A convertible note is a short-term financial document that allows a business to receive cash in exchange for equity in a company. This agreement is utilized by startups to receive support from angel investors, venture capitalists, or other types of private investors. Investors provide funding with the assumption that those funds will be repaid or…
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What Are Current Liabilities? How to Calculate Them [+ Calculator]
A current liability is any financial obligation that has an amount due within the next 12 months. It can be found on your company’s balance sheet and can include loan payments, payroll expenses, and accounts payable (A/P). It’s an important figure to know because it will help ensure that you have enough assets to satisfy…
What Is an Installment Sale & How Does It Work?
An installment sale is a transaction where one or more payments occur after the end of the seller’s tax year and gain may be deferred to future years.
Installment sales are often used for the sale of a business and for real estate transactions. This sale structure is often chosen for the significant tax benefits to the seller and the unencumbered cash flow afforded to the buyer. How Does an Installment Sale Work? Without the installment sale rules, a gain or loss would…
Ethical Sourcing: A Small Business Guide
Ethical sourcing practices offer small businesses a pathway to enhance reputation, increase sales, boost employee satisfaction, and ensure regulatory compliance.
There is a growing trend towards labeling business products as “ethically sourced”—but what does that term really mean? Often used interchangeably with “sustainably sourced” or “responsibly sourced”, ethically sourced refers to components of the supply chain that are obtained in an ethical way. Businesses that have ethically sourced products and services do so because of…
Are Supplies a Current Asset? (+ Journal Entries)
Generally, supplies are classified as current assets on the balance sheet until their use is recorded as an expense.
Supplies on hand are classified as current assets on the balance sheet because they are expected to be used up or converted into cash within one operating cycle or one year, whichever is longer. Since supplies are consumed in day-to-day business operations, supplies on hand are considered current assets. These can range from office supplies in…
Accounts Payable Workflow: 3 Easy Steps for Small Businesses
The accounts payable workflow is the process of entering, reviewing, approving, and processing vendor invoices for payment.
The A/P workflow starts immediately after goods have been received. The A/P clerk will first gather all the necessary documents and enter them into the accounting system. They will then review the documents to ensure the accuracy and correctness of the information. After review and approval, they will prepare the payment request and forward it…
The 5 C’s of Credit: A Beginner’s Guide
The 5 C’s of credit analysis are character, capacity, capital, conditions, and collateral.
The 5 C’s are used by lenders to evaluate potential risk when determining a borrower’s creditworthiness and ability to repay a loan. Each lender has their methods of valuing each category and uses their judgment during the approval process before extending financing. The 5 C’s of credit are as follows: Character: This demonstrates your reliability…
What Is Predatory Pricing? Effects & Legalities
In this article, we’ll define predatory pricing and take a closer look at how it works, its short- and long-term effects, and real-world examples. How Does Predatory Pricing Work? Predatory pricing is a strategy that unethical businesses adopt for customers to flock toward their goods or services and away from competitors—often those with smaller financial…