When it comes time to get paid, writing an invoice is essential. Not only does an invoice request payment from a buyer, but it also serves as an important record of your transactions. One of the most important elements of an invoice are the payment terms. Your invoice payment terms tell the customer how soon […]
It’s no secret that being paid late is one of the most common challenges business owners face, especially small business owners operating on tight budgets. Yet sometimes payments are intentionally made after a service or good has already been provided. There is a term for this kind of prearranged late payment: “paid in arrears.” Most […]
Verifying financial records is critical for businesses of all sizes. An important process to help maintain the integrity of your records is invoice reconciliation. From small businesses to large corporations, understanding the details of invoice reconciliation is necessary to manage finances effectively. Doing so can uncover accounting errors, offer insights for spending, and detect fraudulent […]
Mastering the art of accounting is one of the most frequent challenges small business owners struggle with tackling. But overcoming the accounting hurdle is pivotal, and knowing how to reference and define terms correctly will prevent bookkeeping errors that could otherwise put a business in jeopardy. Two accounting terms you will hear in business that […]
Often, you’ll hear the terms “invoice” and “bill” used interchangeably, and you won’t think twice. But depending on who you ask, you may get slightly different definitions of an invoice vs. a bill, potentially leading to even the most experienced accountants dealing with confusion when balancing the books. On their own, terms such as invoice, […]
As a first-time business owner or someone new to handling accounting procedures, you’re going to come across a plethora of new terminology, such as “payment terms” and “Net 30,” both of which pertain to the invoicing process. Since properly managing your accounts payable (AP) and accounts receivable (AR) processes is necessary to achieve long-term success […]
You have probably heard of an invoice but have never been faced with the challenge of writing an one yourself. While a common business document, it can be intimidating to create an invoice, leaving many to wonder where to start. In this article, we will cover what an invoice is, how to format one, what […]
When it comes to getting paid for the work you do for your clients, few things are more important than having a solid invoicing system in place. An itemized invoice serves as a valuable record of money owed, while also helping set a deadline for payments. Businesses historically sent their invoices through the mail; however, […]
Managing your paperwork is one of the less exciting aspects of running a small business — but it is also one of the most important. An efficient invoicing process can make all the difference for your cash flow and can help you achieve your growth goals. However, many small business owners find themselves confused about […]
It’s not uncommon for people outside of the procurement realm to confuse purchase orders with invoices. Even seasoned business teams mix up the terms from time to time. However, purchase orders (or POs) and invoices are two distinct and essential financial documents, so failing to understand their differences can negatively impact company expenses, documentation, and […]
An invoice is an essential component of any transaction between two parties. In fact, invoices are one of the earliest expressions of written records, being traced back to 2900 BCE when merchants would carve details of transactions on stone tablets. While the layout of a modern-day invoice looks quite different from 5000 years ago, its […]
Learning how to send an invoice may not be the most glamorous aspect of running a business. However, the efficiency of a business’ invoicing process can significantly alter cash flow and be a determining factor into whether important growth goals are met. One survey showed that 49% of B2B invoices become overdue, while a separate […]
As a business owner, knowing your finances like the back of your hand is crucial during important decision-making processes. Among the most important financial metrics that help business owners analyze their trajectory are gross profit and gross margin. Often, these two terms are used interchangeably and sometimes get confused with terms such as net profit […]
Working capital is the money that a company has available to manage its day-to-day operations. Used to pay a business’s short-term expenses, working capital is an important metric in determining the financial health and operational efficiency of a company. To help you better understand what your net working capital and working capital ratio are, we […]
Business owners who are considering invoice factoring to improve A/R cash flow may wonder what the payment process looks like between their customer and the factor. For most factoring companies, lockboxes play a vital role in this process. They provide a source for both parties – the debtor and the factor – to transfer and […]
Essential to any business is having customers pay invoices as quickly as possible, at least within the period allowed. The Average Collection Period ratio is a metric that can help determine how efficiently this is happening. Monitoring this metric can help a business determine if they have a collection problem than needs to be addressed. […]
There are many calculations and metrics that can provide valuable insight into your business operations and financials. One metric, the Accounts Receivable Turnover ratio, it’s useful to track how efficiently you collect debts from customers to whom you have extended credit. Too many late or delinquent payments negatively impact cash flow. Here’s what business owners […]
A company’s financial health is calculated using several different metrics. One is the Times Interest Earned (TIE) ratio, also called the Interest Coverage Ratio. Most companies need to borrow money occasionally to maintain or expand their business. However, if a company can’t meet its debt obligations, it could go bankrupt. The TIE ratio is a […]
Running a business requires a solid understanding of basic financial terms and equations. You can use this financial knowledge to understand better how your company operates and ensure you track your finances correctly. This short article defines and details the formula for the weighted average cost of capital (WACC). This formula may seem confusing at […]
Net profit margin is one of many ways to measure the success and growth of your business over time. Your business’s net profit margin can inform decisions related to the profitability of your business, but it can’t tell you everything. Read on to learn more about net profit margin, calculating it, and how it can […]
A return on equity (ROE) ratio measures the probability of a business. To calculate the return on equity, business owners must divide the net income by the shareholder’s equity. Shareholder’s equity is a business’ gross assets minus liabilities. ROE is an essential metric for business owners because it allows you to gauge your profit levels. […]
Opportunity costs are expenses you pay when you choose one alternative option over all others. These costs may be financial but are not limited to and are necessary to consider for all business owners. This article will give an in-depth analysis of what opportunity costs are, their applications in the real world, and how you […]
You want to grow your business, but you’re finding it difficult to get the cash flow that you need. You’ve tried asking for a loan or getting an additional credit card, but the banks say you don’t have enough collateral or enough credit history. What do you do? Invoice factoring can be a solution to […]
When you’re running a business, there are many things to keep records of. There are expenses, taxes, and payroll, to name a few. One essential thing to track is your free cash flow, or FCF. It may seem daunting, but this article will detail what free cash flow is and how to calculate it. What […]
Making a profit and loss statement (P&L) is one of the most important things you can do for your business. This document tells you how much money your company has made and lost over a specific time. It can also provide insights into your business’s financial health and help you make better decisions about where […]
Business owners and project managers use tools like discounted cash flows in the payback period to make fiscally responsible investment decisions. You can determine whether a proposed project is viable with this formula since this formula compares the initial costs involved with the financial returns you can expect to receive. In this article, you will […]
If you’re a first-time small business owner, you’re probably getting hit with financial terms like “net cash flow” that would make the average person want to run for the hills. However, it is important to stay informed to help your business remain afloat. Understanding bankruptcy, profit and loss and everything in between – financial literacy […]
A balance sheet is critical for any business, and you must establish one from the get-go. They are considered one of the basic financial instruments of a business. Keep reading to find out what exactly a balance sheet is, how to correctly build one, and ways you will use it in your business operations. What […]
It’s the end of the year, which means it’s time to do your annual accounting. You may not think this is a big deal, but if you want to avoid paying penalties and interest on taxes owed at the beginning of next year, then now is not the time to procrastinate. This article will walk […]
Working for yourself is excellent. It provides flexibility and the opportunity to do what you genuinely love. However, that’s not to say running your own business or working as a contractor is all roses. There are times when it’s inconvenient to have to rely on several different clients to get paid, whereas being an employee […]
You’ve been working hard for months, maybe even years, to build your business. You take care of your customers, and they love you for it. But a few of them are still not paying their invoices on time, and now you’re feeling the pressure to act professionally yet again. You may be wondering how to […]
As a new business owner, it’s a good idea to understand the different invoice payment terms that are out there before you set up your invoicing system. For example, you wouldn’t want to be sending an invoice with a due date that is too early and risk having it returned or one with dates that […]
Creating accurate reports on your company’s cash flow is an essential part of running a successful business. A cash flow statement can show how your accounts receivables, inventory, and accounts payable line up yearly. By analyzing these trends, you’ll be better prepared to help your business grow. Falling behind on auditing your cash flow and […]
Like it or not, budgeting is one of the most crucial aspects of running a successful business of any size. Your monthly budget—and the in-depth analysis it entails—gives you all the information you need about the money your business brings in and where it’s going. Tracking your cash flow is especially important if you have […]
If your company operates in the retail industry or provides a product or service, you’ll need to know how effective your collections efforts are during the year. There is a method for determining this information: your accounts receivable turnover ratio. It may sound complicated, but calculating this ratio is pretty simple. This is something every […]
Accounts Payable (AP) is an essential resource for businesses in the management of payable obligations. Usually, AP refers to the amount a specific party owes to a given supplier or vendor. To elaborate, once the client places an order and receives it before releasing finances, they should record the liability amount in a record book. […]
Proper account receivables management is among the key secrets to a thriving business. It helps the management identify and fix potential cash flow problems, conversely facilitating smooth-sailing operations. An excellent way to stay on top of account receivables is through an aging schedule. From what it is to why it’s of the essence, below is […]
As a business owner, managing cash is a tedious but necessary part of the job. Keeping a hold of your cash flow is critical for a thriving, successful business, but it’s not always the simplest task or the easiest to understand. Two terms often thrown around in the realm of business management are ‘cash budget’ […]
Behind every thriving company is an efficient accounts receivable game plan. It’s easy to get lost in the pile when it comes to tracking invoices and remembering how much money your customers owe you after providing them with a product or service. If you don’t keep a close eye on this aspect of your business […]
When you’re running a small business, you must know several formulas to keep expenses low and maintain high-profit margins. Other formulas present business owners opportunities to know how fast their inventory is selling and tracking cash flow, called the cash conversion cycle (CCC). It’s also known as the net operating cycle. Read on to find […]
Running a small business is no easy feat, but running a successful small business takes even more time and skill. Performing a cash flow analysis and looking at your expenses can be the difference between your business floating or sinking. Knowing the financial health of your company helps you identify what you’re doing right and […]
Keeping cash flowing is a business’s key to success. Sadly, companies that do not manage their cash smartly tend to fail quickly. Along with making a profit, keeping the cash flowing is vitally important, especially for small businesses that are getting started. Young businesses often suffer from cash flow problems, and they need that money […]
In business factoring, companies they sell them to a factoring company. This type of financial transaction helps a business reduce its credit risk. Businesses also factor invoices if they need immediate cash. When businesses factor their invoices, they usually sell them at a discounted price. Because the process involves several steps, recording invoice factoring transactions […]
The cash ratio, also known as the cash asset ratio, is a liquidity measurement used by financial analysts. Its purpose is to evaluate a company’s capability to pay off any short-term debts. This capability is determined by calculating the ratio of the short-term assets against a company’s short-term liabilities. There are two other common ratios: […]
Net working capital (NWC) is an organization’s total short-term assets minus its short-term liabilities. An organization’s net working capital paints a picture of its overall financial health and ensures it’s being run efficiently. There are a number of ways to calculate net working capital depending on what the person analyzing the data is looking for. […]
What exactly is a cash flow statement? Before you can make one, it is essential to understand the definition of what a cash flow is. Cash flow is a company’s ability to generate revenue and the operational turnover of a business. The cash flow statement is part of the trifecta of financial statements that are […]
Your business is running; you’re making sales; inventory is turning over, but are you making a profit? There are many costs involved in running a business, from salaries to rent to insurance to payroll, and even more so in the early days of a new company when the investments typically surpass the initial sales. It […]
The current ratio is an essential metric that small business owners, in particular, should keep a close eye on for their own company. It is also necessary for an investor to understand the current ratio in multiple companies when purchasing stock. What Is the Current Ratio? The current ratio is a commonly used metric in […]
When it comes to figuring your ability to secure funding for your business, you need to have a clear idea of your financial situation. There are many ways to do this. You must start by gathering all your financial data. You can then use several formulas to assess your current standings. One of those formulas […]
When you start a new business, one of the first tasks you have to learn is sales invoicing, and, in particular, transaction types. Choosing the right transaction for your business helps you get paid on time and avoid delays in cash flow. One example of a commonly used transaction is COD or cash on delivery. […]
As a small business, keeping up with finances can be a nightmare, especially as the business grows and things get more complicated. Not all of us were born with a love of numbers, and cash flow management is tough! Maybe you started a successful business with little understanding of balance sheets, invoicing, or payroll management. […]
