Author: Complete Controller

Embarking on a journey as a new small business owner is thrilling yet challenging. In the rollercoaster of entrepreneurship, a clear understanding of your finances is your safety harness. Among the various financial concepts to grasp, the Cost of Goods Sold (COGS) stands out as a critical metric for success. This article aims to demystify COGS, illustrating its necessity for business operations, its impact on tax returns, and the importance of accurate reporting.

Grasping the Fundamentals: What is COGS?

At its core, COGS is a calculation that helps determine the direct costs attributable to the production of a company’s goods. This encompasses the materials and labor directly involved in manufacturing a product but excludes indirect expenses such as distribution and sales force costs. Understanding COGS is crucial because it affects gross profit, which is a key indicator of a business’s financial health.

The Necessity of Understanding COGS

For new small business owners, diving deep into the realm of COGS is not just beneficial—it’s essential for several reasons:

• Profitability insights

COGS directly impacts the gross profit margin, a vital metric showing the revenue percentage exceeding the cost of goods sold. A lower COGS means a higher gross profit margin, indicating better efficiency in production and potential for profitability.

• Pricing strategy assistance

Knowing the exact cost to produce your goods helps you set competitive yet profitable prices. This balance is pivotal in positioning your business strategically in the market.

• Inventory management efficiency

COGS awareness aids in effective inventory management. By understanding which products have higher production costs, you can make informed decisions about stock levels, potentially reducing holding costs and waste.

COGS Explained on Tax Returns

When tax season arrives, COGS transcends from being just a business operation metric to a crucial element in your tax filings. For businesses that manufacture or purchase goods for resale, reporting COGS on tax returns is mandatory. This reporting affects your taxable income, as COGS is deducted from your gross receipts to determine the year’s gross profit. Consequently, an accurate computation of COGS can significantly decrease the taxable income, leading to potential tax savings.

The Importance of Calculating COGS Correctly

Accurate COGS calculation is not merely good practice but necessary for compliance and financial success. Here’s why:

• Tax compliance

The Internal Revenue Service (IRS) closely scrutinizes COGS claims. Discrepancies or overestimations can trigger audits, leading to penalties or additional taxes. Ensuring accurate COGS reporting aligns with tax laws, minimizing the risk of legal complications.

• Financial clarity

A precise COGS calculation provides a clear picture of your business’s financial health. It helps assess profitability, making it easier to secure loans, attract investors, and plan for future growth.

• Decision-making support

Accurate figures support better business decisions. Whether it’s pricing strategies, inventory management, or identifying cost-cutting opportunities, a true understanding of COGS underpins effective business strategies.

Tips for Accurate COGS Calculation and Reporting

• Maintain detailed records

Keep thorough documentation of all direct costs associated with your products, including invoices for materials and records of labor costs.

• Understand allowable deductions

Familiarize yourself with what the IRS considers allowable deductions under COGS. This includes the direct costs of producing goods along with storage and labor costs directly tied to manufacturing.

• Regular review and adjustment

COGS is not static. Regularly review and adjust your calculations to reflect changes in costs, operations, or inventory levels.

• Seek professional advice

Considering the complexities surrounding COGS calculation and tax reporting, consulting with a tax professional or an accountant can be invaluable. They can provide guidance tailored to your business’s specific needs and ensure compliance with tax regulations.

Conclusion

For new small business owners, understanding and accurately calculating the Cost of Goods Sold is more than just a financial exercise—it’s a cornerstone of business success. It offers vital insights into profitability, assists in strategic pricing, enhances inventory management, and plays a pivotal role in tax compliance. By embracing the complexities of COGS, you pave the way for informed decision-making, financial stability, and long-term growth. Remember, mastering COGS is not just about numbers; it’s about unlocking the potential of your business strategy in the competitive marketplace.

 

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

The modern era has much to offer. Technological advancements introduce new and improved concepts. Society often measures a person’s success by their ability to spend less than they earn. By achieving this balance, individuals gain stability and confidence, which helps them effectively handle emergencies. Additionally, they are in a better position to assist others.

While stress-free budgeting won’t shield you from life’s challenges, it enables you to care better for yourself and your family, resulting in increased stability and ease. Saving money is one of the most innovative actions you can take. By implementing effective, habitual changes, anyone can enjoy a higher level of economic independence. Though challenging, it is not impossible to achieve.

To establish stress-free budgeting, you must understand seven key concepts that address one of the most common causes of financial turmoil: extravagant spending. Below are seven valuable tips for better money management, leading to reduced stress and more financial freedom.

7 Tips for Effective and Stress-Free Budgeting

Set a target

Before making changes, it’s crucial to acknowledge that a problem exists. Only then can you begin to address the issues without exacerbating the situation. Your goal should be to create a budget that reflects your essential needs. This approach will provide a clearer picture of what you require over a specific period and help identify where things may have gone wrong.

Observe your spending habits weekly

Monitoring your weekly transactions can reveal a lot about your financial habits. Small purchases can accumulate and significantly impact your budget by the end of the week. Observing these spending habits in real-time can lead to valuable self-awareness.

Estimate your expected earnings and expenses

Estimating your income and expenditures helps you understand your financial inflows and outflows. List all expenses, such as mortgage, tuition, utilities, and credit card bills. Prioritize mandatory expenses, as these are critical to maintaining a stress-free budget. Be aware of discretionary expenses like clothing and entertainment, which can lead to stress if not properly managed. This clarity will help you avoid overspending.

Choose between plastic and cash

Paying with cash can complicate your budgeting efforts. Credit and debit cards provide an easier way to track your expenses since payments are billed and recorded. Using cards helps facilitate stress-free budgeting, allowing you to see where your money is going. While credit cards can also offer perks and rewards, debit cards serve as a practical alternative if you prefer not to use credit.

Save, save, save

This should be your guiding principle in personal budgeting. With a budget, you can understand your earnings, spending requirements, and savings goals. It is advisable to start saving immediately during your budgeting process. Allocate your funds by prioritizing savings before spending on non-essential items. This method prevents overspending and promotes a savings mindset.

Follow the 50/20/30 rule

Promoted by Senator Elizabeth Warren in her book “All Your Worth,” this rule is simple and effective. Allocate 50% of your income to necessities, reserve 20% for savings, and spend 30% on lifestyle choices. If you’re struggling with your budget, this straightforward plan is worth trying.

Use schedules and relevant tools

Today, the landscape of stress-free budgeting is enriched by a variety of tools to assist with everyday expenditures. No single tool fits everyone, as each person’s financial situation is unique. Some individuals may benefit from simple scheduling and daily monitoring, while others might prefer more advanced budgeting applications linked to their bank accounts that utilize innovative technology.

By adopting these tips, you can establish a budget that fosters financial stability and provides peace of mind in managing your finances. About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

The word “audit” can make any business owner break out in a sweat, but a little acknowledgment about what it is and how it works with the Internal Revenue Service (IRS) might make you a bit comfortable. Some audits are stress-free, but some can be troublesome. Once you recognize the type of tax audit that has been conducted, you’ll have a better sense of what’s involved. 

Generally, most of the business audits are conducted by IRS officials. These audits are detailed and cover issues, including payroll taxes, income taxes, and employment taxes. That is why proper preparation and comprehension are significant for the audit. However, the calculation of the IRS officials can be inaccurate, so you have a right to appeal against their analysis.  

Understanding the Complexity of Audits

The audit of your business tax return is organized to verify the authenticity of the financial information that you’ve provided. Queries include whether you’ve filed your income and expenditures and whether your business is legalized. These audits are not randomly conducted. Instead, they are supervised after a proper inspection or your interaction with prepared questions. These audits are done within the same year of filing and are completed by the end of the year. 

How to Meet IRS Audit Standards

Even with a professional presentation, you must be prepared for an audit by gathering financial information and taking it to your accountant. A business owner who’s undergone an audit test might know how crucial it is to meet the IRS audit standards. Everyone is aware of how strict the IRS is when it comes to audit and payroll taxes. More specifically, how should a taxpayer prepare for an audit? These few tips will surely take you in the right direction. 

Reserve the services of a professional

Tax attorneys, financiers, or accountants might represent you at an audit session. They are trained professionals who know how to initiate the meeting and can represent you better than yourself. It would be very wise if you allow them to lead the way. Also, the IRS officials will be impressed with your brilliant selection of such skillful individuals. 

Maintain good records

It is not enough only to gather your records every year. Get yourself habitual of maintaining good primary and secondary tax records and utilizing a personal filing system to keep them with a timely tax return. Then, if your company is required for an audit, you’ll be prepared. Usually, primary records are utility bills and cash receipts, and secondary records include spreadsheets, mileage logs, and other monetary information that you’ve kept. Experts suggest that a business owner should keep all the tax returns and all the backup data for the current year and the past three years. 

Professional behavior

Generally, the IRS officials will arrange the place and select a suitable time for an audit. Always try to comply with their wishes and selections. If you and your accountant can’t attend the meeting at the given time, try to negotiate with them. Remember that the audit presentation is crucial, so you’ll have to appear politely, promptly, and professionally. Also, you’ll have to dress up officially with zero signs of complexity. 

IRS auditor isn’t your pal

You can be sure of two things with an IRS official. Firstly, he’ll precede your business taxes. Secondly, there’s an assumption that your business might have done something wrong, or you wouldn’t be present here in the first place. Be attentive to the information, but only answer the queries that are directed to you. Never provide unwanted details, and don’t be impatient or surly. Stay fearless and confident about the accuracy of your taxes and that you have facts to prove them. 

Fortunately, every audit doesn’t end up with the taxpayer owing extra taxes. Numerous audits prove the IRS practically owes you instead of the other way around. 

You can put yourself in the latter category as a business owner by following the abovementioned steps. If you’re still confused about determining reductions, then you must consider hiring a tax professional to prepare your files. The best defense regarding an IRS audit is always a good offense. 

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Personal debt encompasses the financial obligations that individuals incur, which can also serve as a funding source for small business endeavors. Unlike equity financing, where individuals invest in the business in exchange for ownership, personal debt involves obtaining loans or using personal credit lines to support the business. While there are various methods to raise capital for launching a new enterprise, including business loans or securing investments from partners or shareholders, these options typically entail the company making repayments in the form of interest and profits. In contrast, personal debt is not considered an investment as it does not typically involve sharing profits or ownership with creditors.

Personal debt can be effectively managed and is feasible for a start-up business when utilized practically. Personal obligations may involve maximizing credit card limits and obtaining loans. However, it is essential for an entrepreneur to carefully consider and adhere to specific rules before opting to use personal debt to fund the business.

Those rules are:

• Research what other options you have

It is important to avoid using personal debt to finance your business. Relying on personal funds to start a business can leave you with limited resources for private transactions and personal expenses. Starting a business carries significant risk, and there is no guarantee of success. If the business fails, it could lead to personal financial ruin. Therefore, it’s essential to explore safer and more reliable sources of financing that don’t require excessive returns. Options such as lines of credit or business credit cards with minimal or no interest can help minimize potential losses for your business. It’s crucial to conduct thorough and detailed research on each financing option to make an informed decision. 

• Cut down your expenses and other debts

Businesses juggling multiple obligations tend to encounter more challenges compared to those with just one or two large loans. The total interest payable on various debts is notably higher than the interest on individual loans. A high debt ratio can significantly lower your credit score and negatively impact cash flow. Before considering personal debt to finance your business, it’s critical to pay off or eliminate other existing debts.

• Find debtors who ask for lower interest rates to make it less complicated

Various types of debt are easily accessible and do not require high-interest payments. For instance, secured debts can be obtained by providing collateral to the creditor in exchange for the loan. The interest rates on secured debts are typically lower compared to unsecured debts. However, it is crucial to ensure that you can repay the debt to safeguard the asset offered as collateral.

• Consider crowdfunding to finance your business

Crowdfunding is a fantastic way for startup businesses to raise money because you don’t have to pay it back. It comes from many different people, and you can even use social media to reach out and get people to support your project. It’s a really easy way to get funding without having to worry about any costs or losses. 

• Always create a Plan B

Always have contingency plans in place to protect yourself from personal financial ruin in the event of setbacks or unpredictability. Be ready to face any challenges, fully understand your choices, and establish an emergency fund for unforeseen circumstances. Seek guidance from experts when making major decisions. 

Entrepreneurs must embody practicality and precision in decision-making, especially when considering using personal debt to fund their business. Adhering to rules is paramount to forestall regrets and complications. Startup owners must gain proficiency in debt management and financial acumen. By vigilantly monitoring industry trends, entrepreneurs can effectively steer their businesses toward growth and success.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Business debt is taken by an entrepreneur to use in funding huge purchases that they would not be able to afford under normal conditions. A debt arrangement means that the borrower is given money under the condition that borrowed money will be paid back at later dates. Most of the time, this is paid back with high interest. There can be different types of loans. Debt can be issued either to an individual borrower or to a business. 

A service company is also a business, but it provides services instead of physical goods or products. There are various categories of service companies. An accounting firm that performs audits of other companies prepares income tax returns, and provides bookkeeping services to other companies is a good example of a ‘service company.’

Impacts of Debt on Your Service Company

Bankers and lenders will be more than interested in providing loans with interest to your service company. They will ask for your personal guarantee of a debt. This debt will work like a handcuff for you. Even if your service company fails, the lenders have all rights to receive the money-back for the loan from you, personally and legally. A few of these lenders who give away loans to small-sized businesses will take payments from your business checking accounts.

On a big scale, if a service company is growing fast and takes a small loan with a low interest rate, it is not necessarily a bad thing to do. In some instances, affordable debt is a good choice when running a service company. However, consider all the pros and cons before initiating a loan-taking process.

Grow Your Service Company Debt-Free

• Reduce expenses.
• Do not mix your personal finances with your business account. Start paying for the things you need, not want.
• Sacrifice rapid progress for steady growth: Many entrepreneurs aim to expand their businesses quickly. A small service company will grow more slowly without debt, but a debt-free business is still a better option.
• Never miss a chance to pick customers who give gross margins to your service company.
• Always know the precise cost of the services you provide to your customers. Never compromise on the price, as doing so could lead to your company’s dissolution or bankruptcy.
• Keep a strong handle on your business bookkeeping.
• Business operations must be routinely carried out for all companies, including service companies. Keep all accounting statements up to date and know where you always stand.
• Use your budget wisely.
• Never spend all your gross and profit margins. Fix a percentage of 30-40% of gross margin and 10% profit margin. Only spend in this range from gross margins. Do not distribute profit all at once among shareholders. You will need much of the cash to fund the growth of your service company.
• Use accounting software to keep your accounting system up to date and on top of your business game!
• Credit cards should be used minimally in small businesses as the loans will pile up quickly.
• Do not select your prices out of fear of going into debt. Know the actual cost of the services you provide and price accordingly. Overpricing may cause you to lose customers.
• Company leaders must be efficient, smart, and confident in sales, good at interpreting accounting statements, and fair to their employees. Such a service company will grow successfully.

Conclusion

Bigger is not always better. A debt-free and profitable service company is better. Service company owners must keep the debt financing option as the last priority and when it is needed. Debts halt the growth of small businesses. A service company ideally needs no debt to get started. Without debt, the business’s growth may be slower, but it will still be profitable. Using valuable strategies and techniques will help your service company grow debt-free. 

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

The question of why attorneys hate marketing has attracted many heated debates among various professionals and lawyers. One of the most interesting points revealed in these debates is that most people agree that lawyers are antipathetic towards advertising, and even lawyers are privy to it.
Often, you would hear statements like ‘Advertising is unethical’ and ‘If I make four calls every week, I’d be out of people to call after a month’ from lawyers. Though it appears that they might have a point, without marketing, your firm will fall into oblivion. Let us look at some of the most common reasons for attorneys to hate advertising and what we can do to alter their views.

Ethical Dilemma

Lawyers have a negative perception of advertising, that its primary function is to trick customers into making buying decisions. They consider it unethical and unprofessional to indulge in promotional practices. However, that is not entirely true, as advertising has developed from only being a source to lure customers into helping them make informed and better decisions.

Solution

The state bar ethics office can play a vital role in altering this perception by conducting seminars and defining the ethical boundaries of marketing. 

Clients do Not Like Being Approached by Attorneys

Lawyers tend to object that approaching clients who dislike being marketed is invasive. They base this assumption on the fact that they do not like it, so others will not be impressed. Because lawyers are aware of individuals’ privacy rights, which reinforces their academics and practice, they tend to believe and act upon them firmly.

Solution

Advanced marketing approaches are far more refined and consider the clients’ consent. Lawyers can ask their clients and conduct surveys about the kind of advertising they would prefer. The core of marketing is to find your client’s needs and fulfill them by offering them their desired services, eventually making them happy. This will also help you understand what they do not like so you can abstain from those practices in the future.

We are Attorneys, Not Marketers

Lawyers believe that advertising is a profession and requires actual know-how to be genuinely effective. They view things through their own lens and think of someone who is not a professional. The outcome will not be favorable as lawyers have to be continuously part of the whole process and be aware of the minor technicalities.

Solution

Marketing has nothing to do with this, and it works on its own without any legal boundaries. As your firm grows, you will need to cater to different sorts of target audiences, which requires a real branding effort. Just because you are not an advertising professional does not mean you cannot hire an expert to do the job for you. Investing in advertising could be one of the most significant decisions in the success of your law firm.

Nothing Solid to Sell

This objection was raised by attorneys who do not believe in marketing services. They think that it is just a waste of resources and will not yield any significant outcome. They also believe that their services are limited and that they are better off reaching out to their clients through conventional sources. This claim is proper to a certain extent, as the Return on Investment (ROI) for services generally tends to be lower than that for actual products.

Solution

However, this does not mean that you must abandon advertising. A well-structured advertising campaign can give you significant insights into the client’s preferences and what they require from you as their legal counsel. This kind of information is crucial because it can help you perform better at your job. Having access to pertinent data about your client’s needs is still a good enough reason to invest in branding campaigns. 

Marketing is a Waste of Money

Lawyers argue that most clients come through referrals from friends, family, and acquaintances. Lawyers spend most of their time in conferences and meetings, so they constantly engage with other lawyers and sometimes people from another profession. Most attorneys seem content with this approach and consider advertising to be a waste of money and resources. However, to answer why some conversations lead to referrals and others do not, you would probably need the help of advertising.

Solution

One solution is showing lawyers that marketing will expand their network of connections rather than replace them. Please explain it to them through examples of other businesses, specifically law firms, that have branded themselves to success. Lawyers must think of advertising to an end, rather than the end itself, for them to profit from it.

I am Smarter than Marketers

There is always a tendency to be biased about understanding your business. This preference is extreme for attorneys, as they must rely on their intuition and skill to run their law firm. The increased dependency on oneself tricks them into believing they are their business’s sole bearers. Some may be bright enough to do well, but usually, the outcome is unwanted.

Solution

It would be best if you started small with these people. Start with a small marketing campaign and show them the results. They need facts and figures to grasp the ideology behind advertising. Build trust and eventually unleash the perks of branding on them. About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Businesses use various management tools to ensure that their business functions run smoothly. These tools efficiently do what they are supposed to do and offer business owners critical insights into their financial information and business processes. Budgets are one of the most common financial tools that businesses use to manage their finances. A budget is created with advanced forecasting tools and helps predict your future expenses. Companies heavily rely on the accuracy of their budget because most of their critical decisions are based on it. There are all sorts of budgets, including departmental and company budgets.
On the other hand, performance reports are generally an assessment of a specific business function. However, a comprehensive performance report is generated at the end of every fiscal tenure. These reports, along with budgets, are extremely critical to every business. Professionals should appoint highly professional people to work on them, including professional bookkeepers or accountants. The finance department allotted the task of creating a budget, while a performance report may highlight specific attributes associated with the funding and should be completed by an expert.

Performance Reports and Budgets Help Plan for Expenditures

Your current budget is an essential indicator of how you should plan your future budget. Based on previous experience, business managers can identify overspending and allocate the proper funds to specific departments. Your business’s growth depends on your ability to manage your budget correctly and efficiently.
A budget also helps you determine the number of sales required to meet a specific target. You can then allocate your sales resources accordingly to achieve the target. Reviewing the budget and adjacent performance reports helps businesses understand the specific elements in their mode of operation.

Tracking Spending Variances

Tracking a company’s spending is an essential aspect of any business. If you do not regulate and control spending, you will soon lose control of your cash flows, and negative balances will start popping up. Small things matter; therefore, the expenses matter. A budget can highlight important aspects of your spending. If your expenditures are not resulting in the estimated sales, your money is likely not fully utilized. Performance reports and budgets help you identify these cases of spending variances that are responsible for the underutilization of your resources. Therefore, their roles are vital for a business to achieve its fullest potential.

Performance Reports

Though a budget holds a significant amount of crucial information, it cannot offer you additional information related to budget variances. This information does not necessarily have to be financial and can go outside the realm of budgets. Various factors, such as additional resource acquisition costs and poor economic conditions, need to be assessed before approving a budget. Government changes in laws and regulations related to your specific business can impact your budget and information regarding performance reports. Some of these indicators are financial, while others may ultimately depend on something else. Therefore, you must provide a performance report to ensure that there are no surprises in the future.

Suggestions

Businesses use accounting tools and software to create budgets as they offer a broader picture of your company’s financials. You can view the information in graphs, plots, and any other medium of choice, making it easier to understand. Maintain accurate records from the beginning and uphold them throughout the bookkeeping periods so you do not have to rush at the end. The process is also quick and efficient. Therefore, it will save you precious time and resources. You can also hire professional accounting and bookkeeping services that will make highly accurate performance reports and budgets. If you are in doubt or your accounting skills are not spot on, always opt for that option. About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

The landscape of securing financing for a small business has evolved, and the loan application process can be stressful. Before applying for a loan, the first step involves understanding the necessary documentation, determining the appropriate amount of funding to request, and identifying potential lenders.

Here are some essential steps to qualify for a small business loan.

Establish Why You Need a Small Business Loan

When seeking a small business loan, it’s important to consider the following factors:

1. Clearly define the purpose of the loan and outline how it will contribute to the growth of your business. Whether it’s for launching a new venture, acquiring an existing business, purchasing equipment, covering operational expenses such as marketing and human resources, addressing cash flow challenges, or seizing expansion opportunities, understanding these reasons will guide your choice of lender and loan type.

2. Accurately assess the financing amount you need and determine what is feasible for your business. It is crucial to have a clear understanding of the capital required to achieve your business objectives, even if it does not precisely align with what you can afford. Utilize a business loan calculator to compute the monthly loan expenses before finalizing any loan agreements. Additionally, a comprehensive loan performance analysis will help ascertain the precise financing required to propel your business forward.

Explore Diverse Types of Business Loans

Discovering the perfect loan for your business is an exciting journey. You’ll find the ideal fit by tailoring your choice to match your unique needs. Understanding which loan aligns with both your credit score and financial requirements, as well as the purpose behind seeking financing, is vital. There are various options for small business loans, available from traditional banks, financial institutions, micro-lenders, and online lenders, ensuring you can explore a wide range of opportunities.

Moreover, when it comes to bank loans, you have the flexibility to explore equipment financing, short-term loans spanning 2-3 years, or long-term commercial loans typically secured by real estate. A popular choice for many small business owners is a line of credit, which provides a valuable safety net for unforeseen circumstances and serves as a cushion for your cash flow. Embrace the excitement of finding the perfect loan for your business today!

Collect All Loan Documents

Once you have thoroughly compared your options for various business loans, it is crucial to gather all the necessary documents. Depending on the bank and the type of loan, you will be required to submit a range of documents, including business and personal bank statements, tax returns, annual revenue, financial statements (such as balance sheets and profit-loss statements), and other legal business documents. It’s essential to meticulously organize all your documents and ensure they are promptly submitted with your loan application.

Apply for Your Business Loan

Once you have all the required documents prepared, confidently submit your loan application. Limiting your applications to one or two loan types is crucial to preserve your credit score in the long term. Upon submission, your lender will meticulously review and authenticate all your documents. Upon approval, it’s imperative that your lender fully informs you about the loan and its intricacies before you proceed to sign any paperwork. 

When it comes to securing a business loan, it’s common for small businesses to find the process daunting due to the strict lending criteria that banks and financial institutions impose. However, with strategic planning, meticulous preparation, and a solid loan application, your chances of securing the loan you need improve significantly. It’s important to maintain a positive and proactive approach throughout the entire process, from gathering necessary documents to demonstrating a clear plan for utilizing the funds. By showcasing your dedication and readiness, you can increase your chances of loan approval and take your small business to the next level. About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Cloud computing services for resource accounting confidently provide, host, and manage services that can be rented out to remote consumers, whether individuals or businesses. These comprehensive services range from offering fundamental computing resources like bandwidth, storage, and computational power to advanced enterprise applications such as Software as a Service (SaaS).

The prevailing business model for charging these services is a pay-per-use basis. Under this model, consumers utilize resources as per their requirements and are subsequently billed for the resources used at the end of a defined period. Ideally, consumers should be presented with a transparent resource accounting model that comprehensively identifies all factors considered when calculating consumption charges.

Providing consumers with access to their resource usage data is essential for effective IT budget planning, billing awareness, and personalized service automation. Additionally, offering this data benefits cloud service providers by enabling them to develop tailored user-centric services. Although many providers already offer usage data to their clients, accountability concerns remain.

Accountability Concerns

The resource accounting model for cloud services raises important questions about accountability for measuring resource usage data. This responsibility could fall on the provider, the consumer, or a trusted third party. In the cloud services industry, it is standard for the provider to be solely accountable, much like traditional utility services such as gas and electricity. Unlike traditional utilities, where consumers can use trusted meters to measure usage, there is no equivalent metric for cloud service consumers to track their data usage. Consequently, consumers have no option but to rely on the measurements provided by the service provider.

Consumer Side Proposition

Continuing the previous discussion, we are proposing a customer-centric resource accounting model to address the concerns of all involved parties. This model will enable customers to programmatically request and receive billing charge calculations from the service provider. The service provider will be required to respond to these requests. Additionally, a robust customer-centric accounting model will empower customers or a trusted third party to measure the billing charges for cloud services independently. This will enable customers to assess their billing charges accurately, which is a fair practice. We recommend that service providers adopt customer-centric models to facilitate regular checks and promptly address any discrepancies in consumption data.

Inspecting Consumer Centricity of the Resource Accounting Model

Many service providers provide or publish details of their billing information; however, it must be examined whether the detailed information follows the customer-centric notion. We will start with a considerably basic example and see if there is any room for improvement.

S3 Amazon

In our investigation, we thoroughly examined the simple S3 cloud storage service provided by Amazon. This service operates on a pay-per-use basis and is marketed as fast, reliable, and cost-effective. However, upon closer inspection, we identified ambiguities in the model that cannot be programmatically queried from Amazon. This highlights that even the most fundamental resource accounting models do not meet the standards of a strong consumer-centric model but align loosely with a weak one. Nevertheless, these uncertainties with S3 can be promptly and efficiently addressed internally with minimal attention. It is strongly recommended for a cloud service provider to integrate a third-party measurement service, allowing customers to access and measure their data usage conveniently.

Limitations

Time zone

The pricing information lacks a specified time zone for the geographical location, leading to uncertainty about the billing cycle. Nevertheless, the Amazon developers’ guide reasonably infers that S3 servers are synchronized to GMT, providing clarity on the billing cycle.

Data and metadata

One issue with S3 involves measuring user data. The S3 resource accounting model includes both system metadata and user metadata in addition to the actual data. System metadata is used only by S3, while user metadata is utilized only by the consumer and has a maximum size of 2KB. However, Amazon does not clearly state the actual storage space used by data and metadata.

Checkpoints

Amazon says they check how much storage you use at least twice daily, but they don’t say when exactly. When we looked into it, we found out that the checks don’t happen as often as they claim and can happen at any time in the Zulu time zone.

So, it’s clear that the cloud service still needs to set clear rules for its operation before we can trust it as a reliable tool for consumers. About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Liquidity is essential for both individuals and companies. While individuals may be rich in their total worth of possessions owned, it may also cause difficulties if they are incompetent in converting those assets into money. The same rings true for businesses. Without proper bookkeeping and cash coming in the door, they can rapidly get into trouble with their creditors. Banks are vital for both groups, providing financial mediation between those who need money and those who can offer it, thus keeping the cash rolling. Understanding the liquidity of an enterprise’s stock within the market helps stakeholders judge when to buy or sell shares.

What is Liquidity, and Why Does it Matter to SMEs?

If you are running a small industry, one of the theories in bookkeeping that you are going to want to wrap your head around as timely as possible is liquidity. Liquidity is a measure of your business’s aptitude to cover its immediate and short-term debts and responsibilities. Put a different way, it’s a method of labeling how well you can shield your current liabilities using your current possessions.

Computing your company’s liquidity, which you can do by computing and tracing different ratios of your business’s properties and liabilities, will be fundamental in ensuring that your corporation is in good financial shape. It can also help you spot possible money problems before they evolve too far and help you secure loans from creditors.

Why Liquidity is Important

Good, healthy liquidity ratios can help your company secure the acclaim it needs. Taking a close look at your business’s liquidity over time can also allow you to make intelligent, in-house choices about your business’ finances. By comparing your bookkeeping current and quick ratios month-over-month and year-over-year and creating contrasts to your opponents’ percentages, you increase the probability of spotting financial snags before they pop up and start to escalate. That way, you can make more conscious decisions on company expenditures and conclude whether you will need to liquidate any assets to cover short-term debts.

Examples of Liquidity Risks for SME’s

Liquidity risk arises out of the inability to implement transactions with appropriate bookkeeping. It is a potential risk for an association that does not meet its short-term debt obligations to sustain significant losses. One of the circumstances that might lead to this is the incapability of an institute to convert its current assets into cash without suffering capital losses. Most SMEs will center their efforts on loaning to meet their short-term debt. They might, at the same time, have long-term tactical investments. Liquidity might become a problem if the individual skirmishes to bring in proper funding within the required time frame. To guard against these kinds of conditions could put risk organization policies in place to protect against precisely these kinds of situations. Liquidity risk can be further broken down into two groups: market liquidity risk and funding liquidity risk.

Market liquidity risk can be described as the incompetence to sell an asset at its reasonable market value (therefore retailing it at a loss). Furthermore, it could be clarified as not selling the purchase at all due to opposing market conditions. The asset is thus “illiquid,” and the entity turns the risk of not raising the capital needed.

Funding liquidity risk is more concentrated in cash flow and is the incapability of an entity to settle its immediate duties as they become due over a specific period. An entity might rely on guaranteed and contractual cash flows to come into the business and make payments on its debts and other commitments.

Conclusion

Liquidity and liquidity risk in smaller organizations is a critical problem. It is considered one of the most significant aspects of holding back the world’s economy. It would be valuable for every business to make liquidity and liquidity risk a top priority.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.