Credit Tips

5 Factors That Affect Your Business Credit

What makes up your business credit score? What gives you the best chances of getting a loan? Here are a few factors that play into your business credit picture, and what you can do to make the most of them:

1. Payment History – Your payment history is an important part of your business credit profile, and is what your D&B Paydex score is based on. Many credit opportunities come with a minimum Paydex requirement. What you can do: always pay vendors EARLY. On time is “okay”, but paying early (as in before you receive the invoice) is best.

2. Credit Applications – Believe it or not, multiple applications for credit can be a red flag that will keep you from getting approved for a loan. Too many in a short period of time will make your company look desperate and be a sign to potential lenders that things are going downhill. What you can do: plan your use of credit accordingly, and keep applications to the minimum necessary to accomplish your goals.

3. Blanket UCC Filings – One thing that many people don’t realize is that they need to pay attention to the order in which they get certain types of loans, and what UCC filings the lenders will file. Some lenders may file a “blanket” UCC filing, which essentially says they have an interest in ALL of your assets. These blanket UCC filings will then take precedence over any subsequent ones, which drastically reduces your ability to get credit elsewhere. What you can do: plan your credit carefully, and negotiate UCC filings according to what your needs are. For example, if you need particular assets excluded from a UCC filing to use as security for another loan, explain that fact in advance to get those items excluded from any blanket filings, or, alternatively, get the loan or account with the more specific UCC filing first. Some experts recommend opening accounts with competing UCC filings at the same time, and negotiating the details with each party simultaneously.

4. Company Financials – With D&B, it’s important to make sure your financials in your credit file are up to date. If they are not, it could negatively reflect on your company when the lender is comparing the available data. What you can do: update your financials on your credit reports so that they reflect your current circumstances, and plan to do so periodically.

5. Company Legal Structure – The legal structure of your company (LLC versus INC versus Partnership, etc.) can also affect your business credit. Lenders are less likely to loan money to Sole Proprietorship’s and Partnerships than Corporations or Limited Liability Companies. What you can do: if you aren’t incorporated, you should be. The advantages span far past just your ability to get credit.

There are other factors that affect your ability to get credit, such as the amount of debt you already have, how heavily invested you are in your company, and even your personal credit can play a role in your approval or denial. Here we’ve covered five of them. In the end, the better the all-around picture you can paint, the better your chances of getting approved for loans will be.


Business Structure

Each company, firm, joint venture, stock-holding company, concern, bank, fund has its own complicated business structure and the stuff which is necessary for the work. But still there are some general principles how to organize the work at the enterprise. We’ll try to give you some information about it.

The Managing Director or the Chief Executive or President is the head of the company. The company is usually run by a Board of Directors – each Director is in charge of a department. The Chairman of the Boards is in overall control and may not be the head of any department.

Vice-President or Vice-Chairman is at the head of the company if the President or the Chairman is absent or ill.

Most companies have Finance, Sales, Marketing, Production, Research and Development, Personnel, Tax, Logistics Departments. These are the most common departments, but some companies have others as well.

Most departments have a Manager, who is in charge of its day-to-day running, and who reports to the Director. The Director is responsible for strategic planning and for making decisions. Various personnel in each Department report to the Manager.

Let’s dwell on some positions in details.

General Manager-supervises and leads the company’s employees, maintains relations with customers, executes sales contracts and provides problem analysis and resolutions. Represents the company at fairs and distributors’ conferences. In some companies maintains a local warehouse. Provides quality audits. Self-motivated, decision maker.

Sales Manager-manages the sales staff of a company, supervises sales activity including a stuff of sales representatives, plans and achieves target sales revenues and maintains a positive relationship between the company and its clients. Must have extensive sales experience, often as many as 5 years in the position of sales representative before moving up to the position of sales manager. Excellent communication and management skills are required. The person must be a proven problem solver and possess management skills necessary to develop a sales team.

Finance and Administration Manager-must have strong accounting experience including maintenance of Internal Controls, costing. Budgeting, forecasting and the development of Logistics and Administration Systems to support a rapidly growing business.

Marketing Manager-manages marketing department. Plans, directs and executes all marketing and related activities. Oversees creative effort and media plans. Must have year commercial experience, strong interpersonal skills, ability to manage a team and lead personnel, excellent communication skills, computer literacy.

Customer Service Manager-finds proper persons, organizes and supervises the job of Customer Service Clerks, Receptionist. Provides the solution for all existing conflict situations. Provides information and orders forms for distributors, directors. Prepares monthly reports regarding performance of distributors.

Product Development Manager-develops branded products for the company. Prepares a brief of the project, a timeline with priorities and options for the successful competition of the project. Researches on potential facilities, provides competitors’ analysis. Realizes market research on product quality and packing. Negotiates with the producer.

Forecast, Supply and Transport Supervisor-makes monthly forecasts of all products. Works with a company software system (Product Forecast). Provides logistics, works with suppliers concerning shipments of product.


Quick Guide to Implementing Business Intelligence, Data Warehousing & BPM

Definitions and Overview

Business Performance Management (BPM) establishes a framework to improve business performance by measuring key business characteristics which can be used to feedback into the decision process and guide operations in an attempt to improve strategic organisational performance. Other popular terms for this include; Enterprise PM (EPM), Corporate PM (CPM) Enterprise Information Systems (EIS), Decision Support Systems (DSS), Management Information Systems (MIS).

BPM: Cycle of setting objectives, monitoring performance and feeding back to new objectives.

Business Intelligence (BI) can be defined as the set of tools which allows end-users easy access to relevant information and the facility to analyse this to aid decision making. More widely the ‘intelligence’ is the insight which is derived from this analysis (eg. trends and correlations).

BI: Tools to Access & Analyse Data

Key Performance Indicators (KPIs) are strategically aligned corporate measures that are used to monitor, predict and anticipate the performance of the organisation. They form the basis of any the BPM solution and in an ideal world it should be possible to relate strategic KPIs to actual operational performance within the BI application.

KPIs provide a quick indication on the health of the organisation and guide management to the operational areas affecting performance.

In many companies analysis of data is complicated by the fact that data is fragmented within the business. This causes problems of duplication, inconsistent definitions, inconsistency, inaccuracy and wasted effort.

Silos of Data: Fragmented, Departmental Data Stores, often aligned with specific business areas.

Data Warehousing (DWH) is often the first step towards BI. A Data Warehouse is a centralised pool of data structured to facilitate access and analysis.

DWH: Centralised/Consolidated Data Store

The DWH will be populated from various sources (heterogeneous) using an ETL (Extract, Transform & Load) or data integration tool. This update may be done in regular periodic batches, as a one off load or even synchronised with the source data (real time).

ETL: The process of extracting data from a source system, transforming (or validating) it and loading it into a structured database.

A reporting (or BI) layer can then be used to analyse the consolidated data and create dashboards and user defined reports. A modelling layer can be used to integrate budgets and forecasting.

As these solutions get more complex, the definitions of the systems and what they are doing becomes more important. This is known as metadata and represents the data defining the actual data and its manipulation. Each part of the system has its own metadata defining what it is doing. Good management & use of metadata reduces development time, makes ongoing maintenance simpler and provides users with information about the source of the data, increasing their trust and understanding of it.

Metadata: Data about data, describing how and where it is being used, where it came from and what changes have been made to it.

Commercial Justifications

There is clear commercial justification to improve the quality of information used for decision making. A survey conducted by IDC found that the mean payback of BI implementation was 1.6 years and that 54% of businesses had a 5 year ROI of >101% and 20% had ROI > 1000%.

ROI on BI > 1000% from 20% of organisations

There are now also regulatory requirements to be considered. Sarbanes-Oxley requires that US listed companies disclose and monitor key risks and relevant performance indicators – both financial and non financial in their annual reports. A robust reporting infrastructure is essential for achieving this.

SarbOx requires disclosure of financial & non-financial KPIs

Poor data quality is a common barrier to accurate reporting and informed decision making. A good data quality strategy, encompassing non system issues such as user training and procedures can have a large impact. Consolidating data into a DWH can help ensure consistency and correct poor data, but it also provides an accurate measure of data quality allowing it to be managed more pro-actively.

Data Quality is vital and a formal data quality strategy is essential to continually manage and improve it.

Recent research (PMP Research) asked a broad cross section of organisations their opinion of their data quality before and after a DWH implementation.

– “Don’t know” responses decreased from 17% to 7%

– “Bad” or “Very Bad” decreased from 40% to 9%

– Satisfactory (or better) increased from 43% to 84%

DWH implementations improve Data Quality.

Tools Market Overview

At present BI is seen as a significant IT growth area and as such everyone is trying to get onto the BI bandwagon:

ERP tools have BI solutions e.g SAP BW, Oracle Apps

CRM tools are doing it: Siebel Analytics,

ETL vendors are adding BI capabilities: Informatica

BI vendors are adding ETL tools: Business Objects (BO) Data Integrator (DI), Cognos Decision Stream

Database vendors are extending their BI & ETL tools:

Oracle: Oracle Warehouse Builder, EPM

Microsoft: SQL 2005, Integration Services, Reporting Services, Analytical Services

Improved Tools

Like all maturing markets, consolidation has taken place whereby fewer suppliers now cover more functionality. This is good for customers as more standardisation, better use of metadata and improved functionality is now easily available. BI tools today can now satisfy the most demanding customer’s requirements for information.

Thinking and tools have moved on – we can now build rapid, business focussed solutions in small chunks – allowing business to see data, store knowledge, learn capabilities of new tools and refine their requirements during the project! Gone are the days of the massive data warehousing project, which was obsolete before it was completed.

A typical DWH project should provide usable results within 3 – 6 Months.

Advice & Best Practice

Initial Phase

Successful BI projects will never finish. It should perpetually evolve to meet the changing needs of the business. So first ‘wins’ need to come quickly and tools and techniques need to be flexible, quick to develop and quick to deploy.

Experience is Essential

Often we have been brought in to correct failed projects and it is frightening how many basic mistakes are made through inexperience. A data warehouse is fundamentally different to your operational systems and getting the initial design and infrastructure correct is crucial to satisfying business demands.

Keep Internal Control

We believe that BI is too close to the business and changes too fast to outsource. Expertise is required in the initial stages, to ensure that a solid infrastructure is in place (and use of the best tools and methods.) If sufficient experience is not available internally external resource can be useful in the initial stages but this MUST include skills transfer to internal resources. The DWH can then grow and evolve (with internal resourcing) to meet the changing needs of the business.

Ensure Management and User Buy In

It may sound obvious but internal knowledge and support is essential for the success of a DWH, yet ‘Reporting’ is often given a low priority and can easily be neglected unless it is supported at a senior business level. It is common to find that there is a limited knowledge of user requirements. It is also true that requirements will change over time both in response to changing business needs and to the findings/outcomes of the DWH implementation and use of new tools.

Strong Project Management

The complex and iterative nature of a data warehouse project requires strong project management. The relatively un-quantifiable risk around data quality needs managing along with changing user requirements. Plan for change and allow extra budget for the unexpected. Using rapid application development techniques (RAD) mitigates some of the risks by exposing them early in the project with the use of proto-types.

Educating the End Users

Do not under estimate the importance of training when implementing a new BI/ DWH solution. Trained users are 60% more successful in realising the benefits of BI than untrained users. But this training needs to consider specific data analysis techniques as well as how to use the BI tools. In the words of Gartner, “it is more critical to train users on how to analyse the data.” Gartner goes on to say “… that focusing only on BI tool training can triple the workload of the IT help desk and result in user disillusionment. A user who is trained on the BI tool but does not know how to use it in the context of his or her BI/DWH environment will not be able to get the analytical results he or she needs…”. Hence bespoke user training on your BI system and data is essential.

Careful planning of the training needs and making the best use of the different training mediums now available can overcome this issue. Look for training options such as: Structured classroom (on or off site), web based e-learning (CBT), on the job training & skills transfer, bespoke training around your solution & data.

Technical Overview

Information Portal: This allows users to manage & access reports and other information via a corporate web portal. As users create & demand more reports the ability to easily find, manage & distribute them is becoming more important.

Collaboration: The ability for the Information Portal to support communication between relevant people centred around the information in the portal. This could be discussion threads attached to reports or workflow around strategic goal performance.

Guided Analysis: The system guides users where to look next during data analysis. Taking knowledge from people’s heads and placing it in the BI system.

Security: Access to system functionality and data (both rows and columns) can be controlled down to user level and based on your network logon.

Dashboards & Scorecards:

Providing management with a high level, graphical view of their business performance (KPIs) with easy drill down to the underlying operational detail.

Ad-hoc Reporting and Data Analysis: End users can easily extract data, analyse it (slice, dice & drill) and formally present it in reports & distribute them.

Formatted/ Standard Reports: Pre-defined, pixel perfect, often complex reports created by IT. The power of end user reporting tools and data warehousing is now making this type of report writing less technical and more business focussed.

Tight MS Office integration: More users depend on MS Office software, therefore the BI tool needs to seamlessly link into these tools.

Write Back: The BI portal should provide access to write back to the database to maintain: reference data, targets, forecasts, workflow.

Business Modelling/ Alerting: around centrally maintained data with pre-defined, end user maintained, business rules.

Real Time: As the source data changes it is instantly passed through to the user. Often via message queues.

Near Real Time: Source data changes are batched up and sent through on a short time period, say every few minutes – this requires special ETL techniques.

Batch Processing: Source Data is captured in bulk, say overnight, whilst the BI system is offline.

Relational Database Vs OLAP (cubes, slice & dice, pivot)

This is a complex argument, but put simply most things performed in an OLAP cube can be achieved in the relational world but may be slower both to execute and develop. As a rule of thumb, if you already work in a relational database environment, OLAP should only be necessary where analysis performance is an issue or you require specialist functionality, such as budgeting, forecasting or ‘what if’ modelling. The leading BI tools seamlessly provide access to data in either relational or OLAP form, making this primarily a technology decision rather than a business one.

Top Down or Bottom Up Approach?

The top down approach focuses on strategic goals and the business processes and organisational structure to support them. This may produce the ideal company processes but existing systems are unlikely to support them or provide the data necessary to measure them. This can lead to a strategy that is never adopted because there is no physical delivery and strategic goals cannot be measured.

The bottom up approach takes the existing systems and data and presents it to the business for them to measure & analyse. This may not produce the best strategic information due to the limited data available and data quality.

We recommend a compromise of both approaches: Build the pragmatic bottom up solution as a means to get accurate measures of the business and a better understanding of current processes, whilst performing a top down analysis to understand what the business needs strategically. The gap analysis of what can be achieved today and what is desired strategically will then provide the future direction for the solution and if the solution has been designed with change in mind, this should be relatively straight forward, building upon the system foundations already in place.

Advanced Business Intelligence

The following describes some advanced BI requirements that some organisations may want to consider: Delivering an integrated BPM solution which has business rules and workflow built in allowing the system to quickly guide the decision maker to the relevant information.

Collaboration and Guided Analysis to help manage the action required as a result of the information obtained.

More user friendly Data Mining and Predictive Analytics, where the system finds correlations between un-related data sets in order to find the ‘golden nugget’ of information.

More integration of BI information into the Front Office Systems e.g. a gold rated customer gets VIP treatment when they call in, data profiling to suggest this customer may churn, hence offer them an incentive to stay.

Increased usage of Real Time data.

End to end Data Lineage automatically captured by the tools. Better metadata management of the systems will mean that users can easily see where the data came from and what transformations it has undergone, improving the trust in the data & reports. Systems will also be self documenting providing users with more help information and simplifying ongoing maintenance.

Integrated, real time Data Quality Management as a means to measure accuracy of operational process performance. This would provide cross system validation, and verify business process performance by monitoring data accuracy, leading to better and more dynamic process modelling, business process re-engineering and hence efficiency gains.

Packaged Analytical Applications like finance systems in the 80’s and packaged ERP (Enterprise Requirement Planning) in the 90’s. Packaged BI may become the standard for this decade. Why build your own data warehouse and suite of reports and dashboards from scratch when your business is similar to many others? Buy packaged elements and use rapid deployment templates and tools to configure them to meet your precise needs. This rapid deployment capability then supports you as your business evolves.

BI for the masses:
As information becomes more critical to manage operational efficiencies, more people need access to that information. Now the BI tools can technically and cost effectively provide more people with access to information, BI for the masses is now reality and can provide significant improvement to a business. The increased presence of Microsoft in the BI space will also increase usage of BI and make it more attractive. BusinessObjects’ acquisition of Crystal and recent release of XI will also extend BI to more people, in and outside the organisation – now everyone can be given secure access to information!


The potential benefits from a BI/DWH implementation are huge but far too many companies fail to realise these through: lack of experience, poor design, poor selection and use of tools, poor management of data quality, poor or no project management, limited understanding of the importance of metadata, no realisation that if it is successful it will inevitably evolve and grow, limited awareness of the importance of training….. with all these areas to consider using a specialist consultancy such as IT Performs makes considerable sense.


Beyond Basic Accounting Debits and Credits – CPA Exam Section Business Environment and Concepts

Good accountants should know basic accounting debits and credits. But a CPA needs to have a broader view of business and that's why the AICPA along with each state Boards of Accountancy decided to add a new segment of the CPA exam called Business Environment and Concepts. This section replaced in part the less relevant Business Law segment.

The new section tests awareness of the general business environment and business constructs that exam candidates need to understand in order to interpret the underlying business causes for and the accounting implications of business transactions. What is more, the new section tests for skills needed to apply that awareness in performing financial statement audit and attestation work and other functions usually performed by certified public accountants that bear on the public interest.

The profession accepted the need for testing in this area of ​​business knowledge because most look to certified public accountsants to interpret business concepts. As is true for the entire CPA exam, these concepts are tested in the context of entry-level accountant practice.

There are five specific areas of Business Environment and Concepts that may be tested in detail on the CPA exam.

o Business Structures

o Economic concepts essential to understanding the entity's business and industry

o Financial Management

o Information technology and how it affects the business

o Planning and measurement

Below is summary by section that a CPA candidate will be asked to know:

Business Structures

A CPA examination candidate should be able to:

Identify the general characteristics of various business forms such as Limited Liability Corps or Corporations.

Determine the recommended business form based on given facts and circumstances.

Determine income available for distribution or be able to allocate profit and losses to the owners.

Identify the advantages and disadvantages of various business forms such as S-Corps or Limited Liability Corps.

Distinguish the factors supporting a fiscal vs a calendar year end for financial reporting and federal taxation purposes and List circumstances indicating when a business should be closed.

Differentiate between the rights, duties, legal obligations, and authority of owners and that of management.

Business Economic Concepts

The CPA exam candidate should be able to:

Recognize the effect of Federal Reserve Board actions on the national economy.

Determine the purpose of transfer pricing.

Differentiate between real, nominal, and effective interest rates.

Distinguish the components of the business cycle and recognize circumstances affecting economic cycles.

Recognize circumstances giving rise to changes in exchange rates.

Understand of exchange rate fluctuations on financial position and operations.

Point out the economic circumstances giving rise to inflation, deflation, expansion and recession.

Determine the effect on an entity's net income and financial position from changes in supply and demand.

Understand economic events and the effect on the business cycle on an entity's financial position and business operations.

Financial Management

The exam will test a candidate's ability to:

Apply capital budgeting tools to make appropriate business decisions.
Demonstrate an understanding of inventory management techniques, such as just-in-time and economic order quantity. Calculate the effective interest rate.

Identify and define various business risks, such as credit risk or interest rate risk.

Utilize capital budgeting tools such as net present value, internal rate of return, payback method, discounted payback and discounted annual cash flows, including performing calculations.

Project periodic cash flows given certain facts and circumstances. Recognize the objectives and limitations of capital budgeting tools. Compute current and working capital ratios.

Differentiate between and determine when appropriate to use different forms of financing.

Analyze the trade-offs between risk and return.

Information Technology

Each applicant will be tested on their ability to:

Point out basic data validation or editing techniques and recognize basic security controls. Understand the role IT plays in financial reporting systems.

Point out the major players involved in a disaster recovery plan and determine how to set one up.

Describe & evaluate risks, limitations, and advantages of electronic commerce applications.

Apply the traditional concept of segregation of duties to IT functions.
Distinguish risks associated with the use of an electronic business information system.

Planning And Measurement

A CPA examination candidate should be able to:

Define and calculate joint and by-product costing, variable and absorption costing.

Define and determine appropriate circumstances for using performance measures.

Differentiate between cost-volume-profit analysis, target costing, and transfer pricing.

Perform cost-profit-volume analysis.

Define and differentiate among job costing, process costing, and activity-based.

List the appropriate analytical tool in given circumstances.

Calculate the effect of depreciation in operating and capital budgeting.

Identify and calculate the components of a master budget.

Define calculate, and explain budget variances.

Business Environment and Concepts section of the CPA exam is intend to insure that even new CPAs will understand and think about more than just basic accounting debts and credits.


Managerial Economics – Application of Economic Theory in Solving Business Problems!

Managerial economics is concerned with various micro and macro economic tools and the analysis of which can be used in managerial decision making to solve business problems. Micro economic tools that are used in this subject include demand analysis, production and cost analysis, break-even analysis, pricing theory and practice, technical progress, location decisions and capital budgeting. The macro economic concepts that are directly or indirectly relevant to managerial decision-making comprise national income analysis, business cycles, monetary policy, fiscal policy, central banking, government finance, economic growth, international trade, balance of payments, free trade protectionism, exchange rates and international monetary system.

The scope of this managerial science is wide and it has close connections with economic theory, decision sciences and accountancy. Traditional economics talks about the theory and methodology while managerial economics applies economic theory and methodology to solve business problems. It uses the tools and techniques of analysis to provide with optimal solutions to business problems.

  • Relationship with economics:

Managerial economics borrows concepts from economics just as engineering does from physics and medicine from biology. The analysis of both micro and macro economic concepts add valuable inputs to the organization. Say, national income forecasting is an important aid to business condition analysis which in turn could be a priceless input for forecasting the demand for specific product groups. The theories of market structure can be analyzed for the purpose of market segmentation.

  • Relationship with decision sciences:

Decision models are created to format the solutions for problem situations and the process utilizes techniques like, optimization, differential calculus and mathematical programming. This also helps to analyze the impact of alternate course of action and evaluate the results obtained form the model.

  • Relationship with accounting:

Accounting data and statements constitute the language of business. The accounting profession considerably influences cost and revenue information and their classification. A manager should therefore be familiar with the generation, interpretation and use of accounting data. Accounting moreover is viewed as a management decision tool and not anymore as a mere practice of bookkeeping. The concepts and practices of accounting can be very well applied to improve the economic scope of a project.

Economics is an interesting subject as it deals with the day-to-day problems of a common man and at the same time is concerned with the economic prosperity of a country as a whole. Its primary focus is on scarce resource allocations among competing ends. Individuals, enterprises and nations face problems of resource allocation. Managerial economics may be viewed as economics applied to problem solving at the level of the firm.


Effective Budgeting and Planning Are Necessary Business Leadership Skills

Maybe you have already completed yourbudget and plan for 2011. If so, congratulations! Less than 30% of all businesses, especially small businesses, actually go through a formal planning process. I believe that planning (and yes, even budgeting) are necessary business leadership skills to develop, whether you are a business owner or hold a key leadership position in a firm. I learned about planning early in my career.

I worked for a food manufacturing firm as manager of Quality Control. The owner of the company believed that every department should write a plan. When I left that industry and went into sales, the new company believed strongly in planning. Every single sales person was required to write a yearly plan and review it with the manager. It was an intense process that included what I was going to do, how I was going to accomplish it and what resources I needed to make it happen. Those skills served me well when I opened my first company.

I can’t stress enough the importance of the business leadership skill of planning. If we simply say ‘I want 20% growth’ without knowing (a) is that growth in revenue or profits?; (b) is it in one area or across the board?; (c) how are we going to make it happen?; (d) what might interfere with our reaching that goal?; (e) what resources will be needed, etc., etc.?, then we have to depend on luck. If we do get lucky, we have no way of knowing how it happened and how to replicate the results. I’ve done annual business plans for 30 years. Not every goal was reached, and sometimes the goals changed as new opportunities presented themselves. But one thing I know for sure: Over the years my companies have succeeded, not simply because of hard work on my part but because I developed the business leadership skills of planning and budgeting. If you have yet to write a plan for 2011, now might be the time to get started.


Choosing an Accountant for a Start-Up Business

If you are about to start a business or have already got up and running, then you may not yet have thought about what happens when you reach the end of your first year of trading. It can seem a long way off and there are so many other things to worry about when setting up on your own so trying to find an accountant is not at the top of your priority list. But a good accountant, one that suits you and your business needs to be chosen carefully, not in a last minute rush as you approach the deadline for filing your accounts and completing your tax return.

So when you do have a spare moment in that busy first year do some research into your options for accountancy services. You can of course opt for a DIY approach, and this is perfectly possible if the business is fairly straightforward but even for simple companies, including one-man consultancies, do not under-estimate how time-consuming preparing your own accounts can be. Not only will it take plenty of your time but you may miss out on tax-saving advice that a decent accountant will include as part of their service. You will also be saved the hassle of completing your tax returns, both personal and business.

But just how do you know what constitutes a good accountant and where you can find one?

You could, of course, simply do an internet search of your local area and phone a few likely companies. You could ask for personal recommendations from people you already know with businesses of their own. Some people also post on small business forums but if you do that you risk being inundated with messages from accountants selling their services rather than genuine recommendations.

Some accountants work independently from home and it is tempting to believe that these will be a cheaper option but that is not necessarily the case. The disadvantage of a home based accountant (or indeed a one-man band in an office) is that there is no-one to fall back on if they, for example, become ill and are unable to work when you need them. And if their charges are not significantly lower this may not be a risk worth taking.

Also make sure the company handles businesses similar to yours either by industry or size. You don’t want to find you are using an accountant that predominantly deals with large corporations if you only employ 5 people or vice versa.

Will you have a dedicated accountant so that you speak to the same person or see the same person each time? Remember that large accounting companies often do not assign your business to a dedicated accountant so there is little opportunity to build up a good relationship with your accountant and for them to truly understand your business and any issues it may have. This can be a distinct disadvantage especially as you may find yourself having to bring the accountant up to speed on your business each time you talk to them.

Tax in general is a complicated issue but corporation tax even more so, therefore, getting to know your accountant will help build up trust that he or she is competent to handle your tax affairs and can help you to minimise your tax liability.

Here are 4 essential questions to ask any potential accountancy firms that you are considering:

• Will you be assigned a dedicated accountant?

• What type and size of businesses do they currently deal with?

• Is the accountant local so you can easily meet up?

• Do they offer a fixed fee accountancy service?

It goes without saying that the accountant you choose should be qualified either as a chartered accountant or a certified accountant. Another factor to bear in mind is how much you may want to ask for advice during the year – this is particularly relevant for new businesses as they grow and evolve whilst establishing themselves. If you want to have the option to seek specific advice but don’t want to be surprised by a large bill at the end of the year then consider an accounting firm that offer fixed fee accountancy services. These usually include various price options from a basic service to one including regular telephone support or face to face meetings.


Setup a Small Business in Canada

Setting up a small business in Canada requires determination, motivation, high moral and know-how of the business. Following are the steps you need to follow to start up with small business.

Identify Your Business Opportunity: Identify the best possible business for you from the multiple opportunities. It is important to find where you desire lie to understand your personality type.

Prepare a Business Plan: Business plan is must for any business, a business plan permits you to gain a better understanding of your industry structure, competitive landscape, and the capital requirements. Business Analyst observes that companies with business plan have 50% more profits and revenue than non-planning businesses. Writing a business plan just makes good business sense.

Get Start-up Money: To start any business, capital investment is must. Start-up funds for every business is different depending on type of business selected. Finding the money you need may come from a source you never thought of. In Canada the sources of getting money are following:

Canada Small Business Loan Program:

It helps you with your financing needs. Under this program, the Government of Canada makes it easier for small businesses to get loans from financial institutions by sharing the risk with lenders. Program works following ground:

– Who is Eligible: Business which can carry profit with gross annual revenues $5 million or less.

– Who is not eligible: Business which does not fall under Canada Small Business Financial Program is farming business, non-profit organizations, charitable trust and religious organizations.

– How much financing is available?: Provides up to $500,000 of financing, from this no more than $350,000 can be used for purchasing leasehold improvements or improving leased property and purchasing or improving new or used equipment.

– How to apply for Loan?: You need to apply for loan at your bank. If the bank decides to grant you a loan, they register it with Industry Canada. The list of lenders are ATB Financial, Bank of East Asia, Bank of Montreal, Caisses populaires Acadiennes, Caisses populaires de l’Ontario, Canada’s Credit Unions, Canadian Imperial Bank of Commerce, Canadian Western Bank, GE Capital Financial Services, HSBC, Laurentian Bank of Canada, Mouvement des caisses Desjardins, National Bank of Canada, Royal Bank of Canada, Scotiabank, TD Canada Trust.

Note: Agri-Food Canada has a similar program for the farming industry.

Canadian Youth Business Foundation:

– It is a national charity that provides young entrepreneurs.

– Young entrepreneurs from 18 to 34 may get up to $15,000 as a start up capital, with flexible three to five year repayment schedules.

– 2-year mentoring program need to be attended where you are matched up with dedicated business mentors or business professionals.

Business Development Bank of Canada (BDC):

– It is a financial institution wholly owned by the Government of Canada. BDC plays a vital role in delivering financial and consulting services to Canadian small and medium-sized businesses.

– Co-Vision loan can be up to $100,000, which can be repaid over 6 years. If needed, entrepreneurs can postpone principal payments for 12 months.

– Co-Vision specifically targets businesses in the manufacturing, distribution, services and tourism sectors.

– Projects such as working capital, acquisitions, fixed assets, marketing and start-up costs, or the purchase of a franchise can also be financed under Co-Vision.

Name Your Business: What’s in a business name? Find the right name which will distinguish you from your competitors, provide your customers with a reason to hire you, and aid in the branding of your company. Learn what you need to know to find a name for your business.

Select a Business Structure: Deciding on the Business Structure is very important decision; this decision should not be taken lightly. Whether you choose the popular Limited Liability Company (LLC), a sole proprietorship or form a corporation; your choice will have an impact on your business liability, fund-ability as well as taxes due.

Get Your Business License and Permits: Depending on your chosen business structure, may need to register your business with the state authorities. Setting up your small business may require an employer identification number (EIN) which is also used by state taxing authorities to identify businesses. Additional paperwork can entail sales tax licenses, zoning permits and more.

Set Up Your Business Location: One of the multitude of tasks in starting a business is the setting up of your office. There are many steps in office set up including where to locate your office (home or office space), buying the necessary office equipment, designing your work space and getting supplies.

Get Business Insurance: As a new small business owner, you have the responsibility to manage the risks associated with your business. Don’t put your new start-up at risk without getting the proper small business insurance to protect your company in the event of disaster or litigation.

Maintain Accounting System: Unless you’re from accounting or finance background, the accounting and bookkeeping aspect of running your business can’t be avoided. Maintaining your Accounts will help you to understand the financials of running a business and advert failure.

Along with the above you also need to know business legal structures, taxes like GST, PST, Payroll tax and Corporate Income Tax and employer obligations. You can also acquire information from any Business Directory Canada, Online Directory Canada, Yellow Pages Canada or Business Telephone Directory Canada.

Conclusions: There are many entrepreneurs who have lost their everything due to failure in their business. This article will help as a pathway to those who need to Setup a Small Business in Canada.


Simple Accounting For The Small Business – Bookkeeping Using A Simple Spreadsheet Template

Starting a small business out of your home, offering products or services like business consulting, photography, selling on the web or a MLM? You are now faced with tracking all your expenses and revenues for your business and you certainly don’t have the money yet to engage a bookkeeper or accountant. If your business is a sole proprietorship, whether it be a Canadian Proprietorship or a US-based Proprietorship, you do not require an accountant to submit your company financials (books) to the IRS (USA) or Revenue Canada). Your business revenue and losses are reported as part of your annual personal income tax. For this small business start-up, you won’t need to buy fancy accounting software, like Quick Books or AccPac to track your business.

Only as part of incorporating Bizfare Enterprise Inc in 2005 was it a requirement to engage an accountant. My accountant did insist on using Quick Books software for my business accounting. Up until then using a simple spreadsheet template served my business accounting needs for over ten years. This simple spreadsheet accounting stood the test of multiple audits by Revenue Canada (CRA and Revenue Canada Goods and Services Tax. Both the hardcopy columnar pad and an electronic spreadsheet version of my financial books were accepted by Revenue Canada. (BTW the audits disclosed more ways for me to claim back additional taxes for the previous three years! Now that’s my type of audit!)

In your new start-up business venture, you likely will generate somewhere between 10 to 30 accounting transactions per month. These transactions would be items like Expense, Revenue (sales), Liability (Loan) type transactions and Sales Tax (Federal + State/Provincial) Collection/Deductions. These transactions are further broken down into various Business Accounts. All the Accounts you set up for your business is called a Chart of Accounts. Recording your business financial transactions (Journal Entries) can be executed with pen and ink on an accounting columnar pad or electronically with your computer using a spreadsheet program (MS Excel, Open Office, Star Office).

Whether you employ electronic or hardcopy media, you need to develop a simple Journal template to create your Business Synoptic Journal. This Synoptic Journal format has the advantage of allowing you a complete view of all your individual journal entry transactions against all your various Business Accounts. Creating this Synoptic Journal is easier to do than you think and requires no prior accounting or bookkeeping knowledge.

TIP #1: You could further reduce the accounting line items (Journal Entries) by consolidating like items such as ‘all the Sales for the month’ and ‘all parking receipts for the month’ into one totaled line item for the month.

Where do you start to identify the various Business Accounts required for your Synoptic Journal?

If you currently work for a company or government, secure of one of their employee expense forms. Look at each of the areas identified as expenses – meals, mileage, hotel accommodations, taxi, car rental, telephone & cell phone, air fare, office supplies, etc. This is an excellent place to identify the various Business Expense Accounts you need to set up for your business accounting books. To complete your business Chart of Accounts, include a Business Bank Account, Sales, COGS (Cost of Goods Sold), Sales Tax Collection, Marketing Expense and others as required. Each of these Accounts will be a listed as a title across the top of each column of your Synoptic Journal. Each row (line item) will be the individual journal transactions entered by you. The journal transactions are grouped and summarized for each business month; usually, January through December.

So your Synoptic Journal would look something like this Sample Synoptic Journal at

The column headings might be in this order (from left to right):


TIP #2: Unless your business is Incorporated or an LLC, you don’t need to go through the expense of opening a business account with your bank. Usually Business accounts charge a higher monthly fee, charge for printing checks (cheques) and don’t offer any interest on your monthly account balance. Instead, open a separate personal bank account (maybe savings). This will show the ‘taxman’ that you are keeping the business separate from your personal banking. Remember you are a sole proprietor and all your business income (and losses) are to be applied directly to your personal income tax submission ( a s per IRS and CRA).

To save you time and make is very simple, I have already created a simple spreadsheet Synoptic Journal template that performs all the calculations for each month and rolls up the 12 business months so it can easily be included in your annual personal income tax preparation. This Synoptic Journal template has Debit/Credit checks and balances, tracks sales taxes, mileage and totals each account for your entire fiscal year. If you want this FREE Bookkeeping template, you can get it at Communicate Innovate. With a few key strokes, which will help identify yourself, I will gladly send you this FREE Synoptic Journal Template and also any future Small Business Tips.

TIP #3: One Rule of Accounting is that every time you record a journal entry (line item which applies the transaction against the appropriate business accounts) the Debits and Credits MUST REMAIN EQUAL at ALL Times. This Debit Equals Credit calculator is built into this FREE Bookkeeping Template. When you have completed entering a line item (journal transaction), check to ensure that the amount the the Debit cell equals the amount in the Credit cell. If they are not equal, you have not entered the amounts properly in your journal transaction. Correct the problem before entering your next journal entry.

You are now equipped to capture your business financial books with some simple accounting software. Happy bookkeeping! And Happy Selling!


The Business of Running a Bed and Breakfast

Running a Bed and Breakfast (“B&B”) sounds great at 5pm rush hours in the streets of Manhattan during the cold of winter. The fact is it can be a real job. Let me give you a taste of what it’s like in the life of a typical B&B owner.

Imagine it is 8pm on a Friday in the middle of summer at your lovely B&B. You just finished clearing out the dining room, in which your guests recently indulged in some light fare and beverages. You’re tired. It’s been a long day. You’re about to begin to do the dishes, which will take you an hour or so, and the phone rings. It’s John Smith, a late arrival guest, who was to check-in at 9pm. He tells you he will be there no later than 10pm.

It’s now 9pm, you’ve just finished the dishes and now you are tossing the dirty towels into the laundry and gathering up new towels, to replace the old ones in the bathrooms. This takes you another hour or so. You check your watch. It’s 10PM, no John Smith. “Where could he be?” you wonder to yourself. You check the phone for any messages, none. At 10:30pm the phone rings. It’s John Smith. He is on the Garden State Parkway at exit 117. He should be there in about ½ an hour. At 11pm John Smith finally arrives. You check him in, show him his room and at 11:20pm you rush to your bedroom to hit the sack because you promised early riser, Julie Murphy, you would have fresh coffee and a continental breakfast for her at 6am. If you’re lucky you pass out from exhaustion at 11:45pm and squeeze in just over five hours of sleep.

Welcome to the tranquil world of B&Bs. Not your typical day, but you get the idea. My point is this, managing a B&B not as easy as you would think. It can, however, be everything you thought it would be as long as your thoughts are anchored in reality.

The level of your attention to detail, along with your B&B’s location, can make your B&B a real success or a real nightmare. During your B&B’s busy season (primarily May-September in the Northeast) you are always on the go. Your hours are dictated by the hours of your guests. A late arrival can keep you up late and an early riser might require that you wake up at 5am.

Frequently Asked Questions

What constitutes a B&B? Generally speaking anything larger than 5 rooms is considered an Inn and anything less is considered a B&B.

How do you know if your B&B is successful? 100 nights, out of a year, filled to capacity, is a good year.

Can you make a living running a B&B? In most cases you will need about six rooms to make a living at it. Anything less is just supplemental income. If a host wants to make a living at a B&B they must open an Inn.

What are the biggest problems facing B&B hosts? Typically, it’s the attention to detail required of a well run B&B and last minute cancellations or guests just not showing up.

Should you list your B&B with a reservation service agency (“RSA”)? If this is your first B&B and you are just starting out, the answer is a definitive yes! Here’s why. A good RSA provides a number of valuable services. First and foremost they can drive business to your B&B. Many RSAs provide brochures to state-run Welcome Centers. Some RSAs reach out to local businesses and special-events coordinators. When a potential guest takes one of those brochures and calls the RSA they will provide the prospect with B&Bs that meet their geographic and personal needs. Other advantages of joining an RSA include valuable advice about how to run the B&B. Many RSAs will usually come to your B&B to see if it has the right set up for accommodating guests.

They typically bring along a checklist and go through a type of inspection process. Soon you will find out just what strengths and weaknesses your B&B has. Oftentimes, this service is offered free of charge, as an initial consultation, The RSA will do this as a way of determining if your B&B meets their minimum standards. This inspection helps flesh out the problems inherent in your B&B. If you pass the inspection, the RSA will be interested in listing your home. Typical operational services an RSA provides, beyond those mentioned, include answering phones, e-mail/mail inquiries, screening and matching guests with hosts. They will send confirmations to guests who make reservations. Some even send out regular newsletters to hosts and help hosts with record keeping and tax preparation. All of these services, of course, come at a cost. Generally, an RSA’s commission will be between 20-25% of the rental income from the guests they book.

How much should you charge per room per night? Most B&Bs charge a minimum of $100 per night for a double occupancy room. Depending on your geographic location this amount could be significantly higher or lower.

What kind of costs/expenses can you expect to incur in your B&B? Expenses in running a B&B include food, beverage, coffee filters, soap, shampoo, facial/toilet tissue, cleaning supplies, cleaning help, laundry, new sheets, paint, repairs, linens, bedding, towels, fresh flowers, new mattresses, advertising/promotion, office supplies, dues/subscriptions, business cards, reading lamps, telephone, internet access, commission to your RSA, membership fees to local business organizations (i.e. Chamber of Commerce), insurance, utilities, accounting fees, legal fees, income tax, real estate tax and mortgage interest,.

What type of accounting or bookkeeping system is needed in a well run B&B? Accounting for a B&B does not have to be that complicated. Your options are a manual accounting system or a computer-based one. A manual accounting system could be as simple as a checkbook, accordion file and some envelopes. The accordion file should have twelve compartments for each month. Include envelopes for your main expenses in each compartment and place your expense receipts in each expense envelope. For those expenses that do not fit neatly into any one category, include a “miscellaneous” envelope. At the end of the month tally up your expenses on a control sheet which lists the expenses on the left and a column for each month on the right. Subtract the month’s total from your receipts for the month and you will know how much money you made or how much you lost. A computer-based system should be one that is simple to use. I recommend QuickBooks as it is one of the easiest accounting software programs to learn and use on the market. A few hours with your accountant, learning QuickBooks, can save you many more hours of trial and error, not to mention frustration and stress, down the road. If you feel that you don’t have the attention to detail in keeping even a rudimentary accounting system then use your checkbook as your accounting system. Make sure every expense you incur, however, is run through your checkbook or a specific credit card is used only for business purchases, if you are not good with keeping receipts.

Should I organize my B&B as a sole proprietorship, partnership, corporation or LLC?

This is not an easy question to answer. Before we get to that answer let me touch on how the B&B should be owned. I would recommend that the B&B be owned personally. The reason is that there are tax advantages to owning the B&B personally. One major tax benefit is the personal residential exclusion of any gain of up to $500,000 ($250,000 for single taxpayers) on the personal residence portion of your B&B. Another reason is that this direct ownership better facilitates the use of a tax advantaged sale of the B&B using a like kind exchange, which allows the seller to defer taxation of any gain from the sale of the B&B, as long as like kind property (real estate) is acquired within six months from the date of the B&B’s sale. With a direct personal ownership structure you could lease the B&B to the legal entity that will be running the business. In no case would I run the B&B business as a sole proprietorship, since a sole proprietorship has unlimited liability.

My first choice would be a corporation in which an S election was made. The S corporation offers the best limited liability protection, even better than an LLC or a partnership. Here’s why. In an LLC your personal liability is limited, in the case of a lawsuit for some type of negligence, but only if you did not personally cause the negligence or injury (i.e. an employee was responsible for the negligence or injury and you did not direct that employee to perform that act). If you had something to do with the negligent act, you and all of your personal assets can be at risk. In a partnership, as a general partner, you may be held personally liable for any negligence or injury, even if caused by an employee. In a corporation, only the corporate assets are at risk. Your personal assets are safe. Personal liability at the corporate level would require “piercing the corporate veil”, something that is very hard to do given the long history of corporate case law precedence limiting this. In an S corporation, any net income or net loss and certain other tax items will flow through to your personal income tax return, as an S corporation is a pass-through entity.