ss_blog_claim=bd50edc517cf0b7549fe6b5f63b6b5f8 The SLS Business Finance Blog: June 2007

Friday, June 29, 2007

The Purchase Card

The P-Card, AKA the Purchase Card is the next generation of invoice management. In this article I am going to highlight the benefits of business credit card acceptance from the customer’s perspective. Benefits which, in turn, roll over to the Merchant. I have often heard the terms Business/Corporate and Purchase card used interchangeably as if they are one in the same. They are not. The Corporate Credit Card is issued by a company to the individual for expense purposes such as travel and entertainment and client relations. The Corporate Credit Card can also be used to purchase materials or supplies, but that is not its most efficient use. In fact, the Corporate Card has more in common with a regular Consumer Credit Card than anything else.

The Purchase Card cannot be accepted with a normal credit card terminal. Businesses that accept P-Cards must have access to a Payment Gateway. (see previous articles for a description of the payment gateway). The credit card terminal does not have the technology capable of capturing Level 3 Data. What is Level 3 Data? It sounds confusing but here’s how it works. When a P-Card is administered as payment, the purchase must consist of supplies, materials, or inventory for the running of that business. A Purchase Card CANNOT be used for travel and entertainment. The business that supplies the P-card can set the parameters for what supplies may be purchased on the card. At the point of sale, the merchant must request information from the purchaser such as invoice or customer number, or any other relevant information regarding that purchase. The merchant in turn must enter the sales tax, quantity being purchased, date that the goods will be shipped etc. This information is called Level 3 Data. Once the transaction is complete, the card issuing bank generates an invoice containing the Level 3 Data that was entered at the time of sale. The invoice is than sent to the company that purchased the goods alleviating the need for a complex invoicing system.

Both the federal and state governments are converting to the Purchase Card system due to its efficiency and cost saving benefits. Manufacturers and suppliers use it for its ease of use regarding accounting and inventory management. Is the Purchase Card a fit for your business??

Todd Rome
Director, BankCard Services
Southern Lending Solutions, LLC

Tuesday, June 26, 2007

5 Questions of a CPA: Andrew Levy, Rockridge Financial Services, LLC

The 5 Questions feature continues with a CPA, Andrew Levy of Rockridge Financial Services, LLC.
SL: What is the # 1 accounting related issue facing small businesses today?
AL: The biggest accounting issue facing small business today is obtaining

timely and accurate information from the accounting system to drive one's
business. The integrity of information that the business owner uses to
drive his or her company is of the utmost importance to making the right
decisions for the business going forward. Whether the accounting
function is maintained in-house or by a CPA, the importance of deriving value from
GOOD numbers is most important. Making sure that one is maintaining
accurate and timely books to drive the company can't be minimized. Don't
forget, integrity of information is everything, otherwise you've got the
accounting problem referred to as GIGO--Garbage in, Garbage out.

SL: What accounting packages do you recommend to us non-CPA business owners
to keep our records accurately, if any??

AL: For smaller companies who don't have the need for anything too
sophisticated, I'm a fan of QuickBooks. The cost is reasonable and
gives a good jumping off point for most companies. For certain businesses, there
are specialized QuickBooks packages that will work well. QuickBooks also
has an online version so that folks within the organization can do
what they need to do from anywhere they can access the internet. This online
version also adds a level of security because the information is maintained
virtually and not on one's own PC/server.

SL: What aspect of small business is accounted for incorrectly the most often
when keeping the books?

AL: Well, where shall I begin? I suppose the most important thing to
keep in mind is the idea of what we "green eyeshade/pocket protector" sorts
call the "matching principal". The idea here is that you want to match the
revenues in the same period as the costs you incurred to get those sales, so
that you can determine the true gross margin and profitability for that period's
revenues. Too often, I see clients that recognize expenses related to a
sale accounted for in a different period from that sale. It makes it incredibly
difficult to see whether a period, or a project, for that matter, is profitable or
not. If you don't know the cost to the penny for expenses incurred
during a period, you can make an estimate, referred to as an accrued expense,
where you can recognize a cost in the period where the revenue is
recognized, and then correct the expense in the following period. While, since
it is an estimate, it is not completely accurate, it is a better method of
applying the matching principle than to simply leave out the expense for the
period in question and recognize it in a following period.

SL: What does Rockridge Financial do to differentiate themselves from the
marketplace full of CPA firms large and small?

AL: First of all, as trusted business advisors and CPA's, we provide a
suite of services for the small business that enables the business
owner/manager to "cherry pick" from the suite of solutions we offer, and
use them when they need--to the degree they need. If one understands the value of leveraging one's resources by co/outsourcing areas that are not core
competencies, then one will understand how RockRidge Financial works
best. Our services include tax planning/strategy, general accounting,
controller by the hour and CFO for hire services. Second, we pride ourselves on
adding real value to our clients by advising and strategizing with them to
improve on their business. We do not simply regurgitate financial statements
or tax returns in a CPA format, but we add value in using this information to
show the business owner where there are opportunities for continued
improvements in the business or opportunities for cost savings. If all we did was
look at a client as a billable hour or a project, we would neither be
serving our clients nor ourselves.

SL: When is a good time for a small business to utilize your CFO for hire services?

AL: CFO for hire is just one area that we focus on--and most companies who
use our CFO services find tremendous benefits from our collective
experience in knowing how to drive businesses forward. For some companies, our
CFO's sit on their advisory boards, while others use our services to refine the
business model or financial plan to have a great roadmap to run their
business by. Business owners have a passion for what they do--and our
CFO's provide the financial insight that the owner may not have. Even when the
owner has a general understanding of accounting and finance, our
insight and business coaching has proven invaluable.

SL: Andrew, how can we contact you and Rockridge Financial?

AL: RockRidge Financial's website address is
We can be reached by telephone at 678-421-9977 or email at

Thanks Andrew for some great information and insight into small business accounting.

Thursday, June 21, 2007

Credit Card Acceptance For The Business Professional-Virtual Processing

Credit card acceptance for the small business practice and non-retail industries is more important these days than ever. It has become apparent that the small business professional, like any other, struggles to keep up with the latest technology including upgrades to operating systems and new versions of accounting software. The process of payment acceptance from the client is no different. A standard credit card terminal may be a fit for the dry cleaner down the street or the local coffee shop, but not so much where a business provides consultative services or products that are delivered at a future date. These transactions often take place over long distances or online where the business may not be able to see their customer. Thus, virtual processing comes into play.

Virtual Payment Processing utilizes the Payment Gateway. The easiest explanation for this system is to imagine a credit card terminal that exists for your business in theory only. Meaning there is no hardware that sits on a countertop in the office, rather it is a secure website one logs into to complete the credit card transaction. This system provides all sorts of advantages that the typical terminal cannot provide. The most powerful one is the ability to set up a client on an automatic recurring billing cycle. An attorney (as an example) that works on a retainer can simply instruct the system to charge the client’s credit card at a future date in time determined by both parties. This can be set up for 1-2 future transactions or it can be set up to charge the credit card on regularly scheduled intervals. This alleviates the need for several administrative expenses such as man hours spent on collections, postage, and time not spent focusing on the business at hand just to name a few.

The scenario above is invaluable for most professional/non-retail businesses, but the most apparent advantage in the short term is the cost of doing business this way. There is minimal cost to set up credit card acceptance through a payment gateway because there is no equipment. There is no cost for re-supply of terminal paper, no hardware or software to buy, or need of worry for obsolescence of technology. The entire system is handled through the Payment Gateway provider and the business never absorbs any of the cost involved with upgrades or maintenance.

Todd Rome

Director, Bankcard Services

Southern Lending Solutions, LLC

Friday, June 15, 2007

The App Only Lease

The greatest misconception in our field is that because we don't use banks to finance equipment that we don't have to gather as much financial information as a bank does in order to process and approve the transaction. However, and many people are unaware of this, including other consumer and commercial financial professionals but we actually DO have a lease that requires hardly any paperwork at all. That case is the App Only Lease.

App (short for Application) Only leases mean literally a business credit application might be all that is required along with the credit check. Our credit app is only one page long with a 2nd page added to authorize checking the client's credit. Pretty simple stuff. Other App Only programs will require the business owner to provide a PFS (personal financial statement NOT business financials) as well so while its not truly App Only, it is much lesser documentation required for approval.

All App Only lease programs (including all of ours from our 19 sources) have the following 2 things in common:

1) Minimum 2 Years Time in Business Required (meaning 2 years since incorporation)
2) Maximum Amounts for the Program at 50k, 75k or 100k of Equipment

The amount of the upper limit varies with the risk the leasing company is willing to accept but we have seen 50k as the standard.

So, while this is a common misconception of lesser paperwork being required generally in our industry, if you or a business owner you know has been in business for 2 years or more and needs 50k worth of equipment or less, then tell us you want to qualify for an App Only lease. It's a great lower hassle program for everyone involved from you to the leasing company to us or your other commercial finance providers.

Please feel free to visit our website at or email me at if you have any questions or comments about this or any other of our subjects.


Monday, June 11, 2007

Five Questions for a Small Business Attorney: Glenn Lyon, MacGregor Lyon, LLC

This new feature is where we talk to professionals dealing in other areas of expertise that affect small business. Today's topic is the Law and Small Business with attorney Glenn Lyon of MacGregor Lyon, LLC. Stay tuned for Glenn's article on our blog.

SL: What is the # 1 legal issue facing small businesses today??

GL: Failure to properly incorporate and maintain corporate documentation and records. Corporations are required to have by-laws and organizational and meeting minutes; LLCs are not technically required to have an operating agreement, but I would never recommend that an LLC operate without a comprehensive operating agreement. Failure to create and keep these records and documents can result in what is known as, “piercing the corporate veil.” This occurs when the company is not being operated properly and it is stripped of its limited liability – the primary legal reason to incorporate or form an LLC.

SL: What are the biggest pitfalls in the incorporation process?

GL: Similar to the previous question , failing to draft and execute by-laws (or an operating agreement, if an LLC) and organizational minutes that officially set up the corporation and establish its shareholders, directors and officers. The incorporators of the company issue shares to the stockholders; the stockholders elect the board of directors; the board of directors elects the officers. Without these initial documents, a company cannot be run appropriately. E.g., how can a corporate function without a president or a board of directors? Again, the company may lose its limited liability protection and the personal assets of the owners or incorporators will be vulnerable.

SL: How does MacGregor Lyon differentiate themselves from larger firms in the city?

GL: Service, realistic rates and flexible billing options. Most large and even medium-sized firms are overkill for most small businesses, especially when it comes to fees and personal contact with the attorney in charge of the client file. Often, the business owner initially speaks with the partner in charge, but is then relegated to an associate who has much less experience and decision-making power, if any. We also offer free initial consultations, which overhead-conscious business owners like.

SL: What is required of a small business to use you as their outsourced 'in house counsel'?

GL: Generally, we request that a new or existing business to complete a questionnaire that provides a majority of the information we need to determine the business’ needs and then tailor an engagement that best fits. For example, hourly billing versus a flat fee, or maybe a monthly retainer. We understand that small and new businesses have to keep a watchful eye on its cash flow and overhead – we are a small business ourselves. As such, we pride ourselves on be flexible on how we bill our business clients.

SL: What about contract law in GA is creating the most confusion for small business owners in the real world?

GL: Right now, probably non-competes. They are everywhere, but few employees and employers understand them and which ones are enforceable in Georgia. They must be narrowly-tailored in order to be enforceable in Georgia. They must apply to the same geographic location where the employee worked, include only the services the employee actually performed and generally be two (2) years or less from the date of employment termination. One also has to be mindful of choice of law and forum selection provisions that dictate which state’s law applies and where an action must be filed.

SL: How can we contact you??

GL: I can be reached through our website at, via e-mail at, or by phone at 404-942-3545.

Thanks Glenn for your great info and one of the things I like best about MacGregor Lyon is that they are small business owners themselves and can really relate to issues that come up for other small business owners, legal and otherwise. Thanks again Glenn.

What’s In A Credit Card? The Argument Supporting Credit Card Acceptance For Professional Businesses, too

Credit card acceptance has become such a prized commodity, people shrill when they go to a business and don’t see the Visa/MasterCard logo advertised. Although cash in hand is a luxury that most people strive for, more and more of us are relying on credit cards to make payments if for no other reason than the sheer convenience it provides. Most retail and restaurant businesses accept them because:

A.) They know that their customers will frown upon them for not accepting them.
B.) Retailers enjoy the guaranteed convenience of a 1-2 day settlement on funds and the peace of mind in knowing that they will not have to deal with a returned check.

How does this process play out in professional industries such as: Attorneys, Consultants, Manufacturers, Building Contractors, and Government Entities? (just to name a few)
Wonderful is the short answer! More and more businesses have moved to corporate and purchase credit cards as payment for their products or services rendered. Although many industries still rely on a Net 60-90 day payment schedule, most have opened their eyes to the world of electronic payment processing. Why invoice a customer for services rendered when payment can be taken in the form of plastic? No more man hours wasted on administrative tasks such as billing, postage, and time spent on collecting insufficient funds. With a variety of options in which the business can now accept a credit card payment, the argument for accepting credit cards becomes crystal clear.

The biggest break through for professional industries in the past few years has been the ability for a company to accept Visa/MasterCard via their own computer. With the help of a simple internet connection, a business can log into a secure website and input a credit card transaction with a few simple key strokes. This method alleviates the need for costly equipment as well as on site technical support.

Why is credit card acceptance a fit for just about any business? Because it allows companies the freedom of making money instead of finding new ways of collecting on it and let’s face it, no one carries around their checkbook anymore.

Todd Rome
Director, BankCard Services
Southern Lending Solutions, LLC

Leasing and Taxes

Leasing your new equipment provides some tax advantages. I'm not a CPA (but you should consult one with any questions about tax ramifications) but here's what I do know and recommend:

1) Depreciation for Equipment owned outright is front loaded. This means that the 1st year for certain and probably the 2nd year too, the depreciation value would be tax favorable. In other words, you could deduct more off your taxes as an expense in year 1 and year 2.

2) On the other hand, because depreciation is front loaded, this means that in Years 3, 4 and 5 that you continue using the equipment you get to deduct less and eventually nothing through depreciation.

3) When equipment is leased the amount you get to deduct as an expense is consistent each year and easier to calculate. It amounts to the entire value of your monthly lease payments over the course of the entire year, and therefore the entire leasing period.

4) A standard lower cash outlay (in the 5-10% range) is needed for leases. Sometimes bank loans require up to 20% down or more if approval amounts by the bank don't match the cost of the equipment. A classic example of this is the bank approval of 25k for the purchase of a 50k piece of equipment. This happens more often than we'd like to see in banking but NEVER happens in the leasing industry. It's always 100% of the value less the down payment requirement.

So buying equipment has advantages, especially if a big tax bill for the current year is anticipated, but the overwhelming majority of the time, its more tax advantageous to lease the equipment and get the same amount in writeoffs every year.

Wednesday, June 6, 2007

Leasing = Preservation of Cash

As one of my business school profs once told me, you can't spend profits, you can only spend cash. I never forgot that and the importance of cash to the life of the small business. Leasing as a financing tool preserves that all important cash by:

Saving Your Capital and Lines of Credit
  • Lower upfront costs for you while maximizing opportunities for revenue
  • Save your lines of credit for working capital, emergencies and expansion as they were intended.
Leasing typically has a maximum down payment of 5-10% and often can be done with no down payment at all.

Tax Advantages

  • Leasing gives you the option of 100% of payments tax deductible for business expenses
  • Lower cash outlay by you up front with tax advantages = Increased Cash Flow

Unlike in cases of ownership of equipment, where you get to depreciate using a method that favors the early years, leasing gives you a tax advantage in years 3, 4, 5 and 6 as well.

Better Cash Flow Management

  • Match your increased cash flow from your new equipment to your low lease payments to guarantee the equipment pays for itself

Fixed Interest Rates On Your Lease for Full Term

  • Use inflation to your advantage to pay back your lease in cheaper future dollars.
  • Your Payments NEVER change for life of the lease
All of these advantages are cash flow positive benefits of leasing equipment as opposed to purchasing the equipment outright.

Tuesday, June 5, 2007

Why Lease Equipment Anyway??

I am asked this question alot and the first answer that comes to my mind is this: 'It's much easier and safer to lease equipment than buy it'. Why is that??

Ease: Leasing equipment is easier than buying since the majority of the time the small business owner doesn't have the cash available to buy the equipment outright. This means going to the bank to try to borrow the $$ to buy it. If you do have the cash and it doesn't hurt your working capital situation then by all means use the cash to buy the equipment.

When borrowing from the bank, this means jumping through all the bank underwriting hoops required, and those hoops are the same whether the loan is for a 40k piece of equipment or a 40 million dollar commercial property. Anyone who has ever gone to a bank knows there's many steps and chance for them to reject the application at each one.

Leasing however is far easier. The equipment itself is the collateral so if you don't pay the leasing co. just comes in and takes the equipment back. The same 40k piece of equipment in my above example would fall under 'Application Only' guidelines meaning literally a credit application is the only thing required for an approval decision. Sounds alot easier to me.....

Safety: It's safer to lease equipment than pay cash for it because our small business owner clients seem to always be short of cash. Working capital is vital to the small business. More businesses close their doors due to the one unexpected expense occurring that leaves them with ZERO cash, rather than being poorly run on a day to day basis. Leasing is an inexpensive commonly accepted financing technique that allows for payments to be made over a 3-5 yr time period. We tell our clients all the time, if you are going to use the equipment for 3-5 yrs, why not pay for it over 3-5 years instead of depleting all your cash now??

It just makes good business sense due to its ease and safety features for your working capital to lease equipment and pay it off over time.


Welcome To The SLS Blog

Welcome to our Blog. I'm Stu Lustman, your moderator. We hope to bring some of our best advice, as well as advice from those we partner with and trust on issues dealing with small businesses today. While most of the issues we discuss will center around Commercial Finance, this is not exclusive. We will tackle other issues faced by small businesses today and while our financing techniques don't require banks, we still like and need banks, just like you the small business owner does. We will have a couple come through here and give their advice on how to best utilize them for the long term sustenance of your business.