Invoice Factoring Terminology

Whether you have used Invoice factoring in the past to fund your working capital needs or are researching to see if the factoring of your company's invoices is right for you, it is important to understand Invoice Factoring Terminology so you can be a well educated business owner.

First, what is Invoice factoring? It is the selling or assigning of your unpaid invoices to credit worthy clients to a Factoring Company. Once your invoices are verified and assigned to the Factoring company, a Factor will advance you up to 95% against your invoices. Here are some of the terms you will hear when discussing Invoice factoring.

Advance Rate: This is the percentage that a Factoring Company will give you as part of your daily or weekly funding. For example, the factor approves a batch of invoices from you totaling $30,000. Your agreement with the Factor stipulates an 85% advance rate. You will be wired approximate $25,500.

Debtor: This is your client who owes the debt of payment to the factor and subsequently you. Since you are the Factoring Companies customer it cuts down on confusion versus talking about the client's client.

Dilution: Sometimes you have to offer your clients a discount or they take a charge back or deduction. It is important that the Factor knows about this as they compute your funding based on your Advance Rate times the face value of your invoices less any dilution.

Factoring Fee: This is the cost to you of Invoice Factoring. Fees can be anywhere from.6% to 4% per 30 days depending on several risk variables including industry, credit worthiness of your client and dilution chance.

Invoice: An invoice or bill is a commercial document issued by a seller to their customer (the Debtor), which lists the product's or service's description, quantity and agreed upon price the seller has provided the buyer. An invoice also indicates the buyer must pay the seller, according to the payment terms. The buyer has a maximum number of days in which to pay for these goods and is sometimes offered a discount if paid before the due date. An Invoice is a legal document and many times companies do not protect themselves with the correct verbiage on the invoice. A good Factoring Company can help you make sure you are fully protected by reviewing the language on your invoice.

Proof of Delivery: A Factor will want to confirm that your client (the Debtor) has received the goods or services described in your invoice to the Debtor's satisfaction.

Recourse: The factor assumes no credit responsibility and invoices can be charged back to you at any time. This is risky for you unless you are selling to the very strong, credit worthy entities like a Walmart or the US Government. Remember what happened to Circuit City and Linen's and Things? There is one thing worse than no sales and that is selling the product and not getting paid.

Reserve Account: Invoice Factoring is a two part process. First is the initial Advance and secondly is the release of the Reserve less the Factor's Fee once the invoice is paid. Occasionally a Factoring Company will hold a percentage of your Reserves if their is a history of charge backs or to off-set against any bad invoices.

Sales Terms: This is the Payment Terms you give your customer which need to be stated clearly on the invoice. Typical terms are Net 30 days or Due on the 10th day of the following month. Terms can also be combined. For instance many companies sell on 2% 10 days, Net 30. Which means the client receives a 2% discount if they pay within 10 days but the invoice is due by the 30th day without a discount.

Without Recourse: The Factoring Company bears full responsibility for credit approval based solely on the Debtor's financial ability to pay invoices according to the stated terms. There is also Limited Recourse were you covered in the event your client files for bankruptcy protection. Many times this is the most cost effective way to Factor your Invoices as the Factoring Company can use Credit Insurance to mitigate that risk.

This has been a very short description on frequently used Invoice Factoring Terminology. Please contact the author with any questions.

Why Is It Important To Hire Accountants For Your Business?

Employing an accountant is something that a lot of small and medium businesses put off doing. A lot of them will buy accounting software or use a package supplied by their local bank to do their final accounts. What most people do not realise, is that the reason why an accountant is a professional and spends years training is because not only can they produce accurate reports and accounts, but they may also be able to save you money on the amount of tax and liabilities that you have.

Employing an accountant is something that a lot of small and medium businesses put off doing. A lot of them will buy accounting software or use a package supplied by their local bank to do their final accounts. A lot of people do not realise is that the reason why an accountant is a professional and spends years training is because not only can they produce accurate reports and accounts but also they will be able to save you money on the amount of tax and liabilities that you have.

In today's economically challenged climate, businesses are looking to save money in all areas. One of the easiest costs to cut out is hiring an accountant to sort out your financial liabilities. This in fact could be a major mistake as they are trained to not only deal with your finances but also look at ways you can improve your business from a financial point of view.

A lot of accountants will be trained in dealing with businesses from all industries and will know some of the simplest methods to reduce tax liabilities. Also they will be able to produce in depth financial reports that are easy to read and understand. From a business point of view this means that not only will you be able to see a snapshot of how your business is doing month on month but also you will be able to spot when profits are going down and take action before it is too late.

Most self-employed people will leave their accounts until the last minute when they are due in and will spend days trying to find receipts that have been stuffed down the back of their vehicle. This is completely the wrong thing to do as many of them miss opportunities to save money and also they cannot find out how profitable their business is until the end of the year.

Those who choose to employ an accountant are more focused on their monthly earnings and will find that they have a better chance of success especially in hard economic times.

Conclusion

Employing professional accountants is extremely important especially if you have a business to run. It will allow you to take a snapshot of your business to check if you are on course to be profitable throughout the year. Also it is important to make sure your tax liabilities are handled in the correct way therefore eliminating any risk of being penalised for errors in your accounts.

This news article is brought to you by MEMORY-TRAINING - where latest news are our top priority.

Savings on Tax Returns

Filing a tax return is vital for most adults. However, if you don't make more than the minimum amount doesn't mean that you shouldn't file. There are reasons why filing a return may still get you a refund. Sadly a lot of people tend to have little or no idea at all regarding these matters. There are quite a number of strategies that a CPA firm can recommend talking about taxes.

For most tax payers their primary concern is how to get the most money back and how to pay the least amount of income tax whenever they file for their tax returns. Therefore you have to make your own research, and find the right strategies that would work for you. A CPA firm can help you with so many things concerning tax issues. And you will need the expertise that these people have for you to arrive to that amount that is honestly due for you and eventually get that expected refund you deserve.

Tax planning is important to legally reduce your tax liability. And that is one of the main goals of accountants for their clients to achieve. For you to succeed you must follow certain strategies that most of the experts recommends. One is Finding tax deductions by structuring your money to pay for things you enjoy, or if you are an eligible educator and you use your own money to buy needed items for your students, you can deduct up to a certain amount of qualified expenses; you may also include the fees and dues to professional societies, such as maintaining a professional certification; job search expenses is another item, you can deduct expenses related to job-searches - even if you did not get a job - as long as the job you were looking for is one in your present occupation. And the list continues.

Now, about credits there are quite a list of items for which taxpayers may claim a deduction if they are eligible. You may need special requirements though so make sure that you qualify before claiming any of these items on your tax return. An example of available credits may include Education tax credits; this can help to offset the cost of education. So if you are qualified for these credits, they can add up to sensible amounts and might result in you receiving a larger tax refund than you would expect.

This news article is brought to you by MEMORY-TRAINING - where latest news are our top priority.

Self-Employed Accounting Spreadsheets - The Essential Ingredients

Many self-employed individuals will start off their business bookkeeping records on an accounting spreadsheet.

The popularity of spreadsheets such as Microsoft's Excel means that it is often the first 'financial tool' a businessman reaches for. But, is it the right one?

In a previous article 'Accounting Software - are bookkeeping spreadsheets the answer for small businesses' I examined the 'bare minimum' bookkeeping requirements for a small business accounting spreadsheet and outlined what controls needed to be in place to augment these records. The article concluded that a properly designed and fully reconciled Cash Book accounting spreadsheet coupled with a Sales Day Book and a Purchase Day Book could form the basis of a workable bookkeeping solution.

For the self-employed businessman this means making sure that your records will HELP rather than HINDER the work of your accountant. Many accountants find that they 'have to do the work again' because of the inadequacy or inaccuracy of the bookkeeping data presented to them.

I would strongly advocate showing your accounts spreadsheets to your accountant at an early stage and be prepared to implement any changes he might suggest.

What should you include on your accounting spreadsheets?

There are many examples of good bookkeeping spreadsheets, and all of them will incorporate the following essential data for EACH of your business transactions.

· The transaction Date

· The transaction TYPE (Purchase Invoice, Bank Payment, PayPal Receipt etc.)

· Who is the transaction with (Customer Name, Supplier Name etc.)

· The transaction Reference (Invoice Number, Cheque Number, etc.)

· An ANALYSIS of the transaction (Sales, Rent, Wages, Interest Paid etc.)

· The GROSS transaction value

· The VAT value (if applicable) of the transaction

· The NET value (after VAT) of the transaction

· The STATUS of the transaction (Invoice Paid, Bank transaction matched to statement, etc.)

So, a series of three bookkeeping spreadsheets designed in a monthly columnar format with these column headings is a good starting point:

DATE, TYPE, NAME, REFERENCE, ANALYSIS, GROSS, VAT, NET and STATUS.

Each business transaction should be listed on a new line and should be sorted chronologically.

To help your accountant, I would recommend that you use a standard naming convention for your transactions analysis. (Sales, Rent, Wages, Interest Paid etc.)

After you have entered your basic information onto the accounting spreadsheets, you should then examine your bank, credit card and other statements to make sure that you have not missed any transactions. If you have, then these need to be recorded on your listings.

You need to make sure that the whole accounting spreadsheet BALANCES. Add up the individual COLUMN totals and then add up the individual ROW totals, they should be the same.

Finally, send your first months accounting worksheets to your accountant for correction and approval.

As a guide you can view several examples of professionally designed accounting spreadsheets on our website.

This news article is brought to you by HOME-BASED-BUSINESS - where latest news are our top priority.

How to Get Every Stinking Tax Deduction!

It happens every year. A client wanders in with a shoe box and a prayer and wants me to put a miracle out of my hat. Then they get depressed or angry or both because they have to pay tax, sometimes a lot of tax.

So you want to know the secret to getting every stinking tax deduction you are entitled to? Rule No. 1. Keep good records. It is as simple as that.

Rule No. 2. Keep things separated. If you have a business, its records need to be separate from your personal stuff. If you have multiple businesses, you must keep their records separate from each other as well. Mingling your business and personal finances is bad. Separate business and personal bank accounts are good. Only pay business expenses using business accounts, and personal expenses using personal accounts. You may need to write yourself a check from your business (draw) to deposit in your personal account to pay for personal expenses; you may need to write a formal loan document to your business to cover business expenses. Even though this seems like extra paperwork, it is essential to good record keeping clarity.

Rule No. 3. Keep every stinking receipt, no exceptions. If you don't want to store paper, there are scanning products that may allow you to create a digital version of these records and even file them and organize them for you. However you must be able to print out a legible copy from that digital file AND you must keep back-ups (notice the plural?) AND those back ups should not reside in the same place as the original electronic file. Lose the electronic file without a back up and it is the same as NOT having a receipt. Oh, give your digital files meaningful names... office-supplies-4-12-12 is much more useful than PO9567.

Rule No. 4. Invest in some way to keep everything separate -files, envelopes, piles on your desk, bank accounts, credit cards, ledgers, etc., set up a system AND use it.

Rule No. 5. Invest in a pen & a stapler. Use the pen to make notes on your receipts so you can write down What it was for on the receipt. You must write down Where & What for, on that business trip receipt. You must write down Who was there, What business was discussed on that business luncheon receipt. Staple credit card payments to the bill they go with. When you pay a bill, write down How you paid, the amount & when.

Rule No. 6. Get a mileage log and use it religiously. Have one for every vehicle. Lots of mileage is deductible, but only If you write down the mileage in a log created at or near the time the mileage is incurred. Office supply stores carry them and they are very inexpensive.

Rule No. 7. Learn the rules. No one is responsible for your stuff but you. If there are any special deductions: Home office, gambling, real-estate professional, etc. that you've heard of and want to use, learn the rules (www.irs.gov has a wonderful search feature) and follow them. Alternatively, discuss it with your tax professional-nobody knows your business better than you, so if you have a question you must ask it.

Rule No. 8. Keep a schedule. Once a week, twice a month you must sit down and organize everything. Handle each piece of paper once, make a digital copy, log it into your ledger, spreadsheet, Quicken, Quickbooks, Peachtree, or what-ever, staple things together, shred stuff if it needs to be shredded, and file the digital, or paper copy in such a manner that you know you can find it later. If you don't want to do it hire competent help, but realize you are ultimately responsible.

Rule No. 9. Hire competent professionals if you need them. If your finances are complex, maybe you need to investigate the use of entities such as corporations, LLCs and trust, and hire professionals such as lawyers, CPAs, financial planners and bookkeepers. Use them in a timely fashion. If you see your book-keeper once a year, your results are not going to be that good, things get lost, memories fade and questions do not get answered. If you get a CPA or an attorney after a problem has happened your results are not going to be that good either.

Rule No. 10. Take personal responsibility for your finances - that is how the adults do it. Don't blame the bookkeeper for poor financial records if you only show up once a year with incomplete records. Don't blame the CPA if you did not pay your estimated taxes. Don't blame the attorney if you did not give them enough information to adequately advise you. Garbage in, garbage out applies.

Your records are only going to be as good as what you put incomplete records delivered & entered in a timely fashion yield the best results. Most banks only give you 60 days to challenge a charge; and many banks only keep 6 months worth of statements online. You run across a problem 10 months out, often there is no way to get at the record you need or fix a problem, you may not remember critical details, and you may not be able to adequately answer all questions.

As always, small business services and taxation are our business. If you need help with taxes, or other services, Please give us a call. We would love to engage you as a client.

The usual disclaimers: Although the author has made every effort to insure the accuracy of Taxes, Tips and Tools, misinformation, dis-information, changes, mistakes, typos and hackers happen, therefore GetMeOutOfThisShoebox.com, Art & Business Consulting LLC, its employees, members and other associates, take no responsibility for any action taken or results based on the information supplied here in. The content of this article generally applies to business and individual taxation in the United States of America. Internal Revenue Service Circular 230 Disclosure: As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement address herein. The author currently does not have a certified public accountant, human resource specialist, certified financial planner or an attorney on staff; this information is purely for educational pur-poses and not to be construed as legal or financial advice. The author, and its employees, members and other associates are not engaged to practice law; you always should discuss legal matters with your attorney before talking to anyone.

This news article is brought to you by YARD AND EQUIPMENT - where latest news are our top priority.

Cloud Based Accounting: Is It Secure?

One of the most common questions people ask us is regarding the security of cloud based accounting. We've all heard the stories of how our financial information can be stolen online, and it definitely creates cause for concern. That's why we use top level, SSL encryption for all your accounting files, which are stored on our secure servers in SAS-certified facilities. But there are also steps you can take to make sure that your cloud based accounting files stay secure.

1. Make sure you're using the latest version of your Web browser or smart phone software before you access your accounting files. - In most cases, our SSL encryption measures won't permit you to log in to your files if you're not using the latest version of Internet Explorer, Firefox or Safari. But just in case, it's important to always make sure you're using the latest software versions available, as this software will contain important security updates to make it harder for hackers to break into your files.

2. Always access your accounting files from a secure Internet connection. - On our end, your data is kept secure in the cloud. But all of our security measures won't help if you access files through an unsecured network. While one of the benefits of cloud based accounting is the ability to check your financial statements and other records from anywhere with Internet access, we recommend against accessing your Peachtree or QuickBooks files over an unsecured wireless network, such as at your local coffeehouse.

3. Follow common sense measures to protect your data. - Use a strong password with a combination of numbers and letters that no on will be able to guess. Make sure no one is looking over your shoulder when you log in to your cloud based accounting software. Don't leave your computer unattended in a public place. All of these common sense measures can help keep your financial data secure in the cloud.

If you've ever made a purchase online, you've put your trust in the same SSL encryption used with our cloud based accounting system. We do everything we can to keep your financial data and accounting records safe; if you do the same by following common sense measures to protect and limit access to your account, you can be assured that cloud based accounting is secure.

PROTECT YOUR DATA WITH CLOUD-BASED ACCOUNTING

Tornadoes and hurricanes put your company's computer servers and hard drives, and all your financial information, at risk. Natural disasters can create flooding that can wipe out all your computer systems. Power surges - even if you believe your computer is protected with surge protectors - can damage your hard drive, rendering your data unreadable. And heavy winds can even cause buildings to collapse and cause shock damage to your hard drives or servers, again, making it impossible to access your financial records and other data. It happens.

The data back-up best practices recommend having three back-ups of mission critical data, including one version off-site so that you or other authorized personnel can access it, even if you can't get in to your main offices, which could be the case during a natural disaster.

But when you rely on accounting software in the cloud, you'll know your data is safe, regardless of your back-up practices. We still recommend keeping at least one other copy of your financial accounting data backed up, because no storage system is ever 100 percent safe. But if you're looking for consistency and reliability, along with data you can access from any device with Internet access, 24/7, cloud-based accounting software is the way to go.

As we enter the worst time of year for flooding, hurricanes and tornadoes, it may be time to evaluate your data back-up systems and your accounting software. While you're at it, take a good look at your bookkeeping and accounting practices. Are you maximizing your company's potential with the right business accounting software and a bookkeeper, CPA or part-time financial controller you can trust?

This news article is brought to you by GOING GREEN NEWS - where latest news are our top priority.

Do I Need an Accountant for My Business?

New business start-ups require an exhaustive amount of time and effort, a busy and stressful period where making a profit should be the priority but accountants do so much more than just deal with tax, they are also important business advisors who deal with many businesses all the time and offer a full range of financial services in order to save time, cut down on unnecessary expenditure and help plan a business road map to future success.

Hiring an accountant at the beginning is a great way to ensure your business finances are well organised, clear and ready for any inspection. Choosing an accountant is the next step and this is very important as most business owners like to stay with the same accountant for years, this in turn develops into a working relationship of trust which is vital if the business is to survive through both the good times and difficult periods where business is slow.

The first step you should take when looking for an accountant is whether there are any in your local area that have worked with businesses like yours. An accountant who has clients in the manufacturing sector might not be best suited to work with someone who runs a hotel or bed and breakfast business. Ask your local business centre advisors who they recommend as the best local accountants in your area, if you can find a good accountants close to where you live this is an added bonus as you can also pop down to see him/her if you have any problems or questions relating to your accounts.

It is also worth finding out how big the accountant firm is, a large accountancy practice might be good for big businesses but they often charge more than a smaller, family run affair who are likely to more familiar with small to medium sized businesses. Checking out the accountants website will give you a good first impression, the next step is arrange an initial consultation.

Competition amongst accountancy practices is usually pretty fierce so they should be eager to impress you, a good accountant will not mind you asking to speak to their other customers. This is the ultimate test as you will get the best reviews from existing customers. If the accountant comes up with some story about client confidentiality then maybe they are trying to hide something, in which case politely sit through the rest of the meeting and then look for another accountant to go and see.

The Yellow Pages or Thomson Local directory will have many accountants listed or you can even check your local newspaper classified ad section.

By careful consideration there is no reason why you cannot hire a professional, friendly accountant who can take your business to the next level. Remember, accountants are not just for tax returns, they can help with whole host of financial services designed to make you business better and stronger.

This news article is brought to you by LONG-DISTANCE RELATIONSHIP - where latest news are our top priority.