Small business bookkeeping

7 small business bookkeeping tips for time-pressed business owners

Is your small business bookkeeping taking too much time out of your already-busy day? Here are some quick tips to simplify your financial admin.

small business bookkeeping

Remember a time when it was so simple to sort your business receipts, bills, invoices and general paperwork? You might have just been getting started and spent a lot more time growing your business than you did organizing your books. But then you started selling more, got more customers, more paperwork flooded in and everything erupted!

Managing administrative work can become complicated as your business grows (especially if that growth happens quickly) and that once simple admin process can quickly escalate into a daunting challenge. 

Now, even a small error or oversight can impact your P&Ls, Income Statement, revenue projects — and snowball into a big end-of-year mistake that affects your payroll and taxes. So save your money, time and maybe even some gray hair by establishing an easy-to-follow bookkeeping process.

Here are seven essential bookkeeping practices that every small business owner should follow:

1. Separate your business and personal finances

This is essential for every business. Personal finances need to be kept separate from your business expenses, which is best done from the initial point of purchase. If not, you’ll end up with a mangled mess of expenses within multiple account statements to sort through and label at the end of the year. You also don’t want to end up with a shareholder account that is too high — forcing you to claim that ‘additional’ income all at once.

To limit the crossover, don’t use your personal credit card for work purchases and vice versa. However, this can happen from time to time (standing in the checkout line and realizing you don’t have your other card), so make a note of that and flag it immediately with your bookkeeper. It can be helpful to take a picture of the receipt just in case you misplace it along the way or invest in a small business bookkeeping mobile app 

 

Small business bookkeeping tips: Financial Statements

2. Document all expenses

No matter how small the expense, it’s important to track your purchases and payments. Whether it’s on a company credit card, debit account, by cheque or a cash payment, keep a record of those transactions. In addition, download your banking statements each month so you have a file of those for easy access on your hard drive. 

If you have a bookkeeper or admin person, ensure they have access to those statements and are reconciling every month — flagging any questions and clearing them up so you don’t have a backlog later in the year (when you might forget what happened months before.) This also helps you assess your business cash flow in real-time and understand where potential gaps may lie.

Related: 3 biggest financial challenges facing business owners

3. Schedule weekly bookkeeping time

Aside from the monthly reviews, set aside time in your calendar for weekly admin time. This could even be 30 minutes every Monday morning to update your Quickbooks or financial software, pay bills and review bank account balances. By making it a regular and easy task, you will feel more in control of your business financials and less intimidated at the end of the year when you need to dig into the dusty books.

 

Small business bookkeeping & accounting tips

4. Follow up on account receivables

Even more critical is ensuring the money owed to your business is coming in on time. Knowing when invoices should be paid and how that impacts your cash flow is critical to making future business decisions. Within your accounting software, ensure all invoices are entered with the right term dates. 

In your weekly bookkeeping time, review this section to see what has been paid, what’s coming due and, most importantly, what is past due. If you have a collections person or team, get them on the case asap. But if it’s just you managing the books, pick up the phone or send an email to follow-up on the payment. The personal touchpoint with the customer could help get payment quicker and further solidify a good relationship.

5. Monitor cash flow trends

The worst-case scenario in business is running out of cash at a pivotal time. By monitoring your accounts, knowing the seasonal trends in your industry and having a reliable projection for your business, you’ll be ready well in advance. So how do you do that?

Setting up a cash flow statement and budget is step one. (You can follow the steps here.) Next, calculate your DSO, DPO and DIO as part of your cash conversion cycle, which can reveal a host of opportunities and potential roadblocks in your way. Look for warning signs such as taking too long to pay suppliers, changes in sales or customer reorders, or even unusual spikes and dips in payroll. Anything out of the ordinary could warrant a little extra attention.

 

Small business bookkeeping & outsourcing to a professional

6. Outsource to a trusted pro

Despite your best intentions, sometimes the admin work for your business will still be your last priority. Getting help on these steps ensures that things are managed proficiently — freeing you up to spend more time on running the sales, service and operations of your company. 

If you don’t yet have a bookkeeper, look into adding this role (even part-time or on contract), which could save you countless hours. Your accountant may offer this service already or offer a referral to their trusted network, so start with a conversation with the professionals already on your team. 

When it comes to your accounts receivables and collections, when getting financing through invoice factoring at Liquid Capital, our team will also take care of that portion for you. 

Here are additional benefits of invoice factoring.

 

7. Reconcile monthly

This one is so important that it gets its own section. Reconcile all your paperwork and books once a month, along with your accountant and bookkeeper (as applicable). By reconciling monthly, you’ll catch errors associated with cash inflows and outflows earlier, keep accurate up-to-date records and be ready for financing if you’re ever in need. 

Staying on top of the admin will alleviate stress, a much-needed relief for most business owners, and prepare you for those unexpected surprises that are around every corner. 

 

Learn how to become lender friendly in our free eBook here. Get instant access with no download needed.

 


At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

Cash conversion cycle

How to determine your company’s «cash conversion cycle»

Learn the basics of a “cash conversion cycle” and how you can use it to your company’s advantage.

Cash conversion cycle

Every company needs a healthy cash flow to take on new opportunities, prepare for the unexpected and grow to their full potential. If you buy and sell inventory on account, it’s imperative that you know how long it takes to turn that inventory into cash.

This is the cash conversion cycle, and it’s key to making sure you’re on top of your company’s working capital.

Know your company’s cash conversion cycle

Your company’s cash conversion cycle (CCC) tells you how many days it takes to turn your inventory purchases into cash. It’s a cycle that is all too familiar: you acquire inventory from a supplier, store that inventory, sell it to a customer on account, pay your suppliers and collect on your invoices — thus getting paid and putting cash back into the company.

The CCC is an important financial indicator of your company’s cash flow. It shows your ability to maintain highly liquid assets and is a metric that lenders and other finance providers will use to assess your potential risk level.

The formula follows your cash through these various stages:

  1. Inventory Purchase, Transport and Storage
  2. Accounts Payable and Payments to Suppliers
  3. Sales, Accounts Receivable and Collections

Cash conversion cycle formula

It’s not magic, it’s just math

You don’t need to be a magician to unlock the power of the CCC formula for your business. All you need are three figures to complete the basic CCC formula, all of which you can find in your financial statements.

CCC = DIO – DPO + DSO

Let’s look at each component a little more closely.

  • DIO: Days Inventory Outstanding
    • This is the number of days on average that your company turns your inventory into sales. The smaller this number, the better.
  • DPO: Days Payable Outstanding
    • This is the number of days it takes you to pay your accounts payable. The higher this number, the longer you can hold onto cash, so a longer DPO is better.
  • DSO: Days Sales Outstanding
    • This is the number of days you’ll need to collect on the sales of that inventory after the sale has been made. Again, the lower the number, the better.

So the CCC is equal to the number of days it takes to sell your inventory, plus the number of days you need to collect on your sales, minus the days it takes you to pay your vendors.

Example:

Keisha runs a PPE manufacturing  company. Keisha always pays her suppliers within 30 days. She keeps enough inventory on hand to satisfy 60 days of sales and is good at managing this. It will take 52 days on average for her customers to pay their invoices. This would be her CCC formula:

CCC = 60 days – 30 days + 52 days

CCC = 82 days

Keisha’s CCC is 82 days, meaning that she will need on average 82 days of working capital to convert purchased inventory into cash.

The above is a simplified example, and to get accurate results you must calculate and track your DIO, DPO and DSO on a monthly, quarterly or annual basis, along with the dollar values for inventory and sales.

 

Calculate cash conversion cycle

How the Cash Conversion Cycle reveals hidden potential

Now that you have gathered the necessary numbers and ran them through the CCC formula, you will have a good indication of your cash liquidity position — and it can point your attention to what is helping or hindering your cash flow. Depending on the results, you may determine immediate areas that can be improved.

The longer the CCC, the more working capital you’ll need to manage your operations. And that can be an overwhelming challenge for many businesses. Generally speaking, companies want to shorten their CCC.

To shorten the CCC, you may be able to manage inventory levels better, get longer supplier payment terms, improve your collection process or adjust the payment terms you give your customers. However, this may not always be practical or something you’re wanting to change for a number of reasons.

Making adjustments that fit your business

Choosing to use an alternative financing solution such as Invoice Factoring can help to lower your CCC by turning accounts receivable into cash faster. 

Factoring can help to lower your DSO which means that you will get paid on your sales faster and have quicker access to working capital. This cash can then be reinvested into your company faster than if you had to wait on outstanding invoices to be paid out according to the usual payment terms.

Or you could get extended payment terms from suppliers to reduce the DPO portion of the formula or use financing tools such as Purchase Order Financing to help you make up the gap where suppliers are not providing adequate or any terms. By extending the number of days you have to settle your accounts payable, you can keep cash in the company and effectively increase your working capital.

However, the CCC alone cannot be a complete indication of liquidity. You’ll need to look at calculating other liquidity metrics like the current ratio and quick ratio to paint a complete picture. You may already have these calculations in place, but if you haven’t yet calculated your cash conversion cycle, it’s time to start crunching the numbers and tracking changes over time to manage your business better.

 

Reducing your DSO and DIO or stretching your DPO are also useful tactics that can help your cash conversion cycle to grow your business. Do you work in an industry where “inventory” doesn’t apply? There are also other ways that you can use the CCC. Keep reading our four-part cash conversion cycle series to learn more.

 

Read Part 2: Learn about the 7 proven cash flow tactics every CFO and finance pro needs to know.

Read Part 3: Learn how to leverage your assets to grow your working capital

Cash-Cycle-Part-3-ABL

Read Part 4: Learn how to keep suppliers happy and the cash in your pocket

Cash Cycle


About Liquid Capital

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital you’re talking directly to your funding source and a fellow business person.

resilience

Why every business owner’s most valuable asset is resilience

As a business leader, can you overcome adversity & daily pressures? Here’s why your resilience matters most & how to bounce back.

Resilience is a business leader's greatest strength

As far as inspirational commencement speeches go, it was a bit of a shocker.

When chief justice John Roberts of the United States Supreme Court addressed a graduating class in 2017, he wished them … bad luck.

“From time to time in the years to come, I hope you will be treated unfairly so that you will come to know the value of justice,” he said. “I wish you bad luck, again, from time to time so that you will be conscious of the role of chance in life and understand that your success is not completely deserved and that the failure of others is not completely deserved either.”

Only by experiencing adversity, Roberts suggested, can we develop the crucial quality we need to get us through it: resilience.

From Nietzsche to Kelly Clarkson

As a business leader, being ‘resilient’ allows you to “withstand or recover quickly from difficult conditions,” which you may face both internally and externally. An economic downturn, a market disruption, a botched expansion. A cancelled contract, an inventory snafu, a product that sinks like a stone. Unpaid invoices, unforeseen logistical roadblocks, or an employee who is underperforming.

How do you muster up the strength and courage to face the daily onslaught of challenges? Some will chalk it up to ‘entrepreneurial spirit,’ but author and psychologist, George Kohlrieser, points to resilience as the key. He defines this quality a step further, as it pertains to corporate and organizational leadership: 

“Resilience is the human capacity to meet adversity, setbacks and trauma, and then recover from them in order to live life fully. Resilient leaders have the ability to sustain their energy level under pressure, to cope with disruptive changes and adapt. They bounce back from setbacks. They also overcome major difficulties without engaging in dysfunctional behavior or harming others.”

To paraphrase Nietzsche – and a Kelly Clarkson song — “what doesn’t kill you makes you stronger.”

So what does resilient leadership look like? These snapshots may give you an idea. 

Business failure

Accept (and expect) failure 

Before launching New Coke, Coca-Cola CEO Roberto Goizueta conducted blind taste tests with nearly 200,000 consumers. After New Coke aced those tests, it hit the market on April 23, 1985. 

But New Coke fell flat. Coca-Cola was bombarded with thousands of angry calls and letters demanding the return of the original flavor. Just 79 days after introducing New Coke, Goizueta owned up to his mistake and brought the ‘old’ Coke back.

What went wrong? People’s hearts – their intense emotions about a century-old brand – simply overruled their taste buds. Goizueta learned that even if your business seemingly takes all the right steps (remember the 200,000 blind taste tests?) things can still go horribly wrong.

Despite your best planning and execution, failure will sometimes happen. Accept that. Expect that. And if it happens to you, learn from it.

Resilience is about being realistic

For James Stockdale, former U.S. vice-presidential candidate and high-ranking naval officer, taking a realistic view proved to be his saving grace. Although Stockdale survived seven years of torture and imprisonment during the Vietnam War, many of his fellow POWs tragically did not. 

As he explained to now famous business author Jim Collins, the most optimistic prisoners were, surprisingly, the least likely to make it out alive:

“They were the ones who said, ‘We’re going to be out by Christmas.’ And Christmas would come, and Christmas would go. Then they’d say, ‘We’re going to be out by Easter.’ And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again. And they died of a broken heart.”

Collins calls this the Stockdale Paradox, and warns business leaders of its dangers in his bestselling book Good To Great. As he further explains, “you must never confuse faith that you will prevail in the end — which you can never afford to lose — with the discipline to confront the most brutal facts of your current reality, whatever they may be.”

Being resilient means being realistic about your situation, not deluding yourself with false optimism.

Hit your business goals

It’s not about being ‘perfect’

Roy Halladay won a lot of things, including two Cy Young Awards and a place in the Baseball Hall of Fame. Yet the pitcher’s relentless pursuit of perfection cost him his life.

After Halladay fatally crashed his small plane in 2017, an autopsy revealed morphine, alcohol, antidepressants and amphetamines in his system. How could someone so perfectly in control out on the baseball field spiral so out of control in his life?

Biographer Todd Zolecki says Halladay’s constant overtraining and insistence on playing for decades after a spinal fracture, ultimately led to his addiction and downfall. “Because he was so determined, he just felt like he needed to push through it, even though he was in such tremendous pain. But he just couldn’t walk away. He could never turn off the ‘I have to go max effort’ switch,” as Zolecki explained.

In the battle of resilience vs. perfection, the baseball star’s loved ones could see he was not able to overcome and bounce back. Brandy Halladay told Zolecki her husband’s quest for a perfect career took a toll on the most important team of all – his family. As she described, “everyone else [was] getting the hero and we’re getting what’s left over.” Instead of even spending time with their kids, he was left struggling with his physical and emotional pain. 

Extinguish flames

Extinguish your inner saboteur

When we experience a rough patch, it’s often easy to dig yourself a hole and focus only on the negative side of things. Author and business coach Paula Hope defines this as your inner “Saboteur” as she explains in her book focused on conquering negative thoughts that can equally impact your sales revenue.

“A Saboteur, in the context of new business development and the business professional who offers their professional services, is a negative thought, or series of thoughts, that create a level of emotional discomfort for the business professional.” 

Part of being resilient, as we have now come to understand, is to be able to overcome being knocked down. It’s important, regardless of the Saboteur’s intensity, that you don’t let it affect your confidence as well as your business performance. You will not be able to move forward without ridding yourself of those personal fears and doubts.

Business leaders ask for help

Don’t be afraid to ask for help

Perfection is impossible. Instead, reach for the inner strength to bounce back, instead of bending to the point where you (or those around you) completely break. Take care of yourself personally as well as professionally. And when you need help, reach out for it.

 

Next up: How asset-based lending work


Business owners and entrepreneurs will undoubtedly face financing issues and new opportunities requiring access to working capital. If you are searching for ways to overcome one of these challenges, reach out and we’ll provide you with information and options to explore. 

Images from Pexels, and Pixabay

selling PPE

Selling PPE? Follow these steps to secure funding

What a time to be in this business. Whether you were already selling PPE in the past or not, you may have found that you’ve somehow fallen into the space.

selling PPE

 

Orders are flying fast and furious for face masks, shields, gowns, gloves and that ever-critical hand sanitizer! From cities and government offices to private companies and industry organizations  — everyone is placing an order.

You may have all the supplier and trade connections to secure PPE inventory, but not enough working capital to close the deals. So how do you make sure you can deliver — especially if you’re presented with a surprise PO?

Here are six tips to help you access funds:

 

fake deal

Tip 1: Make sure the deal is legitimate!

There are a lot of fake deals and scammers out there, especially when selling PPE. Nefarious people are quick to take advantage of an industry in hot demand, so do your due diligence to ensure whoever you’re talking to has a credible business. Get professional help at this step, and ask your lawyer, banker, collection firm or other partners to do required background checks and extra investigation.

 

funding options

Tip 2: Investigate your funding options

You likely already have a banker on your side, and that can often be step one. But if you have a maxed-out line of credit, or a loan that can’t be extended, how will you get more funds released to make a new deal go through? Check out your options such as government programs (many are listed here), the CDFI Fund, community lenders and alternative lenders such as us here at Liquid Capital. We are happy to work alongside your banker.

 

funding partners

Tip 3: Connect your banker and your alternative lender

This step will benefit you greatly, for two main reasons…

1) It tells you that both your banker and your alternative lender are the trustworthy partners you need right now. They’ll be working together, in partnership, to help your business get the much-needed access to cash — as quickly as possible. If they aren’t willing to work together, you’ve got the wrong people on your side.

2) It gets you out of the weeds. You’ll have a lot more to focus on to close a PPE deal quickly, so having to be involved in the nitty-gritty of every aspect of financing decisions between the banker and lender would take up a lot of your time. Meet with them regularly, of course, but make sure they connect even more often to power through the details.

 

clever

Tip 4: Get clever about order on receivables

When you’re dealing with large financing deals and multiple partners, you’ll no doubt hear about the order in which your lender and banker will need to be placed on your receivables — also known as the subordination agreement. This might not be your decision ultimately, but don’t let this be a deal-breaker.

While your original financing partner may have first position, a new lender may also require they take this top spot. Someone’s got to give, but there are different ways of structuring deals, and you could suggest a split in the territory or some other method of segmenting the positions. For example, a second lender may be able to only take first position in one State, while the original lender retains first position across the rest of the globe.

 

Related: Learn how to become lender friendly and why you should perform a UCC search on your own company.

 

speed red flag

Tip 5: Speed is important, but too fast could be a red flag.

If you’re supplying PPE, your client likely wants their shipment yesterday. That will put some major urgency on your financing. If you’re structuring a PO financing or invoice factoring deal, for example, these can be done relatively quickly — but it will save you time, money and headaches in the long run if you go through the proper steps. If a lender promises they can rush this beyond a believable timeframe, be wary. You don’t want to get into a situation where you actually end up owing on payday loans or merchant cash advances — with enormously high rates.

 

deal

Tip 6: Line up an expert now, even before you have a deal

You might not yet have a PO, but the moment you do, you’ll want to have a trusted partner on stand by. If you’re currently selling PPE (or could be) — or your company does business for any essential service — start talking to new lenders now. Find out what solutions they offer, how they can structure deals, what other industries they work with, and their history of funding businesses like yours. Short-list the ones you think could help you, and you’ll be that much more prepared when a new client comes knocking on your door with the next big order.

 

Next up: How asset-based lending works

 


About Liquid Capital

At Liquid Capital, we work with clients who are selling PPE and those in other essential service industries — supply chains, food services, financial services, manufacturing, transportation services, construction, and resources and energy. Whether you’re currently operating from a virtual home office, or you’ve shifted back to the busy downtown hustle and bustle, we know business can’t stop. We’re business people ourselves, and our company is built on a network of locally owned and operated Principal offices. Whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

Images from Pexels, and Pixabay

business

Key government financial programs & business aid

Find out about possible government financial programs and resource options available for your business.

business

It’s no secret that businesses have seen their fair share of changes in the last few months. As owners, C-levels and managers adapt, it’s a good idea to find all the available financial support and resources at hand. While Liquid Capital can provide much-needed cash flow, this can also be a supplement to other resources, including government grants.

At this time, both the American and Canadian governments are providing some different funding options for small and medium-sized businesses. Here’s a list of some of the highlights below.

USA: Government financial programs

america money

1. SBA: Small Business Guidance and Loan Resources

The Small Business Administration has by far the most comprehensive funding resources available when it comes to seeking financial assistance due to the coronavirus. With content available in 17 different languages, it includes coronavirus funding options, guidance for businesses and employers, as well as information on local assistance, SBA products and resources, and government contracting.

2. Paycheck Protection Program

The SBA is also offering a Paycheck Protection Program, which provides a loan to be used towards keeping your employees and workers on the payroll. The SBA will also forgive the loan, granted it is used for payroll, rent, mortgage interest or utilities. Applications can be completed directly from the SBA website.

3. Economic Injury Disaster Loan Emergency Advance

The SBA is also offering this program with loan advances up to $10,000 of economic relief for businesses that are currently experiencing temporary loss of revenue. Additionally, they have recently revised the eligibility criteria to include agricultural businesses.

4. U.S. Chamber of Commerce: Coronavirus Small Business Survival Guide

The U.S. Chamber of Commerce has compiled a list of resources to help small businesses throughout these uncertain times. With content available ranging from general coverage, information on the federal government’s coronavirus stimulus legislation, small business loans, how to manage employees as well as remote work

5. USA Government: Finance your business

The United States Government has compiled a list of funding sources that they are backing including links for small business loans and other government funding options for your business. This is part of their Coronavirus Aid, Relief, and Economic Security Act.

Canada: Government financial programs

canada money

1. Regional Relief and Recovery Fund 

Offered by the Government of Canada, the Regional Relief and Recovery Fund (RRRF), gives businesses located outside of metropolitan areas access to additional financial resources. $675 million of the near $1 Billion total of the fund will be allocated to help support regional economies. Applications can be completed directly from one of the Regional Development Agencies listed on the page.

2. Government of Canada COVID Benefits Quiz

The Government of Canada will be offering a variety of financial services during the coronavirus pandemic, ranging from the individual to small and big businesses alike. To navigate which option is best suited to you this quiz will point you in the right direction.

3. Relief measures for Indigenous businesses

Additionally, the Canadian government has set up a specific relief fund for Indigenous businesses, which includes up to $40,000 for small and medium-sized businesses. The capital is divided with $30,000 as an interest-free loan and a non-repayable contribution of $10,000. Consult the contact information on the dedicated page for more insights on the application process.

4. Canada Enterprise Emergency Funding Corporation: Large Employer Emergency Financing Facility

This fund was specifically set up for large Canadian employers who need financial assistance due to the pandemic, and will provide loans upwards of $60 million. The minimum annual revenue requirement is $300 million or more, however, businesses in the financial sector are excluded from applying. The applications should be completed by emailing LEEFF-CUGE@cdev.gc.ca to register intent. 

5. Canada Mortgage & Housing Corporation: Canada Emergency Commercial Rent Assistance

The CMHC has set up a rent relief program from those who own commercial properties and have small businesses as tenants who have been affected by the coronavirus. Those eligible for the program will be able to acquire forgivable loans if they agree to reduce the rent by 75% for the months of April, May and June, as well as meet operating expenses on commercial properties. Application can be completed directly through the website.

Additional Resources

research

Better Business Bureau

Although not specifically for funding options, the BBB does offer a range of helpful business tips on navigating the pandemic — plus information on price gouging and scam alerts. Additionally, they offer a COVID-19 toolkit for both Canadian and American businesses.

 

Next Up: 6 comparisons between invoice factoring and cash advances


At Liquid Capital, we work with clients who operate businesses in a variety of industries and office structures — whether from busy downtown buildings, the manufacturing floor, on-the-go or from their home office space. We’re business people ourselves, and our company is built on a network of locally owned and operated Principal offices. Whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

Images from Pexels, and Pixabay

funding

6 comparisons between invoice factoring and cash advances

Contrary to what some might think, invoice factoring and cash advances have 6 key differences.

funding

The first thing to consider when looking for financing is to understand why you need the money. Do you need working capital sooner rather than later? Is it a one-time thing or an ongoing need? 

To help you choose, here are six considerations when deciding between invoice factoring and cash advances. (For a description of both options, read part one in this series.) 

1. Purpose of funding: Why do you need the capital? 

You can use the money from both invoice factoring and cash advances for any business expense — whether you need to pay employee salaries, operational or supplier costs, or cover capital costs. Factoring is a good solution for ongoing cash flow problems caused by slow-paying clients because you unlock the money right away without having to go into debt. Some businesses look at cash advances for one-time expenses or projects when they feel stuck, such as new capital purchases — but be warned, the interest costs can add up, causing you to actually pay more than you borrowed! 

2. Application process

application

Both invoice factoring and cash advances have relatively simple application processes, however, they are based on different information. Factoring depends on the current and immediate future state of your accounts receivable, while cash advances depend on your business and credit history. That makes factoring more attractive to many business owners since it’s visible proof of their ability to repay. 

3. Speed of funding

speed

Most factors are funded within a few days for the first invoice, and even faster on future invoices — sometimes within 24 hours! Cash advances are also funded quickly, typically within a few days, but once again, that speedy promise to get the advance also comes with a costly downside. 

4. Cost of funds

cost

Both cash advances and invoice factoring have variable costs because of their different structures. Generally speaking, factoring costs a small percentage of the unpaid invoice. 85% of the value of the invoice is paid immediately, the rest is paid on receipt of payment minus applicable fees. Most factoring options don’t have any origination costs, except for extremely large or

 complex factoring deals, which would be discussed in detail and agreed upon with all parties. 

Tip: always look for clear, transparent terms from any lending provider to avoid unpleasant surprises. Learn other tips here

Cash advances, on the other hand, charge significantly higher rates on over the lifetime of the advance, and can even be as high as 40 to 50%.

Additionally, cash advances typically have an origination cost that is charged as a percentage of the total advance amount (usually 1 to 3%). This is on top of the regular interest you’re required to pay every week or month.  These high percentages can cripple a business. 

5. Opportunities for growth

opportunity

Invoice factoring funding is dynamic because it can grow with your business. The more you sell, the more you can borrow. It gives you the immediate ability to borrow more and expand your business. 

Cash advances are fixed loan amounts that are not easily increased since you’ll need to pay off the existing advance and then qualify for a new one. 

6. Availability to new businesses

your business

If your business is still new, invoice factoring is a good option for financing, as it depends more on your client’s history rather than yours. You also won’t need to submit the same amount of paperwork as you would for a cash advance. As a new business, you probably don’t have the tax returns, detailed historical financial statements, expanded business plans, or six months worth of banking statements that a cash advance requires.

Beyond its appeal to newer businesses, invoice factoring is a frequently-used way to support growth for larger, established businesses – it’s not uncommon for companies to factor millions of dollars worth of invoices (see our Recent Fundings). 

 

Ready to increase your regular cash flow? Turn your open invoices into working capital with Liquid Capital’s Invoice Factoring solution. 

 


At Liquid Capital, we work with clients who operate businesses in a variety of industries and office structures — whether from busy downtown buildings, the manufacturing floor, on-the-go or from their home office space. We’re business people ourselves, and our company is built on a network of locally owned and operated Principal offices. Whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

Images from Pexels, Pixabay, and Unsplash

home business

5 ways to shift into a home-based business model

With more companies moving out of the office, here are some tips to shift yours into a home-based business.

home-based business

Gone are the days when remote working was a novelty. Today, working at home is just as normal as getting dressed and going into the office each day. And if you are planning to shift into a home-based business model, you have fewer obstacles than ever. But that doesn’t mean there aren’t challenges along the way. 

Here are five ways to get your home-based business set up and keep the momentum going.

1. Get your finances in order.

When launching any new business strategy, your first task is to ensure that you have the money to operate. But finding extra cash can be difficult, particularly if you’ve lost contracts and have dipped into reserve funds or even personal savings because of the pandemic. But there are ways to get financial assistance. Some organizations such as ZenBusiness, for example, have launched a COVID-19 relief strategy and are offering grants of $1,000 to select businesses. 

Even if you miss out on a grant, there are more options to get working capital. If you have outstanding accounts receivable, for example, you may be able to get financed in as little as 24 hours from our team who can help select the right funding solution.

2. Handle the legal details now.

Legal paperwork

Regardless of what you do or where you’re located, all businesses must be set up with the right legal structure. If you are a freelancer, this may just be something as simple as adding income to your personal tax filing. However, anything more than a solo endeavor will require a legal strategy. 

This might include having a business plan, partnership agreement, or terms of service in place before you get started. In the US, the Small Business Administration further asserts that you’ll need to register your business name, trademarks and domain. This helps protect you from competitors and legitimizes your presence in the business world.

3. Master marketing.

Social media marketing

Marketing may not come naturally to every business owner, but it’s a crucial element when launching and running your operation. Fortunately, thanks to the Internet, there are plenty of places to find relevant information on how to market your business. Optimally, you will identify your target customer and cater to them on their terms. To get you started, you can use a mix of social media marketing, search engine optimization and branding.

Related: 10 ways small business marketers can crush big competitors

4. Grow your team.

Home-based business: Growing a remote team

Think of your business as a garden. Once you have planted the seeds, you can watch it grow. But you can’t do it alone, and you will eventually need to place talent in areas where you may not be the strongest. Hiring remote workers is a smart option and one that will allow you to continue to operate from the comfort of home. But remember to prioritize collaboration and communication. Keep your employees up-to-date with what’s going on by sending out regular updates or collaborating on Slack and similar channels. 

Critical to keep on top of here is salary and payroll. Even though employees are working remotely, it’s important to compensate them fairly so they stay motivated and rewarded for quality work. This also helps reduce turnover, which can increase your overall expenses. HRDirector even notes that a telecommuting employee may bring home around $4,000 more annually than they would in a traditional office setting.

Many business owners can run into challenges making payroll at certain times throughout the year. Liquid Capital financing options can also help you get over these hurdles.

5. Evaluate every day. 

Evaluate data

Any size of business can benefit from performing routine evaluations. Even if you’re comfortable with what you are doing, it never hurts to dig in deep to make sure that your customers are happy and they are capitalizing on all available market opportunities. Routinely ask yourself questions about your direction, available resources and areas where you might improve. Failure to do so can leave you sitting stagnant.

 

To summarize, you have to start with financing. Without capital, it’s going to be exponentially difficult to get up and running. Next, make sure to take care of the legal aspects, learn how to market your business, and grow your team into a supportive organization that can help you move to the next chapter. Finally, never get complacent. Evaluate your business each day, and you’ll have many more opportunities to grow, even when running your company from a home-based office.

 

Next Up: 3 biggest financial challenges facing small business owners


At Liquid Capital, we work with clients who operate businesses in a variety of industries and office structures — whether from busy downtown buildings, the manufacturing floor, on-the-go or from their home office space. We’re business people ourselves, and our company is built on a network of locally owned and operated Principal offices. Whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

 

Images from Pexels and Pixabay

Get more accomplished - Business woman

21 effective ways to get more accomplished every day

Even the most productive business owners and entrepreneurs feel like they can (and should) get more accomplished. Here’s how…

Get more accomplished - Business woman

What do the world’s top businesspeople do to be hyper-productive? How can they fit so much into each day, week and year to get more accomplished than the average worker? The answer often lies in the small tasks to stay focused on their goals, priorities and the outcomes that will consistently progress them to the next level.

Especially when remote working, it can be easy to get distracted and out of the regular routine. Updating our work habits at home or on-the-go can bring focus back to our days, so we still have time for some rest and relaxation.

Here are 21 of the greatest tips that elite entrepreneurs and business pros do that have put them on top.

1. Get more accomplished with an ultimate to-do list

Create a master to-do list, not a variety of different lists in multiple formats and locations. Stick to one, preferably online that syncs across all devices and that is available when you’re offline — so even when you don’t have Wi-Fi you can keep adjusting your task list.

2. Prep every night

Start the night before by answering three questions for the next day: 1) What will you work on first thing tomorrow? 2) What do you hope to accomplish during the day? 3) What must get completed tomorrow, in priority? The answers should feed into your to-do list.

3. Your routine is key

Establish a daily ritual. For example, you may start your day by pouring a coffee, putting on instrumental music and reading your favorite newspaper online. Then move straight into your most critical task of the day. By mid-day, you may decide to always take lunch and a 15-minute walk, and on the way home you catch the latest podcast on your list.

4. Learn on the go

Get more accomplished - Podcasts and learning

Speaking of podcasts, listening to them on your commute to or from work is a great way to research and learn. Don’t waste that time on Google or Candy Crush though, when you can be getting in some professional development time or improving an important skill. Listening to podcasts like HBR Ideacast and Outside In will get you thinking a step ahead of your competition.

5. Power hour

Schedule a “power hour” for the first 60 minutes of every morning — where you work diligently and uninterrupted on the most important task on your list. Avoid checking email and doing the little tasks that can veer you off course all day long.

6. Satisfy the stomach

Never ignore a rumbling stomach. This doesn’t mean you should satisfy every snack craving, but make sure you’re staying fuelled up during meal times throughout the day. Working straight through your day without a meal can be the ultimate crush to productivity. So scheduling those meals into your calendar can also be a nice reminder.

7. Get away to recharge

Get in a couple mini-breaks throughout the day, whether that’s just to step away from the computer for 10 minutes, or a walk around the block. Establish a “break habit” by scheduling them into your calendar or using an app to keep track of your time — and potentially to signal when a break is needed.

8. Emails can be your worst enemy

Get more accomplished - Email tips

Enforce a personal email strategy, where you set certain times on your calendar to check email — and don’t spend any more time than allocated. Process the emails according to priority and pick up the phone for emergencies, rather than resorting to typed messages.

9. Time to tidy

Organize your workspace. It doesn’t have to look as clean as an office showroom, but your space should be tidy and uncluttered, which helps you focus on the tasks at hand. Nothing is more stressful than searching tirelessly for your office supplies, working files or phone when you need to get things done in a hurry.

10. Zero distractions

When you’re in true work mode, close down any distracting Internet browsers, email programs or other software. At the very least, minimize them from your computer screen so you won’t get the urge to click elsewhere.

11. A “social” reward

Treat social media like a reward. It’s easy to get distracted by eye-catching headlines and notifications on your phone, so shut those off and save the fun stuff for when you accomplish a task. Then, when you complete each major task, you can reward yourself with your favorite distraction — like a quick one-minute video of a cat being cute. Just make sure you shut it down after the reward to stay productive.

12. One task at a time

Get more accomplished

Stop trying to multitask. Studies show it actually can make you pay less attention and have troubles recalling information. You may feel like you’re getting more done, but in reality it could slow your performance down.

13. Just say ‘no’

Contrary to what you may have been taught, it’s not impolite to say ‘no’ to tasks that derail your productivity. You may want to help others out with their requests, but sometimes you need to decline their request in order to get your work done. By saying ‘no’ you can free up future time for something you really want to say ‘yes’ to — and that will be more fulfilling in the long run.

14. Like Costco for your calendar

Schedule time slots to work on things in bulk. Like many people, you may have had days where you jump so quickly from task to task that you never have a chance to sink into any of it. Instead, schedule multiple working time slots in one to two-hour segments throughout the day where you can have uninterrupted work.

15. Cut your low-value tasks

High productivity people follow the Pareto principle — 80% of your results can be driven by 20% of your effort. The key is figuring out what the other 80% of your effort is spent on, and then systematically delegating, deleting or diminishing those from your schedule so your day becomes more valuable.

16. High-impact times of day

Discover your productivity rhythm — that is, the time of day that you are most impactful. People can be classified into three categories: the morning crush-it, the high noon heavy hitter, or the night owl ninja. Find out which one you are and schedule your tasks accordingly.

17. Always be goal oriented

Never lose track of your long-term goals. Too often, we move from one thing to the next just trying to get through the day. But by integrating your yearly objectives into all your meetings and activities, you’ll be more prepared to cut unnecessary activities and keep your teams (and yourself) focused on the right priorities.

18. Positively priority proficient

As new tasks arrive, reprioritize with speed and ease. The trick is giving every task an A, B or C rating (or 1, 2, 3 if you prefer). The As will get ultimate priority as your most important tasks — so if a new B task comes in and you’re working on an A, that new B task can wait. But conversely, if an A task arrives, you better hop on it.

19. Make meetings count

Get more accomplished - virtual meetings

Even when they’re virtual or on the phone, make sure your meetings are efficient and worth every minute — otherwise, they won’t be worth your time and you should cut them from your schedule. Every meeting must include an agenda with clear objectives, and schedule less important meetings into the second half of your day so you have more time in the morning to complete key responsibilities.

20. High gear afternoons

An hour and a half before the end of your workday, you have a perfect window of opportunity to kick your productivity into high gear. Get your affairs in order by checking your email and drafts folder, finishing those last messages and then completely closing your Inbox. Then, your last hour of work can be spent entirely undistracted.

21. Final 10 before freedom

The last 10 minutes of your day can set you up for a more productive tomorrow. Make sure your to-do list is finalized, clean-up your workspace, sign out of every app and program (including on your phone), and then do a brain dump — where you jot down anything left on your mind so you can go home with lighter shoulders and enjoy your night.

 

 

 

Featured photos by: Emmy E from Pexels, Julia M Cameron from Pexels, by Christina Morillo from Pexels, by Torsten Dettlaff from Pexels.

benefits of invoice factoring

What are the benefits of invoice factoring?

By uncovering the benefits of invoice factoring, you’ll also learn how it can help grow your access to working capital without going into debt!

benefits of invoice factoring

Invoice factoring is an alternative form of financing that is available to businesses that may not have an established banking record with a major lender. Banks and traditional lenders often operate on a line-based financing model based on what your business has already done and the assets you currently own. Invoice factoring, on the other hand, is an innovative way for your business to access the funds you have tied up in your accounts receivable.

Here are five major advantages of invoice financing:

1. Shift your cash flow into high gear

benefits of invoice factoring - shift into high gear cash flow

Applying for business loans or alternative financing options can take months to get approved. With invoicing factoring, your business can get much quicker access to cash if you have immediate financing needs.

2. Financial flexibility

If your business requires financial flexibility in terms of maintaining cash flow, then invoice factoring would be your best option. This way, invoices don’t have to be paid in full before there is money in the business account.

3. Higher probability of financial approval

When determining the chances of accessing funding – aspects such as your credit score, collateral, and financing history are often considered with traditional financing. However, these are not required for invoice factoring approvals. Your factoring partner is more focused on the payment history of the customer required to pay the invoice. This is important to understand the level of risk that would be taken in invoice factoring.

4. Save time and money – No collateral required

benefits of invoice factoring - Faster

Normally when a business applies for a loan or line of credit, the bank requires the business to have upfront collateral such as equipment, vehicles, buildings, inventory or even intellectual property. However, with invoice factoring, a business doesn’t have to worry about showing that traditional collateral. This can save you enormous amounts of time and paperwork.

5. Improve customer relationships

Collection can be one of those tasks that can be an administrative headache. By having a professional invoice factoring company manage the collections of your accounts receivable, you’ll be unburdened from this time-consuming task. Along with renewed financial flexibility, you’ll be able to focus on the other aspects of your business — including building stronger relationships with your customers.

 

Next Steps: Benefits of Invoice Factoring

By unlocking the benefits of invoice factoring, you can grow your business even when a traditional loan isn’t an option.

To learn more about invoice factoring, access the complete Invoice Factoring Guidebook here, featuring the top 10 questions to ask your invoice factoring partner before getting started. This guide will help you assess your options to ensure you’re working with a trusted professional who can help when it counts.

Learn how to ask the right questions so that you can ensure you choose the right working capital solution.

At Liquid Capital, we understand what it takes for businesses to succeed at any stage. We’re business people ourselves, and our company is built on a network of locally owned and operated Principal offices. Whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

 

Images via Pexels

Funding maze - Cash advances or Invoice Factoring

Why you should choose invoice factoring over a cash advance

Which is better for your business? Cash advances or invoice factoring?

Funding maze - Cash advances or Invoice Factoring

As a business owner, it can feel like a constant maze trying to find working capital. You know how vital cash flow is for your operations, and it can impact everything — from regular expenses like payroll and supplier costs to large, capital purchases that help grow your business.

When you need extra cash for your business, you might think of turning to your bank first, but that doesn’t always work out. That’s where alternative financing options can help.

Will I go into debt?

One of these options, called a cash advance, is a fixed amount loan that can provide you an infusion of money — but the potential for a lot of debt.

Another option, invoice factoring, also gives you immediate access to the cash, but without all the debt looming over your head. Factoring gives you immediate access to the cash that’s tied up in your outstanding customer invoices — money that’s technically yours anyways. So, which option is better to keep your business on track: cash advances or factoring?

Agreement - Cash Advances or Invoice Factoring

Image via Pixabay

Cash advances and invoice factoring defined

  • A cash advance is a loan against your future sales. It’s generally a short-term solution for a fixed amount of money, and you have to pay it back to your lender. You can use a cash advance for any business purpose, such as a large one-time expense, capital cost or a special project. However, be aware that this can be a costly option.
  • Invoice factoring (also known as accounts receivable factoring or simply, factoring) is a financing option where you sell your unpaid invoices to a financing company (or factor) for faster payouts. You typically receive 80 to 85% of the outstanding invoice right away, and once the invoice is collected you’ll receive the remaining balance less a small portion the factor retains. No regular repayments required. You can use these funds to improve your cash flow and pay off any business expense, such as employee salaries, operational costs, debt repayment or suppliers.

Pro Tip: A good factor will be transparent and will not hide binding clauses in their contracts. Learn more about how to choose a good invoice factoring partner here.

As you can see, each option gets you cash in the short-term — however, there could be some key advantages of choosing one option over the other. The one you choose depends on your specific business situation.

 

Read part two now to learn how to compare invoice factoring and cash advances.

 

Ready to increase your regular cash flow? Turn your open invoices into working capital with Liquid Capital’s Invoice Factoring solution.


At Liquid Capital, we work with clients who operate businesses in a variety of industries and office structures — whether from busy downtown buildings, the manufacturing floor, on-the-go or from their home office space. We’re business people ourselves, and our company is built on a network of locally owned and operated Principal offices. Whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

 

Featured image via Pexels.