Accounts receivable is typically held by companies that invoice for goods or services to be paid at a later date. Cash businesses, or those who receive payment at the time of delivery of the good or service, won’t have an accounts receivable. A consumer-facing retail shop that sells goods for immediate payment, for example, likely won’t have A/R.
Accounts payable is generally defined as a current financial liability. It is usually money that a company owes to one or more of its vendors or suppliers. According to Less Accounting, how efficient the accounts payable system is in any organization affects the company’s reputation and financial stability. Accounts payable is sometimes thought of as short-term debt payments.
By the time you’re ready to file your business’ first tax documents, you’ll need to have chosen the accounting method you’re going to use. Then, you’ll have to stick to that method for every subsequent return you file. Speak with accounting professionals to help determine the accounting method that fits your business best.
FUTA stands for Federal Unemployment Tax Act. It’s one of the payroll taxes that the government collects in order to provide benefits to workers. Other payroll tax examples include Social Security and Medicare. The purpose of FUTA is to provide unemployment benefits for workers who lose their jobs through no fault of their own.
As a savvy business owner, you know that having a CFO managing your finances can help you improve your profit margins. The problem is that based on the size of your revenues, hiring an in-house CFO won’t provide enough benefit to cover their salary. That’s where a fractional CFO comes in.
Every business starts out with big ambitions for taking over the world. And yet within five years, almost half of them will have shut down. Why is that? Often, the problem is cash flow. Around 29 percent of businesses come to an end because the company failed to break even. That’s why it’s crucial for every business owner to know their break-even point – the point at which your income is greater than your combined outgoings. The good news is that calculating break-even point isn’t hard, as long as you have the right data.
Running a business has many layers and one of the most important elements is understanding the economics. Revenue and profit may sound like the same thing but each is unique in the world of finances. Here is more on understanding the difference between revenue vs. profit. What both are and how they work when it comes to your bottom line.
These eight strategies don’t just take into account what you charge. They also look at how you manage your outflow of money. Further, they recognize that your mindset as an entrepreneur, and your relationships with partners in your field, can determine your success. Have a look and think about your own business. Do any of these strategies look like processes you can implement, in order to turn your passion project into a viable, thriving company?