Small Business Owners: Make the Most of Your Money

Even though the economy has been very difficult to navigate for small business owners in the last several years, it may make sense to actually increase the dollars you spend with your accountant this year.  I realize at first glance this statement may appear to be contradictory to surviving a tough business environment, but give me a chance to explain.

Now, more than ever, it is worth your time and money to make sure you have a handle on your small businesses finances.  Not only are you monitoring the health of your business closely but you are most likely very conscious of dollars flowing in and out of your business on a daily and weekly basis.  You may have had to budget more conservatively, become more efficient, or create new ways to generate revenue to survive this recession.  And, not only are you paying close attention to your finances, your banker (and possible investors/buyers) are most likely paying close attention as well.  And this is not necessarily a bad thing!  Having financials prepared by your accountant could be invaluable to your business for several reasons and could ultimately help you weather the economic downturn.

First, accountant prepared statements can help you stay organized and can leave you more time for running your business.  If your accountant is preparing statements, you have peace of mind knowing it is being done by a professional and hopefully you also have less stress in your life because that particular task isn’t your responsibility!

Secondly, at First National Bank of Pandora, and many other community banks, small business lenders and bankers can be one of your best resources.  Not only are they looking for ways to help your business succeed, but they are also talking to other small business owners who are most likely experiencing many of the same challenges you experience.  Their daily interaction with other entrepreneurs and with other professionals (attorneys, CPA’s, etc) could provide you with valuable feedback on your business practices.  In addition to using financial statements as support to borrow money from the bank, having legible and organized financial statements can help your banker recognize what services or resources your business could use to be more successful and efficient. 

Another benefit to using your CPA regularly for accountant prepared financials is that it provides another layer of feedback and protection for you and you business.  Your accountant will also have ideas and suggestions that could help your business.  And knowing you’ve had a professional work on your books goes a long ways towards giving your financial statements credibility—both to your banker and anyone else who might inquire about your business.

Finally, if you are looking to sell your business someday, accountant prepared statements will actually make your business more marketable in most cases because that second set of eyes provides assurance to potential buyers (or investors) that the numbers are reliable.  This reliability could actually increase the value of your business because there would be fewer questions about the historical performance of the entity over time.  There are several levels of accountant prepared statements (compiled, reviewed, and audited) but even the most basic compilation can be very useful for these purposes.

At the very least, consider discussing your business financials with your banker and your accountant to determine what format will be most helpful for you and your business.  Spending a few extra dollars will be more costly in the short run, but those dollars could be some of the most valuable you spend this year.

In Case You Hadn’t Noticed … your credit card terms are changing

As if there weren’t enough to keep track of in the world of personal finances, new rules regulating consumer credit cards took effect this past month.  The good news: these changes are beneficial to you, the consumer. 

The Federal Reserve is implementing these changes through the Truth in Lending Act, one of the more important regulations protecting consumers who borrow money.  The recent changes were approved in 2009 and were implemented in two different phases in February and August, 2010.  There are several notable changes, some of the most significant include:

Changes Implemented February 22, 2010:

• All credit card companies must include a box on your statement that discloses how long it will take you to pay your entire balance if you only make the minimum monthly payment.  The idea being that if a card company is forced to admit how long it will actually take, the gory details will motivate you to get it paid off quicker.  In addition, companies must also show the monthly payment required in order to pay the entire balance in three years.
• Your credit card company can’t raise your interest rate in the first year you have the card unless it was part of the original agreement you signed.  If they raise the rate after the first year they A) have to give you 45 days notice; B) may only charge the higher rate on new purchases; and C) must allow you to cancel the account if you don’t accept the changes.  Unfortunately, you are still responsible for the remaining card balance if you do decide to cancel.

Changes Implemented August 22, 2010:

• In most cases, you may only be assessed a $25 fee for late payments.  Before August 22, you may have been charged up to $39 for every late payment.  And, your fee can’t be more than your minimum monthly payment so keep track of this change because it may have significant benefits if you do happen to pay late on occasion.
• If your credit card company decides to increase your interest rate for any reason they must tell you why.  And if they increase the rate, they must also reevaluate your account in six months to see if you have earned the lower rate again.

There were other changes implemented on both these dates so if you want more information visit the Federal Reserve’s website and review their fact sheets:

                February 22

                August 22

And BEWARE, unscrupulous credit card companies are beginning to find ways around the new regulations by doing things like marketing business cards to consumers that are not subject to the new consumer protections.  As always, do your homework before getting a new card, and better yet, work with your local community banker to make sure you are getting a quality product that works for you.