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Avoid These Six Debt Collection Pitfalls

Posted By Kenyatta Turner, LegalShield Independent Associate, Tuesday, May 24, 2016

Small Business News


Avoid These Six Debt Collection Pitfalls 

Your ability to collect a debt owed to your business hinges on the processes and policies you have in place. You can avoid some of the most common mistakes and improve your chance of successfully collecting a debt by understanding where problems often arise. Your LegalShield provider law firm is ready to help you understand the laws that govern collections, draft letters to debtors and assist you in taking further legal action if necessary. Call your LegalShield provider law firm if you need assistance with a collection matter or have any questions.

  1. “We didn’t have a payment policy or written contract.” Handshake deals and verbal agreements are difficult to legally enforce. It is essential to have a signed contract for any product or service for which payment will be made at a later date. Your contract or agreement should include a uniform payment policy. Your policy should include exact due dates or a timeline for payment, the name of the individual or business responsible, accepted forms of payment and any potential fees or interest for delinquent payment.

  2. “Our accounting records are a disaster.” Accurate and detailed records will help you quickly identify and manage delinquent accounts. Your customers and clients should know exactly where their account stands. Provide itemized invoices that include a specific due date for payment. If an account is delinquent, include the total amount owed, the number of days past due, the original due date and any late fees or interest owed.

  3. "We waited because we didn't want to upset the customer." If a customer's account becomes past due, consider placing a hold on the account and contact the customer. The longer a customer's account is delinquent and the more debt they accrue the more difficult collection becomes. You may have to make the determination to stop providing additional services or products until payment is made. Always remain professional and courteous.

  4. “We don’t have any documentation but I remember talking to the customer.” Good accounting practices will insure you retain copies of bills and invoices. You must also document your collection efforts. Your records should include letters and emails, as well as the dates and times of any phone calls or meetings. This information will be extremely important if legal action becomes necessary.

  5. “I was so mad I couldn’t stay calm.” Remain professional and friendly during each interaction with delinquent customers. It is illegal to threaten, harass or intimidate customers who are unable to make payment. Never threaten an action you are not willing or legally allowed to make. Making the issue personal or becoming aggressive will hurt your chances of successfully collecting the debt and could land you in legal trouble.

  6. “I didn’t really think the attorney could help.” Utilize your LegalShield small business membership. Call your provider law firm for assistance with collection matters. Your attorney can help you understand the law, draft a collection letter on your behalf, review your contracts and answer other legal questions you may have. If a collection letter does not resolve the matter, your provider law firm will advise you on additional legal remedies available to your business.  

 

For more information about LegalShield or IDShield for yourself, your family, your business, or your employees, please contact Kenyatta Turner, Independent Associate at 602-367-1069 or KenyattaTurner@LegalShieldAssociate.com.  Worry Less...Live More!

 

Tags:  accounting  Bookkeeping  contracts  CPA  debt cancellation  debt collection  family-owned business  finance  financing  legal advice  legal services  small biz  small business  Taxes 

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"Field Guide" to Financing Your Small Business

Posted By Joel Gottesman, Liquid Capital Of Arizona, Thursday, September 10, 2015
Finance

About the Author.  Joel Gottesman, is the owner and President of Liquid Capital of Arizona, specializing in alternative finance, including ABL, factoring, export, inventory and PO finance.  Joel has also been a successful attorney, banker and small business owner. 

 

Introduction.  Field guides help people learn about and identify different varieties of plant and animal wildlife.  This financial field guide can help you sort through the many financing alternatives available for small business.     

Available Financing Options.  The main financing tools in alphabetical order are: 

Asset Based Lending (ABL).  A line of credit from a bank or finance company in the form of a revolving line of credit tied to the amount of eligible assets, including accounts receivable, inventory and equipment.  The typical size of an ABL line is from $1 million to over $10 million.  ABL loans are generally for well-established businesses that do not qualify for a traditional or SBA bank loan.  Generally, the cost of an ABL line is higher than the cost of a bank loan, but less than Factoring.           


Bank Loans – SBA and Traditional

Banks provide a variety of loan options to small business.  Often the loans are made under the government guaranty programs of the U.S. Small Business Administration (SBA).  The SBA has a number of programs for financing real estate and equipment purchases as well as general working capital needs.   The loans are secured by the assets of the business or the assets financed by the loan.  The maximum amount for SBA loans is $5.5 million.  The SBA Express Loan Program offers loans on a streamlined basis for up to $350,000.   If a business can meet the underwriting standards, an SBA guaranteed loan is usually the most cost effective solution.

Cash Advances.

Cash advance loans are based on borrowing against future revenues based on the sales history of the business.  This is a fast-evolving financing tool for small business.  The typical loan advance is unsecured and ranges from $25,000 to $1 million.  The advance is usually repaid in daily withdrawals from your business bank account over a six to twelve month period.  Because the loan is unsecured, it is usually at the upper end of the cost structure for business finance. 

Community Non-Profit Lenders.  Non-profit community lenders offer loan programs for small business and start-ups.  Community lenders can provide loans ranging from $1,000 to $1 million on favorable terms and take into account community development efforts.

 

Equipment Finance 

Equipment leases and loans can be used to finance needed equipment.  The size ranges from $5,000 to over $5 million.  If a company has spent cash in the past to acquire equipment, it may be possible to “unlock” the cash by financing the owned equipment.    The cost varies with the credit of the business.  

Equity & Arizona Crowdfunding Law

Historically, equity investment for small business comes from the owner, family and friends, private “angel investors” and venture capital firms.  The latest development in Arizona is the new crowdfunding law that became effective on July 3, 2015.  The Arizona law is the first in the nation to “go operational” using a crowdfunding approach popularized by such firms as Kickstarter (non-equity raises).   Under the Arizona law, a company can raise up to $2.5 million if it has audited financial statements, or up to $1 million dollars if it does not.  Equity may be sold only to Arizona residents.  For investors who are “accredited” (meet certain minimum financial tests), there is no cap on the investment amount.  For investors who do not meet these tests, there is a cap on the investment of $10,000 per company.   The new law provides a streamlined process, but there are requirements of the Arizona Corporation Commission that must be followed.  

There are also new developments on the federal level.  On June 19, 2015, the SEC implemented Regulation A+, which permits well-established businesses to raise increased amounts of equity under streamlined disclosure rules.    

Equity investment is usually the most costly form of financing and you have a “partner” in the business until the equity is bought back or the business is sold.

Export Finance

Export sales can be a great channel to grow your business.  The key to export finance for small business is finding a lender that will fund sales to foreign customers. There are a number of alternatives, including bank loans, ABL loans or Factoring.  There are government guarantee programs offered through the SBA and the U.S. Export Import Bank (as of this writing the charter of the ExIm Bank has lapsed and may not be renewed by Congress).

Factoring

Factoring is the cash sale of your accounts receivable at a discount so you do not have to wait for your customers to pay before you can redeploy the cash.  A factoring line can range from $25,000 to over $10 million.  Finance companies usually make their credit decision based on your customer’s credit rather than your credit.  Factoring can help an early stage company as long as there are sales being generated.  Only receivables from businesses or government qualify; sales to consumers do not.   The cost of Factoring is higher than a bank loan or an ABL loan, but can put into place quickly.

Inventory Finance

nventory finance can cover the cost of inventory in the form of raw materials, parts or finished goods.  This type of financing is usually only available to well-established businesses.  It is similar to PO Finance, but does not require that the product be pre-sold.   The financing can be in the range of $25,000 to over $500,000 or more.   The cost is similar to Factoring and PO Finance.

Purchase Order Finance (PO).  A specialized form of financing the cost of producing a product that is pre-sold to credit-worthy customers. PO Finance is used to pay for goods manufactured by a third-party and assures the manufacturer of payment once the product is made.  PO Finance can be useful to smaller companies that obtain a large volume of purchase orders.  The typical size of a PO Finance transaction can range from $50,000 to over $10 million.

Business Community Resources

There are many resources available in the business community to help small business owners and entrepreneurs.  A good starting point for more information is the In Business Magazine 2014/2015 Lending Guide.  The Lending Guide lists a number of Arizona lenders, lending resources and community organizations providing counseling and mentoring.  See the Guide at

http://issuu.com/mediapublishersgroup/docs/inbusiness_1014_lending_guide?e=1180713/9536086

Another excellent resource is the Arizona Small Business Association (ASBA) which also offers an effective mentoring program.  A listing of ASBA resources can also be found online at:

 http://www.asba.com/?business_resources

Wishing you much success in your business!

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Tags:  Access to Capital  entre  finance  financing  small biz  small business 

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Basic Bookkeeping Tips For Small Business

Posted By Arizona Small Business Association, Friday, August 29, 2014

Bookkeeping is an important and necessary part of owning a small business. However, you probably weren’t a bookkeeper before you became a small business owner. You are bound to make some mistakes along the way. Fortunately, most of these mistakes are pretty easy to fix. Use these basic bookkeeping tips for small business owners to help you learn the ropes and avoid errors.

  1. Choose the best accounting system for your business. There are two main options - cashed based accounting or accrual based accounting. In a cash based accounting method, you count your income when you get it and count your expenses when you pay them. With the accrual based accounting method, you count these things when they happen instead of when they are paid. So what’s the difference? Well, there will be a difference for your business if you keep an inventory or make transactions on credit. If this is true for your business, the accrual method may be a better choice for you. In fact, the IRS may require a business to use the accrual accounting method if they keep an inventory or have more than $5 million in sales. If you don’t keep inventory or deal with credit transactions, a simple cash based accounting system should work just fine for you.

  2. Keep daily records. This is simple, but extremely important. Make an accurate daily record so that you are aware of the financial situation of your business. It doesn’t matter what system you use; just choose one and stick with it. Once your system is in place, it will only take a few minutes to keep up with it each day.

  3. Treat checks with as much care as cash. You probably write a lot of checks, and you get envelopes full of canceled checks back from the bank. It’s easy to fall into a routine and pay little attention when writing checks, but take a moment and slow down. Review all of your checks carefully. If you make a mistake, it is your mistake, not the bank’s mistake. You will have to deal with the fallout. Review cancelled checks personally; this way, you will be aware of any unauthorized checks before anyone else gets the chance to remove them.

  4. Request a bank statement that cuts off at the end of the month. This is useful because it syncs your bank statement with your other monthly records, so you are comparing matching time frames. It’ll be a lot easier to balance your statements and track expenses this way.

  5. Leave a trail. You should be able to retrace your company’s financial activities easily. Keep business and personal accounts separate. Keep your checks and invoices in order, and don’t skip numbers. If you need to go back and check something later, it will be much easier this way.

  6. Use software. Even for a very small business, using a bookkeeping software program will make your record keeping much simpler and more organized. Let’s face it – the time of the old ledger and pen system has come and gone. You can do everything you need to do, and even back up all of your important records, if you do it on your computer.

Originally posted on NAWBO. Written by Kjell Andreassen, a managing partner of Acceler8.

Tags:  accounting  Bookkeeping  HR  NAWBO  Small Biz  Small Business  tips 

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Miscellaneous Deductions Can Cut Taxes

Posted By Rhette Baughman, Arizona Small Business Association, Thursday, August 14, 2014



You may be able to deduct certain miscellaneous costs you pay during the year. Examples include employee expenses and fees you pay for tax advice. If you itemize, these deductions could lower your tax bill.

Here are some things the IRS wants you to know about miscellaneous deductions:

Deductions Subject to the Two Percent Limit.  You can deduct most miscellaneous costs only if their total is more than two percent of your adjusted gross income. These include expenses such as:

+ Unreimbursed employee expenses.
+ Expenses related to searching for a new job in the same line of work.
+ Certain work clothes and uniforms.
+ Tools needed for your job.
+ Union dues.
+ Work-related travel and transportation.

Deductions Not Subject to the Two Percent Limit.  Some deductions are not subject to the two percent limit. They include:

+ Certain casualty and theft losses. Generally, this applies to damaged or stolen property that you held for investment. This includes items such as stocks, bonds and works of art.
+ Gambling losses up to the amount of your gambling winnings.
+ Losses from Ponzi-type investment schemes.

There are many expenses that you can’t deduct. For example, you can’t deduct personal living or family expenses. You claim allowable miscellaneous deductions on Schedule A, Itemized Deductions.

For more about this topic see Publication 529, Miscellaneous Deductions. You can get it on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

 

This series is brought to you by the Southwest Area Stakeholder Liaison Team covering Arizona, New Mexico & Texas. It is designed for you to share with anyone who will find the information useful. We are interested to hear if you think this information is helpful. Please provide your feedback or topic request to us at sl.southwest@irs.gov and include “Workshop Wednesday” in the subject line.

To access previous editions, click here: Workshop Wednesday Archive links 

 Small business owners, especially new sole proprietors, can find a wealth of information covering their federal tax responsibilities on www.IRS.govThe SB/SE Tax Center is the “Go To” IRS.gov page for everything small business.

 

Tags:  IRS  savings  small biz  small business  tax  taxes  tips 

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Six Tips for People Who Owe Taxes

Posted By Rhette Baughman, Arizona Small Business Association, Wednesday, August 13, 2014



While most people get a refund from the IRS when they file their taxes, some do not. If you owe federal taxes, the IRS has several ways for you to pay. Here are six tips for people who owe taxes:

1. Pay your tax bill.  If you get a bill from the IRS, you’ll save money by paying it as soon as you can. If you can’t pay it in full, you should pay as much as you can. That will reduce the interest and penalties charged for late payment. You should think about using a credit card or getting a loan to pay the amount you owe. 

2. Use IRS Direct Pay.  The best way to pay your taxes is with the IRS Direct Pay tool. It’s the safe, easy and free way to pay from your checking or savings account. The tool walks you through five simple steps to pay your tax in one online session. Just click on the ‘Pay Your Tax Bill’ icon on the IRS home page.

3. Get a short-term extension to pay.  You may qualify for extra time to pay your taxes if you can pay in full in 120 days or less. You can apply online at IRS.gov. If you received a bill from the IRS you can also call the phone number listed on it. If you don’t have a bill, call 800-829-1040 for help. There is usually no set-up fee for a short-term extension.

4. Apply for a monthly payment plan.  If you owe $50,000 or less and need more time to pay, you can apply for an Online Payment Agreementon IRS.gov. A direct debit payment plan is your best option. This plan is the lower-cost, hassle-free way to pay. The set-up fee is less than other plans. There are no reminders, no missed payments and no checks to write and mail. You can also use Form 9465, Installment Agreement Request, to apply. For more about payment plan options visit IRS.gov.

5. Consider an Offer in Compromise.  An Offer in Compromise lets you settle your tax debt for less than the full amount that you owe. An OIC may be an option if you can’t pay your tax in full. It may also apply if full payment will cause a financial hardship. You can use the OIC Pre-Qualifier tool to see if you qualify. It will also tell you what a reasonable offer might be.

6. Change your withholding or estimated tax.  You may be able to avoid owing the IRS in the future by having more taxes withheld from your pay. Do this by filing a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. The IRS Withholding Calculator on IRS.gov can help you fill out a new W-4. If you have income that’s not subject to withholding you may need to make estimated tax payments. See Form 1040-ES, Estimated Tax for Individuals for more on this topic.

To find out more see Publication 594, The IRS Collection Process. You can get this booklet on IRS.gov. You may also call 800-TAX-FORM to get it by mail.

This series is brought to you by the Southwest Area Stakeholder Liaison Team covering Arizona, New Mexico & Texas. It is designed for you to share with anyone who will find the information useful. We are interested to hear if you think this information is helpful. Please provide your feedback or topic request to us at sl.southwest@irs.gov and include “Workshop Wednesday” in the subject line.

To access previous editions, click here: Workshop Wednesday Archive links 

 Small business owners, especially new sole proprietors, can find a wealth of information covering their federal tax responsibilities on www.IRS.govThe SB/SE Tax Center is the “Go To” IRS.gov page for everything small business.

Tags:  IRS  small biz  small business  tax  taxes  tips 

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