Invoice Factoring Can Help Your Small Business

In the business world, opportunities can come from unexpected places. Being ready for these new chances to expand and grow is what separates a growing business from a stagnant one. Having the capital ready to invest allows you to quickly pursue new ideas. 


But sadly in todays economic environment cash is in short supply. But one thing many companies do have is an abundance of accounts receivables. Using invoice factoring, you can turn your receivables into cash, when time is precious.

Invoice factoring enables a small business to sell its accounts receivables to a third party at a discount. The small company receives almost immediate cash which it can use to fund new opportunities. When the invoice is paid in full the company receives the remaining balance less the factoring companies fee which is 3% or so.

In todays fast paced business world waiting for customers to pay an open invoice can take weeks or even months. When a business can't wait it uses invoice factoring. Factoring companies can advance up to 90 percent of an invoice total in under 24 hours. The reason it can be done so quickly is that factoring is not a loan, it's the purchase of receivables or financial assets. Bank loans usually are between two parties, while factoring involves 3 parties. Banks base their loan on credit worthiness but factoring bases its decision on the value of the receivables. There are no lengthy applications or long term commitments.

With invoice factoring a small company has access to quick money to expand, pay taxes, pay insurance, restock, or reestablish cash flow. For further invoice factoring information go to cbacfunding.com  

10 Frequently Asked 529 Plan Questions

 (Photo credit: Wikipedia)We can usually find something to complain about when we discuss our taxes or the government. But when they do something right we should tell everyone about it. One of those things they did right was to establish 529 plans for college savings. The ability to save for college tax free is a great opportunity. It not only encourages you, it rewards you by not having to pay taxes on the growth.

I find that there is some confusion about how 529 plans work so I listed ten frequently asked questions:

What Is a 529 Plan?
529 college savings plan allows family members to save money for a child's education, invest that money and remove the income from their initial investment tax-free for educational expenses.

Do you need to have a child before starting a 529 Plan?
A 529 plan is a good investment option for anyone who wants to cover educational expenses, not just those with children. If you know that you want to have children or adopt, you can start a 529 at any time and the funds will be available to you when you finally do become a parent. If you don't want children or end up not having them due to life circumstances or health, you can use the funds you have in the plan for your own betterment and career advancement.

Can I have more than one 529 Plan?
Each 529 plan has both an owner, who is the one contributing to it and a beneficiary, who is the person who can withdraw the money for college expenses. There are no limits for how many times a child can be listed as the beneficiary on a 529 plan. For example, a child's parents and grandparents might each open a plan for that child. In addition, there is no limit for how many plans a beneficiary can open.

Can You Have 529 Plans for Both Kids or Just One Plan?
Having a separate 529 plan for each child allows you to devise a custom investment strategy for each child's financial needs. If one child is a newborn or toddler, you may invest more aggressively in a 529 plan, as you have more time to recover potential investment losses from higher-risk investments. If you have a child who's in middle school or high school, you may choose to move investments under that child's 529 plan to more conservative investments to minimize losses.

Can You Pay a Mortgage With a 529 Plan?
You cannot use withdrawals from a 529 plan for anything other than qualified high education expenses (QHEE). In general, the IRS lists QHEE as tuition and fees, supplies, such as textbooks, items necessary to do schoolwork, such as a laptop used primarily for education purposes, and room and board for students attending school at least half-time. Thus, you may not use 529 savings to pay for your mortgage.

What Are Qualified Expenses for 529 Plans?

Tuition and Expenses You may pay for tuition and expenses related to an eligible educational institution with money that you saved, and interest earned, in your 529 plan. The IRS defines an eligible educational institution as just about any accredited public, nonprofit and private post-secondary schools. Eligible expenses can include books, supplies or equipment necessary to enroll or attend the institution.
Technology As of 2009, computer technology is an expense that can to be paid from 529 plan funds. This was added to the list of eligible expenses under the American Recovery and Reinvestment Act of 2009. Computer technology includes any computer and related equipment such as a scanner or printer. This eligible expense does not include software or related devices used for entertainment or hobbies.
Special Needs Expenses If the person benefiting from the 529 plan has special needs or requires special services to attend school, those costs are eligible, according the the IRS. The special needs must be connected to being enrolled at an eligible educational institution. An example of an eligible expense would be the cost associated with making a room handicapped-accessible for a student living in a dorm, if the school has not already adequately done so.
Room and Board The IRS allows you to use the money saved and earned in a 529 plan to pay for room and board as long as the student is enrolled at least half-time. However, there are some limitations. The amount spent on room and board must be no greater than the amount determined by the institution as the allowance for room and board, or the actual amount charged for room and board by the institution for institution-owned housing. Otherwise, the expenses may not be eligible.

Can I Use a 529 Plan for High School?
As of 2011, the Internal Revenue Service does not let taxpayers use a 529 plan to pay costs for high school. You may only use contributions to a 529 plan to pay expenses at an eligible institution. In general, eligible institutions consist of any accredited vocational school, university or college. If you withdraw money from a 529 plan to pay for high school tuition, the IRS will charge a 10 percent penalty on the distributions, on top of whatever you pay in income tax.

How to Close a 529 College Plan
Contact the plan manager for the account. You will find contact information on account statements. Inform the plan manager’s customer representative that you want to close the account. At the end of the year, the plan manager will send you a 1099-Q form stating the earnings on the account. Fill-out the Internal Revenue Service (IRS) Form 5329 – Part II. File that form along with the 1099-Q form that you received from the plan manager with your other income tax reporting forms in the same year that you close the 529 account.

How Much Money Can You Put Into a 529 Plan?
A college savings 529 plan had a maximum contribution amount of more than $200,000 as of September 2010. Although no limit for a prepaid plan exists, you contribute funds into the account in a lump sum and installment format, based on the current age of the beneficiary and the number of years of college that you want to purchase.

How to Set Up a 529 Plan for Your Child
Contact your brokerage firm about your state's 529 savings plan. You do not have to use your state's 529 plan, however. Your broker will have information on the plans available through your state. Fill out an application. Fill out an application for a 529 plan with your broker if you plan on using him as your investment adviser. 


Contribute money to the plan. You may elect to have automatic contributions deposited into the plan's account. These contributions will come from your checking account. Choose investments in the plan that are appropriate for building a savings for your child. A 529 plan normally contains mutual funds. 


A Gift for Both Parent and Child.


Saving money for college with a 529 plan is not only a benefit for the future college student, it is also a plus for the parents who have a tax free way to invest funds for their child's education. You should coordinate these investments with your financial adviser to meet your child's future savings needs.

College Savings vs. Retirement Savings - How To Strike A Balance

Retirement (Photo credit: Tax Credits)

Saving money for both college and retirement goals at the same time can be challenging. The cost of a college education continues to rise faster than inflation, at roughly 5 percent per year. According to the College Board, the average costs for four years at a private college is now more than $150,000 — including $38,589 for the 2012-13 school year. Even going to your state’s university, it runs close to half that total at an average of  $17,131 a year. This is peanuts compared to what you need to save for retirement.

With the good intentions of keeping their kids out of debt, parents are footing the bill for college costs. They are putting thousands of dollars away for college expenses that would of otherwise gone to retirement savings. A recent study from Ameriprise Financial shows that only 24 percent of baby boomers were saving any money for retirement, in 2007 the percentage was 44 percent. Many college parents will be experiencing substantially reduced retirement lifestyles because of their kindness. 

Prioritize.

Put retirement saving back where it should be, "first". Your kids can finance college or attend a college where the costs are more in line with the families finances. Sacrificing your retirement plan to help your kids is never a good idea. Your kids will understand, besides tell them if you don't save for retirement you will have to move in with them when your old. That will help them get the picture.

Start Early.

The key to saving for anything is to start early. Start saving for college when the child is born. Waiting even a few years causes you to have to save more monthly and the amount of compound growth will be greatly reduce. Even just saving $50 or $100 per month will help you accumulate a large college fund after 18 years. Set up a 529 college savings plan to take advantage of the tax-free withdrawals for education costs.

Make it a Family Project.

Include your children in their college savings plan. Over the years, your children receive cash gifts for birthdays and holidays. A large portion of those gifts should be put in the college saving account. It's a good lesson in teaching your children the importance of saving and participating in the families financial goals. Why should the parents be the sole provider of college finances? Teaching your children the value of paying their own way has incredible benefits all through their adult lives.

Pick an Affordable College.

Pick a college the family can afford. A prestigious college is all well and good if you have the cash to pay for it. But if the family doesn't, is it worth putting the family in massive debt for only four years of college, just to have a diploma from an ivy league school. Other ways to save college costs is to attend a local two year community college and finish at the more expensive college. Staying in state will also afford you much more savings than traveling out of state.

Remember parents, giving your children a good college education doesn't have to mean breaking the bank and sacrificing your own retirement. It is possible to do both in a reasonable way. 

Social Security Fund Depletion Set To Occur Sooner Than Expected

 (Photo credit: Wikipedia)According to a Summary of the 2012 Annual Reports by the Social Security and Medicare Board of Trustees, Social Security is expected to have depleted its funds a few years sooner than originally expected.

Social Security’s trustees released new estimates of the benefit program, funded through dedicated payroll taxes that are intended to provide Americans a degree of economic security as they grow old and/or become disabled, predicting the retirement portion of the program will run dry by 2035. The United States’ single largest program benefits 44 million senior citizens and survivors of deceased workers.

The program’s Disability Insurance fund, supporting 11 million disabled Americans, is expected to run dry in 2016, and Medicare is now projected to be out of funds by 2024.

The trustees said that to keep the Social Security trust funds solvent over the next 75 years, Congress could take a number of steps:

• increase the payroll tax rate from its current level of 12.4 percent to 15.01 percent;
• reduce benefits by 16.2 percent;
• find alternative sources of revenue;
• adopt some combination of these approaches.

For my fellow mid 50 year olds, these numbers are not going to effect us. We will be receiving our check fully funded by the government. It's the 20, 30, and 40 year old workers who are going to pay the price for the governments mismanagement of the Social Security System. They are paying into a system that will probably never be able to give them the same level of benefit we see today.