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January 14, 2019

5 Finance Management Tips for New Entrepreneurs

manage your moneyThe reason most entrepreneurs set up in business is, at least partly, to make money so financial management is a crucial skill which all new business owners or would-be entrepreneurs need to learn if they want to be successful.

However, managing finances isn’t always a skill which comes naturally to many. Entrepreneurs tend to be focussed on their big idea and making it a reality, but the money side isn’t necessarily where there energies are naturally directed.

While you can always outsource your finances to a professional accountant to a certain extent, you still need to know and understand your numbers to enable you to spot any issues or trends which you might need to address within your business.

Here are five tips for new entrepreneurs to help with financial management:

1. Record and organise your finances

Whether you are managing your finances yourself or supplying all of your information to an accountant to deal with, it’s important to be organised and keep records of all of your income, outgoings and expenses.

This includes keeping copies of all your receipts, invoices, and any other paperwork related to financial issues, in an orderly fashion. Just putting them all into a shoe box won’t cut it when you are an entrepreneur.

Just using a simple spreadsheet to record income and outgoings can be enough to start with, when setting up a new business, or as the business grows you might need to invest in accounting software to help record all of the financial transactions.

2. Keep track of your credit score

As an entrepreneur you might well need to seek funding for your business either to start it up at the beginning or further down the line to help with an expansion of your services so make you’re your credit is up to scratch.

The last thing you want to do is start a business only to find your credit score or existing level of debt means you can’t get the funding you need to grow the company a few years down the line. Take action to improve your credit score ideally before you start out.

3. Have an emergency fund

While setting up a new business often involves expense rather than profit initially it’s still important to make sure you have money put aside for an emergency – you might need to suddenly buy new equipment or replace a computer for example, so try saving an emergency pot to help take the pressure off.

You can create the fund easily by putting a small amount aside every week so it needn’t be too taxing to save enough to help keep as a buffer. You never know when a client might not be able to pay you or a supplier might go bust so an emergency fund can be the difference between success and failure.

4. Seek professional advice

If you are brand new to business then don’t get daunted or overwhelmed by all of the financial obligations or requirements. If the finance side is beyond your knowledge then don’t bury your head in the sand but seek professional help.

Whether you hire a full-time professional accountant or use the services of a part-time book keeper they can both help and provide expert advice to guide you as you take your business forward as well as looking after the books. You can even make it easier for you by signing up for accounting services offered by companies like Crunch. You can find out how they help small businesses here.

5. Set short-term and long-term financial goals

As well as knowing and understanding your business numbers you should set financial goals for the business to achieve as well. Have short term goals for what you want the business to achieve in the next month, the next quarter and the next year.

You should also have a longer term forecasting tool to predict the income you expect to bring in over the next year to five years, to help make sure you keep your business on track and meet all of your income goals.

As well as your business goals you should also set savings goals which allow you to have enough put aside to pay your tax contributions every year so you don’t get caught out with a big bill at the end of the tax year and nothing to pay it with.

Conclusion

Financial management is a key element to running a business and is a skill which every new entrepreneur needs to learn if they are to be successful in the corporate world. No business can survive if it’s not financially viable.

There are few tips here to help make financial management easier to cope with but if financial management really is beyond your skill set then you should always seek professional guidance and advice to make sure your business can still thrive, leaving you free to focus on the aspects of entrepreneurship where you are strongest.

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September 12, 2018

Tips on Using Credit Cards Responsibly

using money cardsThese days, credit cards are driving the consumer market all around the globe. This is a mode of payment that yields benefits like car rental coverage, cash-back points, and automated payments just to simplify our lives.

However, a user needs to be aware of the ways in which a con artist can misuse these credit cards. It’s truly essential as these cards can yield disastrous outcomes when misused. With cards depicting high APR, you may find it tough to pull out of your debt burden. Avoiding debt is your only way out this problem.

You may do your research on using credit cards if you really wish to handle them responsibly. You may come across several online resources illustrating the use of credit cards regardless of whether you’re applying for your first card or is paying off dues to improve your credit rating. While repaying your credit card debt, you must arrive at an affordable minimum payment like when you calculated your personal loan EMI.

Know how to use your credit cards from now on:

1. Repay Your Credit Card Balance Each Month

You must stay focused on repaying your credit card dues every month. You shouldn’t find an excuse since it charges more out of your bank account once you fail to live up to these payments.

You’ll need to bear an interest worth up to 25% based on the outstanding credit balance if you fail to make a payment or opt for making a minimum payment.

You can only keep high rates of interest from piling up if you pay off your dues each month. You must also refrain from skipping a payment. You might have to pay a penalty interest (up to an APR worth 30%) in case you miss out on a due date. Your credit score takes a hit when you actually need to pay a penalty.

2. Restrict Credit Utilization to a bare minimum

Apart from improving your credit score, it will even help in restricting your debt. Credit utilization is the metric that constitutes a large portion of your credit score. Your FICO score tends to rise when your credit utilization falls.

For instance, your credit utilization looks great when it’s valued at 16% after you’ve used 2 credit cards with a balance worth $600 and a combined limit of $3,100. In order to fetch the maximum benefits, you may choose to restrict it below 30%. While avoiding the risk of acquiring debt, you’ll even enjoy an improved credit score.

3. Avoid Using Multiple Credit Cards Simultaneously

You may be lured by the benefits of opening several credit cards especially when you’re seeking the advantage of being a new cardholder or attempting to redeem reward points. You may be thrilled to make the most of cash-back or 0% APR offers. However, you must refrain from opening multiple accounts till you’ve learned to use a single card responsibly.

Chances of overspending get increased when you have several cards in your arsenal. You may even miss out on a due date. You must restrict the number of cards in your wallet as you won’t like to fall prey to any of these incidents.
Credit cards are indeed a very useful tool when you know how to use them properly. By considering the tips mentioned above, you may certainly walk a step forward and repair your credit rating. It will help in securing the financial future of your loved ones.

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June 26, 2018

Reasons behind choosing FDs over other traditional forms of investments

bank investmentsIt’s not advisable that you keep your surplus funds in a regular savings account for long. In that case, you can’t just expect a high ROI against this fund. You may choose to go with multiple options like mutual funds and shares, but they have an element of risk. The risks are much lower with FD investments as they’re regulated.

What’s so special about Fixed Deposits?

You may open FD account while you’re looking for some safe and sound investment option. Besides being safe, FDs yield a lucrative rate of interest for the investors. You may earn quality interests on the amount that goes out in your FD account for a certain period.

1. Fixed Deposits create earning opportunities by compounding interests

FDs yield interest for over a uniform period when issued by banks. If you don’t need the amount of interest to come as regular quarterly or monthly income, you may consider reinvesting in your FD account. You’re likely to witness a growth of the principal amount and the interest of the upcoming period will be ascertained on the new value. In this way, you’ll end up earning more on the invested amount. All you need to do is to pick your payment option besides opting for the compounded FD option. You may use any FD calculator online to check the returns.

2. Sound investment option for senior citizens

You may consider an FD among the most lucrative investment options when you don’t have a source of steady income, especially when you’re old and retired. Many of the Indian banks provide you with an FD account and abide by the safety norms laid out for protecting your invested principal. The rates of interest might not be very high, but you may still gain something on these deposits. Under circumstances when you’re heading towards a financial crisis, you may close all FDs even if they haven’t matured.

3. Fixed Deposits yield tax-saving opportunities

FDs come with great tax saving options when you’re specifically interested in investing a portion of your funds for a long term. You may avail them in the form of a 5-year term deposit and set your money to be locked in for those 5 years. Until the maturity of your FD, you won’t be able to achieve credits or loans on your fixed deposits and can’t break them. With tax saver FDs, you may enjoy tax exemption on the principal amount invested by you. Depending on the tax slab, taxes are levied on the interest.

4. Fixed Deposits are much safer

The RBI governs all FD schemes that are issued by the NBFC and Indian banks. Issuers of these schemes are required to follow certain stringent regulations and rules from time to time. In India, the banking industry is safer for the investors as most saving schemes yield adequate protection towards the principal.

If you’re not among those who looks for a high ROI then you may be in need of a more secure investment. FDs are certainly one of those safer schemes that you’ve been looking for. All of your capital is in safe hands as the FDs are regulated by stringent norms laid down by the government authorities. That is also the reason why FDs are considered so safe for the members of low-income groups that don’t possess any alternative source of income.

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June 19, 2018

5 Things to note before taking your first personal loan

obtain personal loansIf you’re taking out your first online personal loan, it probably means you don’t have a credit history or a credit score. This doesn’t however hold true if you’ve had or currently have a credit card (if you’ve had a credit card in the past, you’ll have a credit score). Lenders use your credit score obtained from your credit report to understand how good you’ve been at managing credit in the past. Personal loans are unsecured loans that don’t involve collateral, and usually come with a higher interest rate in comparison to secured loans. This is precisely the reason why having a good credit score is important for your application to get approved.

Let’s forget the credit score part for now. If you’re a first timer, here are some things you should note before taking your first unsecured personal loan:

Know the various charges involved

Personal loans come with a list of charges that include late payment charges, EMI bounce charges, processing charges, pre-closure charges, and part-payment charges. When you’re taking out your personal loan for the first time, make sure you are aware of the various charges. It is of course, always good to be aware about how much lenders are charging you.

Choose a short repayment period

Choosing a short repayment period helps reduce the interest payment over the course of your loan tenure. Longer tenures attract higher interest payments, but lower monthly repayment amounts. As your first loan, you wouldn’t want to pay too much interest, do you? However, if lower monthly repayments suit you, you should go ahead and choose a longer tenure, for you can always pre-close your loan after a certain period. Note that most lenders require you to complete a minimum of 6 months or 12 months of your tenure before you can pre-close.

Don’t borrow more than you need

Your approved amount might be higher than what you asked for – lenders use this tactic to make you borrow more. Don’t fall for it thought. Borrow only how much you need. Borrowing more than you need is just setting the platform for unnecessary debt accumulation.

Negotiate the interest rate

Negotiating the rate with the bank will help you get a lower interest rate on your loan. Moreover, if you don’t have a credit history, there’d be multiple lenders in the market willing to offer you a loan. Going by this logic, it is advised that you negotiate the interest rate on your loan to get a reduced rate.

Don’t apply with multiple lenders

Applying with multiple lenders negatively affects your credit score. Too many credit inquiries reflect credit-hungry behavior, and lenders can reject you on the basis of this – rejections bring down your credit score as well. So for starters, make sure you apply with only one lender.

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September 4, 2017

Loan Types to Consider if You Own a Small Business

offering business loansSmall business owners are earning increasing visibility in Western society, and are increasingly applauded for their courage in setting off on their own. Founders pour their hearts and souls into both startups and other types of small businesses, and for many people their lives revolve around their company. But even once your small business is off the ground, you’ll likely need to take out loans of some type to cover expenses and to help you expand your company. Read on for some basics on the different types of loans that you could take out, depending on your business’ specific needs.

Business Line of Credit

A business line of credit offers you readily available cash whenever you need it for your business. Like a line of credit for a credit card, there is a fixed maximum, but you only pay interest on the amount of money that you actually use. Also as with a credit card, funds are there for your business when you need them, even if what you really need is physical cash.

Different lenders will have different terms with your business line of credit, but some may require that you routinely pay off the entire amount. Even if your specific line of credit only requires you to pay interest, it is always a good idea to pay off portions of the principal as regularly as possible.

Business Credit Cards

Business credit cards are very similar to the personal credit cards that you already have open. Unlike a business line of credit, withdrawing cash from a business credit card typically incurs high fees, but there are other benefits to business credit cards. Depending on the specific card, you can earn cash back bonuses or “points” on various purchases, which may help you cut costs in the future. You can also build your business’ credit, even if you already have the capital you need, by making relatively small purchases on your business credit card and paying them off quickly.

Term Loans

Small businesses can apply for term loans, which would give you a lump sum of money that must be repaid within an agreed-upon amount of time. Term loans do also accrue interest, which typically must be paid back monthly. Term loans may be repayable in extremely variable time periods, from several months to several years. These loans are best for business that are looking to make big purchases or investments, but need a one-time financial boost in order to do so.

Equipment Loans

If your business needs to purchase new equipment or machinery (including computers, printers, or other industry-specific needs), equipment loans may be the way to go. These are especially beneficial when a business has no other costs that require a loan, except for the equipment costs. Equipment loans are typically made for the exact amount of the desired equipment, and may sometimes be kept for the entire lifespan of the equipment. As with all loans, equipment loans will accrue interest, which will need to be paid back regularly.

In addition to these more standard loan types, there are also some less traditional loans, such as competitive loans offered to small businesses by online companies such as LendGenius. To learn more about these non-traditional finance options, and the potential benefits for your business, visit their website.

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