Monthly Archives: March 2009

Small Businesses Use Invoice Factoring to Pay Taxes

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Small businesses that owe taxes this year, and are short on the cash to pay their dues, can use invoice factoring to cover their tax debts. This is your peace of mind solution. In the meantime, to avoid huge tax debt, here are some things to remember.

Sole proprietors take heed — even though all of the funds that come into your small business are yours, it’s a good idea to keep the money separate from your personal expenses. Why? At tax time, by separating your expenses, you will find that it is much easier to keep track of your expenses. Keeping a separate telephone (even the cell phone) for your business use makes it easier to calculate telephone deductions. Your business cards, domain name and website hosting, advertising, plus other office supplies are deductable.

Here’s the good news: fifty percent of your business related meal or entertainment expenses are deductible. And, those people who are contributing to a retirement plan can deduct those costs. The same goes for health insurance expenses.

Tips that you may not know include: Use your debit card or checks to pay expenses from your business account. Avoid cash withdrawals. As for your vehicle expenses –gasoline and parking costs, oil, tolls and even insurance can be deducted instead of your mileage. Small business owners can take either the standard mileage deduction or the actual expense deduction but parking is deductible even if you choose the mileage deduction. Or, rather than recording mileage, be sure you use a mapping website like Mapquest.com to calculate the mileage only to and from business-related destinations.

If you maintain a home office, you may deduct that percentage of space and a portion of household expenses, including utilities.

When it comes to your IRS and tax questions, just remember when in doubt you can always check the small business and Self-Employed Tax Center at www.irs.gov.

And don’t forget, long used as a way to provide peace of mind, you can sell credit-worthy invoices to an accounts receivable factoring company like IFG, and acquire additional funding for immediate working capital to pay your taxes.

Find out more about how invoice factoring can help you with your small business taxes.

Economic Stimulus Act: How it Affects Small Businesses

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Many people are wondering what changes will affect taxes in 2008 for businesses under the Economic Stimulus Act. On March 16 there was a press release issued by the Internal Revenue Service (IRS) stating that a new law is extending net operating loss carryback for small businesses. Businesses with large losses in 2008 may be able to benefit fully from those losses now, rather than waiting until claiming them on future tax returns.

This is a new net operating loss tax provision to get a tax refund from taxes that businesses paid in years prior. The IRS has updated the instructions for two key forms Forms 1045 and 1139. Small businesses can use these forms for this 2008 tax year carryback provision. With the economic downturn the IRS expects record numbers of small businesses to be eligible for refunds, and they are ensuring that refunds will be paid in a timely manner.

For any business that cannot wait for this tax benefit, invoice factoring might be the solution.

Reasons Why Small Businesses Fail

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Often times, small businesses never even get off the ground because of three things: Fear of failing, lack of funds and limited ideas. But primarily, lacking the money to sustain during the startup phase of the business is why most people fail.

That’s why accounts receivable factoring can be of such a tremendous benefit for small startup businesses.

Invoice factoring will allow a new company to sell their products or services, and not wait 30, 60 or 90 days for payment – so they can do more business, keep up with supplies, manufacturing costs and payroll, to do more business and stay afloat.

To find out more about how invoice factoring can help your new business, go to www.ifgnetwork.com.

Entrepreneurial Finance in 2009

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According to Scott Shane, A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University, “Attitudes toward financing start-ups and small businesses will change
during 2009.” He sees a new realism about entrepreneurial finance emerging. Scott Shane is the author of over 60 scholarly articles on entrepreneurship and innovation management.

“Entrepreneurs are beginning to recognize how difficult it is to raise money for their companies, and are beginning focus more on finding the right sources of capital for their businesses,” said Shane.

Entrepreneurs are also trying new tactics like accounts receivable factoring, to keep their new bsuinwesses afloat during these touch times. Invoice factoring has been practiced for thousands of years, but today there is an increase in a new method called single invoice factoring. Factoring invoices one at a time as needed, allows a company to stay current and grow.

Shane sees that entrepreneurs are becoming less willing to start businesses without capital. He also notes that investors, angels, and venture capitalists are lowering their expectations of how much money they will make off of a new investment. At the same time, they are increasing their expectations of how long it will take for their exit strategy

Tips for Improving Cash Flow

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Cash flow means the flow of cash that comes into and flows out of the business. Following are some suggestions for small businesses to keep the flow going.

As we all know, running a small business can be time consuming, and many entrepreneurs find that they get so busy running the business that they forget to do their billings. Then when they do get around to it, they realize that the cash to cover the payments that are due is short.

It is really important to put a billing system in place, for billing on a regular basis. It is a good idea for longer-term projects, to negotiate regular payment installments in advance. This way the amount due will not build up.

Another tip is to remember that when and if you get in a pinch, accounts receivable factoring can save the day. More and more businesses are using the new single invoice factoring for extra cash flow.

To find out more about how invoice factoring can help you grow your business, go to www.ifgnetwork.com.

Benefits of Accounts Receivable Factoring

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About.com has a great definition page for accounts receivable factoring — the selling of outstanding invoices or receivables at a discount to a finance or factoring company that assumes the risk on the receivables and provides quick cash to your business. This site also list three main benefits of factoring:
1)You can pass off collections: Outsourcing your accounts receivable management to another company frees up resources to focus on other more productive activities such as selling.
2) Businesses can free up working capital: Many companies have the majority of capital tied up in inventory. Accounts receivable funding allows a company to free up capital that is tied up in inventories.
3) Invoice factoring is great for quick financing: Accounts receivable factoring will not require a business plan or tax statements. It’s a quick form of cash often used for businesses that are experiencing a cash crunch.

The History of the U.S. Economy

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Over the last 70 years, the United States economy can be divided into two periods: the time immediately after World War II, and the past three decades when worldwide economic forces and government policies caused it to soar. Today, President Obama appears to be setting out to begin a third period.

The average post-tax income of the top 1 percent of households has jumped by roughly $1 million since 1979, adjusted for inflation, to $1.4 million. The experts are still sorting through the details from Thursday’s speech by Obama, however, various tax cuts and credits aimed at the middle class and the poor would increase the take-home pay of the median household by roughly $800.

Tax increases on the top 1 percent, meanwhile, will most likely cost $100,000 a year. President Obama’s proposals are just like as Franklin D. Roosevelt’s tax increases on the wealthy followed a stock market crash, which had already depressed poeple’s incomes. The combination has the potential to reverse a significant portion of the inequality trends of the last few decades.

Economic growth experts belive that the American economy is not likely to grow as fast as it did in the 1950s and ? 60s. Therefore for small businesses that are trying to make ends meet during this slow growth perdio, one way to remain solvent is to consider putting accounts receivable factoring in place. IFG provides invoice factoring, specifically single invoice factoring, services to small B2B enterprises. If your business has a need for immediate cash and is in the process of fulfilling orders, or has accounts receivable invoices, IFG Network stands
ready to help you.

Get started and find out how invoice factoring can help you grow your business.

Small Businesses Can Implement new Cash Flow Measures

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On February 25, the House of Representatives passed a $410 billion spending bill to keep the federal government operating for the remainder of fiscal year 2009. Then President Obama released his 2010 budget outline that raises taxes for the wealthy, while cutting taxes for the poor and middle class, sets aside more money for banks, talks to climate change, promises to expand health care, and projects $23 trillion in gross national debt by 2019. The president emphasized the economic crisis presents an opportunity for long-neglected reforms across a landscape of policies that will eventually strengthen the economy.

Just as American families are having to making sacrifices, so are small businesses — cutting expenses due to tough economic times. Many small businesses, including the construction industry, can get by if they implement new proceedures too – such as accounts receivable factoring. For years, construction factoring been used in the construction sector was up by 40 percent in the fourth quarter of 2008. The recent tightening of credit markets has been especially hard on the construction industry. Along with industry trends such as sustainable building, there are changes in building code standards that are affecting the industry. The economy and the lack of consumer confidence promise to make 2009 a challenging year for contractors.

Contractors and subcontractors have certain rights under construction laws in each state involving guaranteed payments for labor and material providers, so one of the latest trends emerging is an increase in using factoring. It provides contractors with cash flow to pay suppliers and meet payroll.

Single invoice factoring is a highly effective cash management strategy, particularly in the construction industry and for sub-contractors who often experience cash flow problems. Factoring allows businesses to obtain funds based on their current accounts receivable.

Factoring Promotes Profits and Growth

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Growing Wealth magazine did an article in 2007 on factoring entitled, “Factor in Growth and Profit,” highlighting how when companies are looking to grow business or increase profits, factoring is often an ideal solution.

One of the major challenges facing almost any business owner is to maintain and control a positive cash flow. The article goes on to point out that one of the least understood and underused options to increase cash flow is factoring which can help a business meet immediate operational expenses, such as payroll, equipment, materials or taxes , but also to fund growth.

When you think about it, the factoring process is like that of the credit card business, except that factoring deals only with business-to-business transactions. A business (client) sells its accounts receivable to a factoring company (factor) rather than waiting for money from its customer. As a result, the business improves its immediate cash flow. The full amount of the accounts receivable is then collected by the factor from the customer, making a profit.

Here’s one example from the article. A company is operating with $100,000 working capital and 5 percent net profit. They receive a new order from customer A that exhausts the company’s capital. If the company delivers the order on January 1 and invoices customer A on credit terms of net 30 days, the company will have to wait one month to recoup its expenses and increase its working capital by $5,000. At this rate, it will take the company 20 months to double its working capital. What’s more, if the company receives an order during January from customer B, and there is no working capital, it cannot process the order.

However, if the company factors the invoice of customer A, receiving immediate cash, it can process the order of customer B, and the company’s working capital and sales could practically double overnight. When the factoring process is repeated for customers C, D, and so on, the company grows rapidly and almost without limits.

The impact of accounts receivable factoring on profits can be seen readily by comparing the bottom line before factoring with the bottom line after factoring, which enables the company to provide service to a second customer: The profit after factoring increased both dollar-wise (from $5,000 to $25,000) and percentage-wise (from 5 percent to 12.5 percent). By investing $5,000 in factoring, the company increased its net profit by $20,000 ? or a 400 percent return on the investment in factoring.

Small Businesses can Save Money AND Go Green

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Going green doesn’t necessarily mean smaller businesses ned to spend alot of money for green improvements in the office. The reality is that using environmentally friendly products can help save money down the road. Following are some tips to help you go green.

1. Carpooling saves gas, money and the environment. If you reimburse employees for travel miles, then sencouraging them to carpool and also hold out of the office meetings close by not onlye will help save our environment, but will help you save money.

2. Change the light bulbs. Make the switch to compact fluorescent light bulbs. Why? Because they use around 75 percent less energy, plus they will last longer – eight years longer. These bulbs may be more expensive than regular light bulbs, but CFLs will save money.

3. Turn off computers. This will help lower energy costs and means less wear on the computers, and that will save money for repairs down the road. The U.S. Department of Energy, says that computer monitors should be shut off if you are away from your desk over 20 minutes, and shut down completely after work.

4. Start accounts receivable factoring. Factoring will help keep the cash flow going in smaller businesses, so that you can keep going, and pay for supplies and working capitol, so you can purchase newer green products that will help you save more int he longrun while helping turn your office green.

Also, single invoice factoring, otherwise known as invoice discounting, is a unique factoring practice, and it’s often better than standard invoice factor services provided by traditional old line factors. You can sell credit-worthy invoices one at a time to a factoring companies like IFG, acquiring additional funding for immediate working capital.