The higher tax credit also benefits more people, since it does not phase out until their income exceeds the threshold placed by the IRS.

 

  1. Maximize your retirement fund

Ignoring your retirement fund is one of the major tax pitfalls during the holidays. Sometimes you get engulfed by your spending spree that you might forget to set aside some money for your retirement fund or more commonly known as 401(K)s. Maximizing your 401(k) contributions by year-end can help reduce your taxable income. For taxpayers ages 50 and older, contribution limits for IRAs and 401(k)s are even higher. These higher limits help clients build up their retirement nest egg and can help reduce taxable income.

 

  1. Health is wealth

One pitfall to look out for is if you are a participant in a high deductible health plan. You can actually contribute a substantial amount to a health savings account. Health savings account contributions are tax-deductible, and the money can be withdrawn tax-free to pay for a variety of medical expenses. Importantly, if the money is not used, the account balance continues to grow tax-free.

 

  1. The gift of giving

Feeling altruistic during the holiday season? There’s nothing wrong with that. What’s wrong is finding yourself in this holiday tax pitfall where you don’t include your charitable donations in your tax report.

 

Takeaways

If you do your taxes personally, you will find yourself in need of a lot of tax rules and guidelines coverage. The tremendous information that you should keep in mind to fully maximize your tax return can bring a lot of stress to an individual. Lucky for you, there is someone who can take the weight of tax preparation off of your shoulders! Send FAS a message today and we’ll discuss how we can help you make sure that no stone is left unturned with your tax reporting!

 

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3 Bookkeeping Tasks To Remember During the Holidays

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3 Bookkeeping tasks to remember during the holidays

3 Bookkeeping Tasks To Remember During the Holidays

Christmas is fast approaching and a few weeks after Christmas dawns a New Year. Remember these 3 bookkeeping tasks during the holidays as December is known as an extremely busy month for companies, much more for small business owners. Business owners are torn between preparing for the holidays and planning for the new year. Finishing your bookkeeping tasks during the holidays can sometimes become a burden that gets left stagnant like the glass of milk your kid leaves for Santa.

Finishing your bookkeeping tasks during the holidays is incredibly important as it will ensure that your tax situation is in order. Although the window is closing fast, you can still make sure that your bookkeeping tasks are in order during the holidays. We made a checklist for you that should be prioritized before year-end!

 

  1. Catch Up and Fix any errors

There is no shame in admitting that you have fallen behind on your bookkeeping during the holidays, not being able to remember your bookkeeping tasks during the holiday is a common occurrence. Every business owner has found themselves in the same situation. The majority of business owners say that the bookkeeping tasks that they fall behind on the most during the holidays are data entry, report generation, and reconciliations.

If you are a few months behind, it is important to catch up and keep your financial data up to date. Updating your books allow you to revise them for any possible mistakes, whether it’s miscoded payments or adjustments. Remember that it is important to keep your books updated and it is also equally important to keep your books error-free. Not checking for your bookkeeping mistakes during the holiday could result in further complications with your tax situation.

 

  1. Plan Ahead

The best time to consider and map out the future of your business is when you are closing your books. It gives you an updated snapshot of your business financials which allows you to make informed decisions based off on how it performed for the year. Since you already have your business financials laid out in front of you, take the time to look at it carefully see what worked and what did not work for your business. Consider your broader goal for your business and ask important questions about your business’s future.

Planning after you have finished your bookkeeping tasks during the holiday season helps you prepare for the new year and sets you up for success.

 

  1. Delegate

If crunching your bookkeeping tasks during the holidays got you thinking that bookkeeping is taking too much of your time. It might be high time for you to consider delegating the tasks to someone else. You have the option when it comes to delegating your bookkeeping. The first one is to hire an in-house bookkeeper that you will keep full time and will provide mandatory benefits that could increase your business’ overhead. Not to mention that the checks and balances that you have to lay out and implement in your business’ policies and guidelines to ensure the accuracy and credibility of your books.

Your second option is to hire an external bookkeeper. An external bookkeeper doesn’t bear the disadvantages of hiring an in-house bookkeeper. By hiring a professional bookkeeper, you can rest assured that your books are accurate and up to date. Professional bookkeepers also tend to have a wider range of experience when it comes to the field.

 

Lucky for you we are in the business of helping small businesses! If you need help doing your bookkeeping during the holiday rush, send us a message and we will discuss how we can help you do more by doing less!

 

Get in touch with us now!

Small Business Resilience: Questions Business Owners Must Answer

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Small Business Resilience

Small Business Resilience: Questions Business Owners Must Answer

The past two years have been filled with uncertainty and doubt. Business owners were left steering their business into the unknown without even having a simple glimpse of what lies ahead of them. Even the small businesses that laid out a resilience plan were blindsided by the spontaneity, severity, and length of the pandemic that halted global commerce.

Even though big companies also suffered a considerable amount of damage, small businesses suffered the greatest impact of disruption because their small business resilience plan was non-existent.

But there is always a rainbow after the rain. The past two years have left us a few important questions that will help us prepare for future crises instead of scrambling for solutions when the time comes.

 

Here are 3 questions designed to help your small business become resilient in times of disasters:

 

  1. What are your priorities?

When the going gets rough, your priorities are the key to keep yourself and your business focused. Small businesses are known for their extremely tight profit margins so setting your priorities straight when a disaster arrive, it is vital for your business resilience.

To properly set your priorities in times of uncertainty, you should start mapping out the operational factors of your business. This includes your employees, assets, processes, and payable. You should categorise which functions are critical to keep your business running. Having your priorities identified beforehand can help you avoid making hasty and uninformed decisions in the heat of the moment.

Crises will threaten your bottom line; do everything you can to protect it!

 

 

  1. What makes your business vulnerable?

As you map out your priorities, you will stumble upon a few vulnerabilities within your business. Your vulnerability might stem from your inventory, it being exceedingly high or potentially lower than you first realised. The vulnerability might also come out of your business’ internal process, it being too reliant on certain people to operate on a daily basis.

It is a good and sound practice to look at every aspect of your business that is draining your profits or not producing an optimal return on investment. When times are rough, every cent counts! Keep your business lean and agile.

Certain crises may make one business more vulnerable than others. For example, during the pandemic an invisible line was placed. Differentiating the “essential” and “non-essential” businesses from each other. Businesses tagged as non-essential were extremely vulnerable to the crises as compared to businesses tagged as essential.

Even though no one predicted being defined that way, it is valuable to consider the capacity in which your small business can be resilient and operate in different crisis situations.

 

  1. What are the strengths of your business?

The strengths of your business will keep it afloat during turbulent times. Whether it is unmatchable prices, a personalised service, or the best slice of pizza in town, recognises what keeps your customers coming back to your storefront! Your ability as the business owner to keep up with industry trends is another important strength. When a crisis hits, you should not be in a position where are caught flat-footed. You should always be agile and be able to adapt and innovate to provide what your customers need.

For example, during the pandemic, plenty of businesses shifted their presence online. Digitalization and an understanding of your customers’ behavior can make all the difference in preparing your business for any storm.

 

Conclusion

Once you have answered the three questions posted above, it is now time for you to get creative with your business. Creativity and ingenuity are essential for small business resilience.

When the pandemic hits, plenty of small business owners stepped up their game and got creative with what they had. There once was a local general store owner reached customers via FaceTime to take their orders. Local apparel stores started sewing masks for health care workers and community members. Distilleries turned their alcohol production into the highly sought-after hand sanitizer.

In times of uncertainty, creativity goes a long way. Whether it is repurposing your production line, shifting digitally, or completely changing the way you offer your services. It is important to keep an open mind to whatever may come tomorrow and how you can help your community in times of need.

For small business owners, wading through the pandemic has been no easy feat. The best way to brave ahead? Lay the groundwork for a strong and sound financial model that will serve as the foundation of your small business’ resiliency! Preparing means protecting so get in touch with us to see how we can help you lay a strong financial foundation for your business through the use of your business financials!

 

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US Tax – Here’s what you should know as a Canadian working in the US!

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US Tax - what to know as a Canadian working in the US

US Tax – Here’s what you should know as a Canadian working in the US

 

Do I pay Canadian tax on US income?

Cross border taxation can be extremely confusing, here’s what you should know as a Canadian working in the US!

Did you know that if you live and work outside of Canada for more than 183 days per year, the CRA considers you a “non-resident” of Canada for tax purposes?

According to the CRA, “non-residents” can only be taxed by Canada on income received from Canadian sources.

An example of this would be if you live and work in the US but have rental income in Canada. In this instance, you are required to pay Canadian income tax on the rental income you earned that year. If all your income came from outside of Canada and had no source of income within Canada, then filing of the Canadian Tax Return becomes optional.

 

Still a Canadian Resident but Receiving US Pay? Avoid double-taxation with the Federal Foreign Tax Credit. 

In the case of Canadian residents living and working in the US for under 183 days out of the year and had US taxes withheld from their pay, you are eligible for the Federal Foreign Tax Credit, which can help you obtain credit for any taxes collected by the IRS in the US.

Are you a self-employed or a full-time worker? Classification is vital here. 

Start by being clear. Knowing what your status is with the company employing or contracting you before you begin work will be helpful to avoid future issues. If you commute to work for a company located in the US, or if your company provides you with benefits and work equipment and controls specific aspects of your day-to-day, you are most likely a full-time employee of the company and cannot classify yourself as self-employed.

 

Navigating Compliance Shouldn’t be Difficult

Canadians earning income from US sources should always look to protect themselves from any potential liability and error. Ultimately, being aware of your options helps you stay on the right side of both the CRA and the IRS and avoid being taxed twice on your income as a sole proprietor or even a small business owner.

Residents of Canada must pay taxes to the CRA, and if you are residing in the United States, you will pay taxes to the IRS. Remember that there are nuances, such as the relationship to your employer and more.

If you need more information or help navigate this space, connect with us today – we can help make this process as seamless as possible, saving you time and money.

 

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Get in Touch with us! - US and Canada Tax Preparer

All Treat No Trick: 3 Tips To Avoid Financial Horrors

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Financial Horrors

All Treat no Trick: 3 Tips to Avoid Financial Horrors

Every successful entrepreneur has gone through years of making mistakes before they were able to find a sound risk management approach. Knowing some of the common mistakes that these successful entrepreneurs have experienced might help you make better business decisions that give your business all the treats without the trick this Halloween. Use these 3 tips wisely to keep you on track to reducing your overall business risk and avoid financial horrors.

 

Here are 3 Tips to Avoid Financial Horrors:

 

  1. Do not underprice your services.

Budding business owners have this tendency to mark their products or services at the lowest possible price that sometimes reaches the point that the business owner only breaks even from his initial investment on the product or service. The idea is that low prices might attract customers and it might differentiate the business from other businesses in the same field.

However, as days go by, your operating expenses will also increase. Your once loyal customers that you have acquired due to your enticingly low prices might feel offended if you raise your prices. Now you are set with the dilemma of raising your prices to match your operating costs and risk losing a large chunk of your customer base.

The wiser route would be to come with a more effective way to differentiate your services or products from your competitors. It is near impossible to make a profit if your product or service is priced too low. Avoid this financial horror by finding the unique proposition of your business to differentiate it from other services or products.

 

  1. Borrow money wisely

Qualifying for a business loan can feel like quite an achievement. After all, it means that lenders see your business as sustainable and profitable enough to lend it money. However, just because a lender approves you does not mean that you need to take on the debt. Banks and other lenders make profit by collecting interest on various types of loans, including business loans.

The best way to mitigate the financial horror of being drowned in debt is to pay interest as low as possible. If your business really needs additional funds to keep it afloat, borrow only what you need to help your business grow. Paying high interest rates increases your risk with this financial horror.

 

  1. Do not put all your eggs in one basket

Think of your business as a you would think of your stock portfolio. When it comes to the investments in your portfolio, the majority of your business’ revenue needs to come from multiple sources. Oftentimes, startup owners tend to spend most of their time serving their early customers. Prioritising on only one block of your customer base will make it hard for you to venture into other markets and build new accounts. Those early streams of revenue have a tendency to fade off over time. Avoid this financial horror by expanding your business horizons and build other sources of revenue as well.

 

Unspoken Mistake

There is one unspoken mistake that caused a lot of businesses to fail and that is neglecting your business financials. Your business financials give you a clear view of how your business is fairing in the short and long run. It helps you identify your business’ strong and weak points and lets you address those immediately. Most startup owners start their business with a vision for their product or service, not everyone is expected to be a bookkeeping expert or bookkeeping savant immediately. Lucky for you we are in the business of helping small businesses. Send us a message and we will get in touch with you on how we can help you take a closer look into your business financials.

 

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Struggling to Collect Invoices? Try These 3 Tips!

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STRUGGLING TO COLLECT INVOICES? TRY THESE 3 TIPS

No matter the size of your business, struggling to collect invoices can affect the financial performance of your business. This is especially true if the unpaid invoices are mounting and they outnumber those that are paid on time. Struggling to collect invoices means that your cash flow is affected. Interrupted cash flow due to uncollected invoices might result in a scenario where your business doesn’t have enough cash to pay its employees, suppliers, or vendors.

 

Here are 3 things that you can do to help deal with your struggle in collecting invoices:

  1. Set a procedure and follow it

It is best practice to lay out a policy when it is to collect invoices. The policy might include details as to when will the invoice collection follow up occur and how often will the follow up occur if the initial attempt fell on deaf ears. The procedure to collect invoices might also include additional steps like double checking if you actually did send the invoice, if the payment terms were clear, if the amount due was clear, and if you sent it to the right company’s email address or mailing address.

Next, follow up politely as the procedure dictates. Keep in mind that sometimes uncollected invoices slip through the cracks. A client might be busy and forgot about the invoice, or the client might be out-of-town or dealing with an emergency. Follow up politely and keep your cool. Nobody likes receiving an angry email.

Avoid putting any ‘past due’ remarks on the invoice if the mistake was not deliberate. It will ensure that you’ll have a good working relationship with the client in the future if the uncollected invoice was just an honest oversight.

It is also a great idea to have someone help you keep track of your aging and uncollected invoices. Your bookkeeper would be the ideal person to be in charge of tracking your invoices. This way, any uncollected invoices will show up on your financial statements accurately.

 

  1. Initial steps to collect unpaid invoices

 

Now that you have your internal procedure in place and you are adhering to it religiously. But your clients are still not getting back to you about the settlement of their unpaid invoices, you may proceed and do the initial steps that can help you collect invoices:

    1. Resend invoice

Once the invoice becomes overdue, it is a good idea to send a polite and friendly follow-up email reminder to your client. Send it in a professional and courteous manner.

Inform them that their invoice is now past due and you are politely collecting their invoice. Include the payment due date and remind them of the available payment methods that they can use to settle their unpaid invoices. Clearly inform them of the late fees that might come with their unsettled invoice. Do not forget to include the original invoice in your follow-up email in order for the client to easily see it for reference.

 

    1. Reach out

Emails sometimes get ignored or forgotten. If that’s the case for you, then it is a good idea to reach out to them by giving them a call or try asking if you can meet with them to discuss the matter. Now, if your initial contact does not respond to any of your communication attempts, you can try and contact their higher-ups to discuss the matter directly or you can give their billing department a direct call.

Most billing departments have access to all necessary information and they can let you know whether your reminders were received by them. If they inform you that they have already sent you the payment, you can ask for a rough estimate as to when will the payment arrive on your end.

 

    1. Stop working with them immediately to avoid further losses

If you did all of the steps above and you still have not received a payment, stop working with them immediately. Inform them that you will not do any further work until they send the payment.

 

  1. Get outside help

90 Days is a very long time for uncollected invoices. If your invoices are still not paid after all that time, it may be time for you to get serious outside help. Someone that can assist you in recovering the amount in the unpaid invoices. Here are some steps that you can take:

 

    1. Hire a Collection Agency

      Incessantly sending a follow-up email and cold calling your clients is hard work and it takes a lot of time. Consider hiring a collection agency to do that work for you so that you can focus on new projects that can generate income for your business to help its cash flow.

 

    1. Send an attorney’s letter

      Having an attorney draft a letter for you might be a good idea. You will still have to pay for the attorney’s letter but they usually cost reasonably. Appearing before the court might spur your client to get in touch with you immediately to work out a payment plan.

 

    1. Small Claims Court

      All 50 states have small claims courts that are designed specifically for use by non-lawyers. If the uncollected invoice is less than your state’s small claims court maximum limit, which is usually between $2,500 to $15,000, you can forego hiring a lawyer and represent yourself in court. There will be court fees, but at least you don’t have to pay those expensive attorney fees.

 

    1. Arbitration

      If the amount owed to you exceeds the maximum limit for a small claims court, you still can have another option. You can go through an arbitration board. Arbitration is quicker and cheaper than going to a higher court, but when it comes to an arbitration case, a judge won’t be hearing your case, an arbitrator will hear your case and will make the final judgment. The arbitrator’s decisions can be enforced in the same way a judge’s ruling can be.

 

    1. Higher Court

      If arbitration is not your cup of tea, you have the option to seek assistance from the higher courts if the amount owed to you exceeds the limit of the small claims court. But bear in mind that this option requires more of your time and will be more expensive since you can’t represent yourself in higher courts, you’ll need the services of a bona fide lawyer. Because of these factors, you should weigh in the pros and cons; will the amount that I might spend taking this matter to the higher court be worth it for the amount that I’ll be collecting?

 

Avoid uncollected invoices in the first place

If you want to mitigate the struggle of uncollected invoices in the first place, make sure to do a quick background check for new clients. Doing background checks can help you identify legitimate clients that do not have any prior complaints of non-payment in their history. After that, make sure that you have a signed contract. Keep detailed records, and ask for partial payment if you can’t ask for full payment.

You should also make the payment process as convenient as possible. Set up recurring invoices, and work on establishing strong client relationships.

 

Uncollected invoices can complicate your bookkeeping. Lucky for you we can help you with your bookkeeping!

 

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3 Strategies to Learn from Failure

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3 strategies to learn from failure

“We are programmed at an early age to think that failure is bad. That belief prevents organizations from effectively learning from their missteps”

-Amy Edmondson

3 Strategies to Learn from Failure

Failure is an unavoidable aspect of running a business. Even the most successful of entrepreneurs have their own stories of failure that humbled them and made them into who they are right now. Imagine Walt Disney being told that his work lacked creativity, now his name is synonymous with creativity. Bill Gate’s first company was a disaster, with a product the barely worked.

No one wants to fail, but even the brightest and most clever of people face challenges at some point in their careers. Life is a constant roller coaster. Most of us teeter between our success and our failure. Whatever happens, do not lock yourself into despair. Everyone falls short from time to time. Your ultimate test is how you deal with failure. Remember that you can always learn from failure

Here are 3 strategies to help you learn from mistakes and use the experience to prop yourself back up!

 

  1. Accept that failure is a part of life.

Embrace your failure. Do not try to hide it. Failures don’t somehow work themselves out. They take work, so ignoring the problem only digs a deeper pit. Overcoming problems is a big feat in and of itself. If you managed to come back up after failing, be proud of yourself that you were able to overcome it.

Always bear in mind that mistakes are fundamental parts of the human condition. The scenic route on your road map to a better future. Failure is always lurking at the corner whenever we go outside our comfort zone.

Many of history’s most successful people had significant failures as well as accomplishments. What set them apart is how they used that failure into something positive.

 

  1. Reflect

You need to be honest with yourself. Ponder deep and ask yourself what happened, where did you go wrong, and why. Learn from your failure in order to avoid an even bigger problem; repeating the same mistake.

Here are three powerful questions to ask in the wake of failure:

    • What lessons did I learn from this?
    • What are the three positive outcomes of this situation?
    • How has this experience allowed me to grow as a person?

Pondering deeply on these questions can help you see new opportunities that will arise from this defeat.

 

  1. Take action and move on.

This last step is the biggest test to see if you can bounce back up from a failure. What solutions do you have to rectify the problem? How can you offset the situation to avoid or lessen the impact of the problem? How do you get things back on track?

Deal with your mistakes head-on and with conviction. Once you overcome the problem in front of you, head on to the next one. Start your next project, look at new ventures or consider a new task at hand. Always remember your hard-learned lessons as you keep moving forward, and you’ll emerge stronger and more resilient than before.

 

 

Running a business means that you always have to look ahead over the horizon to search for the next big thing to make your business successful. It is important for you as a business owner to keep learning from failure, that’s why we compiled 3 of the best strategies to learn from failure. But running a business also means that you have to take care of the tedious financial aspects of it. You need a partner that can help take that load off your shoulders so you can focus on expanding new horizons for your business. Lucky for you, we are in the business of helping small businesses!

 

Get in touch with us now!

 

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