The Home-Based Business: Basics to Consider

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More than 52 percent of businesses today are home-based. Every day, people are striking out and achieving economic and creative independence by turning their skills into dollars. Garages, basements, and attics are being transformed into the corporate headquarters of the newest entrepreneurs–home-based businesspeople.

And, with technological advances in smartphones, tablets, and iPads as well as a rising demand for “service-oriented” businesses, the opportunities seem to be endless.

Is a Home-Based Business Right for You?

Choosing a home business is like choosing a spouse or partner: Think carefully before starting the business. Instead of plunging right in, take the time to learn as much about the market for any product or service as you can. Before you invest any time, effort, or money take a few moments to answer the following questions:

  • Can you describe in detail the business you plan on establishing?
  • What will be your product or service?
  • Is there a demand for your product or service?
  • Can you identify the target market for your product or service?
  • Do you have the talent and expertise needed to compete successfully?

Before you dive head first into a home-based business, it’s essential that you know why you are doing it and how you will do it. To succeed, your business must be based on something greater than a desire to be your own boss, and involves an honest assessment of your own personality, an understanding of what’s involved, and a lot of hard work. You have to be willing to plan ahead and make improvements and adjustments along the way.

While there are no “best” or “right” reasons for starting a home-based business, it is vital to have a very clear idea of what you are getting into and why. Ask yourself these questions:

  • Are you a self-starter?
  • Can you stick to business if you’re working at home?
  • Do you have the necessary self-discipline to maintain schedules?
  • Can you deal with the isolation of working from home?

Working under the same roof that your family lives under may not prove to be as easy as it seems. It is important that you work in a professional environment. If at all possible, you should set up a separate office in your home. You must consider whether your home has space for a business and whether you can successfully run the business from your home.

Compliance with Laws and Regulations

A home-based business is subject to many of the same laws and regulations affecting other businesses and you will be responsible for complying with them. There are some general areas to watch out for, but be sure to consult an attorney and your state department of labor to find out which laws and regulations will affect your business.

Zoning

Be aware of your city’s zoning regulations. If your business operates in violation of them, you could be fined or closed down.

Restrictions on Certain Goods

Certain products may not be produced in the home. Most states outlaw home production of fireworks, drugs, poisons, sanitary or medical products, and toys. Some states also prohibit home-based businesses from making food, drink, or clothing.

Registration and Accounting Requirements

You may need the following:

  • Work certificate or a license from the state (your business’s name may also need to be registered with the state)
  • Sales tax number
  • Separate business telephone
  • Separate business bank account

If your business has employees, you are responsible for withholding income, social security, and Medicare taxes, as well as complying with minimum wage and employee health and safety laws.

Planning Techniques

Money fuels all businesses. With a little planning, you’ll find that you can avoid most financial difficulties. When drawing up a financial plan, don’t worry about using estimates. The process of thinking through these questions helps develop your business skills and leads to solid financial planning.

Estimating Start-Up Costs

To estimate your start-up costs include all initial expenses such as fees, licenses, permits, telephone deposit, tools, office equipment and promotional expenses.

In addition, business experts say you should not expect a profit for the first eight to ten months, so be sure to give yourself enough of a cushion if you need it.

Projecting Operating Expenses

Include salaries, utilities, office supplies, loan payments, taxes, legal services and insurance premiums, and don’t forget to include your normal living expenses. Your business must not only meet its own needs, but make sure it meets yours as well.

Projecting Income

It is essential that you know how to estimate your sales on a daily and monthly basis. From the sales estimates, you can develop projected income statements, break-even points, and cash-flow statements. Use your marketing research to estimate initial sales volume.

Determining Cash Flow

Working capital–not profits–pays your bills. Even though your assets may look great on the balance sheet, if your cash is tied up in receivables or equipment, your business is technically insolvent. In other words, you’re broke.

Make a list of all anticipated expenses and projected income for each week and month. If you see a cash-flow crisis developing, cut back on everything but the necessities.

If a home-based business is in your future, then a tax professional can help. Don’t hesitate to call the office if you need assistance setting up your business or making sure you have the proper documentation in place to satisfy the IRS.

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3 Simple Tools help you in Boosting Your Business

small business accounting

small business accounting

Tools help you in Boosting Your Business

What’s most significant to growing your business? Ultimately, making certain profit and enhancing sustainability are the foremost necessary ideas. To get there we should accomplishing 3 things:

• Saving time
• Saving cash
• Retaining customers

Those are 3 simple ideas that have a huge impact on your business.
To help you do those things better, let’s take a glance at 3 varieties of tools available to assist you simply grow your small business.

Save Time by putting Accounting in the Cloud

 

I once knew of a company (which shall remain nameless) that had the most shockingly inefficient accounting routine. Each day, at the close of business, each department would fill out a separate spreadsheet that collects sales, costs, and payroll hours, which would then be emailed to the accounting department. From there, the accounting personnel would synchronize the department spreadsheets with a central spreadsheet and call it a day.

Save Money with data Analytics

It’s hard to separate time from money, since employee hour saved is cash saved for the organization. However there’s one tool which will assist you save cash, without hindering time, directly. This is where data analytics tools come in handy.

You’re terribly aware that your website’s traffic is very important. Moreover, you’re likely to already be participating in actions designed to draw in traffic to your web site, but if you’re not sizing them up, you’re missing (and probably misplacing) troves of money.

Retain Customers with Social CRM

Customer relationship management (CRM) isn’t a brand new concept. It’s a term that’s been around for years, although it’s changed, and, ultimately, has come back full-circle, more recently. The arrival of social media as a leading digital atmosphere for business has brought with it an emphasis on social CRM.
It’s likely that you’re engaging in branding through social media sites like Facebook and Twitter. And, quite naturally, you’ve probably noticed that your fans don’t hesitate to reach out to your brand’s pages in search of facilitate or recommendation on your product or services. The issue is, they expect to be given a solution.

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small business accounting and bookkeeping

Final Thoughts
There’s nothing shocking here, right? Saving time and cash and holding customers are timeless ideas in small business!

Online accounting and bookkeeping service for small businesse

14 Ways Accounting Can Make You Rich

 

personal-finance-and-accounting-blink-images#1 : Sir John Templeton: “Invest at the point of maximum pessimism.”

#2 : “Raise the deductibles on your motorcar and residential insurance.”

#3 : For simple federal tax-exempt wealth transfer, make $14,000 annual gifts to kids and grandchildren. It won’t delve your $5.25 million lifetime exemption from gift and estate taxes.

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#4 : Be a tax-smart investor. Hold nonexempt bonds in an exceedingly 401(k) or IRA.place individual stocks in taxable accounts therefore you’ll sell losers to reap tax losses.
#5 : For the most important tax benefit once donating collectibles to charity, check that they’ll be displayed and not sold .

#6 : Put various investments like property (but never collectibles) in your IRA.

#7 : Keep a watch on—but don’t obsess over—mutual fund fees and expenses.

Green Electricity Mac Wallpaper Sustainable Energy-38853817#8 : Beware affinity fraud; notice God, not hot investments, at your church, temple or musjid.

#9 : Diversify, but don’t overdo it.

#10 : Consider your wedding tax penalty (or bonus) before setting a marriage date.

#11 : To make cash in small-capitalisation stocks, hunt for novel business strategies and niches, notsubsequent blockbuster drug.q01xnsaqzvo89wj_580

#12 : Never strive against a mortgage only for the deduction.

#13 : Before funding faculty accounts make certain you’re saving enough in your retirement accounts.

#14 : When shopping for a luxury home, ignore superfluous amenities like massage rooms and pet spas; they won’t contribute to selling price.

Ratio Analysis

Ratio Analysis

Ratios act as a useful tool to measure business performance. Ratios are a quotient of two numbers and the relation expressed between the two accounting figure is known as‘Accounting Ratio’. There will be a natural difference between ratios according to the nature of the business, the size of the business, its age and the industry within which it operates.Ration analysis is a very important part of the accounting services, bookkeeping services. Different reports can be prepared and memorized for future use, using QuickBooks Statement writer which is part of QuickBooks Accountants edition. They are generally assessed in relation to a comparator or benchmark such as
• Analyzing the past performance of the Firm
• The budget
• Internal division of department
• A competitor
Ratios are useful in a way that
i. They provide an easy way to estimate the present performance with the past.
ii. They depict the areas in which a particular business is competitively advantaged or disadvantaged through comparing ratios to those of the other businesses of the same size within the same industry.
A few limitations could be
i. Ratios do not provide answers to every question and their interpretation can be subjective.
ii. They are calculated on the basis of historic accounting information which may itself include assumptions and interpretations.
The ratio analysis could be made under a few broad categories.
A. Measuring short term solvency / liquidity
Short term solvency is the ability of the firm to meet its short term debts from its liquid assets. These could include cash in hand cash at bank trade receivables, but not inventories since they can’t be converted quickly into cash.
1) Current Ratio:Current assets are assets that can be converted into cash within a year. Current liabilities and provisions are those that are payable within a year. A current ratio of 2:1 indicates a high solvency of the company. This ratio can be calculated as
Current assets / Current liabilities

B. Measuring Long term solvency through leverage ratios:Long term solvency ratios measure the risk a business faces from its debt burden. It is essentially the proportion of the business financed via debt compared to equity.
1. Debt – equity ratio: It indicates the relationship between the loan funds and the net worth of the company, which is known as the ‘gearing’. If the proportion of debt to equity is low,a company is said to be low geared and the vice- versa. The formula used to impute the debt – equity ratio is
Long term debts / Shareholder’s Fund

2. Net Debt to EBITDA: Although not a traditional measure of long term solvency, the net debt to EBITDA ratio has become popular with banks as a measure of Gearing. Banks will typically lend a business up to five times its earnings. Hence, Cash generated from operations can be substituted for EBITDA. (EBITDA stands for Earnings before Interest, Tax, Depreciation and Amortization.)
Net Debt to EBIDTA (tines) = Interest bearing Debt – Cash/ EBITDA
3. Interest Coverage Ratio
This ratio measures how many times a business can pay its interest charges from its operating profit. Ideally a business should be able to cover its interest at least or more times. The formula used to compute this ratio is

Interest Cover [times] = Operating Profit (i.e. Profit before interest, depreciation, and Tax) / Interest (Finance expenses)

C. Investor Ratios

These ratios are used mostly by existing and potential investors of mostly publically listed companies. They can be obtained or calculated where necessary from publically available information.

1. Earnings per Share:-

The EPS is an important measure of economic performance of a corporate entity. The flow of capital to the companies under present imperfect capital market conditions would be made on the evaluation of EPS. It measures the net profit measured per share. It is one of the major factors that effect’s the dividend policy of the firm and the market prices of the companies. A steady growth in EPS year after year indicates a good track of profitability. Investors who lack inside and detailed information of a company can always look at the EPS, as their best base to take their investment decisions. A higher EPS means better capital productivity.
Its can be measured as
Net profit after tax and preference Dividend / No. of equity shares

2. Dividend Payout Ratio

Dividend payout indicates the extent of net profits distributed to the shareholders as dividend. A high payout signifies a liberal distribution policy and a low payout reflects a conservative dividend policy. It is the dividend per share by earning per share; written as

Dividend per Share / Earnings per share

3. Book Value

This ratio indicates net worth per equity share. The book value is the reflection of the past earnings and the distributed policy of the company. A huge book value indicates that a company has huge reserves whereas a lower book value suggests a liberal distribution policy of bonus and dividends, or alternatively a poor track record of profitability.
Book value is considered to be less significant than the EPS, as it reflects the past records, whereas the market discounts the future prospects. The book value of a company can be derived from

Equity Capital + Reserves – Profit and Loss A/c Debit Balance / Total No. of Equity Shares
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