Knowledge Base

Did you ever notice a small black lock at the beginning of a website’s URL? Do you know what that is? Even those who don’t know the lock represents a Security Sockets Layer (SSL), know it means you can trust the website with your personal information. But, what is an SSL certificate? How do you know if a website has one, and why are they essential for online security? This blog post will explain what they are, how they work, the types of SSL available, plus the benefits of using them. We'll also provide you with tips on how to get an SSL certificate for your website. Read on! Understanding SSL Certificates and How They Work An SSL certificate is a digital certificate that uses encryption to secure information as it travels between a website and a user's web browser. When a website has an SSL certificate, the connection between the two is said to be "secure." Any information exchanged- such as credit card numbers, passwords, or personal data - is encrypted and protected from hackers and other malicious actors. To have SSL certificates explained in full, let’s describe the verification process. It goes along the lines of: When typing in the address you would like to visit, your browser or server attempts to visit the web server the SSL-secured website is hosted on. The browser asks the web server to identify itself. The web server will provide a copy of its SSL certificate, which the browser or server will read. If it trusts the certificate, it will signal it to the web server. The web server will return the signed acknowledgment to start an encrypted session. The server and web server then share the encrypted data. This process is also known as the SSL handshake. How To Know If a Website Has SSL Encryption One way to tell if a website has an SSL certificate is to look at the URL. If the URL begins with "HTTPS" instead of "HTTP," the site has a valid SSL certificate. Also, as mentioned before, you can look for a green or a black padlock icon in the address bar, which is another indication that the site is secure. If you want to double-check the certificate yourself, all you have to do is click on the lock icon. Within the popup bar, you will see which person, organization, or device the certificate was issued to and by whom. You will also be able to see the issue and expiry date of the SSL digital certificate and the Certificate Authority’s digital signature. Why Are SSL Certificates Important for Online Security? SSL certificates protect your information from being intercepted and stolen by hackers. While it doesn’t protect you from major attacks, such as DDoS attacks, some of the sensitive information SSL certificates can safeguard is: Identity information, including names, addresses, or phone numbers Login credentials Credit card or bank account information Legal or sensitive documents uploaded on certain websites Medical records Other sensitive information sometimes required by institutions The SSL ensures your data is scrambled and unreadable as it travels from your computer to the website's server. SSL certificate encryption makes it much more difficult for hackers to steal and use your information for nefarious purposes. From a business standpoint, SSL certificates are required to obtain a web address starting with HTTPS, i.e., one your customers will trust. Nowadays, most browsers will signal to your customers that the “website is not secure” if your website starts with HTTP. This will have a detrimental effect on your credibility with your users. How To Get an SSL Certificate For Your Website You can purchase a website certificate directly from Certificate Authorities (CAs). These companies play a crucial role in maintaining the security of internet transactions by signing these digital certificates. Every browser has a list of CAs whose credentials it trusts, and most companies on those lists charge a fee for their services. You can apply for an SSL certificate by generating a Certificate Signing Request on your server. If you are unsure how to accomplish this, contact your hosting company and ask for assistance. Once the request is compiled, you or your hosting provider will submit it to the Certificate Authority to validate it. Once the CA validates it, you should install the certificate on the website’s origin server. If you are hosting the website yourself, you should be able to install the security certificate on your own. However, in most cases, you can rely on your web hosting services to handle the last step. How Much Does Getting an SSL Certificate Cost? The cost of getting an SSL certificate varies depending on the CA and type of certificate you choose. Of course, the stronger the certificate, the more expensive it will be. On average, you can purchase a certificate for $60 per year, but the prices range between $5 per year and $1,000 per year. However, not all websites require the same type of certificate. Let’s briefly cover your options below. Types of SSL Certificates There are many SSL security certificate types, with different certificate validation levels. If you are not sure which one your website needs, read on to find out. Single-Domain SSL Certificates Single-domain SSL certificates are very popular. They are ideal for small businesses and personal websites that only need to secure a single domain name, but they still use strong encryption to protect information exchanged between your website and visitors' web browsers. Unfortunately, this solution doesn’t protect subdomains. Wildcard SSL Certificates Wildcard SSL certificates got their name because they can be used to secure multiple subdomains simultaneously. Wildcard SSL certificates provide the same level of encryption as a traditional, single-domain secure sockets layer, but they offer the added benefit of convenience and flexibility and can be a cost-effective way to secure multiple connection points. Multi-Domain SSL Certificates (MDC) Multi-domain SSL Certificates (MDC), as the name suggests, are digital certificates that secure multiple domains with a single certificate. They're an excellent option for organizations with several websites, subdomains, or even different locations across the globe, since MDCs are issued to an organization's headquarters. This makes MDCs a more efficient and cost-effective solution for large organizations than several Wildcard certificates. SSL Certificate Validation Levels These are simply the steps of confirmatory due diligence a CA must perform before issuing an SSL certificate. Depending on the type of website you want to use the secure sockets layer on, there are three conventional levels of validation: Domain Validation (DV), Organization Validation (OV), and Extended Validation (EV). Domain Validation SSL Certificates The first and most commonly used validation level, Domain Validation, only requires the CA to verify that the applicant has control over the domain listed in the certificate. For example, when you visit a DV-secured website, the browser confirms that the certificate was issued to that domain by checking for a DNS record or sending an email to an address at that domain. Organization Validation SSL Certificates Organization Validation is a slightly more stringent validation of SSL certification, requiring the CA to verify that the applicant controls the domain and that it is a legitimate organization. The CA will check whether the organization is listed in a business directory and its domain is registered to a valid physical address. Extended Validation SSL Certificates The highest level of validation, Extended Validation, requires the certificate owner to be vetted by the CA to the highest standard. This process includes a thorough review of the applicant's business by the CA, which can take up to several weeks before you can use the secure sockets layer certificate. The end result is that visitors to an EV-secured site can be assured it is operated by a legitimate organization that will keep their personal information safe. The Pros And Cons Of Using an SSL Certificate There are several benefits to using an SSL certificate on your website, so let’s discuss them first: It protects your visitors' information from being intercepted and stolen by hackers. It can improve your search engine ranking, as Google now factors in whether a site has an SSL certificate when assigning rank. An SSL certificate can give your visitors confidence in your website and build trust. Now that we’ve covered the main question - What is an SSL certificate used for? - and sold you on its benefits, it’s important to mention there are also a couple of cons to keep in mind when choosing your certificate: It can be costly as not all certificates or authorities are the same. As mentioned before, it will cost you $60 per year on average.  Ensure that you’re using a reputable certificate authority, as there is a chance that your certificate could be fake and provide no security benefits whatsoever. SSL certificates do not guarantee 100% protection from all hacking attempts - they just make it much more difficult for hackers to steal your information. In Conclusion SSL website security certificates are a vital part of online safety. They help protect website information from being intercepted and stolen by hackers, improve your search engine ranking, and build trust with your visitors. While there are some potential drawbacks to using an SSL certificate, such as the cost and possibility of fake certificates, the benefits outweigh the risks. If you're in the process of building a website for your business, or even already running an unsecured one, it's well worth your time and money to invest in an SSL certificate.

By Vladana Donevski

Having a company but not having your own website, in this day and age, is professional suicide. With around 252,000 new websites springing up each day, building a great business website is easier than ever. It’s worth every penny and a must-have for any company.  So, how do you host your own website? Basically, there are two ways: the easy and the complicated.   Self-Hosting a Website and Why It’s Not Such a Good Idea To really host your own website, you need a server at your disposal. Only a couple of tech giants like Microsoft, Google, and Amazon host their own services and are actually the world’s top cloud service providers. The alternative route is to host a website on your own machine (server). The idea may look appealing at first, but there are considerable risks involved. Your server needs to be up 24/7 with backups in place if you lose power or if your hardware dies. You also need to pay someone to maintain your server and your website, which is just the tip of the iceberg. It requires time, money, and skills to operate your own server. That’s why opting for a hosting provider instead is a much wiser choice. Hosting via a Hosting Provider The best way to host a website is to use a hosting provider instead of hosting a website on your own server. These providers offer the necessary infrastructure and vital tech support that you need for running and growing your business. They ensure that your website is up and running, with some offering a 99.9% uptime guarantee, which means your website can never be down for more than nine hours during an entire year. The only thing you need to do is pick a hosting plan that suits your business needs. How to Host a Website via a Hosting Provider The process of hosting a website can be broken down into three simple steps: Buy a domain name Select a hosting provider and a hosting plan Pick a hosting type How to Host Your Own Website – Step by Step Instructions The following sections outline in some detail how you should go about finding the right home for your website.  1. Purchase a domain Each website needs to have an address. In most cases, the address is the same or at least similar to the company's name if that name is not already taken. You can dig up information on the availability of domain names at online domain registers. Just remember that domain hosting isn’t the same as website hosting. All the major hosting providers offer a plan that includes a domain as part of their package. If your web hosting provider lacks such a package, you can always purchase a domain name from another domain hosting provider.  We would advise you to look for a web hosting provider that can provide you with both because it’s cheaper and drastically simplifies the customization process.  2. Pick a hosting provider When you pick out a domain name, the next step is to pick a reliable host provider and a hosting plan. The hosting provider gives your website a home on a server. You can host your own website by sharing space on a server with other websites or having an entire server to yourself.  It’s not uncommon for hosting providers to offer domain names as well, allowing you to host your domain and your website with the same provider. Of course, you can always transfer your domain, website, or both to another host.  With more than 330,000 web hosting providers, how do you pick the right one for your website? There are several key factors to consider when choosing the host of your own website and a hosting plan:  Uptime guarantee Redundancy Backups SSL certificates Bandwidth Database type  Email service Scalability Accessibility Customer service Uptime Guarantee Websites don’t have working hours, so naturally, you want them to be accessible round-the-clock. The last thing you want is for your website to experience upgrade or downtime complications. Therefore, the host of your website must offer an uptime guarantee of 99.5% or above.  Redundancy If you don’t want your business to suffer financial losses due to server-related issues, look for a hosting provider that offers redundancies. In this case, the redundancy offer refers to compensation for financial losses caused by a server-related issue.  Backups If you ask anyone who works in cybersecurity, they’ll tell you that having a backup is the best way to prevent data loss. The same goes for your website, but you don’t have to deal with it yourself. All the major web host providers offer 24-hour backup, which means that your host backups your website once every 24 hours. In the event of a cyber attack or catastrophic hardware failure, the host can bring your website back to life.  SSL Certificates Ensuring user privacy and safety is paramount when hosting your own website. Therefore, you want a website that has an SSL certificate. The SSL certificate will improve your Search Engine Optimization or SEO standing and encrypts data sent between the user and the website, which is crucial for securing online transactions. Some hosts provide them for free, and others are part of a paid hosting plan. Bandwidth Bandwidth represents the amount of data your website traffic generates, and contrary to common misconceptions, it doesn’t have anything to do with speed.  One of the more challenging questions when hosting a site is determining the amount of bandwidth your website needs. It mostly comes down to your expected web traffic and the type of website. If you plan on storing plenty of videos and images on the site, you’ll need more bandwidth. On the other hand, if the website is mainly text-based, you’ll need less. If you run out of bandwidth, your hosting provider may charge you extra, or the website could become inaccessible.  Database Type Different types of websites use different types of databases. The most common type of database is MySQL, but the one you choose will depend exclusively on your website. From there, find a host for your own website that offers the same database type as part of their hosting plan.  Email Service One of the advantages of hosting your own website is access to an email service from your provider. No longer will your email end with @gmail.com or @yahoo.com. Instead, you’ll have an email address ending with @yourdomainame.com. Most hosting providers offer unlimited accounts.  Scalability Business owners hope to see their ventures grow and expand. When that happens, your website needs to be able to accommodate an uptick in traffic and activity. You want to be sure that your web host offers a way for you to upgrade your hosting plan when need be. Accessibility The best part about web hosting providers is that they do all the heavy lifting of hosting your own website, but you should still retain a certain degree of control. That is where accessibility comes into play. Your host provider should give you access to your website's control panel, allowing you to easily manage and monitor your website. Customer Service Like any service provider, web hosting providers should have 24/7 customer service to help you with any technical problems you may face. The availability of technical support is a crucial consideration when picking a hosting provider and a hosting plan.  3. Choose a suitable hosting plan All that is left to do now is pick a hosting plan. There are five different types of web hosting options to choose from. Types of hosting:  Shared hosting VPS hosting Cloud hosting Dedicated hosting Managed WordPress hosting  Shared Hosting If you are starting and don’t expect a lot of traffic, then shared hosting is the way to go. As the name suggests, you share the server and its resources with other websites. It’s suitable for small businesses and blogs that aren’t video or image-heavy.  Shared hosting doesn’t have enough resources to keep any medium-size or eCommerce business website running smoothly, which can lead to a bad user experience and a potential loss of customers. Virtual Private Server (VPS) Hosting VPS hosting is a step up from a shared server hosting plan. VPS hosting is still a shared server solution, but with far fewer websites hosted on the same server. Multiple websites share the same hardware, but each one runs on a virtual machine with its own allocated resources.  Hosting your website on a VPS is the closest thing you can have to a dedicated server. It has fewer resources than a dedicated server, but it’s also more affordable. That is why VPS hosting is perfect for medium-size or eCommerce-oriented websites.  Cloud Hosting Cloud hosting is the fastest-growing sector in the web hosting industry. It provides a reliable and scalable solution for any business. The top cloud hosting providers can keep your website online 24/7 thanks to cloud technology.  Cloud works on a decentralized principle, while other types of hosting work on a centralized principle. With the centralized approach, your website is stored in a single data center. Since the cloud hosting is decentralized, your website is shared between several data centers that don’t even have to be on the same continent. Dedicated Hosting Dedicated server hosting is the favorite choice for businesses that cannot afford slow connection speeds and service disruptions. With a dedicated server, you don’t share any resources with anyone. The server is entirely yours, and you have complete control over it.  If you are looking to get a dedicated server for your company, you have to be aware that there are two distinct types of hosting plans. One gives you complete control, and you have to manage everything. In most cases, companies hire a server administrator who handles such tasks. The second plan is a fully managed plan by the web hosting provider. Not all web hosting companies offer this type of plan, and even when they do, it costs extra.  Managed WordPress Hosting First of all, you can run WordPress on any type of hosting. But managed WordPress hosting is a specialized web hosting service for businesses that use WordPress for their content management system or CMS. The best web hosting companies offer fully managed hosting plans, which enables you to dedicate more time to growing your business. 4. Build a website and upload it to your hosting space If you’re starting from scratch, you can turn to a website builder or a web hosting provider that offers website building services. Once you have a website, you’ll have to upload it to your hosting space. You should be able to do it from the web hosting control panel, customize the website, make the necessary adjustments, and go live.  If you choose a managed hosting solution, the provider takes care of all the maintenance, security, software updates, and data backups needed to keep your website operational. With an unmanaged solution, the business behind the website is responsible for all of the configurations. The unmanaged option is only suitable for businesses with efficient IT departments and experienced web developers.    Conclusion There is a lot that needs to be considered when picking the right web hosting provider, and we aren’t talking just about the technical side and web hosting pricing plans. Now that you know how to host your own website, it’s essential to evaluate what your business needs, and only then should you look for a hosting provider.

By Julija A.

Everything begins with an idea: Everything that makes up our world wasn’t there before someone thought it up. Say you have an excellent idea for an invention or product that might rock the market and make you really rich. Someone else might want to steal the idea for themselves or has a similar concept that puts you in the backseat. How can you protect yourself from that? Getting a patent is one way to secure exclusive rights to a product or invention. This article will discuss how to patent an idea for free and save your intellectual property from infringement. What Is a Patent? A patent is any type of intellectual property that gives its owner the right to legally exclude others from producing, using, or selling that invention within a given timeframe. In summary, with a patent, you can prohibit others from making any profit off your design (or, in this case, idea). To be granted a patent, your intended idea or invention must be new, inventive, and can be made or used. There are some things you can’t patent, such as: Mathematical formulas and natural laws Natural substances Scientific principles Physical processes (e.g., dance routines) Medical methods and procedures Drugs that endanger the user Inventions made for nefarious (criminal) purposes Inventions whose existence violates existing scientific laws Obtaining A Patent: To Lawyer Up or Not to Lawyer Up? Since patenting an idea is the only surefire way to secure exclusive rights, hiring a good legal service for this purpose can be quite expensive. If a patent’s nature would raise complicated legal issues, having a patent lawyer is not a bad idea. Patent law can be dicey, and a lawyer’s expertise may be a necessary investment for protecting your interests. On the flip side, if it’s not so difficult to obtain a patent, you could be saving thousands of dollars in lawyer fees and get a high level of control over the whole process. Let’s look at what it would take to obtain a patent on your own. Filing A Patent On Your Own Now that you’ve decided to take your idea or invention to the next level, here’s how to file a patent: Step 1: Choose the Right Patent In the United States, patents are filed through the U.S. Patent and Trademark Office, also known as the USPTO. The USPTO typically offers three kinds of patents: Utility Patent A utility patent is only available for specific kinds of inventions. You cannot get a utility patent for abstract ideas, natural products that have not been modified, or algorithms that have no real-world use. Provisional Patent Provisional patents help secure inventors with a temporary patent-pending status, usually for one year. You must file an application for a utility patent before the end of the year to maintain this exclusive status. Design Patent Design patents are specifically created for ornamental designs and cannot offer any protection for any functional benefit that the design may have. When filing a patent application, you should remember that USPTO fees are based on the scale of the applicant. The larger your business, the higher your charges. Step 2: Document Your Process The inventing process involves two significant steps: Thinking up the invention and bringing it into existence. It’s vital to document both steps. Even when your design is based on another, for instance, a new machine that combines two existing ones, you must show where the idea to create it was conceived. The second step involves making the invention work. Taking a cue from our earlier example, you should be able to show how the existing machines can be combined, as well as some alternative approaches. You can typically do this with a schematic, drawing, or photo. Another important tip regarding patenting inventions is that any type of documentation is better than none at all, but a lab notebook is ideal for keeping to scientific standards. Remember that dates are important and you should keep records of them. Step 3: Keep Your Idea Confidential Whatever you do, ensure that your ideas are kept strictly confidential. All relevant or irrelevant information should remain undisclosed, as any exposed information could compromise your patent. If you’re in the US, there’s a grace period of about a year to file a patent after any public disclosures. However, in other parts of the world, you may not be so lucky; once it's out there, most exclusive rights are gone. If you have filed an application, the patent has a pending status, and you are free to discuss it. If you feel you must talk to someone before you apply for a patent, make them sign a non-disclosure agreement. Step 4: Run a Patent Search It’s essential to research the patents in your field or industry. This helps ensure your patent covers all the bases with exclusive rights to your invention. You can conduct a patent search using the USPTO database, trade journals, catalogs, conference presentations, and other publications. Because patent searches can be complex, it’s advisable to use online resources. Be sure to consider synonyms, abbreviations, and spelling variations (UK and US spellings). Also, save your data, so you can always repeat your searches. Step 5: File a Patent Application As mentioned, you can file for a patent on your invention on your own, or seek the services of patent attorneys to do the filing for you. Patent applications take a lot of technical and legal expertise, and the potential for mistakes is extensive. Such expertise is costly, with a simple patent sometimes costing thousands of dollars. Going through the patenting process yourself would save you a lot of bucks, but you’ll miss out on the advantages of a lawyer’s experience. For example, your description may not fully expound on your invention, whereas an experienced lawyer would think of alternative scenarios and cover all angles. Exclusive rights are harder to enforce with a poorly formulated, limited patent, which defeats the whole purpose of a patent in the first place. Competitors are always looking for loopholes; any missed details may just give them what they need. However, you can still do a lot with self-made applications for patents. For one, you can file for a provisional patent, which doesn’t have any strict formalities a utility patent would. Drafting and filing a provisional application can be done on the USPTO web portal. You should also have a lawyer look at it before it is filed. This is cheaper than having the lawyer draft it, but you’d still get an expert legal opinion. You can also draft a utility patent application yourself, using a related patent as a template. Just ensure that you include your own draft drawings, all relevant references, and claims that differentiate your invention from others. This way, even if you require a lawyer, the bulk of the work has already been done at no cost. Alternative Methods Of Filing A Patent There are two ways you can actually patent an invention for free, sort of. If you cannot afford an agent or attorney, look to the Patent Pro Bono Program or the Law School Clinic Certification Program, both provided by the USPTO. The Patent Pro Bono Program pairs registered patent agents or attorneys with inventors. The attorneys are all volunteers, so inventors do not have to worry about paying them. However, it’s not an entirely free process, as you would still need to pay all the USPTO filing fees. The Law School Clinic Certification Program, on the other hand, involves law school clinics providing free legal services to inventors. Law students provide these services under the guidance of an experienced supervising attorney at the law school. This is perhaps the easiest “how to patent an idea for free” method. Further Reading How to Start a Meal Prep Business 41 Small Business Statistics: Everything You Need To Know How To Start a Bookkeeping Business

By Julija A.

With a point of sale (POS) system, you can receive card payments from customers and optimize your daily operations, which can save you time and help increase your returns. If you’re just starting a business you should know that there are advantages and disadvantages of a POS system. We’ll show you both in this article so you can decide which approach suits your needs.  Advantages You’re probably already aware of the benefits of POS systems for online and in-person transactions. But you might be surprised to find that with the right approach, they can also help you improve many other aspects of your business venture.  Increased Sales   Nowadays, people don’t necessarily carry a lot of cash around, which is why having a user-friendly and efficient payment system can boost your sales. Card machines allow you to make sales as soon as the customer is ready.  There are also indirect ways in which these systems can help boost your sales. For example, a POS system keeps track of your stock across all of your branches. If you’re out of a certain product, you can instantly check which of your other stores have it in stock, then either send the customer there or get the product transferred. That way, they’ll still buy from you instead of your competitors.   Inventory Management  That brings us to real-time control of your inventory, one of the major benefits of a POS system. This automated service will keep your data synced; it removes the item from stock as the order is placed.  Cloud-based POS systems provide even greater ease of access and help you manage your inventory remotely. This allows small business owners to keep their stock in check, manage their orders in a timely fashion, and provide a better service with limited resources. Team Tracking  Optimizing your daily tasks means keeping track of your staff. Some POS systems provide great tools for these administrative purposes, as they allow you to track employee productivity. This way, you can easily check who’s slacking off and who’s hard at work. The right software can also let you allocate shifts and provide incentives in the form of commission structures. Employees get to track their own progress and see how close they are to earning a monthly bonus.  Theft prevention is another invaluable feature of POS systems. You can control who has access to the system itself and who logs in when, and you can limit the information that each employee gets to see. You can also connect your video surveillance feed to your POS system.  Customer Service Another one of the POS benefits you’ll get is an improved customer experience. The retail and hospitality industry have the most to gain from a system like this because it allows them to tailor each service to their clients’ needs.   One of the main advantages of a POS system in restaurants is that you can get software and hardware that’s specifically designed with this niche in mind. You’ll be able to make quick changes to the favorites menu, add or remove items that have run out, get an overview of the tables, and see if any of your customers have been waiting too long for service.    Disadvantages  Modern POS systems may not suit every business; there can be hidden costs and data security concerns that could sway you towards a more basic approach. Cost POS systems can be costly. Buying or renting hardware usually involves a significant initial outlay, while you’ll probably need to pay monthly fees for software. There will be extra costs for repairs and regular maintenance. Also, some services may charge up to 3% for each transaction, and that might prove to be too much, especially if you’re a small business owner. Even if there’s no up-front fee, you should check for hidden costs and calculate how much you’ll be paying for the service you require. Security Risks One of the main disadvantages of card swipe machines is the security risk. While customers may find them very convenient to use, POS systems can be subject to malware threats. If a POS system is hit with a malware attack, this could allow hackers to steal your customers’ personal info.  In order to avoid these attacks, the system will need regular software updates and almost constant maintenance. If you fail to do this and end up losing your customer data to hackers, you could face liability charges in court.  Reliance on the Internet  Interrupted internet connectivity is another disadvantage of POS terminals that can slow down your sales process and test your customers’ patience. Dealing with these issues may burden your team needlessly, and fixing them can take more time and effort than you’d expect. Some newer systems have an offline mode that can ensure data safety while still accepting card payments, but you won’t know if the transaction goes through until you get your system back online. Buying Used POS Systems If you’re on a budget, you might also consider getting used equipment for your business. However, you should be aware of the advantages and disadvantages of used POS systems beforehand. The lower price point looks tempting and these systems do provide the basic functionality you’ll need. However, you might not be able to receive software updates on these machines as new security requirements arise. The hardware could also cause issues as replacement parts become more difficult to obtain. Final Thoughts We hope we’ve highlighted both the advantages and disadvantages of a POS system in our article. It doesn’t matter whether you’re running an online shopping site or a brick-and-mortar store; you’ll be able to improve your service with a well-organized POS system. It’s up to you to browse through the POS packages on the market and choose the one that will be the best choice for your business.

By Ivan Stevanovic

Some people may confuse eCommerce with eBusiness and vice versa, but while the terms sound similar, they are in no way interchangeable. Understanding the distinction between these can make all the difference. With online retail shops generating 14.34 billion visits in March 2020, both branches of commerce are precious. In short, this article will answer the question: “What is the difference between eCommerce and eBusiness?” What Is eBusiness? With tech becoming integral to practically every aspect of our world, it's normal for businesses to implement tech-driven strategies. This may make it difficult to tell which companies are eBusinesses, but essentially, you could say most businesses are. The eBusiness definition states that any business carrying out its activities via the internet is an eBusiness. From buying raw materials, manufacturing goods, facilitating financial transactions, and product exchanges, so long as a business activity has been done through the internet, it counts as an eBusiness activity. These activities can be carried out through the internet, intranet, or extranet on apps, websites, enterprise resource planning (ERP), and customer relationship management (CRM) software. To identify an eBusiness, we can consider some case studies. Elements of an eBusiness Email Marketing Using email communication to foster relationships with existing and potential customers is a significant element of the eBusiness model. Marketing via email is an essential part of that. Digital Management Tools Digital tools take otherwise physical processes and carry them out online. For example, handling workflow processes with content teams can happen through online documents instead of a physical, paper-fueled system. Because these processes have been carried out electronically instead of physically, any business involved is essentially an eBusiness. Creating and Selling Online Tools Building systems for digitizing business activities, such as inventory management, is a form of eBusiness. The creators of such systems have facilitated the means to carry out business processes electronically, making them an eBusiness. Other eBusiness examples include setting up online stores, facilitating customer education, supply chain management, buying and selling products, and financial business transactions. If a business offers a service or product physically, it qualifies as a standard business. However, if it incorporates tech elements, such as providing services online, it's also an eBusiness. Bear in mind that there are two types of eBusiness models: Bricks and Clicks/ Bricks-and-Mortar (omnichannel) and Pure Play. Omni-channel companies use both offline and online resources to facilitate business activities. In the Pure Play model, business activities are strictly conducted online. What is eCommerce? The eCommerce definition is simple: The term refers to businesses selling goods or services online. In today's world, many products - like movies, music, and books - are bought and sold chiefly through eCommerce platforms. Popular eCommerce examples include retail platforms like Amazon or eBay. An eCommerce sale will typically include all the usual trading elements: You order a product, pay for it, and then have it delivered to you. You may also order a product and opt for in-store pickup, or decide to pay either via card online or in cash when your order is delivered. ECommerce has expanded over the years, across both websites and apps. Some businesses decide to combine their web pages and apps with virtual marketplaces as points of sale. More exposure is good, after all. No matter where a customer buys a product, it's all a part of eCommerce. Just like eBusinesses, eCommerce has various models. The types of eCommerce are: Business-to-Business (B2B) A B2B business model is a form of eCommerce where a business provides products and services to another company.  For example, companies that manufacture goods like batteries, car tires, door locks, and hoses sell them to companies in the automobile industry. Another example is video production companies whose services aid the marketing campaigns of other companies, or tech companies that make accounting software for companies. The B2B eCommerce model involves a business serving another business environment. Business-to-Consumer (B2C) The B2C eCommerce model involves businesses selling products and services directly to individuals. These end-users are called consumers. An example of a B2C model is a clothing store selling fashion items to the public online. Most businesses use their own websites to facilitate these transactions, but that can be costly to design and host. Luckily, cheap effective solutions are available through eCommerce website builders.  Consumer-to-Business (C2B) It might sound surprising, but the C2B relationship actually exists. In the consumer-to-business model, consumers sell services or even goods to businesses. An excellent example of the C2B model is influencers giving reviews and suggestions after using a product. Other times, paid consumer focus groups can test the products, and the business uses these suggestions to further improve the product. Consumer-to-Consumer / Customer-to-Customer (C2C) This is an eCommerce business model where consumers sell their products and services to other consumers, usually through a platform online. A famous example of the customer-to-customer model is the freelance gig market, where individuals sell services like data analysis, content writing, voice acting, web design, or even software development to other people. Platforms like Upwork and Fiverr facilitate these eCommerce transactions, charging a fee on the payments made. eCommerce vs. eBusiness Let’s break down the differences between these two seemingly intertwined terms.     eCommerce  eBusiness 01 The eCommerce definition refers to carrying out commercial activities and transactions over the internet. The definition of eBusiness refers to conducting all and any business activities online. 02  eCommerce is a subset of eBusiness. eBusiness is a broader concept than eCommerce. 03 eCommerce activities include the purchase and sale of products, as well as making financial transactions on the internet. eBusiness activities include buying raw materials, manufacturing goods, and facilitating financial transactions and product sales on the internet. 04 eCommerce usually requires a website or an online platform. eBusiness needs more than just a website. It needs multiple web platforms, enterprise resource planning (ERP), and customer relationship management (CRM) software. 05 eCommerce works on a Business to Customer (B2C) model eBusiness works across all models, so long as they’re on the internet. From all this, it should be clear what the differences between eCommerce and eBusiness are.

By Ivan Stevanovic

When sifting through information on bankruptcy, people tend to consider it a horrifying and lengthy legal process that can leave them in permanent financial ruin from which they can never fully recover.  They may also assume that declaring bankruptcy will act as a magical off-switch and bring financial relief to anyone on the road to financial disaster by eliminating all of their debts.  Neither of these assumptions is necessarily true, as the definition of bankruptcy simply involves legally declaring that you can no longer repay your debts.  This article will seek to dispel these myths by providing information to ultimately answer the question: what is bankruptcy? Bankruptcy Explained Bankruptcy is a legal action whereby a person or a company can legally declare that they can no longer repay their debts in front of a bankruptcy court. By doing so, they may be granted relief by being discharged from bankruptcy.  In the United States, bankruptcy proceedings are governed by federal law under six specific chapters of the US Bankruptcy Code. Claiming bankruptcy is achieved by filing under a specific bankruptcy chapter. However, only four are meant for individuals and businesses out of six chapters, as Chapter 9 deals with municipalities, and Chapter 15 is used in foreign cases. Our focus will be on chapters 7, 11, 12, and 13.  These four different bankruptcy types are categorized based on the parties to the bankruptcy: whether they are an individual or company and the type of legal action or relief sought. Bankruptcy proceedings are achieved through two types of legal action: liquidation and reorganization.  Liquidation happens when you file for bankruptcy, and your assets are sold and the proceeds distributed to creditors to repay debts. Filing for Chapter 7 bankruptcy, which is the most common filing, leads to the liquidation of your assets. However, claiming bankruptcy is not limited to declaring that you can’t pay your debts and then asking the court to sell your assets to pay the creditors back.  Filing for bankruptcy can also mean seeking assistance from the court in reorganizing your property to allow you to pay off individual or company debts.  Reorganization bankruptcy filings are different from liquidation filings because, in most circumstances, they allow individuals and companies to keep their property.  The different bankruptcy types and their legal implications are summarized below: Chapter 7 - Personal or liquidation bankruptcy, best for individuals and businesses Chapter 11 - Business or large reorganization bankruptcy Chapter 12 - Debt relief for family farmers and fishermen Chapter 13 - Wage earner’s plan, best for individual income earners Millions of people file for bankruptcy each year. The purpose of filing for bankruptcy and the end goal of any related proceeding is to be discharged from bankruptcy. Common reasons for filing for bankruptcy are large medical bills, unemployment, loss of a family member, natural disaster, or business failure.  What Happens if I Declare Bankruptcy: Individual Bankruptcy Explained Filing for bankruptcy involves submitting a bankruptcy petition to the bankruptcy court clerk. The court may liquidate or restructure some of your property depending on the type of bankruptcy you’ve claimed. The discharge will ensure that creditors will not chase that debt again in a few years if you do not have sufficient assets to cover your debts. Chapter 7 bankruptcy, for example, will allow the court to gather and sell your assets to pay your creditors and create relief by preventing them from taking further action to collect debts, such as harassing you or pursuing legal action against you. In case of any bankruptcy filing, creditors must stop all action, including legal action to recover the debt and broad measures such as debt collection calls, letters, and personal contact.  Your bankruptcy petition must disclose and outline all your financial and personal information, including a detailed list of all assets and liabilities, a list of creditors and the amounts owed to each party, and any income statements and tax records, including the latest tax returns. It’s important to note that filing and administrative court fees are involved. Depending on your circumstances, the court may waive filing fees or require you to pay the fees in installments.  What Happens After Filing for Bankruptcy? The court assigns a bankruptcy trustee to meet with you to evaluate your financial situation and arrange for the collection of your assets. The trustee then sells non-exempt assets and redistributes the proceeds to your creditors. The total length of bankruptcy proceedings can average between three to six months. Upon completing the case, you will be discharged from your debts.  Being discharged from bankruptcy means that most remaining debts are fully forgiven. This includes almost all types of unsecured debts: Credit card debt Unsecured loans Personal loans Medical bills Utility bills As well as some secured debts such as: Home mortgages Auto loans Tax liens  When dealing with secured debts, the ones backed by mortgage or collateral, you’ll usually have a choice to make. You can allow creditors to repossess the property that secures the debt, continue to make payments to your creditor, or pay a sum equal to the collateral’s replacement value.  Can All Debts Be Forgiven?  Not all debts will be discharged or forgiven after declaring bankruptcy. Certain types of debts will remain: Student loans Court fees  Child support  Spousal maintenance/spousal support payments  Obligations arising due to fraud  Obligations arising related to personal injury claims  Government fines and federal, state, and local taxes Who Can Claim Chapter 7 Bankruptcy?  Chapter 7 bankruptcy is the most common claim for individuals. However, claiming bankruptcy this way may not be available to all. There is a presumption of abuse in place, meaning that you must pass the means test before filing. This test is compulsory and ensures the bankruptcy laws are not abused, and court resources are not wasted.  The means test prevents high-income earners from qualifying for Chapter 7. To pass the means test: Before claiming, your household income must be below your state’s median income for six months. You must carefully gather a list of all your expenses and divide them into allowable and non-allowable expenses.  Your non-allowable expenses are expenses that could be put towards paying off any debts. The remaining expenses and any of your disposable income must be low enough to qualify for filing.  A bankruptcy lawyer can assist you with going through your expenses and determining whether filing under Chapter 7 is the right course of action for you. Access to legal representation can be costly, but you can explore alternatives with our guide to the best online legal services. Petitioning To Keep Your Property in Bankruptcy Proceedings When declaring bankruptcy, you can petition to keep some of your property. This includes the furniture in your home, your clothes, and in some instances, your house and personal vehicle. What you get to keep when filing for bankruptcy could depend on the state you live in.  In the US, bankruptcy filings are governed by federal law, but the personal bankruptcy law on the excluded property varies from state to state. Therefore, the types of property you may get to keep will vary depending on where you live.   Bankruptcy lawyers are generally employed to assist you in successfully negotiating to keep your property. There is no hard and fast rule on what you will get to keep, as it depends on your circumstances.  Chapter 7 and Student Loans Going through the bankruptcy process to relieve yourself from repaying student loans might not be the best idea, as bankruptcy won’t necessarily protect you from this obligation.  Student debt is considered unsecured debt and will not be automatically discharged by the court. Instead, you’ll need to commence additional legal proceedings known as adversary proceedings and successfully establish that the continuation of student loan repayments will cause you undue hardship.  The student loan provider may oppose your claim, and you will need to prove it according to legal standards set by the federal court.  Other Types of Bankruptcies: Chapters 11, 12, and 13 Explained  Bankruptcy chapters 11, 12, and 13 do not involve liquidation. Some companies and individuals may wish to restructure their finances to pay off their debts over the long term or decide on a different approach to bankruptcy. Chapter 11 of the Bankruptcy Code allows companies and business partnerships to continue their operations and keep their property by asking them to create and carry out the terms of a formal plan to pay off their debts. This claim is commonly referred to as company bankruptcy, and it can force companies to completely restructure their operations.  Restructuring is usually achieved by encouraging leadership changes, closure of facilities, and the renegotiation of debts. The main benefit is that the company can avoid liquidating its assets in the short term and continue operations.  Chapter 13 of the Bankruptcy Code is also called a wage earners plan. It allows individuals to reorganize their debt through a formal debt repayment plan based on their income for the last three to five years.  Chapter 13 filing is limited to wage earners, allowing them to keep their property. Individuals must have a regular income and are expected to repay as much debt as possible through regular monthly installments.  Lastly, Chapter 12 of the Bankruptcy Code is similar to Chapter 13, except it’s only available to family farmers and fishers with regular annual income.  Final Thoughts Bankruptcy may seem like a scary word, but it doesn’t have to be. By understanding the basics of bankruptcy and what it can do for you, you’ll be able to decide whether or not this is the right step for yourself or your business. If you’re feeling overwhelmed by debt and don’t see any other way out, bankruptcy could be the solution.  Personal bankruptcy filings may remain on your credit history report for 10 years and directly impact your ability to receive approval for future loans. Thankfully, there are alternative business loans for bad credit providers available. Bankruptcy can provide a fresh start, but choosing the right chapter is important. If you are considering bankruptcy, it’s best to consult with an experienced attorney who can guide you through the process and protect your rights.

By Vladana Donevski

When most people think of business partnerships, they think of two or more people jointly managing daily operations. However, you can opt for another type of partnership where one party isn’t involved in day-to-day management. Enter the silent partner. So, what exactly does this partner do, and what are the benefits and drawbacks of this type of business relationship? In this article, we will answer these questions and more. What Is a Silent Partner? A silent partner is an individual or entity that provides financial backing for a business venture without being actively involved in the day-to-day operations. Silent partners are also sometimes called limited partners, as their liability is usually limited to the amount of money invested even if the business declares bankruptcy. Occasionally, if asked to, the silent business partners can provide guidance and help with networking and finding new potential business partners. It is not uncommon for silent investors to be called upon in case there is a dispute between other active partners to mediate the situation. However, most of the time, the silent partner remains silent. By entering into such a partnership, the silent partner has full confidence in other partners to handle daily operations and grow the business, so they typically have no issues with taking the back seat in the daily management of the company. Who Can Become a Silent Partner? Becoming a silent partner in a small business isn’t a complicated process. Individuals, trusts, and corporations can all serve as silent partners. For small businesses and startups, silent partners can even be friends and family. However, most of the time, it is a business or an investor that benefits from partnering with your company in one way or another. In some cases, a business may even have two or more partners that are silent, as long as it works for both parties. We'll tell you how to find a silent business partner a bit later. But first, we’ll go over the benefits of having one and how the arrangement is supposed to work. The Benefits of Having a Silent Partner There are several benefits that come with having a silent partner, but the main one is financial. Provides the Needed Capital With No Interference First, it allows you to raise capital without having someone interfere in how your business is run. A silent partner doesn’t interfere in the day-to-day decision-making process, either because they don't know much about the industry or lack any interest in managing daily operations. Silent partner business opportunities are ideal for those who have confidence in the management team and are interested in investments that deliver passive income. Those investments can provide much-needed capital for businesses that are just getting started without any revisions to the business plan or the marketing strategy. In addition, this financial support can help cover unexpected costs or help the company expand its operations. New Networking Opportunities Silent partners, just like angel investors, are also usually well-connected and can use their networks to help the new business in a variety of ways. For example, a silent partner or investor may be able to introduce the company to potential customers or help it to secure favorable contracts. Overall, silent partnerships can be a great way for many entrepreneurs and new businesses to get the business off the ground. How Does Having a Silent Partner Work? As with any other partnership, the silent partnership should be formalized in writing. However, to do so, your business must be registered first. Registering the Business Any business with two or more owners can either be structured as a general partnership or a limited liability company (LLC). Different states have different rules for registering these partnerships, and you should inform yourself about the relevant laws and requirements. Silent Partnership Agreement The next step is inking the agreement. It should include the roles and responsibilities of all parties involved, the amount being invested, the stake owned by each party, as well as how the profits are distributed.  Most importantly, it should outline the legal responsibilities of all parties. Silent partners are typically liable for losses up to their invested amount, which makes this a safe investment without the threat of unlimited liability. It also outlines the procedure if one partner wants to sell their stake in the business or if the entire business is sold. A silent partner agreement helps to protect both partners by clearly defining their rights and obligations. By having a silent partnership agreement in place, the partners can avoid potential conflict and ensure that their business runs smoothly. So, if you are considering entering into a silent partnership, it is important to have an attorney review the business agreement to ensure that it meets your needs and provides adequate protection. How Does a Silent Partner Get Paid? Typically, silent partners receive a fixed percentage of the profits on a monthly, quarterly, or yearly basis. In some cases, they may also receive a portion of the proceeds from the sale of the business.  Silent partners don’t get paid like business owners. Their earnings depend on the amount they invest in the business and what percentage of the business they own. If the business partner buys 10% of the shares with their investment, they will typically receive 10% of the profits. The exact details of the payment terms should be outlined in the partnership agreement. Silent Partners vs. Investors Both silent partners and investors provide financial backing for businesses, but there are a few key differences between the two. The most important of these is the level of involvement each type of shareholder has in the business. Silent partners, as mentioned before, are typically passive investors who do not take an active role in managing the company. On the other hand, investors often have a say in how the business is run and may provide input on major decisions. Another key difference concerns the silent business partner's low level of risk. Silent partners are typically liable up to the amount they invest and as such don’t risk losing anything more than the actual investment. Unlike most regular investors, they are also immune from any legal action being taken against the business. Finally, silent partners typically invest their own personal funds, while investors may use borrowed money to finance their investment. How to Find a Silent Partner? If you're interested in finding a silent partner, there are a few places you can look. Similarly to finding an angel investor, you can start by networking with individuals and businesses in your industry. You can also search online for directories of potential investors or work with a business broker to connect with a potential silent partner company. The silent investor doesn't have to be an individual. The business operating in your niche can also be a silent investor. Pros and Cons of a Silent Partnership When starting a business, there are benefits and potential pitfalls to bringing a silent partner onboard. It’s important to thoroughly examine both the pros and cons before pulling the trigger on this business arrangement.  The pros of having a silent partner in a small business: Silent partners can provide much-needed financial support when you’re trying to get your business off the ground. They can also have a valuable advisory role. Having a silent partner onboard can also be helpful in building credibility and attracting other investors. Finally, silent partners can provide an important buffer during difficult times or periods of transition. While they may not be directly involved in running the business, their support can be crucial during tough times. Cons of Having a Silent Partner in Business The silent partner may not be as invested in the success of the business as the active partner.  Silent partners are often not familiar with all aspects of the business, which can limit their ability to provide useful input. Finally, it is important to remember that a silent partner has a percentage of the business but doesn’t get involved in strategizing or managing operations. As such, if the business fails, silent partners are inclined to blame the management team. In Conclusion Silent partnerships are common practice in the business world, and for small businesses that are just starting out, they can be a crucial ingredient for success. Silent partners offer up the cash without demanding changes to daily operations or influencing your decision-making process. However, most silent partners lack the experience and business knowledge to have an effective advisory role. Make sure this is an appropriate arrangement for your company before signing any silent partner business agreements.

By Vladana Donevski

Setting up a business can be a lengthy process filled with challenges and tough decisions. A business bank account is required for the majority of businesses, whether it’s a small business, a sole proprietorship, or a large corporation. However, before opening an account, there are some factors you should consider to ensure that you’ve picked the best option. We’ll go over the benefits of having a business account, how to open a business bank account with the proper documentation, as well as how to pick the account and bank that will be tailored to your needs. Benefits of Setting Up a Business Bank Account A business bank account can facilitate your business ventures and is a requirement for some types of enterprises. Even if you’re a sole proprietor, having an account for your business offers a number of advantages that a personal bank account simply can’t provide. You Can Separate Your Business and Personal Funds Having separate accounts allows you to keep better track of your company’s financial records and income. Additionally, using a single account for your business and personal assets puts your personal savings at greater risk in case legal proceedings are initiated against your company. Therefore, it’s a wise decision to protect your personal savings by having an independent small business bank account. You Can Accept Payments via Credit Cards Accepting and processing credit or debit card transactions is not possible with a personal bank account. Sticking with personal accounts may limit your clients' payment options, as they will only be able to pay with checks or cash, which could be inconvenient for some.  Others Can Access Your Business Funds You probably won't be the only one who needs to use the company's funds. When you open a business banking account, you can give your employees access to it, allowing them to execute numerous financial transactions on the company's behalf. After all, using your personal bank accounts with your business partners and colleagues is inconvenient. You Can Get Personalized Banking Assistance and Appear More Professional Developing a business relationship with your bank ensures that you’ll receive personalized assistance in achieving your company objectives. You can obtain valuable financial guidance, and getting a line of credit or a loan will be a lot easier. Clients may also feel more comfortable making payments to a company rather than to you personally. Decide on the Account Your Business Needs Traditional and online banks provide a similar range of banking accounts, however, their specific services and rates may differ. The advantage of a traditional bank is that there are more products to choose from, and the customer service is better, while an online bank is more convenient for clients who prefer to do everything remotely. Your business might need more than one type of bank account, so let’s check out some of the most common options for opening business accounts. Business Savings Account If your company doesn't plan on spending the money immediately and would rather invest it in the future, a business savings account is the way to go. Over time, money in a savings account earns interest, however, those funds might be more difficult to access.  Business Checking Account Checking accounts are designed primarily for receiving and making payments. In this case, finding the right checking account for your small business is crucial. You also have the option of opening an online checking account if your business doesn’t plan on dealing with cash transactions. Business Merchant Account Merchant accounts are ideal if your business plans on accepting debit and credit card payments. They are a secure way for you to accept electronic payments. For this type of account, you must partner with a merchant acquiring bank, which acts as an intermediary when it comes to processing credit and debit card payments. What Do You Need To Open a Business Bank Account? Ensure you have all of the relevant documentation ready before deciding where to open your bank account. The documents you'll need will vary depending on the legal form of your business, and we'll go over some of the most common ones. Your Personal ID Every signer on a business bank account must submit their Social Security number and an ID document, such as a passport or driver's license, regardless of the business type. This step is the same as opening a personal bank account. Social Security Number or Employer Identification Number  Nowadays, the majority of banking institutions need business clients to supply their EIN to open a business savings or checking account. In order to apply for an EIN (if you don’t have one), you need to fill out an application form on the IRS website with a valid SSN. In some cases, sole proprietors are allowed to open a small business account using only their SSN. Your Company’s Formation Documents These documents should contain essential information about your business, like the name of the person in charge of financial management, the company’s structure, and how it will operate. For a corporation, articles of incorporation are necessary, whereas for an LLC, articles of organization are required. Business Licenses Before you can open a bank account for your business, the bank will request documentation that your company has all the necessary licenses to operate. Of course, the procedures for obtaining a business license differ by location, so it’s advisable to do some research before submitting your documents. Monthly Credit Card Income Businesses that need to process credit and debit card payments and transactions usually opt for merchant accounts. Accordingly, they need to provide the bank with their credit card revenue on a monthly basis.  Choose the Right Banks for Business Accounts and Apply After you've decided on the types of bank accounts that are suitable for your enterprise, you'll need to pick the right bank that will suit your business requirements. We’ll list some of the key factors you should consider before making a decision. Fees Business banking accounts usually come with monthly maintenance fees, ATM fees, cash deposit fees, and wire transfer fees. If you exceed your monthly transaction limit, you may also be charged per-transaction costs. These fees and their impact on your business are important factors to consider when choosing the bank. Tools for Account Management A good business account should allow you to make payments on the go, check your balance, and transfer funds from one account to another. All of this should be possible through a user-friendly smartphone app, an online account, or a third-party application provided by the bank of your choosing. Interest Rates If you opted for a business savings account, then interest rates are of primary importance. Certain business checking accounts also provide interest, so be sure to compare the rates and other criteria before making a commitment. Variety of Bank Accounts Not only do you need a bank that offers the business bank accounts you require right now, but you should anticipate the future requirements of your business as well. For example, make sure your bank offers lines of credit or a business credit card if you think you'll need them in the long run. Branch and ATM Locations As part of your preliminary research, you should look into each bank’s map of branch and ATM locations. Some may be closer to your area and therefore more convenient, so it's definitely worth exploring. Deposit Your Funds and Start Banking You're ready to open your company bank account now that you've chosen a bank and account type, and gathered all of the paperwork for your business entity. Applying for an account shouldn’t take long, and you can do it online in most cases. It’s a good idea to double-check all the information so you don't encounter any problems with the IRS or your bank afterwards. Depositing money in your business banking account is the final step of this process. Usually, you’ll be asked for a minimum deposit, which can be made by submitting cash, transferring money from some other account to yours (via wire or electronic transfer), or by a check payable to your business. Final Thoughts If you’re planning to grow your business and turn it into a profitable venture, creating a business bank account will be a necessary step toward that goal. By describing the procedure in detail, we hope to have made the process of how to create a business bank account easier for you. It just requires you to take several factors into consideration, and opt for the one that is perfect for your business needs. As a result, you’ll be able to focus on your bread and butter, safe in the knowledge that your finances are in good hands.

By Milica Milenkovic

When you're starting a website for your small business, there are many factors to consider - from the domain name to the monthly bandwidth for the website. Many new website owners have problems estimating how much bandwidth they need. Is 5 GB a month enough? Or maybe 100 GB? Furthermore, are those unlimited plans truly unlimited? That's what we're here to answer today. Read on to learn more. Measuring Bandwidth Every website on the internet generates some amount of traffic whenever people visit it. When an internet page loads, it needs to pull up all the files included, like images, audio, and script files, which all need to be downloaded to the client's web browser. The same goes for any data that travels from the client's computer to your website. That traffic is called bandwidth, and it's most commonly measured in bits per second (bps). When you decide to make a website, your bandwidth will most likely have a monthly cap set by the hosting company. This is usually presented in gigabytes (GB), although some providers measure it in megabytes (MB). If you exceed your bandwidth limit, your hosting provider may charge you extra or even shut down your website until the next billing cycle. There's a common misunderstanding that bandwidth affects how fast your website works. However, it will not affect how many visitors you may have on your website at the same time before slowdowns happen or, worse, the website crashes. That is only determined by the actual hardware the server is equipped with, along with the physical distance from the server, i.e., ping times. That’s why many businesses choose to host their websites on a VPS platform instead of a traditional, shared server. Determining How Much Bandwidth You Need The average bandwidth for a website isn't universal. Therefore, in this section, we'll list a few essential factors for determining how much bandwidth to order when setting up your web hosting account. Type of Website Different types of websites have different bandwidth needs. A simple blog with text and a few pictures will need way less bandwidth than a video streaming site or an online store. To put it simply - the more complicated your platform is, the higher the chances it will require more bandwidth leeway. Size of Website Website size is another determining factor in the amount of hosting bandwidth you need. A static website with just a few pages will obviously use less than a website with hundreds or thousands of pages. The number of files on your website is important as well. If you have a lot of high-quality images, for example, those will take up more space and, therefore, use more bandwidth than plain text. Number of Visitors The more people visit your website, the more bandwidth it will use. However, other factors play into this as well. For example, if most of your visitors are just browsing through your website and not interacting with it much, they won't use as much bandwidth as visitors watching videos or downloading files. Average Time Spent on Website Another factor determining the necessary bandwidth for all websites is how much time people spend there. If your visitors are there for a long time, they’re more likely to interact with what you have on it, which means they'll be using more bandwidth than visitors who just spend a few seconds on your site before they click away. Average Pageviews per Visit If people only visit one page on your website, they won't use as much bandwidth as visitors looking through multiple pages. Since each page on your website uses some amount of bandwidth, so the more pages someone visits, the more bandwidth they'll use. Calculating the Necessary Bandwidth for a Website Now that we've gone over all the factors affecting how much bandwidth you need, let's talk about how to actually calculate it. You need to determine the average number of visitors your website has in a month by looking at your website's traffic data in the admin panel. If you don't have that, you can use a tool like Google Analytics to get it. Then, you need to multiply that by average page views per visit and average time spent on it. This will give you the total number of page views for your website in a month. Finally, multiply the total number of pageviews by the average page size. This will give you the total monthly website bandwidth. Let's say you have an eCommerce website with an average of 10,000 visitors per month. Each visitor spends an average of two minutes on the site and views an average of three pages. The average page size is 500 KB. The formula goes like this: 10,000 visitors x 3 pages/visit x 2 minutes/visit x 500 KB/page = 30 GB/month This means you would need at least 30 GB of bandwidth per month for your website, but it would be advisable to have more. You can now start shopping around for hosting plans that offer the right amount of resources for your needs. Optimizing Your Website's Bandwidth Usage There are a few things you can do to reduce the amount of bandwidth your website uses. One of the most important things is to optimize your images. This means saving them in a suitable format and using the appropriate resolution. You should also consider using a content delivery network (CDN) to serve your static content. This can help reduce the load on your server and, as a result, your bandwidth usage. A web hosting plan should have enough resources for your website. This includes things like storage space, CPU power, and, of course, bandwidth. Your monthly bandwidth limit is fundamental if the website attracts a lot of traffic or uses a lot of data-heavy content, like videos and high-resolution images. If you're not sure how much data you need, you can use the formula from the section above to get a rough estimate and plan accordingly. Remember that this is just an estimate, and your actual bandwidth usage may be higher or lower than shown here. It's always best to err on the side of caution and choose a hosting plan with more resources than you think you need. Bandwidth Myths Debunked We've mentioned some common misconceptions about server bandwidth and how it affects websites. Let's look at some other popular cases of false advertising often used by hosting providers to lure inexperienced customers. Myth 1: More Bandwidth Means More Speed Many people believe that having more bandwidth will make their website faster. However, this is not necessarily true. Bandwidth only affects the speed of data transfer, not the actual loading time of your website. This means that, if your website is already fast, adding more bandwidth won't make it any quicker. The only thing that matters is the hardware your web host is using - i.e., its processing power and how fast the storage is. Myth 2: You Only Need Enough Bandwidth For Your Average Traffic Another common myth is that you only need enough bandwidth to cover your average traffic. However, this isn't always the case, as you can easily exceed this website bandwidth limit. If you have traffic spikes, you may need more bandwidth to accommodate them. It's important to keep this in mind when choosing a hosting plan. Myth 3: You Don't Need Bandwidth If You're Not Getting Much Traffic Likewise, many people believe you don't need much bandwidth if you're not getting much traffic. Again, a common misconception. Even with low traffic, you may still need a lot of bandwidth if you're using data-heavy content like videos and high-resolution images on each web page. Myth 4: Bandwidth Can Be Unlimited You might've seen a web hosting company advertising plans with unlimited bandwidth. Web hosting bandwidth is a finite resource. Most web hosts will impose limitations or even shut down your website if you use too much bandwidth. Hosting companies often advertise unlimited bandwidth, or unmetered bandwidth as it's often called, for plans dedicated to hosting WordPress websites and blogs. But, there's often a caveat: Fine print stating you'll either have limited speed after X amount of traffic or imposing some other limitation to what you can do with the website. As you can see, there are a lot of myths about bandwidth. It's important to understand how bandwidth works so you can make sure you have the right amount for your website. Conclusion We hope this article has helped you understand bandwidth and how it affects your website. It's a good idea to have an estimate of how much website-hosting bandwidth you need before launching your platform. Keep in mind that your actual bandwidth usage may be higher or lower than average. It's always best to err on the side of caution and choose a hosting plan with more resources than you think you need. This way, you won't have to worry about running into any problems down the road.

By Bojan Jovanovic

If you’ve ever tried to set up a business, you know how difficult it can be to decide on the structure the business should take. Once that’s out of the way, it’s time to work on branding, at which point you need to choose a name. Many business owners don’t want to associate their names or surnames directly with their brand; instead, they’ll use a “doing business as” name (DBA). In this article, we’ll explain what a DBA is, how to get a DBA, why you might need one, and any other related issues that might be causing you confusion. We’ll get right into it with a definition. DBA Definition A DBA is a pseudonym or alternative name that differs from the legal name of the business or that of its owner(s). It can be used to refer to the business as a whole or partially in instances where the owner(s) want to operate the business under a name other than its legally registered name. It’s also referred to as a fictitious business name, trade name (in Colorado, for example), or assumed name, depending on your location. A DBA doesn’t have anything to do with a business’s structure; it’s merely an official nickname used to present a brand to the public. A sole proprietorship, partnership, LLC, or any other business structure can get a DBA.  One famous example of this is Meta, Facebook’s newly renamed parent company. The company’s legal name is Meta Platforms, Inc., but its DBA is simply Meta. The original business entity and structure remain the same, but once the business owners create a DBA, they can market their company much more effectively using the DBA name. DBAs are not separate legal entities and will not offer you any asset or liability protection, no matter your business structure. They do, however, allow you to receive payments, open bank accounts, and market your business under that name. You may or may not need to register your DBA; this varies by state. It’s also important to note that DBA registration is not the same as registering a trademark; upon registration of your DBA, you should bear in mind that the additional rights and benefits associated with trademarks don’t apply to DBAs, unless you go through a separate trademarking process.  Registering a DBA  So, how do you go about registering your DBA? In the USA, you can do this by filling out the required paperwork and paying the filing fee at your local, state, or county agency, depending on the state. In this section, we’ll answer some questions associated with registering a DBA to give you a better understanding of how it works. Who Needs To File a DBA? Although businesses can go without filing a DBA, having a trading name can be great for branding purposes. Any formal or informal business that intends to trade under a name other than their legal one - or that may do so in the future - needs to file a DBA in most states. This is to prevent random “businesses” springing up under false names to defraud unsuspecting individuals. The main purpose of DBA filing is to prevent such cases of fraud. Once registered, the status of the business, its structure, and its ownership become clear not only to clients, but also to the state authorities where the business is registered. This way, everyone knows who they’re dealing with, especially if and when legal issues arise. DBAs are potentially more useful for partnerships than for sole proprietorships, simply because without a DBA, the business name will carry the surname of all partners. The more partners there are, the messier this can get.  A “doing business as” (DBA) name is also advised for formal business structures like an LLC. That way, if the business owner(s) want a rebrand, changing their DBA is much easier than filing for a legal name change. What Names Can Be Used as DBAs? You have great flexibility when picking a name for your DBA. It could be an acronym or an abridged version of your own name, a play on words, or an entirely new name. Filing a DBA with a brand new name is common among business entities trying to rebrand or branch out to focus on a single aspect of the business. You’re at liberty to be more specific about the nature of the business through the name of the DBA for the sake of creating awareness. When Should You File a DBA? You don’t have to file your DBA at any specific time, but it makes sense to do so early on, before you invest in branding. Don’t worry, though - even if you’ve been trading for years without a DBA, it’s not too late to get one.  Reasons to get a DBA later on include business expansion, rebranding, requirements from your bank, and bidding for contracts. The financial status of the company should also be considered when determining when to file a DBA. Registering multiple DBAs at once can get costly, so it’s worth considering whether you really need a DBA and, if so, how many. A better strategy might be to register separate business structures instead of piling up a series of liabilities on one business. In some jurisdictions, you’ll be required to file your DBA within 30 to 60 days after its first use. Step-by-Step Guide to DBA Registration The process for registering a DBA varies based on the state where your business is located or was registered. You should visit the county clerk at the closest registry or the website of the Secretary of State to find out what peculiar requirements apply to your jurisdiction. Your state may also require you to place a local newspaper ad for a stipulated amount of time. The filing fees range from $10 to $100.  You can manage the process yourself or hire the services of a professional to do it for you. Step 1 - Check business name availability  Conducting a name search by yourself or through the state will show you whether the name in question is available at both state and local levels. You should also be aware of the naming requirements applicable in your state. After you’ve confirmed the name’s availability, you can also conduct a quick web search to see if the URL is available and buy the domain name. After all, your business will likely need a website.  Step 2 - Ensure you fulfill the operating requirements After securing your DBA name, you may be required by your state to carry out business operations before proceeding with the registration process. Some examples of preliminary operations include printing branding materials like complimentary cards, staff identity cards (where necessary), and brochures. Step 3 - Complete the necessary forms  At this point, you’ll need to submit your proprietor information, including contact information, telephone numbers, and email addresses. This stage can be completed online. The completed forms can be handed back to the appropriate officer(s) in charge either online or via email. Whether approved or denied, you will be informed appropriately and this concludes the necessary steps to set up DBA. Other Things To Note About Filing a DBA 1. Restrictions on names Depending on your jurisdiction and the registration status of your main business, you may not be able to use certain words in the name of your DBA, including “Inc.” and “Corp.” at the end of the name. This will usually only apply if your business isn’t incorporated.  2. Announcement of your DBA When you start a business and need to find out how to get a DBA in your state, you may want to look out for requirements about announcing your trading name. Some states will ask that you announce your DBA in a local publication for a specific period. This is to create awareness that your legal business name and DBA belong to you and have been duly registered. 3. Certificate of good standing In some jurisdictions, you may be required to present a certificate of good standing from the office of the Secretary of State before your DBA registration can be accepted. This requirement is mostly for LLCs to show proof of the good standing of the business and its owner(s). 4. DBA renewals DBAs expire and need to be renewed after a certain period. In the majority of states, the lifespan of a DBA is five years. Take note of the registration date and the eventual expiry date to avoid any dramas. 5. Information change If the information you provided at the point of the DBA filing changes, your DBA may need to be revised. This can include changes to the structure of the business or to your principal address. 6. Employer Identification Number To protect your privacy and keep your personal and business matters separate, you’re advised to apply for an EIN. Having this number means you don’t need to use your Social Security number for your business identity. Advantages of Registering a DBA 1. Targeted branding When you need to branch out or focus on a certain aspect of your business, you may do so by getting a DBA registered and marketing it to your target audience. You’re at liberty to create separate logos, websites, and anything else related to branding to fit the description of what you’re registering as a DBA. This way, that aspect of the business can stand alone and have a more focused appeal. 2. Privacy protection Since the legal name of a business is usually the name of its owner(s), it makes sense to apply for a DBA. For some businesses, using a DBA ensures the protection of the owner’s privacy and reduces the number of unsolicited postcards and catalogs sent to your address. Privacy protection also helps reduce unsolicited calls, most of which probably aren’t from potential customers. Some of those calls may even be prank calls. You should consider creating a DBA if you don’t run a business that requires using your name to give you some form of leverage and boost personal branding. 3. Business flexibility For a business that already exists and is looking to expand, a DBA affords you the flexibility to do so while avoiding the need to register a new business entity. This flexibility even allows you to expand your business to a region where your legal business name has already been registered.  Flexibility also means that you can decide to use more fun and relatable names for your DBA. So if you haven’t already done so, the time to follow our guide on how to get a DBA is now! 4. Ease of legal compliance Fraudulent businesses and schemes can wreak havoc, and getting a DBA is the surest way to protect yourself and your business from avoidable legal issues. If you trade under another name in a state where you need a DBA but you haven’t done the paperwork, you’ll be in trouble.  The last thing you want is to end up defending a lawsuit that could have been avoided by filing the correct ‘doing business as’ paperwork. There’s no reason not to; it’s quick, easy, and not too expensive. Disadvantages of a DBA 1. Little or no liability protection Unlike registering certain types of businesses, getting a DBA doesn’t protect your assets from liability if your company gets hit with a lawsuit. The DBA does nothing to separate you from your business; it’s simply a legally recognized alias.  Of course, that’s not the purpose of a fictitious business name. Whether you’re opening an LLC or a corporation, you shouldn’t rely on your DBA for protection. 2. Maintenance difficulties Managing too many DBAs under one legal business entity can be a hassle, especially when you’re planning on doing business internationally. That’s because some other countries will also require you to file registration of trade name paperwork.  When you have to repeat that process for multiple DBAs across dozens of countries, then keep on top of renewals, there’s every chance some important admin could slip through the cracks and cause you some major headaches.  3. No extra tax benefits When you register a business name in the form of a DBA, you’re only getting an alias you can use for clearer branding. You shouldn’t expect the DBA to affect your company’s tax status - that all comes down to your business structure. 4. Lack of exclusivity of business names Seeing as a DBA is not a trademark, it doesn’t offer you exclusive rights to the name you have chosen; it only allows you to conduct business under that name. This means that multiple businesses can conduct business using the same or very similar DBAs. By extension, you can’t use DBAs for legal paperwork, since they aren’t legal entities. It should be noted, however, that you can trademark a business name if you desire some extra protection. Final Thoughts Registering a DBA is an easy and inexpensive way to expand your business and create brand awareness. It’s the best way for small businesses to experiment with other goods or services without having to break the bank or go through the process of registering a brand new business. At the same time, you can also enjoy the privacy a DBA affords you. Now that you know how to get a DBA, we encourage you to follow the steps discussed here and get one if your business needs it.

By Dragomir Simovic

If you’re planning to start a small business or are already a small business owner, you surely understand the importance of having a business plan. A good business plan can help you build a solid strategy, decide which resources you need, set a budget, and stay ahead of any potential complications that may happen along the way. Sounds like a dream, but not everyone knows how to write a business plan. That is why we’ve decided to write a comprehensive guide with all the important information summed up. By the end of this article, you should have a clear idea of where to start and how to develop a business plan that will make your business bloom. What Is a Business Plan? In short, a business plan is a document that includes your company’s goals and the steps you intend to use to achieve them.  Many entrepreneurs don’t even start developing a business unless they have a business plan set and ready. That’s because it’s important to put all your ideas on paper and see if they make financial sense. If your business idea doesn’t look promising on paper, it’s unlikely it will work in real life. Here are some elements you should think about while writing a business plan: Product goals Monthly goals and deadlines Financials for the first two years Profit and loss statements for the first three to five years Of course, as each business is different, you should adjust your approach accordingly. You don’t have to strictly follow any specific rules as long as you have all the fundamentals covered. Why Is a Business Plan Important? Business plans are important for both business owners and potential investors, and here’s why. If you’re just starting out, a business plan will keep you focused and help you position your brand. A solid business plan will help you: Prove that you’re serious about your business. If you have a successful business plan that shows your commitment, your partners and those looking to invest in your company will be confident about doing business with you. Determine your financial needs. One of the main purposes of any business plan is to help determine how much capital you need and for what. By allocating funds properly, you can plan ahead, which is especially important if you intend to ​​raise additional funding later on. Understand your competition. While creating a business plan, you can’t only focus on your company. You need to do a competitive analysis and review the market conditions as a whole. Knowing more about your main competitors will help you step up your game and boost your company’s competitive advantage.  Understand your audience. A business plan can help you better understand your customers and what they expect of you. It can help you make better products and services and tailor them to your customers’ needs. Reduce risk. By following the guidelines set in your business plan, you’re reducing the risk of investing in the wrong opportunities or missing the right ones.  Attract partners and investors. If you’re running a startup, finding prospective investors is the first order of business. Potential investors will be interested to know your goals and how you will go about pursuing them. They will want to see how you plan to manage stressful situations and whether you have an exit strategy. At the same time, prospective partners will want to check your business plan to see how it benefits them. As you can see, there are multiple benefits to making a business plan. It shows you are committed to your business and helps get funding, bring new business partners, reduce risk, and engage with your customers.  How To Write a Business Plan, Step by Step Now that you know all the basics and the advantages of a good business plan, let’s see how you can go about writing one. Here is a traditional business plan template: 1. Executive Summary First things first. Your business plan should start with an executive summary. The summary should include an overview of your company with a brief description of your product or service. It should summarize all your plans, ideas, and logistical details.  If written properly, your executive summary will attract potential partners and investors and convince them to read the rest of your business plan. The executive summary should include a short review of: Your business concept Your product description Your target audience The marketing strategy The current and projected financial status The information about your team 2. Company Description This is the part of a business plan where you should provide a detailed description of your company, including your company’s registered name and address and information about your products and services. You should explain your goal, what sets you apart from the competition, and what makes your business a good investment. Here are some of the particulars you should include in this segment of your business plan: Your business model Your business structure Your mission Your business history Business objectives Thorough information about your team and their salaries 3. Market Analysis Market analysis is one of the crucial parts of business plan writing. By conducting in-depth market research, you will get a better understanding of the current trends and the nature of your industry. It will also help you learn how to outshine the competition, which is extremely important, especially if you’re new in the business. One of the main questions you should answer in this part of your business plan is how big your target market is and how many people are interested in what you have to offer. That might sound overwhelming, but there are various sources you can consult.  You can do some academic research, check government statistics on particular demographics, or simply observe relevant news outlets. The more information you have, the easier it will be to make an informed decision. 4. Organization and Management This is the section in the business plan where you should describe the legal structure of your company. You should explain whether you’re running an S or C corporation, or if you’re operating as an LLC.  Furthermore, you should explain how your management team works and their roles and responsibilities. You should describe the hierarchy between all your team members and how each contributes to your vision. 5. Products and Services Your business plan should also have a dedicated section about your products and services. What exactly is your product? Who is it for? How much does it cost? Why is it better than what your competitors are offering? These are just some of the questions you should answer in this section. If you’re planning on adding some new products in the future, you should describe them as well and explain how they will contribute to your business. 6. Marketing and Sales To build a business plan, you need to define your marketing and sales strategy and how you plan to accomplish it. You should write about your sales process in detail and describe how you plan to attract and retain your customers. Of course, as the market conditions change, your marketing strategy will also change and evolve, and you can always adjust this part of your business plan accordingly. 7. Funding If your business needs funding, you should include that in your business plan. You should specify the type of funding and how much you need. You need to explain how you plan to use that capital, as that is the information your potential investors will be most interested in. Also, if you have any plans to sell the company at some point in the future, you should include that information as you write a business plan. 8. Financial Plan Having solid financial projections is probably the most important aspect of any business plan. Even if you have an excellent business idea and you’re invested in it, it won’t mean much unless you’ve figured out how to finance it. Each financial plan should feature a balance sheet, an income statement, and a cash-flow statement. A balance sheet gives an insight into how much equity you have in your business. Equity is the value the company’s shareholders would get if all of the company’s assets were liquidated and all its debts paid off. In plain terms, the balance sheet will show what you own vs. what you owe. The next segment your business plan should include is an income statement. An income statement is used to show a company’s financial performance over a given period of time. This statement includes all the necessary information about your company’s revenue, expenses, gains, and losses. So, whoever reads your business plan will be able to see how your business has performed in the past and whether or not it’s worth investing in. A cash-flow statement is similar to an income statement, but there are some differences. A cash-flow statement shows the source of cash but also helps track all ingoing and outgoing transactions. If the incoming cash is greater than the outgoing cash, your company has a positive cash flow.  And if it’s the other way around, your cash flow is negative, which can be a serious issue. According to some statistics, 82% of businesses fail because of cash flow problems, which is why you should regularly analyze your cash flow statements. Types of Business Plans Although there are some general guidelines, each business plan needs to be tailored according to your company’s needs and stage of development. With that being said, there are different kinds of business plans you can go for. The Operational Plan An operational plan is a plan that defines how each part of the team contributes to the company and its goals. It outlines the daily operations and tasks for over a year. A good operational plan ensures each manager and employee knows what’s required of them and understands their deadlines. Operational business plans are very important as they provide a roadmap for managing a business, but they can also be extremely helpful if you’re trying to get funding. They help assign human, physical, and financial resources, making it easier to reach your goals. The Strategic Plan The strategic plan is similar to the operation plan, with one major distinction. While an operational plan focuses on day-to-day operations, a strategic plan focuses on the company’s long-term goals and whatever is required to fulfill them. And while these are both action plans, a strategic plan heavily depends on an operating plan and its efficiency.  As a business owner, you need to ensure you have both operational and strategic plans in place, as that will make it much easier to achieve your business mission.  The Marketing Plan A marketing plan is another business plan example we cannot forget. It is a document that shows how you intend to promote and sell your products and services. It is an outline of your advertising strategy and all your promotional activities for a specific period of time.  Some of the key elements each marketing plan should cover include market research, marketing objectives and activities, the current business marketing positioning, marketing budget, and KPIs that should be tracked over time. Having good marketing can help you raise brand awareness, increase market share, and enter new niche markets. The Financial Plan Financial plans are another vital part of any business plan. As the name suggests, this document focuses on a company’s financial goals and the strategies it needs to employ to achieve them. A financial plan is especially important if you’re just starting a business, as it will show whether or not your business idea is profitable.  Each financial plan should include an investment budget, a financial budget, an operating budget, a cash-flow budget, and a personal expense budget. Once you have all this information in place, you should not have any trouble with your business planning and achieving your business goals. Just make sure to review your business plan periodically to see if it requires any adjustments. Final Thoughts As you can see, the process of writing a business plan isn’t as perplexing as it may seem at first, and the final product can be very beneficial to your business. By following the guidelines set in our article, you should be able to make a business plan outline and start developing your business strategy. All you have to do is define where your business currently is and where you want it to be in the future.

By Milica Milenkovic

In business, you will frequently come across the term “operating cash flow.” What does it mean, though? This post will give you the definition of operating cash flow (OCF) and then provide an example. We’ll also discuss two different methods for calculating OCF.  Operating Cash Flow: A Definition Operating cash flow is the cash that businesses generate during normal operations. Companies receive money from customers and clients and then use it to fund wages, rents, bills, marketing, and other services. The operating cash flow formula is as follows: net income plus non-cash income, adjusted for changes in working capital, revealing total cash generated and spent in a given period.  Operating cash flow, along with free cash flow and net income, helps companies determine their financial health. It provides a real-time view of their current cash position, regardless of their end-of-quarter profitability.  OCF Formula To calculate operating cash flow, you can apply the following operating cash flow equation: Operating Cash Flow = Net Income + Non-Cash Expenses - Increase In Working Capital You can also calculate operating cash flow per share to see how much revenue each chunk of equity is generating:  Cash Flow Per Share = (OCF - Preferred Dividends) / Common Shares Outstanding Subtracting preferred dividends (if the company offers them) is essential for calculating this statistic because these shareholders receive cash first. How To Understand OCF in Accounting At first, operating cash flow seems like a complex topic. That’s because most people are used to thinking in terms of profit and loss. However, once you understand how OCF works, you’ll quickly see the value it offers. Operating cash flow enables firms to track cash flows in and out of their business accounts during regular operations. It lets them separate their primary business activities from other factors that influence their balance sheets, telling them how much money they have to play with at any given time.  Operating cash flow, sometimes called “cash flow from operating activities,” is the first section of the cash flow statement. It excludes any investments or financing transactions and includes cash in-flows and out-flows related to: Selling and purchasing inventory, Paying staff wages, Providing services, Paying salaries and bonuses, Paying suppliers, contractors, and consultants. Why Would a Company Use Operating Cash Flow? The beauty of operating cash flow is how it strips out various factors that get in the way of assessing the core health of a business.  For example, a company may have just made a large sale and is waiting for money to enter its accounts. On its year-end profit-and-loss statement, it will record the sale as revenue, making the company appear healthy. However, if the firm cannot collect the money, perhaps because the client pays late, it has no cash inflows – something that a look at the OCF will reveal.  Even so, operating cash flow isn’t always helpful for measuring the financial solvency of a firm. For instance, if capital spending is high and the company applies accelerated depreciation, the operating cash flow will appear chronically low even if the business has enough cash on hand to meet all its needs.  To remedy this, firms also report free cash flow (FCF). This expanded definition of a company’s cash flow avoids the artificial deflation of its total cash reserves, which often appears after working capital increases are taken into account.  Indirect and Direct Methods for Calculating Operating Cash Flow There are two methods of calculating OCF: indirect and direct. Indirect Method The indirect method of calculating OCF takes net income and applies various correction factors to it, reflecting the status of non-cash accounts, such as accounts payable, accounts receivable, and capital depreciation. The reason accountants call it “indirect” is because OFC is inferred from the company’s net income position.  An increase in accounts receivable, for instance, indicates that the firm has earned money, but the cash has not yet been received. Therefore, it must be subtracted from the net income.  By contrast, accounts payable implies that the company has incurred expenses, but they have not yet been paid. This extra cash would need to be added back to net income to produce the OCF statistic.  Direct Method The other method is for the company to record all transactions in cash and summarize its cash position for a particular accounting period on that basis. For instance, it might keep tabs on cash paid to suppliers and vendors, workers, and tax authorities when measuring out-flows, and sources of income, such as sales and dividends, when measuring in-flows. Conclusion Operating cash flow is a useful tool businesses use to determine their net cash position. It is valuable because it informs companies about their ability to pay for the inventory and services they need right now, regardless of their profitability. However, free cash flow might be more helpful to companies with accelerating depreciation programs.

By Nikolina Cveticanin