Friday, February 28, 2014 - 09:43

By Tallie

Non-reimbursable credit card charges have been the Achilles' heel of the automated expense management workflow. Seamless data integration exists for reimbursable expenses, but manual steps or workarounds were common answers for non-reimbursables. An integrated solution for non-reimbursable credit card charges was one of the biggest requests from our Bill.com clients.

This month, Tallie and Bill.com implemented their first non-reimbursable credit card import integration. From expenses paid out of pocket to charges incurred on the company card, Tallie now has the capability to manage and export non-reimbursable corporate credit card charges into Bill.com, covering every scenario.

Consider this scenario:

Conor, an up and coming sales rep, takes a taxi to a business lunch at Bix and uses his company credit card to pay for his cab ride. After a deal-closing lunch meeting with his biggest lead’s CEO, Conor accidentally uses a second, different corporate card to pay for lunch and snaps a picture of the receipt. During his cab ride home, he realizes he left his wallet at Bix. Fortunately, Conor was carrying enough cash on hand to pay for the taxi out of pocket, and he uses the Tallie app to snap a picture of that cab receipt. 

3 days later, Conor sees Tallie has processed all the receipts (displaying merchant, date, amount and expense categories). He also notices Tallie has connected the Bix lunch receipt to the other company credit card charge, automatically. At once, Conor can submit one expense report and he’s done. That expense report, with charges from two separate company cards and a reimbursable expense on it, can be exported in one swoop directly into Bill.com. 

Here’s a guide to how non-reimbursable corporate credit card charges can be imported into Bill.com and how the additional features ensure you and your team are successful - even in the situation described above.

First, Tallie can now import non-reimbursable Corporate Credit Card charges into Bill.com and gives you two options.

Importing Corporate Credit Card Charges as One Bill

With this setting, Tallie will create a bill to your Credit Card vendor with each charge listed on the bill as a line item. When the charges are synced to Bill.com, they arrive as one bill with a line item for each expense. As a result you no longer need to enter each expense as a line item into Bill.com

Importing Corporate Credit Card Charges as One Bill

 For more information on how to set these up, see this guide.

 

Several additional features have been included in this release.

Marking Imported Bills as Paid

If this option is selected, each imported bill will be marked as paid to your selected account. If you don’t want to send a payment to your Credit Card company through Bill.com, simply mark this as your preference and Tallie will import these bills as paid.

Separating Reimbursable Expenses and Charges from Multiple Cards

If an expense report has reimbursable charges and non-reimbursable charges on it, Tallie will separate those into two bills in Bill.com. Additionally, if one expense report has charges from multiple company cards, Tallie will create separate bills for each, mapped to the correct vendor and account in Bill.com.

Importing Negative Amounts as Vendor Credits

If the total of the Corporate Credit Card expenses on a given report is negative, we'll create a vendor credit. If the total of the report is >$0, the negative line items will import as regular line items. 

For further information on how these items look in Tallie, see this guide.

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Friday, February 28, 2014 - 09:07

By Nga Tran & Gabe Robinson, HR Team, Bill.com

It was pretty clear once you stepped into the Quadrus Center, and saw the panoramic views of the surrounding hills, that Bill.com’s 2014 Annual Company Party was going to be a success! Employees and their guests mingled with each other over the sounds of acoustic guitars played by the Gypsy Tribe. Trays of delicious appetizers were passed, bartenders poured generous drinks, and wild laughter carried throughout the evening.

The time to sit down for dinner came and the set-up was extraordinary! Tables adorned with flowers and perfectly arranged silverware awaited everyone. One of the most amusing moments of the night was watching everyone scurry to the tables and discover who they were sitting with, which resulted in people sitting with others who they normally don’t get to talk with on a daily basis. Team building at its best!

Dinner was kicked off by an employee icebreaker, guessing game led by the HR team and closed with an inspiring speech by René, recapping the momentus year for all of us at Bill.com. It’s moments like these that make everyone feel proud to be part of the Bill.com team. Rene’s speech must have spurred an extra boost of energy because several of the employees continued mingling and having a good time until the event center closed.

All in all, the company party was a giant success and a reminder to all us Bill.com’ers of how lucky we are to work here and what we are working hard to build. We’re up to the challenge of topping our success next year!


For available positions at Bill.com, please visit http://www.bill.com/about-us/careers/

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Wednesday, February 26, 2014 - 11:41

By Julie Lubetkin, VP of Strategic Partners

Paper, the traditional "currency" of the accounting world, is coming to the end of its golden age. Invoices, reports, and payments are all migrating to electronic formats that allow you to access the critical information you need anytime, anywhere. This online convenience is the cornerstone of the Bill.com service.Despite this evolution to the cloud, many small businesses remain chained to paper receipts, bills, and invoices that slow down every process and limit mobility. This saps their ability to leverage real-time information for strategic planning and growth.

Bill.com and PNC Bank

Today, we took yet another step towards helping businesses break the paper chain. Leveraging the power of Bill.com, PNC Bank's Cash Flow InsightSM now offers advanced online features that link accounting software with business' bank accounts. The solution allows business owners to migrate previously paper-dependent processes online including receiving and making electronic payments, creating and sharing branded invoices, and managing financial information such as invoices, bills and receipts.  But most importantly, it arms small businesses with more tools to help develop on-demand financial insight.

How this Helps Accounting Professionals

The Bill.com Business Payment Network – a network that already has more than 400,000 members paying and getting paid more than $10 billion a year – is expanding and as more businesses join the network, the easier it will be to pay and get paid electronically. This expansion helps to speed up processes and eliminate labor-intensive, duplicative and error-prone data entry.  This also means less paper, less time, and more productivity. 

It is said, “a rising tide lifts all the boats”.  Such is the case with the rising tide of awareness in the small business market that viable alternatives exist to their current manual, time-consuming and error-prone back-end financial processes. As trusted advisors to these businesses, accounting professionals will be on the front lines of providing the expertise and insight required to guide businesses on how to leverage these alternatives to their optimal financial benefit. 

We're excited with this development with PNC Bank and the positive results it will invite with building our Business Payment Network. If you'd like to learn more about it, you can read PNC Bank press release.

 

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Monday, February 24, 2014 - 09:51

Geraldine Cruz, Senior Director, Product Marketing

Apps can extend the value of your accounting software by delivering functionality unavailable with your backend system. Examples of apps currently available for the leading accounting systems include:

•A full-service, automated payment solution that leverages vendor and invoice data to help businesses pay bills electronically or with paper checks 

•Document management capabilities that connect contracts, invoices,and proposals with customer and vendor data 

•Customer relationship management functionality that transforms lead and proposal data into customer data and invoices upon successful contract execution

•Business intelligence features that analyze order processing, workflows, and other transactional data to measure business efficiencies 

Leading accounting software vendors feature “App Storefronts” on their websites that makes it easy for customers to find new apps that fit their business needs. But the consumer, retail-like experience may belie the need to assess the business, technical, and security capabilities of the app developer with the same rigor as it did when it evaluated the purchase of the accounting system. Assuming you have already done your due diligence in evaluating the fit of an app to your business and technology needs, you should consider the following seven questions and be comfortable with the answers — before you purchase the app:  

1.Does the vendor of the accounting system endorse the app? One indication that the accounting software vendor endorses the app is that it lists it on its “App Storefront.” But not all “App Storefronts” are created equally. The ease or difficulty in getting a vendor endorsement will vary. You should determine how the accounting software vendor evaluates apps. And read what reviewers say about the app, but do not limit your evaluation to just the reviewers on the “App Storefront”. Nothing beats talking to a variety of customers about their experiences with the app. 

2.What challenges, if any, should I expect to integrate the app with my accounting system? Even if the app promises complete integration with your accounting system, you should ask the app developer and its customers about the difficulty of the first integration between the two applications. You should expect some challenges if you have customized the accounting system or are using the system or the data fields differently than the way customers traditionally use them. 

3.Where is the app and the data it generates hosted? The app may be hosted on the same server as your accounting system and data, or it may be hosted separately on the app developer’s servers — or a company that hosts the app and the data. In the former scenario, initial integration may be easier, even for accounting systems that have been customized. If the app is hosted on a different server, you may need to use and pay for integration services from the app developer. You should also assess whether the app developer — or the company hosting the app — can support the volumes you anticipate, particularly during your peak periods. 

4.How does the app developer address updates to the accounting system? Cloud-based accounting systems will inevitably be updated, and the apps that integrate with them may need to be updated. Customizations to the accounting system may result in more challenging upgrades. Validate how the app developer intends to align its roadmap with the roadmap of your accounting software vendor.

5.At what point in your workflow will you need to sync the accounting system and the app? You should consider how and when the syncs between the two applications will need to be performed. When users need to sync data, will it occur naturally, as part of their workflow? Or are there required steps that delay, interrupt, or change the workflow? You may need to redesign your process and/or train users. Or you may decide that using the app requires too many detrimental changes to your workflow.

6.What data is being synced between the accounting system and the app, and is the sync bi-directional or uni-directional? You should know what data (or fields) are taken from the accounting system and what are passed back. This will help you determine if all data fields are updated bi-directionally, or if one system contains more updated data. 

Moreover, if the app is updating only one module in the accounting system (e.g., vendor and payments) but syncs many more fields than that (e.g., vendor, payments, customer, and customer invoices), you may want to ask the app provider to sync only the necessary data to get the app to work. And if the app developer cannot do that, you should assess if users have inadvertent access to data they should not, requiring a change in data access and controls.

7.How will the app scale with your business needs? Business needs change. Will the app accommodate your changing business needs? For example, as your business grows, will the app support those transaction volumes or support new features that you will need? If you anticipate upgrading to an accounting system that supports larger organizations, will the app support the new accounting system you are likely to adopt? Does the app have the same sync capabilities and features with the new accounting system? 

A trial of an app can provide some of the answers to these questions. You can see how the sync works; confirm which syncs are uni-directional and which are bi-directional; and validate that the app workflows and syncs align with your users’ current workflows. But it may be difficult, impossible, or not advisable to replicate the scenarios to test the app vendors’ capacity to support growing or changing business needs. Digging into these seven questions with the application developer and representative customers will help to flesh out what to expect in these scenarios.

 

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Friday, February 14, 2014 - 12:20

Geraldine Cruz, Senior Director, Product Marketing

Efficiency. Productivity. Cost savings. Those are the typical benefits attributed to payment approval workflow (PAW) solutions, and they are compelling. But other reasons justify investment in a solution that routes payment requests automatically to designated reviewers to approve; and that captures the audit trail between receipt of the invoice and the ultimate payment. Consider the following benefits:

    1. REDUCE PAYMENT ERRORS: How do you ensure your business is paying only the amount it is obligated to pay against an invoice? How can you ascertain that your business has not already paid the invoice in the past? If your business is like many typical organizations without a PAW solution, your checks and payments are overseen by a set of approvers through the manual hand-off of payment documentation. But without an integrated view of product or service received and invoice, they may not catch invoices that have already been paid, and they may not reject paying the full price to a vendor that did not fully deliver a service or product. 

A fully automated PAW that provides supporting documentation for payments will alleviate these errors. When an invoice is entered into the system, it is automatically routed to designated approvers, initiating the capture of data for the payment audit trail. These approvers evaluate accompanying documentation, review comments from other approvers, request additional information to append to the payment request, and decide if this is a legitimate payment to make. Approvers can reject, approve, or approve a partial payment based on the full history and documentation supporting an invoice. 

2.  REDUCE PAYMENT FRAUD: The typical payment process is fraught with vulnerabilities to fraud. A PAW solution helps a business identify questionable payments, and the audit trail provides visibility into the actions and decisions of the participants in the approval and payment process. Payment requests that fall outside of established business rules — such as payments exceeding set limits — are flagged and treated as exceptions, making it difficult to avoid extra scrutiny. Without a doubt, fraud could happen in other steps in the in the payment process, but a PAW solution ensures that payments have undergone the appropriate level of review defined by the business. 

3.  SECURE YOUR DOCUMENTS AND RETRIEVE THEM WHEN NEEDED: Because approval requests and the associated documents are automatically routed to the individuals assigned to review a payment request, they are not left languishing on someone’s desk for passers-by to read. Nor are there instances where sensitive documents and email threads are forwarded inadvertently to individuals who do not need to be or should not be able to gain access to those documents. And when those supporting documents and approvals are needed — as in a business review or an audit —  your staff can quickly find them and answer the relevant questions. 

4.  PREPARE FOR AUDITS MORE EASILY: Your business may be subject to audits to  evaluate its compliance with regulations, ensure the integrity of financial statements, and the furnish evidence of the establishment of internal controls. The payment audit trial of a PAW solution can facilitate fulfillment of these requirements with its ability to track the history of a transaction. If or when your business is audited to demonstrate compliance with the requirements, the audit trail can furnish that you have established a system of evaluating and authorizing transactions. 

5.  CONTROL PAYMENT TIMING MORE EFFECTIVELY: With a PAW solution, you can control the timing of payments to address your business need. If you would like to expedite payments to enjoy pre-payment discounts, the automated routing process promotes speed. Visibility in the approval process can help identify and alert approvers that have not responded to an approval request, thereby accelerating turnaround time. Conversely, if you would like to optimize cash reserves by delaying payments, you can include approvers who assess the best time to issue payments. 

And to the extent that the PAW solution supports mobile devices, the supporting documents can be accessed anywhere, at any time. Approval decisions can be made quickly — without the requirements of being in the office to review paperwork or having one person retrieve and scan and email all the documents to approvers. 

NEXT STEPS

A solution to automate and streamline your payment approval workflows has more benefits than simply efficiency. An upcoming white paper published by Bill.com will highlight additional benefits and discuss features that you should consider in evaluating solutions to fit your business needs.

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Wednesday, February 5, 2014 - 13:41

By Julie Lubetkin, Vice President of Accountant Channel, Bill.com

Change. For some people, it can be a dirty word. Change means adjustment, radical re-thinking and perspective shifts – all daunting thoughts for an industry such as accounting that is based on risk mitigation and regulations compliance. 

But more often than not, change means resetting in a positive manner.  Think electronic over paper or cloud over desktop – all powerful technological shifts in work and life habits that have fueled positive changes. 

Imagine taking inspiration from positive changes such as these and applying it to your accounting firm. It’s that opportunity to add innovative facets to everyday practices that can drive real change and positive results both financial and operational. And oftentimes, it is technology that drives change.

The real question is: “Do you have what it takes to be a changemaker?” 

Take our quick quiz and track the results to discover your level of changemaking abilities when it comes to technology.

Question 1What are the major factors impacting your field? 

A. I can name three off the top of my head.

B. I have some general knowledge around that.

C. I don’t know them because I’m too busy.

Question 2:  Are you the best person to help make the right technology decisions for the client? 

A. Yes

B. No

C. I’m working on growing more knowledgeable in that area. 

Question 3Do you know about the available accounting solutions in the market?

A. Honestly, I get overwhelmed by all the options.

B. Yes

C. No. Who can know ALL of the solutions available?

Question 4Do you have the depth of understanding of your client’s business functions?

A. No

B. I know the basics of what I need to know.

C. Yes 

Question 5Do you know how your client’s workflows affect and are affected by software solutions? 

A. Yes

B. No

C. Maybe

Question 6Do you have the knowledge and skills in accounting, software, and how to ensure the overall system accurately serves the needs of your client’s business?

A. I make it my business to know.

B. No.

C. I can make basic recommendations. 

Scoring:  Add up the following points to determine your changemaker level. 

Q1: A – 3, B – 2, C – 1

Q2: A – 3, B – 1, C -- 2

Q3: A – 2, B – 3, C – 1

Q4: A – 1, B – 2, C – 3

Q5: A – 3, B - 1, C -- 2 

Q6: A – 3, B - 1, C -- 2

Results

15-18: Congratulations. You are a real changemaker. Now, take your knowledge and make waves! 

10-14: You have your finger on the pulse of change, even if you haven’t pulled the trigger yet. 

9 or below: Time to expand your skill set and challenge yourself. 

 

Remember – no matter how you score there’s always room to learn more. Access our on-demand webinar featuring Bill.com and Doug Sleeter of The Sleeter Group titled “Get in the Game” to learn more about successful changemakers.  Also, download the Strategic Imperative Matrix for a performance checklist and tips document to guide you through the changing times.

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Wednesday, February 5, 2014 - 13:25

By Geraldine Cruz, Senior Director, Product Marketing, Bill.com

Many articles tout the financial savings and ROI of moving from paper checks to electronic payments (ACH). How large is that number for your business? A previous blog postdetailed the costs of using checks. This blog post will discuss the the costs of using ACH and the calculation of ROI. 

The cost of using ACH will depend on how the payment services are provisioned. The cost structure of manually uploading ACH files to a bank system is different from the cost of using the ACH services of a B2B payment solution provider. This blog post will show how the costs of one relative newcomer, Bill.com, compares against checks and manual ACH services.

Manual ACH Services

Businesses that use manual ACH services upload ACH files to their banks, which in turn, issue the ACH payments. ACH is far more efficient than processing checks internally. After all, the business reduces staff time spent on check runs and eliminates the expenses for supplies, postage, and equipment depreciation. 

But this method requires managing a separate application and requires double data entry or data file manipulation to import files into the bank system. Getting started requires initial application and data integration to connect the business’ accounting system to the bank ACH system. The ability to upload ACH files to a bank’s system often requires the payment of access fees. And if a business wants to use more than one bank to pay its bills, it will need to establish multiple integration points with all of the relevant banks, and pay the respective bank access fees. 

With two separate systems — the accounting application and the ACH system — a user will need another login and will need to manage yet another set of data. When exceptions arise, such as payment cancellations and subsequent credits, both systems need to be updated. Responding to payment questions, reconciling payment issues, and locating documents in response to audit questions are time-consuming and may require search and retrieval from two sets of systems. So while ACH may offer significant costs savings over checks, it is still manual in nature and entails duplicate data entry. 

And in order to use manual ACH services, a business must obtain and maintain a vendor’s bank account information in order to issue payments to it, which poses a security concern for some vendors. In addition, the remittance information that the business can send in an ACH payment is usually limited to a few character spaces, making reconciliation of payments challenging. Thus, in addition to inefficiencies imposed on the business making the ACH payment, the vendors must accept significant risks and inferior remittance information when accepting ACH payments. 

Alternative B2B Payment Solution Providers

A number of innovative B2B payment service providers offer outsourced check processing and/or ACH payments to drive lower transaction costs, reduce staff labor, and eliminate equipment, materials, and postage costs. These solutions often allow customers to schedule and alter payment dates and control cash flow more proactively. Impromptu payments can be made with virtually no disruptions to workflow. This contrasts with manual check and ACH processes, which require a new set-up for a payment run or a handwritten check to be cut. 

But the similarities between B2B payment providers end there. They differ drastically in the level of automation, the ease of integration with business and financial systems, the additional features beyond payments they provide, the level of collaboration they support between businesses and their suppliers and customers, and their cost. However, although many payment providers market themselves as delivering “fully automated” solutions, a business should carefully consider what functions are automated, and to what extent. 

Figure 1 compares the major costs of checks, ACH, and B2B payment services. Because of the diversity in the cost structures of using a B2B payment provider, the figure highlights the costs of one service provider, Bill.com.

The cost comparison is based on the following services offered by a Bill.com subscription and transaction fees: 

  • Bill.com prints and mails checks and processes ACH payments.
  • Bill.com syncs with major accounting systems and integrates with all other business systems, eliminating the need for integration services to get started and double data entry to keep all systems up-to-date.
  • When a business pays a bill, Bill.com emails vendors to alert them to an incoming payment and gives the vendors access to a portal where they can review payment status, reducing the incidence of vendor inquiries about payment status. 
  • Bill.com gives customers complete visibility of payment history, including check images — at no additional charge. As a result, reconciling payments and responding to payment inquiries is more efficient than with manual checks and ACH.
  • Bill.com provides payment fraud at no additional charge. 

One key Bill.com feature that reduces payment processing costs ― but is not explicitly included in the bulleted list above ― is its ability to boost vendor acceptance of ACH payments. With Bill.com, businesses can invite their vendors to accept ACH payments, without requiring the vendors to share their bank account information with anyone but Bill.com. This extra measure of security reduces vendor objections to ACH payments, thereby boosting adoption. As a result, the business is able to issue ACH payments via Bill.com and eliminates check processing costs.  

Figure 1. Cost Comparison of Payment Options 

Cost Comparison of Payment Options

Calculating ROI 

With your calculations of the costs of printing checks, using manual ACH services, and using B2B payment providers, you can calculate the savings of using one service over the others. 

Bill.com has built an ROI calculator to compute the savings from migrating from internal check processing and manual ACH services to Bill.com services. The summary of an example calculation is shown in Figure 2. If you would like a copy of the ROI calculator, or would like to understand the model in more detail, contact us

Figure 2. ROI of Using Bill.com as an Alternative to Checks and Manual ACH

ROI of Using Bill.com as an Alternative to Checks and Manual ACH

Note: Bill.com monthly fees can be provided by a sales representative. The monthly fees are based on a number of factors, including Bill.com modules in the subscription, number of users, and integration with accounting systems. The calculations above assume that Bill.com will continue to process 200 checks and 50 ACH payments for this example business.

Your Homework for this Week

Get started assessing the cost of your payment processes today. Talk with us if you need help collating your costs into a framework that helps you measure and compare the costs of payment options at your disposal. 

Related Blog Posts and Content

As discussed above, B2B payment solution providers vary in the features and benefits they offer. An upcoming blog and white paper will highlight features to consider when comparing manual check processes, manual ACH services, and B2B payment solution providers.

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Monday, January 27, 2014 - 12:35

Guest Blogger: Michael Lewis

Michael Lewis is a former business executive who shares tips related to small business, entrepreneurship, and organizational behavior.

Small business owners contend with a host of problems every day - producing products or services cost-effectively, increasing sales, satisfying unhappy customers, and motivating disgruntled employees - and they quickly learn that most of these problems can be solved with cash. Cash flow is the life-blood of an organization, its means to pay salaries, buy supplies, and make investments in infrastructure. Owners who cannot efficiently manage their business cash flow are almost certain to fail. Those who can are able to improve nearly every aspect of their business.

Tips to Improve Cash Flow

Converting sales into cash as quickly as possible, while reducing and extending your payments to build a cash cushion, is the basis for long-term, sustained growth, whether your company is large or small. Implementing some or all of the following suggestions can help boost your cash flow.

1. Anticipate Future Needs

Avoid surprises. There is nothing more difficult or disheartening than searching for cash when you're desperate. To start, keep accurate, timely accounting records as they are essential to understanding your business's financial standing. Use your past monthly income and cash flow statements as well as your balance sheet to calculate available cash and project likely results for the next three to six months. These pro forma statements can help alert you in advance of any shortfalls, giving you time to prepare for them.

Some business owners, anticipating a future need, open a relationship with a bank for payroll and general company accounts and regularly supply the bank officers with operating statements in order to build trust. Depending upon the authority of the bank officer, however, these efforts are not always successful. To improve your chances, notify your banker that you are eventually going to seek a loan, making it clear that the intent of the relationship is to have access to financing if needed.

 

Cash Flow

2. Build Connections With Lenders

The odds of being able to borrow cash or entice investors to put more money in your company when you absolutely need it are low. Bankers are least interested in lending to a company in desperate straits since their first objective is to be paid back. Build connections in the financial community before you need its help, not when you need it, and you may be able to secure a commitment of future loans. Bankers generally make secured loans on such assets as the following:

  • Accounts Receivable. Typically established as a revolving line based upon a percentage (60% to 80%) of total accounts receivable (AR) due within a 60 to 90 day period, accounts receivable financing is one of the most common corporate loans. The balance due moves up and down as AR varies: When sales and AR increase, the bank advances more cash on the line, when sales and AR decrease, you are expected to make a payment to bring the loan in line with the negotiated loan-to-AR ratio.
  • Inventory. Lenders generally like inventory as it is expected to be sold and turned into cash. Bankers generally prefer finished or raw inventory since it is most marketable in the event of default - many do not lend on in-process inventory as additional investment is required before it can be sold. Like an accounts receivable loan, an inventory loan moves up and down as inventory levels change. A typical ratio of loan to inventory is 50%.
  • Equipment. While technically not a short-term loan, owned equipment in good condition can secure a fixed-term loan for a single shot of cash in an emergency. Remember, however, that the more specialized the equipment, the lower loan-to-value ratio you may receive. For example, a 2012 Ford 150 is likely to have a higher loan ratio than a variable drill press or a customized trailer. If you have old or excess equipment that is marketable, sell it for cash - having extra cash is more valuable than an idle asset.

Some business owners elect to sell their accounts receivable to a third party rather than borrow on them, a process called factoring. Specific terms are negotiated between the third party, or "factor," and the company, including the ratio of value paid for each invoice, whether the sale is "recourse" or "non-recourse," and any fees which might be paid to establish and maintain the relationship between company and factor. The advantage for a company, especially if it is newly established or has damaged credit, is that the factor looks first to the creditworthiness of the customer who owes the money, rather than the company which sells the AR.

3. Keep Your Cash Working

Keep your cash balances in interest-earning accounts, which are available at most banks. In some cases, you might encounter a minimum balance requirement. However, since interest rates on these accounts are often lower than those of savings accounts, certificates of deposit (CDs), or money market accounts, consider keeping the bulk of your funds in higher-paying accounts, then transferring funds to meet the minimum balance requirement in your interest-bearing checking account (plus the total payments due that week or month). Avoid long-term certificates of deposit, which lock you in for a specific period of time, since redeeming them early may cost you interest. Either invest in penalty-free certificates or that portion of funds which you are not likely to need during the life of the CD.

Set up a separate payroll account and establish a bi-monthly cycle. Bi-weekly payroll systems require 26 pay cycles a year, bi-monthly only 24, which means they save the extra administrative costs of collecting, verifying, and tabulating payroll information. Require your employees to take direct deposits to reduce the costs of writing and delivering checks. Finally, transfer payroll funds immediately before payment to keep your cash earning interest.

4. Train Your Customers

As a small business owner, your goal is to collect payment for your services or products before or shortly after incurring the expense of producing or delivering them. The optimal outcome is to receive payment on delivery (COD), but that is not always possible. Invoice your customers the day you deliver your product with the notation that "payment is expected on invoice receipt." Don't suggest that waiting until the end of the month is an option. Include a notification that interest is charged for all payments later than 30 days and collection procedures may be initiated. Also, stay on top of your accounts receivable aging - a report categorizing accounts receivable according to the length of time invoices have been outstanding - with an established process for following up with late or delinquent payers:

  1. An initial form letter 10 days following receipt asking for payment.
  2. A second follow-up letter - more aggressive - in 20 days demanding payment.
  3. A third letter in 30 days and a phone call from your collections clerk seeking payment.

It is important to have early contact with potential delinquent payers and to offer a variety of options for payment if they have difficulties. These options might include a credit card charge or a payment plan. Be careful about instituting a policy of discounts for early payment since big customers are likely to delay and take the discount at the same time. Remember, a customer who doesn't pay isn't really a customer, but an expense. Determine how you want to handle late or non-pays before they arise, document your decision into policy, and stick with your policy.

5. Work With Your Vendors

Just as you want customers to pay you, your vendors want payment as soon as possible. However, early payment to vendors can hurt your cash flow and should be avoided if possible. Delay payment as long as you can while remaining consistent with the terms of the sale. If there is no penalty for late payments, set a pay cycle of 45 to 60 days from receipt of an invoice. While slowing the outflow of cash is important, it is equally important to maintain a good credit rating and cordial relations with critical vendors. Be aware that slowed payment might result in contact from the vendor that has been affected. In those cases, be vigilant that all future payments are as promised. If you are forced to delay payments, contact the vendor as soon as possible with an explanation and a plan to become current on your debt.

6. Maximize Cash Inflows

There are a number of methods to increase cash flow, especially if you sell custom products or engage in extended contracts. Require security deposits equal to 50% of the order if the product or service is unusually large, complex, or one of a kind. If you work with contracts, set up payment schedules and amounts that parallel or exceed your sunk costs. If your customer demands modification of standard products or services that have not been identified in your contract, seek additional payment through fees or change orders.

Small businesses which provide a regular service or product should consider subscription sales whereby customers prepay. Newspapers, magazines, cable television, landscaping, and pool maintenance are examples of products and services which lend themselves to a subscription model. In addition to receiving upfront cash to cover future costs, you have the advantages of securing future sales and easier resource scheduling.

As another option, layaway programs have come back in vogue as an alternative to sale and payment plans. A layaway program allows customers to select a specific product, which is then reserved for a future purchase and delivery when payment has been completed. This allows the seller to have use of the cash prior to incurring the product's cost. Special accounting treatment of the cash received is required, so be sure your accountant is aware of the program. Consider taking credit cards to ensure timely and probable payments, as well. If you elect to do so, raise your prices to compensate for the extra costs and give those customers who pay cash a discount equal to the fee that would be paid for a credit charge.

7. Shrink Cash Outflows

The combination of cutting or avoiding expenses overall and delaying payment as long as possible reduces demands on cash. Strategies to reduce cost include the following:

  • Repair Capital Equipment, Don't Replace It. Save money by having a regular maintenance program, using reconditioned replacement parts from third-party suppliers (rather than factory parts), and contracting with a local repair facility to handle jobs too big or complex for in-house personnel.
  • Buy Used Equipment. Used equipment in good condition is generally just as good as a new piece of machinery. Search local advertisements and auctions in your area, specifically looking for companies whose assets have been foreclosed and are being sold by a lender. You may be able to buy quality used equipment for savings up to 80% without a comparable degradation of capability.
  • Delay Product Upgrades Until Absolutely Necessary. Delay product upgrades and consider open-source software, which is generally free or available for a small donation. Any software you use should have a focus on safety and security, which should always come first for any business.
  • Barter Products For Supplies and Services. Suppliers who are also customers might be interested in a "trade" whereby each company receives all or a portion of its respective payments in the form of finished products. Since the exchange value is usually set at each company's respective retail price, a barter agreement effectively provides a "discount" equal to the net profit margin on your product and allows you to maintain cash that would otherwise be used. From an income tax perspective, be sure to report the products you receive from your suppliers as gross income in the year of receipt, while expensing the products or services you provide as a "cost of goods."

Final Thoughts

Small business owners usually learn two principles early in the life of their companies. "Cash is king" refers to the importance of cash in any company, and the Golden Rule - "He who has the gold makes the rules" - the validity of which is apparent to anyone who's gone hat-in-hand to a lender. Building and keeping an adequate stockpile of cash provides maximum opportunity and flexibility to any business while enabling its owners to sleep soundly at night.

 

Have you suffered cash flow problems? How did you resolve the deficit?

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Friday, January 24, 2014 - 10:10

By Geraldine Cruz, Senior Director, Product Marketing, Bill.com

Nearly $10 per check. That is what market researchers estimate to be the cost of issuing paper checks. Contrast that with the roughly $1 per transaction for electronic payments (ACH). On the surface, that difference should catapult the migration from all paper checks to ACH to the top of your business priorities. But before you do, consider three critical questions:

  1. Do these numbers reflect the costs for your business accurately?
  2. What this your true return on investment (ROI) from moving to ACH?
  3. ACH may result in the loss of remittance information. What solutions can provide the value of ACH and the remittance information available in paper checks? 

This post will delineate all the costs of operating in-house payments. Even if your business only runs some of these tasks in-house, you can use the list as a basis for quantifying your costs.  Future posts will address the ROI of moving to ACH and resolving the loss of remittance information. 

Labor Costs

Labor costs comprise the largest expense incurred from in-house payment operations. Consider all of the steps involved in a fully manual process — from check approvals to handling payment exceptions.

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Some factors will mitigate the steps and the associated costs. An accounting or financial system that automates approval workflows will eliminate many of the pre-check-run activities.

But other factors will exacerbate the process. For example, more approvers and more complex approval rules complicate the process. More scheduled check runs per week result in repeats of these steps. And one-off or unscheduled check runs impose further time drain on staff time.

To calculate the labor costs for your business, use the figure as a framework for identifying:

  • What are all the steps involved in your in-house process?
  • Who is involved in performing the tasks?
  • What amount of time do these individuals spend in performing these activities? 
  • What are the fully-loaded compensation costs of these staff members?

Materials, Supplies, and Postage

To run in-house payment operations, businesses incur expenses for depreciation on magnetic ink character recognition (MICR) printers and envelope stuffing and sealing machines; postage; and supplies, including highly secure check stock, MICR toner, and envelopes. 

Bank Fees

Businesses pay bank fees for issuing checks. These costs may be included as separate line items in their bank statements, or may be bundled with other charges. Businesses will also pay incremental charges for fraud protection, such as positive pay, check reconciliation services, and retrieval of transaction history and check images. All of these costs should be considered in calculating the total cost of printing checks. 

Your Homework for this Week

A quantitative decision to move to ACH or to stay with paper checks requires a full assessment of the costs of all options. Some costs are overt, such as supplies and postage; other costs are not as obvious, such as the costs to investigate and reconcile payment exceptions. Use this post as a guide to begin to quantify the full costs of your operations. =

If you would like a tool to capture the costs of your payment operations, Bill.com has developed a calculator, in spreadsheet format, that captures the costs discussed in this blog. The calculator can be used to determine ROI of moving from checks to ACH payments. Contact us for a copy. 

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Tuesday, January 21, 2014 - 16:03

By Julie Lubetkin, Vice President of Accountant Channel, Bill.com

Anyone who loves the Super Bowl has an inherent respect for the athletes that play in it. To qualify to wear an NFL jersey, players endure complex and science-driven trials that include physicals, body-movement screening, conditioning, proper nutrition and mental preparation. It can take years to develop and train to be a candidate to join a Super Bowl-eligible team. 

After all, football is one of the most competitive and demanding sports in the world. But the rewards - like that large ring the winners wear - are gigantic. 

Much like football, accounting is also a competitive field that demands the finest of conditioning to execute successfully. Firms vie for new clients and top talent while navigating through challenges caused by an ever-evolving industry. According to the 2013 AICPA PCPA CPA Firm Top Issues Diagnostic Report these challenges (identified by firm size) include:  

  • Playbook for AccountantsKeeping up with changes and complexities of tax laws (firms with 1 to 5 professionals)
  • Success planning (firms with 6-10 professionals)
  • Bringing in new clients (firms with 11-20 professionals)
  • Owner/partner accountability and unity (firms with 21 or more professionals) 

Yes, the challenges facing the accounting profession can be substantial. But with the proper playbook, it’s easy for any practitioner to not only get into the game – but win it as well.  

Join Doug Sleeter, Founder and President of the Sleeter Group, and Julie Carman, Sr. Director, Strategic Alliances for Bill.com, tomorrow at 2 pm ET as they break down the essential steps to position you for more profitability and productivity. The “Get in the Game” webinar will help attendees discover: 

  • What forces are currently shaping the business environment and driving change
  • The strategic imperatives that need to be addressed to ensure an effective performance in this time of rapid change
  • The influencing factors that are contributing to the evolution of the accounting profession

Attendees will also be the first accounting professionals to get the Strategic Imperatives Matrix - a performance checklist and tips document that will guide you through changing times.

 

Take the first step to becoming a changemaker by registering today.

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