Don't make it personal

Setting up a business banking account separate from your personal account may save you hours of productivity for other tasks. It will allow you to not only track your purchases without having to figure out if it is a personal or business expense but it will also allow you to establish a relationship with your business banker which could come in handy when your business is ready to grow and begin asking for financial assistance. There are a few points to consider when choosing the bank for your account:

• Do you prefer a local bank or a national chain? A local bank will provide more personalized service and chances are greater that you will have direct interaction with the bank president. On the other hand, if your business requires that you travel outside of your local area, you may want to consider a chain because you will be able to get assistance in a wider area.
• Do you want to integrate your accounting software with your account? Some banks only integrate with certain software programs. If you chose your software first then you want to make sure your bank is compatible with that program.
• Do you want merchant services available through your bank? Some banks offer merchant services through a third party, however, using their preferred company may allow you instant access to your funds or 24 hour access. Using an outside merchant processor may be cheaper (we will go into more detail in a later article) but there may be a delay in getting the funds transferred to your account.
• Do you want to process your payroll through the bank? You may have a different system for processing payroll but some banks offer free checking for your employees if the bank is managing your payroll which not only includes paying your employees but also paying your employee taxes.
• How many transactions will you have each month? You must consider how frequently you will be making deposits (daily, weekly, merchant service transactions) and withdrawals (payroll, vendors, bills).
  

Most banks offer different levels of business banking accounts depending upon the amount of transactions that you anticipate and the amount of money you plan to leave in the account. When you are ready to open your account, most bankers will require the following documents (always call the bank first to double-check):

• A copy of your letter from the IRS listing your EIN (employer identification number)
• A copy of your business license
• A deposit to fund the account
• A driver's license (or other government issued identification)
• A partnership agreement if you are a partnership or a copy of your articles of incorporation if you are a corporation
  

All parties wanting access to the account should be present when the account is open. Mind your business and keep your personal and business banking separate!

Your business needs protection

You pay to insure your home. You pay to insure your car. If you can, you pay to insure your health. However, many small business owners fail to attain insurance to protect themselves and their business from worse case scenarios. Business insurance, like home insurance, can be purchased to protect your business from fire, theft and other losses. Although neither of us have the time to review every type of business insurance, we will review five of the most common types: Liability, Property, Key Man, Automobile and Home Office.

• Liability insurance for businesses is a protection against liabilities that you may incur during your day to day business activities. This type of insurance is especially helpful if you are manufacturing a product because of the risk that can be associated with someone becoming harmed while using your product. Many small business owners do not have the capital in their business to protect against such a catastrophic injury.
  
• Property insurance is used to protect the physical assets of your building whether you rent or own your space. This is helpful in the event of a fire, flood or other disaster because it can offset some of your replacement and repair costs.
  
• 'Key Man' insurance is a policy taken out on a key employee of the business to hedge against the financial losses that the business would incur in the event of that employee's death or illness. Many banks or loan programs may require this type of policy if the revenue stream of the business is dependent upon a key person.
  
• Automobile insurance is necessary for your personal liability but if you use your vehicle for business purposes, you may need a special insurance – non-owned automobile coverage. Additionally, many small business owners have begun using car magnets to advertise their business; however, you should make sure your car is insured as a business vehicle if you are doing so because you may not be covered under your personal policy when traveling.
  
• If you are operating your business from your home, you may not need a special type of policy; however, you should take an inventory of all of your home office equipment and insure that it is covered under your home owner's/ renter's policy as office equipment.
  

When purchasing insurance for your business, consult a reputable insurance agent that specializes in insurance for businesses. Don't be afraid to visit with two or three agents and get quotes. Warning: don't try to price match because an agent may try to meet or beat another agent's quote by adjusting your liabilities and deductibles. You want to compare apples to apples so decide on the level of insurance that you need - go home, compare the information and ask more questions if you need to. This is a key component of minding your business.

Dunn and Bradstreet has your (business) number

Many small business owners do not understand why they have a difficult time establishing credit for their business. They are confused when credit applications ask for their Dun & Bradstreet number. They wonder who is Dun & Bradstreet (D&B) and why would they have my number?

Dun & Bradstreet is a provider of credit information on businesses. Just as your social security unlocks the vault to your personal financial information, a D&B number will do the same for your business. The reports are used by businesses and financial institutions seeking to extend credit to your business. Much like a personal credit report, the lender will submit updates on your payment history and terms of their agreement so that other lenders can make informed decisions about your business.

So, why would you get a D-U-N-S Number rather than continuing to use your social security number or tax identification number? It’s not because it is free because there is a fee to create a D&B credit profile. I believe this is done, not as a primary means of generating income, but because it creates a barrier to entry. Not all businesses have the cash flow to purchase the number, which means they are probably not in a position to take advantage of credit opportunities.

Dun & Bradstreet also allows businesses wishing to extend credit the opportunity to purchase reports of varying degrees about the potential client. This method of qualifying reduces the assumed risk because there is a history of the business’ ability to handle credit. Additionally, the business owner is able to separate their personal credit from the business, which could prove advantageous for businesses with high inventories or those needing to lease equipment. Tying these purchases to your personal credit will reduce your ability to make personal purchases without seeming overextended.

Mind your business and research how a D-U-N-S Number can increase your business’ credit and creditability.

How long will you stay retired?

Ever wonder why some people retire and then a few years later they are back at work? It's because the average American does not have enough money to retire and stay retired. Therefore, they must find additional employment to supplement their shortfall. I've seen people reaching the age of retirement with $200,000 in their retirement account and they feel good about their prospects of a happy life after work. What they fail to consider is that they are currently living a $40,000 per year lifestyle. The probability that you will cut back more than 20-25% of your annual lifestyle is not realistic. Let's do some simple math - $40,000 divided by $200,000 equals about five years of retirement. So, what do you do?

As you near or plan for retirement, there are some decisions that you have to make:
What do you want to do during retirement? Some people like working and want to continue working but doing what they choose to do rather than what they have to do. In this case, research how much that job would pay and factor that as part of your income during retirement. It will reduce the amount that you will have to draw from your retirement account. If you want to sit home and watch TV everyday, that will also effect your monthly retirement income. Your electric and cable bill may increase but your driving expenses may be lower. Whatever you plan to do, develop an idea of how much that is going to cost you per month and per year so that you will know how much you need to live comfortably then multiply that by a realistic live expectancy and you will have a ball park of how much you need to have in an account when you make your retirement toast.

What about social security? It is a personal decision to consider social security in your retirement income. For most people, the amount they will receive from social security will not be enough to sustain their lifestyle and you may want to retire before the age that will allow you to draw full social security. Therefore, you should base that decision upon the annual statements that you receive from the government detailing the expected amount that you will receive based upon the year you retire.

How much should I be saving toward retirement? My advice is to save as much as possible but you should consult a financial advisor about where to save your money. Most employers offer a retirement plan such as a 401k and may even offer a percentage match. If you employer offers a match, then you should take advantage of that. For example, if your employer matches 50% of the first 6%, then they will match 3% of your 6% which would be a total savings of 9%. If you are nearing the age of retirement and don't feel as though you have saved enough, there are catch up provisions that will allow you to save more.

What if I can't save more? Some people are in a position where they have no more to save. If this is you then you should plan to work longer at your current job, work part time during retirement or plan to spend less. It is important to make these decisions before you retire rather than getting to year four and seeing the money begin to run out and panic because you don't know what you are going to do.

Retirement is a privilege. It is something that you earn by having a plan and making good decisions. Traditionally, Americans were able to retire comfortably because they bought a home in their 20s or 30s with a 30 year fixed mortgage, didn't spend more than they earned and kept a little nest egg tucked away. By the time they were ready to retire, the kids were out of the house, the house was paid for and they had a little money in the bank. Some sold their homes and lived off the equity while others enjoyed living rent free with minimal expenses and collected a little check every month. Today, we are so debt ridden and upside down in our mortgages, we can't afford to save without withdrawing the money the next week and the prospect of a comfortable retirement is an illusion that may never be attainable.

Your money matters and you need a plan to deal with your current situation so that you can make the good decisions that will lead to a comfortable retirement. Don't think that one day you will wake up, be 65 and able to walk away from your job. If that's your strategy, you may be 75 in a work force competing with 25 year olds.