Business Tips

The volume and importance of your accounts receivables balance varies significantly by business type. A hair salon where customers pay at the time of service likely doesn’t have a large amount of accounts receivable. A manufacturing company that ships product before payment, and extends generous payment terms, likely has a

If extending terms, sending invoices, and waiting for payment impacts your cash flow, it’s important that you develop a system to manage your accounts receivable.

Creating a System

Whether it’s in a spreadsheet or accounting software, you’ll need a system to track your A/R. Most businesses divide their invoices due into buckets of 0-30 days, 31-60 days, 61-90 days, and greater than 90 days. Set up a system to track how tardy customers are in paying their bills, preferably one that automatically moves them by due date.

As invoices roll from one bucket to the next - i.e., become further and further past due - the likelihood that you’ll receive payment goes down. This is one of the reasons that monitoring your invoices is so important.

Many accounting software systems generate aged receivables reports. Some will notify you with alerts when invoices become severely past due. As part of your A/R management process, review these reports weekly, bi-weekly or monthly depending on the size of your balances owed and how long they’ve been owed. An accounting or A/R clerk can do this, or the business owner can sit down with their clerk to review the report.

Assess Penalties for Past Due Payments

While you are waiting for the check to arrive, your customer is essentially taking an interest-free loan from you. They are using your products for free, but you have already incurred the costs to produce them. And now you will have to incur additional costs - the hourly wage of an A/R clerk, for example - to get paid.

Assessing penalties that reflect these costs to you can help you recoup them. Whether it’s five percent of the balance owed, or a flat fee of $25 for late payments, clearly state the penalties for late payments on all invoices. And don’t just put them on an invoice - enforce them.

Once a customer has had to pay a late fee charge, they might start paying their invoices on time.

Follow Up on Past Due Invoices

It’s not enough to monitor your past due invoices, you need to follow up on them. Hopefully, customers might have forgotten to pay, or their accounts payable clerk if out on vacation. In some instances, a past due invoice isn’t cause for alarm, particularly if the customer normally pays on time.

That’s why it’s important to follow up on past due invoices. Send an email, resend the invoice, or call the customer and remind them of their obligation. If you don’t follow up, they may continue to keep forgetting to pay.

In online accounting software, you can establish dates for automatic follow up emails. You select either 30, 60, or a custom number of days, and the software will automatically send an email. If you’re both struggling to collect and don’t have the staffing resources to manually send emails or letters, investing in software that does it for you could be worth the money.

Ensure that all communications are polite and professional. Your goal is to get paid, not to lose a customer. Though, sometimes, losing a customer could be the best thing for your business.

Identify Problem Customers

Monitoring, following up, and collecting on past due invoices can take significant time and effort. While you can attempt to cover these costs through the interest and late fee penalties discussed above, at some point it might better serve your business to fire the customer.

When making this decision, look at the volume of their business compared to the effort to collect. Do they only place a $500 order every six months, yet it takes you five emails and two phone calls to get paid? Also consider the length of time they typically take to pay. Waiting 180 days, on average, for payment from a customer could be more trouble than they’re worth.

If a problem customer causes you too many headaches, and the volume and size of their business doesn’t justify keeping them around, consider firing them.

Hiring a Collection Agency

Emails have gone unread, they’re sending your calls straight to voicemail, and the invoice is 180 days past due. Should you hire a collection agency? Before you go down this route, consider the following.

Collection agencies typically charge a percentage of what they collect. This percent ranges from 25% to 50% of the total amount owed. They could also charge a contingency fee.

Terms and rates vary, but paying $250 on a $500 debt just may not be worth it to you. As well, you’ll need to research the agency and make sure they’re licensed and insured and have experience in your industry before assigning them your debt. As hard as it may be, at times it could be necessary to write off a bad debt and simply choose not to work with that customer again.

The best solution is to set up a system to monitor and collect on your accounts receivable before you’d ever have to consider collections. If you need advice or help, talk to your accountant.

People become small business owners through several methods. Some inherit a family business when a parent or relative retire. Others launch an innovative new product and find themselves running a company without ever planning on it. But for some, those with money to invest upfront, they intentionally enter the small business world by becoming a franchise owner.

When you buy a franchise, you could be buying the right to use a parent company’s name, to sell their products, or to offer their services. The parent company often retains some control, whether it’s by setting prices across their franchisees or standardizing product offerings.

For some, investing in a franchise takes the work out of coming up with an idea or building a brand. Others chafe at those restrictions, or at paying a royalty to a parent company. If you’ve been thinking about becoming a franchisee, consider these pros and cons.

Pro: Name Brand Recognition

Some small business owners want to get a headstart on getting their business off the ground. With a franchise, you’re buying a known name with an established reputation that can attract customers from the day it opens.

Common franchises like sandwich shops, coffee stores, or fast food restaurants have names that are instantly recognizable. Because of this, you won’t have to work as hard to establish your business in the community or build sales. 

Con: Parent Company Control

For many people, they dream of becoming a small business owner because of the control it offers. They dream of setting their own hours and escaping the nine to five grind. But with a franchise, you’re not fully in control of the business you own.

Corporations that franchise, such as McDonald’s® or Subway®, put together the menu and set prices for your area. You can’t decide that you want to charge a dollar more for a hamburger than a franchise in the next town over. Breaking the rules, or failing to follow agreed-upon protocols, could cost you the franchise.  

Pro: Advertising is Done For You

All small business owners have strengths, or aspects of running the business that they enjoy more than others. If you don’t have the expertise to market your business or sell your products, a franchise could be a good fit.

The franchisor often takes care of local and national advertising. They’ll purchase ad spots on radio, television, or billboards in your area. A creative team in their corporate offices designs the logos and campaigns, and you can concentrate on other aspects of your business. 

Con: Franchise Fees and Royalties

However, you will pay for the advertising that the franchisor performs on your behalf. Franchise fee structures vary but you typically pay a large sum to open the business, then ongoing fees and royalties or a percentage of sales. That initial sum typically averages between $20,000 to $35,000. 

If the advertising campaign created by a team in another state doesn’t appeal to shoppers in your neighborhood, you still have to pay into the advertising pool. When sales rise, so does the amount you pay to the franchisor. Some franchises have set monthly fees, say $500, that you have to pay regardless if you made any money that month. 

Make sure that you include these fees when having your accountant draw up a business plan or review the financials of any franchise that you’re considering purchasing. 

Pro: Buying Power

If you’re a small business just starting out, it’s hard to negotiate terms with vendors. Without an established credit report, or Dun and Bradstreet report, they probably won’t extend credit. And you won’t be able to buy in enough bulk to get discounts.

With a franchise, the buying power of your store is lumped together with that of all the other franchises. Your parent company negotiates contracts with vendors, hopefully getting you the best deals on supplies. Vendors will extend credit and/or offer bulk discounts because you’re buying with other franchises or under the parent company umbrella. 

Con: It’s Difficult to Exit the Business

When you sign a franchise agreement, you sign a legal contract. It has enforceable clauses and an end date. If you opened a sandwich shop on your own and it wasn’t doing well, you could close or sell the business. It’s not as easy if you own a franchise.

Franchise agreements may prohibit reselling or transferring the franchise agreement, or only allow it if the franchisor approves. You could be forced to complete a contract and keep a business open even if you’re losing money. Have a lawyer and and an accountant review all contracts and financial commitments before you sign. 

There’s a lot to consider when it comes to buying a franchise. It could be an easy way to become a small business owner if you have the cash available for the initial investment. Just be sure that you have a good grasp of the pros and cons, and know what you can live with, before you go into business with a franchisor.

Your customers are the lifeblood of your business. You exist to provide them with the products and services that fulfill their needs, and your success depends on how well you identify and meet those needs. But your customers are not a monolith.

Research shows that companies who prioritize customer experience generate 60% more profits, and that 76% of customers believe the customer service represents how your business values them. While you might struggle to compete against a big box store in terms of price, you can differentiate when it comes to the personal connection.

Get to Know Your Customers Buying Behaviors

Tracking the frequency, products, and size of customer purchases can give you insight into their behaviors. Whether you use a customized software program or an Excel spreadsheet, learning their buying behaviors can serve you well in several areas.

One, you’ll have the product in stock

Failing to have a product in stock when a customer needs it can send them online or down the street to a competitor. Robust data on ordering behavior combined with excellent inventory management keeps this from happening.

Two, reminders can spur purchases

Sephora is one business that excels at this. About three months after a customer purchases foundation, they’ll receive an email asking them if it’s time to restock. If you know that your client typically has a wax service performed every three months but they haven’t scheduled an appointment yet, send an email or text reminder.

Three, anticipating their needs builds trust

 When you demonstrate that you’re paying attention to your customers, anticipating their needs and making sure you can meet them, it builds trust. They’re more likely to overlook a one-time mistake if you have a history of delivering value.

Send More than Emails

A handwritten thank you note may seem old-fashioned, but it can have a big impact. Consider jotting a quick note and slipping it in the mail after a customer makes a large purchase, or if they return to your salon after a long absence.

If your business is service-based, look into appointment registration programs that send automatic text messages with appointment reminders. This will help ensure they make their appointment, cutting down on no-show’s, and many people appreciate the reminder.

Around the holidays, or to celebrate important milestones like a one year anniversary, consider sending a small gift.

Always use their first name, and train employees in store or who answer the phone to use names, as well.

Add an Incentive or VIP Program

Have you ever done the math on those free coffee punch cards? By the time you’ve purchased ten lattes for five dollars, you’ve spent $50. And that doesn’t count the occasional muffin or scone you might have picked up with your morning coffee.

If you operate a retail store, consider offering free gift wrapping during the holiday season. Host a VIP shopping night, perhaps with other local stores, and offer appetizers, drinks, and a special discount to invited customers.

Take a look at your business and identify areas where it would make the most sense to offer VIP perks - whether it’s a free coffee or a discount on their birthday. Keep an eye on your bottom line, and track the results, so that you’re not giving away too much. But a small gesture can go a long way to encourage loyalty and build repeat sales.

Use Multiple Channels to Communicate

Everyone has preferences when it comes to communication. Some people prefer to pick up the phone to resolve an issue, others will send a tweet or direct message on social media. It’s important to be accessible to your customers on multiple channels to maximize your reach.

Make an email address, phone number, and other modes of communication easy to find on your website. Don’t ask them to hunt for information. If you chose to have a social media presence for marketing, be aware that customers will use those channels to resolve issues and monitor both comments and messages.

Do Business with Your Customers

The term “if you scratch my back, I’ll scratch yours” can be useful in the business world. Do you need to print new brochures? Choose the print shop down the street that ordered their office chairs from your warehouse.

Doing business with your customers is a great way to build loyalty and support in your local community. Think about some of your regular purchases - whether it’s office supplies, retail stock, or snow shoveling - and look at your client list. Could a current customer fulfill those needs?

While in many cases you could click “buy” online and have the item delivered, spending a little time to identify ways you could do business with your customer is worth it in the long run.

Customer service can be a great way to differentiate yourself from the competition and provide greater value. It helps you build loyalty and increase sales. For many smaller businesses it’s one way that they can compete against larger competitors.

Try some of these tips and see how they work for you!

Many businesses are still struggling due to the financial restrictions imposed due to COVID-19. The severely reduced income combined with ongoing payroll responsibilities has led to many businesses having to shut down entirely. Those that are left standing are hanging on by a thread. Yet, hope is on the horizon. The “Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act” was recently passed by Congress. This Act reauthorizes the original PPP (Paycheck Protection Program) loans that came to an official end in August of 2020. There’s a lot to know in 2021 about PPP loans.

There are two primary goals for the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act. One is to provide needed funding for any small businesses that, for one reason or another, didn’t get a PPP loan in 2020. The second goal is to offer a select group of qualified businesses the opportunity to acquire another PPP loan. If your business falls into one of these categories, you should take the time to learn more about PPP loans in 2021. You have until the end of March, 2021 to avail of the program, or until funds are depleted, whichever comes first. The program is currently available, so you can get your application in immediately. But before you do, it’s important to prepare so that you have the best chances for acceptance.

What to Know About PPP Loans

PPP loans came out as part of the CARES Act, back in April of 2020. This program, administered by the SBA (Small Business Administration), allowed qualified small businesses the chance to get a loan to temporarily cover the costs of payroll. With loan approval, qualified small businesses were able to keep on valued employees through the tough times brought on by the pandemic. So even if a business had to close or have severely limited hours, the PPP loan could enable the business to continue to pay employees for up to eight weeks. While eight weeks doesn’t sound very long, consider the difference between eight weeks with a paycheck and eight weeks without a paycheck. The PPP loan program was not a permanent solution, but it helped. (Note that it was also open to independent contractors.)

The initial program quickly ran out of funding, although it started with a whopping $349 billion available. A further $320 billion was added to help meet ongoing demand.

The key thing to know about PPP loans is that they may be fully or partially forgivable. Unlike other SBA loans, PPP loans do not have to be repaid. The only caveat is that you meet certain requirements. This is a huge benefit to needy small businesses as well as to their employees who ultimately receive the money.

The key things to know about PPP loans in 2021 are:

•   Qualified businesses can get PPP loans up to two and a half times their average monthly payroll costs.

•   Hospitality and/or food service businesses (i.e., restaurants) with a NAICS code that starts in 72 may qualify for up to three and a half times their average monthly payroll costs.

•   The maximum loan amount for businesses that already got one PPP loan in 2020 is $2 million.

•   Expanded coverage that meets criteria for loan forgiveness includes:

• Payroll
• Utilities
• Rent
• Mortgage interest payments
• IT/Operations expenses
• Property damage expenses not covered under insurance
• Supplier Expenses
• Worker PPE and general worker safety equipment

•   You have to spend a minimum of 60% of the total loan amount on payroll costs

•   You have to spend the funds over a period of time of either eight or 24 weeks after the loan origination date.

•   You aren’t required to deduct your EIDL advance grant from total of your PPP loan amount forgiveness.

If you did get a PPP loan in 2020, you’ll note that the expanded list of authorized expenses for 2021 PPP loans is quite significant.

Streamlined Loan Forgiveness Application 

If you get a 2021 PPP loan for $150,000 or less, you can also take advantage of the new streamlined loan forgiveness application. It’s a simple one-page document that provides the number of employees you were able to keep on due to taking out the loan, an estimate of how much of the loan was spent on payroll, and the total amount of the loan that you got. Unless the SBA needs to verify your business’s revenue loss, that’s all that will be required of you to have your 2021 PPP loan forgiven. 

Tax Concerns Regarding the 2021 PPP Loan 

You should speak with your CPA about tax concerns regarding the 2021 PPP loan. However, in general, you need to know that your business can’t be brand new; you need to have been operational since February 15th, 2020 at the earliest.

Your business also needs to fall into one of the following four categories:

1. A non-profit or small business with 500 or less employees
2. A small business, 501(c)(19) veteran organization, tribal business, or small agricultural cooperative that meets the SBA’s size standards
3. An independent contractor or sole proprietor
4. A food services or hospitality business that has an NAICS code beginning with the numbers 72, and have fewer than 300 employees per physical location 

How to Apply For a 2021 PPP Loan 

If you believe your business may qualify for a 2021 PPP loan, you shouldn’t hesitate to apply. The program is already open for applicants. You can apply via the SBA website. Contact your CPA for any needed assistance filling out the application. Be sure to check again with your CPA for the latest information about tax concerns regarding either the 2020 or the 2021 PPP loan program.

It can be difficult to attract talent during the start-up phase when you can’t necessarily offer the larger salaries and bonuses of a more-established company. Many start-ups turn to offering employee equity plans that increase the attractiveness of working for them. But there are downsides to diluting your equity and managing an equity plan.

If you’re a startup struggling to build the professional team you need to succeed, here are some of the pros and cons of launching an equity plan.

Reasons to Offer Employees’ Equity

Offering equity is also a great way to retain important employees. If you offer a stock grant, for example, which vests after two years of service, eligible employees are less likely to leave before the two-year mark. When they’re considering other opportunities, the possibility of losing their options could sway them to stay.

If they receive an offer from a competitor, it could be impossible to compete. A company can’t always afford to increase a key employee’s salary or offer a higher bonus. But you could offer equity as an incentive to stay.

Another reason to offer equity is to increase employee engagement and investment in your company’s results. Similar to a bonus, when they benefit from the company’s success, they’ll likely work harder to make it happen. 

Downsides to Offering Equity

Obviously, offering equity to employees dilutes your equity or the equity of other shareholders. This is why many larger corporations require that the Board of Directors sign off on any equity plan. For founders, it can be hard to lose control of the company they started. 

As well, as equity becomes diluted it could be harder to make strategic decisions and you’ll need to work to get buy-in from all stakeholders. It’s something to consider if you’re not ready yet to handle competing ideas for your company’s direction. 

Increased administration costs are another downside to offering equity plans. A staff accountant or other expert will have to track, account for, and manage the equity plan. This could include forecasting possible exercises and their impact on overall equity, booking accruals for compensation, and responding to employee questions about their plan. 

Types of Equity to Offer

There are three common types of equity plans you can offer, each of which has different tax implications for either the employee or the company.

Stock Grants

Think of a grant as a gift. If the employee is still with the company when it vests, they get the stock. Typical service periods range from two to four years, and often a grant will vest over time. For a four-year grant, the employee may receive 25% of their grant each year.

If you offer a grant, you’re required to fulfill it and the grant’s price, which is often less than the stock’s market price. Employees will have to report the grant as income, and the stock received at the market value, in the year it vests. 

Stock Options

An option gives someone the option to purchase stock at a specified price. It could have the same vesting period as a grant, but the employee has the option whether or not to exercise it. 

If a director has an option to purchase 300 shares at $40 a share and the market price of your company’s stock has risen to $60, they’ll likely exercise the option. If the stock is selling at $30, so less than the option price, common sense dictates that they’d let the option expire. 

Choosing to offer stock options means more work for the company. You’ll have to estimate the likelihood of an option being exercised or forfeited, and accrue stock-based compensation expense accordingly. The employee who exercises the option is responsible for paying taxes on it, but how much they pay will depend upon whether they sell it right away or hold onto it for a few years. 

Performance-Based Awards

Performance-based awards are more commonly offered to higher level or C-suite employees. As their name implies, the amount an employee eventually receives will depend upon performance. When the performance metric is achieved, they could receive the stock as a grant or have the option to purchase it. 

An award could vest based upon reaching a target earnings per share, net income, or EBITDA number. It might also have a vesting period based upon dates of service. Forecasting potential vesting, exercises, and forfeitures becomes even more complicated than with a stock option. 

Taxes and Stock-Based Compensation Plans

There are tax implications to equity plans for both employees and corporations. Corporations can deduct the share-based compensation expense on their taxes, which can impact their income statement.

If you decide to offer employee’s equity, it would be wise to discuss the type of equity and who is eligible with a tax professional. You can structure your equity plan to both incentivize employees and help the company at tax time. Because plans can become quite complex, you may need to consult several professionals and perhaps hire an outside equity administrator.

Whatever path you decide to take, the right equity plan can shepherd your company to success.

Since a lot of employees are working from home now, it makes sense that employers are looking for efficient ways to track employee time. Even though employees do have more autonomy over their working time, you still need to ensure that you’re not paying for excess idle time. Most professionals can be trusted to work when they’re supposed to, but there will always be some people who try to take advantage of the working from home situation. Following are some considerations to keep in mind and some ideas about various ways to track employee time.

Put Expectations in Writing

If your employees are transitioning from full-time, in-house work, don’t just expect that they’ll know what expectations are when working from home. For one thing, it’s unlikely that your employees will appear judiciously at their home computers at 9 a.m. on the dot, take two short breaks and one hour-long lunch before shutting down at 5 p.m. That’s just unrealistic considering a) the distractions and interruptions they may face and b), the amount of focused work they’ll be able to do from home. The truth is, many people find that they’re able to get more done in fewer hours from home than in the office. There are fewer colleagues stopping by the desk to “catch up” or gossip, fewer reasons to visit the water cooler, and fewer reasons to do busy work for the sake of looking busy for the boss. So put your expectations in writing, but don’t expect the same things as you did when your employees were office-bound. In other words, focus on meeting goals rather than meeting minimum hours worked. Put everything in writing and then have the employee sign the document. If you need to terminate the employee for a time-related issue, the document will help prove your just cause.

Decide on How You’ll Measure Time Worked

For employees that are on salary, you don’t need to worry so much that you’re paying for idle hours. It’s the hourly employees that you need to concern yourself with. For this, there are several different ways that you can measure the time actually worked. The one you choose will depend greatly on what kind of work needs to get done and your employee’s tolerance for oversight. 

One such method is to keep track of keystrokes. For this, your employee would install a program on their laptop or desktop. They would log in and proceed with work. If they aren’t actively typing, that means they aren’t working. When they want to take a break for anything (bathroom break, put a load of laundry in, etc.) they would log off and then log back in when they’re ready to work again. This particular method of employee time tracking is suitable for employees who do data entry, but not much else. It can feel oppressive to an employee who might be writing content for your marketing blog or some other work that involves typing.

Another method involves the telephone. If you have employees that make cold calls for your company or do sales calls, this method can be very useful. It involves paying for a phone service that your employee dials into to make their calls. The phone service keeps track of which employee is making calls, when they make them and how long the calls last. In fact, this time tracking method serves two purposes; it allows you to gather accurate information about hours worked and it also protects employees from having to expose their personal telephone information to prospects.

You could also rely on traditional timesheets to track employee time. Bear in mind that timesheets aren’t as reliable and you might spend a significant amount of time chasing down timesheets from certain employees. Making the paycheck dependent on a timesheet being submitted on time is a great inducement! The timesheet method is most effective for businesses that have a lot of different clients and/or projects and you need to keep track of how many hours employees are spending on each client/project. Types of businesses that this is suitable for include architectural firms, marketing agencies, software companies and similar. If you do opt for a timesheet model, you can choose from a digital timesheet or an actual printable timesheet that employees fill in by hand and email back to you. 

Motivating Employees to Keep Track of Time

Employees that are new to the work at home model may need some cajoling to get on board with time tracking. It may feel oppressive or domineering at first, so you should make time tracking as easy and beneficial as possible. Try to consider what kinds of employees you have. Are they sophisticated, highly educated professionals accustomed to little oversight? If so, you probably already have them on salary, so you might consider just trusting that they’ll do the work they’re expected to get done. 

Are your employees mostly freelancer or creative types who rail against authority and rigid boundaries? Then a DIY timesheet might work in your favor. 

Are your employees high school grads who are basically just inputting data or doing other rudimentary tasks? Then a log in, log out time tracking system that keeps track of keystrokes will probably work in your favor.

Finally, make time tracking beneficial. Couch the system in terms that demonstrate your concern that they get fairly paid for the time they put in. Give them the tools they need for free or provide easy to understand instructions for downloading and installing time tracking software. Make things as easy as possible for your employees so that it’s as easy as possible for you to pay them accurately. 

For more tips and advice about accounting for employees’ time worked, consult with your CPA.

When making staffing decisions, it’s important to consider all the variables. You may be hiring support growth, or bring in new clients. Other times, the role in a cost center, and you’ll need to evaluate if existing revenues can support added costs.

In some businesses, such as restaurants, the managers have to make staffing decisions on a daily basis. If it’s slow, should they cut a waiter and send them home? Or will they regret that decision if it picks up later? But many small business owners face they choices infrequently, and struggle choosing the right path to take.

The solution in that case could be to hire a contractor or temp. You may find them on a job board or work through a temp agency that screens candidates, but you have no long-term obligation to the employee. A temporary employee is just that - temporary - but they could be the answer to your needs.

When hiring a contractor is the best choice

There are some situations which naturally lead to hiring a contractor rather than a full-time employee.

Filling a temporary need

Your office manger is going on maternity leave. An employee is taking a sabbatical. While their absence will be temporary, you still need someone to do their work in the meantime.

One of the most common reasons to hire a contractor is for temporary staffing needs like these. Even if you’re not entirely sure that the employee will return from maternity leave, you must comply with legal requirements to keep their position vacant. Hiring a contractor ensures that their work gets done and that you’re following the law.

Uncertainty about Long-Term Needs

If you’re in a growth pattern, it could be hard to predict your long-term needs. If sales growth continues, you might need another support person in the back office. But if it tapers off, you could regret that hire.

Using a contractor when there’s uncertainty about the future is often the best choice. You may end up bringing them on full-time eventually, but if you realize that they’re redundant long-term you can let them go with no hard feelings.

Project Work

If a corporation is migrating to a new software platform, they may need extra help in validating data or testing the new software. But once the software has been implemented, the need will go away. Not all business needs are ongoing, and one of the best times to use contractors is when you have special projects.

Using contractors for special projects also allows you to bring in expertise that you might not have in-house. It could be expensive and unnecessary to hire a developer who’s an expert in the new software, or a data analyst to validate accuracy, full time. If they’re not already on staff, it could also take a lot of time to find the right candidate.

Contractors can be the best fit for a short-term project that demands a specific expertise.

When you Could Regret Hiring Contractors

Before picking up the phone and calling the temp agency it’s a good idea to consider some of the drawbacks to hiring contractors.

Contractors Might Charge More Hourly

Temporary employees or contractors know that their job could end at any moment. To compensate for this risk, their agency often charges a premium for their services. In short, their hourly rate could be much higher than a full time hire for that same job.

However, most businesses save money in the long run because they don’t have to provide them with benefits. If you weigh the total cost of an employee against the total cost of a contractor, taking into account why you need them and the flexibility of the hire, it still may make more sense to hire a contractor.

Contractors Don’t Have a Sense of Ownership

Full time employees have a vested interest in your business’ success. They’re a part of your company culture, and will often go above and beyond for your customers. While contractors will have their own integrity in their work, they’re not part of the permanent team.

A contractor takes ownership of their work and the role they’re temporarily filling, but simply will not have the buy-in and sense of ownership for the company as a whole. You may not need this buy-in, particularly for project work or an extremely short-term need, but think about how this could impact your business if they’re going to be around longer term.

Customers May Complain

Customer-focused businesses, where the customer demands a certain level of service and continuity, might not find that contractors are their best choice. Lack of a sense of ownership could lead to lackluster service. A revolving door of representatives servicing their accounts could lead to customer complaints.

If the role the contractor would fill is customer facing, you might want to hire someone full time.

Reviewing the pros and cons of hiring a contractor will help you make the right choice, one that will support your business and its future.

Charging it has become part of the American way of life. Whether it’s because they want to delay payments, don’t have the money currently, or simply want the convenience, consumers expect to be able to pay their bills with plastic. For a small business owner, this can present a challenge.

How do you meet consumer demand to pay by credit card but also keep your fees slow? Do you want to take down credit card numbers over the phone, or keep them on file, or is the potential liability too great? Here are a few things to think about when deciding whether or not to let your customers charge it.

Customer Demand and Use

Do your clients even want to make payments online with a credit card? If there’s little to no demand, it might not be worth your time to offer the option. Also, think about which credit cards your clients prefer using. Most people have come to expect the ability to use Visa and Mastercard, whereas Discover and Amex are less common.

If you’ve struggled with collection activities and late payments, making it easier for clients to pay could help resolve collection issues. One of the pluses of supporting payments through your website is that it also helps you expand your business to remote customers. The more you can move online, the more you can increase revenue and cuts costs, but you should keep an eye on your fees.

Credit Card and Payment Processing Fees

As anyone who’s booked an entry for credit card processing fees can tell you - those fees add up. When deciding how to accept payments from clients, consider what offering payment options will cost you.

Some card companies charge a flat per-month fee plus a per-swipe fee, which can range from 1.3% to 3.4%. The payment processor also takes a cut. When deciding which portals to use and which cards to accept, keep an eye on your bottom line.

If you’ve never offered to let clients pay by credit card before, it will be hard to estimate these fees. You can send out a survey to current clients, asking how likely they are to pay by credit card. Or, take an average of your last few months accounts receivable and roughly estimate how many of those bills you think will now be paid through the online portal.

For example, if you’ve averaged $6,000 in monthly receivables, and you estimate that 15% of your customers will start paying by credit card, multiply the expected $900/month by the credit card company fees to estimate your costs. If you have an existing banking relationship, talk to your banker about their options and if they offer a discount to bundle services.

Once you have a few months of data, you can make a more informed decision, but you should always keep an eye on your payment processing fees.

Which portal is best?

There are over 20 payment services that small businesses can use, and the options can be overwhelming. From Amazon Payments to Apple Pay to Paypal, each option has its pluses and minuses. When evaluating them, look at the following;

• How well will the service integrate with your existing website?
• Do you need to be able to accept payments by swipe or at a machine in the office?
• How many of your clients have accounts with these services?

You’ll need a professional website that integrates with your online payments. If you already have a website, talk to your web developer and ask for their recommendations. The easier it to integrate a payment portal, the less time and money it will cost you to set it up.

Do you have a lot of foot traffic or offer walk-in tax services? You may want to accept payments in the office, at the front desk, and make payment due at time of service. Look for a payment service which offers the physical ability to swipe.

While a smaller service could save you money in fees, if it’s not widely used clients may resent having to set up a new account to pay. Finding the perfect balance between wide acceptance, usability, and lower fees may take some time, but eventually your payment processing portal will help grow and support your business.

How to accept payments for your business is always of great concern to businesses. Of course, you need to accept credit card payments so that you can offer your products or services to a broader range of customers. But there are many different options for accepting credit card payments. It’s important that you understand how the options compare with each other so you can ensure that you’re using the best choice for you and your customers. 

Why Credit Card Payment Options Matter 

The credit card payment option you choose for your business payments matters very much to you, your customers and to your business. Consider that if your credit care payment processor goes down, you could lose out on a sale or an entire succession of sales. That’s damaging to your bottom line but it’s also damaging to your business reputation. It’s unlikely that customer will return to your store if they think you don’t have a reliable payment processor. Now consider if your payment processor doesn’t record sales accurately. That would lead to a very lengthy and costly process to figure out. And what if your payment processor’s data was compromised. That would mean that your business data was compromised as well as your customers’ data. Now, you can blame the payment processor all day long, but in the end the customer is going to hold your business responsible. The legalities of such a situation are too grim to even contemplate. Hopefully now you see why it matters so much that you choose your payment processor very carefully.

Fee Structure Differences 

Your credit card processor should offer certain features that help you do business. One of the major differentiators among credit card processors are their fees. Some credit card processors charge fees based on a business’ credit score. If you’re a sole proprietor, they’ll use your credit score to determine your fees. Other credit card processors just charge a straight fee across the board – everyone pays the same fee. Even those types of credit card processors can vary greatly as far as their fee structure. Some charge a percentage of the sales and a small transaction fee. Others charge a slightly higher percentage of the total but no transaction fee. The one you choose should be based on the average amount of your credit card transactions and the number of credit card transactions you do each month. Then you can compare and decide which fee structure works best for your business.

Merchant Accounts 

A merchant account establishes a fairly direct relationship between you and the provider’s network. You’ve seen this system in operation countless times when you shop at grocery stores, bookstores and most retail outlets. The business runs a customer’s card, it gets processed electronically, the total is charged against the customer’s account, your account is credited and you are charged a fee for the privilege of having the merchant account.

Getting a merchant account isn’t as complicated as you might think. If you and/or your business have decent credit, run an upstanding business and are deemed trustworthy, you’ll likely be approved for a merchant account. You’ll then be able to accept Mastercard, Visa and maybe Diner’s Club and American Express if you also apply for those merchant accounts. Once you’re approved, you’ll need to invest in the equipment to run the cards and send the data. Some companies offer leased equipment, so you might be able to expense it over time. 

Mobile Payment Accounts 

If you’re not yet ready for the sophistication of a merchant account or you don’t qualify, you can still accept credit card payments. If your business has a Paypal account, you can run credit cards through their website. If you want to be able to swipe customer cards on the spot, you can get a free credit card reader that attaches to your phone. In fact, several companies now offer a mobile credit card reader for merchants that sell at trade shows, flea markets, fairs, or anyplace where it’s impractical to set up standard electronic card equipment.

Online Credit Card Processors 

There are also other alternatives, such as online credit card processors. These are less convenient, since they may require you to run every transaction through their website. They’re certainly less conventional. You can easily find a list of online credit card processors. In most cases, all you need to qualify is a tax ID number and a business bank account.

Whichever credit card processor you use, make sure you read all their reviews thoroughly. Since you’re going to be placing your customers’ data in their hands, you want a credit card processor with a near perfect track record, a recognizable name and one that is based in the U.S. Here’s why.

The Dangers of Some Credit Card Processors 

The government is very strict about preventing money laundering. If you’re working with a credit card processor that’s based in a foreign country such as the Cayman Islands that has a reputation for money laundering operations, your business could be put on a watch list. Even if you have no knowledge of the issue and do not willingly engage in such activities, your business could suffer by affiliation.

The second danger of some credit card processors is a lack of security. If you use a company that fails to protect your company data, you could fall victim to hacking and be liable for any customer data that you failed to protect. Even though you personally didn’t cause the breach, it could spell trouble for your business and your reputation.

The final conclusion is that you should choose your credit card processor very carefully. Look at their fee structure, consider your needs and think about doing business only with companies based in the U.S. Ask any company you’re thinking of working with how they protect data. Once you find a company that you think will work for your business needs, you’ll feel safe in the knowledge that you chose your credit card processor with discretion.

If you own your own business you already know the joys of being your own boss. You may even have thought about bringing your spouse and/or children into the fold. There are definitely some benefits to hiring your spouse or children. Here are some to consider. 

Tax Advantages of Hiring Children Under 18

There are several tax benefits when business owners hire children under 18, as long as the child is still a dependent. If the child is 18 or older and not a dependent, they’re treated no differently than if you hired a job candidate off the street, tax-wise.

First, the child can earn up to the standard deduction amount without having to pay taxes on their earnings. If you have a retirement plan in place, up to a certain amount of additional dollars can be contributed tax free. Your CPA can help you determine exactly what that amount is, based on the type of retirement plan your business has. They can also help ensure that you take advantage of all the tax benefits of employing your dependent child. 

Additional Benefits of Hiring Your Children

Employing your child is a great way to prepare them to enter the workforce as an adult. Under your tutelage, they can grow accustomed to showing up for work on time, practice good work ethics and learn how to be self-motivated.

Working next to your child also allows you to spend more quality time with them. They’ll get to see firsthand what you do all day long, and how hard you work for the family. Over time, your relationship will grow deeper and stronger because of the time spent together at work.

Finally, your child will benefit from the feelings of independence and self-empowerment of earning their own paycheck. They will learn the relationship between work and monetary reward. They can then take that money and put it toward their future or learn more about saving and investing. Subsequently, they’ll learn lessons about the value of a dollar as they make choices about how to spend their money. These are lessons that can’t be taught from a lecture or a textbook. 

The Work Has to be Real

If you decide to officially hire your spouse or children, do so honestly. The work that your spouse or children do must be legitimate work, and not something that just appears on paper to try and justify a tax write-off. The work doesn’t have to be highly technical or labor-intensive, but it should serve a bona fide need for your business. 

Appropriate Jobs For Younger Children

Younger children can do simpler tasks around your home office that are actually very helpful. Here are some easier jobs that you could give your younger children that would likely pass the “litmus test” as far as the IRS is concerned:

• cleaning your home office on a daily or weekly basis
• making photocopies
• filing papers
• stuffing envelopes/applying postage
• opening the mail
• keeping track of office supplies inventory
• answering the office telephone 

Tax Advantages of Hiring Your Spouse

The tax advantages of hiring your spouse are different than those you gain from hiring your children, but it still might be worth considering. First of all, your spouse will be able to contribute toward your employer-sponsored retirement plan. This may even double the allowable annual contributions, which is very valuable.  Second, if you hire your spouse they can avail of a health saving plan, whereas you couldn’t as a sole proprietor. This enables your spouse to spend pre-tax earnings on medical necessities as trivial as aspirin. And since you’re married, you then get the same benefit. 

Additional Benefits of Hiring Your Spouse

There are lots of other benefits to hiring your spouse that also make this a worthwhile consideration. These include: 

Trustworthy Business Partner

When you hire your spouse you can freely share every aspect of your business. You don’t have to worry about learning to trust some manager that you hired off of a job board. There’s a lot to be said for working with someone with whom you can openly and honestly communicate about the business no matter what. 

Save on Daycare

If your spouse is also the parent of young children, you could save on daycare costs if your spouse works in your home office. Many couples find daycare costs so exorbitant that one spouse quits to stay home. If the stay at home spouse is also earning, that’s a huge bonus for your household budget. 

Less Stress

Your spouse will experience much less stress by not having to endure a long commute each morning while you stay home to work. With both of you working together, you can either share the commute or simply enjoy a leisurely morning as you prepare to go to work in the home office. Your quality of life will improve remarkably with this change in working dynamics. 

Tips For Hiring Your Spouse

Once you decide to hire your spouse, here are some tips to make the transition go more smoothly:

Take Advantage of Existing Skills

Did your spouse used to be a bookkeeper or secretary or something else that you could use in your business? Instead of asking your spouse to do something completely foreign, take advantage of existing skills to reduce the learning curve. 

Treat the Relationship Separately 

Don’t let the marriage relationship affect the business relationship. Talk about business at work and personal things after hours. That way, you can maintain that line between your professional and personal relationship.

Provide Adequate Training

Just as you would if you were hiring someone off the street, be sure to provide adequate training for your spouse. Spend time explaining your business processes so they can feel more comfortable working alongside you and adjust as soon as possible.

Working with your spouse or children can be a rewarding experience that is even better when you consider the tax benefits. Before doing the actual hiring, consult with your CPA to ensure you go about it in the right way.