85 posts tagged with "beancount"

Every loan payment splits into two stories: the principal that reduces what you owe and the interest that compensates the lender. When you understand how those pieces move, you can rewrite the ending—paying less interest and clearing the balance sooner. This guide unpacks the math, shows how to experiment with payoff tactics, and explains how to document everything cleanly in Beancount.

1. Know What Principal and Interest Really Mean​

• Principal is the original amount you borrow. It is the liability that appears on your balance sheet and declines as you repay.
• Interest is the cost of using someone else’s money. It accrues over time based on the outstanding principal and the annual percentage rate (APR).
• Total payment equals principal plus interest for that period. Early in an amortized loan, most of your payment goes to interest; later on, the balance flips as the principal shrinks.

Keeping these definitions straight matters because only principal reduction improves your debt-to-equity ratios and lowers future interest charges.

2. Follow the Amortization Flow​

Most business loans and mortgages follow an amortization schedule:

1. The lender calculates the interest due for the period: (Outstanding Principal × APR ÷ Periods per Year).
2. Your contractual payment—fixed or variable—is applied first to that interest.
3. Whatever remains reduces principal. Next month, interest is computed on the new, smaller balance.

For example, a $120,000 loan at 7$1,200 allocates $700 to interest and$500 to principal in month one. By month twelve, the interest portion falls to $632 while the principal portion climbs to$568. The more you can push toward principal early, the more you compress the total interest cost.

3. Choose the Right Acceleration Tactics​

To outpace interest, focus on strategies that directly target principal:

• Make targeted extra payments. Adding even $100 toward principal each month on the example loan above saves roughly$8,000 in interest and shaves 28 months off the schedule.
• Adopt a biweekly cadence. Twenty-six half-payments per year equal thirteen full payments. That “extra” month goes entirely to principal without hurting cash flow.
• Refinance when rates drop. Lowering the APR or shortening the term increases the principal share of every payment. Model closing costs to confirm the savings.
• Redirect windfalls. Tax refunds, bonus payouts, or seasonal revenue spikes can become lump-sum principal reductions that permanently shrink interest accrual.

Always confirm that your lender applies additional funds to principal and that there are no prepayment penalties.

4. Model Scenarios Inside Beancount​

Beancount’s plain-text structure makes it easy to compare payoff strategies:

2000-01-01 open Liabilities:Loans:Equipment USD
2000-01-01 open Expenses:Interest:Loans USD
2000-01-01 open Equity:RetainedEarnings USD

2025-01-01 * "Loan disbursement"
  Assets:Bank:Operating          -120000 USD
  Liabilities:Loans:Equipment     120000 USD

2025-02-01 * "Monthly payment"
  Assets:Bank:Operating           -1200 USD
  Liabilities:Loans:Equipment      -500 USD
  Expenses:Interest:Loans          700 USD

• Clone this baseline entry for future months and adjust the split between principal and interest to reflect your lender’s amortization table.
• Create alternative ledgers (for example, Liabilities:Loans:Equipment:Biweekly) to simulate different payment plans and compare end dates.
• Use Beancount queries such as balance Liabilities:Loans:Equipment to see your outstanding principal after extra payments.

5. Build a Sustainable Payoff Plan​

1. Add debt reviews to your monthly close. Reconcile the loan balance in Beancount against the lender statement and confirm that extra payments hit principal.
2. Automate contributions. Schedule the biweekly or extra payments through your bank so momentum never depends on manual action.
3. Track interest savings. Run a yearly report on Expenses:Interest:Loans to watch the cost decline and motivate stakeholders.
4. Reinvest freed-up cash. When the loan is gone, redirect the former payment amount into reserves or growth projects so your financial position keeps strengthening.

Mastering the interplay between principal and interest gives you control over debt rather than letting interest dictate the pace. With clear modeling in Beancount and disciplined execution, you can close the loan faster and keep more cash for the priorities that matter.

Plain-text accounting can do more than keep your ledger clean—it can make your company credit ready. Whether you are chasing a new product launch or smoothing out seasonal cash flow, lenders reward founders who show meticulous records, reliable forecasting, and thoughtful cash planning. This guide breaks down how to use Beancount to prepare, what funding options to consider, and how to run the loan process without derailing your week.

Step 1: Quantify the Need and the Payback Plan​

Lenders want to see two stories: why you need capital and how you will repay it.

1. Size the project. Build a Beancount query that models the cash required, the expected timing, and the revenue impact. A simple balance report on your project accounts plus a forecast of Accounts Receivable aging helps show the gap the loan will cover.
2. Stress-test cash flow. Use historical Beancount data to calculate debt service coverage ratio (DSCR = Net Operating Income ÷ Total Debt Service). Most banks want to see DSCR ≥ 1.25 on a forward-looking basis.
3. Define the exit. If you plan to refinance, sell, or pay down the balance with future profits, document that inside your loan memo. Banks love a plan that can be cross-checked in your ledger.

Founder tip: Export a Beancount-generated cash flow forecast to CSV and attach it to your application packet. It shows discipline and saves underwriters work.

Step 2: Build a Documentation Packet Straight from Beancount​

A clean documentation packet speeds up underwriting. Create a folder that includes:

• Trailing 24 months of financial statements. Use Beancount reports for the balance sheet, income statement, and cash flow statement.
• Year-to-date ledger detail. A print statement filtered by date and account demonstrates transparency.
• Tax returns and filed sales tax reports. Tie your ledger totals to each filing to prove accuracy.
• Owner equity schedule and capitalization table. Lenders scrutinize how much of your own capital is at risk.
• Accounts Receivable and Accounts Payable aging. Export your aging report to spotlight collection discipline.
• Business plan addendum. A concise memo summarizing strategy, market traction, and why the loan will succeed.

Store the packet in a shared drive and label each file using a consistent naming convention (for example: 2024-12-balance-sheet.pdf). When an underwriter asks for supporting detail, you can respond within minutes.

Step 3: Match the Loan Type to the Business Use Case​

Choosing the wrong product is the fastest way to overpay. Evaluate these common options:

Term Loan (Bank or SBA 7(a))​

• Best when: You need a multi-year lump sum for hiring, inventory, or equipment.
• Loan size & rate: $50k–$5M with terms of 5–10 years; rates typically track prime + 2.75%–4.75%.
• Beancount prep: Tag the capital expense accounts and build an amortization schedule to show monthly impact.

SBA 504 Loan​

• Best when: Funding owner-occupied real estate or heavy equipment with long repayment horizons.
• Loan size & rate: Up to $5.5M with fixed rates based on 10-year Treasury yields plus a modest spread.
• Beancount prep: Model blended payments (bank + Certified Development Company portions) to show total debt service.

Business Line of Credit​

• Best when: You want flexible working capital for payroll gaps or large receivables.
• Loan size & rate: Revolving limits from $20k–$500k; interest accrues only on the drawn balance.
• Beancount prep: Set up a Liabilities:LineOfCredit account and reconcile draws weekly.

Equipment Financing​

• Best when: The asset itself serves as collateral and you need rapid approval.
• Loan size & rate: Covers 80%–100% of the equipment cost; terms 3–7 years.
• Beancount prep: Track depreciation schedules alongside liability amortization.

Invoice Financing or Factoring​

• Best when: Cash is tied up in slow-paying enterprise clients.
• Loan size & rate: Advance rates of 80%–90% of invoice value; fees 2%–4% per 30 days.
• Beancount prep: Flag invoices eligible for funding and reconcile fees as cost of goods sold.

Microloans and Community Development Fund Loans​

• Best when: You need <$50k and value mentoring or technical assistance.
• Loan size & rate: Typically $5k–$50k with 6%–13% APR.
• Beancount prep: Document community impact and job creation stats pulled from your ledger.

Step 4: Improve Your Credit Package in 30 Days​

You cannot change last year’s results, but you can polish the presentation fast.

• Tighten accounts receivable. Use Beancount’s aging report to target overdue customers and document collection plans.
• Reduce discretionary spending. Update your budget, tag nonessential expenses, and demonstrate improved margins in the latest month.
• Separate personal and business flows. Reconcile owner draws and ensure all personal transactions are coded to equity, not operating expenses.
• Increase cash reserves. Sweep idle funds into a business savings account to show liquidity equal to at least two months of operating expenses.
• Check your personal credit. Download reports from Equifax, Experian, and TransUnion and dispute errors now.

Document each change in a “credit readiness log” so you can narrate improvements during lender conversations.

Step 5: Shop the Market with a Targeted Outreach List​

Create a lender comparison spreadsheet that captures:

• Loan program and maximum amount
• Rate type (fixed, variable, or indexed)
• Required collateral and guarantees
• Minimum credit score, revenue, and time in business
• Decision timelines and funding speed

Prioritize lenders that already bank your deposit accounts, community development financial institutions (CDFIs) that understand local markets, and fintech lenders known for API-based underwriting. Record each conversation with date, contact, and next steps so you can keep momentum without double-booking meetings.

Step 6: Submit, Track, and Update in Beancount​

Once you submit applications:

1. Log application fees and deposits. Use a dedicated expense account so you can deduct or capitalize costs appropriately.
2. Track conditional approvals. Create metadata tags like loan_status:"conditional" to surface open requests.
3. Respond to underwriting questions. Build saved Beancount queries (for example, inventory turnover, gross margin trend) so you can export reports quickly.
4. Update the ledger when funded. Record the disbursement, set up the liability account, and schedule automatic postings for interest and principal.

Step 7: Maintain Post-Funding Discipline​

Winning approval is the start of the relationship, not the end.

• Monitor covenants. If your loan agreement requires quarterly DSCR or minimum cash, schedule Beancount queries that alert you before you slip.
• Automate reporting. Create templates for the monthly or quarterly packages your lender expects. Send them early.
• Document capital deployment. Tag every expense tied to the loan so you can demonstrate compliance with the approved use of funds.
• Plan for renewal or payoff. Build a timeline 6–12 months before maturity with tasks for refinancing or repayment.

The Beancount Advantage​

Lenders gravitate toward borrowers who think like controllers. By leveraging a transparent, auditable ledger, you can replace frantic spreadsheet scrambles with repeatable workflows:

• Clarity: Double-entry bookkeeping keeps every draw, fee, and payment reconciled.
• Speed: Saved queries and exports answer underwriter questions without manual rework.
• Confidence: Clean books help you negotiate better rates, larger limits, or more flexible covenants.

Use this playbook as a checklist the next time you need outside capital. With Beancount as the source of truth, your numbers speak the language lenders expect—and that can turn a stressful loan hunt into a strategic win.

International contractors, remote teammates, or family abroad can make cross-border payments part of your regular bookkeeping. Fees and currency swings add complexity, but a little planning helps you pick the right payment rail and keep your Beancount ledger accurate.

Step 1: Clarify the Purpose and Frequency​

Start by recording why you are sending the money and how often it will happen. Paying a freelancer once a quarter has a different risk profile than reimbursing a subsidiary every week. Document the business purpose in Beancount with metadata like payee, project, or invoicenumber so you can trace each transfer during reviews or audits.

Step 2: Compare the Main Transfer Options​

Most cross-border transfers fall into three buckets. Evaluate each one based on speed, cost, and the level of documentation it provides for your ledger.

Bank Wire Transfers​

Traditional bank wires ride the SWIFT network. They are reliable and deliver strong compliance records. Expect higher fixed fees ($15–$50 USD per wire) and potential intermediary bank charges. They work best when:

• You already have a relationship with the receiving bank.
• The amount is large enough that fixed fees are a small percentage of the total.
• You need a paper trail that satisfies auditors or investors.

In Beancount, capture wires with a two-step entry:

2025-09-10 * "Wire to Berlin Studio" "September design sprint"
  Assets:Bank:Operating           -2500.00 USD
  Expenses:Professional-Services   2450.00 EUR @@ 2500.00 USD
  Expenses:Bank-Fees                 35.00 USD
  Assets:Bank:Operating              15.00 USD

The example splits out bank fees and uses a cost basis notation to lock the EUR amount to the USD cash impact.

Fintech Payment Platforms​

Specialized platforms designed for small businesses bundle competitive FX spreads with lower transfer fees. Many integrate with accounting tools or provide CSV exports you can import into Beancount. They are ideal when:

• You pay multiple vendors in the same currency each month.
• You want to lock in an exchange rate ahead of payroll or invoice runs.
• You need automation hooks (APIs, webhooks) to reconcile payments quickly.

Record these transfers by importing the platform statement, then tag each posting with the platform name so you can trace disputes or chargebacks.

Multi-Currency Accounts and Digital Wallets​

Holding balances in multiple currencies lets you pick the timing of conversions. Digital wallets shine when you receive and send money in the same foreign currency. Watch for:

• Dormancy fees if balances sit unused.
• Regulatory limits on business use in certain countries.
• The need to mark-to-market balances at month-end in your Beancount ledger.

Model wallets as separate asset accounts per currency. Revalue them with a price directive so your balance sheet reflects current FX rates.

Step 3: Account for Exchange Rates and Fees​

Every transfer includes at least two components: the amount you send and the cost to convert or deliver it. Break those costs apart in Beancount:

• Use cost basis annotations (@@) or price directives (@) to lock in the exchange rate used for each transaction.
• Post fees to Expenses:Bank-Fees or a dedicated Expenses:FX-Spread account so you can analyze them later.
• If you use forward contracts or limit orders, add metadata (method: forward) to trace the hedge strategy.

Step 4: Build a Documentation Trail​

International compliance requirements change frequently. Keep the following artifacts handy:

1. Invoices or contracts that justify the transfer amount.
2. Transfer confirmations with reference numbers and FX rates.
3. Communications with the recipient about receipt of funds.

Attach these to your Beancount entries using document directives so auditors can follow the money without digging through email threads.

Step 5: Review and Reconcile Monthly​

Cross-border transfers can take days to settle. Schedule a monthly reconciliation to match your Beancount ledger against bank or platform statements. Focus on:

• Transfers still in transit at month-end.
• FX gains or losses on multi-currency balances.
• Fees that creep up over time and warrant a pricing review.

Checklist Before You Hit Send​

• Confirm the recipient’s banking details or wallet address.
• Validate the transfer limit with your bank or platform.
• Capture the projected FX rate and total cost in Beancount.
• Queue up supporting documents for compliance.

Staying methodical keeps international payments from turning into a reconciliation nightmare. By choosing the rail that matches your speed, cost, and documentation needs—and by capturing every detail in Beancount—you build a ledger that stays audit-ready no matter where your money travels.

Electronic funds transfers (EFTs) quietly move most of the money in a modern business. Rent, payroll, customer payouts, even reimbursements are increasingly routed through digital networks instead of paper checks. That speed and convenience comes with new bookkeeping expectations: you have to follow the money before, during, and after it leaves your bank.

This guide unpacks how the major EFT rails operate, what to look for in the settlement timeline, and how to model the entire flow in Beancount so your ledger always tells the truth about cash.

What is an EFT payment?​

An electronic funds transfer is any movement of money between bank accounts that happens via digital messaging rather than cash or paper instruments. The umbrella covers ACH debits and credits, wire transfers, debit card transactions, peer-to-peer payments, instant payout products, and more. Instead of carrying a physical authorization, the sender instructs their bank to push or pull funds through a shared network.

The key bookkeeping implication: the timestamp when you initiate an EFT, the date it posts on your bank statement, and the date the counterparty recognizes the cash are often different. You need to record the intent, the in-flight balance, and the final settlement to keep your balances reliable.

Popular EFT rails for small businesses​

• ACH (Automated Clearing House). Batch-based transfers that settle in one to three business days. Common for payroll, vendor invoices, and recurring billing because of predictable fees.
• Same Day ACH. An accelerated flavor that still clears through NACHA but credits the destination account the same day if submitted before the network deadlines. Useful for urgent payroll corrections or supplier rush payments.
• Wire transfers. Real-time gross settlement with higher fees, typically used for large, time-sensitive transactions or international deals.
• Debit and virtual card networks. Card-not-present sales and payouts from platforms (Stripe, PayPal, marketplaces) ultimately sweep through EFT settlement, though a card processor stands in the middle.
• Instant payout services. Offer immediate movement to a debit card or account using RTP or push-to-card rails. Fees are higher but valuable for gig payouts or emergency disbursements.
• Bank-to-bank payment links. Open banking APIs and RTP allow customers to authorize a one-off pull directly from their accounts with instant confirmation and finality.

How an EFT moves from initiation to settlement​

1. Authorization. You (or your platform) capture the customer or vendor’s consent, storing the banking details or tokenized credentials.
2. Submission. Your bank or payment processor bundles instructions and submits them to the appropriate network (ACH, RTP, SWIFT, etc.).
3. Network processing. The network validates the transaction, checks for sanctions or errors, and schedules settlement.
4. Settlement. Funds move between the participating financial institutions. Your bank reflects the pending amount, then the posted balance when cleared.
5. Notification and reconciliation. Statements, webhooks, or CSV exports confirm the final figures and any associated fees or chargebacks.

Your ledger should mirror that timeline. Use supporting accounts (like clearing or undeposited funds) when money is in flight so cash-on-hand never looks higher or lower than reality.

Recording EFT activity in Beancount​

Customer payments collected via ACH​

When a platform deposits card or ACH payouts, fees are usually withheld before the deposit reaches your bank. Record the gross sale, the fees, and the net cash in a single transaction:

2025-09-03 * "Stripe Payout" "August card sales"
  Assets:Bank:Operating                4,850.00 USD
  Expenses:Fees:PaymentProcessors        150.00 USD
  Income:Sales                        -5,000.00 USD

If the payout is marked as pending for a day before it posts, add an intermediate account:

2025-09-03 * "Stripe Payout" "August card sales"
  Assets:Clearing:Stripe               4,850.00 USD
  Expenses:Fees:PaymentProcessors        150.00 USD
  Income:Sales                        -5,000.00 USD

2025-09-04 * "Stripe Payout Settlement"
  Assets:Bank:Operating               -4,850.00 USD
  Assets:Clearing:Stripe               4,850.00 USD

Vendor payments sent via ACH or wire​

Separate the approval date from the bank posting date so you can monitor cash commitments:

2025-09-05 * "ACH Payment" "Pay Greenline Supplies"
  Expenses:CostOfGoodsSold             1,920.00 USD
  Assets:Clearing:OutboundACH         -1,920.00 USD

2025-09-06 * "ACH Settlement" "Greenline Supplies"
  Assets:Clearing:OutboundACH          1,920.00 USD
  Assets:Bank:Operating               -1,920.00 USD

For wires, swap in a dedicated clearing account to capture the fee separately:

2025-09-07 * "Wire Fee"
  Expenses:Fees:Bank                     25.00 USD
  Assets:Bank:Operating                 -25.00 USD

Payroll direct deposits​

Payroll processors often withdraw one lump sum for net pay plus taxes. Split the entry so liabilities zero out when the EFT posts:

2025-09-10 * "Payroll Funding" "September cycle"
  Expenses:Payroll:Wages             18,500.00 USD
  Expenses:Payroll:Taxes              4,200.00 USD
  Liabilities:Payroll:TaxesPayable   -4,200.00 USD
  Assets:Clearing:Payroll           -18,500.00 USD

2025-09-11 * "Payroll Settlement"
  Assets:Clearing:Payroll            18,500.00 USD
  Assets:Bank:Operating            -18,500.00 USD

Reconciliation checklist for EFTs​

• Match every payout or debit against the bank statement date, not just the processor report.
• Confirm that clearing accounts return to zero; lingering balances signal stuck transactions.
• Capture gateway fees, chargebacks, and reversals in the same period they occur.
• Store the processor’s confirmation number as metadata (txn_id or eft_id) for audit trails.
• Schedule periodic reviews of ACH returns (R01–R85 codes) so you can re-initiate payments quickly.

Controls and automation ideas​

• Configure bank feed imports to flag EFT transactions above a threshold and require secondary review.
• Use Beancount’s balance directives to enforce the expected clearing account totals at month end.
• Attach YAML metadata to note processing times (settlement_days: 2) and calculate cash forecasting scenarios in Fava or downstream analytics.
• Export NACHA or processor event logs to version control so you maintain an immutable history outside the banking portal.

Frequently asked questions​

Are EFT payments secure? They rely on encrypted bank-to-bank messaging and regulated networks. Your internal controls—like dual approval for new beneficiaries—are the most important safeguard.

How fast do EFTs clear? ACH is usually T+1 or T+2, wires settle same day, and instant payment products clear in seconds if both banks support the rail. Record the exact posting date to avoid timing mismatches.

Do I need special accounts in Beancount for EFTs? Not mandatory, but clearing accounts make it easy to spot delays and reconcile complex payouts. Think of them as a staging area that mirrors the processing network.

Keeping EFT activity transparent in Beancount gives you real-time visibility into working capital. With accurate postings, you can forecast cash, respond to customer inquiries faster, and close the books without hunting through bank portals.

Month-end chaos is a sign that data, processes, and teams are working in batches. A continuous close replaces that scramble with a steady rhythm of daily reconciliations, exception alerts, and rolling financial statements. With Beancount as your system of record, you can design that rhythm without buying another closed platform.

Plain-text accounting shines here because it is fully observable, scriptable, and easy to automate. Combined with AI-assisted data classification and reconciliation, finance teams can monitor the ledger in near real time and catch issues long before they derail reporting.

What Is a Continuous Close?​

A continuous close is an operating model where journal entries, reconciliations, and reviews occur throughout the month instead of in a single end-of-period sprint. The goal is to provide leadership with fresh financial data at any time while still preserving audit quality.

Key traits of a mature continuous close:

• Rolling reconciliations: Bank, payroll, and card feeds sync daily with automatic variance checks.
• Exception-first workflows: Analysts focus only on flagged anomalies; everything else posts automatically.
• Shared visibility: Controllers, FP&A, and RevOps can all view the same Beancount source of truth.
• Short feedback loops: Forecasts update as soon as actuals land, improving planning accuracy.

Why Plain-Text Ledgers Make It Easier​

Traditional ERPs hide business logic behind forms and API quotas. Beancount stores every decision in git-friendly text files, making it perfect for continuous delivery practices.

• Version control keeps a full history of adjustments, approvals, and supporting context.
• Composable automations let you pair Beancount with Python, dbt, or Airflow for scheduled tasks.
• AI-ready data because accounts and metadata live in a structured, machine-readable format.
• Portability so auditors can ingest the same ledger as your internal scripts.

Architecture Blueprint​

Use the following blueprint to align systems and responsibilities:

30-Day Implementation Plan​

Week 1: Map the current close. Identify every data source, manual reconciliation, and approval gate. Document them in a swimlane diagram and note handoffs that create waiting time.

Week 2: Automate ingest and validation. Configure daily imports for banking and revenue systems. Add Beancount assertions (balance, pad, close) plus Python scripts that fail the pipeline when totals drift.

Week 3: Layer on AI assistance. Deploy classification prompts that enrich transactions with payee, cost center, and VAT tags. Route unresolved items to a shared inbox with context pulled directly from the ledger.

Week 4: Pilot rolling reporting. Publish a continuously updating income statement and cash dashboard. Hold a retro to capture new policies (materiality thresholds, approval SLAs) and update your runbooks.

Sample Beancount Automation Snippet​

2025-09-09 * "Stripe Payout" "September subscriptions"
  Assets:Bank:Operating                -12500.00 USD
  Income:Stripe:Fees                     187.50 USD
  Assets:Clearing:Stripe               12687.50 USD

; automation: reconcile_stripe_payout
; expected_settlement_days: 2
; alert_if_variance_gt: 25 USD

Pairing metadata annotations (automation, expected_settlement_days) with scheduled scripts lets you auto-close clearing accounts and raise alerts only when payouts miss the window or fees drift.

Metrics and Alerts to Monitor​

• Ledger freshness: minutes since the last successful ingest job.
• Reconciliation coverage: percentage of balance sheet accounts reconciled within 48 hours.
• AI assist rate: share of transactions auto-classified versus requiring manual review.
• Close readiness index: weighted score of open tasks, outstanding variances, and unresolved approvals.

Trigger notifications in Slack or email when thresholds slip, and log every alert in Beancount metadata for audit traceability.

Change Management Checklist​

• Establish who reviews automation pull requests and how issues escalate.
• Update your accounting policies manual to document AI usage and override procedures.
• Train cross-functional teams (Sales Ops, RevOps) on reading Fava dashboards fed by the continuous ledger.
• Run a quarterly controls review with internal audit to validate evidence storage and access controls.

Move Toward Always-On Finance​

Continuous close is not about adding more meetings at month end—it is about designing flows that run every day. With Beancount, you already have the composable ledger foundation. Layer on automation, AI tagging, and disciplined review habits, and your finance team can deliver investor-ready numbers whenever leadership asks.

Choosing a credit card processor is part math, part operations. The right partner simplifies your workflow, while the wrong one can slowly bleed your margins through hidden fees and create bookkeeping nightmares. Transaction fees, payout timing, hardware costs, contracts, and data export quality all affect your bottom line—and your accounting workflow. This guide highlights popular U.S. options in 2025 and adds Beancount-friendly tips so you can keep your ledger clean from day one.

All pricing snapshots below are published U.S. rates as of September 2025 and may vary by plan, industry, and transaction volume. Always confirm current pricing on the provider’s official site.

How to Choose: A Quick Framework​

Before diving into brand names, use this framework to narrow your search. Your business's unique transaction profile is the most important factor.

• Transaction Mix

  • Mostly in-person, low average ticket: Your priority is speed and simplicity at the point of sale. Favor simple flat-rate POS systems like Square, Zettle, Clover, or Chase.
  • Mostly online/SaaS or multi-country: You need robust APIs, international payment methods, and developer-friendly tools. Look at Stripe, Adyen, or Braintree.
  • $30k–$100k+ monthly volume with a stable mix: At this scale, flat-rate pricing becomes expensive. It's time to consider interchange-plus (Helcim, Dharma) or membership (Stax, Payment Depot) models to lower your effective rate.

• Total Cost of Ownership (TCO) Don't just look at the advertised percentage. Calculate your effective rate by combining the percentage fee, fixed cents-per-transaction fee, monthly account fees, hardware costs, and potential chargeback fees. This gives you a true picture of your costs.

• Payout Cadence How quickly do you need your cash? A next-day deposit schedule versus a two-day rolling window (T+2) can significantly impact your cash-flow forecasting. We'll cover how to model this in Beancount below.

• Lock-In Avoid long-term contracts with hefty early termination fees (ETFs). Look for month-to-month billing and, crucially, the ability to easily export your transaction data via CSV or an API. Your data is your own; don't let a processor hold it hostage.

The Shortlist: Who It’s Best For​

Stripe — Best for Online-First and Platforms​

Stripe is the gold standard for internet businesses. Its excellent APIs, pre-built Checkout and Link components, robust subscription management, and global payment method support make it incredibly versatile. For physical sales, its Terminal line of hardware integrates seamlessly.

• Pricing Snapshot: Online transactions are typically 2.9% + 30¢ (domestic). In-person payments via Terminal are 2.7% + 5¢. International cards and currency conversion may incur surcharges.
• Payouts: Operates on a configurable, rolling schedule. Most U.S. businesses see funds available on a T+2 basis (two business days after the transaction).

Square — Best Turnkey POS for New Storefronts​

Square excels at getting new retail and service businesses up and running quickly. With a free and intuitive POS app, a simple hardware lineup, and fast onboarding, it's a favorite for cafes, boutiques, and service providers.

• Pricing Snapshot: In-person is 2.6% + 15¢, online is 2.9% + 30¢, keyed-in is 3.5% + 15¢, and invoices are 3.3% + 30¢.
• Payouts: Standard next-business-day transfers are free. For urgent cash needs, instant or same-day transfers are available for an additional 1.75% fee.

PayPal Zettle — Best “Micro-Merchant” Mobile POS​

Perfect for sellers at farmers' markets, pop-up shops, or conventions. Zettle offers low-cost entry hardware that integrates smoothly with the broader PayPal ecosystem, making it easy to manage funds alongside your online PayPal sales.

• Pricing Snapshot: In-person card transactions are 2.29% + 9¢. Keyed, invoice, and online transactions have separate rates.

Braintree (by PayPal) — Best for PayPal/Venmo + Cards Under One API​

Braintree is a developer-centric platform that allows businesses to accept credit cards, PayPal, Venmo, and other digital wallets through a single integration. It's a strong choice for e-commerce sites that want to offer customers a wide array of payment options.

• Pricing Snapshot: Standard rate for cards and most digital wallets is 2.89% + 29¢. Venmo is often 3.49% + 49¢. Discounts for non-profits and custom pricing for high-volume businesses are available.

Helcim — Best Transparent Interchange-Plus with Volume Discounts​

Helcim offers interchange-plus pricing with no monthly fee, making it an accessible option for businesses graduating from flat-rate models. Its pricing automatically gets cheaper as your processing volume increases, with clear tiers published on its site.

• Pricing Snapshot: Margins are typically around Interchange + 0.40% + 8¢ (card-present) and Interchange + 0.50% + 25¢ (card-not-present), with margins decreasing at higher volumes.

Dharma Merchant Services — Best Small-to-Mid B2B Interchange-Plus​

Dharma is known for its fair interchange-plus pricing and excellent support, with a focus on B2B transactions. It helps businesses qualify for lower Level 2 and Level 3 processing rates, which can lead to significant savings on corporate card transactions.

• Pricing Snapshot: Card-present is IC + 0.15% + 8¢, and e-commerce is IC + 0.20% + 11¢, plus a modest monthly fee.

Stax — Best Subscription (Membership) Pricing at Higher Volumes​

Stax uses a membership model: you pay a flat monthly subscription fee and in return get access to direct interchange rates with a "0% markup." This can be extremely cost-effective once your monthly volume is high enough to justify the subscription cost.

• Pricing Snapshot: Plans start at $99/month, with tiers based on annual processing volume.

Payment Depot — Membership Alternative to Lower Processing Costs​

Similar to Stax, Payment Depot offers interchange-plus rates under a membership model. It positions itself as a way for businesses to access wholesale processing rates without percentage markups, with an emphasis on no long-term contracts or early termination fees.

• Pricing Snapshot: Membership-style IC+ pricing. Plans are typically provided via a custom quote.

Shopify Payments — Best if You Already Run on Shopify​

If your business runs on Shopify, using Shopify Payments is a no-brainer. It's tightly integrated with your store, provides excellent fraud analysis tools, and enables the high-converting Shop Pay checkout. Using a third-party gateway on Shopify incurs additional fees.

• Pricing Snapshot: Rates are tied to your Shopify plan. Online fees range from ~2.5% to 2.9% + 30¢, while in-person rates are around 2.4% to 2.6% + 10¢ on higher tiers.

Toast — Best All-in-One for Restaurants​

Toast is purpose-built for the food and beverage industry. Its platform combines durable, restaurant-grade hardware with software for kitchen display systems (KDS), online ordering, inventory, and even payroll add-ons.

• Pricing Snapshot: A pay-as-you-go plan is available at ~3.09%–3.69% + 15¢. If you pay for hardware upfront, rates can be as low as 2.49% + 15¢ (card-present) and 3.50% + 15¢ (card-not-present).

Clover (Fiserv) — Best POS Hardware Variety (Retail/Service)​

Clover offers one of the broadest hardware lineups in the industry, from the mobile Go and Flex to the countertop Mini and Station. This variety makes it a flexible choice for retail stores and service businesses that need a specific form factor.

• Pricing Snapshot: Rates vary widely by plan and device, but in-person rates are commonly advertised as low as 2.6% + 10¢.

Lightspeed Payments — Best Mid-Market Retail POS with Deep Inventory​

Lightspeed is a powerhouse for retail businesses with complex inventory needs. Its integrated payments system works seamlessly with its advanced POS features, providing a unified platform for sales and stock management.

• Pricing Snapshot: A frequently cited U.S. reference rate is ~2.6% + 10¢ for in-person and ~2.9% + 30¢ for card-not-present transactions.

Authorize.Net — Best Standalone Gateway (Bring Your Own Merchant Account)​

A long-standing and trusted name, Authorize.Net is a payment gateway that connects your website to your merchant account. This is for businesses that have already negotiated a direct merchant account with an acquiring bank and just need the technology layer to process online payments.

• Pricing Snapshot: All-in-one: $25/mo + 2.9$25/mo + 10¢ per transaction, plus a small daily batch fee.

Chase Payment Solutions — Best Bank-Integrated POS & Fast Deposits​

For businesses that bank with Chase, their payment solutions offer a compelling advantage: the potential for same-day deposits into a Chase business checking account at no extra cost. This tight integration simplifies cash flow management.

• Pricing Snapshot: Card-present is 2.6% + 10¢, while keyed-in sales and payment links are 3.5% + 10¢.

Beancount: Model Your Payouts and Fees Cleanly​

Plain-text accounting shines when you can model real-world financial flows precisely. For payment processors, the key is using a "clearing account" to track money from the moment of sale until it lands in your bank. This preserves your gross revenue figures and makes reconciliation trivial.

Example Chart of Accounts:

Assets:Bank:Operating
Assets:Processors:Stripe      ; A clearing account for each processor
Income:Sales
Expenses:ProcessingFees
Liabilities:SalesTax:Payable

Pattern A: “Net Deposit” Processors (Most Flat-Rate)​

Most processors batch your sales, subtract their fees, and deposit the net amount. Your job is to record the gross sale first, then account for the deposit and the fee. A $100 sale with a$2.90 fee becomes:

2025-09-08 * "Online order #8421"
  Assets:Processors:Stripe               100.00 USD
  Income:Sales                          -100.00 USD

2025-09-09 * "Stripe payout"
  Assets:Bank:Operating                   97.10 USD
  Expenses:ProcessingFees                  2.90 USD
  Assets:Processors:Stripe               -100.00 USD

Why this pattern is essential: It correctly records $100 in `Income:Sales` and$2.90 in Expenses:ProcessingFees. This is critical for analyzing your true gross revenue and is exactly what you need to reconcile your books with the processor's 1099-K form at year-end.

Pattern B: “Daily Batch” with Line-Item Fees​

Some POS systems (like Toast or Clover) will show a single large deposit for a day's sales, with fees deducted as separate line items in their report. The principle is the same: balance the clearing account to zero.

2025-09-08 * "Toast batch — store #1"
  Assets:Bank:Operating                  1,943.55 USD
  Expenses:ProcessingFees                   56.45 USD
  Assets:Processors:Toast               -2,000.00 USD

Pattern C: “Membership” Pricing (Stax/Payment Depot)​

For membership models, the monthly subscription is a separate operating expense. You book it directly, while the much smaller per-transaction fees are handled using Pattern A or B.

2025-09-01 * "Stax subscription"
  Expenses:ProcessingFees                  99.00 USD
  Assets:Bank:Operating                   -99.00 USD

Importing & Reconciling Tips​

• One Clearing Account Per Processor: Create Assets:Processors:Stripe, Assets:Processors:Square, etc. If you have multiple locations, consider Assets:Processors:Toast:Store1 to isolate activity.
• Mind the Payout Cadence: A sale on Friday might not hit your bank until Tuesday. This lag is why the clearing account is so important for accurate cash forecasting.
• Automate Your Imports: Every provider offers CSV exports. Write simple Python scripts or use Fava's importer functionality to map the columns (date, gross amount, fees, net deposit) to Beancount transactions.
• Handle Sales Tax Correctly: Sales tax is not income. Split it out to Liabilities:SalesTax:Payable at the time of sale. Most POS reports provide this breakdown.
• Book Chargebacks Promptly: When a chargeback occurs, the processor debits your account. Book a reversal to Income:Sales for the sale amount and a separate entry to Expenses:ProcessingFees for the chargeback fee.

Quick Comparison Snapshot​

Which One Should a Beancount User Pick?​

• For the simplest setup with daily auto-payouts: Start with Square or Zettle. Their reports are clean and easy to import.
• For developer work, subscriptions, or multiple payment methods: Stripe or Braintree are your best bets due to their powerful APIs.
• If you process ≥$30k/month with a stable card mix: It's time to do the math. Price out Helcim (IC+) versus Stax/Payment Depot (membership) to calculate your true effective rate.
• For a restaurant POS: Compare Toast and Clover/Lightspeed, paying close attention to contract terms and hardware financing.
• If you're already on Shopify: Use Shopify Payments to avoid paying extra gateway fees.
• For same-day deposits into your operating account: Chase QuickAccept linked to a Chase business checking account is the clear winner.

Final Beancount Checklist​

• Create Assets:Processors:* clearing accounts for each processor and location.
• Always record gross sales and separate fees, even if your bank deposit is a net amount.
• Match payout dates and batch IDs from the processor's CSV report to your clearing account transactions.
• Automate your workflow by writing small importers to map CSV columns to Beancount postings.
• Review chargebacks weekly and post the reversal and fee on the day they are debited by the processor.

If you keep immaculate books in Beancount, you already think in systems. You appreciate precision, automation, and a single source of truth. This guide turns that disciplined mindset into an 11-step, practical workflow for establishing and growing business credit. We'll map each critical step to simple, automatable Beancount habits, transforming your ledger from a historical record into a forward-looking tool for financial strength.

The 2025 Quick Primer: What Actually Matters​

The world of business credit can feel opaque, but the principles for 2025 are straightforward. Here’s what you need to know before you start.

First, separate your identities. The absolute foundation of business credit is a distinct legal entity (like an LLC or corporation) with its own, separate bank accounts. Co-mingling personal and business funds is the fastest way to be denied business credit.

Next, get an Employer Identification Number (EIN). This is your business's social security number for tax purposes. It is always free and you should apply for it directly with the IRS—never pay a third-party site for this service.

Then, understand how you’ll be scored. Unlike consumer credit's unified FICO score, business credit is measured by several bureaus, each with its own methodology:

• Dun & Bradstreet PAYDEX® (1–100): This score is almost entirely driven by your payment history with vendors and suppliers. A score of 80 is considered on-time, while anything higher indicates you pay your bills early.
• Experian Intelliscore Plus (1–100): This is a predictive score that forecasts the likelihood of serious delinquency. It analyzes payment trends, public records, and other company data.
• FICO® SBSS (Small Business Scoring Service): This score is critical for accessing SBA 7(a) "Small Loans." As of 2025, the Small Business Administration (SBA) lists a minimum prescreen score of 165.

Finally, know that monitoring is fragmented. Scores differ by bureau, and accessing your full reports often costs money. Before paying for a report, try to verify which score a specific lender or vendor uses.

Heads-up: A quick note on identifiers. If you plan to sell to the U.S. federal government, the Unique Entity ID (UEI) replaced the D-U-N-S number in the SAM.gov system on April 4, 2022. However, for building your business credit file with Dun & Bradstreet, the D-U-N-S number is still essential.

The 11 Steps (and the Beancount Moves That Make Them Stick)​

1. Formalize the Entity and Separate Money Flows​

This is the non-negotiable first step. Form a legal entity, open a dedicated business checking account, and keep personal funds out. This creates a clean financial history that credit bureaus can track.

Beancount Move: Your ledger should explicitly reflect this separation from day one. Open distinct accounts for the business and document initial capitalization cleanly.

2025-01-01 open Assets:Bank:Checking:Business      USD
  institution: "Bank of Example"
2025-01-01 open Equity:Owner:Contributions         USD

2025-01-05 * "Owner Capitalization"
  Assets:Bank:Checking:Business        10000 USD
  Equity:Owner:Contributions

2. Get Your EIN (Free) and File It in Your Repo​

Apply directly at IRS.gov. Once you receive your EIN confirmation letter (SS-4), store a digital copy in a docs/ directory alongside your ledger. This keeps critical identity documents version-controlled and accessible.

Beancount Move: Use metadata at the top of your ledger file to record the EIN and link to the source document.

; organization-id: "EIN 12-3456789"
; documents: "docs/tax/SS-4.pdf"

Tip: Beware of search-ad "EIN helpers" that charge fees or harvest your data. Always verify you are on a .gov domain before entering sensitive information.

3. Claim Your D-U-N-S® Number​

A D-U-N-S number links your company to its Dun & Bradstreet credit file, which vendors and lenders use to assess your reliability. Go to the D&B website to claim or update your company's record for free.

Beancount Move: Just like your EIN, add your D-U-N-S number to your ledger's metadata. You can also link to an internal checklist for vendor onboarding to ensure you're always providing consistent information.

; duns: "123456789"
; vendor-onboarding-checklist: "docs/credit/dnb-checklist.md"

4. Open a Business Credit Card and Use It Prudently​

A revolving business credit card is a powerful tool, as issuers often report your payment history to business bureaus. Use it for regular expenses, keep your utilization modest (ideally under 30%), and never, ever miss a payment.

Beancount Move: Model your credit card as a liability. Use metadata to note which bureaus it reports to. Track purchases and, crucially, payments from your business checking account.

2025-01-01 open Liabilities:Credit:BizCard:BankCo  USD
  reports_to: "Experian, Equifax (varies)"

2025-02-04 * "Laptop (business card)"
  Assets:Equipment:Computers          1600 USD
  Liabilities:Credit:BizCard:BankCo

2025-02-15 * "BizCard payment (keep util <30%)"
  Liabilities:Credit:BizCard:BankCo    1200 USD
  Assets:Bank:Checking:Business       -1200 USD

5. Establish Vendor Net-30 Trade Lines That Report​

This is the fastest path to building a strong PAYDEX score. Find vendors that offer payment terms (e.g., Net-30) and confirm that they report your payment history to bureaus like D&B. Office supply, packaging, and shipping companies are common starting points.

Beancount Move: Track each vendor invoice in your Accounts Payable (Liabilities:AP). When you pay the invoice, record the transaction and consider adding a tag to track your payment habits.

2025-02-03 * "Acme Packaging — Net30"
  invoice: "INV-2025-023"
  Expenses:COGS:Packaging              525.00 USD
  Liabilities:AP:AcmePackaging

2025-02-27 * "Pay Acme INV-2025-023 (paid early)"
  Liabilities:AP:AcmePackaging         525.00 USD
  Assets:Bank:Checking:Business       -525.00 USD
  ; tag: net30-early

6. Pay on Time or Early to Target PAYDEX ≥ 80​

D&B explicitly maps a PAYDEX score of 80 to "prompt/on-time" payments. Scores above 80 signify early payments. If your cash flow allows, paying invoices 10–20 days before the due date can significantly boost your score.

Beancount Move: This is a process, not a transaction. Set up a recurring reminder (e.g., a cron job or a Makefile task) that queries your open Liabilities:AP accounts and flags invoices that are due in the next 30 days, prompting you to schedule payments early.

7. Keep Business Identity Consistent Everywhere​

Use the exact same legal name, address, phone number, and industry codes (like NAICS) across your bank accounts, IRS filings, insurance policies, and credit bureau profiles. Inconsistencies can lead to fragmented credit files or mismatches.

Beancount Move: Establish a single source of truth for this data in your ledger's top-level metadata.

; company-legal-name: "Acme Robotics, Inc."
; naics: "541511"
; address: "123 Market St, Springfield, ST 12345"

8. Monitor Your Business Credit and Dispute Errors​

Business credit reports are less standardized and regulated than consumer reports, making errors more common. Periodically pull your reports from the major bureaus and dispute any inaccuracies immediately.

Beancount Move: Maintain a directory for docs/credit/ where you store PDFs of your credit reports and any dispute correspondence. You can link to these documents directly from transactions that were misreported, creating an auditable trail.

9. Graduate to Bank Lines and SBA Options (When Ready)​

Once you have a solid history of on-time payments, you can approach banks for lines of credit or apply for SBA-backed loans. For SBA 7(a) Small Loans, lenders use the FICO SBSS score, and the current minimum prescreen is 165. Keep your personal credit clean as well, as it's often a factor.

Beancount Move: Use your ledger to track key financial metrics that lenders care about, like your Debt Service Coverage Ratio (DSCR) or cash buffer days. You can define these as custom metadata and run queries against your ledger to see if you meet a lender's covenants before you even apply.

10. Automate the Habits That Move Scores​

Good credit is the result of consistent habits. Set up autopay for at least the minimum payment on business credit cards. Schedule a weekly time block to run your A/P. Regularly review A/R aging to protect your cash flow. Systematize the behaviors that lead to good scores.

Beancount Move: Document your financial policies as metadata. This serves as a reminder and a checklist for your operations.

; policy:
; - autopay: "Liabilities:Credit:BizCard:BankCo:min"
; - payables-run: "weekly, Mondays"
; - target-utilization: "<30%"

11. Keep Learning Your Scores’ Dials​

Finally, understand what drives each score so you can focus your efforts:

• PAYDEX (D&B): Driven almost entirely by payment timeliness and the number of trade lines reporting.
• Intelliscore (Experian): Influenced by payment trends, public records (liens, judgments), and firmographics (age of business, industry risk).
• SBSS (FICO/SBA): A blended model using business credit, personal credit, and business financials. Used heavily for SBA 7(a) loans.

A Compact Beancount Starter for Credit-Building​

Here is a minimal credit.beancount file to get you started on tracking these activities in a structured way.

option "operating_currency" "USD"

; --- Accounts ---
2025-01-01 open Assets:Bank:Checking:Business      USD
2025-01-01 open Assets:Equipment                   USD
2025-01-01 open Liabilities:AP:Vendors             USD
2025-01-01 open Liabilities:Credit:BizCard:BankCo  USD
2025-01-01 open Expenses:COGS:Packaging            USD
2025-01-01 open Expenses:Office:Supplies           USD
2025-01-01 open Income:Sales                       USD
2025-01-01 open Equity:Owner:Contributions         USD

; --- Identity (metadata you can query) ---
; EIN: 12-3456789
; DUNS: 123456789
; NAICS: 541511
; address: "123 Market St, Springfield, ST 12345"

; --- Example workflow ---
2025-02-03 * "Acme Packaging — Net30" "Boxes for March"
  invoice: "INV-2025-023"
  vendor_duns: "987654321"
  Expenses:COGS:Packaging              525.00 USD
  Liabilities:AP:Vendors

2025-02-27 * "Pay Acme INV-2025-023 (early)"
  Liabilities:AP:Vendors               525.00 USD
  Assets:Bank:Checking:Business       -525.00 USD

2025-03-04 * "Laptop (business card)"
  Assets:Equipment                    1600.00 USD
  Liabilities:Credit:BizCard:BankCo

2025-03-15 * "BizCard payment (util <30%)"
  Liabilities:Credit:BizCard:BankCo    1200.00 USD
  Assets:Bank:Checking:Business       -1200.00 USD

Common Questions​

How many trade lines do I need to generate a D&B score? Dun & Bradstreet requires a sufficient number of verified trade experiences to generate a PAYDEX score. While there's no magic number, the key is having multiple vendors consistently reporting your on-time or early payments.

Where do I check my business credit scores? Each bureau (D&B, Experian, Equifax) offers paid access to reports on their websites. Some third-party services aggregate data, but they may not show the specific score a lender uses. Before paying, ask your potential lender or vendor which credit bureau and score they rely on.

I see sites charging money for an EIN. Are those legit? No. An EIN is always free from the official IRS.gov website. Avoid non-.gov domains and sponsored search ads that pose as official IRS pages; they are designed to charge you for a free service or collect your data.

Recap: The System in One Checklist​

1. Form an entity → Open a dedicated business bank account.
2. Get an EIN (free) → Store the SS-4 document in your code repository.
3. Claim your D-U-N-S number → Align your business identity across all systems.
4. Add a business credit card → Automate payments and keep utilization low.
5. Open 2–3 Net-30 vendor accounts that report → Pay them early to target a PAYDEX score of 80 or higher.
6. Monitor your reports → Dispute any and all inaccuracies with the bureaus.
7. When ready, approach lenders → Keep the SBA's SBSS prescreen minimum of 165 in mind as a benchmark for readiness.

Sources for Further Reading​

• U.S. Small Business Administration: On establishing business credit and the SBA 7(a) Small Loan SBSS minimum.
• IRS: On obtaining an EIN for free.
• Dun & Bradstreet: On PAYDEX scores and D-U-N-S numbers.
• Experian: On Intelliscore Plus and business credit basics.
• Investopedia: On monitoring business credit.
• GSA: On UEI replacing D-U-N-S in SAM.gov.

As a founder, you live and breathe your product, your customers, and your team. But are you just as connected to the financial pulse of your business? Financial health can feel like a complex topic reserved for accountants, but it really comes down to four pillars: liquidity, profitability, insolvency, and operational efficiency.

This article provides a concise, founder-friendly checklist you can run monthly or quarterly to get a clear picture of where you stand. Best of all, it’s designed specifically for users of the plain-text accounting tool Beancount, showing you exactly where to look and what to track.

Beancount Tip: Fava, the web interface for Beancount, is your command center for this checklist. Its built-in Income Statement, Balance Sheet, and Holdings reports, combined with its query capabilities, provide everything you need to check these metrics fast.

The 12-Question Financial Health Check​

1) Do you have enough cash to sleep at night?​

• What to look at: Your cash reserve. The common rule of thumb is to hold 3 to 6 months of operating expenses in cash or highly liquid assets. Adjust this target based on your business’s volatility, seasonality, and growth plans.
• Why it matters: A healthy cash buffer allows your business to absorb unexpected shocks—a lost client, a market downturn, a supply chain delay—without resorting to expensive, reactive financing. It's the foundation of financial peace of mind.
• Where to check in Beancount: In Fava, navigate to the Balance Sheet and sum the balances in your Assets:Bank:* accounts, plus any short-term liquid investments you hold.

2) Is today’s liquidity solid?​

• What to look at: The Current Ratio (Current Assets / Current Liabilities). For an even stricter view, use the Quick Ratio (or "Acid Test"), which excludes inventory from current assets. A ratio above 1.0 is generally considered stable, but this varies by industry.
• Why it matters: These ratios gauge your ability to cover all your short-term obligations (like payroll and supplier bills) using only your short-term assets. They answer the critical question: "If we had to pay all our upcoming bills right now, could we do it without distress?"
• Where to check in Beancount: Your Balance Sheet in Fava provides all the necessary figures. To make this easy, ensure you are tracking Assets:Receivables, Assets:Inventory, and Liabilities:Payables in separate sub-accounts.

3) Are you consistently profitable?​

• What to look at: The Net Income on your Income Statement. More importantly, look at the trend. Is it positive and growing month-over-month or quarter-over-quarter?
• Why it matters: Profit is the engine of your business. It funds growth, attracts investment, and provides the ultimate cushion against downturns. Consistent profitability is the clearest sign of a sustainable business model.
• Where to check in Beancount: Go to the Income Statement in Fava. (Pro-tip: consider enabling Fava’s option to invert income signs, which many find more intuitive for reading financial reports.)

4) Are gross margins holding (or improving)?​

• What to look at: Your Gross Margin Percentage, calculated as (Revenue − COGS) / Revenue. COGS, or Cost of Goods Sold, is typically Beginning Inventory + Purchases − Ending Inventory.
• Why it matters: Gross margin reflects the profitability of your core product or service before overhead. A shrinking margin is a major red flag, often signaling issues with pricing power, discounting pressure, or rising supply costs.
• Where to check in Beancount: Categorize all direct costs under Expenses:COGS:*. You can then review your margin directly on Fava’s Income Statement.

5) Are you collecting on time? (DSO)​

• What to look at: Days Sales Outstanding (DSO), which is approximately (Accounts Receivable / Total Credit Sales) × Number of Days. This tells you the average number of days it takes to collect payment after a sale.
• Why it matters: A high DSO means your cash is trapped in your customers' bank accounts, tightening your own cash flow. Efficient collections are crucial for maintaining liquidity.
• Where to check in Beancount: Track invoices using metadata (e.g., invoice: "INV-123" and customer: "AcmeCorp"). You can then monitor the total A/R balance on Fava’s Balance Sheet.

6) Are you turning inventory efficiently?​

• What to look at: Inventory Turnover, calculated as COGS / Average Inventory. This measures how many times you sell and replace your inventory over a period. You can also track Days Sales of Inventory (DSI) to see how many days stock sits on the shelf.
• Why it matters: Slow-moving inventory ties up cash that could be used elsewhere. Conversely, turning inventory too quickly can lead to stockouts and lost sales. Finding the right balance is key.
• Where to check in Beancount: Use Beancount’s built-in inventory lot tracking to manage cost basis and quantities accurately. You can then review your current positions in Fava under Holdings.

7) How fast do you turn cash? (CCC)​

• What to look at: The Cash Conversion Cycle (CCC), calculated as DSI + DSO − DPO (Days Payable Outstanding). It measures the time between paying for inventory/supplies and receiving cash from customers.
• Why it matters: A shorter CCC means your business needs less external capital to operate and grow. A negative CCC (common in businesses like Dell or Amazon) means your customers pay you before you have to pay your suppliers—a powerful position for liquidity.
• Where to check in Beancount: With DSI and DSO already tracked, the final piece is DPO, which you can derive from your Liabilities:Payables account. Reviewing this trend quarterly is sufficient for most businesses.

8) Can you comfortably service your debt? (DSCR)​

• What to look at: The Debt Service Coverage Ratio (DSCR), calculated as Net Operating Income / Total Debt Service. Many lenders, including for SBA loans, look for a ratio of 1.25 or higher.
• Why it matters: This ratio signals your ability to make your loan payments from the cash your business generates. A healthy DSCR is critical for maintaining good relationships with lenders and avoiding breaches of loan covenants.
• Where to check in Beancount: Tag your loan payments (both principal and interest). You can use a query or manually summarize your total debt service for the period and compare it to your operating income from the Income Statement.

9) Is leverage appropriate for your business model?​

• What to look at: Your Debt-to-Equity ratio and overall Working Capital. Don't just look at a single number; analyze the trend over several quarters.
• Why it matters: Debt can be a powerful tool for financing growth, but it also introduces risk. The right level of leverage depends on your industry and risk tolerance. Are you taking on debt faster than you're growing equity?
• Where to check in Beancount: Fava’s Balance Sheet clearly lays out your total liabilities versus your total equity.

10) How concentrated is your revenue?​

• What to look at: The percentage of total revenue coming from your top 1, 3, or 5 customers. Many practitioners flag a risk when a single customer accounts for 10-20% or more of your revenue.
• Why it matters: Over-reliance on a few large clients magnifies churn risk and can weaken your pricing power. Diversification creates a more resilient business.
• Where to check in Beancount: This is where metadata shines. Add a customer: tag to every income posting. You can then use Fava's filtering or Beancount's query language to pivot revenue by customer.

11) Do your unit economics work?​

• What to look at: The Contribution Margin for each product or service line (Revenue - All Variable Costs).
• Why it matters: This tells you if scaling a particular offering will add cash to your bottom line or just burn through it faster. If the contribution margin is negative, you lose money on every additional sale.
• Where to check in Beancount: Track variable costs and revenue with specific metadata tags like product: "Widget-A" or channel: "Retail". This allows you to slice and dice your data with queries to calculate profitability at a granular level.

12) Are your books clean and audit-ready?​

• What to look at: Do you have clear documentation, a consistent chart of accounts, and are you retaining records for as long as the IRS recommends?
• Why it matters: Clean books reduce errors, dramatically speed up tax preparation, and are essential for securing financing or passing due diligence if you ever sell your company.
• Where to check in Beancount: Use invoice: and document: metadata, and leverage Fava’s ability to link directly to source documents (like PDFs of receipts or invoices) to keep proof organized and accessible.

A One-Hour Monthly Financial Ritual​

Turn this checklist into a routine. Block out one hour on the first business day of each month to perform this health check.

• (15 min) — Cash & Runway: Confirm your cash balance. Review upcoming major payables and expected inflows from receivables. Re-validate that you still have your 3–6 month buffer.
• (15 min) — P&L Review: Scan your net income and, most importantly, your gross margin trend. Did margins dip? If so, investigate whether it was due to discounting, returns, or higher COGS.
• (15 min) — Working Capital Check: Quickly glance at your DSO, inventory turnover, and DPO. Calculate your CCC. Identify any actions needed, like following up on late invoices or adjusting inventory reorder points.
• (15 min) — Solvency & Risk: Check your DSCR if you have debt. Review any changes in your Debt-to-Equity ratio and revenue concentration. Are any trends moving in the wrong direction?

Final Reminders​

• Benchmarks vary by industry. A "good" current ratio for a SaaS business is very different from that of a retail store. Compare your metrics against your own history first, and then against industry peers.
• Trends beat snapshots. A single data point can be misleading. Charting your key ratios over 6–12 months will reveal the true direction of your business.
• Plain-text wins. The beauty of Beancount is transparency. If a number on a report looks off, you can drill down to the exact plain-text transaction in seconds. This puts you in complete control of your own financial narrative.

A business line of credit (LOC) is one of the most flexible financing tools available, but its mechanics can be tricky. It lets you borrow up to a set limit, repay, and borrow again, paying interest only on what you use. It's ideal for smoothing cash flow, bridging accounts receivable gaps, and handling other short-term needs.

However, navigating secured vs. unsecured lines, variable rates, hidden fees, and tax implications is crucial. This guide breaks down everything owners and bookkeepers need to know, complete with practical examples for tracking it all in Beancount.

What a Business Line of Credit Is (and Isn’t)​

Think of a business line of credit as revolving working capital. It’s a preset credit limit you can draw from whenever you need funds. Once you repay the borrowed amount, your available credit is restored, ready to be used again. The simplest analogy is: “credit card mechanics, business-loan pricing.”

This makes it fundamentally different from a term loan. A term loan provides a lump sum of cash upfront, which you repay over a fixed period through regular installments. LOCs are built for flexibility and short-term cash cycle management, whereas term loans are better suited for large, long-term investments like purchasing equipment or real estate.

When an LOC Makes Sense​

A line of credit shines in specific, recurring business scenarios:

• Bridging Receivables and Inventory Cycles: This is the classic use case. You can draw from your LOC to pay suppliers for inventory and then repay the line weeks or months later when your customers pay their invoices. It’s a perfect tool for wholesalers, agencies, and seasonal businesses that face predictable cash flow gaps.
• Emergency Buffer: Unexpected expenses are inevitable. An LOC acts as a ready-to-draw backstop for covering a payroll shortfall, funding an emergency repair, or managing a sudden operational need. It’s far more efficient than applying for a new loan every time a surprise occurs.
• Opportunistic Buying: Did a key supplier offer a significant discount for early payment? You can use your LOC to seize the opportunity, capture the savings, and repay the draw once your own cash flow catches up.

Secured vs. Unsecured (Read the Lien Language)​

Lenders need assurance they’ll be repaid, which is why most lines of credit are secured by collateral.

• Secured Lines: Many bank LOCs are secured by specific assets, like your accounts receivable or inventory. More commonly, a lender will place a blanket UCC lien on the business. This gives the lender a claim on most of your business assets in the event of a default. It is critical to read the security agreement and confirm if any key assets (like intellectual property) are excluded assets.
• Unsecured Lines: These are harder to qualify for, typically come with lower limits and higher interest rates, and are reserved for businesses with stellar credit. They don't require you to pledge specific collateral, but many lenders will still require a personal guarantee from the owner.
• SBA Options: For U.S. borrowers, the Small Business Administration (SBA) offers programs like the 7(a) Working Capital Pilot (WCP) for monitored lines of credit and CAPLines, which are asset-based revolvers tied directly to short-term working capital needs.

Practical Tip: Always ask the lender to spell out any carve-outs in the lien agreement. "Excluded assets" clauses are negotiable and can prevent a blanket lien from interfering with other financing, like an equipment loan.

How Costs Work (Rates + Fees)​

The cost of an LOC isn't just the interest rate. You must account for a variety of potential fees.

• Interest: You are only charged interest on the drawn amount. Rates are typically variable, calculated as a benchmark rate (like the Prime Rate) plus a margin (e.g., Prime + 1.5%). As you repay the principal, your interest cost decreases and your credit availability is restored.
• Fees to Watch For:
  • Origination Fee: A one-time fee charged when you open the line.
  • Annual or Monthly Maintenance Fee: A recurring charge to keep the line open, sometimes called a non-usage fee if you don't draw from it.
  • Draw Fee: A fee charged each time you take funds from the line.

These costs add up. Before committing, model your expected usage to find the true cost.

Back-of-the-Envelope Example​

Let's say you have a $100,000** limit and draw **$40,000 for two months at 12% APR. The line has a 2% draw fee and a $150 annual fee.

• Interest ≈ $40,000 × 12$800**
• Draw Fee = 2% × $40,000 = **$800**
• Annual Fee = $150
• Total Cost ≈ $1,750

In this scenario, the fees make the effective cost significantly higher than the headline 12% APR.

Qualifying and Staying in Good Standing​

Lenders evaluate your business's health based on revenue consistency, time in business, and both business and personal credit scores. Building a strong history of on-time payments is the best way to gain access to better terms and lower rates.

Most LOCs aren't "set it and forget it." They often require annual renewal, where the lender reviews updated financial statements. Your agreement may also include financial covenants, such as maintaining a minimum Debt Service Coverage Ratio (DSCR) or interest coverage ratio. If your financial metrics slip, the lender has the right to reduce your limit or freeze the line entirely.

LOC vs. Term Loan vs. Credit Card​

Choose the right tool for the job:

A Note on U.S. Taxes​

Interest paid on a business line of credit is generally a deductible business expense. However, under Section 163(j) of the tax code, this deduction may be capped.

A small-business exception exists for companies whose average annual gross receipts for the prior three years fall below an inflation-adjusted threshold (around $30 million for 2024** and **$31 million for 2025). Always confirm the specifics with your tax advisor, as these rules are complex.

Beancount: How to Record a Line of Credit​

Tracking an LOC in a plain-text ledger like Beancount ensures clarity and accuracy. Below are illustrative examples of the key transactions. (Note: In Beancount, increasing a liability uses a negative amount, while repaying it uses a positive amount).

1. Open Accounts & Document the Facility​

First, set up the necessary accounts in your ledger. It's a best practice to add a note with the LOC's key terms.

2025-01-01 open Assets:Bank:Operating         USD
2025-01-01 open Liabilities:LOC:BigBank       USD
2025-01-01 open Expenses:Interest:LOC         USD
2025-01-01 open Expenses:BankFees             USD

; Optional: Document the facility's terms with a note
2025-01-01 note Liabilities:LOC:BigBank "Limit=100000, Rate=Prime+1.50%, Secured by A/R & Inventory (UCC-1)"

2. Draw Funds​

When you transfer funds from the LOC to your operating account, you increase cash and increase the liability.

2025-03-03 * "Draw from LOC to cover receivables timing"
  Assets:Bank:Operating               40000.00 USD
  Liabilities:LOC:BigBank            -40000.00 USD

3. Accrue Monthly Interest​

At the end of the month, record the interest incurred as an expense, which adds to the total amount you owe.

2025-03-31 * "Accrue LOC interest for March"
  Expenses:Interest:LOC                 800.00 USD
  Liabilities:LOC:BigBank              -800.00 USD

4. Record a Draw Fee or Maintenance Fee​

Book any fees as an expense, paid from your operating account.

2025-03-31 * "LOC draw fee (2%)"
  Expenses:BankFees                     800.00 USD
  Assets:Bank:Operating                -800.00 USD

5. Make a Payment (Interest + Principal)​

A payment reduces your operating cash and reduces the liability balance.

2025-04-10 * "LOC payment (principal + interest)"
  Liabilities:LOC:BigBank             10800.00 USD
  Assets:Bank:Operating              -10800.00 USD

Due Diligence & Negotiation Checklist​

Before you sign, get clear answers to these questions:

• Fees: Request a full fee table: origination, annual/maintenance, inactivity, draw, and wire/ACH fees.
• Renewal: What is the renewal process? What could trigger a limit reduction or a freeze?
• Lien Scope: What specific assets are covered by the lien? Are there any exclusions?
• Covenants: Are there financial covenants like DSCR? How often are they tested, and what happens if you temporarily fall short?
• SBA Terms: If it's an SBA-backed line, is it a WCP or CAPLines facility? How is your borrowing base calculated and reported?

Final Word​

A well-structured line of credit is an invaluable tool for managing a growing business. The key is to fully understand the collateral you're pledging, the total cost including all fees, and the obligations required to keep the line in good standing.

By keeping a clean ledger in Beancount with clear metadata, you can track your usage, understand its true cost, and ensure this flexible tool remains a powerful asset for your business.

This article is for educational purposes and does not constitute financial, legal, or tax advice. Consult with a qualified professional for guidance specific to your situation.

Deciding where to park your small business's cash reserves can feel like a balancing act between earning a decent return and keeping funds accessible. The two most common, safest options are high-yield savings accounts and certificates of deposit (CDs). Each serves a distinct purpose, and choosing the right one depends on your timeline and liquidity needs.

Let's break down the differences, explore the nuances of FDIC insurance for businesses, and then dive into practical Beancount patterns to track it all cleanly.

TL;DR: The Quick Summary​

• Savings / Money Market Deposit Accounts (MMDAs): Best for liquid, everyday operating cash and near-term tax payments. Their interest rates are variable. While the Fed removed old withdrawal limits, banks can still set their own rules.
• Certificates of Deposit (CDs): Offer a higher, fixed yield if you can lock up cash for a specific term. Pulling money out early triggers a penalty.
• Safety First: Both are FDIC-insured up to $250,000 per depositor, per bank, per ownership category. The rules differ slightly for sole proprietorships versus corporations.
• Over the Limit?: For balances above $250,000, services like an Insured Cash Sweep (ICS) can spread your funds across multiple banks to maximize insurance coverage while you maintain a single banking relationship.
• Beancount Users: Skip to the end for journal patterns to model CDs, accrue interest, and handle early withdrawal penalties correctly.

What Each Account Does Well 🏦​

High-Yield Savings / Money Market Deposit Accounts (MMDAs)​

Think of these as your business's primary cash hub. They are designed for safety and accessibility.

• Liquidity: This is their main advantage. You can withdraw funds anytime without penalty. It's important to note that even though the Federal Reserve removed the old "six convenient withdrawals per month" rule (Regulation D) in 2020, individual banks are still free to impose their own transaction limits or fees. Always read your account's terms.
• Insurance & Safety: Savings and MMDAs at an FDIC-insured bank are covered. Don't confuse these with money market mutual funds offered by brokerages, which are investments and are not FDIC-insured.
• Best Use Case: Perfect for your operating cash buffer (3-6 months of expenses), funds set aside for near-term payroll or taxes, and your general emergency reserve.

Certificates of Deposit (CDs)​

CDs are a deal you strike with the bank: you agree not to touch your money for a set term (e.g., 3, 6, 12 months), and in return, the bank gives you a higher, fixed interest rate.

• Yield Certainty: The fixed rate is a key benefit, protecting you if market rates fall. The flip side is the penalty for early withdrawal. If you break a CD within the first six days, federal rules mandate a minimum penalty of seven days' simple interest. After that, the penalty is determined by the bank's own policy (e.g., three months of interest).
• Insurance & Safety: CDs carry the same FDIC insurance as savings accounts, up to the same $250,000 limit.
• Best Use Case: Ideal for cash you are certain you won't need for the duration of the term. This could be money earmarked for a tax payment nine months away or a reserve for a capital expenditure you plan to make next year. CD laddering—opening multiple CDs with staggered maturity dates (e.g., 3, 6, 9, and 12 months)—is a popular strategy to balance higher yields with regular access to cash.

FDIC Coverage: The Practical Bits for Businesses 🛡️​

The FDIC insurance rules are straightforward but have important distinctions for different business structures.

• The Headline Rule: You get $250,000 of coverage per depositor, per insured bank, per ownership category. All your deposits (checking, savings, MMDAs, CDs) within the same ownership category at a single bank are added together to determine your coverage.
• Sole Proprietorships: Business accounts for a sole prop are treated as the owner's individual accounts. They are combined with the owner's other personal single accounts at that same bank for one $250,000 insurance limit.
• Corporations, LLCs & Partnerships: These legal entities are insured separately from their owners' personal accounts. The business itself gets its own $250,000 of coverage per bank.
• Need More Coverage?: If your business holds more than $250,000, you don't have to juggle multiple banking relationships. Ask your bank about an Insured Cash Sweep (ICS). This service automatically distributes your deposits across a network of other FDIC-insured institutions, keeping all your funds insured while you manage them through your primary bank.

When a Small Business Should Favor Each Option 🤔​

• Choose a Savings/MMDA when…

  • Your cash flow is unpredictable or you have frequent, variable expenses.
  • You're building your 3–6 month operating expense buffer.
  • You need immediate access to funds and are willing to accept a variable interest rate.

• Choose a CD when…

  • You have a surplus of cash that you can confidently lock away for a fixed term.
  • You want to lock in a specific interest rate and protect your return from market fluctuations.
  • You are building a CD ladder to create a predictable schedule of maturing cash.

A blended approach is often best: keep your immediate operating cash in a high-yield savings account and place longer-term reserves into a CD ladder or short-term Treasuries.

Important Fine Print to Read 📝​

• Early Withdrawal Penalties: These are specific to each bank and will be disclosed in your CD agreement. The best way to avoid them is to plan your ladder carefully so you don't have to break a CD.
• Transaction Limits on Savings: Just because the federal rule is gone doesn't mean your bank won't charge you a fee after a certain number of monthly withdrawals. Check your account agreement.
• Taxes on Interest: Interest earned from both savings and CDs is generally taxable income in the year it's credited to your account. You'll receive a Form 1099-INT. If you pay an early withdrawal penalty, it is deductible. The penalty amount appears in Box 2 of your 1099-INT and is typically treated as a business expense.

Alternatives Worth Knowing​

• Treasury Bills (T-Bills): These are short-term loans to the U.S. government that mature in 4 to 52 weeks. They are considered one of the safest investments in the world, backed by the full faith and credit of the U.S. government (not FDIC insurance). They are highly liquid and can be a great option for cash reserves exceeding FDIC limits.
• Money Market Mutual Funds (MMFs): Offered by brokerage firms, these are investment products, not bank deposits, and are not FDIC-insured. They invest in high-quality, short-term debt and aim to keep a stable value of $1 per share, but this is not guaranteed.

A Decision Cheat-Sheet ✅​

Beancount: How to Model Savings and CDs 💻​

For those of us managing our business finances with plain-text accounting, here are some simple, effective patterns for tracking these accounts in Beancount.

1) Chart of Accounts​

First, ensure you have the necessary accounts. Adjust the names to fit your own chart.

Assets:Bank:Checking
Assets:Bank:Savings
Assets:Bank:CD:12M              ; Create a unique account for each CD
Assets:InterestReceivable       ; Optional, for monthly accruals
Income:Interest:Bank
Expenses:Bank:EarlyWithdrawalPenalty
Documents:Bank                  ; To link statements and agreements

2) Open and Fund a CD​

When you open a CD, it's a simple transfer from one asset account to another.

; Open a 12-month CD for $50,000
2025-01-15 * "Open 12M CD @ fixed rate"
  Assets:Bank:CD:12M              50,000.00 USD
  Assets:Bank:Checking           -50,000.00 USD
  document: "Documents:Bank/CD-Agreement-2025-01-15.pdf"

3) Recognize Interest: Two Methods​

Option A: Recognize Interest Only When Paid (Simple)​

If your bank credits all interest at maturity, this is the easiest method.

; CD matures; principal + interest paid to checking
2026-01-15 * "CD matured; interest credited"
  Assets:Bank:Checking              52,375.00 USD
  Assets:Bank:CD:12M               -50,000.00 USD
  Income:Interest:Bank             -2,375.00 USD

Option B: Accrue Interest Monthly (Better for Reporting)​

For more accurate monthly financial statements, you can accrue the interest earned each month.

; Monthly accrual (illustrative amount)
2025-02-15 * "Accrue CD interest"
  Assets:InterestReceivable            197.40 USD
  Income:Interest:Bank               -197.40 USD

; At maturity, reverse the receivable when the cash arrives
2026-01-15 * "CD matured; settle accrued interest"
  Assets:Bank:Checking              52,375.00 USD
  Assets:Bank:CD:12M               -50,000.00 USD
  Assets:InterestReceivable        -2,372.80 USD
  Income:Interest:Bank                 -2.20 USD   ; true-up for rounding

4) Early Withdrawal and Penalty​

Recording a penalty requires an extra posting to an expense account. This keeps your reporting clean and makes tax time easier.

; Break CD early; bank pays back principal plus net interest after penalty
2025-06-10 * "Early CD redemption; penalty applied"
  Assets:Bank:Checking              50,900.00 USD
  Assets:Bank:CD:12M               -50,000.00 USD
  Income:Interest:Bank             -1,200.00 USD
  Expenses:Bank:EarlyWithdrawalPenalty   300.00 USD
  document: "Documents:Bank/1099-INT-2025.pdf"  ; Box 2 shows the penalty

5) High-Yield Savings Interest and Reconciliation​

Recording interest from a savings account is straightforward. Use a balance assertion to confirm your books match the bank statement.

; Monthly interest posted to savings
2025-03-31 * "Monthly interest - Savings"
  Assets:Bank:Savings                   185.23 USD
  Income:Interest:Bank                -185.23 USD

; Reconcile with the month-end statement
2025-03-31 balance Assets:Bank:Savings  150,185.23 USD

Tip: Always attach digital copies of your statements and CD agreements using the document: metadata tag. At tax time, you can easily search for Expenses:Bank:EarlyWithdrawalPenalty and verify the amount against Box 2 of your 1099-INT.

Final Thoughts: A Simple Cash Policy​

• Segment Your Cash: Keep your runway plus 1–2 months of operating expenses in a liquid Savings/MMDA. Place reserves for the next 3–12 months in a CD ladder or T-Bills.
• Mind Your Insurance: Keep balances for each legal entity under the $250k limit per bank, or use an ICS service.
• Avoid Surprises: Read the fine print on withdrawal rules and CD penalties before you commit your cash.
• Stay Tax-Aware: Remember that interest is taxable and early-withdrawal penalties are deductible. Consult with your CPA to ensure you're handling them correctly.

This article is for educational purposes and does not constitute financial or tax advice. Please consult with a qualified professional for guidance specific to your business.