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In our modern digitally enhanced world, data and information underpin all of our activities.
But are you making your data work for you, or is it something that you are yet to take full advantage of?
For many business owners and marketers, analyzing and deploying data can be an intimidating prospect.
For that reason, analytics agencies have emerged, whose aim is to help businesses leverage their data for better decision making and improved outcomes.
If you are thinking about hiring an analytics agency, here is everything you need to know.
Know Your Goals and Desired Outcomes
Like when working with any agency partner, you first need to consider your current situation and goals.
The reason for this is that not every analytics agency is built in the same way.
Some agencies work with certain industries or companies at different stages of maturity.
Other agencies specialize in certain areas of analytics such as marketing vs operations.
There are also differences in how they execute. For instance, one agency may rely heavily on technology to power their insights. Whereas another may rely more on their years of experience and human intuition.
When thinking about your goals, consider these aspects:
- Your existing data – Think about the data assets that you are currently building. This can include things like marketing channels (search, PPC, content), operations or product data.
- The role of data in your business – Next, you will need to think about the role that data plays in your business. For instance, do you need to use data to predict and manage your inventory? Or perhaps you may need to leverage data to scale an existing marketing channel.
- Your budget – Naturally, there is a varying service fee depending on which agency you work with. Depending on what you want to achieve, you need to think about how much budget you can allocate to an analytics service.
- Business priorities – Ultimately, you will need to think about what is a priority for your business at the moment. This is where you should spend most of your time thinking and see how data and analytics syncs up with your main priority. Maybe you need to optimize your processes to reduce costs. Or perhaps you need to discover new market segments by leveraging customer data.
Before rushing into hiring an analytics agency, take the time to conduct a full audit of where you are today and where you want to be, while being conscious of how leveraging data can help you get there.
6 Characteristics That Make a Great Analytics Agency
Choosing the right analytics agency can be tricky if you don’t know much about analytics yourself.
In addition to a partner that can provide all the technical fundamentals of analytics, you will need someone who guides you and helps you make sense of what’s going on with your data.
And in the ideal case, a partner that can help take over the execution of your new data-informed strategy, particularly when it comes to the marketing aspect.
When evaluating an analytics agency, make sure that you vet for these characteristics.
Thought leadership describes the esteem and authority a company is held in in a particular industry.
This position is typically achieved by that company producing content that educates, solves industry problems and demonstrates superior expertise.
Take a look at the type of content that a given analytics agency is producing.
Are they even creating content at all?
Is the content insightful and communicated in a clear and concise manner (this also affects how they will communicate with you)?
An analytics agency that is producing good thought leadership content also signifies whether that company is on top of the latest trends, which is needed in fast-evolving fields.
Your analytics agency partner will need to have the appropriate technologies built that can help you aggregate and make sense of your data.
Their technology will need to be able to integrate with your data sources such as Google Analytics or Shopify, depending on the platforms that you use.
They should also have a platform that allows you to view and make sense of this data in a way that provides an intuitive user experience – such as the ability to visualize data with graphs or easily download reports.
In an ideal case, your analytics agency will have more advanced technology such as machine learning algorithms which can crunch and manipulate data for deeper analysis.
A Well-rounded Team
Analytics sits at the intersection between the world of numbers and the world of words.
There’s no point in collecting data if you can’t turn that data into actionable insights and strategy.
For that reason, the analytics agency that you work with will need to have a diverse set of team members who are both analytical but also creative.
This could include team members such as data scientists, psychologists, and digital marketers.
Bonus points for analytic agencies that have strong founders, as the insight and disposition of the founder is often imprinted onto the companies culture – affecting how they think and execute.
A Solid Client List
Sometimes, you can gauge the value of a company simply by looking at who they’ve worked with in the past.
If the analytics agency you are considering has an impressive track record of working with big names such Google or Intuit, then chances are that they know their stuff.
One caveat though: even if the agency has worked with impressive brand names, it doesn’t mean that they will necessarily be the right fit for you.
For a start, you may not even be able to afford their fees. And even if you could, they may be more optimized to working with bigger clients or clients with different needs.
So consider also the relevance of their client list in relation to your particular situation.
If you are working with an analytics agency, you want a partner that can explain to you the story behind your data.
The first way they need to do this is through their technology, which should allow you to visualize your data through graphs, charts, and other meaningful ways.
The second way they should do this is through how they communicate actionable insights through storytelling, and ideally strategy creation.
Remember that although data is objective, it doesn’t guarantee that the interpretation of that data will be objective too.
For that reason, your partner should always have a strong, clearly communicated, and logical case for their analysis. This way, you can know that you are making informed decisions.
Syncing With Your Team
Working with an analytics agency requires synchronization between both your technology and your teams.
Your development team will need to be able to easily integrate and set up with your partners.
Your marketing team will need to feel confident and informed enough to adapt their strategies based on the insights your partners are providing.
To work successfully with an analytics agency, both your teams need to be on the same wavelength. Strategy, expectations, and skill sets need to be well aligned to get the best results.
How to Work With an Analytics Agency
Each analytics agency that you work with will have a slightly different process. In general however, there is an overriding structure that will be the same from company to company.
In order to reach a successful outcome when working with an analytics agency, you should typically go through these steps.
1) Share your goals – Your agency partner should have a complete understanding of your goals including services, timeline and results. You will need to be as transparent as possible at the start of your relationship to ensure that you both have the appropriate expectations going forward. For instance, if you will actually need help with the marketing execution but you’ve partnered with a tech focused agency, there will likely be an issue later on.
2) Manage expectations – It’s important to also manage clear expectations about what’s possible early on. Some agencies offer a variety of additional services such as helping with strategy or machine generated analytics. Others may just offer a simple dashboard. It’s also important to understand the role of analytics in general and what it’s uses and limitations are.
3) Map out your assets – Your data assets represent the existing ways that you are collecting and storing data across your business. You will need to map out all your existing assets such as marketing channels (Google Analytics, etc), operations (inventory management, etc) and technology. These will then be used by your analytics agency for integration and analysis.
4) Integration – With your assets in place, you will then need to integrate them with your analytics partner. In the best case, your partner will have their own platform and will work with your development team to connect your data assets. If you are working with a smaller agency however, they may choose to access your data directly, in which case you would need to provide them the login credentials to the software you use.
5) Reporting – Once everything has been connected, your analytics agency will begin conducting an audit of your existing data assets. If they have a platform, you will be able to access and view all of your data in one place. The best agencies will allow you to view and manipulate your data in a user friendly way through graphs, charts and reports. They may also have machine learning technology that makes sense of your data without any human input.
6) Analysis – With technology, the human eye or a combination of both, your analytics agency will help you make sense of your data by telling you the story behind the numbers. They should then help you produce actionable insights which will inform your strategy going forward.
7) Strategy – With your existing data fully analyzed, you will then need to update your strategy, depending on the insights produced. For instance, you may choose to double down on a particular sales channel, or realise that you need to remove a bottleneck in your operations.
8) Execution – Some analytics agencies offer services beyond analytics, such as marketing execution. Your data may signify that you lack the necessary human capital to generate results with your existing or new strategy. Here, your agency partner may be able to help by taking over the reigns of wherever you are coming up short.
9) Monitoring – On an ongoing basis, your agency partner will work with you to ensure that your data, strategy and execution are all synced up. You should be having analysis and strategy meetings with them at least once a month, but also be able to access your data and any computer generated insights on demand.
How to Find The Right Analytics Agency For You
Finding the right analytics agency requires that you look out for and vet certain things. We have spoken about some characteristics to look out for here and what to expect when working with an analytics partner.
Here is a quick summary of the things to look for when finding the best analytics agency (LINK HERE):
- Full stack marketers – When analyzing your marketing data, it helps a lot if your analytics agency are marketers themselves. That way, they can help turn your data into strategies that actually get results.
- Strong technology – An analytics platform is the bare minimum your agency partner should have. If they have machine learning and data crunching algorithms, even better.
- An all star team – Your analytics agency needs to have a diverse set of team members that understand both numbers and marketing psychology. A strong founding team is also something to look out for.
- A strong client roster – Agencies that have worked with big brands is always a good sign. But when inquiring, try to find out if they have worked with brands similar to yours in terms of size and industry.
- A great communication style – Making sense of data is one thing, but explaining it in a clear and concise manner is something else. An analytics agency that can storytell in a meaningful way will help you put your data to use.
- They take a holistic approach – There are numerous sources of data that you are probably collecting. The more sources of data they can integrate and analyze the better.
What to expect:
- Onboarding and integration – The first thing your agency partner should do is onboard you to their platform and talk you through the process. This will include things like syncing up your technology and managing expectations in terms of outcomes.
- Auditing of assets – Next, they will need to do an audit of your existing data assets and come up with actionable insights which will turn into strategy and then execution.
- Setting up marketing channels – If your analytics agency offers services beyond analytics, they will work with you to execute your marketing strategy, including channels such as SEO, PPC and social media.
- Data management – On a continuous basis, you will be able to access and view your data through your agency partner. You will be able to download reports and visualize your data.
- Actionable insights and results – The best analytics agencies really stand out when it comes to translating your data into insights, strategy and execution. You should work with your agency to ensure that your data is informing decision making and driving results.
The Top 3 Analytic Agencies
There are hundreds of good analytic companies out there that serve all types of needs.
It is unlikely however that you have the time to go through and vet them all, so we’ve filtered down the top 3 analytic agencies, based on the various criteria we’ve discussed in this article.
The top 3 agencies listed here have different strengths and weaknesses, so you will have to decide which is the best fit for you.
1) NP Digital — Best For Marketing Execution
If you think that you will need helping putting the insights from your data into practice, then you should work with NP Digital. The agency was founded by Neil Patel, one of the most influential digital marketers in the world. And in addition to the analytics services they provide, they can also help you set up and execute a results driven marketing strategy. They have worked with big brand names including companies such as Google and Intuit.
2) Artefact — Best For Technology
Perhaps you are in an industry where you have a ton of data to analyze, or data plays a critical role in your ability to compete in the market. In this case, you should consider Artefact, an agency that has a robust technology stack which leverages artificial intelligence to really get the most out of your data. They have a strong and diverse team, ranging from social scientists to statisticians, and have worked with companies such as Greenpeace and Carrefour.
3) Adverity — Best For Smaller Businesses
For smaller businesses who may not be able to afford high end agency fees, Adverity may be a better match. Although Adverity is more of a technology platform than an agency partner, you will be able to amplify your analytics strategy at a fraction of the cost. The platform allows you to integrate data sources from operations to marketing. The drawback of course is that you don’t have the human level insight and execution that consultative agencies provide. Adverity currently has a 4.5/5 star rating with over 100 reviews on the G2 website.
At this point, you should have a good idea of how to choose an analytics agency.
Keep in mind that everything written is from our perspective, and there may be other things you should consider when evaluating an agency.
Before you finally pull the trigger and sign any contract, make sure that the analytics agency you want to work with has worked with companies similar to yours and that they can demonstrate some results.
Diane talks with Shane Harris, intelligence and national security reporter at The Washington Post, about Russia’s latest disinformation campaign – as well as the one happening domestically.
The post Russia Is Meddling Again, And The U.S. Is Making It Easy appeared first on Buy It At A Bargain – Deals And Reviews.
There are so many factors that affect the fundability of your business. Truthfully, your Experian profile is just one link in a very long fundability chain. However, that does not mean it isn’t important. As you know, it only takes one weak link to break a chain. As a business owner, it is important to understand your Experian financial profile.
Your Experian Financial Profile Can Affect the Fundability of Your Business
What does your Experian profile have to do with the fundability of your business? A lot actually. In fact, not only does your Experian business profile impact fundability, but your personal Experian profile does as well.
Experian Financial Profile and Fundability: What is Fundability?
Simply put, fundability is the ability to get funding for your business. If you are fundable, lenders see your business as one that can and will pay its debt. Since lenders are in it to make money, they see a fundable business as one that will offer a return on investment. That part is easy. The real question is, how does a business become fundable?
Keep your business protected with our professional business credit monitoring.
Sadly, the answer to that question is not quite as simple. Sure, a great business credit score is important. In addition, many of the things that are important for a strong business credit score are necessary for fundability as well.
The thing is, there is a lot more to fundability than credit score. You can find out more about that here. For now, let’s talk about the role the Experian plays in the fundability of your business.
First, you should know that Experian keeps files on both your personal and your business finances. Consequently, if you own a business, you have a business profile with them as well as a personal profile. In most cases, a personal and business credit profile is totally separate. However, with Experian, that isn’t always the case. While they do keep the two separates if you set things up that way, they also issue a combined report that incorporates your personal credit as a piece of business credit for lenders making decisions.
For you, that means that at least as far as your Experian profile is concerned, your personal credit history can actually affect the fundability of your business.
You can see your personal Experian financial profile here.
Experian Financial Profile: What about Business Credit?
Of course, it’s pretty obvious how Experian business credit can affect fundability. The big questions still remain however. What do you Experian reports tell lenders? Where do they get their information? How do they calculate their business credit score, and what does it mean?
Experian keeps business credit profiles on 99.9% of all United States companies. In addition, it claims to have the credit industry’s most broad data on small and mid-sized businesses. That’s why, if you own a business, it likely has a business Experian file.
According to Experian, all their information stems from third party sources. That means you cannot add anything to your profile. Still, you can check your profile and let them know about any inaccuracies. As a result, you have to know what that report is telling lenders about you and your business to stay ahead of the game. Also, you need to know where the information comes from, and what you can do about it.
Business Experian Financial Profile: What’s on there?
First, there isn’t just one score. On the contrary, your complete business Experian profile consists of a number of reports and scores. Lenders can choose to use any or all of them. Each one tells them something different. It takes all the scores put together to get a complete credit picture, but not all lenders look at all scores.
Quite simply, the Intelliscore Plus credit score shows credit risk based on statistics. It is a highly predictive score. As such, its main purpose is to assist users in making well informed credit decisions.
The Intelliscore scores range from 1 to 100. The higher your score, the lower your risk class. The opposite is true as well. Meaning, the lower your score, the higher your risk class.
Score Range Risk Class
76 — 100 Low
51 — 75 Low — Medium
26 — 50 Medium
11 — 25 High — Medium
1 — 10 High
How Do They Calculate the Intelliscore Plus Score?
One of the things Intelliscore is most known for is the identification of key factors that can indicate how likely a business is to pay their debt. There are over 800 commercial and owner variables used to calculate an Intelliscore Plus credit score. They can be broken down like this:
This is just your current payment status. It’s how many times accounts have become delinquent. Additionally, it shows how many accounts are currently delinquent and overall trade balance.
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The frequency factor shows how many times your accounts have been sent to collections. It also notes the number of liens and judgments you may have. Any bankruptcies related to your business or personal accounts are in the part as well.
In addition, frequency includes data regarding your payment patterns. Were you regularly slow or late with payment? Did you decrease the number of late payments over time? As you can imagine, those things make a difference.
This specific factor focuses on how you use your credit. For example, how much of your available credit are you using right now? Do you have a high ratio of late balances when compared with your credit limits?
Of course, if you are a new business owner, a lot of this information will not exist yet. Intelliscore Plus handles this by using a “blended model” to identify your score. That means that they take your personal consumer credit score into account when determining your business’s credit score.
The Experian Financial Stability Risk Score (FSR)
FSR predicts the potential of a business going bankrupt or not paying its debts. The score identifies the highest risk businesses by making use of payment and public records. These records include all of the following and more.
- high use of credit lines
- severely late payments
- tax liens
- collection accounts
- risk industries
- length of time in business
Experian’s Blended Score
This is a one-page report that provides a summary of the business and its owner. A combined business-owner credit scoring model is more comprehensive than a business only or consumer only model. Blended scores have been found to outperform consumer or business alone by 10 – 20%.
Business Experian Financial Profile: How to Know What Yours Is Telling Lenders
Experian sells a number of products which can be used to monitor your business’s credit with them.
Business Credit Advantage Plan
This option is $149 per month and incorporates mobile-friendly alerts and score improvement recommendations.
Profile Plus Report
This report costs $49.95 and includes in-depth financial payment details. Also, it offers predictive information on payment behavior.
Credit Score Report
A cheaper option at $39.95, this report contains details on the company, credit information, and a summary of financial payment information.
The valuation report costs $99. It shows the market value of your small business and features key performance indicators. It also displays your company’s fair market value.
Premium Corporate Profiles
Experian also sells premium corporate profiles. These are enhanced profiles that contain extra information. For example, sales figures, size, contact details, products and operations, credit summary, and any Uniform Commercial Code (UCC) filings will show up here. This report also includes fictitious business names, payment history, and collections history.
In addition, you can subscribe to business credit alerts through Experian’s Business Credit Advantage program. This is a self-monitoring service that offers limitless access to your company’s business credit report and score. It allows business owners to proactively manage small business credit. Alerts are sent when:
– Company address changes
– Business credit score changes
– Credit inquiries show up
– Newly-opened credit tradelines are added
– Any USS filings open
– Collection filings open
– Any public record filings pop up. This includes liens, bankruptcies, and judgments.
Despite all that business Experian credit monitoring offers, it is pricey. Monitor your business credit at Experian and Dun & Bradstreet here for much less.
Keep your business protected with our professional business credit monitoring.
Experian Financial Profile: How to Make a Positive Change
Since both your personal and your business Experian profiles affect the fundability of your business, it is important to understand how to make positive changes if you need to.
While you may not be able to do anything to make a big score increase happen all at once, you can definitely do some things that will make a positive difference over time.
Make On-time, Consistent Payments
This is number one. Over time, paying your bills on time will help establish your company as one that pays their debts. This will definitely help push your score up and show other firms that you are a low credit risk.
Handle Your Credit Responsibly
The more debt you have, the more monthly bills you have. As a result, you have less of your income available to spend. If your overall debt is close to or even over your income, it will look like you are a high credit risk.
Keep your debts in check and consistently pay them down or off to keep a good balance between what you make and what you owe.
You Have to Use Credit to Increase Your Credit Score
Keeping your debts low is good advice, but you have to use the business credit accounts you have. You make payments on accounts for your score to grow. Having a ton of credit and not using it at all doesn’t really help. Again, balance is key.
There is no need to buy things you do not need however. Even if you can pay cash, use credit for the things you would be buying regularly for your business regardless. Then, use the cash to pay the credit account.
Pay Attention to Both Business and Personal Credit
By now, you’re aware that personal credit is fair game when it comes to your Intelliscore Plus score. But don’t fall into the trap of thinking your personal credit doesn’t matter. If it is bad, there are options for working around it. However, it is much better to just keep it strong. Making certain you stay on top of your monthly bills is the number one way to keep your personal score healthy. Avoid unneeded credit inquiries, and refrain from compromising your personal credit for business needs.
This means setting things up in a way to actually have separate personal and business credit. Find more about how to do that here.
Make Use of Monitoring Options
No matter what your credit score is, it is crucial that you continue to be diligent and review your personal and business credit reports. This can help you spot possible errors and stay on top of your Experian financial profile.
For personal credit this is easy and free. Not only can you get a free copy of your personal credit reports annually, but there are a number of free services that offer you a peek at your personal credit score throughout the year.
As mentioned above, keeping track of your business credit will cost you. The good thing is, there are options to fit most budgets.
Experian Financial Profile: It Definitely Matters
Experian is well known in the personal credit world, but when it comes to business credit, Dun & Bradstreet often gets all the glory. Your business Experian financial profile can definitely affect fundability however. Throw in the fact that Intelliscore has a personal credit aspect, and you can see just how much your Experian reports can matter.
Keep monitoring all your credit reports and make changes when needed. Work hard to ensure only positive information is reported to all credit reporting agencies. Also, take the time to do a fundability analysis on your business. So take action where needed. If you do these things, you should be able to get funding for your business whenever you need it. Whether you want credit cards, loans, lines of credit, or some combination, you shouldn’t have a problem.
The post How Your Experian Financial Profile Can Affect Business Fundability appeared first on Credit Suite.
And 3 Surprising Things Other than Tax on Business Credit Card Rewards that May Impact Your Taxes
When choosing a credit card, whether personal or business, there are several factors to compare. Interest rate is probably the one most consumers consider first, followed closely by credit limit, and then rewards. Throw an annual fee in the mix, and you have even more to ponder. Back to the rewards thing though. Who doesn’t love a good reward? Cash back, points, airline miles galore, these are often the things that make the choice between one card or the other most interesting. When it comes to rewards however, one thing most do not consider is that they may have to pay a tax on business credit card rewards.
When Do You Have to Pay Tax on Business Credit Card Rewards?
Whether or not you pay tax on credit card rewards on your business credit cards will depend. Depends on what you ask? It depends on whether you had to spend money to get those rewards. For example, if you earn cash back, that would be a discount rather than income. It is therefore not taxable. The same is true if you earn points or travel miles as a percentage of the money you spend. If you earn $1 cash back for every $5 spent, that is considered a $1 discount, not $1 of income, and therefore not taxable.
If, however, all you had to do was open the account to earn the reward, and you did not have to spend anything to get it, then you may have to report it as income. This is the case with the bonuses that many credit card companies are fond of offering for opening an account with them. They may come in the form of cash, points, or miles. It doesn’t matter what form they take. If you didn’t have to do anything to get them, they are likely going to be taxable.
If your credit card information specifically states the funds are taxable, or if you receive a form 1099 from your credit card company, you can be sure there will be a tax impact. However, the absence of these two things does not set you free. A company only needs to to send a form 1099 if the amount is $600 or greater. Amounts under $600 are still taxable, but companies only have to send a form 1099 if the amount is over $600.
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Real Life Example of Tax on Business Credit Card Rewards
In 2012, some Citibank card holders received frequent flyer miles as a gift for opening their accounts. At tax time, a 1099-Misc came in the mail. It indicated the miles had been reported to the IRS as income with a value of 2.5 cents per mile. As you can imagine, this was an unwelcome shock to most. Since they did not have to spend anything to receive the miles, the reward was taxable income.
Special Considerations for Tax on Business Credit Card Rewards
When it comes to tax on rewards from business credit cards, there are some special considerations that can affect the tax impact of the rewards.
Using Rewards to Offset Business Expenses
If you are using business credit card rewards to reduce the cost of business purchases, that affects the amount of a business expense that is tax deductible.
For example, if you purchase a new printer for your business for $300, and you offset the cost with rewards equal to $100, you can only deduct $200 as a business expense. In this way, business credit card rewards can still increase your taxable income, though they are not technically taxable as income directly.
Using Business Credit Card Rewards to Offset Personal Expenses
If you happen to use rewards earned on business credit cards for personal expenses, rather than business expenses, you will not have to worry about them reducing business expense and thus indirectly affecting your tax liability. The question has come up about whether rewards earned on business cards and used for personal purposes should be personal taxable income. The IRS has said no. They will not consider this to be taxable income. As a result, there is zero impact on your taxes from these rewards.
If you receive a $500 bonus for opening an account, that is taxable income because no spending took place to get those funds. If, however, you have the option to donate that amount to a charity, you do not have to report that $500 as income. And it is also tax deductible as a charitable contribution. It’s a win/win.
Recap: How Do You Avoid Tax on Business Credit Card Rewards?
What’s the takeaway? To best use your business credit card rewards with minimum tax impact, do the following:
- Donate any bonuses, such as rewards not attached to required spending, to charity.
- Use rewards such as cash back, points, or miles for personal expenses rather than to reduce business expense.
How Do I Find the Best Business Credit Cards for My Business?
There are a ton of options when it comes to choosing a business credit card, and which one is the best for your business will depend on many factors. The first, as mentioned earlier, should probably be interest rate. You want the interest rate to be as low as possible.
Next, consider the credit limit. Does it give you access to enough funds to handle what you need it to? If you are going to consistently have balances at or near your credit limit, that’s no good. It will lower your debt-to-credit ratio, which directly impacts your credit score in a negative manner.
The next thing to look at is rewards. You need to find the card with the rewards that will be the most useful to you. A great travel rewards program is only great if you travel a lot. Triple points earned at gas stations and restaurants sounds good, but it is only a good deal if you spend a lot of money at gas stations and restaurants. If most of your credit cards spending is on supplies or inventory, these rewards will not be useful to your business.
Check out our professional research and score the best business credit cards for your business.
Next, balance the cost of the rewards versus how much you will actually benefit from them. For example, you may have a card with rewards that are good for you. But if it has a high annual fee, determine if the rewards benefit actually makes up for the cost of the annual fee. Do you pay $100 fee each year? Then be sure to earn more than $100 worth of useable rewards with that card annually.
How To Get Business Credit Cards
Of course, the business credit card discussion is moot if you don’t even have one. Perhaps you have tried, but you can’t get approval. Here’s the key. You need to have strong business credit to get the best business credit cards. This is credit that is separate from your personal credit, and therefore the accounts on your business credit report do not affect your personal credit score.
Business credit doesn’t just happen on its own however, and most new businesses do not realize this. In fact, many new small business owners are not aware that business credit is even a thing, and consequently they have no clue how to set up their business properly to allow them to build business credit.
How Do You Set Up a Business to Build Business Credit?
Before you can worry about tax on business credit card rewards, you have to have business credit cards. Before you can get business credit cards, you need business credit. To get business credit, you have to set up your business to be a separate entity from yourself.
The first step in this process is to incorporate. It is easy for a new business owner to simply operate as a sole proprietorship or a partnership, but this ties up all your personal credit data with your business information. By incorporating, you are taking the first step in separating your business from your personal credit.
Next, apply for an EIN. You can do this for free at IRS.gov. It is a number that functions as an identifier for your business the same way your SSN is a personal identifier. You will use this number on business credit card applications instead of your SSN.
Then, you will need to get a DUNS number. This is a unique identifying number that you get from Dun & Bradstreet. Since D&B is the largest and most commonly used business credit reporting agency, this number is essential to building business credit. Get it for free on the Dun & Bradstreet website, but don’t let them fool you. They will try to sell you a bunch of stuff you don’t need. You really only need the number, and it is free.
Other Things that Will Make Your Business Appear Fundable On its Own to Lenders
What else does your business need to appear as a fundable entity separate from you personally?
- A phone number and address that is different from your personal phone number and address. The phone number should be through a toll -free exchange and listed in the directories along with the business name and address.
- A business bank account that all business transactions run through. Not only does this help separate your business as its own entity, but it also makes it easier to separate business expenses come tax time. In addition, some lenders actually make a business bank account a requirement for approval.
- A professional website and dedicated email address. The email address should have the same URL as the website, and the web address should be something professional and paid for. A free email or website service is not suitable for these purposes.
Surprise! Here Are 3 Other Things that are Taxable that May Not Know
Now you know whether or not your credit cards rewards are taxable, how to avoid tax impact from business credit card rewards as much as possible, and how to get the best business credit cards for your business. How about a few fun facts? Here are 3 things that are taxable that you probably did not realize.
Yes, if your bitcoin is currently worth more than you paid for it, the gains are taxable just like with stocks and bonds. This also rings true of Bitcoin you get from your employer as compensation, a bonus, incentive, or even as a gift.
Gifts from an Employer
Speaking of gifts from employers, they are usually taxable. This includes more than cash bonuses. Did your boss give you an awesome new set of golf clubs or a weekend in his beach condo? That may be taxable too.
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This one was a total shock to me. One of my favorite small business budget hacks is to barter within my network for goods and services. It is not uncommon for small business owners to trade off for any number of things. Graphics, social media management, content writing, cleaning services, printing services, and more. The cash value of those trades can actually be taxable. Who ?
Do You Owe Tax on Business Credit Card Rewards? Maybe, Maybe Not
It all depends on how you got those rewards and what you do with them. Most credit card rewards are actually a discount, because they are directly related to some level of spending. These are not taxable, but they can still increase your taxable income by decreasing your business expense deduction if you choose to use them to reduce your business expenses. But if you choose to use those rewards to reduce personal expenses, they have no tax impact at all.
Bonuses for opening an account are different. They are taxable as income, even if they do not reach the $600 threshold to trigger a form 1099. This changes if you get the option to donate these funds to charity and choose to do so. Not only are they then not taxable, but they also count as a tax deduction.
The best option to avoid tax on business credit card rewards is to choose the card with the rewards that will best benefit you personally. Then you can redeem rewards for personal use. For bonuses, just donate them to charity if given the option. It looks good for your business, and it will only help you come tax time.
Always be careful to weigh the tax benefit of not using rewards for business expense against the actual benefit of the cost reduction however. You may find reduced expenses to be worth the cost come tax time.
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