Author: Jennifer Brazer

A brand new business owner may not necessarily be found as a financial expert. It is quite common and natural that a start-up will often be required to take a loan. Investors normally wish to be provided with an extensive financial analysis and data before considering granting any such loan to the owner for their start-up.

So, what is this data, and where does it come from? The data is from the bookkeeping records that calculates all of the company’s financial ratios. These ratios define the health and well-being of a business along with the risks. Investors are highly interested to see these facts and figures before deciding if they wish to invest in that certain business or not.

Ratio analysis is one of the most recognized methods used to determine a business’s overall financial condition. These ratios are also most useful in making comparisons and assessments between a client and other companies in the industry.

In accounting and bookkeeping, each of the below ratios is extremely important for credit professionals to make informed decisions. They can judge and decide if they should or shouldn’t give customers credit, exactly how creditworthy the business is, how much they should invest, and the appropriate terms of sale.

Financial Ratios That Lenders Review when Deciding the Credit Worthiness of a Business

1. Debt-to-Equity Ratio

The debt-to-equity ratio permits lenders to compare a company’s assets with their debts. A lender considers a business as high risk when their equity debt is a high ratio. They would much rather invest in a business where the ratio calculated is found to be of little or no debt.

To calculate the debt-to-equity ratio, take a company’s recent balance sheet. Divide the figure of total liabilities by their total figure of shareholder’s equity. For example, for a business with $200,000 as liabilities and $400,000 as assets, that company’s debt-to-equity ratio will be calculated as 0.5.

2. Operating Margin

An operating margin is used to calculate a company’s profit as a percentage of their total sales. Operating margins find a company’s total revenue and total profit. These figures give a clear picture of where the company is standing in terms of efficiency.

To determine the company’s operating margin, divide the income from operations by the total figure of net revenues. For example, a company with a $1 million figure from $100 million yearly profits from their sales will have its operating margin calculated at 1%.

3. Current Ratio

The current ratio is used as a liquidity ratio. This ratio is calculated when the total current assets’ total sum is divided by the total current liabilities. This ratio measures if you have sufficient assets to pay for your liabilities. If your current ratio is calculated to be two, it means that you have twice as many current assets as your current liabilities.

This ratio is similar to the ratio of debt-to-equity, though in this case, total assets are divided by total liabilities instead of liabilities divided by shareholder’s equity.

4. Inventory Ratio

A company’s production and purchasing efficiency can be calculated by using the inventory ratio. The inventory ratio gives a fair picture of how many times the company can sell their inventory for a specific period.

To calculate this ratio, divide the entire cost of the services or products sold with the entire inventory cost. If the ratio is higher, it means the company is more efficient at turning over their inventory. Lenders will take and consider such businesses as creditworthy and most likely to be successful and productive for investment.

Let’s take an example of this. If a business has sales of $500,000 and an inventory of $100,000, the inventory ratio calculated will be 5-to-1.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Running a beauty salon is a complex and challenging task that requires a deep understanding of the industry, customers, and the latest trends and technologies. Salon owners face unique challenges today, where competition is fierce, and customers have more choices than ever. To succeed, they must balance creativity, business acumen, and a customer-centric strategy.

As a salon owner, facing the challenge of standing out among competitors is understandable. However, you can confidently attract and retain customers with the right approach. To set yourself apart, consider offering something that’s uniquely you. This could be a specialized service, like permanent makeup or microblading, or a focus on creating a memorable customer experience through personalized consultations or a serene, spa-like ambiance. With enthusiasm and optimism, you can share your friendly approach and interest in helping customers look and feel their best.

Another challenge that salon owners face is keeping up with industry trends and technology. The beauty industry constantly evolves, with new products and techniques introduced continuously. To stay relevant and competitive, you must stay on top of these trends and invest in the latest technology and equipment. For example, if you don’t offer online booking or have a solid social media presence, you could miss out on many potential customers.

In addition to these challenges, salon owners must also deal with the daily business logistics. This includes managing employees, maintaining inventory, and keeping up with administrative tasks such as bookkeeping and payroll. These tasks can be time-consuming and overwhelming, especially for owners responsible for client services.

Despite these challenges, there are several strategies that salon owners can use to overcome them. One of the most effective is to focus on customer satisfaction. By providing exceptional service and creating a positive experience for each customer, you can build a loyal following and generate positive word-of-mouth referrals. This can help you stand out from your competitors and attract new customers.

Another strategy is to invest in technology and automate as many tasks as possible. This can include using software to manage bookings and appointments, track inventory, and handle payroll and accounting. By automating these tasks, you can free up time to focus on providing high-quality services to your clients.

To keep your business competitive and relevant in the ever-evolving beauty industry, staying up-to-date with the latest trends and developments is crucial. Adopting new services and products, revamping your marketing strategy, and investing in cutting-edge technology can help you stand out as a trendsetter in the industry. Proactive measures like these attract customers seeking innovative beauty services and demonstrate your commitment to providing the best possible experience for your clients. So, let’s work together to ensure your salon stays ahead of the curve and continues leading the way in this dynamic and exciting field!

Conclusion

In today’s world, running a beauty salon requires a deep understanding of the industry, a customer-centric approach, and a willingness to embrace change and innovation. By putting your customers’ needs first, implementing technology to streamline operations, and staying up-to-date with current trends, you can overcome the obstacles of running a successful salon and create a flourishing business that provides exceptional services and builds long-lasting relationships with clients. With persistence, unwavering focus, and a dash of ingenuity, you can position your salon as a trailblazer and attract discerning customers seeking the best beauty experience possible. Let’s embrace these strategies; together, we can achieve unparalleled success in the beauty industry!

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Starting your own business is an exhilarating journey filled with countless opportunities! However, it’s essential to recognize that navigating tax responsibilities can be a bit tricky, especially for new entrepreneurs. We understand it’s easy to overlook critical details, leading to costly mistakes. That’s why we’ve put together this informative article, which covers startup owners’ most common tax blunders and how to steer clear of them. Let’s dive in and make your entrepreneurial dreams a reality!

Failing to Keep Accurate Records

One of the entrepreneurs’ most prominent tax mistakes is inaccurate records. As a business owner, you must keep track of every business transaction, including expenses and income. Failure to keep accurate records can lead to incorrect tax filings, penalties, and fines.

To avoid this mistake, it’s crucial to set up a bookkeeping system that tracks every transaction. You can use accounting software like QuickBooks or hire an accountant to manage your finances.

Mixing Personal and Business Expenses

Another common mistake entrepreneurs make is mixing personal and business expenses. This mistake can make it difficult to track business expenses accurately, leading to incorrect tax filings.

To avoid this mistake, separate bank accounts and credit cards are essential for your business and personal expenses. This will help you keep track of your business expenses and avoid confusion during tax season.

Not Understanding Tax Deductions

As a business owner, you’re entitled to several tax deductions, but many entrepreneurs fail to take advantage of them. This mistake can lead to higher tax bills and missed opportunities for savings.

Understanding the tax deductions available to you is crucial to avoid this mistake. Some standard tax deductions for businesses include office, travel, and marketing expenses. Consult with an accountant or tax professional to ensure you take advantage of all the deductions available.

Missing Tax Deadlines

Missing tax deadlines is another common mistake entrepreneurs make. This mistake can lead to penalties and fines, which can be costly for a new business.

Keeping track of tax deadlines and filing your taxes on time is crucial to avoid this mistake. You can use a calendar or set up reminders to ensure you don’t miss any deadlines.

Misclassifying Employees

Misclassifying employees is a costly mistake that many entrepreneurs make. Misclassifying employees as independent contractors can lead to penalties and fines from the IRS.

It’s crucial to understand the difference between employees and independent contractors. Consult with an attorney or tax professional to ensure you correctly classify your employees. 

Failing to Pay Estimated Taxes

As a business owner, you’re required to pay estimated taxes quarterly. Failure to pay estimated taxes can lead to penalties and interest charges.

Estimating your tax liability for the year and making quarterly payments is crucial. You can use accounting software or consult an accountant to calculate your tax liability accurately.

Conclusion

Beginning a new business can be an exhilarating and fulfilling experience, but it’s important to be well-informed about your tax responsibilities to avoid costly mistakes. Fortunately, numerous ways to prevent these errors include:

• Keeping meticulous records.
• Differentiating between personal and business expenditures.
• Understanding tax deductions.
• Adhering to tax deadlines.
• Accurately categorizing employees.
• Paying estimated taxes.

It’s always a smart decision to seek out the guidance of a knowledgeable accountant or tax professional to ensure that you’re on the right track. With the proper expertise and advice, you can focus on growing your business without worrying about tax-related concerns. Let’s embark on this exciting journey together!

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Recreational marijuana dispensaries are local government retail stores that can be utilized for recreational use of cannabis. In this regard, an adult can easily purchase smoking accessories. It has been observed that recreational marijuana dispensaries confront compliance issues that have effects on sales. It is important to have legal advisors who can guide you on overcoming compliance issues and inform you of the legalities essential to acknowledge before you get into trouble. The owners of dispensaries often ignore compliance issues, resulting in severe legal action and even the shutting down of the business.

Avoid Selling to Minors

It is highly-discouraged, and it is against the law to sell to minors just as it is in other markets. Because of the issues with minors trying to make purchases of legal marijuana, budtenders must ask for picture identification of 100% of the facility’s customers. Violations can garner fines and result in the shutdown of the facility and possible jail time.

Compliance Check

Another essential aspect related to compliance issues is the inability to maintain appropriate and required records. Documentation such as background checks relevant to all employees and contractors who visit the recreational marijuana dispensary should always be organized and kept. 

 Corporate Documentation

It is considered crucial to keep corporate paperwork and documentation up to date for legal compliance. In this respect, changes in terms of members or changes in documents such as licensing require state regulators reporting. A recreational marijuana dispensary can keep a full-time compliance officer documentation organization to avoid compliance issues.

 Inspection and Physical Security for Safety

Another compliance issue is a regulatory process regarding physical security and inspection within and outside the premises. It has been observed that there is a lack of video surveillance in many dispensaries. This lace of surveillance equipment is a violation of the law.  Compliance requires one to follow the rules of law to run a recreational marijuana dispensary and avoid issues.  

 Safety of Storage and Logging

After taking preventive measures against inspection and security around the premises, especially video surveillance, it is important to ensure that the dispensary complies with statutes relating to the storage of surveillance logs and video recording. These are some important facts that are widely ignored in recreational marijuana dispensaries.

 Product Safety

Dispensaries must be concerned with their packaging, labeling, and the safety of their products. It is crucial that each product’s size and labeling meet the set guidelines mandated by regulating agencies. Auditors have reported that many dispensaries hardly pay attention to these legal compliance issues, resulting in harsh penalties and punishments.

 Inventory Management

It is important to ensure that a recreational marijuana dispensary does not run out of stock because of poor inventory management. This negligence may lead to heavy fines, loss of dispensary licenses, and other penalties.  Discrepancies occur because of an inability to account for inventory accurately, lack of inventory assurance, and employee theft.

Failure to Report

All states have compliance regulations that specifically regarding the production of a sales report. Depending on the recreational dispensary, reports are required on a daily, weekly, or monthly basis. As compliance with all regulations is a part of the business, it is essential to provide sales reports that align with inventory counts. Those dispensaries who do not possess a point of sale system face difficulties making accurate sales reports that meet regulations.

Illegal Sales

Illegal sales can lead to great trouble legally and can lead to the destruction of the business and possible harsh legal consequences. Dispensaries should not underestimate these consequences when it comes to illegal sales. For those in the business of selling marijuana where it is legalized, they should not participate in illegal sales if they are serious about the business. Because marijuana was previously illegal in every state, the legalization has violations of regulations and laws carry heavy penalties, and illegal sales will be no different from those with no legal sales of marijuana.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Improving your credit score is truly a fantastic investment in your financial future! Your credit score has a big impact on your ability to get student loans, auto loans, mortgages, and business loans. It’s also super important when you’re applying for insurance, renting a property, or getting a new cell phone. Making positive changes to your credit score can open up so many opportunities for you!

You can see the utility of having a good credit score almost everywhere. However, to improve your credit, you will have to take the measures. Here are some ways to improve your credit.

Track Credit Reports for Accuracy

Keeping an eye on your credit score is incredibly important because it’s a key factor that lenders use to evaluate your creditworthiness. Your credit report is specifically tailored to you and serves as a significant measure of your financial risk. Three major credit bureaus meticulously maintain separate credit scores for each individual, and it’s fascinating how these scores may vary. It’s definitely a great idea to proactively review all your credit reports at least annually to spot any inconsistencies and take action by filing a dispute if you come across any inaccuracies. By staying informed and taking charge of your credit, you are empowering yourself to make smart financial decisions.

Develop a Financial Track Record to Improve Your Credit

You possess a unique financial history and a specific credit score linked to your identity. To boost your credit score, it’s crucial to build a dependable and prudent financial track record. Every positive financial action contributes to improving your credit, whether it’s consistently meeting previous payment deadlines or maintaining an old credit card account. Older credit card accounts typically indicate financial discipline, reflecting positively on your financial habits. If you’ve been consistently making timely payments, your credit score is likely already on the higher end. Keep up the good work, and you’ll continue to see positive results in your credit score!

Do Not Open Multiple Credit Cards at One Time

One way to keep a good credit score is to maintain a stable and consistent track record without anomalies. If you open or close multiple credit cards or other accounts, it may result in a hard inquiry on your credit report. This kind of behavior is not considered standard. The point is not to make impulsive financial decisions, which can make it hard to improve your credit further.

Pay Bills on Time

Ensuring that you pay your bills on time is essential for maintaining a positive credit score. Your bills encompass a wide range of expenses including utility bills, loan payments, and student loans. Timely payments play a significant role in influencing your credit score, with recent payments carrying more weight. Even if you have missed a payment in the past, you can mitigate its impact by consistently making all your recent payments on time. It’s important to note that a missed payment can have a lasting effect, as it may remain on your credit report for up to seven years. Therefore, it’s crucial to strive to avoid missing any payments. Even if you can only manage to pay a small amount, it’s advisable to contribute what you can to stay on top of your bills.

To improve your credit and prevent missing payments, enroll yourself in an automatic payment plan with your service provider. There are also specific incentives for students to enroll in auto payments as they pay a lower interest rate on the balance.

Avoid Constantly Switching Employers

Justifiably, this isn’t always possible. However, if you have the option and ability to retain a specific job, it is wise to seek good credit. Lenders like to see consistency in employment as a steady income means that you have a higher chance of succeeding with a payment. Retaining to the same employer for five or more years will significantly improve your chances with lenders.

Of course, this doesn’t mean that you should stay with it if you don’t like your current job to improve your credit. It is essential to remember that this increases your credibility among lenders and shows positively on your credit report.

Frequent residential changes and having judgments filed against you in court would seriously harm your credit score. For businesses, maintaining comprehensive bookkeeping records improves your credit score.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

By: Jennifer Brazer

Jennifer is the author of From Cubicle to Cloud and Founder/CEO of Complete Controller, a pioneering financial services firm that helps entrepreneurs break free of traditional constraints and scale their businesses to new heights.

Fact Checked By: Brittany McMillen

Mastering an Ideal Liquidity Position: Essential Tips for 2023

Liquidity management remains critical in 2023 for maintaining financial stability in uncertain markets. By adopting strategies that address cash flow forecasting, contingency planning, and technology integration, businesses can safeguard against shortfalls while optimizing their financial agility.

The past few years have taught us that economic conditions can shift dramatically without warning. Whether you’re running a small business or managing finances for a large corporation, your ability to access cash when needed isn’t just about survival—it’s about seizing opportunities when competitors can’t.

What is an ideal liquidity position, and how do you master it?

• An ideal liquidity position balances having enough cash-on-hand to meet obligations while not keeping excessive funds idle, achieved through proactive cash management, contingency planning, and technological tools.
• Effective liquidity management requires understanding key financial ratios like current ratio and quick ratio to benchmark your position against industry standards.
• Maintaining diverse funding sources creates resilience against market disruptions and provides flexibility during both challenging and opportunistic times.
• Regular stress testing of your liquidity position helps identify potential vulnerabilities before they become crises, allowing for strategic adjustments.
• Modern technology solutions provide real-time visibility into cash positions across multiple accounts and locations, enabling more precise liquidity management.

Understanding Liquidity Fundamentals

Liquidity refers to a company’s ability to convert assets into cash quickly without significant loss in value. It’s the financial oxygen that keeps your business breathing even when unexpected expenses arise or revenue streams temporarily slow down. In uncertain economic environments, liquidity becomes even more crucial for business continuity.

The foundation of effective liquidity management starts with understanding key metrics that give you visibility into your current position. The most common liquidity ratios include:

• Current Ratio: Calculated by dividing current assets by current liabilities, this measures your company’s ability to pay short-term obligations. A ratio above 1.0 indicates you have more assets than liabilities.
• Quick Ratio (Acid-Test): A more stringent measure that excludes inventory from current assets before dividing by current liabilities, revealing if you can meet obligations without selling inventory.
• Cash Ratio: The most conservative liquidity measure, calculated as cash plus cash equivalents divided by current liabilities.

These ratios provide valuable benchmarks, but they only offer a snapshot of your current position. To truly master liquidity management, you need to combine these metrics with forward-looking strategies that anticipate market shifts and internal cash flow patterns. This requires both analytical rigor and strategic foresight—qualities that separate reactive companies from proactive ones.

For small to medium enterprises, understanding these liquidity ratio insights for SMEs can be particularly important as they often have less access to quick capital than larger organizations.

Implementing Strategic Cash Flow Management

Cash flow management sits at the heart of liquidity optimization. Even profitable businesses can face liquidity crises when cash is poorly managed. The difference between surviving economic turbulence and thriving through it often comes down to how effectively you control the timing of cash movements.

Start by mapping your complete cash cycle—from inventory purchases to customer payments. This visualization helps identify areas where cash gets trapped in the system. Common pressure points include:

• Slow-paying customers extending your accounts receivable timeline
• Excess inventory tying up cash that could be deployed elsewhere
• Misalignment between payment terms for vendors and customers
• Once you’ve identified these bottlenecks, implement targeted strategies to address them:
• Receivables acceleration: Offer early payment discounts, use electronic invoicing, and establish clear payment terms upfront.
• Payables optimization: Negotiate extended payment terms with suppliers without damaging relationships, and leverage early payment discounts when cash flow allows.
• Inventory management: Implement just-in-time inventory practices where possible to reduce cash tied up in unused stock.

Many businesses have found success through liquidity management through optimized payment terms, creating a more predictable and manageable cash flow cycle.

Remember that cash flow management isn’t about delaying all payments and collecting all receivables as quickly as possible. It’s about creating a balanced, strategic approach that maintains vendor relationships while protecting your liquidity position. I’ve seen too many businesses damage valuable supplier relationships by stretching payment terms without communication, ultimately costing them more in lost opportunities than they saved in short-term cash preservation.

Creating Robust Contingency Funding Plans

The businesses that weathered recent economic storms most effectively weren’t necessarily the largest or most profitable—they were the ones with comprehensive contingency plans. Preparing for liquidity challenges before they arise gives you options when others face limitations.

A comprehensive contingency funding plan should include:

• Identified funding sources: Establish and maintain multiple funding options, including bank lines of credit, asset-based lending facilities, and relationships with alternative lenders.
• Triggering events: Define specific metrics or events that will activate different levels of your contingency plan.
• Action steps: Document concrete actions to take when triggers are hit, including who is responsible for each action.
• Communication protocols: Outline how and when to communicate with stakeholders including lenders, suppliers, customers, and employees.

One approach that’s gained traction is establishing a “liquidity ladder”—a time-based framework that outlines which funding sources to tap and in what order during different types of liquidity events.

Your contingency plan should undergo regular stress testing to ensure it remains viable. This testing should consider multiple scenarios:

• Industry-specific downturns
• Broader economic recessions
• Loss of key customers or suppliers
• Supply chain disruptions
• Rapid growth opportunities requiring quick capital deployment

The Federal Deposit Insurance Corporation (FDIC) has emphasized the importance of such planning in their 2023 guidance, which recommends that financial institutions maintain robust contingency planning with diversified funding sources and regular collateral testing. While aimed at banks, these principles apply equally to businesses seeking to maintain adequate liquidity in challenging environments.

Organizations that follow this liquidity risk regulatory guidance often find themselves better positioned to navigate market volatility compared to less-prepared competitors.

Leveraging Technology for Liquidity Optimization

Modern technology has transformed liquidity management from a backward-looking accounting exercise into a dynamic, predictive discipline. The right technological tools can provide real-time visibility into your cash position across multiple accounts, currencies, and subsidiaries—eliminating the dangerous blind spots that often lead to liquidity crises.

The most impactful technologies for liquidity management include:

• Treasury Management Systems (TMS): Centralize control of all banking relationships and cash positions, providing a single source of truth for liquidity management.
• Cash Flow Forecasting Software: Use historical patterns and current data to project future liquidity positions with greater accuracy than manual methods.
• Artificial Intelligence and Machine Learning: Apply predictive analytics for liquidity management to identify patterns and anomalies that humans might miss.
• Payment Automation: Streamline payment processes to reduce float time and increase control over cash outflows.

The most sophisticated organizations are now using machine learning algorithms to analyze thousands of variables simultaneously, identifying subtle patterns that impact cash flow. These systems can learn from past data to continually improve forecast accuracy—something that’s impossible with traditional spreadsheet-based approaches.

When implementing technology solutions, consider these best practices:

• Start with clear requirements based on your specific liquidity management challenges
• Ensure new systems integrate with your existing financial infrastructure
• Implement in phases rather than attempting a complete overhaul at once
• Provide adequate training to ensure all stakeholders can leverage the new capabilities

Remember that technology is an enabler, not a complete solution. The most effective approach combines powerful technology with human expertise and judgment. As I often tell my clients, even the best forecasting system can’t replace the insights of a seasoned financial professional who understands your business’s unique dynamics.

Managing Liquidity Risk in Volatile Markets

Understanding and mitigating liquidity risk becomes especially critical during periods of market volatility. Liquidity risk—the danger that your business won’t have sufficient resources to meet its obligations—can emerge unexpectedly, threatening even fundamentally sound organizations.

There are several dimensions of liquidity risk that require attention:

• Market liquidity risk: The risk that assets cannot be sold quickly without causing a significant price reduction.
• Funding liquidity risk: The possibility that a business cannot meet its current and future cash needs.
• Time risk: The threat that payments due now cannot be deferred, while incoming funds are delayed.
• Call risk: The danger that contingent obligations (like loan covenants) trigger unexpected cash needs.

To effectively manage these risks, employ a multi-faceted approach:

• Diversify funding sources: Avoid over-reliance on any single financing channel. Maintain relationships with multiple financial institutions and explore alternative funding options.

• Monitor early warning indicators: Track metrics that may signal emerging liquidity issues, such as extending accounts payable, increasing customer delinquencies, or deteriorating working capital ratios.
• Perform regular stress testing: Test your liquidity position against multiple adverse scenarios to identify vulnerabilities before they materialize.
• Establish minimum liquidity thresholds: Define the minimum cash reserves needed to maintain operations and build in additional buffers for unexpected events.

Understanding liquidity risk is essential for businesses of all sizes, though small and medium enterprises often face heightened challenges due to their limited access to capital markets.

I’ve witnessed firsthand how quickly liquidity positions can deteriorate during market disruptions. A manufacturing client who maintained robust relationships with multiple lenders was able to quickly secure additional financing when their industry faced unprecedented supply chain challenges in 2021, while competitors who relied on single banking relationships struggled to maintain operations.

Building Long-Term Liquidity Resilience

Creating sustainable liquidity resilience goes beyond short-term tactics—it requires building a financial foundation that can withstand stress while capitalizing on opportunities. This long-view approach separates organizations that merely survive economic cycles from those that thrive through them.

Establishing an ideal liquidity position involves finding the right balance between having enough cash on hand to meet obligations while not keeping excessive funds idle. This balance point varies by industry, business model, and growth stage, but some universal principles apply:

• Maintain a capital structure aligned with business volatility: Companies with more predictable cash flows can operate with lower liquidity buffers than those facing significant uncertainty.
• Build a cash culture throughout the organization: Educate all department heads on the importance of liquidity management and their role in preserving cash.
• Create a formal liquidity policy: Document your approach to liquidity management, including minimum cash reserves, funding diversification requirements, and escalation protocols for potential shortfalls.
• Incorporate liquidity planning into strategic decision-making: Consider the liquidity implications of major business decisions, from expansion plans to new product launches.
• Review and refine regularly: Treat your liquidity strategy as a living document that evolves with your business and market conditions.

Organizations that implement these principles develop what I call “liquidity muscle memory”—the institutional capability to respond reflexively and effectively to both challenges and opportunities. This capability becomes particularly valuable during economic transitions when access to capital tightens for less-prepared competitors.

One retail client implemented a quarterly liquidity review process that examined not just current positions but also projected needs based on seasonal patterns and growth initiatives. This discipline allowed them to secure additional financing before their busy season rather than scrambling for funds when inventory purchases were imminent—saving them both stress and financing costs.

Integrating Liquidity Management with Strategic Planning

Liquidity management isn’t just a finance function—it’s a strategic capability that should inform your overall business planning. When properly integrated with strategic initiatives, effective liquidity management becomes a competitive advantage rather than merely a risk mitigation tool.

Start by aligning your liquidity strategy with your business growth plans:

• Growth financing alignment: Determine whether internal cash generation, debt financing, equity investment, or a combination will fund your growth initiatives.
• Acquisition preparedness: Maintain the flexibility to act quickly when strategic acquisition opportunities arise by establishing acquisition funding lines or cash reserves.
• International expansion planning: Address the unique liquidity challenges of operating across multiple currencies and regulatory environments.
• Product development funding: Create dedicated funding mechanisms for innovation that protect R&D investments even during temporary cash flow challenges.

Effective integration also requires breaking down silos between departments. Sales teams should understand how payment terms affect liquidity, operations should recognize the cash flow implications of inventory decisions, and executive leadership should consider liquidity impacts when setting strategic direction.

Communication is essential to this integration process. Regular liquidity briefings that translate financial metrics into business implications help non-financial stakeholders understand how their decisions affect the company’s financial flexibility.

I’ve implemented monthly “cash flow councils” with several clients, bringing together representatives from sales, operations, purchasing, and finance to review liquidity projections and collaborate on optimization strategies. These cross-functional teams not only improve liquidity management but also build organization-wide financial awareness that translates into better day-to-day decision making.

FAQ

What is the ideal liquidity ratio for a business?

The ideal liquidity ratio varies by industry, but generally, a current ratio between 1.5 and 3.0 indicates good short-term financial strength. Too low a ratio (below 1.0) suggests potential difficulty meeting obligations, while too high might indicate inefficient use of assets. Industry benchmarks, business cycle stage, and company-specific factors should influence your target ratio rather than applying a one-size-fits-all standard.

How can small businesses improve liquidity quickly?

Small businesses can improve liquidity quickly by accelerating accounts receivable through follow-up calls, offering early payment discounts, or using factoring services; negotiating extended payment terms with suppliers; reducing non-essential expenses; selling unused assets or inventory; and establishing or increasing lines of credit before they’re urgently needed. The most effective approach typically combines multiple tactics rather than relying on a single solution.

What’s the difference between liquidity and solvency?

Liquidity refers to a company’s ability to meet short-term obligations using current assets, essentially addressing whether you can pay bills due now. Solvency, meanwhile, concerns a company’s long-term financial viability and ability to meet long-term obligations. A company can be solvent (having more total assets than liabilities) but illiquid if those assets cannot be quickly converted to cash when needed.

How often should businesses review their liquidity position?

Businesses should review their basic liquidity metrics weekly, with more comprehensive analysis performed monthly. During periods of economic uncertainty or rapid growth, more frequent monitoring (even daily for cash-intensive businesses) may be necessary. The review frequency should scale with your business volatility—companies with predictable cash flows may need less frequent reviews than those with highly variable income and expenses.

Can a business have too much liquidity?

Yes, excessive liquidity can indicate inefficient capital allocation. When too much cash sits idle in low-return accounts, businesses miss opportunities to invest in growth, reduce debt, or return value to shareholders. Finding the right balance requires understanding your cash flow cycle, upcoming obligations, growth plans, and the general economic environment. Many businesses establish a target liquidity range rather than a single fixed number.

Sources

• FDIC. (2023). “Updated Guidance: Interagency Policy Statement on Funding and Liquidity Risk Management.” www.fdic.gov/regulations
• J.P. Morgan. (2023). “Liquidity Management Strategies for Uncertain Times.” www.jpmorgan.com
• GTreasury. (2023). “How to Implement Effective Liquidity Management Strategies.” www.gtreasury.com
• KPMG. (2023). “Liquidity Challenges in a Down Market.” kpmg.com/kpmg-us/content/dam/kpmg/pdf/2023/liquidity-challenges-down-market-new.pdf
• Investopedia. (2024). “The Stock Market Crash of 2008.” www.investopedia.com/articles/economics/09/subprime-market-2008.asp
• Yale School of Management. (2024). “How the FDIC Sourced Crisis-Time Fed Funding.” som.yale.edu/story/2024/how-fdic-sourced-crisis-time-fed-funding-through-failed-banks-2023
• Tennis Finance. (2025). “How AI Improves Cash Flow Forecasting.” tennisfinance.com/blog/how-ai-improves-cash-flow-forecasting
• Investopedia. (2023). “Understanding Liquidity Ratios.” www.investopedia.com/terms/l/liquidityratios.asp
• Complete Controller. “Liquidity Ratios SME Challenges.” www.completecontroller.com/liquidity-ratios-sme-challenges/
• Complete Controller. “Ensure Ideal Liquidity Position.” www.completecontroller.com/ensure-ideal-liquidity-position/
• Complete Controller. “Payment Terms for Small Business.” www.completecontroller.com/payment-terms-for-small-biz/
• Wikipedia. “Predictive Analytics.” en.wikipedia.org/wiki/Predictive_analytics

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Marijuana is a psychoactive substance that is widely used around the world for various purposes. Some enjoy the ecstatic feelings and mind-high they get after ingesting it, while some utilize it for medical purposes. Despite how socially acceptable the plant has become, it is still illegal in many countries, and most governments do not plan on legalizing it anytime soon. However, the use of the plant has never decreased. Instead, people are continuing to use it more and more for various purposes and are taking steps to legalize it worldwide.

The Marijuana Industry

Marijuana, also known as cannabis, has a very large business industry. It involves risks that endanger providers due to limited availability and legal issues. However, those risks do not stop people from earning and setting up businesses to provide the public with this psychoactive plant. This has caused many changes in the business industry of medical marijuana. Now, many are coming together to improve the plant’s legal status and make it more easily available for recreational and medicinal use.

In the millennial age, everything has been largely affected by technology. From automatic flushing toilets to cars that park and drive themselves, the marijuana industry is not unaffected by technology. Worldwide entrepreneurs have affected the marijuana industry as well. 

Entrepreneurs Taking  a Huge Interest in the Industry

Previously, the recreational use of marijuana had a doubtful reputation. Typically, marijuana users did not carry a positive reputation in society. This created a concept in most people’s minds that the industry would soon perish. However, in some places like Silicon Valley, entrepreneurs have rapidly changed the way people see this industry.

Due to the hype in media, the potential benefits of marijuana, such as curing joint pain and seizures, have increased recognition of the plant among people worldwide. The increased social acceptance has caused the sale of marijuana to go up by almost 50%. This increase in sales became too big to ignore. Considering only the United States, sales reached an amazing $1.5 billion in 2013.

Recent studies show that more than 58% of Americans now support the sale of marijuana. With governments taking steps to close these dispensaries, politicians and authorities are undecided on just how many legal certificates they will grant. Spokespersons for the cannabis industry are trying to balance out the public’s demand with the amount of marijuana produced because they look forward to completely diminishing the black market.

Technology has enabled dispensaries to keep online bookkeeping records of how much marijuana has been sold, bought, utilized, transported, and wasted for whatever reason. Retail stores and dispensaries providing marijuana are planning to collaborate to improve the plant’s safe sale further.

Retail stores working in collaboration with marijuana dispensaries are now supposed to have a medical certificate that allows their staff to sell the plant to patients with legal permission. These certifications aim to educate employees to assist patients in a better way.

According to changes in the laws for selling marijuana, retail stores will sell potent products that can be used for recreational purposes by patients who require it. The sold products will mostly be limited to suppositories, capsules, tinctures, and transdermal patches.

With more states heading towards legalizing marijuana in the future, investors and professionals worldwide are heading towards cannabis faster than people head for a gold mine hunt.

Whether it is designing indoor farms to grow the plant successfully without geographical limitations or developing new vaporizers for effective and harmless smoking, these fresh entrepreneurs have decided that, no matter how protective the law gets towards cannabis, they are determined to make it more accessible and legal for both recreational and medicinal purposes.

Despite the “not-so-successful” acts of the government and the rapid changes made by tech-entrepreneurs affecting the marijuana industry, do you support the legalization and availability of this psychoactive plant?

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Reviewed By: Brittany McMillen

Brittany McMillen

Brittany McMillen is a seasoned Marketing Manager with a sharp eye for strategy and storytelling. With a background in digital marketing, brand development, and customer engagement, she brings a results-driven mindset to every project. Brittany specializes in crafting compelling content and optimizing user experiences that convert. When she’s not reviewing content, she’s exploring the latest marketing trends or championing small business success.

See Full Bio

Certainly, investing in real estate is a lucrative business. However, it is challenging to be an expert in every aspect of this money making market. Thus, you need to concentrate on one thing to be successful and become potentially good at it.

The crucial decision the investor needs to make is whether to fix and flip the property or hold it to use as a rental property to bring in a passive income. Both options could bring in great profits for the owner of the property. What has to be decided is whether you want to deal with the property short-term or long-term.

Fundamentals of Fixing and Flipping

Typically, fixing and flipping can serve as a potential source of profit with a fairly quick turnaround depending on how much fixing the property needs. Many utilize earnings from their fix and flips to help them fund their long-term rental purchases. Generally, a fix and flip is a house that a real estate investor purchases, fixes up, and sells immediately to profit. Unfortunately, productive fix and flip houses are relatively difficult to find. Also, it is challenging to make a profit on them in certain markets or timeframes.

Finding a house cheap enough to profit after renovations is typically the biggest challenge when opting to flip a property. With the gradual improvement in the market, owner-occupied purchasers are facing difficulty find productive deals. It is even more challenging for anyone to find a house cheap enough to flip. Besides repair costs you bear when purchasing a flip, you also have to carry selling and closing costs.

Financing Expenses of a Fix and Flip

Short-term financing is expensive when you do not have enough money to purchase a fix and flip. Even so, average creditors may charge at least 15% interest with 4% upfront when you buy a home. Compared to fix and flips, long-term financing on rental properties is much cheaper and easier to obtain. Also, banks and financial institutions prefer long-term debts, as they will be getting interest benefits for a considerable time. On the other hand, they will not be receiving interest payments on fix and flips for as long as a long-term rental; thus, they charge home buyers more fees and interest.

Repair Requirements: Fix and Flip vs. Rental Property

Fix and flips require top-notch repair work to get great profits, and, subsequently, the buyer bears significant costs. On the other hand, in some cases, renters are less picky about properties. They are neither personally tied down to the apartment nor worried about the long-term condition of the roof, furnace, structure, and plumbing. They are not responsible for any repairs or breakdowns.

Investors on a flip have to pay heavily for a home they will own for a long-term period. They will get an expert inspection to ensure everything on the property works properly and was well repaired. Although we do not suggest a homeowner skimp on repairs, certain things may require a repair right away on rental properties that must be repaired imperatively on a flip. There are several other costs concerning a fix and flip versus a rental that an individual has to consider when making real estate investments to make profits.

Instant Profit of a Fix and Flip vs. Long-Term Earnings from Rental Properties

Long-term rentals provide you with a monthly cash flow as long as you own and rent out the house. One can also refinance the house upon owning it a year and subsequently take money out. The longer you own a property, the more favorable chances you have of the house appreciating and decreasing the mortgage. Also, you have the potential opportunities for the rents to increase considerably. If you can put off the immediate gratification of the money you make from a fix and flip, you will make much more profit in the long run through rental properties.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Doing business in other states is known as a foreign qualification. Though this may sound like an international concept, in this case, “foreign” doesn’t refer to business outside of the United States when it comes to U.S. corporations and limited liability companies (LLCs). Foreign qualification is a term that has to do with registering a business across state lines.

What is a Foreign Qualification?

Foreign qualifying is simply the registration of doing business in a state other than the one you incorporated. That’s because companies and LLCs are considered domestic only in their state of incorporation.

Foreign Qualification Process and Requirements

When you foreign qualify a business, you register for a Certificate of Authority in the state(s) where your company will do business and pay compulsory state fees. This informs the state that your company is conducting business within its limitations. If your business expands into new states and needs foreign qualification, these initial and ongoing fees should be considered a required part of doing business.

Do you need to foreign qualify?

If you are presently evaluating whether to incorporate in a state other than where you are located (your home state), you should consider whether you may need to foreign qualify in your home state. There are many factors used in determining the needs of foreign qualify. While different states have different criteria for conducting business, consider the following:

1. Does your company have a physical presence in the state?
2. Does your company have workers in the state?
3. Does your company receive orders within the state?
4. Does your company have a bank account in the state?

If you answered yes to any of these statements, you would most likely need to foreign qualify your business in the state. If you’re still not sure if you need to foreign qualify, you may want to get the advice of a lawyer.

Consequences of not foreign qualifying

State laws require foreign corporations and LLCs doing business within their borders to foreign qualify, and the penalties for not doing so outweigh the costs:

• You may lose access to that state’s court system
• You may face fines, penalties, and back taxes

Foreign qualified or incorporated in every state?

An alternative to foreign qualifying is to incorporate your business or form your LLC in the other state(s) in which you plan to do business. The primary difference is that your company becomes domestic in each of those states when you incorporate or form your LLC in multiple states, thus creating separate entities. Consider the following in making your decision:

1. Increased corporate formalities: For corporations, the increase in corporate formalities is a big hindrance. Corporate procedures include drafting and maintaining regulations, issuing stock, and recording all stock transfers. Also holding initial and then annual meetings of directors and shareholders and keeping minutes of all director and shareholder meetings with the corporate records. LLCs do not face the widespread regulations imposed on corporations.
2. Separate owners and management: When you create a distinct corporation in each state, each has its stock, shareholders, directors, and officers. Even if they are the same people, the formalities apply for each domestic corporation, greatly increasing the annual record-keeping requirements.
3. One company versus separate companies: Only one corporation or LLC exists when you foreign qualify. For corporations, irrespective of the number of states in which it foreign qualifies, it needs only one set of statutes, stock, shareholders, directors, and officers. Bookkeeping for initial and annual meetings of directors and shareholders happens only once.
4. Separation of liability between businesses. Forming a new corporation or LLC in each state provides liability separation. If you have foreign qualified in each state, only one corporation or LLC exists, so there is no separation of liabilities.

Conclusion

Although each foreign qualification comes with filing and annual fees, additional laws to become familiar with, and added paperwork, you should never overlook your business’s legal obligation to foreign qualify.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

The management and recording of financial documents and records can prove challenging, especially if it is not done in an organized and efficient manner. When these records are in paper form, there is a risk of losing them; therefore, many businesses have moved to cloud storage to solve this issue. Despite the storage advantages, there are also some security issues, and using cloud storage develops.
Here are eight tips to help you with your business accounting and bookkeeping needs while addressing storage and security issues.

Use Accounting/Bookkeeping Software

Although you can handle all of your documents in paper form, going paperless through cloud-based accounting software will enable you to manage and record your bookkeeping documents more efficiently.

Accounting and bookkeeping software enables users to handle all of the bookkeeping basics, providing easy-to-use management tools that help in effective organization and improved security. Vital templates for check printing, deposit slips, business records, and invoices are part of the package that comes with the software.

Another benefit that accounting software provides is the ease of accessibility. Once you have all of your important data on the software, you can access it from anywhere. This is because cloud-based software has applications that can be used on a smartphone, providing easy access to the records. 

Maintain a Chart of Accounts

Small businesses have to maintain a ‘chart of accounts’, a list of accounts and bookkeeping records that help categorize all financial transactions in your business. You may own several different titles, depending on the type of processes taking place in your business. There are five types of business accounts that are commonly found:

1. Liabilities
2. Assets
3. Owners’ Equity
4. Income
5. Expenses
6. Practice Diligence with Tax Forms

If your small business has paid contractors and employees, it is important to stay attentive towards the tax forms that your business is preparing.  An important factor that you have to consider for your small business is that you have to make sure that the employees working in your firm have the forms they need at the required time not to have to face penalties or interest. Ensure that you set aside ample cash to cover all of the payroll taxes that will apply to your employees’ wages.

Do Not Combine Business and Personal Finances

One of the most important bookkeeping tips you must practice is ensuring that your personal and business transactions are not combined in any way. Your business is a viable entity, and you have to treat it that way. Combining your personal finances with those of the business will make accounting in the organization much harder, and it will be much more difficult to track records. Always ensure that you have a different checking account and separate credit cards for your small business and personal life to avoid confusion and ensure effective organization, saving you both time and money.

Outsource your Bookkeeping Needs

Business owners have the option of outsourcing their bookkeeping needs. This is especially helpful for small business owners running a business and playing the role of a bookkeeper themselves. This divides the tasks and responsibilities while lowering the burden and enables you to accommodate the time into something else that is beneficial to your business.

Outsourcing a bookkeeper is cost-effective and accurate. Secondly, instead of spending money on training a fresh bookkeeper, an experienced outsourced bookkeeper will provide you effective bookkeeping straight up.

Contact Professionals

When we consider bookkeeping for a small business, there is a big chance that things can go wrong. In certain situations, the smartest decision is to contact a professional. Bookkeeping and accounting experts will help you set up your bookkeeping system to minimize errors and mistakes. Hiring a professional may seem like an expensive option, but accounting mistakes can do major damage to your business, so they are worth the investment.

Practice Daily and Weekly Reviews

For a small business, it is not sufficient to check your bookkeeping records monthly. To stay updated on any changes going on in your business, you have to keep track of your records on a daily and weekly basis. Being updated regularly will also enable you to keep track of any current invoices, see all expenses, and understand your cash flow.

Save as Much Paperwork as Possible

Paperwork has a higher chance of falling prey to disastrous events. This can negatively affect a business because, if you have to prove your tax returns’ validity, your business will not have any proof. Alongside, cloud-based software enables you to stay more organized and keep important bookkeeping documents safe.

Consider Profitable Deductions

Tax deductions can majorly benefit your small business. Effective business owners have a habit of maintaining proper bookkeeping records to ensure that you get the most out of all tax deductions, enabling you to invest that money elsewhere.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.