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Some Tax Season Tips for Small Businesses

Small business owners must comply with various federal, state and local policies in an extraordinarily complex tax system. Although tax season doesn’t officially begin until next year, it is prudent to consider the existing tax structure, as well as review any upcoming changes, that apply to the Internal Revenue Service and other taxation entities.

Dr. John J. Petosa — a licensed CPA, attorney and faculty member at the Whitman School of Management at the University of Syracuse — owns a private accounting and legal practice with a focus on tax preparation at state and federal levels. When preparing for the 2017 tax season, Petosa advised business owners not to assume that “business-friendly” platforms or Affordable Care Act (ACA) changes promised by the new administration will actually become policy. Instead, they should prepare themselves to file within the existing tax structure, he said.

“If a small business falls under the requirements of the ACA, it is my suggestion that they continue to take steps to comply with the act,” Petosa told Business News Daily. “It is the law of the land unless it is otherwise revisited. Failure to comply with certain parts can subject a small business to significant penalties, so compliance is in the business’s best interest.”

Preparing for tax season
Compliance starts with preparation, and small business owners should consider seeking professional advice on navigating their tax liabilities and expenses. For 2017, Petosa suggested that small business owners compare their profit-and-loss margins to the 2016 tax season to avoid underpaying on their taxes. According to the IRS, if you will owe more than $1,000 in taxes, you must make estimated tax payments in the amount of 100 percent of last year’s tax liability, or 90 percent of the current year’s liability — whichever is smaller.

The estimated tax payment method enables small business owners to keep track of their expenses in the buildup to tax filing in April, and offset any costs that occur between this point and their final submission to the IRS, Petosa said.

In addition, Petosa advised businesses to consider purchasing new equipment or certain other business property that will qualify for a Section 179 deduction, which allows you to deduct all or part of the cost of certain qualifying property (up to a limit) in the year you put that item into service.

“If you were waiting on that new computer system, you may wish to buy it [now] and put it in service this year [and] write it all off, which reduces your overall taxable income,” Petosa said. “Often, I will suggest that my clients create a separate bank account for taxes and [put] a percentage of their receipts … in [that] account to save it so they are not short on tax day.”

Small businesses should always consult a licensed CPA or other tax professional to discuss their tax liability, Petosa said. He cautioned against trying to interpret tax code language on your own without professional assistance.

“Many business owners/entrepreneurs think that they need to know and understand everything about their business, [but] most are not tax or accounting professionals, [and instead] are much better at other aspects of their business,” Petosa said. “It makes sense to hire a professional to give you the advice necessary to lower your tax bills, and give you ideas or options that can help your business, while the owner can concentrate their efforts in areas that they might be more comfortable with.”

Any federal or state legislation that could potentially change the tax code will take time to enact, so for the upcoming tax season, small business owners should levy their costs and expenses according to the current tax structure, Petosa said. Tax burdens vary by state and local jurisdictions in conjunction with the IRS’ taxation policies, and small business owners should have a coherent plan for dealing with liabilities and expenses leading into the new year.

Know The Most Small Business Owners Not Interested in Retiring

In the corporate world, many employees start counting down the days until they can ride off into retirement. Small business owners, on the other hand, would rather keep working well past retirement age, new research finds.

The latest Wells Fargo/Gallup Small Business Index revealed that if money weren’t a consideration, 53 percent of small business owners would choose to keep working in their current ventures, with 17 percent saying they would look to start a new business if money wasn’t a concern. Just 27 percent of the small business owners surveyed would immediately retire if they could.

“Many owners don’t want to retire at all, but (instead) keep working in their business in some capacity as long as they are able,” the study’s authors wrote. “These attitudes reinforce a generally upbeat small business environment today.”

Overall, small business owners are optimistic about their prospects for retirement. The research found that, if they do decide to stop working, 76 percent of small business owners believe they will have enough money to live comfortably in retirement. That’s up considerably from the 66 percent who said the same thing in 2014 and more in line with the feelings of small business owners before the start of the recession in 2007.
Small business owners are much more confident in how they will fare once they retire than most professionals. In 2016, less than half of the nonretired U.S. adults surveyed said they would have enough money to live comfortably in retirement.

“Small-business owners tend to have a more positive outlook about retirement than U.S. adults overall,” the study’s authors wrote.

When they do retire, small business owners will rely on their retirement accounts to fund their nonworking years. Specifically, 40 percent say their 401(k), IRA and other retirement accounts will be their main sources of income, while 30 percent said this will be a minor source.

Among other sources, they will rely on include Social Security, the money they get from selling their businesses, the equity they have built up in their homes, and individual stock and mutual fund investments.

Work-sponsored pension plans, money from inheritances and annuities, and insurance plans are the sources they will rely on least.

“These projected sources of income mirror what Gallup has found from the general nonretired population,” the study’s authors wrote. “However, one exception is work-sponsored pension plans, which 26 percent of all nonretirees, but only 13 percent of small-business owners, cite as a major source of retirement money.”

Most small business owners say they aren’t very worried about some of the major financial concerns many retirees face, including not being able to pay medical costs or build back retirement savings lost during the recession, not being financially prepared for unexpected life events, not being able to pay for the basic costs of living during retirement, and not being able to sell their businesses when they’re ready.

Of those concerns, medical costs was the one they were most worried about.

“But fewer than one in seven small-business owners say they are very worried about the other concerns tested, including the basic issue of not having enough money to pay cost-of-living expenses in retirement,” the study’s authors wrote.

The study was based on telephone interviews with 602 U.S. small business owners in all 50 states.

Simple Tips To Calculate Your Net Worth

Do you know how much you’re worth? Most people don’t but as a business owner, your personal net worth may be important. Although your business is probably legally separate from your personal assets, a bank that considers giving you a business loan will likely ask for personal collateral if your business has little real value. Calculating your net worth gives you an accurate picture of how much of your personal worth you’re pledging to your business.

On a more personal level, having a clear picture of how much you’re worth helps with financial planning. Do you have enough saved for retirement; where is your debt and are there assets that could help you pay it down it down faster? What percentage of your net worth is in liquid investments and is it allocated appropriately? Your net worth is more than a single number—it’s an entire report full of important data.

Terms

Before diving into the calculations, you need to know a few terms:

Asset- Any property with real value. Real estate, a car, and jewelry or art are a few examples.

Illiquid Asset- Something that can’t be converted to cash quickly without a substantial loss. Remember the housing crisis that left people underwater on their homes? Homes became an illiquid asset for many.

Liability- Something you owe—a debt.

Liquid Asset- Something easily sold for profit. Stocks might be the best example.

Personal Property- Something you own that is movable—boats, cars, collectibles, and furniture are examples of personal property.

Real Property- Property permanently attached like a home, a barn, or detached garage.

Gather the Information

Probably the toughest part of calculating your net worth is gathering the information. Some of the information might be an estimate. Unless your real property was appraised recently, you won’t know it’s current value without paying an appraiser. In the case of your home, look up recent sales of similar homes in your neighborhood and use those as a guide for estimating your home’s worth. These are called “comps” or comparables in the real estate business.

If you have jewelry, some jewelry stores have appraisers on staff or they can recommend somebody.

For assets like your car or some collectibles, look at online guides that list their value. If you haven’t dug into the value of a 401(k) from a past employer or the cash value of a life insurance policy, set up online accounts with the firms holding these investments or call and request a current statement.

If you’re going to invest time into calculating your net worth, do the legwork to compile the most accurate data. The more you estimate, the more inaccurate your final calculation will be.

The Calculation

Calculating your net worth is simple once you have the information. It’s simply your assets (what you own) minus your liabilities (what you owe). Add everything you own including:

Money in savings or checking accounts
Actual cash
CDs or treasury bills
Annuities, bonds, mutual funds, pensions and other retirement plans, stocks
The cash value of any life insurance policies
The value of real and personal property
Anything else that you own that has sellable value.
Next, add your liabilities

Loans—car, mortgage, home equity, second mortgage, boat
Credit card debt
Medical bills
Student loans
Personal loans
Taxes due
Any other debt or outstanding bills
Subtract your total liabilities from your total assets. Now you know your net worth.

What’s Next?

Once you do the work the first time, the calculation is easier the next time around. If you haven’t already, use a free service like Mint.com to keep many of the numbers up to date in one place. Instead of having to compile the value of each of your investment accounts, credit cards, and everything else, you simply open Mint and copy the numbers into your spreadsheet.

In fact, Mint tracks the estimated value of many of your personal and real assets and gives you your net worth based on the information it has. It won’t be perfect but it will be pretty close.

Best Tips for Selling Your Business and Retiring

The majority of business owners are planning on the proceeds from the sale of their business to fund their retirement. However, the 2013 State of Owner Readiness Survey revealed that over 80% of business owners have no formal transition plan.

Historically, only 25% of businesses up for sale actually sell. Those odds are likely to become worse as millions of baby boomers attempt to sell their businesses over the next decade in the Exit Bubble®.

Combine the lack of readiness with the historically low success rates for selling a business, and you could be looking at the perfect storm for business owners. Below are five tips to increase your odds for a successful business sale:

1. Start planning NOW! It is never too early or too late to start planning the sale of your business. You’ll need to become informed on the emotional aspects to anticipate, and educated on the numerous tactical complexities of the business sale process. This will help put you on a level playing field with buyers and increase the odds of a successful sale.

2. Create a clear vision of what comes next. One of the biggest reasons businesses don’t sell is that business owners don’t have a vision of what they will do next. They can’t imagine not being the owner of “XYZ Company,” and the fear of the unknown causes them to walk from a deal at the last minute (cold feet).

For you, what comes next might involve working in a different occupation, dedicating more time to charity work or becoming a coach. Taking the time for this introspection early in the sale process greatly increases your odds of successfully getting to the closing table.

3. Be armed with the facts. It is natural that, as a business owner, you value your business higher than most buyers. You have spent years of blood, sweat and tears building your company and know it inside and out. Unfortunately, buyers don’t have that same level of understanding or legacy. Before buyers begin to ask questions, perform your own pre-sale due diligence on your business. View your business through the eyes of a potential buyer to identify impending issues and arm yourself with detailed facts about the business. Sellers who can answer detailed questions with facts and data (as opposed to opinion and anecdote) instill confidence in buyers and make the due diligence process easier.

4. Minimize surprises. Surprises are fun for birthdays but not when selling a business. When dealing with a potential buyer, it is human nature to want to avoid discussing a negative issue such as a troubled customer relationship. Especially for proud business owners who feel confident the relationship issues can be resolved. Buyers may not have that same confidence without the years of history with that customer. Instead, identify potential negative issues during your pre-sale diligence, and disclose them immediately while you still have negotiating power. Once you sign the letter of intent, a negative surprise in due diligence could result in a reduced purchase price or a failed deal.

5. Don’t take it personally. Due diligence is the most personal thing you will do in business, and it’s critical you don’t take it personally. Buyers routinely perform due diligence to confirm what you have told them and to find potential reasons to reduce the purchase price. This is standard business practice. Buyers question everything about the business and want facts to support the answers you have provided. You might feel like you are being attacked and a buyer is criticizing your business. By having a vision for your life after you sell, and by being prepared to answer the difficult questions, you can keep your emotions in check and get to the closing table.

Some Small Business Money Mistakes

Of all the roles a small business owner takes on, often the most challenging is managing the business’s finances. The reasons are many, but most small business owners don’t have a background in business finance, and at least at the start, are more focused on bringing in business and serving the customers than they are on record keeping and financial planning for their business. As a result, many work long and hard at their businesses with only mediocre success to show for their efforts. Others fail completely.

You can improve your chances for success – and your profitability — by being aware of and steering clear of these common small business money mistakes.

Insufficient Cash

Insufficient cash is one of the leading causes of business failure. Startups often overestimate how quickly they’ll start making money, and underestimate all the expenses they’ll incur. But startups aren’t the only businesses prone to failure due to insufficient cash. Once you have a steady flow of business you can run into cash problems in a couple of ways. One is a failure to realize the difference between cash flow and sales. You can have plenty of sales on record, but unless you get paid in advance for those sales, you’ll have expenses to pay before you collect from your customers. If one or more of your big customers pays late, or doesn’t pay at all, you may not have the cash to pay your bills on time.

Growing businesses can have a similar problem. You ramp up to be able to serve bigger customers or a wider areas, and before you start earning income from the growth, you need cash to pay your growing staff, growing payroll taxes, and other growing overhead expenses.

Still another problem for an existing business: existing cash flow may make the business owner miss or ignore falling profits and growing debt. To avoid cash flow problems take pains to accurately estimate all your costs and allow for the time it can take you to get paid. Get invoices out on time, stay on top of collectibles, and reassess your cash position at least quarterly, if not more often.

Waiting Too Long to Seek Credit

The worst time to look for a business loan or line of credit is when you most need it. If your business is paying its bills late and is on the brink of failing, finding funding will be difficult or impossible. The time to seek funding is when your business looks solid enough to convince a lender you will be able to repay what you borrow.

The type of credit to seek will depend on the type of business you run, the purpose of the funds, and the size of the loan. Depending what you need, funding sources include traditional banks, online lenders, credit card cash advances or purchases, and specialty lenders. (For major projects, check with your local economic development agencies for suggestions on funding.) Interest rates and terms vary widely, so give yourself time to find the best funding source for your needs. And don’t get discouraged if local banks turn you down. Check with the major online lenders to see if they’ll work with you and how their rates and terms may compare with other options.

Mixing Business and Personal Funds

Whether you are starting a new business, or you’re running an established business, mixing personal and business funds is a recipe for disaster. Assuming you are the sole owner and you buy business supplies with your personal credit card or use a business check to pay for a personal purchase, you’re going to have difficulty keeping track of how much money the business actually is making or losing throughout the year.

You’ll also have a big headache at tax time trying to separate out the business and personal purchases to determine what’s deductible on your business tax form, and what your profit or loss is for the year. The headache will get a lot worse if you get audited and the IRS believes you have purchased goods or services for personal use and deducted them as business expenses. If you have business partners or investors and mix business and personal expenditures, you’ll have even more problems on your hands.

Finally, if you don’t clearly separate business and personal expenses (using separate banking accounts and credit cards for each), you’ll find it difficult or impossible to get a business loan if you ever need one.

Even if your business is only a part-time operation with few profits, you should have a separate checking account and separate credit card for the business. You may need to take out the credit card in your own name when you’re starting out, and that’s ok, as long as it’s used exclusively for business purchases.

If there are times when you have to use personal funds for your business – or vice versa – the correct way to handle the situation is to make a formal transaction and document it. If you have business partners, get them to sign off on the transaction, too.

Not Staying on Top of Recordkeeping

Let’s face it. Recordkeeping is a big pain in the neck. As a business owner your focus is usually on winning business and making sure the customers get it in a timely fashion. Along the way there are so many things to do that it’s easy to let recordkeeping fall by the wayside. Receipts for inventory or other purchases get shoved in a folder, envelope, drawer, or the proverbial shoebox, until such time as you “get around” to recording them. Invoices for items you’ve purchased on credit maybe wind up in your inbox – with dozens of other pieces of paper. Mileage records for business travel may wind up on the back of a receipt or napkin, or stuck in a note on your smart phone. Check stubs from people who still pay you that way wind up in the same folder or drawer, and credit card payments show up in your bank account based on the credit card used to make the purchase, with no convenient way of matching any one day’s credit card receipts to specific purchases made.

As a result, whenever you get around to actually putting the expenses and income records in an accounting program or spreadsheet, you’ll waste a lot of time trying to remember what each thing was for. You may also have misplaced some of the records. Worse, if you haven’t been keeping all your accounting up-to-date, you may find out months down the road that you’re losing money because the cost of your supplies went up and the number of hours your employees worked went up, but you never raised your prices.

The only way to avoid these kinds of recordkeeping disasters is to do you recordkeeping weekly or more frequently. Either you have to take the time yourself to enter all the data into an accounting program or spreadsheet or you need to delegate the job to someone else. If you have someone else manage all your financial records, you need to review their work weekly, looking to be sure income and expenditures are properly documented and be sure that nothing looks strange. Employee theft is a big problem for small businesses, and often the thief turns out to be a trusted, long-time employee.

Under-pricing

Determining the right price to charge for products or services is seldom an easy decision. Charge too much, and you could lose sales to a competitor. Charge too little, and you won’t make much profit – or worse, you’ll lose money.

Small businesses – particularly those just starting out – often charge too little. Sometimes they rationalize that the low price is a way of “getting their foot in the door.” Sometimes the price is low because a new business owner isn’t taking into account the cost of his or her own labor, or hasn’t accurately determined all of the costs that have to be considered in setting prices.

A fencing company, for instance, has to figure in not only their costs for the fencing, but also the costs of labor, advertising, office expense, vehicle maintenance and repair, and other overhead costs when deciding what to charge customers. An independent consultant may have fewer overhead or labor costs to consider, but has to pay close attention to what her target annual income is, how many clients she’ll actually land and be able to serve during the year, and how many hours of work time will be billable vs unbillable and what her advertising, networking and other promotional expenses will be.

Established small businesses sometimes underprice their goods and services because they’re afraid to raise their rates. They worry if they increase their prices their customers will go elsewhere.

Tips To Reduce Business Debt

Your business is no different than your home—too much debt can cripple you. Although it might be ideal to run a debt-free business, that’s virtually impossible. The best you can do is to manage and reduce it as much as possible. Here are some ideas.

1. Know Your Numbers. Don’t just be familiar with your numbers—know them. Knowing them means that you know the cost of each of your raw materials, labor, rent or lease costs, and everything else. Do you know what each item costs down to the penny? Do you know the interest rate on each of your debts? If you don’t, you’re probably paying too much for something.

2. Be Smart About Your Ordering. Sometimes you stock a poor-margin item that gets people into your store, but as a general rule, if it’s not getting you to the margins that others in the industry report, it may not be worth your time. Sales that result in ultra-low margins are costing you money. Identify unprofitable sales and eliminate them or look for a lower price from suppliers.

3. Increase your Margins. Speaking of margins, each industry has its own benchmark for what are considered strong margins. Do you know yours? Check with your industry trade group, but once you know it, make adjustments. You can raise your prices, lower your costs, or both. The goal should be to raise margins without raising your overhead expenses. What are others charging for the same item? Can you purchase more at a significantly lower cost without losing the savings to debt service?

4. Watch Your Inventory. Like your refrigerator at home, some items tend to linger. Don’t put off ordering more of your popular inventory but look for the product that isn’t selling and liquidate it.

Inventory is probably where most of your money is tied up. You’re probably paying interest on that stale inventory that everybody forgot about. Don’t let it sit in your store unnoticed. Even if you move it at cost or for a small loss, liquidating is better than keeping the money tied up. Sell it online—eBay or Craigslist, for example.

5. Check Your Interest Rates. Business owners are still enjoying an economic climate of low interest rates. If you have older debt, it’s time to renegotiate the terms.

6. Talk About the Terms. If you’re having trouble making payments, talk to the supplier about extending the terms. You aren’t going to save any money but lower payments may give you the financial room you need until the product sells.

7. Sell and Lease Back. Do you have relatively new fleet vehicles or other larger items? Sometimes it makes sense to sell the items and lease them back. Payments might be lower. To gauge the payoff that comes from this strategy, you will likely need help from a professional crunching the numbers.

8. Ask Your Employees. You were an employee at some point. You know that the people on the front lines will see things that the managers may not. Your employees know where money is being wasted. Ask them. They may be skittish about telling you for fear of retaliation. Explain to them why you’re asking and maybe offer a bonus to anybody who helps the company save money.

9. Be Tougher on Your Customers. Don’t become that business owner that every customer hates but do insist that customers meet their payment terms. You probably won’t go to battle if payment is a few days late but when a couple of weeks go by, it’s time to start calling the customer to ask for payment. If late paying customers are a big problem, you may want to add a late fee clause to agreements you have customers sign before you begin work for them. Check with your local professional advisors to find out if there are any laws that regulate what late fees you can charge. Good business relationships happen when both parties feel respected and valued.

10. Reduce Staff. Nobody likes to reduce staff, but if your business fails, the reduction in staff will be much larger. Sometimes you have to make tough decisions that negatively impact the few to protect the many. Are there employees you could do without? Could you consolidate positions by paying one person more rather than paying benefits for two employees?

11. Speak to a Credit Counselor. Most credit counselors are consumer-based but some work with small businesses. If you’re having trouble negotiating better terms, a credit counselor might be able to help.

12. Hire a Debt Management Company. Debt Management companies come into your business and sniff out where you’re losing money unnecessarily. They may be expensive but worth it in the long-run.

13. Bring on an Investor. If things are really bad, an investor can offer an injection of cash often in exchange for a piece of your company. In general, avoiding this option is best since it involves signing away a portion of your future profits but if times are really tough, it’s worth considering. However, finding investors is difficult. Don’t wait too long to start looking.

Tips To Avoid Overpaying for Everyday Business Expenses

You’re a small business. You probably don’t have the money-is-no-object budget of big businesses when it comes to every day expenses. In fact, you’re probably trying to pinch pennies while providing your employees the tools they need to do their best work. So how do other business owners save money on—well—everything? Here are a few ideas.

Don’t Hire. Contract!

Gone are the days where you have to bring on a part-time “employee.” Employees need an office and/or equipment, you’re on the hook for a portion of their taxes and insurances, and you have to invest a considerable amount into training.

Instead, hire a contractor or freelancer. They’ll require some training but outside of that, all you pay them is the cost of the job. No taxes, no worker’s comp. insurance—just a fair wage for outstanding work.

But be careful. The IRS has very strict rules when hiring a contractor. For the most part, you can’t have any control over their schedule, you can’t act as their manager, and you shouldn’t provide them with any type of company uniform, among others. If you break the rules, they’re an employee. If you’re not sure, use IRS form SS-8 to figure it out.

Cut the Office Supplies

Nobody is saying not to provide paper for the copier but if you’re still following the old playbook of stocking your closets with binder clips, post-it notes, and boxes of pens, there’s probably not a need. Technology has made offices much more paperless. Those to-do lists that were once kept on post-it notes can now be saved on an app. Filing cabinets have been replaced with Dropbox and Google Drive, and there’s no need to print everything out.

You also don’t need swanky, high-end desks. If you have an IKEA close by, head there and buy desks on the cheap.

Teleconference your Meetings

Is it essential that you’re all in the same room to hold a meeting? How about a teleconference? There are plenty of conferencing platforms on the market and some are pretty expensive but if you only have a few people in the meeting, consider Google Hangouts. For meetings of 10 or less, all your people need is an Internet connection. It’s completely free and easy to use.

If you need a more robust platform, platforms like GoToMeeting will cost $50 per month for up to 100 people but that’s still cheaper than flying people to one location.

Speaking of Technology

First, Internet. Depending on your type of business, you may not need business-class service. If you have a lot of employees or they’re doing high-end computing tasks that actually require a robust service, then business-class speed is a necessity. But if you only have a couple of employees and they’re performing basic computing tasks, you can probably get by with a slower speed at a lower price. Don’t buy more than what you need.

Second, no need to upgrade your equipment every time something new comes out. Purchase every other software update instead of each one unless there are large amounts of security updates. No need to buy the newest iGadget either. On the other hand, don’t be cheap. New features and faster, more efficient hardware could be a cost saver. Buy and update, skip an update, buy an update—that makes for a reasonable upgrade cycle.

Don’t be Too Loyal

In business, loyalty to vendors can be a plus but don’t be too loyal. That insurance agent you play golf with might not have the lowest rate. The vendor you’ve done business with for decades may not be the best deal. At least once per year, compare prices and don’t be afraid to do some haggling. Loyalty means giving your current vendors the opportunity to match prices. It doesn’t mean paying more for the same product.

Stop Paying Finance Charges

There’s no way around it—if you’re paying finance charges, late fees, or bank charges, you are throwing away money unnecessarily. If you’re paying annual fees on a credit card, unused gym membership fees, and strange fees from a vendor, it’s time to cut these out. Every business ends up having a bit of money bleed. Audit your books regularly. Ask questions about every charge, regardless of how small it is, and refuse to pay unnecessary fees. You can’t avoid taxes but fees are negotiable.

Advertise Online

Advertising takes a lot of time and research to get right. That doesn’t mean you should pay for a mailing and hope it works. Online advertising gives you more control over the audience that will see your ad and you can spend as little as a few dollars each day if you want to. Carefully measure your advertising efforts and use the platform that converts the most people.

Partner with Other Businesses

Businesses are finding creative ways to cut expenses by sharing. Businesses sometimes rent a large office space and move in together. They can then share Internet service, other utilities, and office equipment. Companies like Uber have made “sharing economy” a household term. There’s no reason your business can’t take advantage of it too.

Easy Tips to Let Customers Pay with Their Smartphones

If your customers aren’t asking already, they will. Doing business with smartphones is likely to become the standard in coming years and as a small business owner, you better be ready when the masses show up with only a phone as a way to pay.

You Have to Change Anyway

The last thing you want to do is invest in a technology that may or may not catch on. It’s not like mobile payment is wiping out traditional payment methods but the good (or bad) news is that you have to invest in new equipment anyway.

Most business owners know that as the United States switches over to EMV credit cards, they have to invest in new card readers anyway. During that switch, merchants can pay a few extra dollars to purchase a card reader that has the technology to accept mobile payments. Experts in the field say that the cost is relatively low—about $250 per payment terminal.

Businesses have until October of 2015 to make the switch. That’s when credit card companies are supposed to shift liability for fraudulent technology from themselves to the company with the most antiquated equipment. If you fail to upgrade before that date, you will likely be the one who pays for the fraudulent transaction.

There are plenty of articles online that review the various payment terminals but for small businesses with a relatively simple system, your point of sale company will have plenty of valuable information to offer.

How Do I Sign Up?

There are a number of mobile payment options available to you. Apple Pay is the most talked-about, largely because of Apple’s massive marketing engine, so let’s look at it in more detail. Once you upgrade your equipment the sign up process is easy. Your payment provider will set up Apple Pay for you. Apple Pay accepts Visa, MasterCard, and American Express cards and there is no additional fee for using it. Just the normal merchant fees you were already paying.

Some Payment Types Should Your Business Accept

Most business owners would say that the most important thing they do is accept money. Without money, every other business activity is irrelevant because money is the lifeblood that keeps the business open. Of course, building relationships is important and essential but unless your business has a healthy stream of capital rolling in, you’re destined to close your doors.

You’ve probably heard that if you want your customers to do something you should make it as easy as possible for them to do it. If you want them to sign up for your e-mail list, give them more than one way to give you their information. If you want them to visit your store, make sure there’s plenty of parking, you’re open at convenient hours, and your location is as central as practical.

How you collect money follows the same rules. The easier it is for your customers to pay you, the better it is for you. But here’s the problem: the easier it is for you to get paid, the more you’ll likely have to pay for that convenience. Which of the many payments should you offer and why?

It Depends

Don’t you hate it when you can’t get a hard and fast answer? Unfortunately, it really does depend. It depends on the type of business, its size, the amount of employees and customers, the average cost of transactions, and more. But don’t worry; we can give you some general guidelines.

If, for example, your business only works with other larger businesses rather than retail customers, you probably don’t need to accept cash. Unless the business is exceedingly small, its accounts payable department isn’t going to pay anything in cash. You won’t need a layaway plan either.

A retail small business that deals largely with the general public on mostly low-dollar purchases probably won’t deal with purchase orders. That business may not accept them because they don’t have an accounts receivable department to track the PO and collect payment.

Should You Accept These Payments?

There’s plenty of ways to pay. Which should you accept?

Cash- Unless you’re a business that deals in high-dollar invoices and works with only commercial customers, you should accept cash payments. If you’re a retail business that has a self-service model, you may not accept cash either. Some gas stations that don’t have a store now only accept credit cards, for example.

Checks- If your business works with other businesses, you probably don’t have a choice but to accept checks. If you’re a retailer, you have a choice. Whole Foods has stopped accepting checks at many of its locations and many other retailers have as well. If you do accept checks, have a means of verifying the check before taking it as payment. There are now websites that will help you with this.

Credit Card- With more than 500 million credit cards in circulation in the United States alone, you should accept credit cards regardless of the business you’re in. Some businesses traditionally don’t accept cards but that’s changing too. But consider the amount of fees you will pay to take credit card payments and work those into your cost.

Mobile Payments- Only about 41% of people say that they have used their phone to make purchases in a retail store and of those, only about 14% say they do it regularly. If you’re not yet using Apple Pay or one of its competitors, don’t consider yourself a dinosaur but it’s hard to find people who don’t think mobile pay is only going to grow. You may not accept it now but keep a close eye on it.

Money Order- You might consider cashing money orders if your business works with a large amount of low income consumers who may not be eligible for a credit card or checking account and don’t want to carry cash. If you accept money orders, verify their authenticity.

ACH- ACH, or automatic clearing house, uses your bank account to transfer funds to you. Employers often use this payment type to pay their employees. If you’re a freelancer, ask the business you’re working with if they make ACH transfers. If they do, you’ll likely get paid faster than through other means.

Payment Plan- Avoid this, if possible. Small businesses don’t usually have credit departments and you don’t want to get into the business of tracking down late payments and everything else that comes with setting up payment plans. If they want a payment plan, they should use a credit card.

Layaway- Just like a payment plan, unless you’re a large business, you probably want to bring inventory in and sell it as fast as possible. If you’re offering a special price, you might work out a deal to honor the price and order the item once they have the money to pay if you’re out of stock.

Bitcoin- If you’ve never heard of bitcoin you should definitely not accept it as payment and even if you have, it’s best to stay away from it for now as well. Virtual currency is so new and so volatile that it’s not worth the hassle. There are also security concerns.