Business Finance Through Your Business Plan

There has been numerous accounts of research into businesses and one result from this research clearly shows that there is a high failure rate as one in three businesses close within a year and only one in five make it past five years of being in business.

Some of the main reasons as to why businesses fail are down to aspects such as poor marketing, lack of financial awareness, unrealistic expectations. However successful businesses are more likely to succeed if they have prepared a business plan. There is a saying that states success comes to those who plan it and this is never truer than when it is applied to business.

A business plan is the process of charting a course for a business it is the act of defining the ambitions and objectives of a business as well as working out what is needed to achieve them in terms of actions and resources. Without your business plan you won’t know where your business is headed and you are unlikely to get to where you want to be. A completed business plan should keep customers. Capacity and cash in balance as your business grows. It is proof that your business is viable based on the assumptions that is made within it. The business planning process defines these assumptions and ensures that the business understands, and is prepared to take, the actions needed to deliver the results it needs.

One of the main uses of a business plan is to secure external finance from investors or lenders. Investors are people who will provide your business with the money it needs without you having to pay back a penny; however it will mean that the investor gains a percentage of the shares within your business. A lender is, for example a bank; they will lend you the money you need for your business on the condition that you will repay it plus interest. Without a well prepared and structured business plan no investors or lenders will be prepared to hand over money to your business. This is because without a business plan they have no proof that you will be able to repay the debts that you will owe them.

Financial planning is key to your business plan. Your financial planning should include your businesses financial forecasts for the next three, or even five years and the level of sophistication used should reflect the level of sophistication of your business; however, the first 12 months’ forecasts should have the most detail associated with them.

As well as enabling you to gain the finance that you need to start up your business, your business plan is also essential to help you spot potential pitfalls before they happen as well as a way of focusing your development efforts within the business and it also works to measure the success of your business.

It is also important to remember that your business plan is a living document that will need updating and changing as your business grows, this is regardless of whether you intend to use your business plan internally or externally, either way you should still take an objective and honest look at your business.

Paydex Score – The Secret to Business Financing

As a business one of the most important things to know is your Paydex score. Your company’s paydex score is the business equivalent to your personal FICO score, or personal credit score. Knowing what this number is and having the secrets to increasing your Paydex score can mean acquiring the financing needed to start or grow your business and make the difference in achieve your business goals. On the flip side, not managing your Paydex score can cost your business.

The exact definition from Dunn & Bradstreet, or D&B is: The D&B PAYDEX® Score is D&B’s unique dollar-weighted numerical indicator of how a firm paid its bills over the past year, based on trade experiences reported to D&B by various vendors. The D&B PAYDEX Score ranges from 1 to 100, with higher scores indicating better payment performance.

The higher the score the better. Now, how do you increase your Paydex score or establish a score if you don’t have one yet. First, know what you are doing.

1 – Know what your payment pattern means

If you are under the impression you should have the highest Paydex score because you pay before the due date, you are wrong.

The highest scores are given to Companies who pay the bill PRIOR to the invoice being sent. This payment pattern is considered an anticipatory payment pattern. The company anticipates the payment is due and pays it ahead of time. This is the highest responsibility a company can display and will earn high points for your company.

2 – Understand what the Paydex score means

So, your business has a paydex score of 75. What does the paydex score mean? Is this good or bad? Well, for this example a 75 Paydex score would be the equivalent of a FICO score of about 700 or above. This is a good Paydex score.

You can use this D&B key to help you interpret the PAYDEX Score.

Key to the D&B PAYDEX® Score


100 – Anticipate – Payment detail may state: payments are received prior to date of invoice (Anticipated)

90 – Discount – Payment detail may state: payments are received within trade discount period (Discount)

80 – Prompt – /i>Payment detail may state: payments are received
within terms granted (Prompt)

70- 15 Days Beyond Terms

60- 22 Days Beyond Terms

50 – 30 Days Beyond Terms

40 – 60 Days Beyond Terms

30 – 90 Days Beyond Terms

20 – 120 Days Beyond

UN – Unavailable

The payment details section may include the following comments on your payment patterns:

 Antic – payments are received prior to date of invoice (Anticipated).

 Disc – payments are received within trade discount period (Discount).

 Ppt – payments are received within terms granted (Prompt).

 Slow – payments are beyond vendor’s terms. For example, “Slow 30” means payments are 30 days past due.

 Ppt-Slow – some invoices are paid within terms, others are paid beyond terms.

 (#) -indicates that no manner of payment was provided; the number merely reflects the line where it appears in the listing. For example, (004) means it is the fourth experience listed.

 Payment Commentary – such as “Cash in Advance,” “Account in Dispute,” “Credit Refused,” or “Placed for Collection” may also display next to trade details. “Placed for Collection” means the account was forwarded to a third party for collection action during the past year.

It may also indicate comments like, “seasonal purchasing pattern” if many transactions are recorded in a certain period of time, routinely, during a specific time of year.

You can view a sample Paydex report at


There are creditors that will grant lines of credit to businesses without a personal guarantee or a paydex score. This is a great way to establish credit for your business. Gaining a small line of credit with these types of vendors and making anticipatory payments will increase your Paydex score or establish a strong score for your business.

The website [] provides you with a program to build your Paydex score within 90-120 days and will tell you which creditors will grant you a line of credit with no Paydex score required AND no personal guarantee. This program has assisted many companies in not only increasing their Paydex score but gaining substantial lines of credit.

You should know that less than 3% of businesses that attempt to receive funding on their own ever do! If you apply at multiple places without pre-qualifying, you may damage your credit and will destroy your chances of receiving funding from the sources that would have done your deal. It would be in your best interest to consult a company like prior to attempting to gain credit lines.

4 – Manage Your Business Credit Responsibly

If you own your own business you are probably not 18 years old anymore and should know how important maintaining good credit is. A strong Paydex score can give you the credit lines you need to increase your marketing effort, buy the needed equipment, get the supplies required to land big clients, and could be the difference in your companies success.

Home Business Financing – 3 Reasons to Use a Credit Card to Fund Your Home Business

Would you like to start your own home business but do not have the money for it? Well, you are part of a club with many members. You may think getting money for a business can be a monumental task. However, it does not have to be. If you anticipate and plan for as many expenses as possible you may want to consider using a credit card to finance your home business.

One of the easiest ways to get a loan for your home business is to apply for a credit card account. It may not be the answer you are looking for. However, credit cards are easy to receive if you have decent credit. Plus they are very flexible in using for spending purposes. Consider these three reasons for using a credit card for your home business.

The most important reason about having a credit card for your business is you get to keep your cash assets. Even though there is a risk of acquiring debt, you still get to keep your cash in the bank for a rainy day. I find this a very valuable benefit because you keep your family’s money in tact and reserved for family needs. Your savings will continue for its original intentions (i.e. college money for kids, school clothes, etc.).

Another benefit is that Credit Cards have itemized statements of purchases. This is great for keeping track of money you spend on your business. The itemized statement provides proof that the Credit Card is being used for business expenses. Also, if you use the credit card for all of your purchases you can easily report expenses when tax season rolls around. Payments made that are shown on the statement is proof where your businesses money is going.

Finally, and this is my favorite reason, you have increased purchasing power with a credit card. You can use a major credit card to purchase items almost anywhere in the world. Having direct access to the funds is much more flexible than a loan. This also provides flexibility in time management because you can use the credit card to purchase items at your convenience if you have internet access.

The downside to this is that the credit card minimum payment will be an additional expense. Also, credit cards are a very easy way to acquire a lot debt for yourself if you are not careful. Always practice good and sensible spending practices. Once you start a home business it is very exciting time in your life and you may want to spend money on lots of things that you think you may need.

Always think of the basic needs of the business first. I tend to be very frugal with spending on a credit card then I do with cash. One way to curb spending by asking yourself, “Does my business really need this item right now?” Give yourself an honest answer and empower yourself to cut down on impulse buying.

Try to think out of the box when getting funding for your home business. A credit card to fund your business start up expenses may make things easier for you. Also, there are many offers for low interest credit cards for a specified time period. So, if you need a few thousand dollars in capital to start and sustain your business for a while then credit cards may be the answer to financing the start up costs your home business.

10 Easy Ways To Organize Your Business Finances

Whether you are a new entrepreneur or a more experienced business owner, taking control of your finances can feel like a part-time job. Some simple tips can help you streamline your time, organize your finances and reduce the stress of business money matters.

1. Keep Your Bills in One Place

When the mail comes, make sure it goes in one place. Misplaced bills can be the cause of unwanted late fees and can damage your credit rating. Whether it’s a drawer, a box, or a file, be consistent. Size is also important. If you get a lot of mail, use an area that won’t get filled up too quickly.

2. Pay Your Bills on Schedule

Bill paying can be simplified if it’s done at scheduled times during the month. Depending on how many bills you receive, you can establish set times each month when none of your bills will be late. If you’re paying bills as you receive them, chances are you’re spending too much time in front of the checkbook. Although bills may state “Payable Upon Receipt”, there’s always a grace period. Call the creditor to find out when they need to receive payment before the bill is considered late.

3. Read Your Credit Card Statements

Most people take advantage of low interest credit card offers but never read their statements when paying the bill. Credit cards are notorious for using low interest as bait for new customers then switching to higher rates after a few months. Make a habit of looking at your statement carefully to see what interest rate you are paying each month and if any transaction fees have been applied. If the rate increases or a transaction fee appears on your statement, a simple call to the credit card company can oftentimes be beneficial in resolving the matter. If not, try to switch your money to a more favorable rate.

4. Take Advantage of Automatic Payments

Most banks offer a way to automatically deduct money from your account to pay creditors. In addition, the creditors usually offer a lower interest rate when you sign up for this payment option because they get their money faster and on-time. Consider it as one fewer check to write, envelope to lick and stamp to buy. Just make sure you record the deduction when the automatic payment is scheduled or you run the risk of bouncing other checks.

5. Computerize Your Checkbook

Using a software program is a handy way to organize your finances. Whether it’s Quicken(r), Microsoft Money(r) or another package, these easy-to-use programs make bill paying and bank reconciliation a cinch. Computer checks can be ordered almost anywhere and fit right into most printers. Once the checks are printed, all of the information is automatically recorded in your electronic checkbook. Furthermore, many banks have direct downloads into these software packages so when money is deposited or withdrawn, the transaction is entered immediately onto your computer. And, when it comes time to do taxes, it couldn’t be easier.

6. Get Overdraft Protection

Most banks have a service where, if you run the risk of bouncing a check, the money will come from another source. For a nominal fee, the bank will link your checking account to either a savings, money market, or credit card so the embarrassment of bouncing a check will be avoided. Call or visit your bank to learn about this convenient feature.

7. Cancel Unused Accounts

Whether it’s a credit card or bank account, write a letter requesting that the account is formally closed. Not only will this improve your credit score, it is a useful way to avoid money from being scattered all over the place. Don’t let department stores and credit card companies lure you into opening new accounts by offering favorable interest rates and purchase discounts. It’s easy for credit to get out of hand by taking advantage of every credit offer that comes your way.

8. Consolidate Your Accounts

If you have several credit card accounts with outstanding balances, try to consolidate them into one. Be careful and check the balance transfer interest rates and one-time fees. Also, make a list of all your open Money Markets, Savings, CDs, IRAs, Mutual Funds, and other accounts to see if any consolidation can be done. Keeping your money in fewer places eliminates all of the guesswork involved and reduces errors.

9. Establish Automatic Savings

Create a link from your checking account into a savings account that will not be touched. This can usually be done through the banks and automatic amounts will be transferred over each month. Most people will not put money into a savings account on a regular basis. They may wait until a large tax refund check arrives or some other event to actually deposit money into savings, retirement or other accounts. If you establish an automatic savings deposit every month, your accounts will begin accumulating money faster than you think.

10. Clean up Your Files

Make sure your paid bills are organized in a filing cabinet. Keep individual files for paid bills. Go through your files at the end of each year and throw out bills and receipts no longer needed for auditing purposes. Contact your local IRS office to see how long records need to be kept for audits. Usually federal tax return audits can be done three years back but cancelled checks may need to be kept for seven. Consult the Internet for auditing and records-keeping procedures for your state or region.