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Starting your Direct Sales business and How to Finance It

Want to start your own business but do not have the money to do it?  Here are some methods to help finance your startup and get you going.

Direct sales can be a very exciting industry, and when you find the company that suits you, you are ready to jump in with both feet and get started.  Unfortunately, sometimes having the money to get started, even an amount as little as $20 can be difficult to find, but there are some things that you can do to help you with this.

Money cash

Money cash (Photo credit: @Doug88888)

Have a Party – One of the best ways to get started is to host your own party!  If you have found someone to sign up with that is local to you, see if they will come over and do a party for you and give you all the sales.  If your friends know this is going to be your debut party, they will likely come out and support you.  Not only does this get you your kit, but it also gets you started on any new consultant program that your company may offer.  Be prepared to sign on the dotted line the day of your party, or else the consultant that did your party will be within their rights to keep all sales and you won’t get the proceeds to signup.

Odd jobs – Can you do some odd jobs for friends, family or others?  Check your local classifieds for people needing help with various things like house cleaning, dog walking, lawn mowing or anything else you are capable of doing.  Before too long you could have the money raised!

Garage Sale – if the weather is nice, haul any unneeded items you have onto your driveway or lawn and try to sell it.  Once you get started sorting out your house, you will be amazed at much you can find to sell.  Remember that you will never get as much for your items as you think they are worth, for instance, books will sell anywhere from a nickel up to 50 cents (at least where I live).

Borrow – See if you have a relative or friend that might lend you the start up fee or help you in some other method.  Maybe you can ask a few different people to help you out.  In return, you will want to pay them back and you may want to offer them a discount on product or something else as a thank you.

Charge – Do you have a credit card with some room on it?  While it is always best to buy things with cash, you can put your kit on credit.  Make sure you take any money you make at the party to pay it back before you start paying interest on it.

Payment Plan – Does the company you are signing up with have a payment plan?  If so, use that.  Or you may have to choose a lower level kit than what you want, and work on building it up with profits.  There is nothing wrong with doing this.

While direct sales may be cheap to get into, sometimes cheap is still hard for some people, and they are joining a company to make money.   Don’t forget that there are additional costs in direct sales that you will have to have money to pay for, even if all you get are new catalogues.

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9 Things to Consider when Joining a Direct Sales Company

When you are thinking about joining a direct sales company there are many things that you should look into.  Of course, there are many other items that might be relevant to your search but these are some of the main ones.

Man thinking on a train journey.

Thinking about direct sales? (Photo credit: Wikipedia)

Signup Fees – How much is it going to cost to get going?  Is there a way you can earn any of these fees back or get your kit for free?  Is there an application fee regardless of earning your kit for free?  What do you get for the fee?

Renewal Fee – Is there a renewal fee that you have to pay each year to continue being a consultant with the company?

Website – With the Internet being such an integral part of our lives, a website is becoming necessary.  Do you get a website for customers to shop on? If so, what is the cost and how long is that for?  How much is shipping off this site for your customers?  Can you build your own website and link to this one for people to shop?  Can you host and do parties through this website?

Supplies – What types of supplies are necessary?  This would be items such as catalogues, order forms or other paperwork.  For the basics such as catalogues, how much will they cost you and how often do you need to purchase them?   How much do other supplies cost such as order forms?  Do you need to buy new product every 3, 6 or 12 months?

Quotas – Are there quotas with this company?  If so, what are they?  How often?  What happens if you do not make them, not only to yourself, but to any team that you may have accumulated?  Does the company remind you in advance if you are below your quota?

Commission – How much commission do you make when you make a sale?  Do you get the money right away or a month later?  Is that the maximum you can earn or does it go up as your sales increase?  If you build a team, how much commission do you make from them?  Do you have to do something in regards to sales to earn this?

Credit Cards – Can you accept credit cards through your company or do you have to get your own credit card account?  If the company handles them for you, do they charge you anything?  If you have to get your own credit card processing account, make sure to compare monthly/yearly fees, and the fees for processing each card.

Perks – What kind of perks does the company offer?   Many direct sales companies have monetary incentives throughout the year or ways to earn free product.  You can typically earn a trip for free by making certain sales or recruiting levels, or earn some jewellery.  Some companies offer car and home allowances once you get quite high up on the company ladder.

Training – What kind of training does the company provide you with?  Is your upline expected to do it all or will the company provide materials?  If so, what is provided and how do you access it?

You will likely want the answers to most, if not all of these, before making a decision.  Occasionally you find a company you fall in love with, and nothing matters, but you should still find out all the details you can, as otherwise it can end up horribly.   You should have no difficulty finding a company that will meet your requirements once you do a bit of research.

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Paying for Training

Attending various training sessions with your direct sales company can add up.  But if you have enough notice about an event and have time to plan, you won’t have to struggle at the last minute to find the funds to attend.  Chances are your company has at least one big event each year, their convention, and you will need to spend a few nights at a hotel and spend money on meals.  Not to mention, there are likely going to be articles for sale from company clothing, to supplies and product that you will want to take home with you.

Money cash

You will likely need more than pennies (Photo credit: @Doug88888)

Share Costs

If you have to drive somewhere or overnight, see if there are other locals that are going.  See if you can share the cost of gas and a hotel room.  No one local?  Not a problem, chances are there are others looking to share hotel rooms.  Post on company message boards, Facebook pages or wherever others congregate to find someone to share.

Company Incentives

Check to see if your company offers any type of incentives to help you get to your training events.  They may offer the chance to win your convention cost, you may be able to get a discount on registration or maybe you can earn points towards your hotel stay.    Even if you cannot earn anything towards your convention, you may be able to win products or sales supplies.

Reward Cards

Get a credit card that has reward points it to help pay for airfare if you will have to fly to the convention.   Depending on the card, you can use rewards for a multitude of items that may help towards your costs if you do not have enough for the airfare itself.  Being able to redeem for $20 towards office supplies is $20 towards your trip as you are not going to have to spend the cash.  Talk to your bank and find the right card for you, you can find free cards that give rewards as you do not want to have to deal with an annual fee.

Set Money Aside

Set aside 10% or $50 of every party that you do to help pay or take all your commissions and overrides and put them aside.  If you need all the money that you make at your parties to cover your bills or other expenses, challenge yourself to doing one or two more parties a month.  If you cannot find the time to do more parties, learn more about how to upsell to make more sales or promote yourself in other places to make extra sales.

 

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Tracking Business Expenses in Direct Sales

Not many people enjoy having to do the books. But, if set up properly, and with the right knowledge, they are not as cumbersome.

Expenses

Expenses in Direct Sales (Photo credit: Phillie Casablanca)

For anyone who runs a business, they know that one of the tasks that must be accomplished is the accounting. For some, this is a job which they hate as much as toilet cleaning, but it is one that has to be done. Even if you use an accountant do to the final year end papers, if you do a good job with the day to day books, their job will be easier. Here are some ideas to help with tracking the expenses so that it will not be as much of a hassle.

Tips

  • Have a separate bank account for your business expenses
  • Put as many of your expenses on credit cards as possible
  • Create a place where you put all your receipts for when you sit down to do the books
  • Depending on how much paper you have, put everything for each month in one envelope
  • Have a filing cabinet so that if you have a lot of paper you can organize things in categories

Know Your Expenses

If you categorize your expenses correctly, it will end up helping you in the long run when it comes to tax time. This list assumes that you are running a business outside of your home, as there are other deductions that you are entitled to with a home based business.

  • Advertising – business cards, web site marketing
  • Insurance – Business insurance – does not include health insurance premiums
  • Interest – Any interest you pay on accounts such as credit cards or loans
  • Legal and/or professional services – Accountant or lawyer fees that you pay
  • Office Expenses – Anything beyond supplies for your office
  • Rent or lease – Premises or equipment
  • Supplies – Paper, toner, notepads or anything else routine
  • Travel – Cost of travelling to conventions or meetings
  • Meals/Entertainment – Amount paid for meals or entertaining clients. This has a special tax ramification which is why it should be separate
  • Utilities – Gas, electricity, telephone, Internet
  • Dues – Subscriptions to magazines or trade groups your business is a member of
  • Other – Any items that you are not sure where they belong can be put here

Make sure you keep the receipts that go with all of these expenses, as you will need them to show your accountant and possibly the IRS. But if you can get your expenses itemized through the year, it will make it easier for your accountant and you will spend less money.

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How to Handle your Business Expenses

Accounting and paperwork are scary to a lot of business owners, but it is a part of life. By setting up a system, you will make your life a lot easier.

Receipt Please

Receipt Please (Photo credit: Peter π)

For most people, accounting is not a priority in their business, but when month end or tax time comes, they are scrambling to find all their documents and prepare things. But if you take a bit of time each week or month to track your expenses, you will be ahead of the game and you will not have to look all over the place to find your paperwork.

One Location – First things first, put all your receipts in one location. This way, even if you do not have time to deal with it right now, you will know where to find it.

Make Notes – Mark your receipt with any relevant notes such as you were mailing a parcel to Jane or you took Joan out for coffee to discuss why your business would be a great fit with hers. These receipts are easy to forget their purpose.

Legibility – Make sure that the receipt is legible. If it is not, you can ask the location to write you a written receipt. If it is on the glossy till paper, you may want to photocopy or scan it, as those tend to fade over time.

Keep Current – Try to work on your books every week or at a minimum, once a month if you do not have a lot of transactions. This will save you a lot of time and headaches down the road.

Filing – Have a filing system that makes sense and you can keep up with. Challenge yourself to see how fast you can find something; if you have to go through multiple folders then it is not the right system for you.

Credit Cards – A great way to keep track of your spending is to put everything onto a credit card or debit card where you get a statement listing the expense. You won’t forget about it this way. Do not use the same card for your business as you do for your personal spending, as this can be very confusing and cause issues at tax time, especially if you are audited.

Envelopes/Folders – Envelopes and folders are a great way to organize your paperwork. Put unrecorded receipts in one until you record it, and then move to the appropriate folder once it’s recorded. You may choose to organize these by month or by type of expense; whichever works better for you and makes more sense.

One of the best reasons for keeping your expenses current and tracked is that you can see at a glance how well your business is doing and where you may be spending too much money. This is very important for a small business owner.

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Placing an Order for a Customer – Accounting Ramifications

This question came to me from a reader.  I did answer her privately but I thought I would share with my readers as well. (This version of the question is not an exact replica; it is my version)

When you place a transaction for a customer – the order is just theirs and you use their credit card, how do you account for it?

Credit Card

There is a simple answer for this.  The only accounting you need to do is for the commission that you receive on the order.

It is not going on your credit card so you do not need to account for it there and it was not part of a direct sales party so you do not need to add it into sales anywhere.  The only thing you are going to know about is how much you received at the end of the day.  If you have a website, treat it the same way you treat any orders you get from there – you only record the commission.

Now, if you were using the customer’s credit card as part of a party order, then it is a different issue and the answer depends on how your direct sales company handles credit cards.  If your company accepts cards on your behalf you are going to treat it differently than if you have to process the card with a third party processor.

Regardless, points to you for being on top of things and getting your bookwork done.  Many people just ignore these types of things or will just fudge them in to make the books work whether they are done correctly or not.

Do you have other questions about how to account for something in your direct sales business or about any other aspect of your business?  Please use the contact button and let me know so that I can help you and share with my readers!

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This post sponsored by:  Amazon Promotional Code

 

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Tax Tips for Your Business Today

I've started so I'll finish

Image by get down via Flickr

Are you one of those who wait until March to gather all of your bank statement, credit card statements, receipts, invoices, and bill statements? Do you wait until your accountant has called you repeatedly asking if you are going to make your appointment this year? Well stop. Chances are you might be missing something very important by waiting until the last minute. Being rushed puts stress on the body. Stress puts the brain into high access mode and you are not thinking clearly. No one wants to forget an expense or other important piece of tax information. Here are some simple tips for your business that you can get started on today to save you the stress headache during the next tax season.

Set up a file system

Most people don’t like to keep a paper trail. I can certainly understand why. It takes time to set up a file system and it takes up space to keep papers. In the world of taxes, it is always better to be safe than sorry. If an audit should ever arise you will want to be armed with your papers as proof of your deductions.

To quickly get set up you will need a file box or a filing cabinet for larger businesses. The first section should be invoices. It is up to you whether you want to write PAID and the date on them. It is also up to you to decide whether you want a separate folder for each client. The second section should be bills/expenses. It is here you want to keep the internet or cell phone bill as well as credit card statements (with the expense highlighted). Again it is your choice if you want to put these all in one folder or separate them by company. The final section should be for your bank statements.  When a new one comes in you should highlight work income as deposits and business related deductions as expenses.

What about receipts?

Receipts can be a pain to keep track of but you need them as proof of payment. I carry an envelope in my purse and place my receipts in there. Every few weeks I empty the envelope.  Receipts generally get stapled to the appropriate bill when using a credit card, or filed with the appropriate bank statement.

These are the things you need to pack up and take to your accountant at tax time. The better organized you are, the easier it is for everyone.

At the end of the year you can shred what you don’t need and the rest gets filed with your copy of the tax return.

Set up a form of recordkeeping immediately.

Do not wait until we are half way through the year to pick up a copy of Quickbooks , Quicken Home & Business, or any other accounting software you decide to use.  Unless of course your business is new. In that case, start right away. Having a accounting program at your fingertips will serve as a backup copy to your paper trail and do all of your calculations for you. With accounting programs you can bill clients by sending them invoices, reconcile your bank and credit card statements, place expenses in the appropriate categories and prepare financial statements. With a software program all of your needed numbers are available with the click of a mouse.

Starting these few simple tasks today can put your business on the right track to avoiding any disaster that could occur later. Start with 10 minutes a day preparing your files, and then moving on to sorting the papers. Once those tasks are set up you only need to spend minutes a day entering the bills, invoices, checks, deposits, etc. as they cross your desk.

Chrystal Mahan resides in Michigan. Mahan is a current college student working on a (double major) Bachelors in Accounting and Business, with plans to continue forward with a Masters.

She has 20 years of experience in the Accounting industry and over 10 in the field of Tax.

Mahan has been writing short stories since the age of nine and professionally since 2005. Mahan owns her own freelance business and writing appears on various blogs and websites.

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Keeping Track of your Accounting Paperwork

Replacement filing cabinet

Image via Wikipedia

Unfortunately, any type of business generates paper and you have to organize it in some way that you can find it again if needed.  You may need to find it due to warranty issues, to see what a customer ordered last, or heaven forbid, you get audited and you have to show the paperwork to the auditors.   Here are some suggestions on how to organize it all.  If this doesn’t sound like a good system to you, use it to figure out your own method – we don’t all work the same!

For me, as I do not put through a lot of parties and orders each month, I find an envelope system works well.  I picked up a box of about 200 9 ½ by 12 envelopes at Costco for about 10 bucks and I have barely used any.

Sales:

I take all the sales slips from each party and staple them together.  I mark the top one with the order number and the date I submitted the order to my company and put them in a folder labeled for the appropriate month.  In an effort to save paper, I save the order from my company in a PDF format to my computer with the order number.  You could easily print the page down and staple it to the front.

Expenses:

I have another folder for expenses throughout the year.  Again, I keep PDF copies on the computer for as many items as I can (for instance, utility bills as I get them all electronically).  For receipts for other things, such as trade shows or supplies bought at the store, I keep them in an envelope labeled “Expenses”.  I make sure to photocopy all the ones that are on thermal paper as they tend to fade which will not help you in the future.

If the expense envelope gets too full, or if you have a lot of expenses through the year, you could easily sub-divide it.  Select the divisions that make the most sense to you.

Banking:

Another folder you should create is for banking.  I would recommend taking your bank statement and attaching any receipts behind it that are not already accounted for in your sales or expense folders.   You may not have anything left but bank charges and interest.  Make sure to account for those in your bookkeeping and put these in their own envelope.  If you use a credit card, it should be in an envelope separate from your bank account simply due to the amount of paper generated.

Whichever folders or envelopes you create, start new ones on January 1.

 

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