ACH Makes Financial Transactions Easier for Small Business Owners

Automated Clearinghouse (ACH) transactions and benefits remain largely unknown and misunderstood for most consumers and businesses. The misunderstanding stems from the fact that the ACH has multiple uses and applications. It can be both a credit and debit transaction. It can be used by both consumers and businesses to pay an obligation (ACH credit transaction). Or, it can be used to receive payment by using an ACH debit instruction.

What is ACH?

The ACH, and the association that set its rules and enforces compliance-The National Association of Automated Clearinghouse (NACHA)- was formed more than 30 years ago as a replacement for the paper check.

Direct deposit of payroll was one of its first payment types and is still one of the most popular (now considered a native ACH payment) types of ACH transactions due to the ease, convenience and safety provided to both employers and employees.

As time marched on, businesses, governments and consumers increasingly embraced ACH payments because they are cost-effective, reliable and efficient to initiate and receive. Federal, state and local authorities’ use of the ACH is evidence of its ever-growing popularity to collect taxes and remit refunds. Online bill payments are predominately accomplished using the ACH network. Consumer-oriented businesses (e.g., credit card and mortgage companies) use the ACH to convert checks to settle consumer debts. Retailers, such as Wal-mart, convert checks written at the point-of-sale to the ACH, often surprising consumers when the cashier actually hands back their voided check.

How can small businesses benefit by using the ACH?

The simplest thing to do is to use direct deposit of payroll to pay employees, be it one employee or more. An abundance of companies exist to service the direct deposit needs of small businesses. Their services include calculating and filing all the tax and withholding obligations associated with payroll. ADP, PayChex and Intuit come to mind first, but there are others.

Accounting software providers, such as Peachtree and QuickBooks, also offer direct deposit of payroll. Often their direct deposit service is an add-on to the basic accounting package or requires use of a premium version (at an additional cost).

Financial institutions also offer direct deposit of payroll that automatically link to accounting software and provide the same electronic payroll services as an ADP or PayChex, often at a reduced cost. Banks also offer other ACH services. Ask your bank if they have an online bill payment tool for small businesses to use the ACH to pay vendors and other obligors electronically. It’s easy to use and, again, integrates with common accounting software packages.

Most online bill payment providers make their services accessible via the mobile phone, in addition to the PC, so it is getting even easier and more convenient to pay bills and employees every day. Intuit, for example, recently announced a mobile app for small businesses.

Make the management of your business simpler by using the ACH payment system. Eliminate the time spent on calculating what is owed to employees and vendors by leveraging the tried and true, safe and sound ACH payment tools available to small businesses today. Then focus on what is really important: making your business successful.

Settle Your Small Business Taxes With a Peer-To-Peer Loan

Like the saying goes, “The only things certain in life are death and taxes.” Unfortunately, small businesses know this saying all too well.

Unlike employees who look forward to their refund every April, small businesses loath the approaching spring, knowing they will have to pay Uncle Sam its share of their profits. Each year, small businesses struggling to turn a profit in an increasingly competitive business environment must pay taxes in order to keep their doors open.

With dwindling profit margins and tightened lending restrictions, however, many small business owners find themselves between a rock and a hard place when it comes time to pay the tax man. Although a business may have steady sales and revenue or thousands of dollars in inventory, banks and traditional lending institutions simply aren’t handing out small business loans like they were in year’s past, leaving small business owners with few funding options to pay their tax bill.

Thankfully, peer-to-peer lending, or social lending, has solved this growing dilemma. These modern social lending marketplaces have connected millions of borrowers with individual investors. Borrowers receive low-interest, fixed-rate loans that can be paid off in two to five years, while investors are able to benefit from decent returns in an economy with sinking bond and savings rates.

Thus, it’s a win-win situation for both small business owners in need of immediate funding and investors looking to make a small profit while helping others.

From Desperation to Exultation: One Man’s Venture into Peer-to-Peer Lending

John Mitchell is an Ohio-based small business owner who found himself in such a predicament just last year. As the owner of the only hardware store in a small town, John’s store flourished the first few years it was open.

After getting his inventory levels, pricing models, and management just right, he decided to expand his business by opening a second location in a neighboring town. John sunk all of his profits into opening his new store, which meant he was short on funds come tax time. However, knowing the success of his business, he thought he would simply get a small loan from the bank that housed his accounts and provided him with the initial loan he used to launch his business four years earlier.

Unfortunately, he witnessed first-hand the effect the recession has had on lending regulations as the banker he’s known for years denied his loan application. If he couldn’t get a loan there, where could he?

On the brink of despair, John took to the Internet to research loan options. After digging through forums and trying a few different searches, he ran across peer-to-peer lending. In less than a week after going through the quick and easy application process, he received a personal loan at a low rate for the amount he needed. A week later, John sent a check for the full amount to the IRS, and less than eight months later, he was able to pay off the loan with the profits from his new store!

If you are a small business owner who has found yourself in a similar circumstance, peer-to-peer lending can do the same for you as well, but how does peer-to-peer lending work?

How Peer-to-Peer Lending Works

A breakthrough product or service emerges every generation, and in the early 2000’s, the emerging breakthrough was social networking. From helping in the organization of overthrowing political regimes to staying in touch with friends and family members, social networking has had a profound effect on our daily lives. Now, it’s changing the small business financing landscape as well.

Peer-to-peer lending is a modern social networking solution for small businesses in search of a way of securing alternative funding. The goal of peer-to-peer lending sites, such as Prosper and Lending Club, is simply to connect individual investors with those in need of funding, and these sites are becoming an increasingly useful tool for small business owners who are unable to secure funding from traditional lenders.

Rather than jumping through endless hoops only to be denied by a bank, small businesses can receive funding via peer-to-peer lending in no time at all by following three simple steps:

Step 1: Create a Profile and Loan Listing

There are a myriad of peer-to-peer lending networks to choose from, so your first step is to research the best ones and create a profile and loan listing on the site you choose. The loan listing is essentially a cost-free ad that indicates the amount of money you need and your desired interest rate.

Step 2: Let the Bidding Process Begin

After your listing goes live, investors have the opportunity to begin bidding on your listing, providing you with the interest rate and loan amount they are willing to offer you. A major advantage of this bidding process is the fact that it can intensify as more and more lenders begin competing for your business.

When this happens, interest rates will begin dropping, potentially allowing you to obtain a much lower interest rate than you expected. It’s important to note, however, that your credit score, income, and debt-to-income ratio plays a role in the lending decision process.

Step 3: Funding and Paying Back the Loan

Another benefit of borrowing from peer-to-peer lenders is that you can accept several bids to receive your requested loan amount. For instance, if you ask for $10,000 in your loan listing to pay your business taxes, you can acquire the amount from collecting $2,000 from five different borrowers.

This makes it much easier for borrowers to receive the money they need. However, instead of making five separate payments, you would only make one payment, because the peer-to-peer lending site is responsible for dispersing the money to lenders until loans are repaid in full. They simply charge a small fee for this service.

With increased lending regulations, banks are tightening their purse strings more than ever before, making it much more difficult for small businesses to receive the funding they need to expand their business or even pay their taxes. Thankfully, peer-to-peer lending has proven to be a worthy competitor in the small business lending marketplace. If you are a small business owner and find yourself unable to pay your taxes as April approaches, or backed taxes for that matter, a peer-to-peer loan is an ideal option.

Small Business Bookkeeping Simplified

Small business bookkeeping could be one of the tasks most generally avoided today in industry. The majority of entrepreneurs begin their small business companies because they have a passion for their product or service – bookkeeping is frequently seen as drudgery which must be tolerated to remain in the business. For this reason, hiring a small business bookkeeping service can be a great way of maintaining your energies concentrated on the business, leaving an expert take care of the financial details.

In bookkeeping, an accountant keeps a complete trace of how much your small business owes creditors and how much is owed to you. The accountant also traces how much you have invested in tools and inventory. In general, accounts receivable, accounts payable, bank reconciliation as well as financial statement preparation such as balance sheets, income statements, and cash flow statements are all included in small business bookkeeping.

The cost of small business bookkeeping depends on your company’s explicit needs; however, accountants typically charge a flat rate per month for basic services. The cost rises while the volume of work increases – the more transactions and statements you expect your bookkeeper to prepare, the more you will pay.

The bookkeeping rates can vary depending on your geographical sector, the size of the company, and the experience and seniority of your accountant. For the most basic bookkeeping services, you can intend to pay $500 to $1,500 per month for a skilled accountant to handle your finances.

In certain cases, the accountants will charge an hourly rate until they get a feeling for your business and how much hours is implied in the work that you wanted to be done. Following a few months, they will have clarity of your needs and you will be able to discuss a long-term flat monthly fee.