Business Nature and Its Scope

In our daily life, we often use the term business, commerce, industry, trade and the like often. Each term has a special meaning in “Business Organization”. In this content, you are going to be educated on the terms of Business, wherein you are going to understand the characteristics, branches and objectives of basic terms of business and the importance of Business in simple way.

The human carries out two activities from dawn until dusk; they are generally classified into two groups namely economic and non-economic activities. The activities carried out for making money is called economic activity whereas activities that are carried out on not making money but it is for other purpose, or not forcing on earning money is called non-economic activities.

The economic activities are further classified into three divisions namely Business, Profession and employment.

Business

The term business refers to the activities, which involves in connection with production or exchange of goods and services, with the ultimate objective to make profit from those activities, these are some examples of such activities such as banking, financing, manufacturing, trading, transportation, insurance and warehousing. Commodities production such as paper, pencil, pen, etc., or activities involving providing service such as banking, insurance, logistics, etc., are some forms of businesses. The person who does the business is called “businessman” or an”entrepreneur”. The firm carries out business activities is called an “enterprise” or “firm”.

Profession

Profession is rendering of a specialized services, as from the professional knowledge is called a “Profession”. Services such as doctors, company secretaries, lawyers, etc., are executed through the particular professionals.

Employment

Recruiting employees under an agreement or rules for any service or assignments / duty by the employer is called employment. For example, workers in a factory, office, etc., are executed through the deployed employees.

Business characteristics

Characteristics of business involve the following steps in the execution of business such as sales, dealing, recurrence, profit and risk bearing.

Business always involves the important event sales, or transfer of goods and services for value. the activities involved for personal consumption is not under sales or transfer. However, they don’t categorize under the term business. In fact, production or purchase of any goods and services, in order to exchanging on a value comes under business.

Mostly business depends on the dealing of goods and services, it consists of money transactions towards goods and services. Based on this any business is decided on its profit and lose count. This is another important step in business proceedings.

Recurrence of dealings is the important term to define business, in which its reputation, if a person sells a car and gets profit, it is not business. But, if that person regularly does it, then that activity is treated as a business.

Business activities always run under profit motive, in any business it involves production and purchase of goods and services in order to turn them into a profitable activity. Profit is life blood of any organization and this will be centralized for its survival, growth and expansion of the business.

Risk bearing is another face of business, when the business is not under control, then the business involves the element of risk and uncertainty. For example, loss by means of natural calamities, theft, fire accident, change of technologies, change in trend, or scarcity of raw materials, etc., are risks borne to any business. Certainly, a businessperson takes the business in the hope of profit.

Build Business Credit – The Essentials on Why and How

Why Build Business Credit?

Simple. Because it establishes a solid business foundation that gets you “APPROVED.” It doesn’t matter if you’re a new or seasoned business owner. One day financing will become one of your primary concerns.

It’s just like how we eventually learn the importance of our personal credit. We know that our personal credit must be at a certain level in order for us to get approved for a car or a home.

In fact, if you never build credit for your business, you’ll be stuck with using your personal credit for practically every business financing opportunity. That’s why many business owners suffer from poor credit to this day. It’s because of over-leveraging their personal credit.

Here is the difference when you build business credit.

Lenders can evaluate your business credit profile to get you approved instead of your personal credit. They’ll base the terms of the loan on the creditworthiness of your business instead of you personally.

More benefits are…

1.) You can maximize your access to cash since loan approvals are almost automatic.

2.) You can get the best possible credit terms including low interest rates and fees.

3.) You can reduce your expenses by improving the flow of cash infusion into your business.

4.) You can enjoy peace of mind since it protects your personal assets and reduces your personal liability.

These are really just a sample of the benefits that you can receive.

To enjoy these benefits, it’s absolutely essential that you build a solid credit profile. Then you’ll be in a position to open up more opportunities for yourself and the growth of your business.

Information Established By Your Business Credit Rating

These are the type of data lenders will review on your business credit profile…

  • The date you started the business
  • Information on the leaders in your company
  • The number of employees
  • The past financial behavior of your business and predictions of future behavior.

Building Credit – How To

As mentioned earlier, building a good credit profile results in many advantages for you and your company.

It will assist in securing lines of credit, credit cards, as well as any other business loans that you apply for.

It will help you to secure future financing with a credit supplier.

It can even assist you in purchasing supplies and/or investment property to use in the day to day operations of your business.

At this point, you may think to yourself, “Ok, it sounds good, but how do I build business credit to begin with?”

Here are fundamental tips to help you build business credit:

1. Create and establish a business profile. One of the best ways to do this is to incorporate or create an LLC.

2. Obtain an “EIN.” It’s a federal “employer identification number” that identifies your business like a social security number identifies an individual.

3. Ensure that you have a copy of all the licenses that your business is required to obtain by law.

4. Obtain an official telephone number and location associated with your business operations.

5. Create a Web site and business email address.

6. Open a business checking account with a financial institution.

7. Create a profile with the 3 major business credit bureaus.

8. Establish a positive reputation by paying bills on time among creditors such as vendors, retail businesses, small retail credit cards, major credit cards, and major financial institutions such as banks.

9. Deal with companies and agencies that report to the 3 business credit bureaus.

10. Limit credit use in the early days of operation to avoid falling into the trap of too much credit.

Remember, even with a poor personal credit history, you can successfully develop a positive credit history with your business.

If you follow the steps above you’ll begin to build a solid business credit foundation that gets you “APPROVED!” Having the financing you need when you need it will ultimately allow for many opportunities to achieve the success that you desire.

Five Small Business Finance Tips

Owning a small business involves much more than coming up with and implementing a business idea. Small business owners quickly learn that a huge part of their role as the owner of a business means learning how to take care of the financials. Here are several tips for small business owners who want to learn the best practices for managing their business’ finances:

1) Bookkeeping

To the dismay of many business owners, the ancient art of bookkeeping isn’t going anywhere. Fortunately, bookkeeping has become much easier. Bookkeeping programs can make the process much easier, but there are still certain fundamental rules that business owners must take into account. Firstly, business owners must always keep a record of all of the invoices processed by their business as well as the expenses they have incurred, such as raw materials, salaries, and operating expenses. While there is no solid rule for how to keep track of earnings and expenses, what matters most is that you keep track of your finances in a consistent fashion and that everything is written down. This is arguably the most important part of owning a small business.

2) Don’t Over-Exaggerate Your Earnings

When working with investors, banks, or other financial lenders, one of the biggest mistakes you can make is to exaggerate your business’ earnings. These lenders need to know how likely you are to repay the money they have lent you when making their decision about whether or not to lend it in the first place. Lying or exaggerating about your earnings will only harm you and the lender in the long run.

3) Make Sure All Of Your Funding is Backed by a Legal Contract

Regardless of where you are going to receive funding, you need to ensure that the terms of your financial agreements are written down on a contract. Unfortunately, things can become troublesome during the repayment process and it is therefore urgent that you and your lender lay out terms in the beginning that you must adhere to later on. This keeps both sides accountable and also ensures that both sides know exactly what they are getting into before the money starts circulating.

4) Cash Flow

A successful small business always maintains a sufficient amount of cash on hand to take care of daily operations and unexpected expenses. However, many businesses that have been successful in receiving funding find that the money they are lent covers already-existing expenses but doesn’t quite leave enough cash left over to keep on hand. This is why small business owners are familiar with the feeling of being stuck somewhere between outstanding invoices and bills that are past-due. One option for small business owners is to use a merchant cash advance. These types of business cash advances can provide small businesses with additional cash flow to meet these expenses or to grow their business, and they are repaid through future credit card receivables. This is an important option to consider for many small business owners who have been denied other forms of funding.

5) When to Process Credit Cards

The short answer: Now! Being cash-only is extremely inconvenient for most customers. While setting up a credit card processing system can be costly, your customers may find it more convenient to go to your competitor’s business once they learn that your business doesn’t process credit cards. Furthermore, using credit cards at your business functions as an instant line of credit and means less hassle and paperwork for your business. This can cut down on lengthy credit approval processes. Also, there are additional types of funding available for businesses who process credit card transactions as opposed to those who don’t.