How to choose a financial planner?
A financial planner is a professional who would put together a financial plan for you to help you achieve your financial goals. Before considering a financial planner, it would be good to examine if you really need a financial planner. As you grow older and your income increases and your list of goals become bigger, it would be prudent to engage the services of a financial planner. Even if you know the basics, it would be worthwhile to have sound advice from a professional. While the fee may appear steep, it becomes sensible when you look at the purpose for which the money is being spent.
Some planners confine their services to drawing up a financial plan without getting into execution whereas others do both. There are merits and demerits to both these approaches. Let us look at a few important features that you need to consider when you choose your financial planner.
Relevant credentials:
The plan should be made by a certified financial planner with the relevant experience and qualification to render appropriate advice. Given the plethora of people you encounter ranging from your stockbroker to your tax consultant and the friendly banker, you need to be able to distinguish a financial planner from the rest.
No obligation service:
There should be absolutely no obligation to buy any products from the planner. This will eliminate any conflict of interest that may exist as the planner will suggest products that are beneficial to you and not look at his/her commissions. Planners who charge a fee for their services are likely to provide unbiased advice compared to ones who earn their income primarily from commissions.
Ability to provide a comprehensive plan:
The plan should address all areas, ranging from your short term goals, life goals and your retirement and insurance needs.
Customised and confidential service:
The planner should meet you exclusively in a place convenient to you, to collect the required information and subsequently render personalized advice when presenting your financial plan.
Large players versus individuals:
Large firms claim to bring structured processes and systems which ensure consistency and standardization. However, as a customer if you are sure about the quality of service from smaller players, you can go ahead and engage them as quality is not dependent on size. Also, larger players may have a vested interest in pushing mutual funds and insurance products from those providers who are affiliated with them. And smaller independent financial advisors can provide more personalized service. Another big advantage with smaller players is that you engage with the same person throughout, as opposed to larger organizations where the individual may take up a bigger role. When it comes to executing a financial plan, a larger organization would score better, given the kind of access to resources that they would have.
Summary:
It is also important that the planner should be able to provide you with testimonials or show his/her track record. At the end of the day, given the important role played by a financial planner, it is worthwhile to spend time and do appropriate due diligence before engaging with a planner. You can check out the National Association of Personal Financial Advisors (NAPFA) to locate planners.
Author Bio: Christopher is a full time blogger and part time financial counselor. He has invested his time and energy in producing quality information for ISA Rates and its subsidiary blogs. He is a passionate finance professional who wants to reach out to a large audience through web and media.
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12 Most Common Business Tax Questions
Most people can get away with doing their own taxes. Even if you itemize, there’s not that much that needs to be done in order to square things away with the IRS.
For businesses, however, it’s a whole different ballgame. Even a sole proprietorship in a service industry (where you don’t have to deal with much in the way of inventory) can face significant tax questions.
Here are 12 of the most common tax questions asked by small businesses:
1. When first starting a business, what do I need to do to keep from getting in trouble with the IRS?
The most important thing you can do is to make sure you’re keeping decent records. It’s most often poor record keeping (rather than dishonesty) that impacts small businesses during the IRS audit process. Keep all of your receipts, and use a reputable bookkeeping software program such as QuickBooks or Peachtree.
You’ll also want to get up to speed with what can and can’t be deducted as legitimate expenses.
2. Can I write off my vehicle since I use it to travel for business?
You can indeed consider your vehicle a business expense, but usually not in full. You have to be able to track just how much you actually use the vehicle for business. One of the best ways to do this is by creating a mileage log, noting the purpose for every trip.
When it’s tax time, you have two options: write off the use based on the “mileage” deduction which works with a cents-per-mile formula, or use the actual expenses that you pay for your vehicle at a pro-rated percentage.
3. Can I write off entertainment?
You can write off half the cost of entertaining clients and customers. If you have a party or other event for employees and their families, however, you can write off 100%. Here again, documentation is key; note who was in attendance and their business relationship.
4. What are capital vs. current expenses?
Current expenses are those everyday costs that keep your business running, such as office supplies or the electric bill. Capital expenses are those that keep the business running over time, such as a copy machine or furniture.
5. What is depreciation?
Depreciation is the process of writing off capital expenses over several years. Depending on the type of expenditure, you may need to write it off over three, five, or seven years.
6. Do all of my capital expenditures need to be depreciated?
Right now, Section 179 allows you to deduct the cost of your capital equipment all in the first year, but there is a limit to that amount. In 2010 and 2011, it was $500,000. For 2012, that limit will decrease to $125,000. Many small businesses will be able to cover all of their capital expenses in that single year.
7. Are there exceptions to Section 179?
There are certain things that Section 179 doesn’t cover. Inventory, buildings, land, and heating or cooling units aren’t covered. Vehicles are covered, but there are rules about what portion of the cost of the vehicle you can deduct.
8. Can I deduct a home office?
If your business is based in your home, you can deduct a percentage of your home’s costs, including mortgage, rent, utilities, homeowners insurance, and even remodeling. The office to be used primarily and regularly for business reasons, however; if it’s partly used for work and partly for personal reasons, you can’t deduct it.
9. Can I deduct my family’s expenses if they travel with me to a trade show?
If anyone else goes with you when you travel for business, you can deduct your expenses. However, you can’t deduct more than if you were traveling by yourself. You can’t deduct your family’s meals, and you can’t deduct additional expenses (such as a second hotel room) incurred by their presence.
10. Will incorporating help me pay less in taxes?
This really depends on the nature and size of your business. If your business is solidly profitable, it may be worth looking into incorporating. It’s often not beneficial during the first couple of years of a small business’ life, however.
11. Should I do my own accounting and file my own taxes?
For many small businesses, doing your own accounting and taxes can save money. However, it’s worth having a qualified professional review things at least once or twice a year. A small business tax professional can help you to avoid some nightmare scenarios that could come up during an audit, for example.
12. Should I hire employees or contractors?
The IRS has specific rules about this. If you tell workers how, when, and where to work, the IRS considers them employees. If they have their own businesses and have other clients, they’re contractors.
Your small business taxes don’t have to be a huge headache. Do your research, keep good records, and turn to an accounting and tax professional when you’re not sure if you’ve got it right.
About the Author: Dominique Molina is President of the American Institute of Certified Tax Coaches, an organization of tax professionals who are trained to help their clients rescue thousands of dollars in wasted tax and is a registered educator with the National Association of State Boards of Accountancy (NASBA). In addition to her blogging and speaking engagements, Dominique also provides engagement letter, accounting marketing and a range of accounting templates to her clients.
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The 10 Best Credit Cards for Small Businesses
Starting your very own small business can be a very exciting and very stressful time. Even before the doors open, a massive amount of work needs to be done to ensure the business is successful right out of the gate. Too many small businesses fail because they’re unprepared with initial costs and one of the ways to ensure any small business is getting the best bang for their buck is by owning a small business credit card.
Most small business credit cards are geared toward two types of rewards programs; travel and cash back. Here’s a look at the ten top small business credit cards available to business owners today.
The Plum Card® from American Express OPEN
My personal favorite, the Plum Card from American Express OPEN is a charge card which simply means that a small business owner has no pre-set spending limit. This also means the card has no interest rate so purchases are due in full every month. As an added bonus, if you pay 10 days early each month, you’ll receive a 1.5% discount, effectively providing you with a 1.5% cash back rate. There is an annual fee of $185, but it’s waived during the first year.
Ink Cash(SM) Business
The Ink Cash Business offers the biggest up-front incentive on our list, giving new cardholders a $250 cash bonus after they spend $500 in the first three months. 5% cash back is earned on office supply, cellular and cable services, 2% cash back is earned on gasoline and restaurant purchases and 1% cash back is earned on all other purchases. There is a limit of $25,000 spent annually that triggers the 5% and 2% cash back categories (so once you’ve spent $25,000 in gas and at restaurants, you’ll earn 1% for the remainder of the year) but this card also includes a 0% intro APR on purchases for six months AND does not charge an annual fee.
The New Business Gold Rewards Card® from American Express OPEN
Another one of American Express’s line of charge cards, the new Business Gold Rewards Card from American Express OPEN dishes out rewards points in tier levels. 3x points on travel purchases, 2x points on gas, advertising and shipping purchases and 1x points on everything else makes for a very solid rewards program. There is a hefty $175 annual fee which is kindly waived during the first year and every small business owner can expect the full line of AMEX perks.
Capital One® SparkSM Cash for Business
A fairly new credit card, the Cap One Spark Cash for Business is a no-nonsense small business card offering 2% cash back on every purchase. New cardholders will also earn a $100 cash bonus after spending $1,000 in the first three months with another $50 cash bonus coming after an additional employee is added to the account. The $59 annual fee is waived during the first year and this card includes a very low 13.9% variable APR.
TrueEarnings® Business Card from Costco and American Express
The best card on our list for the local traveler, the TrueEarnings Business Card from Costco and American Express offers 4% cash back on gasoline purchases (up to $6,000 spent annually), 3% cash back at restaurants, 2% cash back on travel and 1% cash back on everything else. The 1% cash back includes at Costco and there is no annual fee so long as your Costco membership is paid every year. Cardholders will also find a 0% intro APR on purchases for the first six months.
Bank of America® Cash Rewards for Business MasterCard® Card
Another great cash back business card to fill out our list is the Bank of America Cash Rewards for Business MasterCard Card. Cardholders will earn 3% cashback at gas stations, office supply stores and for computer network services, 2% cash back at restaurants and 1% cash back on all other purchases. There is no annual fee to own this credit card and it comes with a 0% intro APR on purchases for the first nine months.
The Business Platinum Card® from American Express OPEN
The most powerful of business credit cards, the Business Platinum Card from American Express OPEN provides its members the best perks any business card can. Complimentary airport lounge passes, an annual $200 travel reimbursement and 24-hour concierge service are just some of the things every business owner will receive when owning this charge card (remember, payment in full every month). The big downside to having this power and prestige is a $450 annual fee.
Capital One® SparkSM Miles for Business
Similar to the Spark Cash card listed above, the Capital One Spark Miles for Business offers double miles on all purchases. 10,000 bonus miles are provided to businesses that spend at least $1,000 in the first three months of card ownership and another 5,000 miles are awarded when an additional employee is added. A $59 annual fee accompanies this travel themed small business card but Capital One will not charge it for the first year.
SimplyCash® Business Card from American Express OPEN
The least expensive American Express business card to own; the SimplyCash Business Card from American Express OPEN provides cash back on every purchase. It’s earned based on purchase categories; 5% cash back on office supplies and wireless services, 3% cash back on auto gasoline and 1% cash back on everything else. Cardholders can save an additional 3% – 10% on select merchants like FedEx and Hertz and are also offered a 0% intro APR on purchases for 12 months. This card is annual fee FREE.
Capital One® SparkSM Classic for Business
The last but not least card to make this list is the Capital One Spark Classic for Business. This is actually the small business card I own, and I chose it because my credit score would be classified as below-average to average. The card offers 1% cash back on all purchases and does not have an annual fee. The upside is that it’s perfect for a small business owner with less than excellent credit … the only card on our list which is offered to mid-600 FICO score consumers.
About the Author: Founded in 2004, CompareCards.com is an online resource that provides expert reviews, tips and tools to find and compare credit cards. Visit CompareCards.com today and review the credit card deals that fit your lifestyle and/or current needs.
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4 Free Tools for Managing Your Small Business Finances
Every small business dream begins with the simple idea of making money while providing a needed product or service. As businesses evolve, their proprietors quickly learn that the product or service isn’t where all the effort is; tracking, managing, and even getting the money all take their fair share of work as well. While financial management can (ironically) be costly if you don’t have the right tools, there are plenty of free resources to help organize your business’s income, saving time and money. Keep your business on the right track (and out of debt) by taking advantage of these 4 free tools:
Mint
One of the most popular free finance tools is Mint.com, an online application that allows you to manage all of your financial accounts in one place. The clean, streamlined interface makes it easy to use, giving this tool major brownie points. Mint works automatically, pulling information from your checking, savings, investment, and retirement accounts, and displaying it visually with handy graphs and charts.
Beyond account monitoring, this tool helps you set a budget and financial goals, making it a valuable asset for any small business. The icing on the cake is Mint’s mobile device support and integration, enabling finance tracking on-the-go.
Sage Billing Boss
Who said invoicing had to be complicated (or costly)? This feature-rich invoicing system allows you to organize customers, track payments, and even collect money. You might be expecting a customer limit or an upgrade fee hidden somewhere, but all of Sage Billing Boss’s features—including unlimited invoices and customers—are completely free.
Built especially for small businesses, this tool integrates handy options like recurring invoicing, online payment tracking and quotes. If you’re looking to get organized and save time on small business invoicing, Sage Billing Boss might be all you need!
Google Wallet
Previously Google Checkout, this tool serves as a virtual wallet that securely holds your payment information for faster purchasing and better tracking. Google Wallet helps make light work of online purchases, storing your credit card and billing information for easy access when you pay through a merchant’s Google Checkout button. It offers fraud protection and even helps keep your email address confidential, keeping unwanted emails at bay.
Google Wallet’s latest feature is the ability to make purchases in-store using its mobile app; just tap the phone on participating credit card devices (at the time of this writing it only works with the Nexus S 4G phone).
Moneytrackin’
The key to staying organized is keeping relevant information together in one simplified location. That’s what Moneytrackin’ promises to do with its free online app. Keep tabs on income and expenses on all of your accounts, tagging transactions for easier grouping. If more than one person is involved with your business’s finances, you’ll appreciate the collaborative working capabilities this tool offers, including budget-sharing. This may not be as robust as Mint’s application, but it offers a clean-cut solution to organizing and keep track of your company’s finances.
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About the Author: Chris Turberville-Tully is a marketing strategist for Personal Touch Debt Solutions, a debt management company providing personal security, debt payment plans, expert advice and more.
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Photo Credit: Images_of_Money
Why Tracking Your Expenses is Smart and How to Start Today
Unless you’re willing to take on some extremely high monetary risk, the old adage is almost always true: you have to spend money to make money. No matter what your business involves, there will be some costs associated with it. There’s a reason why the retail industry as a whole spent well over 8 trillion dollars on operational expenses in 2009, according to the U.S. Census Bureau.
If you’re a startup, it’s even worse – you need to be sure that you have plenty of extra money around in order to anticipate any unexpected costs. Add to this the fact that fiscal irresponsibility and lack of financial planning are two of the biggest factors in business failure. Being lackadaisical about monitoring your cash flow can quite literally cost you your business, and spending money on things you didn’t need, or failing to shop around, will sting in retrospect. So, it should be very clear that you need to track every cent that is received and spent by your business. For entrepreneurs, especially online entrepreneurs, you may need to do this tracking yourself.
Organizing Your Expenses
The first step involved in smart money tracking is categorizing your business expenses. Creating a balance sheet is perhaps the most comprehensive way to examine what you’re spending money on.
A balance sheet contains both assets and liabilities. In very simple terms, assets represent the money that you have, while liabilities represent where you’re money is going. There are two types of liabilities: current and non-current. Current liabilities include:
Accounts Payable – These expenses represent money owed to trade suppliers that have provided goods as inventory or other services essential to running your business.
Accrued Expenses – These costs involve money that is owed but not billed, such as payroll taxes and wages.
Notes Payable – These involve obligations such as promissory notes that mature within one year.
Current Portion of Long-Term Debt – This figure represents the amount of long-term debt that must be paid within the next year. An example of this would be a large loan that was used to purchase a business space.
Non-current liabilities include:
Notes Payable to Officers, Shareholder or Owners – This is exactly what it sounds like. If you’re a small, startup Internet business, you might not have to worry about these costs for a while.
Non-current Portion of Long Term Debt – This involves term loan expenses that are due after one year.
Contingent Liabilities – This category accounts for things that may become liabilities, such as lawsuits.
These categories are standard for any business. In simpler terms, a balance sheet forces you to think about common expense categories such as:
- Taxes
- Utilities
- Employees (wages, benefits)
- Office supplies
- Vendors
- Loans
- Insurance
- Licenses and permits
- Rent/mortgage
- Advertising/marketing
- Leasing equipment
Costs associated more specifically with Internet businesses include:
- Domain name
- Internet service
- Hosting
- Software
Tools For Tracking
It’s simple to create a balance sheet using a spreadsheet editor such as Microsoft Excel or a free alternative such as Google Docs spreadsheet (the latter allows you to easily share the document with co-workers). Microsoft also offers a free balance sheet template for Excel users. Several other programs exist for managing business expenses, including:
- Quickbooks
- Sage Peachtree
- Quicken
- Texthog
- Outright
These products vary in cost and features. For example, Outright is free, while Quicken starts at around $20. Some of these programs also allow you to focus on your personal expenses. Also, it’s important to have a filing cabinet that has folders for each of your categories. Keeping receipts, bills, check stubs, invoices and other paper documents in order is essential for staying organized. If you receive many of these notifications through email, consider using an email client such as Thunderbird to easily create folders and manage these types files.
Staying Smart
There are some specific practices that should be considered in order to most effectively track your expenses. They include:
Personal vs. Business – Always pay for business expenses from a dedicated account. Not only is it ethically justifiable, but it makes tracking much easier. Keep all business files apart from personal files, and get a dedicated business credit or debit card.
Adapt – The whole purpose of tracking your expenses is to avoid spending money needlessly. If there’s anything in your files that you could be paying less for, always investigate your options. For example, it’s imperative for an online business to compare Internet providers instead of paying an unnecessarily high rate.
Do the Work Immediately – Effective tracking involves processing invoices and purchases right away. Getting behind can lead to lost files and inaccurate expense reports.
Hire Out – If your business gets big enough, it’s very wise to hire a CFO or pay for an accounting consultant’s help. It’s better to spend the money getting it done right rather than doing a rushed, incomplete job yourself.
Don’t Forget About Deductions – As you track your expenses, it’s beneficial to make note of the things that you can deduct from your taxes. Check out the IRS page on deducting business expenses to learn more.
About the Author: Mitch O’Conner is an online marketer and writer. When he’s not busy testing sites, generating traffic or writing content, he enjoys spending time with his wife and kids, watching TV, playing games or going camping.
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Crowdfunding Your Startup [INFOGRAPHIC]
In a down economy, it’s difficult for entrepreneurs to access the capital needed to build their venture from the ground up. Luckily, projects can now be funded by a powerful combination of the social Internet and generous networks of friends, colleagues, and communities. This model is called “crowdfunding” and is sweeping the startup nation by storm. It seem s to be an entrepreneurs dream,. bit are there problems in the way?
Check out the below infographic on how to navigate the new crowdfunding landscape (click image for larger view).
Click for Larger View
infographic source: drawing a crowd
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When Small Businesses Need to Collect on Outstanding Debts
When the economy is in the current shape it is, it behooves small businesses to make sure they’re collecting on any outstanding customer debts. That being said, what are the best ways to go about doing that? Read more
7 Things Businesses Should Know Before Opening A Business Banking Account
Anyone who is in business is usually trying to stay afloat in this recession and concerned about keeping costs to a minimum. Running your business income through your personal account may seem like a great idea, however, there are some things you should be aware of.
Income Taxes:
Keeping your business income and expenses separate is a must come tax-time. Being religious about keeping these separate will make life a lot easier down the road. If it isn’t a business expense, then you won’t use your business checking. Simple as that. Business is for business, personal for personal and never shall the two meet.
Figuring your profit and loss, balance sheets and tax returns will be a breeze, especially if you use accounting software such as Quicken to track your business checking account. Everything is automatically put into the right categories for you so you can examine monthly, where your biggest expenses are, and where you can minimize expenses.
Better Money Management:
Having a business account helps you budget, because if you don’t use it for personal reasons, there tends to be funds left over at the end of the month. You can transfer from business to personal when needed, and even that is a write-off. Everything that you run through your business will become a business income or expense and therefore much easier to see where your hard earned cash is going.
Professionalism:
The more you act like an established business, the more you will be perceived as a successful business. Having a business account will allow your clients to perceive you as a professional.
Having a business account, business cards and a professional answering service will give you a means of business credibility and representation, as well as give you the confidence to land more clients.
Business Account Uses:
When you open a business account, money can be allocated for investments, partnerships and make business payments, keeping your business credit optimum. If you have employees, paying salaries from a business account is mandatory, especially if you have a corporation, or LLC.
Business Account Benefits:
Business accounts at major banks offer benefits such as special discounts on business products, and special promotions. And, there are perks such as sub-accounts, direct and free connections to personal accounts, the ability to obtain better rate credit cards and financial rewards.
Type of Business Account:
Each financial institution is different, however, there are many choices that should be considered when opening an account. How many checks do you write, how much income is run through the account monthly? What is your average balance monthly? These are things that should determine what type of account you choose.
There are small business accounts, which offer new and smaller businesses a business account with no fees. Some accounts offer no fees if you keep a specific balance or a specific amount of checks are written, so make certain you look closely at the options.
Risks Involved:
The times when business is slow, finding yourself with insufficient funds can cost you a fortune with a business account. The fees are escalated, which makes matters worse, and your business associates could lose confidence.
Also, because you have a business, banks tend to see you as credible and offer you business loans, especially if your credit is worthy. These loans can escalate when times are slow, and end up costing you more than you make just paying them back.
Disadvantages:
Usually, interest-bearing accounts offer less interest on business checking than a savings account. And, there are fees associated with a business account that are not charged with a personal account or savings.
- Overdraft fees and interest rates are higher for businesses.
- If your credit is iffy, your ability to get a business account may be jeopardized.
- Opening a business account requires a lot of paperwork, and the approval process is sometimes tedious, and time consuming.
Conclusion:
Essentially, the benefits outweigh the disadvantages, and having a business account is sometimes a necessity in keeping your accounting straight, your tax information handy and to allow the clients you work with to see you as much more worthy when writing checks made out to your business, instead of you personally.
Business accounts lend credibility, especially to a new business.
About the Author: Ally is part of the team that manages How To Save Money, a personal finance blog that wrote about How To Save Money On Your Food Indulgences. Before joining BS, she was a Media Planner with McCann Worldgroup Philippines, Inc., with award-winning executions, including the Levi’s 501 “Live Unbuttoned” global campaign.
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Three Options for Small Business Payroll
When starting a new business it is very easy to forget, during the budgeting stage, one of the most important costs a company will accrue. At the heart of every business, perhaps even more so than the services provided and products sold, are the people who undertake the day to day running of the operation. Read more
3 Options for Dealing With A Financial Crisis Without Resorting To Lay-Offs
When a company’s running cost comes dangerously close to the amount it earns, it becomes necessary to cut costs, of course. Well, most companies will begin with cutting out unnecessary expenditure. And ultimately, a company might be forced to lay off employees.
