Credit Cards – Basics
Credit cards are the card issued by a bank authorizing the holder to buy goods or services on credit. These are also called Charge cards. They are extensively used all over the world and became a part of our lives. Some people say that there might be a cashless economy in the future due to these credit cards. Understanding the basics of credits will help us to handle the cards more efficiently.
A credit card is nothing but a type of loan, called as revolving credit in banking terms. Every credit card has a ‘credit limit’ that is the maximum amount up to which the card holder can spend money. After you have used up your limit you cannot use the card further till you have paid back some of the credit amount. Credit limit is calculated on the basis of the credentials of the card holder, i.e. his monthly income, his profession etc. which are the indicators of his ability to pay back.
Say for instance, if your credit limit is Rs. 25,000 then you can use your card to purchase up to Rs. 25000.Now if you pay back Rs. 10,000 of the Rs.25,000 then you can further purchase for Rs. 10,000 using your credit card but not more than that. At any point in time you will not be allowed to avail credit more than your credit limit. Also unlike other loans, banks do not have any collateral in credit cards, so banks have to be prompt and careful while issuing a credit card to anyone.
A person’s credit report is a record of their credit history.The credit report will tell if a person makes payments on time or not.It will tell about the types of accounts a persons has and their credit limits. It will also show who has been looking at the person credit. All of these things factor into what is called a credit score. The credit score is a huge factor in lenders and decides if a person is credit worthy or not.
Most people do not think of the terms and conditions of their credit. Except for interest rates, most people do not understand about the fees and penalties they can be charged. This can be a huge mistake. Understanding these things and taking time to figure them out is a part of credit finance. The key to credit finance is taking credit seriously and being responsible with it.
Credit is very useful and a good thing that people needs, but it may be very bad too, if not managed properly. So just be careful while you make your purchases.
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Mortgage is a temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt. Mortgage can be obtained from banks. Loan size, loan maturity, interest rate and loan payment method considerably differs from one creditor to another.The disposal or use of mortgaged property have some restrictions. Economies of certain countries like US and UK greatly depends on mortgage.
The borrower’s can submit the documents provided by the bank along with the loan application, to a mortgage broker, who then assess the information and provides the borrower with best possible options of financing the mortgaged property. But some lenders will make the borrowers as a victim to make money unscrupulously. They lwnders may also take the borrowers situation as an advantage to them and force the property owners into foreclosures.
The Key factors that the lender take in to account before lending the borrower are credit report, outstanding credit, credit card accounts, down payment, income, interest rates, available funds and debt to income ratio. In addition, supply & demand, interest rates, demographics and economic growth relatively influence the mortgage industry.
Mortgage loans are provided at Fixed and Variable interest rates.
Fixed interest rates remain constant no matter what the national interest rate change is. This fixed interest rates are used as an introductory offer, and may be replaced wit the higher rate or variable rate after the successful completion of six months loan duration. Fixed interest rate provides a security against the elevation of national rates. If the borrower are locked for a lower fixed rate than the current national rate, then it is an advantage for the borrowers. The disadvantages is that the borrowers has to pay a higher interest on their mortgage loan when the national rates have pulled down.
Variable interest rates, they are contrast to fixed interest rate. They are most commonly used for small loans and credit cards.They vary according to the changes in national rates. It is directly proportional to the national interest rate, hence if the national interest rates raises there will be a hike in variable rates, and if it decreases then the variable rates too drop-off.
Among the other types of loans like balloon loans and government backed loans, Fixed and variable interest rates are popular while dealing with mortgage finance.
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When taking small business financial decisions, it is crucial that business owners should assess their most practical and effective choice. This may avoid a number of commercial finance problems. While a business men seeks new loan and working capital financing, being realistic to him will avoid many problems. Business owners should be in a better position with proper preparation to get new financing despite of the challenges that impact most working capital loans. It should be intimated that terms of financing will be different from previous commercial financing.
Business owners are finding the smoothest way to the loan success as they are accessing the practical options while taking decisions due to recent commercial lending difficulties. But it will not be a simple task, in case of unstable conditions which have recently impacted credit markets.Getting scrupulous information about what is realistically possible can be one of the most difficult challenges for commercial borrowers. Business owners would face many problems to find a realistic choice.
There are several major factors to be anticipated for most current commercial financing decisions by business owners.
In spite of the above stated constraints, there are practical working capital options for small business owners to consider. In the midst of uncertain economy, merchant cash advance program based on credit card processing activity is an effective commercial financing option. Though it has been available for few years, it has not been used by most small businesses. Business owners who wants to pusue the cash advance option should consult a business financing expert.
Since some of the largest providers have stopped making these business loans, business borrowers ha started dealing with a different commercial lender. Small business owners will benefit from finding an experienced and honest financing expert to assist in evaluating realistic options. While making financial decisions, it is vital for business owners to determine their effective business finance funding options.
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Customizing Homepage In Numia
In Numia, You can have a look into your recent activity by just logging in your account. The home page lists the recent activities in invoices, Due receipts, Due payments, checks, deposits, aged customers, cash sales, etc. Login details are also included in the home page list.
The data are displayed in the form of gadgets. There is an option to customize your home page, i.e. to add or remove gadgets of your choice. This feature facilitates to make your home page to list the details you prefer.
The crucial vantage of this feature is that you can easily go through the recent transaction details and log in details without going very deep into your account.This saves our valuable time being wasted.
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Preparing Journal Entries
For a business to go in Godspeed we should keep track of our funds in a well organized form. Journal entries are the simple way to track each penny we handle. You can track your debits and credits for supplies, business expenses, insurance, cash, revenue, bank charges and any other form of monetary exchange in journals.
Entries should be made in a format as it will be perceivable even after few years. There are five components to a journal entry, enter them in each column.
Sample Journal Entry
Now-a-days, journal entries can done using online Accounting Softwares and some of them have an option of reversing the journal entry.
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In this Modern era, the world has become systematic. To keep us in equilibrium to its development, we should spend some time to know the latest technologies. In the past Business man will have to spend more time on maintaining their accounts, but now it has become facile by the use of Online Accounting Softwares.
I use Numia for managing my accounts, It saves lot of my time. Many latest features are implemented in it. For instance let me tell how to enter the recurring transactions in numia. Recurring transaction is nothing but the transaction that has to be entered periodically. Once you set this option in numia, your transactions will be automatically added.
To avail this option,
- Login to your numia account.
- Select Company -> Recurring Transaction List
- To add new transaction select “Add New” button.
- In the Recurring Transaction Dialog box, Choose the Transaction Type, Customer, Debit A/C, Credit A/C and amount.
- Provide a Name to this transaction.
- You can choose the time period for automating the transaction, either daily, weekly, monthly or yearly.
- You should set the starting and the ending date for the transaction to be recorded. you can select the dates using the date selector.
- Then click ” Save Transaction”.
Now your transaction will be saved and will be entered mechanically.
Recurring Transaction
You can also remove the unwanted transactions by selecting that specific transaction from the Recurring Transaction List and click ” Delete”.
Delete Transaction
Actually we should remind ourselves about the recurring transactions that takes place periodically. This option in Numia will save our time and keep our mind free from thinking about those regular entries.
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Tags: bookkeeping, online accounting, Recurring Transactions
Managing Debtors
Credit control should be proper for running a business successfully. Late payments become a challenge for many small businesses. If your turnover reduces, you will feel the effects of a sluggish economy. Managing your debtors effectively by following the below tips, will render you the positive cash flow that you will need to magnify your business.
Set Up Credit Controls
Have a clear credit control process and stick to it. Use references and reports to check credit rates, Such checks should identify any new customers that have had bad credit experiences in the past, so that these can be monitored.
Know your Customers
Know your customer by providing them a form to be filled about their details and make sure they are able to pay their bills by getting a credit check on them.
Payment Options
Encourage customers to make payments directly into your bank account.
Monitor the Debtor Accounts
Monitor the accounts of new customers and rate them. Slow payers can be found easily, if trading conditions have been clearly laid out from the beginning.
Raise Invoices Accurately
Raise invoices as soon as the work is completed and don’t wait until the end of the month.Make sure you know to whom and where to send invoices and the detail they should contain.
Send Reminders
Make an option of reminding them about the payment at periodic time intervals. And keep in touch with the customers,if necessary, including regular telephone reminders.
Stop Supplies
Stop supplies, if accounts are not being paid. Make this part of your credit system. You can then discuss the situation with your customer, and reach an understanding regarding payment for past supplies and conditions for new supplies.
Allowing a good customer a little freedom during tough times can be beneficial and promote good will with clients, going too far with payment extensions damages your ability to remain afloat.Do not be concerned about taking a disciplined action to debt collection because you are afraid of losing the customer. It is not worthy for having customers those who are not meeting the payment obligations.
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Leading Small Business
President Barack Obama said small businesses are “the places where most new jobs begin” and will be at the forefront of new hiring as the economy recovers.
Small business always play a vital role in the international economy. One should know how to initiate these small business and run it successfully by taking additional measures and precautions.
A leader is someone who holds a vision and courageously implements that vision in such a way that it resonates with the souls of people.
The crucial thing to lead a small business is that we need our long term strategy first, before determining whether we have a infrastructure to reach our destination.
This may be chaotic, I can explain you with the simple Bus metaphor. Now just conceive of a Bus company, the first thing they should determine is the destination and route for each bus rather than choosing the passengers and the drivers. After determining the routes, then they will choose the drivers for each route.
To lead a business, plan it efficiently before every step. Especially while doing small business, the owners should be alive of their capabilities. They should have a proper budget planning, maintain daily accounts properly. This is mainly because overstretching your budget would lead to business unfortunate or stagnation.
The best abstract is just to just follow the saying ” Slow and Steady wins the race”. Make your business moves small and tardily until you become wiser with abundant ideas.
Align the customer goals with the performance of your employees. Don’t aim for more money at the beginning, aim for the satisfaction of your customers. Customer satisfaction will vantage your business to be successful.
Keep in contact with new technology especially in regards to your business operations. Now-a-days there many upcoming soft-wares to handle your business, signally Online Accounting soft-wares to maintain accounts much easily. Engage your employee in the impact therefrom providing to your customers with up-to-date products and services.
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Accounting Vs Bookkeeping
Everyone think either Accounting and Bookkeeping are the same or they have only a slight variation within them. But it is not so. In general, Accounting and bookkeeping are financial tools that are used for the recording of business transactions. Technically, they are differ from one another.
Bookkeeping
Bookkeeping is the traditional process of recording day-to-day business transactions and the relation between the transactions. Bookkeeping does not require any analysis it is just a mechanical process. In olden days, the records were kept in books and thus they named it as Bookkeeping. Now there are many Bookkeeping Soft-wares like Numia are in use.These soft-wares simplifies the task of the bookkeepers.
There are two types of Bookkeeping, Single Entry Bookkeeping and Double Entry Bookkeeping. In Single entry bookkeeping, each transaction is carried to either the debit column or the credit column. It uses only income and expense accounts. Whereas, Double entry bookkeeping records each transaction twice using credits and debits.This is done in the way that the two entries can be checked.
Accounting
Accounting is also a process of recording business transactions systematically, but it includes additional reports and further financial analysis of the transactions. Accounting involves four steps:
- Recording the transactions (obtained through bookkeeping) in the proper ledger accounts.
- Categorizing the transactions into meaningful and orderly manners.
- Summarizing all the data collected.
- Analyzing and Extracting these financial data in the form of various financial statements and records.
Accounting will enable the organisation to ascertain the results of the business and also assist in taking any management decisions.
This means Bookkeeping is the just the basic part of Accounting.
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Bookkeeping is a crucial task for any business. But most of the entrepreneurs are lethargic to complete this task and to maintain explicit records of their accounts. Bookkeeping can be done by the owner himself, if he has some basic accounting knowledge and time else a bookkeeper can be assigned. Bookkeeping is the key for successful business, here are some common mistakes done while bookkeeping, avoid them to record accurate accounts.
Mixing up Personal and Business Funds
Don’t mix up the personal and business funds together. Have a separate accounts for both.
Lack of Reconciliation
Reconciliation is an essential task of Bookkeeping. Many errors may occur due to it, so reconcile the books with bank statement every month.
Not Saving Receipts
Save receipts for all expenses, even if it is a very small amount.
Forgetting to track reimbursable expenses
Most of them will pay the expense using their personal funds or credit card and forget to track them.
Lack of Record Back Up
Even though all the records are computerized they should have a back up, since issues may arise in computerized records too and there may be a loss of data.
Not Deducting Sales Tax
A common mistake in retail businesses is not deducting the sales tax from the total sales. This results in a higher total sales amount and does not lower the amount of taxes due.
Improper Employee Classification
Business must properly classify their employees for tax purposes and must keep these designations separated.
Lack of Communication
There should be proper communication between the Bookkeeper and the employee, it will reduce many financial errors.
Improper Categorization
Business expenses should be properly categorized mainly for reporting Tax.
Lack of Professional Help
If the owner does not have adequate accounting knowledge and time , then it is better to hire a bookkeeper. Bookkeeper will be aware of the legal changes and will record the accounts accordingly.
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Tags: bookkeeping, common mistakes
Recent Entries
- Credit Cards – Basics
- Fixed and Variable Interest Rates in Mortgage
- Realistic Choice For A Successful Business
- Customizing Homepage In Numia
- Preparing Journal Entries
- Entering Recurring Transactions in Numia
- Managing Debtors
- Leading Small Business
- Accounting Vs Bookkeeping
- Common Bookeeping Mistakes by Small Businesses
- Accounting Myth Vs Reality
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