Category Archives: Money Management

The End of Credit Card Signatures

What Does It Mean for Your Small Business?

By Andrey Bobrovskiy, smallbizdaily.com

Have you noticed something different about your in-store transactions recently? If so, that’s likely because the end of the signature requirement announced by Visa, Mastercard, American Express and Discover is finally coming into effect. Although it affects just one step in the payment process, it means a lot more for your small business in the long run.

It Makes Checkouts More Convenient

The payment card industry has been moving toward simplicity and convenience for years. Customers want seamless and secure methods of paying for goods and services, while merchants seek reliable and flexible ways to process these payments across a variety of channels. This paved the way to innovative forms of payments, including those using near-field communication and virtual reality.

However, convenience isn’t always about adding new features. Oftentimes less is more, and this happens to be the case with credit card signatures. By now, they’ve simply outlived their usefulness, a fact supported by Mastercard’s revelation that it already didn’t require signatures for 80 percent of its transactions even before the changes went into effect.

Removing this small extra step from the transaction process will have a large impact on both sides of the checkout counter. As a merchant, you’ll get to keep the line moving, and quicker, while your customers will face less friction at an important point in their in-store experience.

Fewer steps to complete during the checkout may also mean fewer technical difficulties capable of preventing the payment from going through. This could prove to be one of the biggest advantages, especially during the busy holiday season later this year.

Continue reading here

Self-Employment Tax 101 for Small Business Owners

When you’ve made the transition from working for someone else to being your own boss, you gain the freedom to create your own professional path. You also get additional responsibilities, like paying self-employment tax.  

Self-employed individuals are required to not only submit the income tax they owe to the federal, state, and local governments, they must also submit self-employment tax to the IRS. 

Who Is a “Self-Employed Individual”?

The IRS defines a self-employed individual as someone who conducts business as a sole proprietor, independent contractor, member of a partnership, or as someone who otherwise is in business for herself or himself. 

What is Self-Employment Tax?

According to IRS.gov, “Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.”

Employees of a company pay half of their Social Security and Medicare taxes (usually withheld from their wages) and the employer pays the other half. However, as a self-employed individual, a business owner must remit the entire amount. 

Most self-employed persons, because their tax typically isn’t withheld from paychecks, must estimate their self-employment and income tax amounts due and pay them on a quarterly basis. 

Similar to the FICA tax that wage earners working for employers pay, the self-employment tax rate for tax year 2018 is 15.3 percent on the individual’s first $128,400 of net income and then 2.9 percent on net income beyond that. The rate consists of two parts: 12.4 percent for social security and 2.9 percent for Medicare. 

To pay self-employment tax, you must have a Social Security number or an individual taxpayer identification number. Schedule SE (Form 1040) can be used to calculate self-employment tax. 

Self-employed individuals can deduct the employer-equivalent portion (half of the total self-employment tax) in computing their business’s adjusted gross income, reducing the business income subject to income tax.

Tips for Staying on Track with Your Self-Employment Tax

Neglecting to pay your taxes can result in fines and penalties, so it’s critical to stay current. Talk with an accountant and/or tax professional for assistance in understanding your tax obligations. This is especially important with the new tax laws in effect for 2018.

Here are some additional tips for consideration:

And always remember, a SCORE mentor can help you navigate the uncharted territory of being self-employed. You are invited to ask for guidance on all aspects of starting and running your business.

How much cash should a small business keep in reserve?

piggy bank cashCash is the fuel that makes a business run. It is needed to pay salaries including your own, fund marketing programs to acquire and retain new customers, invest in equipment and facilities, pay rent, supplies and many more day-to-day activities. Most financial experts recommend three to six months of operating expenses, but using this for every business in every situation is misleading.

To determine how much cash you need, you must look at the following key areas.

How Much Cash Have You Been Using?

If you’re an established business owner, look at your monthly cash flow report (or go to the next paragraph if you’re a start-up). This report will provide an historical and seasonal perspective. Note the cash received from sales and the cash spent. The net of these two is often referred to as the “net burn rate.” For example, if you have $50,000 in sales and $30,000 in expenses, then your net burn is +$20,000

Your “gross burn rate” only takes cash expenditures into account; in our example, that’s $30,000 and is the more conservative amount, since it does not assume any sales are made. Historical spending patterns are a good starting point in considering future spending plans.  Continue reading

Washington’s Paid Family and Medical Leave Program.

PFML_Employer_OverviewWashington is soon to be the fifth state to offer paid family and medical leave benefits. All workers will no longer have to choose between caring for their loved ones and making ends meet. They can dedicate their time away from work to be the best caretaker they can be. In return employers have access to an inexpensive benefit, save on payroll costs while the worker is on leave, and reduced employee turnover costs.

Workers can begin taking leave in 2020, but next year employers will have some actions to take.

First, employers need to withhold premiums from paychecks starting with the first check in 2019. These premiums are split between employers and workers. Workers foot most of the bill, but employers with 50 or more employees have a portion to pay also. (Employers with fewer than 50 employees don’t have to pay premiums but are still responsible for collecting and remitting the workers share.) Premiums are paid to the Employment Security Department by employers quarterly, starting in 2019. Learn more about premiums on the Premiums page.  Continue reading

Selling your business? Timing is everything.

by Kelly Deis of SoundPoint Consulting

Owners want to sell their businesses for for a variety of reasons – some want to retire and others are ready to move on to something else. Most owners ask – “is now a good time to sell?” Not surprisingly, the answer is, “it depends”.

Here are three factors to consider when timing the sale of your business. Of course, it is best when all three are optimally aligned, but that is not always possible.

The State of the Owner

The owner is critical to the success and ultimate value of a business. Typically, once the owner is beyond his or her prime, the business value will begin to falter.

It is best to sell when the owner is engaged, still excited about the business and perhaps wiling to stay on after the sale. Likewise, the more youthful and healthy the owner the less they will appear eager to sell.

You want to be the owner that wants to sell, not one that has to sell.  Continue reading

How Good Is Your Revenue?

by Kelly Deis of SoundPoint Consulting

A dollar is a dollar. That’s true. And, all revenue is equal. Right?  Well no, not in an investor’s or potential buyer’s eye. So what makes some revenue good and other revenue not quite as good?

1. Recurring

Recurring revenue is highly desirable because is it known and predictable. The best example of this is an auto-renewal fee or service charge periodically charged directly to a customer’s credit card. Once the initial sale is complete there are no more costs to acquire a customer. The revenue stream is much like an annuity. Continue to provide the goods or services as promised and the revenue keeps coming in.

Great examples of this are insurance premiums and streaming fees. Once customers have decided to purchase the product – and assuming they remain content, they are happy to have their credit card billed automatically.

In contrast, consulting and attorney fees are often one-time in nature. Revenue ceases when the project is complete and the engagement ends.  Continue reading

The 3 things keeping small business owners up at night.

Small business owners heading into 2018 have a lot to be happy about — but they’ve also got some major concerns about the continued success of their businesses.

Capital One polled small business owners about their hopes and fears, and here’s what the latest Small Business Growth Index has to say about their responses.

Positive Outlook

All told, small business owners feel good about their finances. Nearly half (47 percent) say their businesses’ sales rose in the past six months—the highest percentage recorded by the survey since the second quarter of 2013. Some 37 percent say their financial position has improved from one year ago, too.

But it’s not all sunshine. While small business owners are happy with their finances, they’re also wondering how long the good times will last. In fact, two of the top three concerns cited by entrepreneurs in the survey are financial in nature.  Continue reading