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Projecting Your Business Cash Flow, Made Simple

By Caron_Beesley, Contributor
Published: July 30, 2012

Cash flow is king for small businesses and the self-employed. But planning cash flow is easier said than done, especially if you’re not a numbers person.

However, if you’re going to succeed in business, mastering basic cash flow projections is a must. After all, you can be a profitable business yet still have poor cash flow, simply because the cycle of cash in and out of your business isn’t synchronized.

So where do you start? The first thing to know is that your projections don’t have to be – and probably never will be – 100 percent accurate. It’s one of the reasons many business owners hesitate working through this process.  But it is possible to simplify the process. Here’s how:

Cash Flow is About Timing

It’s important to understand that the timing of cash income and cash outgo comes down to the operating cycle of your business. This cycle includes many moving parts, such as buying or selling with credit, your collection process, the costs of running your business (salaries, rent, marketing, etc.) and, of course, when you get paid.

Why Manage Cash Flow Through Projection?

Using a basic spreadsheet as your tool, cash flow projection gives you a clear look at when money comes in, when it goes out and what money you are left with at the end of each month after you have paid your expenses and recorded your income.

Knowing your numbers in terms of cash flow projection allows you to plan and anticipate for the coming months.  It also gives you enough information to see potential pitfalls within the cash-in and cash-out flow of your business. This might involve a short-term injection of cash from family, friends or a bank. Remember, you’ll need to share this kind of projection document if you want to secure a loan and prove your ability and timeline for making your loan repayments – another good reason to spend some time on this document.

What Does a Cash Flow Projection Spreadsheet Look Like?

SCORE offers small business owners a wide selection of free business templates for download, including a sample cash flow projection spreadsheet template (with formulas built in for those of us who are spreadsheet illiterate). Look for the download labeled Cash Flow Statement (12 months).

Try to think of cash flow projection as part of your ongoing business planning process. And although this document and the process itself is not a function of accounting, all your numbers and tracking categories should be in sync.

If you’re unsure how to forecast your sales or expenses, business planning pro Tim Berry has broken this down into a simple process, too. Read his blog – How to Project your Basic Business Numbers – for a step-by-step guide.

Lastly, if cash flow is a problem, it might be worth talking to your accountant. There are a number of options available before you dive into borrowing money. Read more about these in this article: 5 Things to talk to your Accountant About, by Barbara Weltman.

Related Articles

 

 

 

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

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Partnerships Built To Last For Small Business: SBA Forges New Alliance With US Black Chamber

By Marie Johns, Former Deputy Administrator
Published: July 27, 2012 Updated: July 1, 2016

Over the last three years, SBA has provided small businesses owners and entrepreneurs with the tools they need to not only survive, but thrive in tough economic times. We’ve supported more than $80 billion in loans to more than 150,000 businesses in tight credit markets and worked to bring 1,000 community banks back to SBA lending. Today, we’re seeing commercial markets improve, but we know gaps still remain, especially in underserved communities.

Marie Johns signing MOU with USBC

 

At the SBA, and across the Administration, we are committed to building strong communities and creating an economy built to last. I was excited to participate in the Administration’s annual African-American Women’s Forum earlier this week at the White House to underscore that commitment and highlight SBA’s efforts increase access and opportunity in our community.

We’ve stepped up our outreach to underserved communities and held eight White House Economic Forums to connect small business owners and entrepreneurs with the resources and networks they need to start, expand and create more jobs. Through that effort, we’ve had tangible results, reaching thousands of small business owners and millions more through social media. In addition, we established the Advisory Council on Underserved Communities (CUC) to get invaluable input on ways to improve our programs and services for our customers in underserved communities.

And we continue to look for new opportunities to expand our reach. That’s why today, I formalized a partnership with the U.S. Black Chamber, Inc. to build on our efforts to support underserved communities that have been hit hard by the recession. This partnership is designed to increase the participation of African American small businesses in SBA programs, including:

President Obama has fought since the beginning of his Administration to support small businesses. The success of America’s small businesses is critical to our economy, our communities and our future. The partnership established today is yet another example of our commitment to creating an economy built to last-one that is inclusive, resilient and robust and brings more access and opportunity to more communities.

 

About the Author:

Marie Johns

Former Deputy Administrator

Marie Johns is a former Deputy Administrator of the U.S. Small Business Administration. 

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Starting a Freelance Business – How to Take Care of Legal, Tax and Contractual Paperwork

By Caron_Beesley, Contributor
Published: July 18, 2012 Updated: August 18, 2015

If you are new to freelancing or thinking of becoming a freelancer, you’ll no doubt have lots of questions, especially about the legal and regulatory paperwork you need to obtain and manage throughout the business year.

Freelancing, particularly if you are unincorporated, is one of the least paperwork-intensive forms of business ownership. Nevertheless, you are still a business and you need to be sure you have the right licenses or permits, make estimated tax payments on time, report your earnings each year, and deal with client paperwork such as contracts, non-disclosure agreements, and more.

To help you stay on top of your obligations, here’s a breakdown of key legal and regulatory processes, plus important “business-ready” documentation you’ll need when dealing with new clients.

Legal and Regulatory “Must-Dos”

Here’s what you’ll need to do to ensure you set up and manage your freelance business legally:

1. Get the Right Licenses and Permits – All businesses need some form of license or permit to operate in their state, county or city. In all likelihood, your freelance business is operated out of your home. So you may need a Home Occupancy Permit and a General Business License. You can get both from your local government website. Or simply use SBA’s “Permit Me” online tool for information about the licenses or permits you may need. Be sure to obtain these before you start doing any business.

2. Register Your Business Name – If you want to name your business anything other than your given name, then you’ll need to register a “Doing Business As” name with your local government. This guide explains how. If you use your own name, skip this step.

3. Pay Estimated Taxes – This one often comes as a surprise to freelancers, who may be used to having their taxes withheld by an employer. As a freelancer, it’s your responsibility to pay Uncle Sam and your state revenue agency almost as soon as you earn income each quarter. If you expect to owe $1,000 or more when you file your annual return, then you must pay estimated taxes on income. For information on how to calculate and make your payments, read: How To Calculate and Make Estimated Tax Payments.

4. Complete a W-9 Form When You Get a New Client – When you ink an agreement or start work with a new client, it’s likely they will ask you to complete IRS Form W-9 (you may have to ask them for it). Filling out a W-9 is straightforward: provide your name and social security number, or “Doing Business As” name. The client holds this form and doesn’t send it to the IRS; it’s a formal certification by you that your tax ID (SSN) is correct. The form also asks if you are subject to backup withholding – most taxpayers are exempt.

5. Annual Tax Reporting: The 1099 Form – If you’ve earned more than $600 in a year from a client, they have to report these payments to the IRS through Form 1099-Misc. Your client will send you a copy by the end of January each year. Be sure it’s accurate – does the amount the client stated they paid you match your records? You don’t have to do anything with the form other than it in your records and use it as a reference when you report your annual income to the IRS.  Think of it as the freelancer’s equivalent of the W-2 form.

I’ve deliberately excluded incorporation as a “must-do” legal and regulatory step for freelancers. Incorporation isn’t a legal must-do. While it has its benefits, it can also have cost disadvantages. To help you decide if incorporation is right for you take a look at: Should You Incorporate Your Freelance or Consulting Business? SBA’s Incorporating your Business guide is also a useful reference.

Essential “Business-Ready” Documentation for Freelancers

Here’s a list of some of the day-to-day documentation and paperwork that you will likely need or encounter as a freelancer:

1. Cost Estimate and Proposal Documents – Give your business a professional touch by creating your own branded template for project quotes and proposals. You can pay a graphic designer to create many of your basic business documents and graphics, or use freely available templates in software such as Microsoft Word and Google Docs. Sites such as FreelanceSwitch also offer free templates and resources.

2. Contract Documents and NDAs – Most clients will have their own contracts in place for independent contractors or freelancers. Be sure to read through the terms with a fine tooth comb. Don’t be afraid to question anything that doesn’t make sense or is irrelevant. The Non-Disclosure Agreement or NDA is usually included and is pretty standard. It requires you to agree to the client’s legal rights for protecting company knowledge or information you may have access to during the course of business, as well as intellectual rights relating to the work you produce.

If your client doesn’t present you with a contract, you may wish to protect your own interests by producing your own. This blog offers tips: Setting Up a Client Contract.

3. Statement of Work – Even if you have a client contract in place, many clients will also ask for individual statements of work (SOW) for each project. It’s a good idea to volunteer one even if they don’t ask for it. A SOW is a project-specific agreement outlining the mutually agreed scope of work and the timeframe for its completion. It sets expectations, deliverables, and the price. It may also include information on resources needed for the project, including roles and responsibilities on both sides. The secret to a good SOW is to avoid being vague – if it’s too broad and non-specific, you may end up with a dispute.  Once the SOW is agreed and signed, you are ready to begin the project.

Got questions? Post them below.

Related Blogs

 

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

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How a Business Email Address Can Hurt or Help Your Financing Efforts

By Marco Carbajo, Guest Blogger
Published: July 17, 2012

We can all agree that email is another tool used for exchanging information. But when it comes to business, it plays a much greater role then many people seem to realize.

Unfortunately, one of the most common mistakes business owners make is obtaining a business email account from one of the many free email services available on the Internet. While a free email services does serve a purpose, it can give a bad impression to a potential customer or even hurt your chances for obtaining credit because some creditors require a dedicated business email account.

You can help your business by obtaining a business email account that clearly shows that your company has a personalized domain name. The email address you set up should have @yourbusinessname.com. Not only does this look professional, but it also shows that you are a “real” company with a dedicated communications system.

The first thing you will need to do is register a domain name for your business with an approved domain registrar.

Once you visit the site, you will need to conduct a domain search to see if a .COM for your company name is available. I strongly suggest that you obtain a .COM because it adds another layer of credibility and professionalism to your business as opposed to a .Biz or .Net name.

If your company name is not available as a .COM, then consider searching for a .COM with the extension of your structure title as well. For example, ABC Company.com may not be available, but try ABC CompanyLLC.com as an alternative.

Be prepared to supply the following information when setting up your business email account:

  1. Name, company name, address and phone number
  2. Administrative contact information
  3. Technical contact information
  4. Domain Name System (DNS) server details

The DNS server is usually provided by the web hosting company that you use to host your website. If you don’t have a website, you can have your domain name parked on your registrar’s servers until you set one up. This can be done afterwards and you can always contact their tech support for additional help.

Once you register a domain name, you will be able to set up a business email account associated with your new domain name. When you select an email address, keep it simple because you will be supplying this information on all your company documents, applications, registrations and so on.

If you decide to establish multiple email addresses like ceo@abccompany.com, support@abccompany.com and sales@abccompany.com, make sure you use only one of these email addresses on all things related to the business credit building process.

It’s essential that you understand how lenders and credit providers assess the creditworthiness of a business. Even though it may seem like a minor detail, having a dedicated business email account does play a role in the decision making process. Small details like this that get overlooked can cause problems for you later on.

About the author

Marco Carbajo is CEO of the Business Credit Insiders Circle (http://www.businesscreditblogger.com), a step-by-step business credit building system providing credit recovery, lines of credit, business credit cards, trade credit, and funding sources.

About the Author:

Marco Carbajo
Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.

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Operation Boots to Business Introduces Returning Veterans to Entrepreneurship

Published: July 12, 2012 Updated: July 20, 2016

Our mission in the Office of Veterans Business Development is to support the men and women who have returned home from active duty and are interested in starting or purchasing their own business. 

Veterans already over-index in entrepreneurship.  Nine percent of all U.S. firms are owned by veterans.  More than 2.4 million veteran-owned businesses employ more than 5.75 million individuals.  So we know that providing greater access and opportunity to these veteran-owned small businesses will strengthen the American economy and help create jobs. 

We already have numerous programs at SBA specifically designed to support our veterans.  For veterans who are establishing or expanding their small business we have a range of financing opportunities including microloans and Patriot Express Loans.  There are Veteran Business Outreach Centers to train and counsel veterans, and this year we created the Mentor-Protégé Program for Service-Disabled Veteran Owned Small Businesses to help veterans learn how to do business with the federal government. 

But, as a veteran myself, I am confident that there is more we can be doing to support our returning service men and women.  That’s why we have created Operation Boots to Business: From Service to Startup, to teach service members the nuts and bolts of how to start and grow a business. 

Veterans are natural entrepreneurs, already possessing the experience and leadership skills to start businesses and create jobs.  Boots to Business will leverage SBA’s existing collaboration with Syracuse University’s Institute for Veterans and Military Families (IVMF) to provide training materials specifically geared toward transitioning service members to become entrepreneurs. 

SBA currently offers three programs through its partnership with Syracuse University. The Entrepreneurship Boot Camp for Veterans with Disabilities delivers entrepreneurship training through a one-year “boot camp” for service-disabled veterans of the wars in Iraq and Afghanistan who want to start or grow small businesses.  Operation Endure & Grow expands on the SBA and Syracuse University ”boot camp” and provides high quality training, networking and mentoring to support Reservists and U.S. Military family members.  And Women Veterans Igniting the Spirit of Entrepreneurship delivers high quality training, networking and mentoring to women veterans. 

Boots to Business will take these programs one step further, by providing exposure to entrepreneurship training to all 250,000 service members who transition from active duty to civilian life each year. 

If you are a transitioning Marine interested in registering for the program, visit the Boots to Business registration page.

The pilot program is currently being launched with the Marine Corps at four locations-- Quantico, VA; Cherry Point, NC; Camp Pendleton, CA; and Twenty-Nine Palms, CA.  The initiative will include three phases of instruction: a short introductory video on entrepreneurship; an in-person classroom training on entrepreneurship; and an in-depth, online, 8-week entrepreneurship course that leads to the creation of a business plan. 

Through this initiative, we will work with our entire team of resource partners to deliver an effective introduction to entrepreneurship to returning service men and women so they can learn about the opportunities and realities of owning a small business.  I’m excited about this opportunity to help our veterans start businesses, create jobs and ultimately help lead the American economy to a stronger recovery. 

Semper Fidelis,

M. Rhett Jeppson

About the Author:

Rhett Jeppson
Rhett Jeppson is the Associate Administrator for SBA's Office of Veterans Business Development.

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Can You Become A Part-Time Franchisee?

By FranchiseKing, Guest Blogger
Published: July 3, 2012 Updated: July 6, 2016

Is it possible to find a legitimate franchise opportunity that only requires a few hours a week to run? And, if you do find a part-time franchise, can you make enough money for it to be worth your up-front investment, and of course, your time? Let’s find out.

First off, it’s important for you to be able to distinguish a true franchise-type of business, from a non-franchise business.

In most cases, franchise ownership offers:

·       A proven business system that’s easy to replicate

·       A formal training program

·       Proprietary software and technology

·       Marketing and advertising tools and systems

·       A support team

·       Formal and lengthy contracts

·       Protected territories

Non-Franchise Businesses

Business Opportunities, or Biz Opps, as they’re sometimes called, aren’t very structured when compared to a franchise business. You won’t usually find territory restrictions with a business opportunity, and there are no royalties.*

In addition, the total investment amount is usually less than a franchise business.

While there may be training, and even some marketing tools, the support structure isn’t as tight as it is with a franchise business system.

(It's not because purveyors of Business opportunities are mean-spirited people that they don't supply a tight support structure. It has to do with the business model; in a Business Opportunity, the investment amount is collected up-front. There’s no royalty-stream coming in that could support a lot of well…support, in this type of business set-up.) 

There’s another type of non-franchise business that’s worth mentioning here; Network Marketing businesses. Also known as MLM’s (Multi-Level Marketing) these businesses are almost always marketed as “Part-Time Opportunities.”   

There isn’t enough space here for me to go over all the pros and cons of a Network Marketing business. Suffice to say, there’s a plethora of information available, including an article I found over at FTC.Gov that defines Network Marketing businesses in easy to understand terms.

 Part-Time Franchise Opportunities

While the thought of owning a franchise that doesn’t require a full-time commitment may be appealing to you, the reality is that there are very few franchise concepts around that fall into that category. Most franchises are designed to be owner-operated, with the owner on the premises.

But, if you do have your heart set on investing in a franchise that can allow you the flexibility to not be there all the time, know this; you’ll probably need deep pockets. That’s because most of the franchises that tout things like “flexibility” in their marketing methods are multi-unit ownership opportunities.

In addition to the promise of flexibility that several franchisors offer their franchisees, there’s another option offered in the franchise marketplace that may also have a nice ring to it for you. Ready?

How would you like to keep the job you have while you start a franchise business?

Right off the bat, it’s very appealing, cash-flow wise. That’s because if you can keep your day job while launching a new franchise business,* you’ll have cash coming in-via your paycheck, and that can really give you some breathing room.

To summarize, if you have a pretty sizeable net worth, want a lot of flexibility, and like the idea of maybe being able to keep your current job while your new business launches, there are opportunities available in the franchise marketplace.

*Non US-Government links

More resources

5 Franchise Tips From SCORE

 

 

 

About the Author:

FranchiseKing
Joel Libava

Guest Blogger

The Franchise King®, Joel Libava, is the author of Become a Franchise Owner! and recently launched Franchise Business University.

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Do the Credit Cards for your Business Report to your Personal Credit Reports?

By Marco Carbajo, Guest Blogger
Published: June 19, 2012

Due to the growing difficulty in obtaining traditional business lines of credit from banks, many business owners are turning to credit cards for small businesses as their primary unsecured business lines of credit.

Unfortunately, the majority is turning to the wrong sources. They end up putting their personal credit on the line and all their business credit card debts show up on their personal credit reports.

This means that anytime you use your business credit cards, your personal debt/credit ratios are affected. Did you know that drawing a large portion of funds from these types of business credit cards can result in your personal credit scores dropping anywhere from 20-100 points overnight?

Some of the largest financial institutions offering business credit cards report to your personal credit. This negatively impacts your scores.

Do your current business credit cards report to your personal credit reports?

If so, you should consider obtaining several true business credit cards that do not report. This will shelter your personal credit for personal necessities such as auto loans, mortgages, student loans and personal credit cards.

Unsecured credit lines such as business credit cards have been around for a long time. They are no secret to the wealthy and savvy business owners. When properly structured, they do not report to your personal credit reports. They can be excellent cash flow tools, as the monthly debt service is usually lower than almost any other form of financing. The rates are usually very good, too–usually between 3-7% above prime.

So where can you find business credit cards that do not report to personal credit?

Well, the good news is there are credit cards that only report to the business credit bureaus. The bad news is the credit card issuers for these types of cards do not advertise this fact.

First, while there are hundreds of credit cards for small businesses available in the marketplace, only a handful of major companies issue and service all these consumer and business credit cards.

So when you see a financial institution launch a new credit card program with its own branded label, in most cases it always includes a partnership with a leading agent credit card issuer to provide and service the actual credit card products to its customers.   

The agent credit card issuer is the company that actually underwrites, issues and services the credit card customer. As you may know, part of account servicing includes credit reporting.

You have two options if you want to locate these types of credit cards for your business. First, you can utilize a business credit service because they know firsthand which lenders are lending, which ones report to only the business credit bureaus, and whether you and your business will be a good fit for them.

Your second option is to do it on your own. But, you will need to know which lenders offer unsecured business credit without full income documentation. In addition, you will need to find out which ones do not report to your personal credit reports.

Finally, you should be aware of which credit bureaus are pulled by each lender so you can properly plan the series of applications. These are just a few of the questions to address prior to doing it on your own.

 

About the author

Marco Carbajo is CEO of the Business Credit Insiders Circle (http://www.businesscreditblogger.com), a step-by-step business credit building system providing credit recovery, lines of credit, business credit cards, trade credit, and funding sources.

About the Author:

Marco Carbajo
Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.

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