Congress has just passed, and President Bush signed today, a $300 billion housing bill to help restore confidence in the housing and financial markets. The bill is called The Housing and Economic Recovery Act of 2008. The new law includes more than $15 billion in tax incentives. These are some of the major provisions.
First-time homebuyer tax credit - The credit is essentially an interest-free loan from the government. Taxpayers who take the credit, which equals 10 percent of the purchase price (up to $7,500 for single individuals and married couples filing jointly; $3,750 for married individuals filing separate returns), must repay the credit. They will have 15 years to repay the credit in equal amounts. If a taxpayer sells his or her home before the end of the 15-year period, he or she will likely have to immediately repay any outstanding balance. Important income thresholds also apply. Additionally, the credit is temporary and applies to homes purchased on or after April 9, 2008 and before July 1, 2009.
Borrowers - Many homeowners are trying to refinance mortgages that offered low teaser rates but whose rates have now skyrocketed. The new law authorizes states to issue $11 billion more in mortgage revenue bonds for 2008 and allows qualifying sub prime borrowers to use their state's mortgage revenue bond program to refinance into a loan with a more favorable rate.
Property deduction for non-itemizers -There is a new standard property tax deduction for taxpayers who do not itemize deductions. Before the new law, only itemizers could deduct state and local property taxes. The housing act gives non-itemizers a limited deduction for state and local property taxes by increasing the amount of their standard deduction by the amount of property taxes they paid or $500 ($1,000 for a married couple filing jointly). You might benefit from this deduction if you have paid off your mortgage and no longer itemize. This is available only for taxes paid in 2008.
Home sale exclusion - A married couple filing jointly can generally exclude up to $500,000 in gain (single individuals up to $250,000). Before the new law, if a second home becomes a principal residence, after two years the owner could sell it and exclude up to $250,000 in gain from their income or up to $500,000 for couples filing jointly. http://www.irs.gov/taxtopics/tc701.html The new law pro-rates the exclusion between the time that a home is used as a principal residence and the total length of ownership, which includes any "non-qualifying" use as a rental or vacation property. The non-qualifying use before the January 1, 2009 effective date of the provision is not used in the calculation; neither are periods after a qualified use of the property or temporary absences of less than two years.
Down payment assistance - Seller-funded down-payment-assistance programs provide cash assistance to homebuyers who cannot afford to make the minimum down payment or pay the closing costs involved in obtaining a mortgage. The new law bans seller-funded down payment assistance programs.
Military personnel - The housing bill includes many provisions to help military personnel on active duty and veterans avoid foreclosure. Under the new law, service members and veterans are protected from foreclosure for nine months following a period of military service (rather than the current 90 days). Congress also made the VA home loan program more attractive and provided funding for disabled veterans to make accommodations in their homes for their disabilities.
So that is all for now. I will keep you posted as I know more. If you have any questions or comments on this article, let me know. I would love to hear from you. Until next time, remember, have fun and create a great day.
Be well.
Wednesday, July 30, 2008
How Your Paradigm Influences Your Cash Flow and Bad Debts
Today’s article is about how your paradigm influences your cash flow and bad debts. You might say how does that apply to me? Read on and you will learn how it does.
Athletes for years wanted to break the 4-minute mile. It was once thought to be impossible. Then on May 6, 1954, Roger Bannister Roger Bannister - Wikipedia, the free encyclopedia ran the mile in 3 min 59.4s. A challenge thought impossible by Bannister himself at one time. In fact after the devastation of his failure at the 1952 Olympics, Bannister spent two months deciding whether to give up running. He decided on a new goal: To be the first man to run a mile in under four minutes. Accordingly, he intensified his training. It all started with a decision. He asked himself the question, what do I really want?
When Wernher von Braun, considered by some the father of the space program Wernher von Braun - Wikipedia, the free encyclopedia was asked by President Kennedy what it would take to get to the moon. His response was, “the will to do it.” In fact one of Wernher von Braun’s other famous quotes is “I have learned to use the word 'impossible' with the greatest caution.”
Typically when we each of us set goals, we set our goal based on what we think we can do, or we base the goal on our past. This is our paradigm. It can also be called our belief system or our way of thinking. Our current paradigm is like a governor on our performance. We usually do not base our goal on what we really want. Additionally, we sometimes set our goal based on what others think we can do or on some study. We need to break these barriers of self-limitation. The truth is that all of us have infinite and unlimited potential and that all things are possible. Author Joel Barker writes “In order to change your future, you must be willing and able to change your paradigm.” Joel Barker -- Welcome So let’s look at a specific example.
My last article was titled “Accounts Receivable - How to Improve Cash Flow and Reduce Bad Debts.” I have worked with business owners for the past 36 years and one of the most challenging issues of every business is the collection of accounts receivable. In the article I made some recommendations that will improve cash flow and reduce bad debts for every business owner. One of those recommendations was to establish goals and standards.
One of those goals or standards might be the average collection period, usually expressed in day. That is the average number if days it takes for an invoice to be collected. In this example let’s say that our company collects its invoices within an average of 52 days. That is a long time considering the work has been done, employees and associated costs have been paid and that it is possible to have the average be zero days with today’s modern financial tools. These tools are credit cards, Paypal, automatic debit, etc.
So how would a business owner begin? That is, reduce the number of days from 52 to something dramatically shorter. It would start with the question, “What do I really want my average collection period to be?” Then the next step is to make a decision. Napoleon Hill wrote “God throws himself on the side of the individual who knows exactly what he wants, if he is determined to get just that.” The Napoleon Hill Foundation Then realize that for every result we want in our lives, there is a way of thinking and a way of acting. You have heard it said, “If you always do what you have always have done, you will always get what you have always gotten.” So you must change you thinking, your policies and your actions with regards to accounts receivable.
It is a simple as that. Success and decision are partners. If you have any questions or comments on this article, let me know. I would love to hear from you. Send me your success stories. Until next time, remember, have fun and create a great day.
Athletes for years wanted to break the 4-minute mile. It was once thought to be impossible. Then on May 6, 1954, Roger Bannister Roger Bannister - Wikipedia, the free encyclopedia ran the mile in 3 min 59.4s. A challenge thought impossible by Bannister himself at one time. In fact after the devastation of his failure at the 1952 Olympics, Bannister spent two months deciding whether to give up running. He decided on a new goal: To be the first man to run a mile in under four minutes. Accordingly, he intensified his training. It all started with a decision. He asked himself the question, what do I really want?
When Wernher von Braun, considered by some the father of the space program Wernher von Braun - Wikipedia, the free encyclopedia was asked by President Kennedy what it would take to get to the moon. His response was, “the will to do it.” In fact one of Wernher von Braun’s other famous quotes is “I have learned to use the word 'impossible' with the greatest caution.”
Typically when we each of us set goals, we set our goal based on what we think we can do, or we base the goal on our past. This is our paradigm. It can also be called our belief system or our way of thinking. Our current paradigm is like a governor on our performance. We usually do not base our goal on what we really want. Additionally, we sometimes set our goal based on what others think we can do or on some study. We need to break these barriers of self-limitation. The truth is that all of us have infinite and unlimited potential and that all things are possible. Author Joel Barker writes “In order to change your future, you must be willing and able to change your paradigm.” Joel Barker -- Welcome So let’s look at a specific example.
My last article was titled “Accounts Receivable - How to Improve Cash Flow and Reduce Bad Debts.” I have worked with business owners for the past 36 years and one of the most challenging issues of every business is the collection of accounts receivable. In the article I made some recommendations that will improve cash flow and reduce bad debts for every business owner. One of those recommendations was to establish goals and standards.
One of those goals or standards might be the average collection period, usually expressed in day. That is the average number if days it takes for an invoice to be collected. In this example let’s say that our company collects its invoices within an average of 52 days. That is a long time considering the work has been done, employees and associated costs have been paid and that it is possible to have the average be zero days with today’s modern financial tools. These tools are credit cards, Paypal, automatic debit, etc.
So how would a business owner begin? That is, reduce the number of days from 52 to something dramatically shorter. It would start with the question, “What do I really want my average collection period to be?” Then the next step is to make a decision. Napoleon Hill wrote “God throws himself on the side of the individual who knows exactly what he wants, if he is determined to get just that.” The Napoleon Hill Foundation Then realize that for every result we want in our lives, there is a way of thinking and a way of acting. You have heard it said, “If you always do what you have always have done, you will always get what you have always gotten.” So you must change you thinking, your policies and your actions with regards to accounts receivable.
It is a simple as that. Success and decision are partners. If you have any questions or comments on this article, let me know. I would love to hear from you. Send me your success stories. Until next time, remember, have fun and create a great day.
Tuesday, July 29, 2008
Accounts Receivable - How to Improve Cash Flow and Reduce Bad Debts
I have worked with business owners for the past 36 years and one of the most challenging issues for every business is the collection of accounts receivable. In this article it is my intention to share with you some ideas that might dramatically improve cash flow and reduce those costly bad debts.
I believe it all starts with communications. I am recalling lightheartedly the scene in the movie Cool Hand Luke: “What we've got here is a failure to communicate.” Cool Hand Luke - Wikipedia, the free encyclopedia I remember when I first met my friend Shannon and we were cooking dinner together in her kitchen. She was explaining to me which towel was for drying hands and which towel was for drying dishes. She then explained what was recycled, what was composted and what very little went in the trash. In addition, she was always aware of my agreement with her. There was much more that we discussed, but I will not bore you here. The message that I want to convey is that I would not have known these procedures without her communicating them to me.
So it is the same with customer or client accounts receivable. Every business owner should communicate at the beginning of each relationship what is expected from the customer or client; the billing, payment and accounts receivable policies; and the promises of the business to the customer or client. I have found that as business owners, we are more worried about having the business than in getting paid. I believe this should be reversed and the first question that should be asked is how are we going to get paid and when. Every business should be paid promptly for the service they provide. In the end, it reduces the cost of doing business for everyone.
The communications should be as simple a providing each new customer or client with a copy of what is expected from the customer or client; the billing and accounts receivable policies; the promises of the business to the customer or client and obtaining agreement on everything. Agreement is the key. This should be handled before the relationship starts and as a very important part of every relationship. Existing customers and clients should also be communicated with and agreement reached.
So the beginning of the relationship with every customer or client is the key to increasing cash flow and reducing bad debts. The following are some additional ideas to consider and implement.
- Communicate and obtain agreement with everyone in the organization concerning the policies for billing, collection and accounts receivable and make the communications periodically. Employee participation is important.
- Make it easy for people to pay, including Paypal, credit cards and automatic withdrawal.
- Keep communicating to everyone.
- Make no exceptions in the process.
- Have periodic meetings to assess the procedures and then change if necessary.
- Set goals and standards for billing, collection and accounts receivable. These could be the following: Average collection period; # of days beyond month end when invoices complete; receivable turnover; and bad debts as a percent of sales.
- Reward employees when goals are achieved .
Start today and implement these ideas. Success and decision are partners. The benefit will be improved cash flow, reduced bad debts and more profit for everyone to share.
Monday, July 28, 2008
The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means by George Soros
I recently finished reading a book that I highly recommend. The name of the book is The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means GeorgeSoros.com
George Soros is a noted and influential financier, chairman of Soros Fund Management Soros Fund Management and founder of a global network of foundations designed to support open societies. A Budapest native who lives in New York, Soros is very active politically.
Soros is known for "breaking the Bank of England" on Black Wednesday in 1992. With an estimated current net worth of around $9 billion, he is ranked by Forbes as the 97th-richest person in the world.
With the country in recession and a housing market that is suffering, Soros looks at it as "the worst crisis since the Great Depression." He sees a profound difference, though, between today's financial problems and those of the 1930s. "The periodic crises were part of a larger boom-bust process; the current crisis is the culmination of a super boom that has lasted for more than 25 years."
Soros believes there is a basic difference between thinking and reality. Soros learned that principle when he was a student at the London School of Economics and was heavily influenced by Karl Popper. Today, he thinks a new economic model is needed to understand the nature of the economic situation.
Although the economic crisis was "slow in coming," Soros believes it could have been "anticipated several years in advance. It had its origins in the bursting of the Internet bubble in late 2000." Soros also asserts that "cheap money engendered a housing bubble, an explosion of leveraged buyouts and other excesses. When money is free, the rational lender will keep on lending until there is no one else to lend to. Mortgage lenders relaxed their standards and invented new ways to stimulate business and generate fees.”
The result is the housing foreclosure mess that is sweeping the country, taking houses away from people who strapped themselves too tightly and ruining their credit for the foreseeable future. Economic distress, noted Soros, "spread from residential real estate to credit card debt, auto debt and commercial real estate."
EXCLUSIVE: Soros: Fannie, Freddie crisis not the last Reuters
Soros does write that he doesn't know what the economic future holds. He believes that "we have not learned how to govern ourselves. As a consequence, we live in great uncertainty and grave danger. We need to gain a better understanding of the situation in which we find ourselves."
I recommend that you get a copy of the book from your local library or local book store.
George Soros is a noted and influential financier, chairman of Soros Fund Management Soros Fund Management and founder of a global network of foundations designed to support open societies. A Budapest native who lives in New York, Soros is very active politically.
Soros is known for "breaking the Bank of England" on Black Wednesday in 1992. With an estimated current net worth of around $9 billion, he is ranked by Forbes as the 97th-richest person in the world.
With the country in recession and a housing market that is suffering, Soros looks at it as "the worst crisis since the Great Depression." He sees a profound difference, though, between today's financial problems and those of the 1930s. "The periodic crises were part of a larger boom-bust process; the current crisis is the culmination of a super boom that has lasted for more than 25 years."
Soros believes there is a basic difference between thinking and reality. Soros learned that principle when he was a student at the London School of Economics and was heavily influenced by Karl Popper. Today, he thinks a new economic model is needed to understand the nature of the economic situation.
Although the economic crisis was "slow in coming," Soros believes it could have been "anticipated several years in advance. It had its origins in the bursting of the Internet bubble in late 2000." Soros also asserts that "cheap money engendered a housing bubble, an explosion of leveraged buyouts and other excesses. When money is free, the rational lender will keep on lending until there is no one else to lend to. Mortgage lenders relaxed their standards and invented new ways to stimulate business and generate fees.”
The result is the housing foreclosure mess that is sweeping the country, taking houses away from people who strapped themselves too tightly and ruining their credit for the foreseeable future. Economic distress, noted Soros, "spread from residential real estate to credit card debt, auto debt and commercial real estate."
EXCLUSIVE: Soros: Fannie, Freddie crisis not the last Reuters
Soros does write that he doesn't know what the economic future holds. He believes that "we have not learned how to govern ourselves. As a consequence, we live in great uncertainty and grave danger. We need to gain a better understanding of the situation in which we find ourselves."
I recommend that you get a copy of the book from your local library or local book store.
Friday, July 25, 2008
Housing Bill - Break For First-Time Home Buyers
I wanted to get this article from the New York Times up and posted about a new tax credit for first time home buyers. You might benefit, so take time to read it. I will keep everyone posted when the final version is signed.
Here is the link. Your Money - Housing Bill Has Something for Nearly Everyone - NYTimes.com
Here is the link. Your Money - Housing Bill Has Something for Nearly Everyone - NYTimes.com
Yoga - A Way To Reduce Stress In Your Life and Your Business
I have been practicing yoga since about 1982. It was June and a physician suggested that I take up the practice of yoga to reduce the stress in my life and improve my health. I have had a daily practice since then.
The practice of yoga embraces all our parts, body, mind, heart and soul. The practice of yoga bestows countless blessings. The paradox is that yoga takes time, but makes more time available; the practice of yoga requires energy but it restores us; yoga requires effort, but becomes effortless: the practice is typically hard to start, but eventually cannot be stopped.
I wanted to share with you an article that was in the Wall Street Journal yesterday. Follow the link. Yoga Bears: It's No Stretch to Say Traders Are Taking Deep Breaths - WSJ.com
Have a great day and let me know how you enjoy yoga.
The practice of yoga embraces all our parts, body, mind, heart and soul. The practice of yoga bestows countless blessings. The paradox is that yoga takes time, but makes more time available; the practice of yoga requires energy but it restores us; yoga requires effort, but becomes effortless: the practice is typically hard to start, but eventually cannot be stopped.
I wanted to share with you an article that was in the Wall Street Journal yesterday. Follow the link. Yoga Bears: It's No Stretch to Say Traders Are Taking Deep Breaths - WSJ.com
Have a great day and let me know how you enjoy yoga.
Thursday, July 24, 2008
Three Cups of Tea
One of the questions I always ask my clients is what is your definite purpose in life? It seems for most people a hard question to answer. Some people tell me all they want to be is happy. I explain that they are already happiness, and ask them the question again. Some tell me money and I ask the question again. What is your definite purpose in life? Then they tell me they do not know.
Author James Allen James Allen Home Page says that ‘until thought is linked with purpose, there is no intelligent accomplishment.” You must decide what you want. You must decide on your definite purpose. Only you can decide that. Most people go through life trying to find their purpose, only to realize that it can be whatever they decide it to be. It is an intention, resolution or determination. Purpose is the focus of your attention and attention is the creative energy that brings about your reality. Purpose is a settled determination and comes about from a decision. You can make a difference in the world. What is your purpose?
Lance Armstrong offers a particular inspiring example. “The truth is if you asked me to choose between winning the Tour de France and cancer. I would choose cancer. Odd as it sounds, I would rather have the title of cancer survivor than winner of the tour, because of what it has done for me as a human being, a man, a husband, a son and a father…The one thing the illness has convinced me of beyond all doubt-more than any experience I’ve had as an athlete-is that we are much better than we know. We have unrealized capacities that sometimes only emerge in crisis. So if there is a purpose to the suffering that is cancer, I think it must be this; it’s meant to improve us.”
You can go to Lance Armstrong Foundation: Home and learn about what he is doing with the wisdom and knowledge he has learned to help and inspire other people.
I recently was given a book by a friend of mine, entitled Three Cups of Tea, by Greg Mortenson and David Oliver Relin. Three Cups of Tea - About the Book
The book is part mountaineering memoir, part puff profile, but largely a testament to a generosity that transcends politics and religion, Three Cups of Tea shares the story of a consummate outdoorsman-turned-infidel saint. Separated from his expedition while scaling K2 in 1993, a moribund Greg Mortenson staggered into a Himalayan shantytown in northern Pakistan. Nursed back to health, Mortenson pledged to build a school for a village where sticks and dirt were used to practice multiplication tables. He has since erected 55 schools across the Muslim mountain region, amid brushes with local crooks, kidnappers, a salty Swiss philanthropist, Tom Brokaw, and the Taliban.
Greg Mortenson has a purpose for his life and Tom Brokaw had this to say about him. “Three Cups of Tea is one of the most remarkable adventure stories of our time. Greg Mortenson’s dangerous and difficult quest to build schools in the wildest parts of Pakistan and Afghanistan is not only a thrilling read, it’s proof that one ordinary person, with the right combination of character and determination, really can change the world.”
Greg has this to say. “I do it because I care about kids. Fighting terror is may be seventh or eighth on my list of priorities. But working over there, I’ve learned a few things. I’ve learned that terror doesn’t happen because some group of people somewhere like Pakistan or Afghanistan simply decide to hate us. It happens because children aren’t being offered a bright enough future that they have a reason to choose life over death.”
This is Greg Mortenson’s advice. “Everybody looks for something that you can look back at, to see you’ve really accomplished something for future generations. You may not have to go clear to the Himalayas, but you can still make a big difference where you live. .. You have to make that first step.”
So what would you do if you knew you could not fail? What is your purpose in life?
All great people started out small. Take Gandhi, Mother Teresa, Joan of Arc, Martin Luther King, Jr. When you look back at their history, almost without exception they were nobodies. Nobody! Gandhi was just a mediocre attorney who got thrown off a train into the dust by the British because he was Indian. Mother Theresa was just an ordinary nun.
Again, I ask “what would you do if you knew you could not fail?” What is your purpose in life?
If you fail to determine and decide on your definite purpose, everything else will feel wrong. Your purpose gives you direction in life. It is why you get out of bed in the morning and it is the fuel that will transform your life. It could be you might want to work with children, help the environment, cure malaria or build schools. Without a clear purpose, you will wander through life, not sure which way to go, and usually living someone else’s dream. Your purpose should be to do something that you love. When you have your purpose, everything else will fall into place. You will focus less on what is wrong and more on what is right. You will be happier.
Your purpose may be something you would be willing to trade your life for. The psychologist Alfred Adler once said, “I am grateful for the idea that has used me.” Martin Luther King said, “If you do not have a life worth dying for, you are not living.” Mr. King The King Center died so others could live. What is your purpose? We live in a world of abundance, where you can have anything your heart desires. There is nothing standing between you and your desires except lack of definite purpose and the plans that will derive from it.
Author James Allen James Allen Home Page says that ‘until thought is linked with purpose, there is no intelligent accomplishment.” You must decide what you want. You must decide on your definite purpose. Only you can decide that. Most people go through life trying to find their purpose, only to realize that it can be whatever they decide it to be. It is an intention, resolution or determination. Purpose is the focus of your attention and attention is the creative energy that brings about your reality. Purpose is a settled determination and comes about from a decision. You can make a difference in the world. What is your purpose?
Lance Armstrong offers a particular inspiring example. “The truth is if you asked me to choose between winning the Tour de France and cancer. I would choose cancer. Odd as it sounds, I would rather have the title of cancer survivor than winner of the tour, because of what it has done for me as a human being, a man, a husband, a son and a father…The one thing the illness has convinced me of beyond all doubt-more than any experience I’ve had as an athlete-is that we are much better than we know. We have unrealized capacities that sometimes only emerge in crisis. So if there is a purpose to the suffering that is cancer, I think it must be this; it’s meant to improve us.”
You can go to Lance Armstrong Foundation: Home and learn about what he is doing with the wisdom and knowledge he has learned to help and inspire other people.
I recently was given a book by a friend of mine, entitled Three Cups of Tea, by Greg Mortenson and David Oliver Relin. Three Cups of Tea - About the Book
The book is part mountaineering memoir, part puff profile, but largely a testament to a generosity that transcends politics and religion, Three Cups of Tea shares the story of a consummate outdoorsman-turned-infidel saint. Separated from his expedition while scaling K2 in 1993, a moribund Greg Mortenson staggered into a Himalayan shantytown in northern Pakistan. Nursed back to health, Mortenson pledged to build a school for a village where sticks and dirt were used to practice multiplication tables. He has since erected 55 schools across the Muslim mountain region, amid brushes with local crooks, kidnappers, a salty Swiss philanthropist, Tom Brokaw, and the Taliban.
Greg Mortenson has a purpose for his life and Tom Brokaw had this to say about him. “Three Cups of Tea is one of the most remarkable adventure stories of our time. Greg Mortenson’s dangerous and difficult quest to build schools in the wildest parts of Pakistan and Afghanistan is not only a thrilling read, it’s proof that one ordinary person, with the right combination of character and determination, really can change the world.”
Greg has this to say. “I do it because I care about kids. Fighting terror is may be seventh or eighth on my list of priorities. But working over there, I’ve learned a few things. I’ve learned that terror doesn’t happen because some group of people somewhere like Pakistan or Afghanistan simply decide to hate us. It happens because children aren’t being offered a bright enough future that they have a reason to choose life over death.”
This is Greg Mortenson’s advice. “Everybody looks for something that you can look back at, to see you’ve really accomplished something for future generations. You may not have to go clear to the Himalayas, but you can still make a big difference where you live. .. You have to make that first step.”
So what would you do if you knew you could not fail? What is your purpose in life?
All great people started out small. Take Gandhi, Mother Teresa, Joan of Arc, Martin Luther King, Jr. When you look back at their history, almost without exception they were nobodies. Nobody! Gandhi was just a mediocre attorney who got thrown off a train into the dust by the British because he was Indian. Mother Theresa was just an ordinary nun.
Again, I ask “what would you do if you knew you could not fail?” What is your purpose in life?
If you fail to determine and decide on your definite purpose, everything else will feel wrong. Your purpose gives you direction in life. It is why you get out of bed in the morning and it is the fuel that will transform your life. It could be you might want to work with children, help the environment, cure malaria or build schools. Without a clear purpose, you will wander through life, not sure which way to go, and usually living someone else’s dream. Your purpose should be to do something that you love. When you have your purpose, everything else will fall into place. You will focus less on what is wrong and more on what is right. You will be happier.
Your purpose may be something you would be willing to trade your life for. The psychologist Alfred Adler once said, “I am grateful for the idea that has used me.” Martin Luther King said, “If you do not have a life worth dying for, you are not living.” Mr. King The King Center died so others could live. What is your purpose? We live in a world of abundance, where you can have anything your heart desires. There is nothing standing between you and your desires except lack of definite purpose and the plans that will derive from it.
Monday, July 21, 2008
Financial Ratios-Standards For Success
To qualify for the 113th Boston Marathon, Boston Athletic Association athletes must meet the designated time standard which corresponds to their age group. Every runner knows what that is for their corresponding age group and they constantly monitor their performance and trainings to that standard.
In business, performance standards are usually measured in terms of financial ratios. Financial ratio's and other key indicators are important. Think of these like the meters and lights on the dashboard of an automobile. Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the company's financials to those of other company's.
Any successful business owner is constantly evaluating the performance of his or her company, comparing it with the company's historical figures, with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of your company's effectiveness, however, you need to look at more than just easily attainable numbers like sales, profits, and total assets. You must be able to read between the lines of your financial statements and make the seemingly inconsequential numbers accessible and comprehensible.
This massive data overload could seem staggering. Luckily, there are many well-tested ratios out there that make the task a bit less daunting. Comparative ratio analysis helps you identify and quantify your company's strengths and weaknesses, evaluate its financial position, and understand the risks you may be taking.
As with any other form of analysis, comparative ratio techniques aren't definitive and their results shouldn't be viewed as gospel. Many off-the-balance-sheet factors can play a role in the success or failure of a company. But, when used in concert with various other business evaluation processes, comparative ratios are invaluable.
A good place to start in understanding financial ratios is to go read the article on Financial Ratio in Wikipedia at Financial ratio - Wikipedia, the free encyclopedia
Next, you should determine which one’s you want calculate and monitor for your business. Some of the ratios to include and monitor are the current ratio, receivable turnover, receivable aging, average collection period, inventory turnover, debt ratio, debt-to-equity ratio, interest coverage, gross profit margin, return on assets and return on equity. These should be calculated periodically and compared to industry standards and previous periods. When comparing your company with industry figures, make sure that the financial data for each company reflect comparable price levels, and that it was developed using comparable accounting methods, classification procedures, and valuation bases.
Such comparisons should be limited to companies engaged in similar business activities. When the financial policies of two companies differ, these differences should be recognized in the evaluation of comparative reports. For example, one company leases its properties while the other purchases such items; one company finances its operations using long-term borrowing while the other relies primarily on funds supplied by stockholders and by earnings. Financial statements for two companies under these circumstances are not wholly comparable.
The following are some good websites to use to calculate the financial ratios you choose:
Financial Ratios
UW Libraries - Foster Business Library - Financial Ratios Calculator
If you have a business, decide today which financial ratios you will monitor. If you are just starting a business, put those financial ratios in your business plan. Success and decision are partners.
This is all for now. If you have any questions, you can always contact me at marty@martymcevoy.com. In addition, I would love your feedback to this post.
Take care,
Marty
In business, performance standards are usually measured in terms of financial ratios. Financial ratio's and other key indicators are important. Think of these like the meters and lights on the dashboard of an automobile. Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the company's financials to those of other company's.
Any successful business owner is constantly evaluating the performance of his or her company, comparing it with the company's historical figures, with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of your company's effectiveness, however, you need to look at more than just easily attainable numbers like sales, profits, and total assets. You must be able to read between the lines of your financial statements and make the seemingly inconsequential numbers accessible and comprehensible.
This massive data overload could seem staggering. Luckily, there are many well-tested ratios out there that make the task a bit less daunting. Comparative ratio analysis helps you identify and quantify your company's strengths and weaknesses, evaluate its financial position, and understand the risks you may be taking.
As with any other form of analysis, comparative ratio techniques aren't definitive and their results shouldn't be viewed as gospel. Many off-the-balance-sheet factors can play a role in the success or failure of a company. But, when used in concert with various other business evaluation processes, comparative ratios are invaluable.
A good place to start in understanding financial ratios is to go read the article on Financial Ratio in Wikipedia at Financial ratio - Wikipedia, the free encyclopedia
Next, you should determine which one’s you want calculate and monitor for your business. Some of the ratios to include and monitor are the current ratio, receivable turnover, receivable aging, average collection period, inventory turnover, debt ratio, debt-to-equity ratio, interest coverage, gross profit margin, return on assets and return on equity. These should be calculated periodically and compared to industry standards and previous periods. When comparing your company with industry figures, make sure that the financial data for each company reflect comparable price levels, and that it was developed using comparable accounting methods, classification procedures, and valuation bases.
Such comparisons should be limited to companies engaged in similar business activities. When the financial policies of two companies differ, these differences should be recognized in the evaluation of comparative reports. For example, one company leases its properties while the other purchases such items; one company finances its operations using long-term borrowing while the other relies primarily on funds supplied by stockholders and by earnings. Financial statements for two companies under these circumstances are not wholly comparable.
The following are some good websites to use to calculate the financial ratios you choose:
Financial Ratios
UW Libraries - Foster Business Library - Financial Ratios Calculator
If you have a business, decide today which financial ratios you will monitor. If you are just starting a business, put those financial ratios in your business plan. Success and decision are partners.
This is all for now. If you have any questions, you can always contact me at marty@martymcevoy.com. In addition, I would love your feedback to this post.
Take care,
Marty
Al Gore And The Environment
If you have not seen this video, I recommend it. Then go to his sight and sign up. Here is the link: http://www.wecansolveit.org/?source=GoogleSearch
Friday, July 11, 2008
Measuring Performance - Your Business Financial and Accounting System
Over the next 2 to 3 weeks, large corporations will begin reporting their earnings to investors for the second quarter of 2008. Investors and analysts use these reported earnings of the corporation in the calculation of the value of the stock and thus the market value of the corporation. Do you know what your earnings through June 30th have been? Are you able to measure and evaluate the performance of your business through this period? Do you know where your business stands financially?
Almost weekly, I will have a business owner call me for advice on their business. One of the usual concerns is always the financial and accounting system of the business. They tell me they feel out of control and lack the information necessary to make informed decisions on the future of their company. Even worse, they tell me they don't have last years taxes done because they are waiting on their accountant and this years books are not current.
Financial information for the business owner is critical. Financial information is used to make decisions both short and long-term. Financial information is used in the planning and budgeting process and to value the business.
There are two basic reasons, besides providing a useful product or performing a meaningful service, for building a business. One is to sell the business at some future date and the other is to franchise the business. With these reasons as the goal, meaningful, timely and accurate financial information is a must for every business owner. You want to build a business so that people bring other people to your business telling and showing other people what an incredible and successful business you have. Therefore, your financial and accounting systems are important ingredients to the success of your business.
The main purpose of the financial and accounting systems for every business should be to provide information to be used in the decision making process. Accounting is both the art and the science of systematically recording, classifying, summarizing, analyzing and reporting financial information so that it can be used to make financial decisions within the organization and to report information to users both within and outside of the organization.
Today is July, 11, 2008. I believe every small business should have their financial information complete through June 30, 2008. The following are the important reports for every business owner:
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7/10/08
by Marty McEvoy
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Almost weekly, I will have a business owner call me for advice on their business. One of the usual concerns is always the financial and accounting system of the business. They tell me they feel out of control and lack the information necessary to make informed decisions on the future of their company. Even worse, they tell me they don't have last years taxes done because they are waiting on their accountant and this years books are not current.
Financial information for the business owner is critical. Financial information is used to make decisions both short and long-term. Financial information is used in the planning and budgeting process and to value the business.
There are two basic reasons, besides providing a useful product or performing a meaningful service, for building a business. One is to sell the business at some future date and the other is to franchise the business. With these reasons as the goal, meaningful, timely and accurate financial information is a must for every business owner. You want to build a business so that people bring other people to your business telling and showing other people what an incredible and successful business you have. Therefore, your financial and accounting systems are important ingredients to the success of your business.
The main purpose of the financial and accounting systems for every business should be to provide information to be used in the decision making process. Accounting is both the art and the science of systematically recording, classifying, summarizing, analyzing and reporting financial information so that it can be used to make financial decisions within the organization and to report information to users both within and outside of the organization.
Today is July, 11, 2008. I believe every small business should have their financial information complete through June 30, 2008. The following are the important reports for every business owner:
- Balance Sheet
- Income Statement
- Cash Flow Statement
Balance Sheet
The balance sheet reports the assets, liabilities and equity of the business. It is a picture of the business at a particular point in time. The balance sheet reports total assets, such as cash, accounts receivable, inventory and equipment. The balance sheet also reports total liabilities, such as accounts payable, accrued liabilities and notes payable. The difference between the assets and the liabilities is the equity of the business. The equity of a business is an important number.
Income Statement
The income statement reports revenues, expenses and the resulting net income of the business. The income statement tells the "story" of the operations of the business for a period of time. It could be one month, one quarter or one year.
Cash Flow Statement
The cash flow statement explains the reasons for changes in the cash balance, showing all the sources and uses of cash in the operating, financing and investing activities of the business.
In addition to the above financial reports, financial ratio's and other key indicators are important. Think of these like the meters and lights on the dashboard of an automobile. Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the company's financials to those of other company's.
I will be discussing these ratio's in future articles, but it is always a good idea to have a few that you always monitor. One of my clients always required three numbers from her accounting department each week; cash, accounts receivable and accounts payable. It might be something simple like average sale per customer. Financial ratio's are important for every business.
This is all for now. If you have any questions, you can always contact me at marty@martymcevoy.com. In addition, I would love your feedback to this post.
Take care,
Marty
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7/10/08
by Marty McEvoy
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Monday, July 7, 2008
Outline of a Good Business Plan.
A client of mine on Friday asked me to give her an outline for the business plan she is writing. I told her that a good business plan would normally include the following sections.
- Cover Sheet
- Table of contents
- Executive summary
- The company and business description
- The products and services
- Market and competitive analysis
- Operations plan
- Management and organization
- Financial
- Appendix
I suggested she read the information on business plans at the Small Business Administration.
If you have any questions, you can contact me at marty@martymcevoy.com. Remember, have fun and create a great day.
Marty
Higher Fuel Prices and the Business Auto Expense Deduction
In this article, I am going to be discussing the methods available for deducting auto expenses and suggest that you review now your own situation in light of higher fuel prices.
On July 1, 2008, the IRS raised the standard mileage rate from 50.5 cents to 58.5 cents for business travel from July 1, 2008 to December 31, 2008. Was this enough? Do you need to consider switching to the actual expense method to compute your vehicle expense deduction in 2008? This article will help you address these questions.
The two methods:
There are two basic methods that business taxpayers may choose from to compute their deduction for the business use of automobiles: the IRS’s the standard mileage rate method and the actual expense method. The method chosen in the first year the vehicle is placed into service is very important and it will affect whether a change in method can be made at a later date.
Standard mileage method – With the standard mileage rate method, the fixed costs and the operating costs of the vehicle are generally calculated by multiplying the number of business miles traveled during the year by the business standard mileage rate. The actual expenses for operating the vehicle are not included in this calculation, but the IRS does allow additional deductions for business-related parking costs and tolls, interest paid on vehicle loans and any state or local personal property tax paid on the vehicle. In addition, there are certain other limitations that need to be reviewed. One is that you cannot use this method if you have previously depreciated the vehicle using a method other than straight-line for its estimated useful life.
Actual expense method - With the actual expense method, taxpayers can deduct the operating and maintenance costs incurred for the vehicle during the current year. These include gas and oil, insurance, tires, license, registration fees, business-related parking costs, tolls, interest paid on vehicle loans, any state or local personal property tax paid on the vehicle, repairs, maintenance and car washes. In addition to this total, depreciation is added. Be sure to see the new rules for 2008 depreciation, because these have been changed. When the business use of the vehicle is less than 100 percent, expenses need to be allocated between business and personal use.
Changing methods
Businesses can switch between the standard mileage method and the actual expense method only if they have not claimed depreciation in excess of straight-line on the vehicle. No mid-year method change is allowed.
For more information on the standard mileage rates, you can go to IRS Announces 2008 Standard Mileage Rates; Rate for Business Miles Set at 50.5 Cents per Mile. For more information on depreciation for 2008, you can go to IRS To Issue Guidance on Special 50-Percent Depreciation Allowance
If you have any further questions, or would like me to answer a specific question, you can contact me at marty@martymcevoy.com.
On July 1, 2008, the IRS raised the standard mileage rate from 50.5 cents to 58.5 cents for business travel from July 1, 2008 to December 31, 2008. Was this enough? Do you need to consider switching to the actual expense method to compute your vehicle expense deduction in 2008? This article will help you address these questions.
The two methods:
There are two basic methods that business taxpayers may choose from to compute their deduction for the business use of automobiles: the IRS’s the standard mileage rate method and the actual expense method. The method chosen in the first year the vehicle is placed into service is very important and it will affect whether a change in method can be made at a later date.
Standard mileage method – With the standard mileage rate method, the fixed costs and the operating costs of the vehicle are generally calculated by multiplying the number of business miles traveled during the year by the business standard mileage rate. The actual expenses for operating the vehicle are not included in this calculation, but the IRS does allow additional deductions for business-related parking costs and tolls, interest paid on vehicle loans and any state or local personal property tax paid on the vehicle. In addition, there are certain other limitations that need to be reviewed. One is that you cannot use this method if you have previously depreciated the vehicle using a method other than straight-line for its estimated useful life.
Actual expense method - With the actual expense method, taxpayers can deduct the operating and maintenance costs incurred for the vehicle during the current year. These include gas and oil, insurance, tires, license, registration fees, business-related parking costs, tolls, interest paid on vehicle loans, any state or local personal property tax paid on the vehicle, repairs, maintenance and car washes. In addition to this total, depreciation is added. Be sure to see the new rules for 2008 depreciation, because these have been changed. When the business use of the vehicle is less than 100 percent, expenses need to be allocated between business and personal use.
Changing methods
Businesses can switch between the standard mileage method and the actual expense method only if they have not claimed depreciation in excess of straight-line on the vehicle. No mid-year method change is allowed.
For more information on the standard mileage rates, you can go to IRS Announces 2008 Standard Mileage Rates; Rate for Business Miles Set at 50.5 Cents per Mile. For more information on depreciation for 2008, you can go to IRS To Issue Guidance on Special 50-Percent Depreciation Allowance
If you have any further questions, or would like me to answer a specific question, you can contact me at marty@martymcevoy.com.
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