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Accumulated depreciation refers to the total amount of depreciation expenses related to your business. Your business likely has multiple assets that appreciate or depreciate over time. By tracking changes in the value of your assets, you can get a clear view of what your business is worth. Here are a few common questions about accumulated depreciation. 

What Are Some Examples of Depreciating Assets? 

For example, if a restaurant buys a couch for customers to sit on, it will start to depreciate in value as soon as someone sits on it. Stains from spilled food, wear from people sitting on it, and general interior design trend shifts will decrease its resale value. This is no different from the couch in your living room at home. 

Conversely, some assets may increase in value, or appreciate. The most common example of this is real estate. A business might buy a property and pay it off over a decade then significantly profit from selling the space because the land value appreciated. 

What Type of Account Is Accumulated Depreciation?

For example, if you spend $30,000 on a delivery van, you would record that amount under “fleet” in your balance sheet. After a year, the depreciation might be $2,000, meaning the true value of your fleet asset is only $28,000. 

Why Should You Track Depreciation?

Can You Control the Depreciation in Your Assets? 

How Can You Track Deprecation?

Some companies set up formulas for asset tracking. For example, they might reduce an asset’s value by 10% during the first month (because the item is no longer new) and then subtract a percent of the value each quarter. This makes researching accumulated depreciation easier, but it means it’s not always accurate. 

As a business owner, you want your accounting statements to be as accurate as possible to help you make sound financial decisions. Use a tool like Lendio's software to track your expenses and invoices to get a clear view of your company’s finances.

The first thing to know about subsidiary companies is that they can offer tax advantages. In this rocky business environment where financial strain has forced more than a few small businesses to permanently close their doors, any positive tax news should be greeted with open arms.

But before we get into those details, let’s back up and look at what defines these companies. A subsidiary is a company that belongs to a separate company that controls more than half of the subsidiary’s stock. The company holding the controlling interest is known as the parent company (aka the holding company).

Basically, if more than half of your company’s equity is controlled by a separate company, you are likely a subsidiary. In this arrangement, the parent company plays a key role. They help elect the board of directors for the subsidiary and can exert influence on multiple aspects of the business operations.

“Subsidiaries are common in some industries, particularly real estate,” explains a report from The Balance Small Business. “A company that owns real estate and has several properties with apartments for rent may form an overall holding company, with each property as a subsidiary. The rationale for doing this is to protect the assets of the various properties from each other's liabilities. For example, if Company A owns Companies B, C, and D (each a property) and Company D is sued, the other companies can not be held liable for the actions of Company D.”

Now let’s look at some of the tax implications for subsidiaries. Because a subsidiary is a separate legal entity, it must often do all the things that a normal business would. This includes maintaining financial records, recording all liabilities and assets, filing tax returns, and paying income taxes. This level of independence is noteworthy because it opens the door for financial benefits for the parent company. For example, if a parent company in Canada owns a subsidiary based in Germany, the subsidiary might pay taxes on its profits according to the laws of Germany rather than lumping its financials together with the parent company and paying in Canada. This dynamic can often provide tax benefits for the parent company.

Similar tax savings might also be available at the state level. For example, let’s say a parent company in California wanted to use a new trademark. If the trademark taxes were particularly high in the Golden State, the company might create a subsidiary in Wyoming in order to take advantage of that state’s more favorable tax rates.

This is not to say that the financials of subsidiaries and their parent companies are completely separate. There are times when a parent company will consolidate things in order to save money.

“However, many public companies file consolidated financial statements, including the balance sheet and income statement, showing the parent and all subsidiaries combined,” says The Balance Small Business. “And if a parent company owns 80% or more of shares and voting rights for its subsidiaries, it can submit a consolidated income tax return that can take advantage of offsetting the profits of one subsidiary with losses from another. Each subsidiary must consent to being included in this consolidated tax return by filing IRS Form 1122.4.”

While this type of consolidation can be a shrewd approach for a parent company to offset losses among its subsidiaries, special rules apply. Tax returns and financial statements from multiple subsidiaries can only be merged when the parent company owns 80% or more of each of the companies in question. And the parent company would need to notify the IRS in advance of the plan to consolidate tax returns.

As you can imagine, it’s complex and burdensome to manage the accounting for multiple companies. Add in the tax element and things get even more difficult. For this reason, the owners of parent companies and subsidiaries should always invest in the services of a reliable and trusted accountant. Additionally, they should consult with attorneys in order to understand and adhere to all relevant laws.

It’s understandable that some business owners might balk at the idea of paying for accounting and legal help. After all, the price tag is never cheap for quality advice. But it’s a wise investment that will help them maximize the unique financial benefits of their business structure. Failing to do this would be like owning a high-performance sports car but never learning how to shift into its 2 fastest gears.

Subsidiary corporations also need to ensure that their day-to-day bookkeeping is consistent and accurate. It’s a best practice to use bookkeeping software that can automate recurring tasks and help to ensure tax compliance. This proactive approach to your finances will save you time, hassles, and money.

The information provided in this post does not, and is not intended to, constitute tax advice; instead, all information, content, and materials available in this post are for general informational purposes only. Readers of this post should contact their tax professional to obtain advice with respect to any particular tax matter.

“Inflation” is one of those economic terms Americans hear about from childhood onwards—but if quizzed on its exact definition, many might have a hard time coming up with the correct answer.

Most often, we probably think of inflation as the reason why goods cost more and wages are higher today than in the past. For example, you could buy a glass of beer for a nickel in the late 1800s, and the federal minimum wage in 1980 was just $3.10 per hour.

Inflation is also usually the answer to why the government can’t just print out more cash and simply hand it to everyone who wants some.

But to understand how inflation works and how it can impact your small business, it’s critical to look at the concept from several angles. Wages, supply, demand, and monetary supply all play a role in inflation.

“Inflation can be defined as the overall general upward price movement of goods and services in an economy,” according to the Department of Labor.

This upward trend is generally caused by 1 of 2 reasons: cost and demand.

Cost-push inflation is caused by the rising cost of producing goods and services. If the cost of labor, land, or raw materials go up, businesses will usually increase prices to maintain their profit margins.

Natural disasters provide an extreme example of cost-push inflation. If production facilities are severely damaged, prices go up because production becomes more expensive.

On the other hand, demand-pull inflation is caused by an increase in demand. If demand exceeds production, inflation will likely occur because prices will rise.

While it’s not wise to overgeneralize economic trends, demand-pull inflation is sometimes thought of as “good” because it typically happens in an expanding economy with low unemployment.

When the national money supply, which includes cash as well as credit and loans, is overextended, a type of demand-pull inflation occurs. If there is too much money being produced for not enough goods, the price of goods will increase. This situation also lowers the value of the overproduced currency in comparison with other global currencies, causing import costs to rise and, in turn, causing overall prices to increase.

Overproduction of the money supply, in some cases, can lead to the extreme devaluing of currency. Famously, hyperinflation occurred in Germany following World War I and in Venezuela during the 2010s.

Because small businesses are less financially stable by their very nature, inflation has an outsized impact on smaller companies. Increasing your prices by just a few dollars can make you far less competitive. As a small business, your profit margins are likely very tight anyway.

Unfortunately, when it comes to macroeconomic forces like inflation, there is not much you can really do except for plan. When doing your long-term financial forecasting, you should think about both demand-pull and cost-push scenarios.

If your cost of production rises year after year or demand starts to overwhelm your supply, how much can you raise prices and still stay competitive?

Financial statements are meant to provide insight into your business and help you to make informed, strategic decisions. With the data you collect and report, you can identify a host of problems, ranging from wasted spending to underperforming investments. 

However, a financial statement is only as good as the insight you can glean from it. If you aren’t sure how to read the reports, don’t update them regularly, or don’t take action on them, they won’t be valuable. 

If you’re new to financial reporting or have a hard time knowing what to look for, consider these 5 red flags in your financial statements.

1. A High Debt-to-Income Ratio

Business and personal accounting have 1 thing in common: you always want to make more than you spend. If your debt-to-equity ratio is on the rise, then you’re spending more than you’re bringing in—and unless you’re scaling and reinvesting in your business, that’s a major red flag.

Set a goal for a standard debt-to-income monthly ratio, with ranges for healthy high and low levels. This process will help you to sound an alarm if your ratio begins to rise—that way, you can intervene before your spending gets out of hand.

To rebalance your debt-to-income ratio, look for unexplained or unnecessary expenses. You can also acknowledge that some expenses are 1-time issues (like an unexpected plumbing repair cost at your business) that will return your ratio to normal in the following month. 

2. Lower Profit Margins

High sales totals don’t always indicate a successful business. A more reliable metric to look at is your profit margin. The profit margin is a metric that describes the amount of money (or percentage of profit) that a business makes from its sales. 

For example, let’s say you offer 2 products that both cost $20. If Product A costs $5 to make and Product B costs $15 to make, then Product A is significantly more profitable to your business. So even though these products are priced the same, their costs are different—which means they have different profitability (profit margin).

You can’t always control what your customers buy. However, you can create a diverse product offering and prioritize marketing your higher-margin items while continuing to focus on optimizing your company-wide profit margin. 

3. Excess Inventory

Inventory that you haven’t been able to sell is called dead stock. This term refers to items that get stuck on store shelves or in warehouses before they can get moved to the store or shipped to customers. 

Excess inventory means lower profits. First, you have to pay for warehouse space for the inventory that isn’t selling. Next, your shelves become full of unwanted items, which limits your ability to bring in new, highly desirable products. 

Even if you do sell your dead stock, you’re more likely to take a loss. Think about a collection of unfashionable sweaters that’s discounted 75% by May or the Christmas decorations that immediately go on clearance after December 25. At some point, you just want to get rid of the inventory and move on. 

If you consistently have problems moving your inventory, you may need to reconsider how much of a given item you buy or change your buying patterns to acquire more desirable items.  

4. A Large Account Receivables

When you send an invoice to a customer, it goes into your accounts receivables until those outstanding funds are collected. This is money you’ll have in the future but can’t use now. 

Watch to see if your accounts receivables build up—if they do, it could create cash flow problems in the future. Not only do you need to worry about customers not paying their bills (or taking too long to reconcile them), you also need to make sure you have enough operating cash to sustain your own liabilities and expenses. 

Like your debt-to-income ratio, set ranges for a healthy accounts receivable amount so you can intervene before the unpaid invoices become a problem.  

5. A Large Number of ‘Other’ Expenses

Within your financial records, you should keep most of your expenses categorized. You’ll likely have categories for materials, utilities, labor, marketing, and other costs. Unfortunately, not all of your business costs fall into these exact categories. 

Keep an eye out for a rise in “other” expenses that might fly under the radar but build up if you’re not careful. This is particularly relevant if your “other” expenses are large and contribute significantly to your debt-to-income ratio. 

You should look for ways to categorize these items and set budget items to avoid overspending.  

Many of the financial metrics above can change depending on the statement, time frame, or other variables you might use. If you notice any of the above red flags in your financial statement, it doesn’t mean the sky is falling—these are signals that should give you pause and lead you to investigate further, but they’re not completely damning.

For example, during the pandemic, you may have extended your net payment terms with clients. This flexibility with your customers could lead to an increase in accounts receivable—but within the context of the global pandemic, you can understand that it’s not indicative of a poorly run business.

The key to reading financial statements is to identify patterns and problems. If you can’t answer why these changes are happening, you need to take a closer look at your business. 

For better organization and financial planning, look into getting a software system that can help with bookkeeping. The Lendio app can help you organize expenses, sort invoices, and make accounting a breeze. 

Launching a brand-new business is an exciting experience. It's usually just you and a blossoming idea against the world. However, with so many unknowns, the beginning stages of a startup can be anxiety-filled and tricky.

Whether you like it or not, business success ultimately comes down to cash flow—is your business making more than it's spending? If the answer is yes, then you're on the right track. If the answer is no, then you need to start making some fixes.

In the early stages, you'll likely burn more cash than you're making—that's common. Nonetheless, you need to have a plan for how you're going to eventually turn a profit.

Running out of cash is the second biggest reason most startups fail. It's not that businesses don't get enough financing or sales—it's that they don't strategically and responsibly manage that capital.

Getting your financial ducks in a row is critical to the short-term and long-term survival of your business. The sooner you get your financial situation established, the better. Below, we'll cover the 10 critical financial steps you need to take to build a durable business foundation.

1. Establish Financial Goals

Everyone wants to build a multi-million dollar business, but you need to set realistic financial goals for how you're going to get there. Ask yourself a few questions to get your mind thinking of the possibilities—don’t worry, there are no right answers:

• Do you want to keep your business small forever, or would you like to eventually scale it to something bigger?
• Do you plan on owning this business for the long-term, or do you want to grow and then sell it for a quick buck?
• How much do you plan on paying yourself?
• How much revenue would you like your business to generate in the first year? What about the first 3 or 5 years?
• When would you like to start turning a profit?

You don't need to have answers to all these questions just yet, but keep them in the back of your mind as you build your business. Soon, you'll begin making important business decisions that may permanently steer your business in a specific direction—and it's essential you know where you're going.

2. Determine How You'll Fund Your Business

It takes money to make money, especially when you're just getting started. Initial investments in your business will require a significant sum of money. Real estate, renovations, website hosting, product molds, marketing material, software, payroll—operating a business isn't cheap.

To get your business off the ground, you'll likely need a healthy pile of cash. How you fund your business is just as important as what you spend your funds on. Here are a few financing sources for you to consider:

• Debt financing: Borrow money and repay it with interest. Maintain complete control of your business
• Venture capitalists: Trade equity for cash. Lose a portion of ownership of your business.
• Angels: Share ownership of your business with a wealthy individual in exchange for capital.
• Friends and family: Mixing personal and business life can get a bit thorny, but mom, dad, and your high school best buddy may be willing to lend you some cash without contracts and collateral.
• Crowdfunding: Harness the power of the internet to raise funds for your business in exchange for future products, rewards, acknowledgment, or good-Samaritan points. 
• Bootstrapping: Build your business from the ground up with only your personal savings and cash from initial sales.

Before you give away expensive equity or lock yourself into a 10-year loan, consider all your financing options. Take a look at our Top Financing Options for All Your Business Growth Needs guide for more details.

3. Separate Your Business and Personal Finances

While it might seem easier to just carry around one piece of plastic, it's not easier come tax time. Trying to remember which expenses were for your business and which were for your personal life can be a nightmare—especially 9–12 months later.

Right from the get-go, do everything you can to separate your business and personal finances:

1. Apply for an Employer Identification Number (EIN)
2. Set up your business entity type
3. Open a business bank account
4. Obtain a business credit card
5. Separate all your expenses

Separating your expenses doesn't just make tax season easier (though, that'd be reason enough)—it also can help you claim valuable tax deductions, shield your personal assets, and build your business credit.

The longer you wait, the harder it becomes to separate your finances. Set yourself up for success early to avoid major accounting headaches later.

4. Build an Emergency Fund

In the beginning, every dollar counts. Every sale, every saved expense, every penny-pinched—it all matters. However, it's never too early to start building your emergency fund.

Get into the habit of setting aside a portion of your weekly or monthly revenue toward a cash cushion. COVID-19 was a rude wakeup call for all businesses solely reliant on future cash flow—don't let an uncontrollable disaster destroy your business.

As a rule of thumb, try to save at least 3 months (or more) of liquid funds. These rainy-day funds could help you survive future calamities and unexpected expenses without having to wait around for government loan programs.

Another great way to build an emergency fund is to obtain a business line of credit. A business line of credit is a flexible form of financing that you can keep in your back pocket for downtimes—it's there when you need it, but you have no obligation to use it.

Whether you need to make immediate repairs to a vital piece of equipment, cover payroll during a slow month, or restock your inventory, a business line of credit can handle it all. The credit is revolving, so when you use it and repay the borrowed portion, you'll get immediate access to your full credit line again. Plus, you only pay interest on funds you use, not the full amount.

5. Get a Business Credit Card

You're going to start accruing expenses here and there even before opening day. Get a business credit card as soon as possible so that you can keep your personal and business expenses separate. 

Unlike other business loans, you don't need to wait to apply until you've been in business for 12 months or until you've sustained thousands of dollars in annual revenue. Lenders will look at your personal credit score, meaning you can qualify for a top-notch business credit card starting day one.

Business credit cards can give your new business a huge headstart:

• Use your card to pay for practically any business expense
• Start building your business credit score so that you can qualify for bigger loans down the road
• Enjoy a 0% introductory APR for the first 12 months with most cards
• Qualify for higher credit limits to pay for expensive equipment or other startup costs
• Earn points, rewards, cashback bonuses, and other great perks
• Automatically separate and track your expenses

6. Track and Monitor Your Expenses

You don't need to become an accounting wizard, but you need to learn a few bookkeeping basics. First, create an account on a free bookkeeping tool, like Lendio's software. Connect your bank accounts and credit cards, and voilà—Lendio's software will automatically begin importing, tracking, and categorizing all your income and expenses.

Data like this might not seem important now, but it'll be critical when you're applying for loans, forecasting your cash flow, and building your business plan. Plus, it'll make tax season a breeze.

Meticulous monitoring of your finances will also ensure no money slips through the cracks. Lendio's software can help you create, send, and automate your invoices, so you never forget about a delinquent customer. Plus, you'll always know where your money is going, so you'll never be surprised at your end-of-the-month numbers.

7. Strategically Set Your Prices

Pricing your products right is a Goldilocks conundrum. Too high, and you'll practically be marketing for your competitors. Too low, and you'll come off as a cheap brand. You'll need to find the sweet spot to outprice your competitors, maximize ROI, and maintain your brand integrity.

Setting your prices is hard on day one. Further down the road, you'll have more historical data, reliable break-even points, and research to help dictate your prices. In the beginning, however, you'll have to rely on forecasts, estimates, market trends, and (admittedly) a bit of guesswork.

To get baseline prices, you'll need to do some homework:

• Know your costs: Get down in the weeds with exactly how much it costs to source, produce, store, market, and deliver your products and services. Once you determine your costs, you'll know the absolute bottom limit to your pricing.
• Know your financial goals: Look back at the financial goals you established in Step 1. What price point do you need to set to make those goals a reality? 
• Know your competition: Analyze the market and see how your competitors are pricing complementary and substitute products and services. In this day and age, regardless of where your customer is, they can whip out their smartphone and get instant price comparisons—and research says they do it all the time.
• Know your market: How important is price to your customer demographic? For example, if you're selling breakfast cereal, some customers will fuss if your price is 15 cents more than a competitor. On the other hand, if you're selling Ford F-150s, your customer might not think twice that your truck costs $5,000 more than a leading competitor.

Once you've done your research, price your goods with confidence. Continually reevaluate your price point—it's never set in stone. Over time, you may build up operating efficiencies that dramatically decrease your costs, or your competitors may get caught up in a pricing war. Keep an eye on your sales, and don't be afraid to experiment with pricing changes.

8. Invest in Professional Services

When money is tight, you might be tempted to try and do everything on your own: bookkeeping, marketing, sales, recruiting, designing, and the list goes on. However, your most valuable asset is your time.

First, track how you spend your time. Record everything you do: answering emails, fly-by chit chats, scheduling, meetings, screening candidates, etc. Now, attach a dollar value to each of these activities—how much would you need to pay someone to do any of these tasks for you? Next, determine how much your time is worth—attach a dollar figure to it. 

If the value of an activity is less than your time is worth, outsource the task. Hand over the minutiae and start spending your time doing what nobody else can do for you—growing your business.

The most successful small business owners know when to do and when to delegate. Penny-pinching here and there could save you a buck or two, but you might be leaking more cash than you're saving. Consider which tasks you could easily hire a professional to do:

• Bookkeeping
• Web development
• Content marketing
• Copywriting
• Data entry
• Social media
• Customer service
• IT support

You can offload a lot of time-consuming activities to a freelancer or digital assistant. While learning new skills is valuable, it's not always the best use of your time as a small business owner to learn the ins and outs of WordPress or how to troubleshoot Mac issues. Start building a team (whether that's freelancers, employees, or other professional services) early on—you'll always have more than enough to do.

9. Remember to Pay Yourself

Don't forget that you're a business expense, too. Some entrepreneurs pour their heart, spirit, and bank accounts into their businesses at the expense of their families and livelihoods. 

You don't need to take home a big fat salary every month, but pay yourself enough to live comfortably (at least). Eliminating personal financial stress from your life will help you focus on your business and make more objective business decisions.

How you pay yourself will depend on your established business type. Owners of LLCs, partnerships, and sole proprietorships are viewed as self-employed, so they're paid through something called an owner's draw. If your business is a corporation (like a C-corps or S-corps), then you'll pay yourself through a set salary.

As the owner, it's easy to neglect yourself. Plan for this expense in advance so that you leave sufficient budget for your pay. Start a good habit from day one of always making yourself a priority—this practice will go a long way in the future business decisions (big and small) that you make.

10. Plan for Taxes

Your first tax season is right around the corner. Unfortunately, many small business owners forget to calculate their tax burdens when they're budgeting startup and operating costs. The reality is that your potential tax obligations could make the difference between profitability and financial loss.

As a full-time employee, your taxes are automatically deducted from your paycheck—no planning, no budgeting, no hassle. However, as a small business owner, you must take the initiative to calculate, set aside, and pay your taxes. 

The best way to avoid any future tax surprises is to pay quarterly taxes on your income. Doing this will give you a clearer picture of your month-to-month financial situation—plus, it'll make tax season much less of a headache.

Lendio makes it easy to prepare your company's taxes with a nifty feature called Lendio Tax Assist. Lendio Tax Assist is a free tool that helps you organize and estimate your taxes so you know how much money you'll owe in advance.

Sometimes taxes can be tricky, and that's why accountants are paid the big bucks. Still, they're almost always worth the cost. Consider hiring an accountant, especially for your first tax season. They'll save you time and money, as well as maintain your relationship with the IRS.

Let's Get Down to Business

Now that you've taken care of the essential financial steps, you're ready to start growing your business. Yes, these steps can be time-intensive, but they're well worth the initial investment—they'll pay dividends in time and money in the long run. With a solid financial foundation, you'll avoid many of the mistakes that kill new businesses. 

Remember, business success is rarely the result of spontaneity (especially for entrepreneurs). You need a plan—let us help. 

If you need capital to get your business off the ground, our personal funding managers can help make it happen. Just start your no-fee, no-obligation 15-minute application to see what small business loans you qualify for. Then, a funding manager will help walk you through your options so that you don't walk away with any ol' loan—you skip and hop away with the very best loan.

It takes a little cash to make big things happen. Get the capital your small business needs to start off on the right foot.

Collecting payments from clients can be surprisingly challenging. Every small business owner has experienced the frustration that comes from providing a valuable product or service and waiting days, weeks, or even months for payment. 

The best invoicing software does more than reduce the work that goes into creating invoices and collecting payments. It also helps you get paid significantly faster, improving the timing of your small business’s cash flows.

Forget waiting for checks to arrive in the mail, taking them to the bank, and waiting again for the deposits to clear. With invoicing software, your clients can pay you almost instantly, and you can get your funds in days instead of weeks or months.

Invoicing Software Options

Below are some popular and new invoicing tools and software.

Lendio’s Mobile App

Manage your business finances with confidence using our simple, centralized dashboard. Create quotes and invoices and collect payments from the same application where you manage your business bank account, track your cash flow, and even apply for a business loan. The Lendio mobile app is free to all users.

Sage

Like many other invoicing software, SAGE offers a combination of invoicing and accounting tools for small businesses. The Pro Accounting software starts at $346 for the first year and includes access for a single user, invoice and bill tracking, expense management, automated bank reconciliation, inventory management, fraud management and reporting.

Freshbooks

Freshbooks offers invoicing and bookkeeping software. You can try the software free with a 30-day trial. After that plans start at $8.50/month. On the lite plan, businesses can bill up to five clients, automate recurring invoices, send out estimates, send out unlimited invoices and accept credit card and ACH bank transfers. Plus and Premium plans include more robust accounting features.

Wave

Wave offers free accounting, invoicing and banking software. Instead of charging for the software the company charges a percentage for payment processing. It also offers optional payroll software and advisory services for an additional cost.

Benefits Of Invoicing Software

Invoicing software can be an invaluable tool for any small business. These are some of the most significant ways you can use them to your benefit.

Online Invoicing Options

In a world where convenience is increasingly in demand, online payment processing is no longer optional for many small businesses. If it’s at all possible for your business model, your clients will expect to be able to complete your invoices online.

If you can’t meet those demands, it’ll soon start to cost you business if it hasn’t already. Fortunately, invoice software is an affordable way to collect funds remotely. For example, the free plan lets you access our invoicing tool at no cost.

In addition, the convenience of the system isn’t just beneficial for your customers. It also means you’ll receive payment for your products or services more quickly, reduce the frequency of unpaid invoices, and improve your cash flow.

Streamlined invoice creation

It’s time to say goodbye to building invoices in a spreadsheet or document and emailing them to clients as a PDF. With invoicing software, you can effortlessly generate personalized and professional invoices in minutes.

Once you’ve created one with a structure that you like, you can save it as an invoice template and duplicate it for future transactions.

Not only will the software save you a significant amount of time and energy, but your clients will appreciate the increased quality of your documentation. Holding yourself to a higher standard of professionalism will only benefit your client relationships.

Automatic collections processes

Traditionally, the most frustrating part of invoicing is collecting from slow-to-pay clients after the due date has passed. You’ll inevitably run into those who have many other redeeming qualities but can’t seem to complete invoices on time.

That can have a significant negative impact on your business’s cash flow. If you find yourself going for weeks at a time without receiving payment for your products or services, it can cause a lot of financial strain and even push you into debt.

Fortunately, software can make the collections process the easiest part of invoicing. With it, you can schedule automatic follow-up emails that will go out to delinquent clients professionally and promptly without having to lift a finger.

Integrated Invoices And Bookkeeping

If your business sends invoices and purchases regularly, keeping your financial records in order can be surprisingly time-consuming. There’s a reason that full-time bookkeeping and accounting services exist.

When you use old-fashioned invoices, you create a lot of work for the individual in charge of revenue and expense tracking. They have to adjust the books for each transaction by hand, and there’s a lot of room for human error.

Once again, invoice software can help you automate the process, saving you or your accountant hours of work. Plus, when your invoicing feature integrates directly with your bookkeeping and accounting software, your Lendio account and records are always up to date.

How To Choose Invoicing Software

Invoicing is critical for most small businesses—it is likely the mechanism for how you get paid for the work you do. However, it can become tedious and frustrating for many of us who work with many different clients.

Why do you want invoicing software? For any small business using invoices, the overarching goal of an invoice is to get paid what you’re owed on time. Good invoicing software helps you accomplish this task—and more.

You should aim to create standardized, easy-to-understand invoices that can be made in minutes with a few keystrokes. Although it depends on your clients, ideally you don’t have to use different invoice templates for each entity you do business with. Invoicing software helps you homogenize and accelerate your invoicing operation.   

1. Easy to Create Invoices

Probably the most critical function of any invoice software is the ability to create invoices, which you want to be able to do quickly, easily, and repeatedly. You want your invoice recipients to easily recognize how much they owe you, where they should send payment, and when you expect it—you want to give them no excuses for being late with a check. Most likely, you didn’t go into business to create invoices—solid invoicing software makes this part of the job a snap.

2. Branding Capabilities for Your Invoices

Along with making invoice creation breezy, look for invoicing software that easily allows you to add branding. Again, your big, bright logo sitting atop an invoice helps clear up any confusion on the part of the payee. Creating colorful invoices with your excellent branding also ensures you come across as highly professional and organized. Good invoice software can help you create documents in your brand voice for all of your clients. All you should have to do is switch out the type of work being invoiced and who you are sending the invoice to.

3. Ability to Create Recurring Invoices

Invoicing software eases the burden of being a small business owner by chasing down payments for you. You should be able to set up recurring invoices to your repeat clients so you don’t have to remind yourself to send something out every week or month. Even better, some options allow clients to set up automatic payments so you get your payments as smoothly as possible. If you work with clients on a long-term, repeated basis, invoicing software means you don’t have to constantly remember to send out invoices to them.   

4. Multiple Payment Methods

Unfortunately, it can seem that clients will find any reason to delay payment. We’re often told that checks have been “lost in the mail” for weeks on end. Good invoicing software combats this issue by allowing your clients to pay you in multiple ways. Some can even allow you to receive payment by credit card or bank transfer, ensuring those funds enter your account as quickly as possible. Oftentimes, you can receive your money within 72 hours of your client paying the invoice through an automated clearing house (ACH) options.

5. Tie Invoices to Your Expenses So You Can Monitor Revenue

Invoices are only one element of your business equation. They represent your cash in-flows, and, in many cases, invoices might be the entirety of your revenue. On the other end of the equation are expenses like rent, wages, equipment, and office supplies. The best invoicing software links the two parts of your finances so you can see how your business is earning and spending money. For the long-term, this feature will give you a granular, data-driven ability to create accurate business planning documents, not to mention it helps take the sting out of tax time.

6. Identify Unpaid Invoices

If you have a long roster of clients, keeping up with your invoices is a job in itself. Determining who owes you what and when, along with who is delinquent, can be extremely frustrating and is likely not what you signed up for when you decided to go into business. Invoicing software can quickly identify which invoices are unpaid and how long they’ve been delinquent. It also easily sends invoice reminders on a recurring basis so you can let your payees know you are paying attention.

7. Change Your Pricing and Offer Deals

Depending on your business, you might find your pricing changes with the seasons, business traffic, or other factors. However, it would be nice to determine price changes for your business without doing line-by-line math in every one of your invoices. Good invoice software allows you to easily change up your pricing in case you want to offer a discount or need to increase costs due to a surge in demand. Even better, software can allow you to easily set prices by either dollar amounts or percentages.

Why A Professional-Looking Invoice Helps Your Business

Invoices are more than just a way to document transactions with your clients and collect payments from them. Just like your website, emails, and any other public or client-facing communications, they’re also a representation of your business.

As a result, investing in a small business invoicing software that can produce more professional-looking invoices may benefit you in similar ways, such as:

• Professional reciprocity: Your relationships with your clients are just like those in your personal life. Consciously or not, they’ll take cues from how you treat them and treat you similarly. Setting a high standard for professionalism with your invoices will only encourage them to do the same with you.
• Respect and credibility: Successfully closing a sale with a client means they think you’re the best option readily available. Anything you can do that builds further respect and credibility with them, including maintaining a professional image, will help you stay ahead of your competitors.
• General goodwill: Using invoicing software to make professional invoices does more than just present an attractive payment page. It also makes completing your invoices a more convenient experience. Making things easier for your clients whenever possible is a great way for freelancers and business owners to promote recurring transactions.

These may all be intangibles, but they manifest themselves in a tangible way. Making your customizable invoices look more professional can directly increase your client’s timeliness in paying you and smooth out your cash flows.

When applying for business loans, credit cards, or other lines of credit, lenders put your credit scores in the spotlight. Credit scores tell lenders at a glance how responsible you are when it comes to borrowing money and paying bills. But just how important is that 3-digit number? Here's what you need to know about the highs—and lows—of credit scoring. 

Credit Score Ranges Explained

There are different FICO score variations, but the typical score range you're working with is 300 to 850. VantageScores, which are an alternative credit scoring model, work along the same lines. The current VantageScore version also ranges from 300 to 850. 

What Is Good vs. Bad Credit?

• Payment history: 35% of score
• Credit usage: 30% of score
• Credit age: 15% of score
• Credit mix: 10% of score
• Inquiries for credit: 10% of score

That range leaves a lot of gray area in-between where you have different levels of credit. For example, here's how FICO breaks down its credit score ranges and grades:

• 800+: Exceptional credit
• 740 to 799: Very good credit
• 670 to 739: Good credit
• 580 to 669: Fair credit
• <580: Poor credit

Why Credit Scores Matter When Seeking Financing

A FICO score in the excellent range virtually guarantees that you'll be approved, whether you have a perfect 850 credit score or not. In fact, lenders typically don't distinguish much between a score of 800 or 850. Either one sends a strong signal that you're a low-risk borrower, based on your past payment history and credit usage. 

Having a credit score in the poor or fair credit range, on the other hand, could make it much more difficult to get approved for loans. You may be limited to certain borrowing options, such as a secured loan or line of credit. Generally, the lower your score, the riskier you appear in the eyes of banks and lenders. 

Your credit score also counts when it comes to how much you pay for a loan. As a rule of thumb, the higher your credit score, the lower the interest rates you can qualify for. Getting a low rate is important, whether you're taking out a loan for your business or any other purpose because it means less money you have to pay back over time. 

Is Aiming for a Perfect Score Worth It?

With that in mind, it's helpful to work on improving your score as much as possible, particularly if you plan to borrow money to fund your business. If your credit score isn't as high as you'd like it to be yet, here are some of the smartest things you can do to get it on the right track:

• Pay your bills on time. Payment history accounts for the largest share of your personal credit score, so get in the habit of paying on time. Setting up automatic payments for your personal and business expenses can make this easier.
• Reduce your debt. Carrying high balances on your credit cards can work against your score. Prioritize paying down some of what you owe, aiming to use 30% or less of your total credit limit.
• Limit new inquiries for credit. Applying for new credit cards or loans can knock a few points off your score each time. Stick with applying for new credit only when it's absolutely necessary.

As a small business owner or someone who is self-employed, tracking your business-related expenses and understanding what you can and can't deduct while doing your taxes is critical. Not only can it maximize your small business deductions and save you lots of money, but it can also help you reduce your risk of being audited.

Some of the most common business-related expenses are travel costs. Whether you drive to meetings often or fly out for conferences and stay in hotels, understanding what is and isn't considered a travel expense is an important aspect of small business accounting.

What Is a Travel Expense?

However, not all business-related travel expenses are deductible. According to the IRS, you can't deduct anything extravagant or unnecessary, so don't try ordering a private limo service to pick you up from the airport and writing it off. You also have to be traveling away from the general area considered your "tax home" for at least 1 workday to deduct your costs as travel expenses.

Different Types of Travel Expenses

Transportation

Additionally, if you use your car to get around on a business trip, you can claim mileage on your taxes and deduct it at the standard mileage rate. According to the IRS, the mileage rate for 2020 is 57.5 cents per mile that you drive for business-related usage.

Airfare

Accommodations and Lodging

Food

Miscellaneous Travel Expenses

• Shipping and handling costs for luggage or work-related materials to and from your destination
• Laundry
• Business-related communication (business calls or faxing, for example)
• Tips paid for work-related expenses
• Other necessary costs related to business travel

What Isn't Considered a Travel Expense?

You can't deduct any travel expenses that aren't business-related, which includes personal expenses completed while traveling for business. You also can't deduct travel expenses that are superfluous or excessive, such as luxury purchases. If your family travels with you on a work trip, their expenses don't count as your travel expenses.

When you have business-related expenses in your home city, they may or may be deductible. However, they aren't considered travel expenses.

Knowing what counts as a travel expense will help you understand what you can and can't deduct when doing your taxes. Pair that knowledge with common small business tax credits, and common small business tax mistakes, and you'll be able to maximize your refund and avoid being audited.