Risk management is the merely the procedure to evaluate risk and build up strategies to handle the hazard. Considering the model of risk management, a prioritization course of action is pursued where in all the risks with the highest possible loss and the ones of the superlative probability of happening are taken care with an immediate momentum. While bringing risk management to practice, the process can be extremely intricate. And above all, the balancing between the highest risks and the lower risks can be awfully confusing as sometimes the risks with lesser probability but higher losses can be frequently bungled up.

A lot of big corporate companies formulate several risk management strategies to lend a hand in preventing monetary catastrophes and workforce hazards. Scores of social fraternities and further analogous corporations have engaged risk management procedures to help out in preventing accidents caused due to alcohol addiction. Risks are not only restricted to the alcohol addiction accidents but also include slave trade practices, intoxicated injuries and employee fights. Certain risk prevention centers employ matured drivers along the week, clear-headed festivity supervisors. Various centers across the region often come up with cells that handle assessing of the risk management policies and promote speakers to talk about the dangers of alcohol. Overall, risk management aspires to prevent and eradicate the living dangers of life. (more…)

Islamic banking follows Islamic laws and principles, primarily the tenet that interest must not be paid or collected and that profits and losses are shared. There are two other rules that come to play in Islamic banking. First, banks cannot be involved with businesses that take part in industries that are considered sinful, like gambling and alcohol. Neither can entrepreneurs take part in ventures that deal with sinful activities. Second, excessive risk cannot be taken in ventures.

On loans, borrowers only repay the amount that was originally borrowed. As a gratuity, the borrower can pay choose to pay the lender a small amount of extra money. Such a token should not be promised to the original lender, but paid on a voluntary basis to show appreciation for the loan. Neither should the lender expect such a gift in exchange for loaning money. (more…)

“Interest Free Banking” is a fundamental concept derived from the Islamic form of banking. It operates with the primitive professional and ethical standards that exclude the “Muslims” from paying or receiving any kind of interest. This certainly does not mean that the revenue generating activities or money raving businesses are not encouraged. All of these business forms are greatly appreciated as far as they do not involve interest in any kind. There are a lot of financial tools introduced by the Islamic financial bodies to fulfill these business or profit making requirements. For a clear understanding, they deal with equity financing rather then reflecting on debt financing. In addition, as a replacement of fixed interest rates on the savings account, these interest free banks give a small percentage of return on deposits on an annual basis.

Now looking at the inception of interest free banking, it all started around the later part of the nineteenth century when the Muslim countries were doing well, both politically as well as economically. These banks started establishing their centers in the major cities of Islamic as well as non-Islamic countries to cater their comprehensive business needs. Conversely, the branches of such interest free banks turned out to be scarce and the regions apart from the major cities were totally ignored by such a banking system. But however, a lot of local businesses engaged with these financial entities rather than other commercial banks only due to religious reasons. The only reason behind this is, Islam completely forbids the concept of paying or receiving interest. With increasing time and business, it also became exigent to stay away from commercial banks. The commercial banks evolved with the most convenient user-friendly practices like faster money transfer and effortless current accounts but even then, lending money and starting deposit accounts were outlawed due to the forbidden interest banking. Coming to the present moment, it has been obvious that any financial transaction in the most cases involves a bank and for that reason avoiding the modern banking has become impossible. Thus we find a greater indulgence of banks in our local communities. Looking at this inevitability, interest free banking came into existence to serve all the business needs of Muslims and in turn taking utmost care of the rules of Islam. The interest free banking works on some simple rules in the Quran and those who do not follow these rules or deviates from following them correctly is termed as “non-Islamic”. (more…)

There are two types of accounting systems or methods available to business owners: cash accounting and accrual accounting. These two accounting methods are important to understand, because a business is required to use one or the other consistently in recordkeeping for tax purposes. Here’s a definition of each:

Cash Accounting

In the cash accounting method, debits and credits are recorded to accounts only when money actually changes hands. For example, if a business sells a product today for $100, but the customer doesn’t have to pay for it for 30 days, the business wouldn’t alter their cash account records until the money is actually received.

Benefits of Cash Accounting

1. Working under a cash accounting model can be easier for small business owners in the sense of time spent.

2. It’s easier to determine actual cash on hand, instead of just money owed to the business.

3. It’s often also easier for small business owners to understand basic cash flow, as opposed to asset and liability accounts. (more…)

Recordkeeping is vital for all businesses, especially when it comes to financial records. Good financial business records are needed for a variety of reasons, including taxes, getting financing, and evaluating the company’s financial position when updating the business plan to move forward.

Important Financial Records for Accounting

There are a few common types of financial records that business owners will need for accounting purposes, most notably for taxes. These are often called “source documents,” and include:

1. Receipts for purchases.
2. Invoices and purchase orders.
3. Employee time sheets and payroll information.
4. Contracts.
5. Any other record that could back up the claim of a business expense if audited. (more…)

Most areas of business accounting would be difficult to understand without first grasping the concepts of assets and liabilities. Essentially, all money going in and out of a business will fall into different “accounts.” Those accounts are classified as asset accounts, liability accounts, or equity accounts (such as owner’s equity or shareholder equity, basically meaning what’s invested into a business). Assets and liabilities are the most common classifications between accounts.

What are Assets?

An asset is anything a person or company actually owns that has some kind of future value. Something fluid like cash is an asset for a business, as are property, equipment, accounts receivable (money owed to the company), investments, and even intellectual property rights such as copyrights, trademarks, and patents.

Here’s an example when thinking of a wholesaler: Some of their assets would include their products, any money owed to them by retailers ordering in bulk but paying later, and their vehicles for transporting goods to buyers, assuming they do that independently. (more…)

Balance sheets are one of the most basic business accounting tools, and understanding balance sheets is a good thing for any small or online business owner to grasp before diving into the financials of running a business.

What is a Balance Sheet?

Balance sheets are generally brief financial statements that give a general overview of the financial state of a business, including factoring in assets, liabilities, and equity. Balance sheets cover very specific periods of time, such as a company’s fiscal year.

Assets = Liabilities + Owner’s Equity

The “balance” part of the term balance sheet comes from the fact that a business owner’s assets should equal their liabilities plus owner’s equity, thus creating a balance in the company’s financial records. (more…)

One of the most fundamental, and often most confusing, aspects of basic business accounting is the distinction between debits and credits. In accounting, the ultimate goal is to have your financials balance (such as on a balance sheet). In order to balance financial records, every business transaction has both a debit and credit (if money is being added to one account, it has to be coming from somewhere else, and vice versa).

Debit and Credit Confusion

For those new to accounting, and just learning the basics for their small or online business, the terms credit and debit may only be familiar through things like credit cards or debit cards through a bank. This causes confusion, because it sometimes leads to the assumption that debits are “bad” (such as a debit card taking money from a bank account) and that credits are “good” (such as a credit card giving someone extra finances). In fact, neither debits nor credits are “good” or “bad” at all. They’re simply opposite sides of the same coin, used to balance the books. Here’s how: (more…)

Despite their many perks to business owners, business credit cards also have a downside and risk to their use, much as personal credit cards do. Here are a few common risks or potential problems with using business credit cards for a small or online business:

Potential for Abuse – Because business credit cards offer an instant funding solution for business owners, even when there is no cash on-hand, they carry the potential to be abused. One of the most common examples of business credit card abuse or overuse is during a small business startup. When an entrepreneur can’t obtain other forms of small business financing, credit cards can become an attractive option. The problem is that the business owner sometimes isn’t able to recoup the expense quickly enough, and they stay in debt, adding financial strain to the new business.

High Interest Rates – Just like with personal credit cards, business credit cards often carry high interest rates. Those interest rates can accumulate, and amount to a hefty business expense. The biggest hit will often come if a business owner applies for a business credit card with a low introductory interest rate without paying attention to the later rate hike or amount, having the interest rate on the credit card increase unexpectedly later. (more…)

There are several benefits of business credit cards for small business owners, but there are also a few potential business credit card problems. In order to maintain a high business credit score when using business credit cards, entrepreneurs have to use the credit cards responsibly. Here are four steps to smart business credit card use:

1. Choose business credit cards wisely. Pay attention to all of the small details when comparing business credit cards, from interest rates and other fees to grace periods and perks, in order to choose the best credit card for the particular business. A good option is often to check with the bank holding the business checking account, as there’s already direct access to customer service people, and the business may already have a reputation with the bank.

2. Avoid using business credit cards as startup capital. Many businesses can take a few years to turn out a decent profit. Because of this, it’s rarely smart to finance the full startup costs of a new business with credit cards. The business owner often simply doesn’t earn enough to pay of the debt, and incurs large interest costs or penalties, and sometimes is even put out of business because of the inability to pay off the startup costs to the business credit card company. (more…)