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Top Reasons Why You Should Use Dashboards To Monitor Financial Performance

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No matter the business size, financial reporting is a mandatory practice. For decades now, the reporting process has been tedious and time-consuming. Not to mention static and hard to understand for users that are not acquainted with spreadsheets and other number-driven formats, leading to a decrease in the quality of the data presented in them.

With industries becoming more competitive by the day, the need to present relevant financial data in a more interactive and intuitive format becomes critical. This is where dashboards come in.

Essentially, a financial dashboard is an analytical tool that presents relevant financial data in real-time in a visually appealing way. This makes relevant insights understandable for average users, facilitating the decision-making process and making it more accessible to every relevant stakeholder.

To put their power into perspective, here we will present you with 5 benefits that you can reap from implementing them into your company.

Get a Centralized View of Financial Data

As mentioned, financial dashboards are interactive analytical tools that provide a centralized view of your most important key performance indicators. While static financial reports in the shape of PowerPoint presentations and Excel sheets have been used for decades, they don’t provide the level of interactivity needed to make swift decisions in today’s competitive landscape.

Dashboards enable you to visualize your most relevant data sources on one screen, allowing you to extract actionable insights about your performance and make informed decisions to ensure financial stability.

Save Time and Resources

Manually generating reports has always been a dreadful task that involved a lot of manual work. Modern financial dashboards can be automatically generated and updated in real-time. This way, you will always have the latest data available in hand and will be able to leave the pains of manually gathering and updating the data in the past.

This real-time access will allow you to spot any issues and tackle them before they become bigger. In the long run, your business will save money and time that can be invested in implementing initiatives to improve performance.

Financial Forecasting

Thanks to modern predictive analytics technologies, financial dashboards allow their users to generate accurate performance forecasts. By analyzing a mix of historical and current performance data, financial dashboards can generate projections about income and expenses as well as any unplanned scenarios that could affect them.

Financial forecasting has always relied on skilled experts to be performed. Modern dashboards provide a self-service approach that allows you to generate forecasts with just a few clicks. Like this, financial managers can decide where to allocate their yearly budget based on the insights provided.

Inreasing small business profits

Increase Profitability

Increasing profitability is one of the main goals of any finance department. Having 24/7 access to financial data through an interactive dashboard allows any relevant stakeholder to stay on top of any latest development as well as closely monitor progress against the business’s main financial goals. It empowers management to find trends, patterns, and improvement opportunities that will drive the company forward.

In time, this will lead to a significant increase in profitability that will also present a great competitive advantage.

Improve Communication

Last but not least, using modern financial dashboards can also significantly improve internal communication and efficiency.  Financial analytics tools offer the possibility to generate online dashboards that can be easily shared and accessed from any device with an internet connection. This level of accessibility empowers employees to use data for their decision-making process and collaborate with others to implement initiatives that will drive the financial department forward.

And not just that, these analytical tools are user-friendly, making them easier to generate and navigate for an average business user.

Summing up, modern financial dashboards create a common language between different business users, allowing those who have more financial experience to help the ones with less experience to dig through the data and use it to boost performance. Visualizing your most important financial indicators in one central location will allow you to focus your efforts on reaching your core goals and improving operational efficiency.

With all these benefits in mind, dashboards have become a best practice for successful financial management, and companies who extract their full potential will set themselves apart from the competition.

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Finance & Accounting

What Are Typical Small-Business Loan Terms?

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Small-business loan terms determine how long a small-business owner has to pay back their borrowed money, plus interest. Typical loan terms, also referred to as repayment terms, can vary from a few months to 25 years — it depends on your lender and the type of business loan.

You and your lender will establish a repayment schedule that shows how much you’ll pay per week or month. While reviewing repayment terms, consider eligibility requirements and annual percentage rates, which take into account interest rates and other fees associated with the loan.

Typical loan terms overview

Repayment term

Term loans

Up to 10 years.

Business expansion.

Microloans

Up to six years.

Startups and businesses with smaller funding needs.

Up to 25 years.

Small businesses with good credit and available collateral.

Business lines of credit

Up to five years.

Short-term, flexible financing.

Invoice financing

A few months.

Cash advances based on unpaid invoices.

Equipment financing

Up to 10 years.

Equipment purchases.

Business loan repayment terms

Term loans: Up to 10 years

Small-business term loans provide a lump sum of cash upfront that borrowers pay back over time. Online lenders and traditional banks offer them, and maximum amounts range from $250,000 to $500,000. Term loans fall into either the short-term or long-term category — for example, a long-term loan may have a repayment term of 10 years while a short-term loan from an online lender might only give the borrower from three months to two years to pay it back.

Microloans: Up to six years

Nonprofit, community-driven lenders offer microloans to small-business owners in specific regions and underserved communities. While smaller loan amounts typically mean shorter repayment terms (and this is true for some microloans), SBA microloans have terms of up to six years.

SBA loans: Up to 10 years for working capital and fixed assets; up to 25 years for real estate

SBA loans range anywhere from thousands of dollars to $5 million and generally have low interest rates. The maximum 7(a) loan term for working capital is 10 years, although according to the SBA, seven years is common. Borrowers have up to 25 years to pay off loans used for real estate.

Business lines of credit: Up to five years

With a business line of credit, small businesses pay interest only on the money that they borrow, and funds can be available within days. Some business lines of credit require weekly repayments instead of monthly repayments.

Invoice financing: A few months

Invoice financing provides businesses with a cash advance while they wait on their unpaid invoices. Like a business line of credit, invoice financing is a quick way to access cash and is one of the shortest-term financing options available. Terms mostly depend on how long customers take to pay their invoices.

Equipment financing: Up to 10 years

Equipment financing is used to pay for large equipment purchases, and then that same equipment serves as collateral. Terms vary and usually depend on how long the equipment you’re financing is expected to last.

What is a loan maturity date?

A loan repayment term describes how much time you have to repay the loan, plus interest; you might also hear this referred to as loan maturity. This is not to be confused with the loan maturity date, which is the final day of your repayment term. On the loan maturity date, the entirety of the loan and any extra associated costs should be paid.

What is a prepayment penalty?

Some lenders charge borrowers a fee for paying off their loan ahead of schedule. Typically, this is to offset the lost interest the lender expected to receive over the full term of the loan. For example, SBA borrowers with a 15-year-plus loan term are penalized for prepaying 25% or more of the loan balance within the first three years of their loan term. Check your business loan agreement to see if your lender charges this type of fee.

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Banking

Fidelity Bonds: What They Are, How to Get One

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Fidelity bonds are insurance policies that protect a business’s finances in case an employee steals from the business or commits fraud. Fidelity bonds are also known as employee dishonesty insurance.

You can buy a fidelity bond on its own or as part of a commercial crime insurance policy. Consider purchasing this coverage if your employees routinely handle money or valuable assets that belong to your business or your customers.

What are fidelity bonds?

Fidelity bonds are a type of business insurance that protects your business finances if an employee steals money or property from your company or customers.

This coverage can pay out to make your business whole if an employee or group of employees commits theft on the job. It goes by a few different names, including “employee dishonesty insurance,” “fidelity bond” and “employee dishonesty bond.”

Despite the name, fidelity bonds are insurance policies, not bonds. Historically, fidelity bonds were similar to surety bonds, which are agreements among the business owner, their client and a third party promising that work will be completed. Today, fidelity bonds are structured like insurance policies. Some companies still use the term “fidelity bond,” while others use “employee dishonesty insurance.”

Does your business need a fidelity bond?

Fidelity bonds are important for businesses where lots of employees have access to your business finances or customers’ property. Consider purchasing this coverage in the following instances:

If your employees have access to your business finances: Nonprofits, medical offices, professional offices and other kinds of businesses where employees make financial transactions are all at risk of employee theft.

If your employees have access to customers’ money or assets: If your employees regularly enter customers’ homes or businesses, a fidelity bond can set you apart from your competitors because customers know their assets are protected. This may be important for janitorial and cleaning businesses, HVAC businesses, plumbing businesses and other in-home service providers.

If you need this type of protection, look for business service bonds or third-party fidelity bonds, which specifically protect a business’s customers from losses due to theft.

If you work as a contractor or consultant: Clients may request that you buy a fidelity bond before beginning work with them. In this case, you’ll also want a business service bond.

If you work in the financial services industry: You may need a specialized type of fidelity bond known as a financial institution bond, which protects financial institutions. If you’re a pension plan trustee, you’re also required by law to have an ERISA bond, which protects pension plan participants and their beneficiaries.

How to get a fidelity bond

You can get a fidelity bond on its own or as part of a commercial crime insurance policy. If your business faces risks like forgery, computer fraud, extortion and counterfeiting, opting for a broader commercial crime policy may make sense.

NerdWallet recommends getting business insurance quotes from multiple companies so you can compare coverage details, coverage limits and premium costs before choosing a policy. Start your search for fidelity bonds with these companies:

If you need a business service bond to protect customer assets: Nationwide sells business service bonds, which cover your customers’ losses if one of your employees commits theft or fraud on their premises, as well as employee dishonesty bonds and ERISA bonds. Read NerdWallet’s review of Nationwide business insurance.

If your primary concern is your company’s assets:

You can also look into bonding companies, which specialize in products like surety and fidelity bonds. Merchants Bonding Company, for instance, was one of the 10 largest writers of fidelity and surety bonds by premium values in the first half of 2021, according to the Surety & Fidelity Association of America

How much do fidelity bonds cost?

The cost of a fidelity bond depends on the size of the bond, which is the most the insurance company will pay out to cover a loss.

According to BondExchange, a wholesale insurance marketplace that helps insurance agents find policies for their customers, fidelity bonds insuring five or fewer employees can cost:

  • $100 per year for a $5,000 bond.

  • $167 per year for a $20,000 bond.

  • $257 per year for a $50,000 bond.

  • $359 per year for a $100,000 bond

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Finance & Accounting

Chargeback Fraud: What Small Businesses Need to Know

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Chargeback fraud occurs when a customer disputes a credit card charge with their bank without following proper procedures or by giving reasons that are false. A chargeback is a process by which a customer requests reimbursement for a disputed credit card transaction that meets certain criteria under federal law; the merchant who received payment from the disputed transaction loses the money from the transaction and also has to pay a chargeback fee, typically $20 or more. When consumers request chargebacks for false reasons or accidentally, the impact on small businesses can add up quickly.

But small businesses can fight suspected chargeback fraud, and there are a few practices you can put into place to try to avoid chargebacks that result from simple confusion.

Nerdy tip: While illegitimate chargebacks are colloquially referred to as chargeback fraud, they often don’t quite fit the legal definition of fraud because it’s difficult to prove intent, and in some cases, the dispute might be accidental. In this article, chargeback fraud is referring broadly to all types of chargebacks that aren’t legitimate or don’t follow proper procedures.

How chargeback fraud happens

Chargebacks are a way for people to refute unauthorized transactions through their banks rather than directly with a merchant. Under federal law, there are three valid types of credit card disputes:

  1. Unauthorized use, when someone charges a person’s credit card without their permission.

  2. Billing errors, when a merchant incorrectly charges a consumer or charges them for a product they didn’t receive.

  3. Right to withhold payment, when a customer has attempted to address a complaint with the merchant but hasn’t been able to resolve the issue.

But people sometimes use these protections to circumvent merchant refund policies and get their money back for illegitimate reasons. In these cases, merchants can file a counter-dispute. Reasons that consumers commonly give for chargebacks include not receiving an item, a transaction being unauthorized or a service continuing to charge them despite their attempts to cancel. But a buyer’s actual reason might differ: Maybe they want to keep the item without paying for it, they regret making a purchase, they waited too late to return the item or they honestly forgot they made the purchase.

How it can affect small businesses

Regardless of which type of fraud occurs, when people bypass merchants to request an illegitimate chargeback, it affects small businesses in many ways.

Lost revenue

The most obvious loss is the potential profit from the product or service. With a chargeback, the customer is essentially refunded the cost of the product, which means a merchant is out an item without being paid for it.

Merchants often have to pay chargeback fees as well. When a bank processes a chargeback, they often charge the merchant a fee to penalize them for what the bank views as an illegitimate transaction. Fees can start out around $20 but can grow if a small business frequently experiences chargebacks. Small businesses are also paying the transaction fee for processing the payment, which is more money out of their cash box.

Higher risk category

A high frequency of chargebacks can lead a merchant to be labeled as a high-risk business. Small businesses that are classified as high-risk often pay higher per-transaction fees and might be canceled by their current payment processor. This can lead to a bigger cut in profit and complicate payment processing options.

What small businesses can do

Successfully disputing chargebacks is difficult, but possible. A 2021 survey of more than 400 merchants from Chargebacks911, a company that helps businesses reduce their chargebacks, found that while businesses respond to around 43% of chargebacks, an average of only 12% were recovered successfully. To improve your odds of success, try this:

Respond quickly

Chargeback responses have deadlines, and you’ll be out of options if you wait too long to respond. Gather your information and respond to the chargeback in a timely manner. But not so quickly that you overlook information. Give yourself time to be thorough.

Talk with the customer

Try to identify the issue and learn what is going on beyond what the card issuer or bank tells you in the chargeback notification. Keep the conversation friendly, and report the conversation in your documentation to the card issuer or bank to inform them of any relevant information the customer explained to you to support your case.

Prove your point

Merchants are able to write a rebuttal letter for a chargeback. If you have time, craft a letter that clearly states your evidence for why the chargeback is fraudulent and why the charge is legitimate. Keep a professional voice and provide evidence of your argument, including pictures and screenshots.

 

How to avoid chargeback fraud

Small businesses can take steps to decrease their odds of experiencing illegitimate chargebacks, including:

Ensure the charge on a statement matches your business name

Some people will report a charge as unauthorized if they do not recognize the business name on their financial statement. You can avoid this by ensuring that your business name appears correctly on transactions. If you need to update this information, contact your payment processor. If you can’t update it and it’s not identical to your business name, notify the customer within the email confirmation so they know what to expect.

Track shipments

Using tools and services that track shipments and show when a product is delivered gives you more leverage to dispute a chargeback when a customer asserts that a product was not delivered.

Make it easy to return items

By relaxing your window for returns, you make it simpler to return items for a refund. Customers might be more inclined to work with you if they know they can still return an item instead of calling their credit card issuer after a short window has passed. Making contact methods easy to locate and responding to upset customers might help the process as well.

 

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