Insights

Would you be surprised to learn that many small businesses carry debt? If you’re a business owner, it may not shock you that 72% of small businesses hold outstanding debt, according to the 2023 Report on Employer Firms issued by Fed Small Business.

While debt is necessary, it’s important that it’s carefully managed with the help of a financial professional. In this article, we’ll cover different types of business debt, how to effectively reduce and stop accumulating debt, when it’s wise to file bankruptcy, and your options if this happens.

Understand your business debt 

There are several common types of debt, including:

• Short-term: Typically used to cover short-term operating expenses. It can come in the form of lines of credit, short-term loans, overdraft protection and merchant cash advances. The debt is repaid within a short period, usually about a year.
• Long-term: Often used to finance capital investments, like vehicles, equipment or real estate. It typically carries an extended repayment period. Examples include term loans, bonds, mortgages and equipment financing.
• Secured: A loan or credit backed by collateral, such as property, inventory or equipment. It presents less risk and typically has lower interests. However, if businesses fail to make payments, assets used as collateral can be seized to recover the amount owed.
• Unsecured: Not backed by collateral; usually more challenging to obtain. Rates are generally higher. Offered in the form of traditional term loans, lines of credit and business credit cards.

How to reduce debt 

If your business carries recurring debt, you’ll want a debt management plan. (Disclaimer: Working with a trusted professional who specializes in this field is highly recommended.) This plan can include strategies to:

• Assess your current debt situation. Look at all your business liabilities, including bank loans, business credit cards, lease obligations, contracts, business taxes or employee-related liabilities (e.g., wages, benefits, pension, retirement).
• Set debt reduction goals. Determine the amount of debt you want to pay off in a specified timeframe. Be realistic, based on your budget and income.
• Renegotiate terms. Work with your lenders to negotiate more favorable terms for your debt. Options may include lower interest rates, extended payment terms or temporary payment relief.
• Consolidate loans. If available, consolidation can simplify your debt management and may lower interest costs.

Ways to stop debt accumulation 

As you work to reduce your debt, it’s also important to see where you can cut costs so you can remove—or diminish the need for—more debt. Work with a professional to:

• Develop (or adjust) your budget. Implement a strict budget; adjust spending accordingly.
• Increase revenue streams. Are there areas of your business where you can raise prices or introduce a new product or service?
• Improve invoicing and collections. Ensure you’re invoicing on time and following up on overdue payments.
• Cut unnecessary expenses. Review expenses and see where you can eliminate non-essential costs.
• Avoid unnecessary borrowing. Before considering a significant purchase or investment, research the ROI and decide whether a new loan is worth it.
• Conduct financial reviews. To stop debt accumulation and overspending, regularly review your financial status. This keeps you on top of spending and helps avoid unnecessary debt.

When bankruptcy is the only option

If your business carries too much debt and there’s no end in sight, bankruptcy may be necessary to reduce your business debt burden. If it comes to this, you have two options:

• Chapter 7: A Chapter 7 business bankruptcy is administered by a bankruptcy trustee who sells your business assets, tries to retrieve outstanding accounts receivable, pays owed taxes and distributes any remaining funds to your creditors. It eliminates any personally guaranteed business debts and provides you with a clean break from the failed business. But your personal credit rating takes a massive hit—which stays on your record for seven years.
• Chapter 11: A Chapter 11 bankruptcy allows your business to reorganize debts and restructure finances to pay bills. Your business continues to operate, and calls from debt collectors cease in the short term. If you have assets worth less than your debt, bankruptcy may allow you to pay only what the assets are worth instead of the balance due. Chapter 11 is costly, requires a bankruptcy attorney and can take several years.

Consult a professional 

Effective debt management is crucial for business owners, but you shouldn’t do it alone. Work with a qualified professional who can guide you through strategies to navigate debt efficiently and keep your business on a path to financial health.

The Corporate Transparency Act (CTA) became a significant piece of legislation in fiscal year 2021 as part of the National Defense Authorization Act. It was created to combat money laundering, the financing of terrorism and other illicit activities. The CTA aims to enhance business transparency by requiring the disclosure of information about beneficial owners.

On January 1, 2024, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) began accepting beneficial ownership information (BOI) reports. Here’s a quick look at what you need to know.

Which businesses have to report BOI?

Not all companies are required to report BOI; some companies are required to report only if they meet the definition of a reporting company. Your business may qualify as a reporting company if it meets one of the following requirements:

• The company is a corporation.
• The company is a limited liability (LLC).
• The company was created by the filing of a document with a secretary of state or any similar office under the law of a state or Native American tribe.
• The company is registered to do business in any US state or Native American tribal jurisdiction by filing a document with a secretary of state or similar office of the state or tribe.

For updated information and a list of exemptions, refer to the Small Entity Compliance Guide.

Who are beneficial owners?

A beneficial owner is any individual who directly or indirectly:

• Exercises substantial control over a reporting company; OR
• Owns or controls at least 25% of the ownership interests of a reporting company.

A reporting company may have multiple beneficial owners; no maximum number must be reported.

What information must be disclosed, and who can access the BOI?

Reporting companies are required to submit accurate and current beneficial ownership to FinCEN. The following information must be included:

• The full legal name of the reporting company, including any trade name; complete current US address; state, tribal or foreign jurisdiction of formation; IRS taxpayer identification number (TIN), including an employer identification number (EIN).
• The full legal name, date of birth, and residential or business address of each beneficial owner.
• A unique identification number from an acceptable identification document (e.g., driver’s license, passport) for each beneficial owner.

FinCEN permits federal, state, local and tribal officials to obtain BOI for authorized activities related to national security, intelligence and law enforcement. Foreign officials who submit a request through a US federal government agency may also gain access. Financial institutions have access to BOI in specific circumstances only with the consent of the reporting company.

When does your business need to disclose?

If your company existed before January 1, 2024, it must file its initial BOI report by January 1, 2025. If your company is created between January 1, 2024, and December 31, 2024, it must file its initial BOI report within 90 days.

If there are any changes to the reporting company or any of its beneficial owners, your company has 30 days to file an updated BOI report with FinCEN. Changes may include:

• Any change to the information reported for the reporting company, like registering as a new DBA (doing business as).
• A change in beneficial owners, such as a new chief executive officer, the death of a beneficial owner or a sale that changes who meets the ownership interest threshold.
• Any change to a beneficial owner’s name, address or unique identifying number.

How are BOI reports submitted, and is there a fee?

If your business is required to report your BOI, you can use the secure filing system available on FinCEN’s website and refer to their quick reference guide and step-by-step instructions. There is no fee for submission.

What happens if a reporting company fails to report or submit correct information?

Anyone who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 per day the violation continues and may also be subject to criminal penalties of up to two years imprisonment, along with a fine of up to $10,000.

Summing it up

If you need more information regarding the BOI reporting requirements or have concerns about reporting on your own, visit the FinCEN website. You may also visit their FAQ page, start a chat and stay current on FinCEN updates by subscribing to their email list. Remember, it’s up to you to remain compliant with the CTA; consider consulting with your legal counsel on BOI reporting requirements.

Starting a small business is an endeavor that requires intentional thought and decision-making. One of the first important decisions you need to make concerns choosing the right business structure. The structure you select influences many things about your business, from the amount you pay in taxes to your everyday operations. And each one comes with its own set of benefits and challenges.

In this blog, we’ll break down the five common types of business entities and the pros and cons of each.

Sole proprietorships

If you’re looking for a business type that’s easy to form and grants you complete control over your business (i.e., the only person in charge), a sole proprietorship is the way to go. You’re automatically considered a sole proprietorship if you perform business activities but don’t register as any other business. Note: Sole proprietors must report earnings on schedule C of their personal returns.

Pros:

• The least expensive—and easiest—to establish.
• As the owner, you keep all profits.
• The tax process is simplified because income is reported on personal tax returns.

Cons:

• Business assets and liabilities aren’t separate from personal assets and liabilities.
• It’s harder to secure business loans or investors.
• Upon death, your sole proprietorship will typically cease operations, and assets become part of your estate.

Partnerships

When owning a business with one or more people, a partnership is the simplest structure to select. There are two common types of partnerships:

• Limited partnerships (LP) have one general partner with unlimited liability (i.e., personally responsible for any loss of the business), while all other partners have limited liability (i.e., liability for debts is restricted to the amount they put into the business).
• Limited liability partnerships (LLP) give limited liability to every owner and protect each partner from debts against the partnership.

Pros:

• Partners bring different skill sets and knowledge to the partnership.
• There is less financial burden for all involved.
• Taxes pass through to the business owners on individual tax returns.

Cons:

• Partners are personally liable for business debts.
• All profits are shared between partners.
• There’s potential for disagreements and partnership disputes.

C corporations

When you form a C corporation (C corp), you’re creating a legal structure where owners or shareholders are taxed separately from the entity. They’re also subject to corporate income taxation, which means business profits are taxed at both the corporate and personal levels (i.e., double taxation).

Pros:

• Personal liability of directors, shareholders, employees and officers is limited; legal obligations can’t become a personal debt obligation of any individual.
• C corps can offer shares of stock, which may fund new projects and/or future expansions. Note: When C corps reach $10 million in assets and 500 shareholders, they must register with the Securities and Exchange Commission (SEC).
• The business has an unlimited lifespan as owners can change, and management can be replaced.

Cons:

• Filing articles of incorporation can be costly and incur greater legal fees.
• Profits are taxed twice—when the business files its income taxes and when profits are distributed as dividends.
• Shareholders cannot deduct business losses on tax returns.

S corporations

Unlike C corps, S corporations (S corps) pass their taxable income, credit, deductions and losses directly to their shareholders, known as a “pass-through” entity. S corps are available only to small businesses with 100 or fewer shareholders.

Pros:

• There are no corporate taxes so there is no double taxation like a C corp.
• Personal assets are protected, as shareholders are not personally responsible for business debts and liabilities.
• Ownership can be transferred without adverse tax consequences.

Cons:

• There are restrictions, such as limiting S corps to one class of stock, no more than 100 shareholders and foreign ownership is prohibited.
• Because amounts distributed to a shareholder can be dividends or salary, the IRS may scrutinize payments more closely.
• There is less flexibility in allocating income and loss because they’re governed by stock ownership.

Limited liability company

Like an S corp, limited liability companies (LLCs) are also “pass-through” entities where business income is part of the owner’s income without a separate tax (i.e., limited liability protection). Owners are typically referred to as “members.”

Pros:

• Members have no liability for acts of the LLC or its other members, meaning personal assets are not at risk in relation to business debt.
• There is flexibility in membership, so members can be individuals, trusts, partnerships or corporations, and there is no limit on the number of members.
• Members can manage the LLC or elect a management group to do so.

Cons:

• LLCs can have higher startup and maintenance costs, as many states impose ongoing fees like annual reports and/or franchise tax fees.
• It’s harder to transfer ownership for an LLC, as all members must approve adding new members or alternate ownership percentages of existing members.
• Because members are considered self-employed, they must pay the self-employed tax contributions toward Medicare and Social Security.

Work with a professional

Selecting the best business structure is a decision that can’t be taken lightly—it impacts your taxes, liability and the ability to grow your company. Think about the risk you’re willing to take and where you want your business to go. Be sure to consult with financial and legal professionals for insight into the business formation that’s right for you. Doing this will help position your business for success.

“How can I help you today?” Chat GPT asks as the cursor blinks below a list of prompts. Maybe you type, “Help me write a social media post for Facebook,” or “Can you write an email to our customers about an upcoming spring promotion of 20% off their purchase?”

As you hit the return key, ChatGPT immediately gets to work, carefully spitting out content to (hopefully) meet your request or asking you for more information to craft the perfect social post or email campaign.

Sounds incredible, right?

While ChatGPT can help small businesses with many tasks, there are also several things to consider if you want to implement artificial intelligence (AI) into your small business. In this article, we’ll cover how to use ChatGPT, along with some caveats and risks to look out for.

Ways to use ChatGPT in your business

From streamlining processes and enhancing operations, small businesses can incorporate ChatGPT in many ways.

• Better customer service and support. Businesses can incorporate ChatGPT into their customer service systems to provide quick responses to questions. This helps reduce response times and can help improve satisfaction and engagement.
• Quick content creation. ChatGPT can help generate content when it comes to social posts, blog posts or product descriptions, which helps save time and resources.
• Enhanced research and analysis. ChatGPT can analyze large volumes of data, like customer reviews, so businesses can better understand market trends and customer preferences.
• Personalized communication. Businesses can use ChatGPT to create customized emails or messages based on the customer’s purchasing history. This helps customers feel valued, which is a great way for businesses to stand out.
• Streamlined operations. ChatGPT can automate repetitive tasks, such as answering FAQs, scheduling appointments or even managing order processes.

ChatGPT enables small businesses to reduce costs and improve efficiency. While those two outcomes sound like a no-brainer when it comes to integrating AI into everyday processes, overreliance comes with significant risks.

The potential pitfalls of using ChatGPT in your business

ChatGPT offers numerous advantages and benefits for small businesses. But it’s important to remember that it can also introduce some caveats. Here are a few things to keep in mind if you want to start using ChatGPT:

• Privacy and security. Small businesses must treat their data—including their customers’ data—with the utmost protection. As with any third party, there’s a risk of sensitive information being exposed through automation.
• Misinformation and limited context. Keep in mind that AI responds to you based upon the data it’s been trained on, and it may be unable to fully understand a complex or nuanced question. Misinterpretations can lead to the spread of misinformation, which can harm your business’s reputation.
• Dependency and overreliance. Businesses that rely heavily on AI can quickly become dependent on their use. If the system fails or encounters issues, your business can become disrupted.
• Lack of human touch. If your business relies on customer relationships and personalized service, incorporating ChatGPT has the potential to move that in the opposite direction. AI doesn’t have feelings and can’t express empathy, which can lead to a lack of personal touch with your customers.
• Regulatory and compliance issues. Depending on your business sector—especially if you’re in finance or healthcare, providing advice or information through AI could violate industry regulations.

If you choose to use ChatGPT in your business, you must make sure that you’re double-checking information or facts produced by AI. While it seems like an answered prayer for AI to develop a quick blog post or financial report, it’s up to you to give it that human touch—and to confirm its validity.

Striking a balance

As with any new technology that promises to move mountains for your business, you must also take it with a grain of salt. No technology is perfect—not even ChatGPT (sorry, ChatGPT, but it’s true). Make sure your business is transparent about the use of AI and let your humans handle complex or sensitive issues that may come up. The key to success is balancing the use of AI with human supervision. AI may do things more quickly, but humans provide the personal touch that customers look for and respond to.

When it comes to financial planning, one of the most common concerns for small business owners is how to reduce taxable income.

The most obvious benefit, of course, is paying less in taxes. However, there are several other strategic and practical advantages of reducing your taxable income, which can, in turn, help you:

• Improve your cash flow. Additional cash can be crucial for day-to-day operations, especially if your business is operating with tight margins.
• Build a safety cushion. The money you save on taxes can help fund emergency savings to withstand economic downturns, market fluctuations and other financial challenges.
• Reinvest in your business. Do you need to purchase new equipment? Hire additional staff? Expand your marketing efforts? Develop new products? Enter a new market? Additional cash can help with any of those goals.
• Plan for retirement. Tax strategies that maximize your contributions to retirement accounts can prepare you for the future and reduce your taxable income.
• Attract and retain employees. The savings realized from tax reductions could be used to enhance your business’s employee benefits, bonuses or salaries.

10 ways you could reduce taxable income next year

As a small business owner, you can use a number of strategies to reduce your taxable income. We should note, however, that tax laws can vary significantly, depending on your location and the type of business you operate. As a result, consulting with a tax professional is always advisable.

Here are 10 common methods business owners use to reduce their taxable income, along with links to IRS information where applicable.

1. Business expense deductions—Ensure that you’re deducting all the legitimate business expenses available to you (and keeping thorough records of these expenses). This includes office supplies, business travel, staff salaries and other operational costs.
2. Home office deductions—If you work from home, you may be eligible to deduct a portion of your home expenses, like utilities, rent or mortgage interest, based on the part of your home you use for business.
3. Retirement contributions—Contributing to a retirement plan can reduce your taxable income. SEP IRA, SIMPLE IRA or solo 401(k) plans are options for small business owners.
4. Health insurance premiums—If you’re self-employed, you might be able to deduct the premiums you pay for medical, dental and some long-term care insurance for yourself and your dependents.
5. Depreciation—If your business buys equipment or property, you can depreciate the cost over several years, which can be deducted from your taxable income.
6. Education and training expenses—Costs for education and training that maintain or improve skills required in your business may be deductible. Also, offering an educational assistance program for your employees now has additional benefits that can help you attract and retain talent.
7. Hiring family members—Employing family members can shift income from your higher tax bracket to their lower one, and you can deduct their salaries as business expenses.
8. Business structure—Sometimes, changing your business structure can result in tax savings. For example, some businesses could benefit from being taxed as an S corporation instead of a sole proprietorship.
9. Tax credits—Take advantage of any tax credits for which your business is eligible. These can include credits for hiring certain types of employees, implementing environmentally friendly practices, or research and development.
10. Investments in technology or equipment—Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment or software purchased or financed during the tax year.

For more information, check out the IRS Small Business and Self-Employed Tax Center, which has a wealth of resources for taxpayers who file Form 1040 or 1040-SR, Schedules C, E, F or Form 2106, as well as small businesses with assets under $10 million.

Keep in mind that as a small business owner, the key to reducing taxable income lies in understanding the tax code and its implications for your specific business. To ensure that all deductions and strategies are legitimate and in line with current tax laws, it’s important to regularly consult with a tax professional who can help you navigate all the complexities and changes—and stay compliant.

Retirement.

It sounds like such a leisurely word, doesn’t it? When you think of retirement, you might envision sunny beaches, road trips or spending as much time as you can visiting your grandchildren (fur kids included). But before those dreams can become a reality, there’s quite a bit of planning to be done.

Making sure your employees have a tidy nest egg to begin their golden years is both a joy and a responsibility. Providing the right benefits, particularly in the form of retirement accounts, can help your employees start their retirement path on the right foot. Not only does it help retain and attract quality employees, but it can also provide tax advantages for your business.

Let’s explore the options available and the considerations small business owners should keep in mind.

Available retirement account options for employees

Choosing the right type of retirement account can feel like hunting for buried treasure. Let’s uncover the retirement options available to you and your employees.

1. Simplified Employee Pension (SEP) IRA. Think of SEPs as The Three Musketeers: All for one, and one for all. This option is great for self-employed individuals, freelancers and small business owners. For 2023, the contribution limit is the lesser of 25% of each employee’s salary or $66,000.
2. Savings Incentive Match Plan for Employees (SIMPLE) IRA. For businesses with 100 or fewer employees, the SIMPLE IRA lets both employers and employees contribute. For 2023, employers can either match employee contributions (up to 3% of the employee’s compensation) or make a fixed 2% contribution for all eligible employees. Employee contributions can’t exceed $15,500.
3. 401(k) plan. Often considered the gold standard of retirement plans, 401(k) accounts are an option for any business, including self-employed individuals. For 2023, employees are limited to contributing $22,500, with an additional $7,500 for catch-up contributions (for those age 50 or over). Total contributions (employee and employer) are limited to the lesser of 100% of employee compensation or $66,000.
4. Profit-sharing plan. As the name implies, these plans allow employers to share a portion of the business’s profits with their employees. For 2023, contributions cannot exceed 100% of an employee’s salary or $66,000. If also participating in a 401(k), contributions can’t be more than 25% of the compensation paid or accrued during the year.

Potential pitfalls to consider

While charting the course of retirement benefits offers numerous advantages, it’s important to be aware of potential challenges. Let’s delve into some complexities and considerations business owners and employees may encounter.

For business owners

• Administrative costs and responsibilities. Offering retirement benefits, especially 401(k) plans, can introduce significant administrative tasks, like record-keeping, regular compliance testing and mandatory filings.
• Fiduciary duty. When you sponsor a retirement plan, you have a fiduciary duty to act in the best interest of plan participants. You’ll need to carefully select and monitor investment options to ensure fees are reasonable.
• Cost implications. While retirement accounts can offer tax advantages, they also come with costs, including setup fees, annual charges and other administrative expenses.
• Vesting schedules. Plans that include an employer match often have vesting schedules. If an employee leaves before they’re fully vested, they run the risk of forfeiting a portion of the employer’s contributions.
• Plan termination. If you decide to end the retirement plan, there are processes and potential costs associated with terminating a plan properly.

 For employees

• Investment risks. Employees have the responsibility of choosing their investments within a retirement account. Without the proper guidance, they may fail to diversify properly, which could potentially jeopardize their retirement savings.
• Limited liquidity. It’s essential for employees to understand that most retirement accounts are designed for long-term savings. Early withdrawals can lead to additional taxes and penalties.
• Fees. Some retirement plans require associated fees with their investment options. High fees can erode investment returns over time, so it’s important to be aware of this when choosing investments.
• Vesting schedules. As mentioned, if employees leave before they’re fully vested, they may not get the full benefit. This can be frustrating for employees who may leave before they reach a vesting milestone.

Conclusion

Offering retirement accounts to your employees is a commendable and strategic decision for any small business. While there are many benefits, it’s important to navigate the retirement plan terrain with as much information as possible.

Consult with a financial professional so they can guide you on the best options for your specific business model and make sure you’re not only supporting your employees’ future—but also securing the financial health of your business.

What is a credit score?

The short answer: It’s a number that represents your creditworthiness.

A longer answer: Your credit score is calculated based on an analysis of your credit files and is used by lenders to assess the risk associated with extending credit to you. Scores typically range from 300 to 850, depending on the scoring model used (e.g., FICO or VantageScore), generally categorized as follows:

• Excellent: 750 and above
• Good: 700-749
• Fair: 650-699
• Poor: 600-649
• Bad: Below 600

“But wait,” you might say. “I don’t need any loans. So why does my credit score matter?”

Well, you don’t need any loans today. And you might not need to get a new job today, either. But it’s impossible to see the future, and your credit score can play a significant role in that future. So, your credit score does matter, because it can play a decisive role in whether you get:

• Lower interest rates on loans. Individuals with higher credit scores are typically seen as lower risk. As a result, they often qualify for lower interest rates on mortgages, car loans, personal loans and credit cards.
• Mortgage and rental approvals. When you apply for a mortgage or try to rent an apartment or other property, the lender or landlord may check your credit score. A poor score could lead to a denial or require a larger down payment or security deposit.
• A lower insurance premium. Some insurance companies use credit scores to determine auto and homeowners insurance premiums. The higher your credit score, the lower your premium could be.
• Your ideal employment opportunities. Some employers check potential employees’ credit as part of the hiring process, especially for positions that deal with money or sensitive information. A poor credit score could influence an employer’s hiring decision.
• Lower security deposits. Utility and telecom companies may check your credit score when you establish service. A low credit score could result in the company requiring a higher deposit.
• Negotiating power. A high credit score may give you more leverage when negotiating terms on loans or credit cards.
• Business financing. For entrepreneurs and business owners, a good personal credit score can be critical in obtaining business loans or lines of credit—particularly for new businesses without an established credit history.
• Peace of mind. A good credit score shows that you’re managing your financial obligations well and can be a source of pride and confidence in your financial life (not to mention a stress-reducer).

Monitoring your credit score can also be an essential part of personal financial management. It can help you understand how your financial behavior affects your creditworthiness, and it can help you make more informed decisions.

More information on credit scores

Credit scoring models vary, but most commonly, they’re composed of the following elements:

• Payment history (35%): Whether you’ve paid your credit accounts on time. Late or missed payments can significantly impact your score.
• Credit utilization (30%): The ratio of your outstanding credit card balances to your credit card limits. High usage can negatively affect your score.
• Length of credit history (15%): How long your credit accounts have been active. A longer history can positively influence your score.
• New credit (10%): The number of recently opened credit accounts and hard inquiries (i.e., when you’ve applied to a lender for a loan). Too many new accounts in a short time can hurt your score.
• Credit mix (10%): The variety of credit types you have: credit cards, mortgage loans or personal loans. A diverse mix can positively impact your score.

If your score is currently lower than you’d like, don’t despair. You can improve your credit score by:

• Paying your bills on time.
• Keeping your balances below 30% of your credit limit.
• Not opening too many new accounts at once.
• Regularly checking for errors on your credit report.

If you do find errors on your credit report, you can dispute them with the credit reporting agency.

Where can you access your credit score and credit report? In the United States, you can request a free credit report from one of the three major credit agencies (Equifax, Experian or TransUnion) once a year. Your financial institution may offer access to your credit score for free; check with your credit union or bank for details. There are also a number of credit monitoring apps that can help you keep track of your credit—and some, like Credit Karma or Mint, are free.

Just be sure to remember that, for all the reasons stated above, your credit score does matter and can significantly influence many aspects of your financial life. Understanding your score and taking steps to improve or maintain it will give you financial benefits and peace of mind for years to come.

We live in a data-driven world. And because data is so readily available, businesses have the ability to tap into key metrics to measure against set goals. Whether those goals are to reduce staff turnover or client churn, increase profits, or extend the average client life cycle…having a KPI (key performance indicator) strategy in place is essential for long-term success.

While data tracking and monitoring key metrics is critically important to business success, the abundance of data available can cause information overload. To help you navigate the world of KPIs and build a “starter plan” of sorts, this article offers three tips to creating a sound KPI strategy.

#1 – Choose the right KPIs

Not all KPIs are created equal. The first step is to understand the difference between lagging and leading indicators and why both need to be monitored.

Lagging indicators show results over a period of time (e.g., total sales in the closing quarter). These are easy to measure and provide quick answers on whether set goals have been met. For example, if you set an ambitious goal such as doubling sales by the end of Q4 (compared to Q2 sales), the ultimate lagging indicator is annual revenue or profits.

Leading indicators capture data that has an effect on an outcome. This makes leading indicators useful for predicting outcomes. For example, if an online retail store shows a sharp drop in the purchase of a popular item, the company could predict a drop in overall quarterly sales. Monitoring leading indicators helps you get ahead of predictable trends and make adjustments to influence positive outcomes.

#2 – Foster a KPI-driven culture

The goal here is to get your entire organization talking about data! When everyone speaks the data language, it better supports a company-wide KPI strategy.

To build a KPI-driven culture, be sure to offer regular staff training on the value of KPIs and the metrics each department is responsible for tracking. Also, be sure to assign the proper leads to champion KPI progress and ensure staff are kept updated as your strategy evolves. Finally, make sure you have the right technologies in place to collect and analyze data, and make KPI dashboards available to required staff.

#3 – Implement a process for KPI refinement

It’s important to understand that KPIs are subject to change. You can bet that over time customer behaviors will change and business goals will evolve in response to market trends. This calls for businesses to refine their KPI strategy on a regular basis.

Over time, you may discover that a KPI is not helping you progress toward a specific goal or that it’s driving the wrong actions. For these reasons, commit to consistent KPI evaluation and enhancement as you move forward. The formal process of refinement requires you to monitor what is working and what is not.

Need help with KPIs? Contact us today! Simply click here to CONTACT US and complete the brief form or give us a call. We are here to help.

Small businesses are often seen as the backbone of the economy. Because of this, they’re granted an opportunity to lead the charge when it comes to diversity, equity and inclusion (DEI). While DEI may seem like the sound bite of this generation, it’s not. It’s a strategy movement that does more than meet a checklist of criteria—it promotes inclusivity in all realms of business.

At the end of the day, implementing DEI can help you build a stronger business. In this article, we’ll dive into the basics of DEI, explore the benefits it brings to small businesses and provide actionable steps you can take to create a welcoming and inclusive environment.

Understanding DEI

Diversity, equity and inclusion are three interconnected pillars that promote a culture where everyone—regardless of their background—feels included and is given equal opportunities to succeed. Incorporating DEI into your business means that you’re creating an environment for every employee to feel valued, respected and able to thrive. Let’s break down each pillar:

• Diversity refers to the variety of differences among people. But it’s not just about race, ethnicity, gender, age and sexual orientation. It encompasses much more than that—socioeconomic background, nationality, disability, education, talents, work experience, mental well-being and much more.
• Equity focuses on fairness and creating a level playing field. Equity isn’t about treating everyone the same; it’s about recognizing everyone’s different needs, experiences and backgrounds—and treating employees fairly and equitably with a tailored approach or accommodations.
• Inclusion goes beyond diversity—creating an environment where everyone feels welcome and included. It’s about empowering your entire team to contribute their unique perspectives on ideas or situations and bringing their talents to the table.

The benefits of DEI

With a better understanding of DEI under our belts, let’s talk about how implementing DEI in your business is beneficial.

• It can enhance creativity and innovation. Diverse teams can bring a wider range of perspectives, which leads to more creative problem-solving and new ideas. Creating a team with different viewpoints can spark innovation and help drive business growth.
• It can improve decision-making. When you promote an inclusive environment, employees feel encouraged to create open dialogue and give/receive constructive feedback. When employees feel comfortable being candid, this fosters better decision-making.
• It can attract the best talent. When your business is consistently committed to DEI, it can help you find and retain top talent for your team. Many job seekers are looking for an environment that reflects their values of fairness and inclusivity.
• It can promote better customer relationships. When your team is happy, so are your customers. Diverse teams are better equipped to understand and work with a broad client base, and this can lead to increased customer loyalty.

Actionable steps to incorporate DEI

Here are seven steps you can take to implement DEI in your business.

1. Get leadership involved: DEI efforts must start at the top—business owners must lead by example and demonstrate their commitment to DEI (i.e., actions speak louder than words).
2. Conduct DEI training: Get your employees involved by investing in educational training and workshops about DEI, cultural competence and unconscious bias. Be sure to speak openly about these sessions to raise awareness.
3. Review policies and practices: Ensure that your hiring, promotion and compensation policies don’t contain hidden biases. Make changes that are necessary to ensure fairness and equity.
4. Diversify recruitment: Expand your candidate pool by actively seeking out diverse talent. Reevaluate job advertisements to ensure there’s no bias in descriptions, and post job listings in additional locations, like community colleges.
5. Encourage a culture of inclusivity: Make space for employees to be open and honest about their perspectives, and ensure you’re accommodating the diverse needs of your team.
6. Create an employee resource group: Encourage the formation of an employee resource group that promotes celebrating diversity and allows your employees to connect and share their experiences.
7. Benchmark and measure progress: Regularly check in on your DEI efforts by collecting data and gathering feedback (i.e., sending surveys to your staff). Use their responses to adjust your strategies and make improvements.

DEI isn’t a nice-to-have; it’s essential to the success of your business. Embracing DEI leads to increased creativity, better decision-making and stronger relationships. Don’t wait—start your DEI journey today and watch your business flourish.