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Fundamentals of money Management

Fundamentals of money management

Fundamentals of money Management

It can be getting  money and managing money  because  in addition to customers,   and properly managing your accounts is what keeps your business going. Thus, being paid fully and on time, as well as an understanding of money management, should become a priority, even if you choose to hire   or bookkeeper to manage the books. You will still need to learn about  basic  and money management principles and activities such as understanding credit, reading bank statements and tax forms, and understanding  and payable. You should also carefully consider the purchase payment options that you offer to customers, including cash, checks,  ,  and cards  and online payment options, as well as setting payment terms and collecting debts in case of non-payment.

Open bank account

Once you have chosen a name and registered your business, you will need to open a business bank account. Creating a business bank account is easy. Start by deciding which bank you want to work with - think of a suitable small business - and call to arrange an account opening appointment. There is not much more required than that. However, when you go, make sure you have personal identification as well as your business name registration papers and business license, as these are usually required to open a business bank account. The next step would be to deposit money into your new account (up to $100 is fine). If your credit is healthy, also ask the bank to attach a line of credit to your account, which can be very useful when making purchases for business or during periods of slow sales to cover overhead even to increase business.  and discount account and other small business services. bookkeeping

When it comes time to prepare your financial books, you have two options - do it yourself or hire an accountant or bookkeeper. You may want to do both by keeping your own books and hiring an accountant to prepare year-end financial statements and tax forms. If you choose to keep your own books, make sure you invest in accounting software such as  Quickbooks  or  Quicken  because they are easy to use and make bookkeeping almost as enjoyable. Most accounting software allows you to create invoices, track bank account balances and merchant account information, and track accounts payable and receivable.

If you are not sure of your bookkeeping abilities even with the help of accounting software, you may want to hire an accountant to do your books on a monthly basis and a chartered accountant to audit the books quarterly and prepare business statements and year-end tax returns. To find an accountant or accountant in your area, you can contact  the American Association of Certified Public Accountants  or  the American Institute of Professional Accountants  . In   , you can contact the Canadian  Chartered Accountants or the  Accountants  AssociationCanadian  .

If you're window-washing on the weekends just to earn a few extra bucks, there's little need for accounting software or accounting services. Simply invest in the basic ledger and record all business and sales costs. Since you are doing it yourself, be sure to use a commonsense approach when calculating how much to invest in your business against the expected revenue and profit. Also, remember to keep all business and tax records in a dry, safe place for up to seven years. This is the maximum amount of time the   and Revenue Canada can request past business income and expense information.

Accept cash, checks and debit cards

In today's highly competitive business environment, you must provide customers with several payment methods, including cash, debit cards, credit cards, and electronic cash. There is a cost to providing these payment options – account fees, transaction fees, equipment rentals, and merchant fees based on a percentage of the total sales value. But these expenses must be seen as a cost of doing business in the twenty-first century. However, you can reduce the fees by shopping for the best service at the best price. Not all banks, merchant accounts, and payment processing services are the same, and fees vary widely. You can also check with small business associations such as the Chamber of Commerce to see if they offer discounts to members; It's not uncommon to save up to 2 percent on credit card merchant fees. just remember,

Cash is the number one way to make money, which is great because it's liquid and doesn't require processing time. Once the cash arrives, you can use it to pay bills and invest in business building activities to increase revenue and profits. The main downside is that cash is risky because you could get robbed or lose it. In such cases, collection from your insurance company can be difficult if there is no paper transaction as proof. Even if you prefer not to receive cash, there are people who will pay cash, so get into the habit of making daily bank deposits during daylight hours. Also invest in a good quality safe to store cash for those times when you can't get to the bank.

If you run a service business, the most common way people still pay for services is by check. You have to take some precautions to ensure that you are not left with a rubber check, especially when dealing with new clients. Ask to see a photo ID and write the customer's driver's license number on the check. If the check amount exceeds a few hundred dollars, ask the buyer to get the check certified or pay with a wire transfer instead, especially if the customer is new to your business. Also, get in the habit of checking the dates and dollar amounts to make sure they are correct. I've been caught multiple times with wrong dates and dollar amounts and it can take a long time to get a new check due to a small mistake.

Debit cards are another option, but to accept them, you'll need to purchase or rent a debit card station. Most banks and credit unions offer debit card equipment and services to commercial customers. Processing equipment will set you back roughly $40 a month for a station connected to a traditional phone line and about $100 a month for a cellular station, plus the cost of the phone line or cellular service. There is also a transaction fee that the bank charges and pays each time a debit card transaction is made, which ranges from 10 cents to 50 cents per transaction, based on variables such as dollar value and frequency of use.

Opening a credit card merchant account

Many consumers have completely replaced paper money with plastic to purchase goods and services. In fact, giving your customers the option to pay for purchases with a credit card is often critical to success. This is especially true if you plan to do business on the web because credit cards and e-cash are used to complete almost all web sales and financial transactions. To offer customers credit card payment options, you will need to open a credit card merchant account. Start by visiting your bank or credit union or by calling a merchant account intermediary such as  1st American Card Service  ,  Cardservice International  , or  Merchant Account Express to inquire about opening an account. Offering your credit is sound, and you will encounter some obstacles. If your credit is poor, you may have difficulties opening a merchant account or have to make a large security deposit. If you are still not successful, the next best option is to open an account with an online payment service provider, which is discussed in the next section.

The advantages of opening a merchant account with a credit card enables you to accept  many In fact, studies have proven that merchants who accept credit cards can increase sales by up to 50 percent. Not to mention that you can accept credit card payments online, by phone, by mail or in person, as well as sell services on an installment basis by having permission to charge a customer's credit card monthly or as per the agreement. Of course, all of these benefits come at a cost, especially when you consider that you will have to pay application fees, setup fees, purchase or lease processing equipment and software, pay management and billing fees, and pay processing and transaction fees that range from 2 to 8 percent of the total sales volume. . Again, this fee should be viewed as the cost of doing business.

Online Payment Services

Online payment services allow individuals and businesses to exchange currencies electronically over the Internet. These services are very popular among consumers and merchants. PayPal is one of the most popular online payment services with over 40 million members in 45 countries, providing both personal and business account services. Both types of accounts allow for electronic funds transfer between members, but only a business account allows merchants to accept credit card payments for goods and services. The advantages of online payment services are that they are fast, easy and cheap to open, regardless of your credit rating or expected sales volumes, and you can receive payments from any customer who has an email account. You can deposit money directly into your account, issue and mail a check, or leave the money in your account to withdraw with your debit card. The only real drawback is that most services redirect your customers to their website to complete the transaction. This can confuse people who will abandon the purchase in some cases. However, the advantages of online payment services far outweigh any disadvantages.

Define payment terms

Every small business owner also needs to create a payment terms policy. Although you definitely want to standardize the way you are paid, at the same time you must also be flexible enough to meet the needs of customers on an individual basis. Determining payment terms covers deposits, interim payments, and credit extensions. It is important to establish clear and written payment terms with customers before providing services or offering a product. Your payment terms should be printed on your estimate forms, included on formal contracts and work orders, and printed on your final invoices and monthly account statements.

deposit insurance

If you run a service business, you have to get in the habit of asking customers for a deposit before providing services, especially if the business also includes sales of products for which you have to pay up front. In this case, the deposit must be at least the value of the materials. If you are supplying labor only, try to secure a deposit of at least one-third to one-half of the total contract value before providing any services. The application or contract form must clearly contain the filing information. Information about canceled orders or contracts and the refund policy should also be on your forms. Securing a deposit is the best way to ensure that basic out-of-pocket costs are covered, at least, in the event the client cancels the job or contract.

progressive payments

Progressive payments are also a way to ensure that you do not leave yourself exposed to financial risk. The key to successfully securing staged payments is pre-arrangement of the contract and payment terms. Agree on the amount owed at different stages of the project. You can use percentages to calculate progress payments, such as 25 percent deposit, 25 percent upon delivery of any materials, 25 percent upon primary completion, and a balance upon completion or within 30 days of primary completion. Or you can arrange for more concrete progressive payments based on indicators relevant to the specific scope of work, job or services provided. No matter what system you use, staging payments on larger jobs can significantly reduce your exposure to financial risk.

credit extension

In most cases, there is no need to extend credit to consumers unless you provide a service such as pest control that is billed monthly or a major contract to be completed in stages. As a rule, when the transaction is completed, you must be paid in full. However, in the case of B2B sales, commercial customers will generally want some type of credit on a revolving account basis, such as 30, 60, 90, or sometimes 120 days after the product is delivered or the service is completed. Ideally, you want to get paid as quickly as possible, so you may want to offer a 2 percent discount if bills are paid within one week. And if you do extend credit, make sure you do a credit check first, especially when large amounts of money are at stake. There are three main credit reporting agencies serving the United States and Canada:Trans Union  ,  Equifax  and  Experian  . The three credit bureaus compile and maintain credit profiles on every person, business, and organization that has applied for credit.

Debt Collection

 No matter how careful you are when it comes to extending credit to customers, you won't get paid on time or at all. What can you do for the money? The first rule of getting paid is to keep the lines of communication open with your late customer, and keep the pressure on getting paid through the use of non-threatening phone calls, letters and personal visits. You can't legally intimidate clients into paying you, but you can explain why it's in their best interest to pay you - i.e. keeping your business relationship the way it is, or that non-payment could hurt their credit rating or you could sue them if they don't pay.

Another option is to hire a collection agency to collect outstanding debts. Collection agencies generally charge a percentage of the total amount owed as a fee, which can be as high as 50 percent. The  Association of Credit and Collection Professionals is  a good starting point for finding a collection agency to work with.