Why You Should Improve Your Business Credit Score

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StrategyDriven Managing Your Finances Article | Entrepreneurship | Why You Should Improve Your Business Credit ScoreWhen did you last check your business credit score? Most business owners know that a personal credit score is important but many have never given their business score a thought. According to Experian, 59% of small business owners have never checked their commercial credit score. And of those that had, 56% had not checked their score within the past six months. Why? Most people do not know what a credit score is or how it works. And with so many ways to improve your credit score (check out this article by Business Credit Workshop to see one way) it’s worth knowing about.

But why is your business credit score important? Read on to find out what your business credit score can mean for your business and why you should improve it.

If your business, like many others, relies or may become reliant on loans or credit cards to grow or maintain cash flow, a good credit score is essential. Your credit score gives potential lenders an idea of your reliability using past loans/credit, they look at how you have been with previous repayments and how probable it is that you might pay late or if at all.

Using this data credit referencing agencies then generate your score using a number (usually between 0 and 999 but this can vary) which generally falls under different parameters of Poor, Fair and Good. Instead of flat out rejecting your application for credit, Lenders can also set rates and terms based on this information, in these circumstances this will done to mitigate risk factors such as late repayment, however, this is not always ideal as these rates (interest) are most likely to be higher. For this reason, maintaining a good credit score will increase your chances of gaining credit in the future with better rates. But that isn’t the only reason to make sure your business credit score is in good shape. If your business garners work through tenders, a good credit score can give you an edge over competitors.

There are many things that can affect your credit score from previous late repayments to having no credit lines at all. But whatever your rating you need to know how to maintain and improve your score, nothing can boost your score overnight but getting started:

  1. First thing’s first, if you haven’t already, check your business credit score. There are plenty of services that you can sign up to that will give you an overview of your credit score.
  2. Keep up to date! Depending on the credit checker you sign up to, you may receive monthly reports straight to your email inbox but it’s worth setting a monthly reminder to check your credit score. Take some time to go through any changes in your score, often finding out the issue means you can take the correct action to improve your score.
  3. Keep your information up to date. You might be surprised to learn that changes in location or business status can affect your reliability if your information is inconsistent. So keep up to date with customers, suppliers and any business registration companies and any credit rating agencies.
  4. Not already sharing information with any credit rating agencies? Your company data is important for validating any information on your records.
  5. If your business is in its early days, it is advised that business owners take a look at their own personal data. When little information is available about start-up businesses, CRA may look to the owner to judge whether they are credit-worthy or not.
  6. Avoid late invoice payments. Because late payment terms set on invoices are a form of credit, late payments will impact your credit score.
  7. Collaborate with your suppliers: Suppliers can provide feedback on payment records and share data with CRAs which support your credit score.
  8. On that note, the financial situation of your customers and suppliers can affect your business, keeping up to date with the circumstances of their credit is important for damage limitation to your business in the event that one of those partners go into administration.
  9. Ensure your accounts and tax returns are updated on time.
  10. Limit credit applications or ask for a quote. Whenever you submit an application for credit, that lender does a search on your credit background, each search is then added to your record. Credit lenders usually check to see how many credit searches has been recorded on your record in a certain period of time. Too many searches may indicate that a business is unable to obtain funding which will deter lenders from making a decision in your favour.

So whether you want to secure funding for your business soon or further down the road, getting your credit score in line is the most important step. Even if you don’t plan on seeking loans for your business, keeping your credit score strong is a good idea; if not to secure tenders and contracts for your company, you never know whether you might need a little bit of help in the future.

Types of Chargebacks You Should Know About

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StrategyDriven Managing Your Finances Article | Entrepreneurship | Risk Management | Types of Chargebacks You Should Know AboutChargebacks have become a menace for online businesses. You risk losing a lot of money and valuable resources when you don’t pay attention to fighting chargebacks. They are transaction reversals that a buyer issues after purchasing products that did not meet the description or for other reasons. It’s important to know how to fight chargebacks, and if you start with understanding how they occur, you can then put into place preventative measures. Here are some common chargeback types that your business might experience.

Chargeback Fraud

A fraud chargeback is a fraudulent request for a refund in the form of a chargeback. The cardholder disputes a transaction to regain the transactional amount and retain the services or products offered.  A chargeback fraud accounts for a significant percentage of all fraud losses. Chargeback fraud occurs when buyers try to take advantage of the chargeback process. They buy the product and try to get their money back by making false claims for the chargeback dispute. While it could be challenging to prevent chargeback frauds, winning such disputes can be equally hard. You can win the conflict by submitting a response with compelling evidence indicating that the buyer is trying to take advantage of you. Also, make sure that you collect all the necessary information from a buyer.

Merchant Error

Merchant error is among the most common chargeback types. While your employees may not intentionally commit a merchant error, its consequences can be dire. Merchant errors are caused by an array of things, including clerical mistakes and system errors. It could also be anything else that doesn’t satisfy your customer. For instance, goods not received or received in an unsatisfactory way and technical issues with your payment process, causing unauthorized errors or duplicate transactions.

Friendly Fraud

It’s an innocent act that could be costly to your business. Friendly fraud doesn’t involve malicious intentions by the cardholder. Professionals, such as Ethoca can help with the measures needed to fight friendly fraud. Some primary causes of friendly fraud include some friends or family members making unknown transactions or forgetfulness. Sometimes a simple action like an unclear product description can trigger a buyer to issue a chargeback for transactions made. An effective way of preventing friendly fraud or generally any chargeback is to tighten measures on your end.

These are some of the common causes of chargebacks. The bottom line is that you need measures to protect your business from any chargeback. Liaise with the professionals to save your reputation and money.

How to Finance a New Vehicle

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StrategyDriven Managing Your Finances Article |Finance a Vehicle|How to Finance a New VehicleAfter your home, your vehicle is one of the biggest purchases you’ll make, whether it’s a car, truck or motorhome. Unless you already have savings, you might be looking to finance a vehicle, and there are many options for doing so, but it can be confusing when working out what’s best for you. Here are some ways you can pay for your next vehicle.

Cash

If you have decent savings and don’t like being in debt, then paying upfront in cash could be your best option. While it means you own the vehicle outright, there are pros and cons to paying in one lump sum, such as:

You may be excluded from certain dealership deals
You no longer have that money in your account if an emergency comes up
If you get a decent interest rate on your savings, as a low-interest loan may mean more money in your pocket overall
If you do decide to pay in cash, make sure you get the best possible deal, check out lots of dealerships and see what special offers or extras you can negotiate.

Vehicle Loans

If you’re planning to borrow to finance your car, then specialist vehicle loans are often the cheapest way. You choose your vehicle, so you can take your time looking at the Bailey Autograph and other new motorhomes, and you fill in an application, either online or through the dealership. Normally, they’ll ask for a down-payment, but there are often deals available for those with little or no deposit. You’ll then have a choice of the length of the loan, and you can find out your repayments.

Some auto loans pay off the entirety of your balance, while others are ‘conditional purchase’ type schemes where you get lower payments, but have to pay a balloon payment at the end of the term if you want to keep the car. If you change cars a lot, you might want to pick the latter, but if you would rather own the car at the end, then you should aim to pay it off.

A Standard Loan

If your credit is good and you’re always getting loan offers, then you may decide to take out a standard bank loan to finance the car. This gives you many of the advantages of being a cash buyer, including flexibility, but again it means you can miss out on special offers such as free extras or services. You should calculate your monthly payments compared to rates offered by auto loan companies, and if possible, try to take out the loan over a shorter term to save on interest. If you aren’t getting good loan rates, take a look at your credit file to see if there’s something holding you back.

When it comes to financing a vehicle, you have plenty of options, many of which will depend on your income, credit rating, and whether you’re buying used or new. It’s important to look through all options and compare rates to ensure you get the best possible deal.

Best Practices To Optimize Your Self Employment Taxes

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StrategyDriven Managing Your Finances Article | Best Practices To Optimize Your Self Employment Taxes | EntrepreneurshipIt’s great to be your own boss and this is the reason that a large number of people are picking up freelancing. Even those in full-time jobs are embracing it as a side hustle. While you can make good money from a part-time or full-time freelance project, you are expected to pay your taxes as well. To start with, you need to be aware of the fact that freelance income is taxable just like any other income is. Also, it will definitely impact how you file the taxes and pay them up. So it is better to understand and plan on the A to Z of taxes on freelance income to ensure that you don’t get into trouble with the IRS. Here are the basics that you must know.

What are the taxes on self-employment income?

Freelancers pay the same income tax rates as employed persons do. Additionally, they are considered independent contractors and are taxed on the net self-employment income. This income is calculated by deducting the tax-deductible business expenses from the gross receipts. This is the tax that takes the extra bite out of the freelancers’ earnings. It includes both Medicare and Social Security taxes. If you were employed, your employer would pay half of these taxes. However, you have to pay both the halves yourself in the form of the self-employment tax as a freelancer.

What are the deductions you can claim?

While you calculate the taxable self-employment income, you will also want to know about the deductions that you can claim. These deductions matter a lot as they can reduce your tax burden to a considerable extent. According to the IRS, you can claim deductions on the entire expenses which are ordinary and necessary for the operation of your business, just like it is allowed for any other business owner. Specifically speaking, you can claim them for a home office, advertising and marketing, computer equipment and software, office supplies, utilities and travel, and business meals. However, you must maintain proper records and documentation for these expenses.

What is the minimum earning that makes you liable for paying taxes?

Obviously, you would want to know whether you actually need to pay taxes on your freelance earning. According to the federal laws, you will be liable to pay them if your earning from freelance work exceeds $ 400 in a given year. The tax attorneys from Travis W. Watkins Tax Resolution & Accounting Firm suggest that you should receive these earnings in a separate saving account for simplifying tax calculations. Further, expect a significant portion of your freelance check to cover the taxes because you have to pay income tax as well as self-employment tax.

How should you keep your taxes on schedule?

Since you are your own boss, the responsibility for keeping your taxes on schedule is yours as well. The IRS prefers a pay-as-you-go basis and this is also simplifying things for freelancers. Ideally, you should send in the tax payments throughout the year, which can be done by remitting estimated taxes. The good thing about doing so is that you will not face a cash crunch in April. You will have to pay up all final tax payments by the April 15 deadline. The better way is to pay the estimated taxes on the quarterly dates of April 15, June 15, September 15 and January 15 (of the subsequent year).

What are self-employment tax rates and thresholds?

Another fact that matters is the tax rate and threshold because you would obviously want to know them as well. The self-employment tax is just like a flat tax. It takes a one size fits all approach and everyone has to pay the same percentage to Social Security and Medicare. However, the Social Security tax only is applicable only to earnings up to $132,900 (as of the 2019 tax year). The threshold will increase to $137,700 in the next year. The Social Security tax is calculated at 12.4% of the net income up to the threshold value, while it is 2.9% of total net income for Medicare. The full values are to be paid by freelancers.

Now that you understand that freelance taxes are different from those for the employed professionals, you need to be careful while computing them. Filing the returns and paying your taxes on time is equally important to keep things on track. Having an expert tax professional to guide you and handle your tax returns is a good idea too.

Raising Money When You Want to Start a Small Business

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StrategyDriven Managing Your Finances Article | Raising Money When You Want to Start a Small Business | EntrepreneurshipStarting a business is a common dream, and while you may only need a small investment to get off the ground, it can lead to big things. However, getting that initial seed money can be difficult, especially when you’ve still got rent and bills to pay while you wait for your first profit to arrive. That’s why you need a plan to get your business going, so here are some ideas.

Find Cryptocurrency Investors

While there are a number of platforms where people can invest cash in startups, you’ll find that people are very cautious about giving cash to inexperienced business owners. However, in the world of cryptocurrency, people tend to be more open to taking risks. Putting together an Initial Coin Offering, or ICO, can be a good way to get the money you need to kick things off, and the more unique and exciting the service, the more likely you’ll get funding.

Invest and Raise More Cash

If you’ve saved a little money but need to raise more, you may want to consider investing in and trying to get a return on your cash. For example, you could use Genesis Mining to mine Bitcoins, which you can then sell on an exchange, potentially making a profit. As with any investment, you should do your homework first and ensure you aren’t taking any unnecessary risks.

Sell Things You No Longer Use

A lot of people have things hanging around their house that they no longer need, so why not sell your old items for cash? You may be surprised that you can make hundreds of dollars in just a few days when you list your items online, and as long as you use clear photos and write a decent description, you should get a buyer.

Get A Loan

Understandably, a lot of people are worried about accumulating debt before they even have their first customer, but if you’re starting a business that needs a lot of specialist equipment or supplies, then it is often necessary. Put together a business plan, outlining what you need to borrow and when you expect to turn a profit. This will help impress banks and potential lenders, so they can see that you’re serious.

Scrimp and Save

A lot of small business owners start their ventures by using their own savings. While it’s a big risk to use the money you’ve so carefully saved, at least you don’t owe anything to a bank if things go wrong. Look at what you earn versus what you spend and see where you can boost your income or cut your expenses. You could also start your business as a side hustle with very low expenses. If you do something creative, look out for ways to do it more cheaply, such as finding bulk supplies or buying different equipment. While you won’t be able to quit your day job right away, you can at least start to build a customer base, which in time could take you to the next level.