Side Hustle 101 - AR/AP | Pay Debts Like a Lannister

Side Hustle 101 Series

Starting Your Own Small Business
https://urbanomics.blogspot.com/2018/12/side-hustle-101-start-your-business.html

Running a Small Business
https://urbanomics.blogspot.com/2019/02/side-hustle-101-own-your-business.html
https://urbanomics.blogspot.com/2019/03/side-hustle-101-are-open-for-business.html
https://urbanomics.blogspot.com/2019/03/a-21-savage-look-into-business-income.html

How to Manage Small Business Risks
https://urbanomics.blogspot.com/2018/11/side-hustles-101-risk-vs-reward.html

Small Business Benefits
https://urbanomics.blogspot.com/2018/12/side-hustle-101-pay-yourself-first-with.html

Small Business Diversification
          Keep Your 9-5 Job: 

https://urbanomics.blogspot.com/2019/11/hey-henry-high-earner-not-yet-rich.html

Know Your Worth: 

https://urbanomics.blogspot.com/2020/10/what-you-need-in-life-invest-like.html

Know When You're Speculating: 

https://urbanomics.blogspot.com/2020/10/oh-snapchat-whats-difference-between.html

This past week marked another significant milestone in building a side hustle that earns more than my main hustle (or 9-5 job).  Over the years, I've documented the slow build up of how to start, run, and manage a small business. A key part of this process is managing risk, something I help large corporations all across the world do. In particular I am building a business that helps me diversify my risk. 

My goal is to never be reliant on one source of income. 

My other goal is to add value to people's lives and this world.

I'm well onto my way of achieving these goals as my side hustles are getting close to eclipsing the relevance of my main hustle. Secondly, I continue to build a professional services business that is growing without a website, any marketing or overall push --- remember I have a 9-5 job. I landed my first major contract in San Antonio, Texas and this leads me to my second goal. I'm proud to be an employer --- I'm not just responsible for myself but my business has given someone a job and that speaks volumes. This person is well qualified but with the backdrop of a nation divided, my focus is on hiring people of color, veterans, women (in particular single moms), and anyone who wants to work hard while giving back to others. 

Due to the fact that I have to pay employees and vendors I wanted to quickly discuss how you manage your cash flow, prepare payroll, and make payments. First, I always remind people to understand who you're doing business with and get all terms documented in a contract. Being a risk manager, I review all my contracts and remove terms that ARE BAD FOR MY BUSINESS.

Cash Flow (Sales | Invoices | Receivables)

Sales - Review my Side Hustle series above and knowing your worth goes a long way into negotiating a sale of your product or service. My firm charges at a range where it's a win for my client, my employee, and myself.

Invoices - Next, I'm careful to invoice my customers on time and per the terms we agreed upon.

Receivables - Finally, I'm a hawk on knowing when and IF we got paid for the services we provided.

Payroll

If you have W2 employees, the best bet is to get a good payroll software here to help you ensure that you are deducting payroll taxes according to state and federal laws. If you only have 1099 or Corp2Corp relationships, you can accomplish this with requiring those relationships to invoice you according to a contractual agreement you've established.

Payables

You've seen me write before, I pay people according to the agreed upon terms "Like I'm a Lannister". Yes as in the dubious Lannister family in Game of Thrones, notoriously known for paying their debts or obligations. I keep my employees and vendors happy if I am paying them on-time and of course the right amounts. I've used a few companies this week to help me receive my cash timely and pay people time. I'll list a bunch (which include a few I use):

• Paycom
• Intuit Quickbooks
• ADP
• Paychex
• Gusto
• Your Bank

To keep things simple, for

Cash Flow and Receivables --- I channel The Notorious BIG on the song Get Money. Good contracts and tracking how much and when you're owed will ensure you'll never have to say the following lines: "Guess you could say your the one I trusted / Who would ever think that you would spread like mustard?"  

Payroll - Get help here, you're dealing with the laws. Don't be cheap on getting this right, as there are plenty of online software.

Payables - Paper or Plastic?  Believe it or not checks are the primary option for free delivery of payments to you employees or vendors. NOW you see why this area is ripe for disruption by startups. (hmmm maybe that will be my next startup company). Expect to pay a fee here to deliver payments directly to a bank account (direct deposit) --- but it reduces the risk of lost checks...and saves time.

#sidehustleseries   #paydebtslikealannister   #dontletcontractsspreadlikemustard  #paperorplastic #sanantonio  

A House of Cards --- Pt. 3 (Debt - The Gift & The Curse)

This has probably been my toughest post to write.  I've been hinting at what is to come through posts like Deja Vu. I believe the economic impact to come will be very rough on all of us and it is the primary reason I headed to the sidelines (moved most of my individual retirement accounts to cash) over a month ago. It's the reason why I have been holding so much in savings and declining to take on any real estate and other deals for the last few years.  It was also the reason why in my Investment Account I stop investing in roughly Q1 of 2017 and began trading options --- short term bets I wanted to win quickly and then get out off. I did well but I still have some bets on the books that have been pummeled and probably overexposed myself to retail and consumer discretionary stocks.  I have invoked my sandlot strategy (taking my ball and leaving the playground) and this has only happened one other time in my Gen X/Millennial lifetime (I'm on the border --- take your pick). You'll see the other time was during the financial crisis. Instead of me speaking on what is to come, I've decided to rip from the headlines snippets of what the everyday people feel and believe are their biggest risks to come. Almost all involve too much debt and that's why I rally around a lyric in an old Kanye verse from the Beyonce Ego (remix): "What you want dog, Tryna stay recession free".  Yes sir, to stay recession free is to stay debt free. See the risks of limited savings, too much debt (over-leverage), and not having enough capital to make investments when others are swimming naked. 

----------------DEBT - THE CURSE--------------------------------------------------------------------

The Human Toll --- No Free Lunch

(The Washington Post) -- In interviews with more than a dozen laid off workers and small business owners, nearly all said their biggest economic concern was paying the rent or mortgage in April. Many people across the country have monthly payments that exceed $1,000. The median monthly rent in the nation is just over $1,600, according to Zillow, an online real estate database company. The median mortgage payment is $1,400. Millions of Americans don’t know how they will get the money in time to make rent. The nation has 40 million renters, who tend to be younger. Black and Hispanic families are twice as likely to rent as white households, according to the Pew Research Center. (Bloomberg) -- “If the government tells me you’re good enough to get a loan, I have to trust and believe in the government,” Castillo said. “Then we just hope and pray that the client doesn’t get foreclosed on.” Matt Badders, a San Antonio lawyer who represents lenders, auctioned off two houses. The failed mortgages remind him of the run-up to the financial crisis 12 years ago, when lending to customers with spotty credit nearly brought down the world’s financial system. “We’re almost back to 2007, when mortgage originators are waking people up on park benches, saying sign here,” Badders said. After the last financial crisis, the fund required a $1.7 billion taxpayer bailout, its first in 80 years. The government has since tightened lending standards and built up the insurance fund. Because of rising home prices, borrowers who bought years ago now have considerable home equity, which could provide some cushion as well. But recent loans are the most likely to fail. In San Antonio, Erika Wilson, a 32-year-old home health aide who was separated from her husband, bought her dream house in June 2018. It had an eat-in kitchen and more than enough room for her two young daughters. Along with her other debt, the $1,900-a-month mortgage payments ate up more than half her family’s income. On Q Financial, an Arizona-based lender, foreclosed on her loan.  She’s still living there because the federal government has suspended eviction proceedings in its lending programs during the pandemic. “I messed it up,” Wilson said.  “I didn’t know what I was doing. It made me feel like I wasn’t adult enough to own a home.”  (The Atlantic) -- According to Zandi, at least three big waves will hit American economy activity. The first is occurring now, as businesses close and the economy grinds to a halt.  Next will be the job losses. “The third wave will hit when people realize they are worth so much less, particularly the Boomers, who are focused on their retirement,” Zandi told me. “When they realize their nest egg has evaporated, they'll go into panic mode and cut back on spending, and that further exacerbates the problem.”  The Small-Business Impact of an Over Levered System (Barron’s) -- The Federal Housing Finance Agency on Monday said that Fannie Mae and Freddie Mac would offer mortgage forbearance to some multifamily property owners—on the condition that they suspend evictions on the basis of nonpayment of rent. According to the plans Freddie Mac and Fannie Mae announced Tuesday morning, landlords whose multifamily properties are financed through the enterprises may be eligible to defer loan payments for up to three months. Landlords who want to take advantage must show hardship as a consequence of the virus and gain lender approval, according to the companies’ press releases. (Bloomberg) -- Real estate investor Tom Barrack said the U.S. commercial-mortgage market is on the brink of collapse and predicted a “domino effect” of catastrophic economic consequences if banks and government don’t take prompt action to keep borrowers from defaulting. Barrack, chairman and chief executive officer of Colony Capital Inc., warned in a white paper and in a subsequent interview on Bloomberg Television of a chain reaction of margin calls, mass foreclosures, evictions and, potentially, bank failures due to the coronavirus pandemic and consequent shutdown of much of the U.S. economy. “To keep people employed, you have to support the employers,” he said Monday in the interview. “The biggest part of employer expense is rent. When commerce stops and they can’t pay rent and they can’t pay interest on the debt, and then the banks and the intermediaries can’t pay their investors, it all collapses.”  Urb Lesson of the Day:  Financial Account Diversification ·         Savings Accounts – Gets you through the rough patches in life ·         Investment Accounts – Allows you to take risks when others are NOT – like today ·       Individual Retirement Accounts – This is truly for your future, why NOT wait for a sign that the recovery is strong

Side Hustle 101 - Are You Open for Business?

My last post was entirely dedicated to ensuring that you have your legal affairs in order.  Many people get started and don't understand the risks a business may pose to their wallets. That's why business formation and how you choose to legally organize or incorporate is key. So here is my list of items to slowly check off to ensure you "Are Open for Business":

1) Legal Document Setup - If you don't feel comfortable documenting your own articles of organization, make sure you get help from from your local Small Business Association, online legal services (like Legal Zoom), or if more complicated a lawyer.  I went the route of documenting my own articles of organization for the challenge and found many helpful resources on the Internet. AND don't forget to designate who are all of your managing directors are and clearly specify the percentage of ownership within the company.

2) Domain Registration - In the digital world, it's critical to have a unique name and formally register your domain name.  YES, every good name is taken, but get creative why do you think we all have Google, Bing, and Yahoo at the top of our minds when on Internet. Your domain will allow you to have your own email domain address and website.

3) Email and Physical Address Setup - While not easy to setup, use your domain to get a non GMAIL, LIVE, or YAHOO address. It's not an immediate need but this addition to your business helps give you a professional look.  While not critical, many people often use remote mailboxes and co-working spaces to keep the professional look on all legal documents.

4) Taxes, Accounting, Invoicing, Expenses - I spent 3+ months reading the tax code. I personally think this is THE MOST important section of business to understand...but I am biased as I have an accounting background. By reading the IRS tax code, it helped me understand what legal structure I wanted to form, when to pay my estimated taxes, how to form and fund my 401K plan, what expenses I should consider.

Other key items items needing to be setup:
- Website
- Phone
- Logo / Letterhead / Business Cards
- Bank Account Setup
- Methods for accepting payments
- Internet and Connecting your Business
- Computers
- Staffing

My rule of thumb is to crawl first.  Spend a few months and get the first 4 items listed above rock solid. Then add things only as they become necessary. If you are an internet based business add a website immediately. When it is time to expand then you can learn to walk and run. I hope you found this helpful. I'll write one more post of the accounting and expenses and we'll get back investing and other fun subjects.