Lending Library

What about your credit score? Whether you apply for financing for your small business or for a personal purchase, lenders will probably want to check your credit score before determining financing options. If this seems a little off-putting to you, don't be too concerned. The more you know about how your personal and business credit scores are used, the more prepared you’ll be for this sometimes stressful step.

What is a personal credit score?

A personal credit score is a number intended to serve as an indicator of how likely you are to pay what you owe. It’s based on a number of factors including: 

• how long you’ve maintained a credit-based product (like financing or a credit card)
• how often you use your credit
• how quickly you pay back what you owe
• how many times you’ve been late in paying back what you owe

Your personal credit score is expressed as a three-digit number between 350 and 800. The higher the number, the better your credit score is. 

What is a business credit score?

A business credit score is calculated using roughly the same criteria as a personal credit score calculation, but with a few more factors: 

• how long you’ve maintained a credit-based product (like a business loan or a credit card)
• how often you use your credit, how quickly you pay it back and how many times you pay late
• how many times you were late paying your rent or your mortgage, your vendor bills or your staff
• your personal credit score

Your business credit score is expressed as a two-digit number between 00 and 99. Again, the higher the number, the better your credit score is. 

And note that personal credit score is a factor in calculating your business credit score. This isn’t the case the other way around, and the reason it’s a factor is because lenders will want to know that the person they’re trusting with their money has a personal history of responsible debt service. 

Who determine your personal and business credit scores?

Why will business loan providers look at both personal and business credit scores?

Lenders and financiers may be looking for a number of things when checking credit scores, but at the heart of their research is the fact that they're attempting to assess the perceived risk of lending money to the applicant. Credit scores were developed as a fast means of identifying the risk. Note that different lenders may assess risk uniquely — credit scores are not the only factor consider by most lenders.

How do good and bad credit scores positively or negatively affect a business? 

The major benefit of a good credit score is an easier path to securing financing you might need for your business. Frequently, a higher credit score is assigned a lower interest rate because the risk of the applicant is considered lower low risk. It may also be a factor in how much financing your offered and the type of financing, too, while a not-so-perfect credit score is perceived as a greater risk.

Can a bad credit score get better?

Yes, a bad credit score isn’t like a scarlet letter. Try these tips for improving your business credit score. For personal credit, paying bills on time, paying down credit cards and any outstanding loans, and not applying for credit for a year are just some of the strategies that will have a positive impact on your credit score. 

Can a company with a bad business credit score still get financing?

Whether or not your credit score will allow you to borrow money often depends on the lender and the type of financing offered. Since lender requirements vary, the best way to find out if you're eligible is to apply to see what's available. A financing marketplace like Lendio simplifies the process by starting with a 15-minute online application that doesn't negatively impact the applicant's credit score. Additionally, Lendio's system works with more than 75 lenders and 10+ financing options, so you can find out quickly (and painlessly) what's available to your business.

Disclaimer: The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of Lendio. Any content provided by our authors are of their opinion and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything.The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice and is provided for general informational purposes only. Readers should contact their attorney, business advisor, or tax advisor to obtain advice on any particular matter. 

Even though dentistry is your focus, running a dental practice comes with extra responsibilities that take time away from patient care. One of the biggest and most important of those responsibilities is bookkeeping. It’s an essential part of running a successful dental practice. 

It gives you a clear view of the financial state of the business and can be used to make your business run more efficiently. Whether you’re doing it yourself or delegating it to your office manager there are a few helpful tactics you can use to simplify the process. 

7 Tips For Dental Bookkeeping

Don’t Mix Business And Personal Finances

Combining business and personal transactions might not seem like a big deal until you have to sort through them. Mixing the two types of transactions makes the bookkeeping process much more difficult. 

It’s confusing and time-consuming to try and remember which purchases or deposits belong to the business. That makes it a hassle to get a clear view of the company’s financial status. And when it comes to your taxes, it complicates matters even further. 

Taxes and financial statements aren’t the only areas that could be affected. It might also impact your ability to get approved for financing or find investors. Potential lenders want to see clean and precise financial data when they’re deciding to approve your business for credit. 

The best solution is to have two separate accounts. One strictly for the business, and one that’s for personal transactions. 

Use A Chart Of Accounts For The Dental Industry

A common misstep that happens in dentist bookkeeping is attempting to use a standard chart of accounts to track income and expenses. A standard COA doesn’t provide the same level of usefulness that a dental industry COA would have for your practice. 

You run the risk of omitting important information without the use of a dentistry-specific chart of accounts. This might affect you further down the line when you transfer those figures to other financial reports. 

You can arrange your chart of accounts to track the areas that pertain to your business model. For example, the payroll for your receptionist would be considered an overhead expense. In contrast, the dentists' and hygienists' payroll would be considered to be part of the Cost of Sales. 

These are important distinctions that might be overlooked when using a standard COA as opposed to a dental industry COA.

Use A Cloud-Based Accounting Software

One of the best things you can do for your dental practice is to take your bookkeeping digital. It minimizes the clutter that comes with paper and makes it easier to maintain reliable financial records. 

When tackling bookkeeping for your small business, it’s difficult to keep up with all the tax guidelines you’ll have to follow which is why many business owners choose to hire a dental CPA or accounting firm. However, outsourcing can be costly for a small dental office. 

Small business accounting software offers an affordable alternative. Most accounting software comes pre-loaded with a chart of accounts and tax guidelines so you don’t have to be a bookkeeping expert. 

You’ll still need a base knowledge of bookkeeping or accounting to get started, but most accounting software offers basic educational walkthroughs of what to do. 

Lendio’s cloud-based accounting software is a great tool for dental bookkeeping. With their affordable Sunrise Plus version, you can

• Keep receipts and expenses organized
• Easily generate profit and loss statements
• View up-to-date cash flow monitoring
• Send and track invoices

If you decide that bookkeeping isn’t your strong suit, they also have a paid bookkeeping service to make the process even easier. It allows you to work with a professional bookkeeper for an additional cost. 

See how Lendio can improve your bookkeeping process and sign up for your free 14-day trial!

Review Your Finances Regularly

Reviewing your finances is an important part of ensuring your bookkeeping process is working well. It also helps you make the best decisions for your business. Not reviewing your financial situation regularly can leave you with unanswered questions about your business.

For example, If your expenses are running high and you’re not aware, approving the purchase of new equipment could put your finances over the edge. Take time each week or each month to review the finances for your business. There are several benefits to doing this:

• Makes you aware of the company’s financial situation
• Gives you solid information to base decisions off of
• Allows you to target unnecessary expenses
• Helps you identify any financial gaps
• Pinpoints where profits are stemming from

Close Your Books The Right Way

At the end of a financial period, you’ll need to close your books. Meaning that the financial information in the reports is finalized. 

Once the books are closed, that’s it. No more changes can be made. This is to ensure that data from other accounting periods doesn’t bleed into the current period . 

Without closing your books properly, it could result in mistakes and inaccurate depictions of how much profit or loss was experienced within one accounting period. To close your books properly, you’ll need to transfer journal entries to a general ledger account. 

Most small businesses choose to close their books monthly. Depending on what works for your business you could also choose to close books annually. 

Reconcile Your Financial Details

When making a dental accounting entry, it’s easy for all of the numbers to start running together. Before you know it, there are transposed numbers or expenses recorded in the wrong place. That’s why it’s important to reconcile the financial details as you go.

A simple way to do this is to confirm the dental accounting entry amount with a copy of the receipt, invoice, point of sale ticket or other pertinent information that can confirm the amount that should be recorded. 

So while the earlier suggestion of adopting cloud-based dental accounting software is effective at cutting down on paper, it doesn’t eliminate the need to keep certain documents. Without the following documents stored safely in your records, you could face big problems. 

• Company bank account statements
• Medical billing for insurance
• Cash flow statements
• Accounts receivable documents
• Accounts payable documents

You can also use the data in these documents to create monthly financial reporting for your company. 

Consider Outsourcing Your Bookkeeping

There are several reasons why dentists and oral surgeons decide to outsource their bookkeeping to a dental accountant instead of keeping it in-house. You might be running a larger dental practice, or the job is just too much to hand off to an office manager. 

Either way, finding dental bookkeeping services that take the task off your hands can be exactly what you need to focus more energy on your patients. By outsourcing your bookkeeping, you’re giving yourself the ability to do what you do best– improving peoples’ smiles. 

Meanwhile, the accountant does what they do best, which is taking care of your financials. Hiring accounting services comes at a cost but it also comes with plenty of benefits: 

• Increased accuracy
• More time to dedicate to patient care
• Some accounting services may help you run payroll
• Trained professionals who are well-versed in bookkeeping
• May assist in developing tax strategies or tax preparation

Overall, dental bookkeeping requires attention to detail and base knowledge of bookkeeping guidelines. You’ll need to use an industry-specific chart of accounts, reconcile financial data and make sure that the books are properly closed each month. The full process takes time. 

Even if you decide to outsource your bookkeeping, you’ll still need to review the financial reports regularly and avoid mixing personal and business transactions. This will help you stay on top of the company’s financial status and limit mix-ups in the accounting process. 

Running a company and maintaining its books is challenging for every small business owner, but the construction industry presents additional accounting challenges.

Contractors usually have multiple projects running simultaneously in separate locations, each with unique costs, goals, and time horizons.

If you run a construction company, here’s what you should know about construction accounting to navigate the industry's complexities.

How To Do Construction Accounting

Construction accounting has so many moving parts that it can seem intimidating, but the process doesn’t need to be stressful. If you have a system in place before you begin taking on projects, you can save yourself a lot of headaches.

Here’s a step-by-step guide you can follow to create an effective construction accounting system for your business.

1. Separate Personal And Business Transactions

The first thing every general contractor should do to minimize their accounting issues is to separate their business transactions from their personal ones. Open a checking account and credit card for your company and use it exclusively for your business activities.

If you mingle your personal and business funds in the same bank account, determining which transactions belong in each category can be incredibly time-consuming. You’ll waste hours going back and trying to sort everything out.

It’s also likely that you won’t do a perfect job since it becomes increasingly difficult to figure out past transactions as time passes. That could cause you to miss out on deductions, misattribute expenses, and create even more problems for yourself.

2. Choose A Primary Accounting Basis

One of the primary complications of construction accounting is that projects have extremely variable completion times. You may be able to finish some within a few months, but others will span multiple tax years.

Contractors must account for projects they complete within a single tax year differently than those that take place in more than one. First, let’s explore the accounting methods allowable for jobs that last less than a year.

Generally, you can use either the cash or accrual basis of accounting for these contracts. Here’s how those methods work:

• Cash basis: Recognize revenues when you receive cash and deduct expenses when you make payments.
• Accrual basis: Recognize revenues when you earn income and take deductions when you incur expenses.

The cash method is typically easier to implement, but it's better at tracking your cash flow than your actual business profits. Meanwhile, the accrual method takes more work, but it more accurately captures the strength of your financial position.

Construction companies can choose either one as long as their average gross receipts are less than $25 million over the last three years or their total time in business, whichever is less. If you exceed that threshold, you must use the accrual method.

3. Choose A Long-Term Revenue Recognition Method

Unfortunately, you can’t use the typical cash or accrual accounting methods for construction contracts that span more than one tax year.

Instead, you generally must use either the completed contract or the percentage of completion (POC) method to record your transactions. Here’s how they work:

• Completed contract method: Recognize your revenues and expenses for a contract all at once after you finish the project.
• Percentage-of-completion method: Recognize your revenues according to the percentage of the contract expenses that you’ve paid.

As a simple example, say you have a construction project that you estimate will take you 18 months and $200,000 in materials, labor, and overhead to complete.

The client agrees to pay you $300,000 for the job, and you begin work on March 1st, 2022. By the end of 2022, you’ve incurred $137,500 in costs, and the client has paid you $200,000.

Using the percentage of completion method, you’d deduct $137,500 in expenses. To calculate your revenues, divide $137,500 by $200,000 to get 68.75% and multiply it by $300,000.

That equals $206,250 of revenue, which you’d recognize even though the client only paid you $200,000 so far.

Using the completed contract method, you’d record neither the expenses incurred nor the revenue received in 2022. You’d wait until you finished the project in 2023 to recognize both.

Once again, each option has its merits. The POC method is more accurate, but the completed contract method is easier to use and lets you defer earnings to later tax years.

Unfortunately, construction businesses don’t get to choose freely between the two options. If your average gross receipts exceed $25 million or your contract lasts more than two years, you must use the POC method.

The only exception to those rules is if your project qualifies as a home construction contract. That means 80% of the total project costs are for work on a residence with four units or fewer.

The POC method has become even more involved since Accounting Standards Codification (ASC) 606 took effect. You must apply the method to every individual “performance obligation” within each construction contract.

The complexities of ASC 606 are beyond the scope of this article, but you should consult a construction accountant for assistance in staying in compliance with it.

4. Implement Job Cost Accounting

Job cost accounting or job costing involves allocating all business expenses to individual projects. Typically, that includes materials, labor, and overhead.

Due to the project-based nature of contracting, job costing is at the core of construction accounting. It’s necessary for projects that last more than one year since you need to know each project’s costs for the completed contract and POC methods.

For example, say you agree to complete a landscaping project. When you first meet with your client, you estimate that it’ll cost you $25,000 in materials and 500 labor hours at $45 per hour to complete, which equals $22,500.

In addition, you estimate that your total overhead costs for the year will be $300,000, including office rent and utilities, administrative expenses, insurance, and equipment depreciation.

After consulting with an accountant, you plan to allocate overhead to each job based on its labor hours. In other words, you'll apply a portion of your annual overhead to each project for every labor hour required. 

To find your applied overhead rate, you estimate that you’ll incur 10,000 total labor hours during the year. Your $300,0000 overhead divided by 10,000 labor hours gives you an applied rate of $30 per labor hour.

Since you estimated that you’d have 500 labor hours for this project, you allocate 500 hours multiplied by $30 per hour to the job, which equals $15,000 of applied overhead.

As a result, your total estimated job costs would be $25,000 in materials plus $22,500 of direct labor plus $15,000 of applied overhead, which equals $62,500.

5. Perform Regular Reconciliations

Working in the construction industry involves managing multiple contracts simultaneously, many of which will likely change their scope at least once before completion.

As a result, staying on top of your construction accounting requires consistently checking in with your company’s books. Here are some steps you should consider taking each month:

• Confirm that you've allocated all costs to the proper projects
• Reconcile your books to your bank and credit card statements
• Verify that your cost estimates for each project are still accurate

Performing regular reconciliations is beneficial in any industry, but it’s essential for construction accounting. If you fall behind on your bookkeeping, it will be difficult to catch back up.

How Is Construction Accounting Different From Regular Accounting

Construction accounting follows the same general accounting principles as regular accounting. However, the nature of the construction industry creates challenges that force construction accountants to take additional measures.

These are the primary traits of the construction industry that require you to use irregular accounting strategies.

Decentralized and Project-Based

The most significant difference between construction and regular accounting is that contractors must track their finances separately for each project. Few other industries need to resort to job costing to stay organized.

For example, a manufacturing company with a single product could easily keep separate financial records for every factory. Its materials, labor, and overhead would be consistent and predictable for each one.

Similarly, a lawyer might have multiple projects simultaneously, but they can easily account for them together. The hourly rate might vary slightly between services, but the labor, materials, and overhead cost inputs would be similar for each job.

However, contractors can have any number of projects going on at once, and each one has cost inputs that vary drastically. For example:

• Materials: Construction contracts are all unique and require widely varying materials. Even when there's overlap, the costs are still usually very different since they occur at separate times and places.
• Labor: Contractors often use separate subcontractors with different rates for each job. Even if they were to use the same people for multiple projects, the work varies so much that the actual cost per labor hour would still be different.

Though job costing takes more work, it’s the only way to accurately measure a contractor’s profitability by matching cost inputs with the related revenues.

Long-Term Contracts

Another reason construction accounting differs significantly from regular accounting is contractors often have projects that last for many months, even spanning more than one tax year.

Unfortunately, those long contracts are unavoidable. It takes much longer to construct or improve a building than to complete most other products or services.

That necessitates accounting methods such as the completed contract or the POC method. It also means that the accounting and tax rules in place at the start of a contract may change by the time it ends.

In addition, contractors often offer their clients extended payment options, such as net 30 or net 60 terms, which makes properly timing revenue recognition even harder.

Unpredictable Job Scopes

The final issue with construction accounting that doesn’t affect regular accounting is that contractor job requirements change more often than not. In fact, there could be multiple change orders during a project that affect the scope drastically each time.

Even if a client doesn’t submit any change orders, there’s no guarantee that the initial job cost estimates will be accurate. It’s difficult to predict the material and labor costs over long-term projects, even for experienced contractors.

Unfortunately, inaccurate estimates due to changing scopes or poor predictions will disrupt your revenue recognition for long-term contracts. That’s another reason why construction accounting is often more demanding than accounting for other industries.

Construction Accounting Best Practices

Our step-by-step guide to the fundamentals of construction accounting should help you get started, but we can’t cover all of the details involved in a single article. However, we can discuss some best practices.

Here are several high-level tips to make your construction accounting system more efficient.

Leverage Construction Software

Nowadays, there’s little reason to keep track of anything by hand. It’s too easy and affordable to find software that can handle administrative tasks without requiring much of your time or effort.

For example, construction accounting software is a must. Contractors have too many transactions across too many projects to keep track of everything manually.

Time tracking software is another tool that can make your construction accounting easier. Labor is one of the primary cost inputs for construction projects, but manually tracking the hours of multiple workers across several jobs is difficult.

Software like Justworks Hours can automate a significant portion of the process. Not only does it let each worker report their hours digitally and aggregate the data for you, but it can integrate directly with accounting software.

Plan For Change Orders

As discussed above, construction firm projects rarely stick to the initial scope of work. Clients often change their minds about certain aspects of projects or try to cut costs, causing them to alter the original plans.

Alternatively, construction contractors may change the scope or price of a project after learning something they weren’t aware of at the onset of the job.

As a result, it’s best to have systems in place ahead of time to account for these pivots. Make sure you have procedures for both approved and unapproved change orders.

It’s best to include your methods for handling change orders in your initial contract with your clients. That can minimize the amount of back-and-forth necessary when changes occur and help prevent any disputes.

Maintain Digital Records

In regular accounting, you might be able to get by keeping paper copies of your supporting documents like receipts, bank statements, and invoices. It’s never optimal, but it’s doable for many small businesses.

However, keeping physical records is unreasonable in the construction industry. You need to keep track of too many documents for too many projects.

While many businesses can get the supporting detail they need for most of their deductions from a bank statement, that’s usually not the case for contractors. They need more information for almost all of their expenses.

For example, imagine you buy several different materials from a supplier in bulk. You'd need to define each of those materials to perform accurate job costing, especially if you’re using them for multiple projects.

As a result, it’s essential that you keep detailed supporting records on hand. Digital copies are infinitely easier to store and review and less susceptible to getting damaged or lost.

Get Help From An Accounting Expert

Doing a company’s accounting and project management is always hard, but it’s even more difficult in the construction business. Not only is construction accounting more time-consuming overall, but there are many more potential complications.

As a result, it’s best to get construction accounting and tax services from an expert. Fortunately, that doesn’t mean you have to hire an accountant full-time. Many small businesses, including contractors, can benefit from outsourced accounting services.

Instead of hiring an employee, that involves paying an accounting firm for help from a Certified Public Accountant (CPA) specializing in construction accounting services and tax planning for contractors.

Accounting is one of the least exciting aspects of small business ownership for many owner-operators. However, you can’t afford to neglect it since your responsibilities can quickly become overwhelming if you fall behind.

Here’s what you need to know about trucking accounting, including how to set up an effective system and some common mistakes to avoid.

Bookkeeping Vs. Accounting for Trucking

Bookkeeping and accounting are closely related business functions. While they’re theoretically distinct, the line between them is somewhat blurred. Accountants sometimes perform bookkeeping services and vice versa.

In broad terms, bookkeeping involves maintaining financial records of your trucking business’s day-to-day transactions in a general ledger. It’s a routine, administrative process that requires relatively little critical thinking.

As a result, many truck drivers handle a significant portion of their bookkeeping without much assistance. For example, it’s usually best for a driver to keep track of their miles, fuel purchases, and meal expenses while on the road. 

Meanwhile, accounting refers to refining and using the financial records created through bookkeeping for various purposes; including the development of financial statements, cash flow analysis, and tax planning.

Accounting is more sophisticated and analytical than bookkeeping, and there’s often more at stake. For example, accounting errors could cause you to miss out on valuable financing or get you in trouble with the Internal Revenue Service (IRS).

As a result, you probably shouldn’t try to manage your trucking business’s accounting function without help. It may be worth handling some lower-level aspects, but you’re better off outsourcing the more complex and time-consuming parts.

How To Do Accounting For Trucking

Even if you rely heavily on the transportation accounting services of a Certified Public Accountant (CPA), you still need to know the fundamentals of trucking accounting, as you’ll always be somewhat involved.

Here’s a general framework you can use to establish a trucking accounting system as a self-employed truck driver.

Open Separate Business Accounts

The first thing every business owner should do to simplify their accounting is to separate their business activities from their personal ones. The easiest way is to open up a new checking account and credit card and reserve them for business use only.

Many business owners learn too late that mingling your personal and business funds makes it hard to identify which transactions belong in which category.

It's often even more difficult for truck drivers, whose gas and food expenses could easily be personal costs if they occurred outside of a trucking trip.

Choose A Legal Entity Structure

Another decision every small business owner has to make is what type of legal entity they want to use. Sole proprietors are the default structure, so owner-operators who start doing business without filing any paperwork will fall into that category.

The simplicity is convenient, but it comes with unlimited liability. As a sole proprietor, you and your trucking business are a single entity. If someone sues your company, your personal assets are vulnerable.

Because working in the trucking industry involves taking on significant risk, you’re often better off taking the time to form a limited liability company (LLC) or a corporation. However, that’s a decision you should get a CPA firm’s advice on first.

Choose An Accounting Basis

Truckers must choose between the two fundamental methods of accounting, the cash and accrual bases. They impact your tax return significantly, so consider consulting an accountant before choosing one.

The cash basis involves recognizing revenues when you receive payments and deducting expenses when you pay them. Because it’s easy to implement, many small businesses favor this method.

The accrual basis of accounting requires that you recognize revenues when you earn them and expenses when you incur them, regardless of when funds enter or leave your accounts. It takes more work, but it also documents your profitability more accurately.

Track Your Expenses And Retain Supporting Documents

All businesses need to keep track of their expenses, but it’s more challenging in some industries than others. Unfortunately, trucking is a business that requires you to be particularly diligent in your record keeping.

Truck drivers can incur many different expenses while on the road, and most of them are potentially tax-deductible. For example, you need to keep careful records of all of the following costs while you’re on long hauls away from home:

• Fuel 
• Meals
• Lodging
• Auto washing
• Tolls and parking
• Vehicle maintenance

Because the IRS sees semi-trucks as qualified nonpersonal use vehicles, you must deduct your actual auto costs instead of using the standard mileage method. Keep records of each purchase's amount, date, location, and business purpose.

In addition to keeping records of your expenses, you should have documents that prove their validity, such as receipts, trip logs, and account statements. Keep these on hand for at least three years. That’s how much time the IRS typically has to audit you.

Stay On Top Of Your Tax Obligations

All business owners must make quarterly estimated tax payments to cover their income and self-employment taxes, and truck drivers are no exception. You'll incur penalties and interest if you don't meet your federal and state liabilities.

Unfortunately, truck drivers often have additional tax obligations, depending on the lengths of their trips and the size of their vehicles. These include the International Fuel Tax Agreement (IFTA) and the Heavy Vehicle Use Tax (HVUT).

The IFTA is a way to redistribute the fuel taxes truck drivers pay in the lower 48 states and the 10 Canadian provinces. It ensures your funds go to the areas where you used your fuel instead of the ones where you purchased it.

IFTA applies to you if you drive a vehicle across multiple states or provinces that weighs more than 26,000 pounds or has at least three axles.

To comply with IFTA, you must report your trips and fuel purchases quarterly. The IFTA office in your home state will allocate your payments to the proper jurisdictions and determine whether you owe more or deserve a refund.

Meanwhile, the HVUT is an annual fee that truckers must pay if they drive a vehicle that’s at least 55,000 pounds for more than 5,000 miles on public highways. It equals $100 plus $22 for every 1,000 pounds over 55,000 pounds up to $550 and 75,000 pounds.

To stay in compliance, file Form 2290 with the IRS and pay any applicable taxes by the last day of the month after the month you first used the vehicle on public highways. For example, if you place your truck into service in July, the due date is August 31.

If you owed taxes in the previous year but not the current one, you must file Form 2290 to report the change and suspend your responsibilities.

Best Practices For Trucking Accounting

One of the primary problems with managing your small business accounting is the sheer amount of time and energy it takes. Running a trucking company alone is enough work to keep you busy, and trying to do both is a lot to handle at once.

Here are some best practices you can follow that will help juggle all of your various responsibilities.

Leverage Software

The ever-expanding capabilities of modern software have made many aspects of business ownership significantly easier. You must be strategic about which tools you invest in to avoid wasting resources, but it’s worth utilizing in many areas.

For example, transportation management software, also known simply as trucking software, is a must-have for owner-operators. It serves as a digital hub and tax center from which you can manage all of your paperwork and filing responsibilities.

For example, you can use it to accomplish all of the following:

• Generate custom invoices and collect payments
• Store copies of records and supporting documents
• Generate and file your quarterly IFTA reports
• Dispatch other drivers and plan their trucking routes
• Extract driving data from an electronic logging device (ELD)

An accounting solution is also essential for most small businesses, including trucking companies. If you link your trucking accounting software to your business bank account and credit card, it should track your every invoice and expense automatically.

Use A Fuel Card

IFTA compliance is one of the additional accounting responsibilities unique to trucking companies. Fortunately, it doesn’t have to take up too much time or energy if you plan ahead.

One of the best ways to streamline your IFTA reporting is by using a dedicated fuel card. These work much like any other credit card, except they’re tied to a unique driver number and provide fuel discounts.

Fuel cards can automatically track, organize, and display the information you need to fill out your IFTA expense reports. If you’re also using truck management software, you can usually link the two and automate your IFTA responsibilities completely.

Get Expert Help

Last but certainly not least, it’s always a good idea to hire a CPA for help with tax preparation and trucking accounting services. Trucking and accounting are full-time jobs, so don't try to do both.

Fortunately, you don't need to hire an accountant for your business full-time. Outsourced accounting lets you select only the specialized accounting services you need, keeping your costs down.

Make sure you choose a service provider carefully. The transportation industry has unique quirks and challenges, and it’s much better to work with a CPA who’s an expert in the applicable tax regulations than a generalist, even if it costs a little more.

Common Mistakes

Executing proper transportation accounting procedures requires as much training and expertise as the transporting itself. While there’s no substitute for experience, here are some common pitfalls you should know to avoid.

Procrastination

One of the most common mistakes small business owners make is putting their accounting responsibilities on the backburner for too long. That’s always problematic, especially for truck drivers.

Remember, it can be surprisingly hard to catch up on trucking records once you’ve fallen behind. It becomes even worse if you also neglect to separate your business and personal transactions.

In addition, ignoring your accounting for more than a couple of months means you’ll likely miss one or more tax due dates. If you fail to make estimated tax payments, submit your IFTA reports, or file Form 2290 on time, you’ll face penalties and interest.

Misunderstanding Tax Deductions

Tax strategies for truck drivers can be surprisingly complicated. Even some CPAs are unaware of the specifics of the industry, where unique rules and changing regulations can cause you to misreport your tax-deductible expenses.

For example, most small business owners can only take 50% of meal expenses, but truckers are allowed to take 80% of either their actual costs or per diem allowances.

That's another reason paying for tax services is essential for the transportation business. You don't want to leave money on the table or risk triggering an audit.

Are you looking for ways to expand your business or cover operating expenses? Learn more about trucking business loans.

Editor's note: This is part 3 in our series on small business competition. Read Part 1: Analyzing Your Competition and Part 2: Differentiating Your Small Business 

Let’s pretend you own and operate the only hotel in your town for the last 20 years. If people are visiting, they’re staying with you.

For as long as you can remember, you’ve controlled the market. You set the price of the rooms. You picked the wallpaper, sheets, TVs, coffee, and refreshments available in the rooms—you even control the room service menu. In other words, you have had complete reign of the hospitality market in your town and have been able to run your hotel the way you see fit.

However, a new Hilton hotel is scheduled to open nearby in a few months, and you’re worried about what that means for your business. Will you be able to compete with a global brand like Hilton?

Small businesses across the country often face a similar dilemma: they own an established business that they’ve run for many years successfully until being suddenly confronted with a new competitor. Sometimes these new competitors can be big brands, but many times they are other local small businesses.

In either case, learning how to manage new competition is important when competing on Main Street. 

Know Your Competition

As with any guide on business competition, determining strategies starts with analyzing your market and the competitors within it. For established businesses trying to defend their territory from new competition, this means taking the time to understand exactly who’s entering your market, the value they offer customers, and how their arrival will affect you and your other competitors.

For example, maybe you run a successful lawn care business and have operated in your town for 10+ years. You have a base of established accounts and pick up new projects as others fall off month to month. If a new lawn care business decides to enter your territory, how will it impact your business?

If the owner is a local who has lived in your town for many years, they may have a sphere of influence (friends and family) that overlaps with your customer base. This may cause you to lose some accounts because of their relationship with your new competitor.

If you know the owner and their network, you can plan for the potential loss in revenue by adjusting your forecast and budget, or even by taking steps to mitigate the customer defection by offering incentives to stay with you.

In other words, if you know your new competitor and the potential challenges they present to you and your business, you can make better strategic decisions.

Understand Your Unique Difference: Differentiation

The answer to this question is crucial to the longevity of your company—especially when faced with new competition. Knowing your unique difference, or differentiation strategy, gives you a better understanding of why your customers choose you, which you can then use to retain or grow your book of business.

Let’s say you’ve operated a small independent tax accounting business for the last 15 years and are worried about a new H&R Block opening up a few minutes from your company. After filing your clients’ taxes, you ask them a few questions about why they like working with you over any of your other competitors.

You might find that they appreciate the personal care that you provide or they know you’re an active member of the community. Your customers are choosing your business because of you.

With this insight, you could prepare for the opening of H&R Block by becoming more involved within the community and developing marketing collateral to communicate the personal care that you provide as an independent tax accountant and not a corporate entity.

Once you understand what makes you different, you can use that to defend your market share from new competitors.

Lean On Loyalty

The statistics below drive home the importance of customer loyalty to small businesses:

• The probability of selling to a prospect is 5−20%, compared to 60−70% for an existing customer.
• A 5% increase in customer retention can increase profits by 25−95%.
• Highly engaged customers spend 300% more—and 90% more often. 

There is no shortage of options for loyalty programs, and the best solution for your business will often depend on the industry within which you operate. Some popular options for loyalty programs include Square Loyalty,part of the Square software umbrella; Clover Rewards, another POS provider; or the tried-and-true loyalty punch card that rewards frequent customers.

Beyond loyalty programs, consider asking customers for:

• • Referrals: Customers you acquire through referrals are more likely to convert and stick. It’s estimated that referred customers have a 37% higher retention rate.
  • Reviews: Online reviews can be a huge differentiator between you and a new business, especially considering 89% of customers read online reviews before making a purchase. You have the experience and history, make sure your online presence reflects that.
  • Feedback: Customers want to feel like their voice is heard, so take time to ask your customers for their feedback and be willing to make changes when warranted.

Be Open-Minded And Adaptable

For example, maybe you operate a small bakery that has always been cash only, because you don’t want to deal with the processing fees from credit card purchases. While you may have been able to operate this way for many years, if a new bakery decides to enter your market with more flexible payment options, you could see customers leaving because of convenience.

In that scenario, your business has 2 options: continue operating as a cash-only bakery or start accepting credit cards.  

Managing new competition may sometimes require adapting how you run your business. This could mean implementing something as simple as adding new payment options or more complex changes like pivoting your business or eliminating certain products or services. Regardless of the scale, it’s important to approach change with an open mind and to remain flexible.

Don’t Be Afraid Of Competition

Competition breeds innovation and is often in the best interest of consumers.

If you operate a business for an extended period of time, you’re bound to face new competition. Don’t shy away from competitors or be afraid of competition; instead, embrace and grow from the experience.

In addition to benefiting consumers, new competition is actually good for your business, because it:

• Forces you to analyze and improve your own business: It can be easy to get complacent within your business if you’ve been operating it unopposed for a while. New competitors force you to reassess and improve your operations, which can increase your efficiencies and profitability.

• Leads to specialization and focus: New competitors can also help established businesses find their differentiation strategy, which can lead to specialization and better focus. They say a jack of all trades is a master of none—an adage which can also apply to your business. Sometimes competition can help you discover what it is you do best, which can provide more clarity and focus as you grow your business.

• Provides another informative resource: Besides the internal analysis that happens when competitors enter your market, you should also view new competition as valuable resources to study. Watch how they operate and see if there are any insights you can glean from their business. Do they have lower prices? Do they have different offerings? Are there opportunities to improve your own business based on the information you gather about theirs?

Managing New Competition: FAQs

How do you deal with new competitors?

The best way to deal with new competitors is to embrace the challenge and use the competition to motivate you to grow. This motivation could drive you to get rid of unnecessary waste and resources, pivot your business to more profitable activities, or simply improve your operations, adding more value to your customers.

If you view new competition as an opportunity to improve your business, you’re likely to find ways to benefit from this perceived negative.

How does new competition affect your business?

The more options available to your customers, the more likely they are to choose someone else. When more competitors enter a market, it makes it harder for established businesses to maintain their previous level of market share. 

Beyond the bottom line, competition can also challenge the way established businesses operate by offering new perspectives and solutions to customers. For example, consumer demand for taxis was forever changed when ride-sharing apps like Uber and Lyft made transportation easier and more convenient for riders.

What are examples of new competitors?

Direct competition includes businesses that offer the same services or products as your small business. If you run a daycare service, any other daycare business is a direct competitor because they’re offering parents the same service as you.

Indirect competition includes businesses that target the same customers but offer a different product or service than yours. Instead of daycare businesses, after-school tutor services could qualify as indirect competition because they attract the same customers, offering different services that satisfy a similar need: supervising children.

New Competitors Means New Opportunities

By taking the time to assess your current situation alongside the potential effects of a new competitor, you can find opportunities to improve and grow your own business. While you may see a downturn in business at the onset of a competitor’s arrival, if you stay focused and continue looking for ways to improve, you’re likely to find yourself in a better position down the road.

Disclaimer: The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of Lendio. Any content provided by our authors are of their opinion and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything.The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice and is provided for general informational purposes only. Readers should contact their attorney, business advisor, or tax advisor to obtain advice on any particular matter. 

As you grow your business, applying for financing can boost your working capital to achieve your goals, whether you want to smooth out cash flow, prepare for financial emergencies, or  expand your operations. There are two primary types of small business funding to consider, each of which comes with its own set of pros and cons. Understanding a line of credit vs. business loan is a great first step in making a smart decision for your business based on your individual needs and goals. 

Business Line of Credit: How Does It Work 

A line of credit provides small businesses with flexible financing on your own schedule. Rather than getting a lump sum as you would with a business loan, you instead get access to a line of credit up to a certain dollar amount. You can draw on the credit line whenever you need capital, and only pay interest on your outstanding balance. 

This type of revolving credit is similar to the way a credit card works. When you pay back part or all of your outstanding balance, you can then borrow from that amount again when you need to. It’s easy to get a sense of how much a certain balance would cost using a business line of credit calculator.

Business Line of Credit: Terms and Rates 

A business line of credit can range anywhere between $1,000 and $500,000. Rates range from as low as 8% APR to as high as 24% APY. If you open a business line of credit with bad credit, you’re more likely to pay a higher rate. Funding times are quick, usually providing the cash you need within one to two weeks. The maturity term typically lasts between one and two years. 

It’s rare to find a business line of credit with no credit check, but you may be able to qualify with a personal credit score instead of one for your business. Similarly, you may not be able to get a business line of credit with no revenue at all, but you could qualify after being in business for a minimum period of time—often six months. 

Business Line of Credit: Requirements

Most lenders have specific requirements in terms of credit score, time in business, and revenue. Lendio’s network of partners typically request the following eligibility minimums:

• Personal credit score of 560+
• 6 months in business
• $50,000+ in annual revenue

A secured line of credit requires some type of collateral to back the financing. You’ll typically receive better terms, like a lower interest rate. Alternatively, you can also opt to apply for an unsecured line of credit, which doesn’t involve any collateral at all. 

Business Loan: How Does It Work?

Another type of financing is a small business loan, which is structured very differently from a business line of credit. You’ll get a one-time lump sum of cash to use however you want for your business. Then you’ll have fixed monthly payments over a set period of time, which include both principal and interest payments.  

Repaying a business loan is similar to repaying any type of installment loan, like a car payment or a mortgage. As long as your interest rate is fixed, so is your monthly payment. It gives business owners the ability to plan their finances because the payments don’t change. 

Business Loan: Terms and Rates 

Business loans typically range from $5,000 to $2 million. The larger amounts of money are reserved for stable businesses with a strong track record and enough revenue to handle the payments. The repayment period can also vary, usually between 1 and 5 years. Rates start as low as 6% APR and funding time is fast—online lenders can deposit cash within 24 hours. 

Business Loan: Requirements 

Business loans often require a review of both the company’s financials and the owner’s personal finances. As part of your application, lenders will review:

• Your credit history
• Time in business
• Collateral 
• Revenue

Just like a line of credit, a business loan can either be secured or unsecured, depending on whether or not you pledge any assets as collateral.

Business Loan vs. Line of Credit: The Difference 

There are benefits of a business line of credit as well as a business loan. Both help you build your business credit score, as long as the lender reports payments to the credit bureaus.  

With a business line of credit, you can borrow as much as you need over a set period of time thanks to a flexible credit line. Plus, the line of credit is replenishable, so you get ongoing access to capital. 

With a business loan, you receive one lump sum of capital. You would have to apply for another loan in order to qualify for additional funds. On the plus side, loans come with a fixed monthly payment so you can easily budget to pay off the balance. 

Business Loan vs. Line of Credit: Which One Works Best for You?

There are a few different factors to help you determine which option is best for your business: a loan or line of credit. 

Amount needed: Term loans typically offer higher funding amounts than lines of credit. If you need to purchase a major asset, like a piece of equipment or real estate, then a loan is probably better than a line of credit. But if you don’t need a huge loan amount and have several purchases to make over an extended period, then a line of credit may be better. 

Timeline: Because loans often include larger amounts, they also have longer repayment periods. A line of credit, on the other hand, usually needs to be repaid in a year or two. 

Predictability: If you’re looking for a predictable payment plan, then a business loan is the way to go. But if you have consistent cash flow and don't mind paying relative to the amount you borrow, then a line of credit could be a good choice. 

Ready to fund your business? Apply for a business loan or line of credit from Lendio.

Disclaimer: The information provided in this blog post does not, and is not intended to, constitute business, legal, tax, or accounting advice. All information, content, and materials available in this post are for general informational purposes only. For advice specific to their situation, readers should contact their attorney, business advisor, or tax advisor to obtain advice with respect to any particular matter.

Business credit cards can be useful for managing daily expenses or covering larger purchases. If you’ve been relying on personal credit cards, loans, or savings to fund your venture, the time may be right to add a business credit card into the mix. 

Read on to learn everything you need to know about business credit cards.

What is a business credit card?

A business credit card is designed specifically for business use, rather than personal expenses. So, for instance, you might use a business credit card to pay for:

• Office supplies.
• Computer equipment.
• Business travel.
• Client dinners.
• Utilities, internet, and/or cell phone service for the business. 

Business credit cards can be helpful for businesses of all sizes. So whether you’re a sole proprietor, a freelancer, or the owner of a small business with dozens of employees, you could take advantage of a business credit card. 

There are two types of business credit cards available: revolving cards and charge cards. 

A revolving business credit card has a revolving credit limit you can use for purchases. As you make new purchases, your available credit shrinks. As you pay down the balance, that frees up the available credit. With a revolving card, you have the option to pay in full each month or carry a balance if needed. 

Charge cards are a little different. With a charge card, you may have a fixed spending limit or your card may have no preset spending limit. No preset spending limit on a business charge card means that your limit can change from month to month, based on your account activity, credit rating, and financials. 

With a charge card, you don’t have the option to carry a balance. You’re required to pay in full every month unless the card offers special extended payment terms. The upside of paying your balance in full, however, is that no interest accrues on the things you charge.

Business credit cards vs. personal credit cards

Aside from being designed for business spending, some other characteristics distinguish business credit cards from personal credit cards. 

1. Credit reporting

To apply for a business credit card, you’ll need to provide your Social Security number. Some card issuers may allow you to apply with your federal Employer Identification Number (EIN) instead, though it’s less common. 

Qualifying for a business credit card is based on your personal credit history, among other criteria. But once your account is open, your payment activity, credit limit, and other account details are reported as part of your business credit history.

Defaulting on a business credit card account can negatively affect your business credit history. Most card issuers require you to sign a personal guarantee for business credit cards. This guarantee makes you personally liable for any debt incurred. If you default, the card issuer could report your negative account history on your personal credit report. 

2. Card protections

Various federal protections cover personal credit cards, including those outlined in the 2009 CARD Act. For example, federal law limits consumers’ personal financial liability for fraudulent purchases made with their credit cards. 

Those same protections don’t automatically extend to business credit cards. If your business credit card is stolen, you could be held responsible for any charges resulting from the theft. The good news is that some business credit card issuers do limit fraud liability for cardholders. 

3. Rewards

Many business credit cards allow you to earn rewards on eligible purchases. That in itself isn’t much different from personal cards. Where the 2 diverge is in which purchases can earn rewards. 

For example, you may have a personal credit card that pays you cash back at grocery stores while business credit cards may pay cash back at office supply stores instead. Rewards programs cater to those expenses most often incurred by businesses, not individuals. 

4. Spending limits

Business credit cards can offer more purchasing power compared to a personal credit card. Where you might have a $10,000 limit on a personal card, your business card might bump that up to $50,000 or more, depending on your credit and business financials. The higher spending limits reflect the greater purchasing needs of businesses.

Pros of business credit cards

There are several good reasons to consider opening a business credit card if you’re not using one yet:

• It may be easier to get approved for a business credit card, compared to a business loan. 
• It’s possible to qualify for a card even if you haven’t started your business yet.
• Business credit cards offer flexibility since you can choose to carry a balance or pay in full.
• Earning miles, points, or cash back on purchases can save your business money. 
• It can be an easy way to keep track of business expenses.
• You can build a business credit score, which could help you qualify for loans or other lines of credit.
• No collateral is needed for unsecured business credit cards.
• Interest rates may be lower compared to other types of business financing, such as a merchant cash advance or invoice factoring. 
• Interest paid on your card balance may be tax-deductible. 
• You can use your card to meet a variety of spending needs.

Cons of business credit cards

On the other hand, there are potential drawbacks to consider:

• Some business credit cards charge an annual fee and/or foreign transaction fee.
• You’ll need good to excellent credit to qualify for the lowest APR. 
• Your credit limit may be less than what you’d qualify to borrow with a loan. 
• Signing a personal guarantee makes you personally responsible for business credit card debt.

How to choose the best card for your business.

If you think opening a business credit card account is the right move, the next step is choosing a card. When considering card options, there are a few important things to keep in mind.

1. Card use

First, think about what you primarily need a business credit card to do for you. For example, are you mainly looking for a way to earn rewards, or do you need a card to cover the occasional cash flow shortfall? Or are you looking for a card that can help you establish and build positive business credit history?

What you plan and need to use the card for can help you narrow down your choices as you shop around. 

2. Rewards

If rewards are on your list of credit card must-haves, consider which kind of rewards would be most valuable to you. 

Earning cash back could be good if you want to apply rewards as a statement credit. You may prefer to earn miles or travel points, however, if you take frequent business trips.

Aside from the type of rewards you might earn with a business credit card, factor in how different rewards programs are structured. 

Some cards, for instance, offer a flat number of miles, points, or cash back on everything you spend. Other cards offer tiered rewards in multiple categories. 

For example, you might earn 3 miles per dollar on travel purchases, 2 miles per dollar on dining and entertainment, and 1 mile per dollar on everything else. 

That type of rewards program could work in your favor if you spend more heavily on certain business expenses than others. One thing to watch out for with tiered rewards is a spending cap. Your card might limit you to earning a higher rewards rate up to a certain dollar amount each year. 

3. Cost

Keeping the bottom line healthy is always important, and while you may be earning money-saving rewards with a business credit card, you have to weigh their value against the card’s cost. 

As you compare cards, look at:

• Annual fees.
• Foreign transaction fees.
• Balance transfer fees if you’re planning on transferring a balance to the card. 
• Promotional APR.
• Regular purchase APR.
• Balance transfer APR.
• Penalty fees and APR. 

As a general rule of thumb, the better a card’s rewards program or the more generous the perks, the higher the annual fee tends to be.

4. Card extras

Rewards and cost matter, but don’t overlook any additional benefits a business credit card may offer. 

Say you’re interested in a travel card. One that offers perks such as free checked bags, travel insurance, complimentary business lounge access, and free WiFi might be even more valuable in your eyes if you take frequent business trips. 

On the other hand, benefits such as cell phone insurance or extended warranty protections may be more appropriate if you need a cash back card to cover everyday spending. Just like with rewards, measure the value of any added benefits against the card’s cost. 

5. Payment options

Last but not least, consider carefully whether you should apply for a business charge card or a revolving credit card that allows you to carry a balance. 

Avoiding interest charges is always good if you want to save your business money. The caveat is being certain that your business will be able to pay off what you’ve charged in full each month. 

If you’re still working to establish a newer business, your cash flow might not be consistent yet. In that scenario, you may be better off with a revolving limit card to start so that you have the option to pay over time if needed.

Best practices for using a credit card for your business.

Once you have a business credit card, be sure to use it wisely. Pay your bill on time each month and in full whenever possible to avoid interest charges. Redeem rewards strategically to get the most value and establish a business card policy before handing them out to employees. Lastly, maintain good records of what you spend with your card so you have a go-to reference for claiming those expenses as deductions at tax time.

Applying for a business credit card

Ready to explore options for a business credit card? Compare business credit card options here.

My spam folder is littered with emails from businesses I don’t currently patronize. Some of them—like my favorite nail salon in a town I no longer live in—have been replaced with new local spots, so any offer they send me goes ignored, no matter how attractive it is. (Unless it comes with a free plane ticket, of course.)

I’d gotten out of the habit of patronizing other businesses during the pandemic’s fluctuation, like my nearby yoga studio that’s now welcoming customers back with revamped safety protocols and class-package specials. And for other businesses still, a bad customer service experience—like repeated delivery errors from the local market that just can’t seem to get my order right—means I’m no longer interested in giving them a fourth, fifth, or sixth chance.

If you’re the owner of this salon, studio, or market, however, you might not know why I’ve filtered your emails to spam and stopped crossing your threshold or using your app—or whether my decision is just for now or forever.  

Why good customers go dormant.

A customer can go dormant for 3 main reasons:

1. they’ve forgotten about you, but still are interested in what you have to offer
2. their need for your offerings or products has shifted, either temporarily or permanently
3. they’ve had a bad experience and don’t wish to give you their business anymore

Are you facing a roster of inactive or under-active clients or customers? Read more to learn how to bring some of these customers back into the fold, how to find out which customers probably aren't worth pursuing, and when to say goodbye to others for good.

Why rekindle an old relationship?

There are new customers out there—so why bother trying to win back your dormant ones? Put simply: they’re more valuable than new customers. 

A study conducted by Marketing Metrics and analyzed by American Express found that small businesses have “a 60–70% chance of successfully selling again to a current customer, a 20–40% chance of winning back an ex-customer, and a 5–20% chance of turning a prospect into a customer.” 

The best marketing strategy takes into account all 3 of these customer categories, of course, but the data shows that ex-customers are 2–4 times more likely to shop with you than a newbie. Make sure you’re not overlooking this key demographic with these 3 tips to entice them back to your doorstep or website.

Strategy 1: Reach out.

The inactive customers at the center of your recruitment strategy should be those who still need your offerings, but may have forgotten what you offer. 

To reach them, come up with a few different ways to put yourself back on a customer’s radar. These could include simple reach-outs via email (beware the spam folder, though!) or a social media campaign highlighting your latest and greatest promotions.

When my local yoga studio launched a targeted Instagram campaign advertising a BOGO class package for the summer, I jumped at the chance to return—and I’d never have known about it if they hadn’t proactively let me know what they were offering.

Strategy 2: Give a gift.

As a millennial woman, I grew up on Clinique skincare. Anyone my age who did the same knows all about their free-gift-with-purchase phenomenon, where a certain spend means a new makeup case and travel-size favorites to fill it with. It’s a promotion that exists across the beauty-product spectrum (I now take ample advantage of it at Sephora), and a strategy that you can leverage to recruit ex-customers back.

Send your dormant customers valuable content or a free product you can assume they’ll need because you haven’t seen them—like a treatment mask to clear their pores before they come in for a facial or a bonus box of printer paper for your B2B office client. For content, how about some free recipes that include your business’s homemade pasta or an exclusive how-to tutorial on repotting houseplants that would look beautiful in your home-goods store’s new planters?

Strategy 3: Create an exclusive opportunity.

Consumers love an insider opportunity—and especially if they’re free or low-cost for your business to offer, so should you. Let your inactive customers know that you have a special offering just for them, and you just might draw them back into your cohort of shoppers.

For example, if you’re a boutique vintage clothing store, you could offer your 6-month-dormant clients an exclusive spring trunk show. A bike shop could schedule an in-person maintenance workshop for folks dusting off their wheels for the new season—and who haven’t shopped for gear since last summer. For e-commerce sites, a WELCOMEBACK discount email code solely for customers who haven’t shopped with you in 2022 could entice them back to—and through— your checkout. 

{{block="/blocks/cta-rekindle-customer-relationship"}}

What if they're just not that into you?

What about the other 2 groups of customers—those who either no longer need what you offer or who’ve had a bad experience with your business? The first step is figuring out which type of customer they are and proceeding accordingly.

Chris Cristoff at Forbes recommends utilizing a survey to get to the bottom of this issue. “You can easily find out why customers are leaving by sending an exit survey to email subscribers. When someone goes a specific period of time without completing an order, or cancels their membership, send a short survey with targeted questions. You could ask them what your company could do to get them to stay.”

This survey could include a few key questions, including:

• What was your last experience with [Business Name] like?
• On a scale of 1−10, how satisfied were you with this experience?
• On a scale of 1−10, how likely are you to shop with us again?
• If you’re no longer interested in shopping with us again, can you share your reason why? (This could include a drop-down to guide them into categories useful for your analysis, like No longer interested in product/service, Negative experience with company, No longer live in the area, and any other relevant categories specific to your business.)

Based on their response—or lack thereof—you can weed out the no-longer-interested (no reply) from the frustrated or satisfied, based on how they rate your services or products. For those who express interest in returning, it’s time to utilize the 3 strategies above.

For those customers who report a negative experience, it’s all about customer service. Thankfully, Lendio’s got a guide all about solving this tricky, nuanced problem. If it seems like a customer is still reachable, use every reasonable tool at your disposal to recruit them back to your business. 

If not—like my ongoing market-delivery-fail—it’s time to let them go, address the issue at hand if relevant, and put your money and energy to work helping other customers.