Learn which partners you really need to build and grow your business—with modern software, it may be less than you think. Set your business up for maximum efficiency by choosing the highest quality over lowest cost partners.
- The way that money flows through your business is relatively simple. Keeping track of it for the purposes of taxes, forecasting and cashflow, is not so simple. And that's where partners come in. One of the first things that a new business owner needs to do, is open a bank account. For a business it's important to consider the bank as a partner. When comparing banks, make sure you focus on fees. Wire fees, overdraft fees, ACH fees and monthly fees can all add up. Also, investigate introductory offers and interest rates for both deposits and line of credit, so you can save some money.
And make sure you read the fine print to know your minimum daily balance, minimum average monthly balance and transaction limits. If you need a merchant account, quick check, do you need to process credit cards? Then you'll need a merchant account. There are new flat-rate vendors, like Stripe and Square, which are inexpensive for small businesses, and easy to implement. Your bank and independent merchant account vendors will also offer services which probably have an interchange plus cost structure. These can be less expensive than the fixed rate services if you have a lot of transactions.
Add up the amount you'll be paying per transaction plus any monthly fees. Pick a vendor with a low cost and then make sure they have a good reputation. You don't want to have disagreements with the vendor that controls your revenue. But what about the value the banks can add? Think about this, it's in the bank's best interest to see you succeed. So look for a banking partner that offers advice and tools to help you do that. It may come in the form of business advice on their site, or in their branch, or local events where you can connect with other businesses around you. Make sure they assign you a personal banker who'll hopefully call you if a check is about to bounce.
And make sure that their website allows you to do wire transfers, ACHs, pay bills and deposit checks remotely. Beyond this, banks offer protection by separating your business finances from your personal funds. They can help with lines of credit to smooth over cashflow crunches, or help you make a large purchase. And just like with personal banking, businesses need a credit history. So look for products like credit cards that can help you do that. But what about nonbanking partners that can contribute to the financial health of your business? A trusted accountant can be a huge help, but you don't need an accountant for most day-to-day tasks.
Many small businesses pay a bookkeeper to keep track of transactions, and only use an accountant to file their taxes, or to give specific advice. Again, most bookkeeping work can be done yourself with software, like Quicken or FreshBooks. A trusted lawyer can be a hugh help, too. But keep the high hourly rate lawyers for the more complex legal issues. Many basic legal tasks can be done via sites, like LegalZoom and BizFilings. Search for free documentation on sites like Cooley GO, a multi-national law firm that allows you to download contracts for free for the UK and US.
One of the biggest time sinks for business owners with staff is HR. As you scale your business, look for outsourced partners who can manage your payroll, insurance, contracts and benefits. Companies like TriNet, Jos Works, and ADP in the US, can reduce your administrative time significantly. Lastly, look for an insurance company that has expertise in your particular field. Getting general business owners insurance may be enough for some small businesses, but look carefully into whether you need specific policies like product liability insurance or professional services insurance.
The great thing about using a mix of software and human partners, is that you should only pay for the personal touch when it can significantly help the quality of the outcome. Use high-cost humans when you have specific problems to overcome. The bottom line is that time is money. And as a business owner, your time should be spent on growing your business. Using cost-effective solutions for elements of your business that are not directly contributing to your growth, can save you time and help you focus on growing your business.
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- Choosing a company structure
- Cash flow
- Borrowing money
- Investing and reinvesting
- Financial health best practices