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3 Tips to Avoid Wasting Money As a New Entrepreneur

StrategyDriven Managing Your Finances Article | 3 Tips to Avoid Wasting Money As a New Entrepreneur

Most new entrepreneurs are at several particular and distinct disadvantages to the established players in their fields.

Perhaps first and foremost, giant established companies will have vast financial resources at their disposal, which can be used to pursue all manner of different innovations and campaigns, while also allowing them to more easily and effectively absorb losses.

For a new entrepreneur, there are all sorts of different things that should be taken into account when it comes to following the most productive path forward. Figuring out how best to avoid wasting money is a key priority.

Here are some tips on how to avoid wasting money as a new entrepreneur

Don’t invest in countless training materials, but learn “on-the-job”

There is a very large industry out there focused on selling books, instructional DVDs, motivational speeches, and more technically-focused “training materials” and “mentorship programs,” for entrepreneurs in general.

While some of these may certainly be helpful in particular contexts, the truth is that, in the majority of cases, these training courses, books, and so on, are unlikely to make much of a difference to your professional life. What they likely will do, though, is to drain your bank balance.

For the most part, the best way to learn how to do things as an entrepreneur is through “on-the-job experience.” Both your successes and your missteps and mistakes will give you a lot of insight about where you need to make adjustments versus staying on the current path.

Invest extra where it counts, but don’t fall for the idea that higher prices always reflect superior outcomes

In a professional context, there are always going to be areas where investing extra money results in a higher overall quality of service, and superior outcomes overall, that can significantly enhance the experience of your customers and improve the prospects of your business.

At the same time, however, there are also going to be many areas where spending a lot of money will not make much difference in outcome compared to spending a more moderate amount of money.

An important art to master is figuring out where that extra investment of money will really count, and where it won’t. The cheapest UPS domestic shipping rates are likely to get the job done well, in many cases.

Work on a focused number of things at a time, instead of trying to cover all the bases

The more you try to “do it all” as an entrepreneur, and to “cover all bases,” the less progress you are likely to make on any one thing at a time, and the less efficient you are likely to be with your money, as well.

By focusing on a limited number of things at a time, you can make more impact with your money, and can also keep your business moving in a more coherent direction.

While you can certainly branch out and add new features to your business over time, trying to do too much at once is often a road to self sabotage.

3 Types of Merger and Acquisition Transactions

StrategyDriven Managing Your Finances Article | 3 Types of Merger and Acquisition TransactionsThere are many reasons why one company may merge with or acquire another company. Sometimes it may be out of convenience and other times it is a necessity. When two companies join it leads to more resources, expanded profit share and less competition. As Aristotle said, “The whole is greater than the sum of its parts.” Entrepreneurs, like David Walsh Bronxville, make their living by knowing which mergers and acquisitions are going to profitable and which are not. Often, this comes down to the legal details and what type of transaction takes place.

Asset Purchase

When one business acquires another, it could be done through an asset purchase. In an asset purchase, the target business sells all of its assets to another company, known as the acquirer. These assets may include licenses, customer lists, equipment and patents. The target business retains ownership of the entity. Sometimes the target company also passes some liabilities to the acquiring company, especially if that debt is associated with an asset. Asset purchases favor the acquiring company when it comes to taxes. This is because the newly acquired assets provide tax deductions for depreciation. On the downside, contracts with employees, customers and suppliers may need to be renegotiated.

Stock Purchase

A stock purchase is another type of acquisition. With a stock purchase, the acquirer takes the target company’s assets and liabilities by buying its stock. The target company then dissolves. Contracts typically transfer to the acquiring business without renegotiating, and the assets transfer without having to pay for retitling. This type of acquisition is more straightforward. There is less to negotiate, making the purchase much simpler. The main disadvantage comes with the transferred liabilities. Separate agreements need to be negotiated if the acquirer doesn’t want the liabilities. Also, the acquirer doesn’t receive tax benefits from those assets.

Merger

Mergers are a little more complex than acquisitions. This is when two companies completely combine, along with all the assets and liabilities of both companies. In this case, the stocks for both companies are surrendered. The new business entity is issued its own stocks. A merger is usually thought of as friendly, while an acquisition can be hostile. Although mergers sometimes lead to hostile work environments. The management structure changes and many departments need to be blended, which often leads to layoffs. Restructuring is necessary so that operating costs are not doubled. Successful mergers benefit both contributing companies and are usually done between similar size businesses.

8 Tips for a Smooth Auditing Process

StrategyDriven Managing Your Finances Article | 8 Tips for a Smooth Auditing ProcessAfter you file your small or midsize business’s taxes for the year, you think you’re done with taxes. However, sometimes you’re contacted about the process that most business owners dread: an audit. While being audited is a long process that takes extra time, by following these eight tips, you ease your worries and help the process go more smoothly.

1. Don’t Panic

If you’ve filed your taxes honestly, you don’t have anything to fear from auditing services. Most auditors look for blatant fraud such as inaccurately reporting your gross income. They also examine your accounting procedures and make sure that they’re sufficient for your business’s size. For example, if you don’t have an accounting department and your business is growing, they may recommend that you hire a full-time employee to oversee your finances. Remember, all you have to do is cooperate with the auditors’ questions, so take a deep breath and get ready for your audit.

2. Keep Your Records

Audits are usually ordered within seven months of when you originally filed your taxes, but the Internal Revenue Service can audit your reports from up to two years ago. For example, if you’re audited in July 2021, the audit could be for your 2020 or 2019 taxes. As a result, it’s critical that you hold on to all your tax forms:

Don’t forget to retain your employees’ tax information as well and the forms verifying their ability to work. Keep all these forms organized by year, even after you’ve filed your taxes, so that you’re ready when it’s time for an audit and assurance.

If you’re overwhelmed by all the paperwork, it’s time to find a new organizational system. Scan your paperwork and store it in well-labeled online folders that you can access from any computer. To streamline this process, use a service such as DocuSign rather than printing your forms.

3. Plan Ahead

Scrambling to prepare for an audit makes you look unprofessional and increases the probability that you’ll make a sloppy error. As soon as you find out that you’re being audited, start working with your accounting team to get the forms ready and make sure your books are up-to-date. Leave room in your schedule to take off work during the audit so that you can answer the auditors’ questions. Finally, choose one of your accountants to serve as the primary contact for your auditing team.

4. Think About Your Changes

Has your small business undergone any major changes that affect your accounting procedures in the relevant tax year? For example, did the tax laws change for your industry, or did you upgrade your personal reporting requirements? Consider whether the leadership of your office changed or was restructured, and note any grants or loans you received. By telling your auditors about these factors before the audit begins, you help them understand potential discrepancies in your books.

5. Learn About Tax Laws

Tax laws change frequently, but they don’t always affect your business. It’s critical that you follow all the developments in financial legislation so you’re ready to implement a change. You don’t want to discover during an audit that you’re required to keep your records a certain way. If you’re struggling to understand the laws on your own, reach out to a lawyer, a certified public accountant, or a professional from the Financial Accounting Standards Board.

6. Look Back

If you’ve been audited before, now is a good time to review that auditing report. Did you fix the issues that the previous auditors pointed out, or are you still making them? What parts of your books were confusing or misleading from their perspective? Looking at your auditing report also gives you an idea of how long the process will take and how much you need to be involved.

7. Speak Up

When an auditor asks you a question and you’re not sure what he or she means, don’t be afraid to speak up. Ask follow-up questions and request clarifications; otherwise, you can’t give your auditing team the correct information. If your auditors ask for a record and you don’t think it’s relevant, explain why you don’t think it’s necessary and ask for their perspective.

8. Read the Report

When the auditing process is over, read through the finished report and decide what changes you need to make. Where did you succeed, and where did you fall short of your industry’s requirements? Keep this report close at hand so you can refer to it as you implement changes in your accounting procedures.

No one wants to be audited, but the process is actually beneficial to you. You learn about your accounting mistakes and adjust your practice to align with the law. Just make sure to stay calm, be honest, and keep good records.

The Basics of Franchise Accounting

StrategyDriven Managing Your Finances Article |Franchising Your Business |The Basics of Franchise AccountingOwning a franchise is an easy and affordable way of starting a new business. As a franchise owner, a lot of the heavy lifting involved in starting a business is already done for you. Franchisees can take on an already established brand and don’t have to worry about marketing themselves, as this is done by the franchise centrally.

All the franchisee needs to worry about is dealing with the day to day running of the business, which includes the accounting. Many aspects of a franchise business will be managed centrally. In particular, the costs of marketing and developing new products don’t fall on the shoulders of individual franchisees.

Franchise accounting is similar to accounting for any other type of business, although there are a few extra steps. Let’s take a look at exactly what a franchise is and how they are run and managed.

How do Franchises Work?

A franchise location is owned by an individual, the franchisee. However, the franchise as a whole is owned by a larger corporation. For example, each individual McDonalds store is owned and operated by an individual franchisee. However, McDonald’s decides what’s on the menu, how the store functions, etc. They also handle all of the marketing and other costs of developing and growing the business.

franchising makes owning and operating a business accessible to people who would otherwise be unable to. Returning to the example of McDonald’s, a franchisee may be able to open a McDonald’s franchise as the first business that they run themselves. It’s hard to envisage most people launching a startup that has the kind of name recognition that McDonald’s does, or the existing infrastructure.

With the franchising model, new locations can be opened easily and quickly. From the perspective of the larger franchise business, this makes expanding a much simpler proposition. New franchisees will bear many of the responsibilities, and some of the costs, of opening a new franchise. If the new franchisee fails, the franchising corporation hasn’t lost as much in terms of time and money as it would if it had invested fully in a new physical location.

Franchisees, on the other hand, get to open a new business with an already established customer base, marketing strategy, etc. The franchisee will have to pay the franchising business according to their contract. This can either be in the form of a percentage of the profits, or it might be a flat rate.

Role of the Franchisor

The franchisor is the larger corporation that ultimately owns all the franchises. They manage the brand and business as a whole, deciding how to market the business and how to develop the available product ranges. The franchisor also provides assistance to their franchisees as and when it is needed.

Fees and Franchise Accounting

A franchisee owns the franchise location that they run, even though the business they operate is under license from the franchisor. They are required to follow all the guidelines set out by the franchisor. If they don’t, the license can be revoked and the franchisee can end up with a location but no business to occupy it. The franchisee will be required to pay fees to the franchisor; that’s how the franchising business makes their money.

The fees a franchisee pays are used to cover a number of costs. For example, these fees allow the franchisee to use the franchisor’s trademarks, brands, products, and services. Franchisors are legally required to set out all the fees involved in being a franchisee upfront and they cannot spring unexpected charges on the franchisee at a later date.

There will be an initial fee to pay the franchisor, which serves as a kind of entry charge. There will also be some form of ongoing fee, usually a royalty fee. Proper franchise accounting requires you to be familiar with all the expected fees and charges; you won’t be able to maintain accurate accounts unless you know what deductions and fees to factor in.

Initial Fees

The initial fee is the entry fee that grants the franchisee the right to use the franchisor’s trademarks, including brand, products, services, logos, etc. And, of course, the most important thing your initial fees will pay for is the right to use the franchisor’s name. Finally, your initial fee will cover some of the costs associated with opening a new business.

For example, the franchisor will cover the costs of training staff to use their point of sale systems, as well as any other in-house sales software. Initial costs are paid as a lump sum to the franchisor. Before you pay any initial fees, it is important that you establish exactly how much business capital you will need.

Amortizing Initial Fees

When filling out a business tax return, a franchisee can deduct their initial fee from their total profits; this is known as amortizing. Amortizing is similar in nature to depreciation, except that it deals with tangible rather than abstract assets. By amortizing a fee, its cost can be spread out over several years. This makes it possible for franchisees who can’t afford to pay a lump sum to instead pay the fee gradually over the useful lifetime of tangible assets, such as trademarks.

You can amortize the fee over a relatively long period of time, paying off fractions of it annually. For example, if you amortize your initial fee over a period of 20 years, you divide the total fee by 20 to work out how much of it you will pay per annum.

Royalty Fees

Royalty fees are the main way that the franchisor makes their money. Royalty fees are a little bit like a tax that the franchisee pays on every sale. This is the cut of the profits that the franchisor gets in exchange for essentially providing the core business. In some cases, royalty fees might be specified at a flat rate. However, the majority of the time they will be paid as a percentage of sales.

Marketing Fees

Some franchisors will further charge franchisees to cover the costs of marketing. Even though individual franchisees aren’t involved in the centralized marketing efforts, they still benefit from the effects of new marketing campaigns, so it does make sense that the franchisor would want to recover some of their investment.

Both franchisors and franchisees need to understand the intricacies of franchise accounting if the arrangement is to work. A mistake in a franchisee’s bookkeeping can end up in the franchisor being paid incorrectly and can lead to a distorted image of how healthy individual franchises are. For this reason, many franchisors are now centralizing their accounting and utilizing cloud-based accounting software. This allows individual franchisees to access and update their business accounts on a daily, weekly or monthly basis.

Conclusion

Franchise accounting needs sophisticated accounting software like QuickBooks Enterprise hosting which can be accessed on Citrix Xendesktop VDI that enables accountants to work remotely for franchise-based models to work from anywhere anytime.

Saving Money As A Startup – Ways To Increase Your Margins

Launching a business is never a walk in the park, not least during a pandemic when the future is uncertain. Despite economic concerns, there are advantages to setting up a startup at the moment. The Covid-19 crisis has caused widespread disruption, but it has also created opportunities. If you’re just starting out on your entrepreneurial journey, it’s crucial to keep a close eye on the books. In this guide, we’ll explore ways to save money and increase your margins.

StrategyDriven Starting Your Business Article | Saving Money As A Startup - Ways To Increase Your MarginsInvesting in technology to improve efficiency

Increasing efficiency in business is often an effective means of saving time and money. Technology has become increasingly critical for businesses in recent years, and it offers company bosses the chance to streamline and speed up operations, reduce the risk of errors and introduce cost-effective ways of working. If you’re thinking about investing in technology for your startup, undertake extensive research, keep track of what your competitors are doing and look for devices, machinery, software or equipment that will enable you to work faster, provide a better service, offer a more diverse range of products or services than your rivals and lower costs. Think about what your business needs and consider hiring or buying second-hand equipment to save money. Hiring makes financial sense for short-term projects, while buying used machinery can work out a lot cheaper than buying brand new models. Whether you’re looking into water cooled chillers, construction vehicles, coffee machines or computers, it’s advantageous to explore the options on the table, compare prices and analyze the impact of your investment. Search for value for money, rather than the lowest price, and choose reputable manufacturers and trustworthy retailers.

Flexible staffing options

For many fledgling businesses, paying wages accounts for a substantial portion of the monthly budget. The majority of businesses need to employ staff, but there are alternatives to hiring employees on permanent contracts. You may find that flexible options work better for you, especially if you run a seasonal business, or you take on multiple projects. If you run a construction company, for example, you may want to look for talented individuals to work on specific jobs, rather than employing a team of workers on a full-time basis. If you manage a store that sells Christmas decorations, or you run a business that handles vacation rentals, for example, you will go through busy and quiet periods, which demand different staffing levels. Hiring on a short-term basis will ensure you have access to the staff you need to thrive during busy periods while saving money when sales start to dwindle. You can also save money on wages by starting with a relatively small team and adding new recruits as your business grows.

Another option to consider is whether you could hire a student to support your business? Students will cost your business less to employ but in some cases can do the job just as you require. Many will be looking for a job to support their degree, so if your business is within that field, then their knowledge could be invaluable. Plus, when you hire a student, you could use their student ID when buying their equipment to save some money. If you require them to travel, student ID’s will help reduce the train fair or bus fair depending on who they travel with.

Outsourcing

Outsourcing has become increasingly popular among small and medium-sized businesses, and it can offer a cost-effective alternative to employing new members of staff. Outsourcing involves working with external agencies or hiring freelancers to take control of certain jobs. It enables you to access skills that you might not already have on your team, and you can also free up time for your employees. Examples of tasks and services that businesses commonly outsource include professional cleaning, accounting and payroll management, IT and marketing. If you own a clothing brand, for example, and you want to drum up interest and try and boost online sales, you could outsource marketing, joining forces with a digital marketing agency to draw up and manage targeted campaigns that are designed to increase sales and improve your ROI. By outsourcing, you can save money on hiring while also benefiting from access to expertise you don’t have in-house.

Negotiating with suppliers

Negotiating skills are imperative in business. Whether you sell products or services, it’s highly likely that you will need to engage with suppliers, distributors and logistics firms to get your business off the ground and provide your customers with an efficient service. At every stage, be willing to negotiate on price, but understand the importance of presenting a professional image. There’s nothing wrong with trying to drive prices down, but be realistic and make offers that are reasonable.

Streamlining your marketing strategy

Marketing plays a crucial role in helping businesses to connect with customers, generate leads and increase the chances of making sales. When you launch a marketing campaign, you want to ensure that you have the best chance of achieving your objectives. This is why it’s beneficial to seek expert advice and to link up with agencies or individuals with an outstanding track record. There is a risk of a campaign falling flat, and not every marketing strategy works. You don’t want to invest money in techniques that don’t work or campaigns that don’t reach the right people. Streamlining your strategy can help you pinpoint target customers, generate high-quality leads and promote your brand in the best possible light. Make use of analytics to track progress and use market research and customer feedback to improve and modify your strategy. If you’re targeting young people, for example, advertising and sharing posts on sites like Instagram is going to be more effective than posting on Twitter. If you’re setting up a local business providing services like roofing, dog walking or gardening and landscaping, focus on local SEO and use flyers and local press adverts to connect with residents in the area. Over 85% of people who search for local businesses on a smartphone will either make contact or visit within 24 hours. By focusing on methods that work, you can increase ROI and eliminate expenses related to techniques that have failed to make an impact.


Every dollar counts when you’re running a new business. If you’ve recently launched a startup, or you’re in the early stages, there are ways to lower costs and increase margins. Think carefully about your recruitment strategy and explore flexible staffing solutions, negotiate with suppliers, invest in technology that will enable you to save time and money, consider outsourcing and streamline your marketing strategy. If you can reduce expenses at the same time as driving sales and optimizing performance, your profits should grow quickly.