Category: Finance & Capital

Business is not for the timid, but for the brave and resourceful. Courage is necessary because it’s difficult for you to anticipate all possible contingencies. It’s almost impossible to prepare ahead of time on what you need to know to make the best decisions when a peril or opportunity opens up. Similarly, resourcefulness is necessary to make ends meet when you are starting a business. It isn’t uncommon for entrepreneurs to go without a paycheck for a length of time while the business gets off the ground and to have to work side jobs to keep the business afloat.

Here are two ways of coping with a financial crisis early in your business: one, for working with a problem with a recognizable cause; the other, for working on a problem whose cause eludes you:

How to Deal with a Known Cause

If you know the cause of the problem because it’s obvious, you need to evaluate the scope of the financial problem so that you can arrive at the best solution.

The financial constraints you’re facing may not be as bad as you imagine. An unexpected spike in your overhead might be compensated for by an increase in sales revenue. Perhaps, too, it’s a minor issue that can be resolved by using a payday loan alternative to get your business back on track. For instance, you might feel inclined to panic if your single business vehicle, a delivery van, has broken down — but with a few hundred dollars worth of repairs, you’ll be back to serving your customers.

Conversely, the problem may appear minor, tempting you to ignore it, but it will get worse if you do nothing about it. For instance, it’s easy to overlook a slump in sales volume for a particular quarter, but this might be the symptoms of a deeper malaise, a shift in the market or a problem with the way your sales team is closing sales.

Either way, whether it looks bad but can be easily remedied or it looks mild but can get worse, assessing the scope of the problem will give you a realistic picture so that you can then find the best solution.

How to Deal with an Unknown Cause

Financial problems are not random events, but symptoms of an underlying cause, a business process that is malfunctioning. If the reason for the problem is obvious, you can move toward a solution, but if you don’t know the actual reason why your business is losing money, then you obviously can’t even begin to think about possible solutions.

Naturally, if you know the cause of the problem, you can work towards a solution. If the salaries you’re offering candidates are below market value, then you can raise them. If there are certain company policies that people consider unfair, you can revise them. However, what do you do if you don’t know the cause? In cases when you don’t know why a problem exists, it’s necessary to resort to applying some problem-solving methodologies or hiring outside experts to help you with the detective work necessary for identifying the unknown cause.

As an example, let’s suppose your HR department has begun to notice that your business has a high staff turnover. Since you spend so much money training new staff, watching them quit soon after working for your company is a cause for financial concern.

Here are 4 steps you can take:

• First, define the problem, getting clear on why a certain situation is problematic.
• Second, get some metrics on what has happened and forecast what will happen if the problem continues.
• Third, research all possible causes until you find the root cause that is responsible for the diverse problems your business is experiencing. A single issue may be manifesting in different ways.
• Fourth, implement a solution and be sure to test it for awhile to see if it works well enough to put the problem behind you.

Problems and Processes

What known and unknown business problems have in common is that they both cause financial distress because they arise from a broken business process. Through patient inquiry and methodically trying out the best solutions that occur to you, they can be resolved. If it’s a discrepancy in cash flow, you can raise the money to resume business operations, or if it’s a problem within the company, then you can use problem-solving methods to identify the hidden cause and set things right again.

In the past, the mortgage lending industry was essentially controlled by a small number of banks and financial institutions with very, very deep pockets and friends in high places. However, these days — and ironically, thanks to the Great Recession — the mortgage lending marketplace is much broader, and barriers to entry and far smaller. You no longer need to have tens of millions of dollars in working capital to get in the game. As long as you have a valid mortgage license (and each state has its own requirements) and a business structure in which to legally operate (e.g. LLC, S Corp, etc.) then you’re ready to start helping individuals and businesses bridge the funding gap for the property the want. Well, actually — not quite!

Multiple InfoSec Obligations 

Yes, you’re headed in the right direction. But before you start serving clients and building your reputation for excellent, it’s important to ensure that you have all of your information security (InfoSec) boxes ticked; and there are more today than ever before. Here are some of the key obligations that need to be part of your firm now and into the future:

• Complying with all prevailing regulations and laws that relate to InfoSec practices and policies, including (but not limited to) the Dodd-Frank Act, the Federal Truth in Lending Act, The Federal Housing Finance Regulatory Act, the Hope for Homeowners Act, and more.
• Using enterprise-grade network and end point (e.g. desktop, laptop, tablet and smartphone) security — including corporate-supplied devices (“COPE”) and employee-supplied devices (“BYOD”).
• Securing all confidential data at-rest and in-motion, including corporate-owned and controlled digital properties (e.g. websites, apps, etc.).
• Ensuring that all third parties (e.g. contractors, consultants, etc.) have appropriate security controls in place.
• Having a plan in place to deal with potential or real cyber security breaches, such as malware attacks, viruses, Trojans, ransomware, and so on.
• Training staff on properly storing and sharing data.
• Implementing a robust social media compliance
• Creating an asset inventory of all hardware and software.
• Having an appropriate disaster recovery process in place.

The Bottom Line 

The residential and commercial mortgage marketplace is growing, which is good news for entrepreneurs like you who want to apply your knowledge to help individuals and businesses bridge the real estate funding gap. However, it’s essential that you comply with all InfoSec requirements and expectations, including those that are not necessarily part of regulations or laws, but are nevertheless industry best practices. Otherwise, you could end up with lasting reputation damage that might ground your fledgling mortgage lending firm before it has a chance to really take off — and achieve its potential to be a lucrative, long-term success!

Article Contributed by Mark Palmer

Business ownership can be a rewarding and lucrative career path. However, the start up phase can be frustrating and challenging and requires a ton of commitment and risk. In fact, recent studies show that over 50 percent of startups fail within the first four years.

This daunting statistic can be attributed to a number of factors, but a lack of capital is often an issue for a new business. The entrepreneur must often balance personal needs with the ability to advance the business and it can be difficult to make ends meet. Luckily, there are a number of side jobs that can help fund your startup and move your business forward. Here are a few of the more popular gigs:

1. Set Up an Etsy Shop

Etsy is one of the more popular online modules on the market these days. It’s relatively simple to set up a store online and begin selling your product. The site is geared towards handcrafted, unique products. If you’re exceptionally good at design or have a knack for something crafty, Etsy may be just the place for you. Etsy is a great option because you can work from home and determine your own supply costs.

2. Freelance

Freelancing is a great way to make use of existing skills. Many companies look to contract with freelancers for skills like writing, graphic design, photography, SEO or social media management. Some companies are willing to pay a hefty price per assignment to avoid the costs associated with a full-time employee. You can find freelancing work on sites like Odesk and Elance which are specifically designed for freelance work. Overall, freelancing is a great income supplement because of its flexibility and high dollars. You won’t find many second jobs that allow you to set your own hours and income levels.

3. Drive for Uber

If you have a car, Uber has transformed the public transit industry and is a great supplemental income option. You just need a valid driver’s license and the ability to pass a background screening. From there, you can pick up rides at your convenience. You can pick and choose your hours with Uber and will enjoy meeting new people along the way.

4. Become a Distributor

One of the more popular business opportunities on the market includes serving as a distributor. A distributor sells products for a company and earns a cut of all products sold. Many beauty and skin care companies use this partnership model to expand their market and reach more consumers. A freelance lipsense distributor is one of many great examples of this business model. As a distributor, you can set your own sales goals and work at your own pace. Many distributor relationships will also give you a discount on the product, so you can save money on some of your favorite products along the way!

5. Rent Your Space

Believe it or not, renting your space is one of the quickest and easiest ways to up your income. Sites like Airbnb and FlipKey are revolutionizing the travel industry and inviting local consumers to join in the fun. You can advertise your space online and offer it up for the weekend or extended stays. You can set your rate as well as cleaning and maintenance fees and enjoy entertaining your new guests!

These are just a few of the many options for additional income to fund your startup. Each of them offers a level of flexibility that is great for a rising entrepreneur. You’ll need to review the initial setup costs as you consider these options, but overall these income sources are steady and reliable.

Article by Hannah Whittenly

You’ve got a great idea for a new business and a solid plan, but you may find coming up with the funds is the real challenge. Total up a list of your expenses, including materials, labor, office equipment, licenses, permits, insurance, and a little operating capital. Here are some ways to raise that seed money.

Find Lenders

Banks can be very fussy about new business loans, knowing that many new businesses fail. You may have to go to great lengths to get the money. You could consider applying for a personal loan instead. Credit unions and small local banks can also be easier to deal with than large commercial banks. There are also small business loans from online lenders. Be sure to look into government loans for small businesses.

Use Personal Assets

If you have good credit, your credit balance or a new credit card can provide funds. You may have equity in your home you could borrow against, or stocks, bonds, and retirement accounts that could be cashed in. Vehicles, jewelry, antiques, or anything else you feel is valuable can be sold or used as collateral. Look for ways to cut expenses. For example, you could buy recycle pallets, like those from Smart Pallets, for your warehouse so that you don’t have to buy brand new ones.

Locate Investors

Wealthy “angel” investors may have deep pockets, but usually want a share of your company and its profits. Venture capital firms invest in small companies as a business, but expect some level of control. In return, they may also provide advice and guidance. You could also try crowdfunding sites. Numerous individuals may be willing to donate small sums either in exchange for public shares, or as simple donations to a great idea. Decide which kind of investor relationship you can work with, and focus on finding and winning them over.

Scale Back

About $39,000 AUD is the typical startup cost, but micro-companies can get started for under $3,900. Consider going into operation with whatever you can afford, even if it’s a bare-bones home business. If you can get established with some good revenue and faithful customers, other funding will come easier. You may even find that the best financing option is to reinvest your profits into your company.

Borrowing money or courting investors is often not a realistic option for entrepreneurs who have a good idea but little else. If you can’t seem to make an impression, carefully weigh your options, minimize your costs, and try every other means of obtaining whatever funds you can.

Article Contributed by Irena McKenzie

Any manager or owner of a business will find themselves periodically in meetings with the company’s accountant. When taking time to review regular reports on the business’s finances, there are certain questions to ask and items to focus on to gain insight into the health of the business. These items will also help to identify early any potential problems, often before they ever arise. Here are a few questions to ask, along with reasons they are significant.

1. Are there any unreconciled transactions? The process of reconciling transactions involves matching internally-accounted transactions with those reflected in company bank accounts, so naturally it is a red flag when there are transactions that cannot be matched. More likely than not, in a meeting with your accountant you will not need to ask about this point – they will bring it up almost immediately – but it is worth being aware if they have encountered any in your business recently. Having unreconciled transactions can mean that you have outstanding company checks, someone trying to overbill your company, or even potentially someone trying to steal from you.
2. Are there any glaring control issues with company finances? Control issues can arise when one or more people within a company have sufficient control over the company’s finances (e.g. check-writing or wire transfer authority) that they can represent a risk to the firm. Accountants will often search for potential control issues during regular reviews, and it’s best to be aware of these potential risks as early as possible so you can determine the appropriate steps.
3. What is the business’s free cash flow; is it higher or lower than in previous periods? Free cash flow is a measure of the business’s cash remaining from operations (income minus expenses) after any necessary investments in property or equipment. Essentially, this figure shows how much discretionary income that the business has left to reinvest, sustain itself through a fall in revenue, escalate investment in equipment, or undertake new marketing or other initiatives. In the world of personal finance, this measure would be like the amount you have left over each month after collecting income, paying your rent and mortgage, groceries, utilities, and car and student loan payments. This is how much you have left to save for a vacation, spend on meals or entertainment, buy a new personal computer, or pay for a class at a local college.
4. What is the company’s current ratio? In finance, a current ratio is a measure of the company’s current assets (these include cash or those items that can be quickly converted to cash) versus immediate payables or short-term debts. An easy way to think of this number is to compare your business’s cash (or how much cash you could have if within 30 days if you converted certain liquid items to cash) to its debts due within the next 30 days. Ideally this number should be more than 3 to 5, meaning that your company has 3 to 5 times the amount of cash needed to pay off its short-term loans, but in almost no event should this figure ever fall below 1.5. The higher this number, the easier you should be able to rest at night; when it starts falling or nearing 2 or 1.5 is when you can start getting nervous and looking for ways to reduce debt or convert assets to more liquid cash.
5. What is the average length of company receivables? This figure measures the average amount of time between when you send an invoice and when you get paid. You want to know if this figure is changing – especially if it is getting longer – because it could mean that you have one or more problem clients who may be a growing risk to your business.
6. How concentrated are the company’s receivables? This question is in the same vein as #5, but it will help you to get a feel for whether your business has just a few clients who contribute most of your revenue. If one or a couple of these clients were to leave, there could be a substantial impact on your company finances. Diversifying clients, which can also be interpreted as spreading out your receivables, can help to reduce the risk presented by having just a few large clients on whom your business depends for survival.

It is worth noting that these are not hiring guidelines, or questions to ask of a potential accountant. These are aspects of a business’s financials that you need to know on a periodic basis. These are questions that need to be asked of whomever oversees the accounting for your business, whether it’s an accountant or mobile bookkeeper. Even if you are filling this role yourself, the items above are things that you need to track and periodically review. Hopefully they will aid you in identifying any potential risks to your business, and taking any corrective action as quickly as possible.

Irena McKenzie

Irena McKenzie is a Castle Hill local and is a very experienced local, mobile bookkeeper and successful small business owner. She has many years’ experience in all facets of bookkeeping and office work.  She has run various small businesses for many years and understands exactly what it takes to get a small business up and running at full speed.