6 Keys to a Successful Business

Millions of people dream about starting their own business, but only a few go further than their thoughts. Many people are unsure of the keys to a successful business, especially when today’s business world is full of unknowns, twists, and turns. 

While there are always procedures you need to follow in your business and industry, there are also certain keys to a successful business that apply to any venture. Check this article to find out what they are! 

Know your competitors

No matter what type of business you’re starting or running, you’ll have competitors. Even if there’s no other business offering exactly what you plan to sell, there are likely to be other products or services your target customers use to satisfy their needs. Moreover, other businesses may be doing something right that you can implement in your business to make more money.

To succeed, you need to research the competition and find out as much as possible about what they sell and how they sell it. Competitive research is something you should plan on doing on an ongoing basis, too. 

If you’re running a coffee shop, you can visit your competition’s cafes, ask other customers what they think, and gain helpful information. However, if you’re running a business with much more limited access to your competitors, such as a chemicals company, you can take a different approach to research your competitors. For example, you can consult with a business professional and accountant to go over their financial information, not just what the business presents to the world. 

Do market research

Market research is one of the main keys to a successful business. Entrepreneurs should never throw their caution to the wind and start businesses based solely on personal opinion. Business success depends on many factors, with data being one of the most fundamental. And data comes from research. What is the size of the possible customer base, and what are their characteristics? It is important to understand what drives and motivates the buyer personas to target them efficiently.

Have a detailed plan

An accurate and precise business plan can help you focus on your goals. You’ll refine your business idea as you create your business plan, and you’ll have a roadmap to refer to before making major decisions. What do you expect from your business? How long will you take to achieve your goals? What is your monthly or quarterly target? 

So, whatever your goals are, write them down and put them somewhere where you will see them every day. Then take each goal and break it down into smaller steps. You can set a certain time to review your plan and mark what you have completed. Having a clear direction will bring you closer to your goals. 

Provide great products or services at a reasonable price

In today’s hyper-competitive business environment, your business’s products or services need to be good enough to meet or surpass the clients’ expectations once the customers are there. This is how you turn your customers into brand ambassadors, which is one of the best and most cost-effective ways to get a small business on the map.

The first principle to consider in establishing any new product or service is to determine if it meets an actual, existing need that customers have right now. No product or service can succeed unless it’s somehow unique and superior to its competitors’ products or services. A new product or service must solve a consumer problem or improve the client’s life or job in a cost-effective way.

The safest strategy here is to start with a common product that already has a widespread market and then figure out how to improve it (e.g., provide faster delivery, produce higher quality, or lower the price of the product or service.) It’s a good idea to start with a product or service that people are already using and find some way to make it more desirable, instead of trying to invent a whole new thing. 

The second principle for any business success is offering good quality products or services at a fair price. Your business must have a unique selling point (USP) if it competes with other products or services. It is one or more features or benefits that make your products or services unique, different, and superior to any competitors.

Keep your records organized

All successful businesses keep detailed records. Proper bookkeeping helps you know the business’s financial status and what could potentially become a problem moving forward. Knowing this helps you visualize future projections, create strategies to overcome those challenges, and assist in business planning. 

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Most businesses are choosing to store their records physically and digitally. By constantly backing up digital information, especially when it comes to financial data, a business owner no longer has to worry about losing their data. If you choose to keep physical records to ensure that the digital information is correct, keep specific folders for each aspect of the business appropriately labeled and organized so you and anyone in the company can access them easily. 

Be consistent

Consistency is a key component of a successful business. Being consistent means understanding that your business will not likely make money immediately, but you still stick with your goals and never give up. Consistency creates long-term positive habits and produces the results you were hoping for so that your business will eventually make some money. 

The bottom line

Once you know the main keys to a successful business, you’ll have a strong foundation to grow your business. 

In summary, to succeed in the business world today, you need to be flexible and have good planning and organizational skills. Being a business owner means being in a state of constant learning and adapting.

Don’t forget to subscribe to the Shoeboxed blog for more helpful entrepreneurship and success stories for small business owners! 

About Shoeboxed

Shoeboxed is a receipt management application that turns your receipts and business documents into a digital format in just one click by taking a picture straight from your smartphone or scanning a pdf. It automatically extracts, categorizes, and human-verifies important data from your receipts so that you can go over and check your records anytime with ease. Shoeboxed ensures you will always have your receipts securely stored and ready for tax purposes.

Access your Shoeboxed account from your web browser or smartphone app. Stay audit-ready with Shoeboxed for FREE now!

Double-entry Bookkeeping Best Practices for Small Businesses

If you’re a small business owner setting up your bookkeeping, you must decide on your accounting system: double-entry or single-entry?

Though single-entry bookkeeping is very straightforward and easy to implement, it can’t provide a business with sufficient financial data and a secure, accurate recording system. 

That’s why double-entry bookkeeping might be more beneficial to your business, and if so, this article is written just for you. 

In this article, we’ll explain double-entry accounting as simply as possible and show you the best practices for using this bookkeeping method. 

What Is Double-Entry Accounting?

Double-entry accounting, or double-entry bookkeeping, is a bookkeeping method that helps you keep track of your business’s financial activities. With double-entry, each financial transaction creates two entries: one debit and one credit. Corresponding to these two entries are two accounts that the transaction affects. For example, your business just sold a product for $500. This transaction will make a debit on the cash account as it increases $500 in cash and create a credit on the inventory account as a $500 good has been gone (we will explain in detail later what creates a debit or a credit.) 

If you record all the transactions correctly, the credit balance will be the same as the debit balance. This is why you will have fewer accounting errors, compared to the single-entry bookkeeping method. 

All public firms are required to use double-entry accounting.

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The 4 double-entry best practices that you must know

We’ve gathered the top 4 practices for small businesses using the double-entry bookkeeping system. These practices will ensure you have an efficient and accurate recording procedure. 

Let’s check them out!

1. Always remember the golden rule of accounting

To ensure your double-entry bookkeeping is compliant and accurate, you must ingrain this equation into your mind:

Assets = Equity + Liabilities 

Assets: all economic resources owned by your company.

Equity: investments and retained earnings of your company. 

Liabilities: debts and financial obligations owed by your company.

All experienced accountants/bookkeepers are familiar with this accounting equation because this is the core mechanism that makes double-entry work. If both sides of the equation do not have the same figures, it means there’s at least one mistake in your books. 

2. Categorize your financial transactions 

You must know how to classify transactions—or in other words, put them in the correct accounts. 

Depending on your business’s nature, you can have several different accounts, but the following are the most fundamental ones that nearly every business has in its accounting system:

Asset accounts

  • Account receivables: the money owed to you from your buyers.
  • Petty cash: money available to pay small expenses.
  • Inventory: your goods and products .

Liability accounts

  • Account payables: expenses you have incurred but not yet paid for.
  • Sales tax: financial obligation to the government. 

Income accounts (revenue accounts)

  • Sales: money earned from selling products or services.
  • Earned interest: the amount of interest earned from your investments.

Expense accounts

  • Payroll: the amount you compensate for your employees’ work.
  • Rent: the cost for renting office.
  • Cost of goods sold (COGS): the money you spent to buy materials, goods and products to resell.

3. Have a double-entry accounting cheat sheet

Knowing only your accounts is not enough. You’ll also need to wrap your head around debits, credits, and how each kind of business transaction affects each account and financial statement. 

To make things a bit easier for you, we’ve prepared a cheat sheet to show you how debits and credits work under the double-entry bookkeeping system.

A double-entry accounting cheat sheet.

Also, remember to record debits on the left of a ledger sheet and credits on the right side. 

For example, if you make a $400 payment received on account from a customer, the journal entry for debits and credits would look like this:

4. Find suitable software tools 

With the advent of technology, it wouldn’t be wise to do everything by yourself manually, as it’s error-prone and costs time. Software can help you eliminate those issues. For instance, accounting software can help you keep your eyes close to your business’s finances and helps manage clients, reconcile bank accounts, and generate insightful financial reports that help your business grow robustly in the future. 

There are many popular options for accounting software now on the market, such as Quickbooks, Zoho Books, Freshbooks, Bench, etc. 

No less important than keeping your records accurate is to have your finance receipts organized and stored carefully. This is because the IRS requires you to provide receipts and other financial proof to be eligible for business deductions. Shoeboxed can help you with that. Shoeboxed is a receipt tracker that helps you digitize and categorize documents smartly in the cloud.  

Start having a smooth and errorless accounting system today with advanced technology tools for your business!   

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Final thoughts 

The double-entry bookkeeping system has been used and proven to be effective and productive for decades in the business world. If you opt to do the same for your business, we hope this article has clarified what you can do to have a smooth and highly-functional accounting system. 


About Shoeboxed

Shoeboxed is a receipt management application that turns your receipts and business documents into a digital format in just one click by taking a picture straight from your smartphone or scanning a pdf. It automatically extracts, categorizes, and human-verifies important data from your receipts so that you can go over and check your records anytime with ease. Shoeboxed ensures you will always have your receipts securely stored and ready for tax purposes. More importantly, Shoeboxed helps you track mileage using your phone’s built-in GPS for unmatched ease and accuracy. Access your Shoeboxed account from your web browser or smartphone app.

Stay audit-ready with Shoeboxed for FREE now!

What You Need To Know About The American Tax System 

It’s no secret that the American tax system is incredibly complex. Many people think it is incomprehensible and unfair, only benefiting corporations and big businesses and not the mass working population.  

To help you understand the American tax system better, we’ll go over how the system works and highlight some major issues that arise in this vast, complicated setup in this post. 

Let’s get to it!

How does the American tax system work?

Once you make over a certain amount of money, you must pay taxes, so it’s crucial to get a general understanding of how the tax system works in the United States.

Overview

The federal government can only function financially through collecting taxes and fees from many different sectors of the economy, and you might not be surprised to learn — the largest sources of government revenues are individual income taxes and payroll taxes.

While nearly all American citizens have to pay taxes, the type and amount of taxes paid are individually different. Well-off Americans pay a larger share of their income in individual income taxes, corporate taxes, and estate taxes compared to lower-income groups. However, lower-income groups pay a greater portion of their earnings to payroll and excise taxes than wealthy Americans.

Overall, the U.S. tax code is progressive, with higher-income taxpayers paying a larger share of their income in taxes. That is true, but high-income Americans can benefit disproportionately from tax breaks, which are also known as tax expenditures. Some find this extremely unfair, and we’ll take a look at that later in this post. 

How it’s managed

The Internal Revenue Code (IRC), generally known as the tax code, is written by Congress, the legislative part of the United States government. The tax code governs tax collection, the application of federal tax laws, and the issue of tax refunds, rebates, and credits. These functions are carried out by the Internal Revenue Service (IRS), a government department of the United States Department of Treasury.

What are the different types of taxes?

There are so many different types of taxes in the U.S. But don’t worry, not all taxes apply to everyone. Below are some examples of the most common taxes:

Income tax 

The U.S. federal income tax is a tax imposed by the Internal Revenue Service (IRS) on the annual earnings of individuals, corporations, trusts, and other legal entities. Federal income taxes apply to all forms of earnings, including wages, salaries, commissions, bonuses, tips, and investment income.

In the U.S.tax system, federal income tax rates for individuals are progressive. As taxable income increases, so does the tax rate. Federal income tax rates range from 10% to 37% and are staggered at specific income thresholds. These are called tax brackets, and income that falls within each bracket is taxed at the corresponding rate.

Capital gains tax 

The tax on the profits generated from an investment after it has been sold is known as capital gains tax, so please note that no taxes are due on stock shares until they are sold, regardless of how long they are kept or how much their value increases. 

The capital gains tax rate in the United States now applies exclusively to income on the sale of assets held for more than a year, also known as long-term capital gains. The current rates are 0%, 15%, or 20%, depending on the taxpayer’s tax bracket for the current year. The short-term capital gains tax is applied to assets that are sold within one year of their purchase date. Ordinary income is taxed on this profit. For most low-to-middle-income taxpayers, this is a higher tax rate than the capital gains rate.

Payroll tax 

A payroll tax is a percentage withheld from an employee’s pay and paid to the government on the employee’s behalf by their employer. Federal payroll taxes are subtracted from an employee’s wages and remitted to the Internal Revenue Service (IRS).

Sales tax 

A sales tax is a government-imposed consumption tax on selling goods and services. The majority of sales taxes are collected by retailers and passed on to the government. Depending on the regulations in the jurisdiction, a business is liable for sales taxes if it has a link or connection to that area, which can be a store or office, an employee, an associate, or some other presence.

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What are the different types of taxpayers? 

We can divide taxpayers into two main categories: 

1. Individuals

Individual taxpayers go into one of 2 groups: citizen or immigrant (an alien is a person who resides within a country’s borders and is not a national of that country). A citizen can also be classed as a resident or a non-resident.

2. Corporations 

Domestic, foreign, and partnership corporations are the three types of corporations. There are two types of foreign corporations: resident foreign corporations and non-resident foreign corporations. 

A foreign corporation engaged in trade or business in the country is referred to as a resident foreign corporation. A foreign corporation that is not engaged in trade or business within the country but receives income from sources within the country is known as a non-resident foreign corporation. 

A partnership is a business arrangement in which two or more people share a company’s ownership and management responsibilities. Because a partnership is not a legal entity apart from its owners, it does not pay taxes.

What Does the Government Actually Do With The Taxes It Collects?

The U.S. government collects income taxes and payroll taxes from individuals and corporate income taxes from companies. The government then distributes the money to different government agencies for specific purposes that benefit or protect the nation and its citizens. Social Security and welfare programs, the education system, national parks, police departments, and the maintenance and development of public infrastructure are all funded by U.S. tax dollars.

What are the main issues with the American tax system? 

Most taxpayers agree that some form or amount of taxation is necessary to fund the government. However, there are many differing views about the size of government and its corresponding funding, the optimal structure of a tax system that’s fair to all, the system’s effective rates, and its impact on different groups in society.

As with all systems, individuals and corporations will do their best to find workarounds and loopholes to use to their advantage. And it is who can take advantage of these loopholes that seems to be unfair, with most taxpayers believing the U.S. tax system favors the wealthy and doesn’t benefit the majority of the population.

Most U.S. taxpayers consider an income tax system that applies higher rates on higher income levels to be fair. At the moment, it doesn’t seem to be that way especially when it comes to businesses, particularly large corporate businesses.

Let’s look at some of these issues in more detail.

1. Higher Benefits for Higher Tax Brackets

Although tax rates on taxable income are progressive, which means big businesses should be paying more, there are ways for these corporations to pay a lesser rate. Ways that lower-income individuals can’t. Let’s have a look at some below:

Exemptions and exclusions for certain types of income—for example, tax-exempt interest paid on state and local government bonds.

Special, lower rates for some income categories, such as capital gains and dividends

Deductions for a wide range of expenditures, including some business expenses

These adjustments can result in much lower effective tax rates on the incomes of high-income, wealthy individuals, which lower incomes miss out on. These deductions can also enable taxpayers with extremely high earnings and investment returns to avoid any tax liability at all.

2. Deductions and tax credits

Deductions benefiting taxpayers by lowering their taxable income are regressive. To calculate how much deductions you can take, multiply the amount of your deductible expenses by your marginal tax rate. For instance, if your income is in the top 37 percent tax bracket, every $100 saved from income that would otherwise be taxed at this rate saves the taxpayer $37. If the appropriate rate is 24%, a $100 reduction in income would result in only $24 in savings. 

Meanwhile, with a tax credit, a taxpayer can only save a flat rate that is equal for everybody. Regardless of income level or tax category, a 20% tax credit will save taxpayers $20 in tax liability for every $100 spent.

However, most tax credits are non-refundable. If your tax credits are higher than your tax liability, you won’t be able to take advantage of the credits’ benefits fully. 

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3. Corporate Tax Avoidance

Currently, the tax law generally applies a corporate income tax of 21%. However, many U.S. corporations pay far lower rates or no tax at all because of substantial business write-offs and aggressive tax planning. Once again, these write-offs just aren’t available to the vast majority of U.S. taxpayers.

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The bottom line 

Most Americans would like to see a less complex and fairer tax system. The tax code is constantly being updated, which can be even more confusing. New guidelines, new forms, and new criteria are always being introduced. Stay on top of your taxes and up-to-date with the latest tax changes by subscribing to the Shoeboxed blog. We’re here to help!

What’s Shoeboxed? 

If you’re tired of spending hours and hours collecting and categorizing receipts by yourself, we’re here to tell you there’s a super easy alternative to that. It’s Shoeboxed

Shoeboxed is a receipt management application that turns your receipts and business documents into a digital format in just one click by taking a picture straight from your smartphone or scanning a pdf. It automatically extracts, categorizes, and human-verifies important data from your receipts so that you can go over and check your records anytime with ease. Shoeboxed ensures you will always have your receipts securely stored and ready for tax purposes.

Access your Shoeboxed account from your web browser or smartphone app. Stay audit-ready with Shoeboxed for FREE now!