Finance: Zero-Based Budgeting Aligns Resources with Priorities



Zero-based budgeting (ZBB) is no longer just your average budgeting technique. ZBB means all expenses must justified for all functions and analyzed for company needs and costs.

Many companies began using it in 1970 to help reduce expenses and cost-effectively apportion resources. But over the decades, ZBB went out of vogue.

In recent years ZBB has been gaining favor with companies. For them, it’s no longer business as usual. Why?

They know they experience improved cash flow for sustained growth by consistently aligning their business priorities. How?

Such companies take full advantage of the advances in technology, society’s increased awareness of human nature, and the desire for long-term strong financial results.

Instead of staying stuck using the same old budgeting approach, ZBB can change a company’s culture and managers’ mindsets – for more transparency and awareness to enhance discussions about managing costs and cost-effectively apportioning resources.

In essence, ZBB brings a new culture of continuous improvement with enhanced visibility in spending and cost discipline.

That’s easier said than done. Many companies have found their managers and department heads are reluctant to change. They’re somewhat territorial and want to maintain autonomous control over their budgets.

ZBB has been criticized for being labor intensive and too complex.

On the contrary, companies that have made the switch realize that with ZBB, profit and loss statements can be simpler in all cost categories – from manufacturing to marketing – as a result of new software or cloud-based solution approaches.

This also means financial recordkeeping and planning are much simpler to implement and to significantly reduce costs.

With ZBB, there’s more accountability as department heads are incentivized to justify expenditures. So, it’s all about governance of policies, costs and pursuing business goals.

ZBB doesn’t have to focus entirely an anticipating negativity. Some businesses are fortunate to have employees open to change.

For maximum profit, they know to partner with employees and to motivate them to offer profitable ideas.

Changing to ZBB

For success, there has to be a commitment at the leadership level and in role modeling for the ZBB approach. Leaders must lead by example with decisive action.

Senior management must commit to altering everyone’s mindsets and changing how things are done.

In this way, lower-level managers are more apt to adhere to planning in keeping with the companies’ culture and goals.

Managers become more sophisticated cost-containment and investment in initiatives. They take a balanced look at expenses and setting targets.

For long-term success, there has to be a new infrastructure. Leaders must continually reinforce and communicate the ZBB message.

So then, employees’ behaviors change in order to make every dollar count.

Checklist for lasting change

  1. For the desirable outcome, you must diligently reinforce the new ZBB method on budgeting and funding decisions.
  2. Again, as it can’t be overemphasized, constant communication of your convictions is paramount.
  3. Forget using the reams of spreadsheets. For real-time data in decision-making, make sure to choose the right tools of technology either in software or cloud-based solutions.
  4. Make training of your staff a priority to use the new tools.
  5. Be certain that everyone understands there are no sacred cows. You might need a cultural change. Don’t allow obstinance.
  6. Some employees will be tempted to call for exceptions claiming ZBB is too complex. Don’t allow them to submit cost leaks. Hold discussions about how to utilize ZBB and set limits on how they can qualify exceptions.
  7. Stop all the pain. Use uniform standards and require burden of proof from your employees.
  8. Evaluate every aspect and detail. Make sure you assess every cost driver. As a result, you’ll be more likely to identify growth opportunities.
  9. Keep an open mind. Don’t limit your thinking. Visualize the future using all feasible digital tools.

You might need to make significant changes in your culture. Your ZBB process must be consistent. Use unassailable analysis and insights. Make certain you maintain a strong governance structure and make decisions on facts not irrational emotion.

Good luck!

From the Coach’s Corner, here additional relevant tips:

Optimize Talent Management with 5 Coaching Culture Tips — When managers become coaches, you get a higher-performing workforce. You will have replaced mediocrity with strong performance. Here’s how to develop a coaching culture.  

Cutting Costs: 9 Best Practices to Avoid Making Reactionary Decisions — In chaotic times, it’s common for businesspeople to be fearful and reactionary when they feel they must cut expenses. But entrepreneurs need to be unemotional so that they make decisions that will bolster their objectives. They can take the emotion out of their decision-making — by eliminating stress factors — if their priorities are clearly defined with values.

Tips for Strategic-Thinking in Finance: Your Staff, Individuals — Many companies want accountants and finance professionals who are strategic thinkers. But that’s not happening at most companies. Here are tips for managers and employees.

Artificial Intelligence: How to Maximize Your ROI — You will maximize your return on investment in AI with these strategies.

Strategy: How You Can Capitalize on Predictive Analysis — The promise of predictive analysis: Obtain forward-looking insights to innovate and quickly recognize opportunities for growth.

“The budget is not just a collection of numbers, but an expression of our values and aspirations. “

-Jacob Lew


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.




12 Best Financial-Planning Tips for Entrepreneurs



Typically, there are critical mistakes made by entrepreneurs. In essence, they’re so busy putting out fires, they leave their financial security in doubt.

Yes, they need to put out their fires.

However, they also need to budget time to focus on important functions of business: Marketing/sales, human resources, cash flow and making astute financial plans.

By focusing on these matters, entrepreneurs also are in a better position to prevent catastrophes, if they’ve planned well financially.

Points to consider:

Envision your financial future.

Automate savings and investment strategies. Minimize expenses and spending.

Do all necessary due-diligence, and get financial planning expertise — before you do anything.

Given the importance of financial planning for your security, here are 12 tips:

1. Grow your retirement savings

Set up automatic monthly withdrawals to pay off your mortgage.

Pick the best tax-advantage retirement strategy for you such as a 401 (k) or a Roth IRA and add to it every month (see tip No. 10). And very importantly, don’t tap into your retirement fund for any reason.

2. Plan for premature death

It might seem inconceivable, but your comprehensive financial planning must allow for emergencies including premature death.

To be sure, you need to set aside enough money for six months if you lose your revenue streams. But if you have a family, you need to have enough assets to take care of your death expenses and to provide funds for your loved ones.

The funds have to be liquid in personal savings and life insurance. Plus, remember the how and what you do are important for beneficiary designations and proceeds.

3. Invest for the long-term

Prepare for the future like a world-class marathon runner.

As legendary investor Warren Buffett is wont to do – only invest in what you know really well, hold it indefinitely, focus on quality and value, and only follow the advice of successful people you know and trust.

As you age near retirement, remember a conservative approach in investing is best.

4. Focus the right way on capital ownership

Remember it’s important to focus on how you’ll get paid, not how much.

If you’re the owner of capital, you’ll never be taxed on appreciation until you want to be taxed. Such appreciation is subject to preferred long-term capital gains tax rates.

You’ll also benefit in preferential taxation from the returns of long-term capital gains and capital-qualified dividends. You’ll benefit more long-term, if you can afford to be compensated in stock vis-à-vis ordinary income.

5. Stay out of debt

Invest in your business, but manage your money to stay out of debt. This means paying off your most-expensive debt first such as credit cards or loans, student loans and mortgage debt.

Avoid future debt and cut back your spending. That includes unnecessary small expenditures.

For instance, if you’re an expresso coffee aficionado, make your own coffee instead of patronizing Starbucks every day. You’ll save as much as $100 a month or more.

6. Discuss money issues with your partner and family

Whether it’s a business partner or personal partner, discuss financial goals. If you have children, teach them about money management.

7. Evaluate and update insurance policies

As you grow and evolve in your business, make certain your insurance policies provide the right types and amounts of coverage.

That goes for business insurance, car insurance, disability insurance, health insurance, homeowner insurance and life insurance. Don’t ignore your beneficiary designations and coverage amounts should you die.

8. Remember your children

Do something for your offspring. Whatever is applicable: Fund a 529 account for college, if they’re disabled fund 529 ABLE accounts, or establish a small investment account or a trust.

But do your homework about all plans. Not all are advantageous.

9. Re-finance loans

Whether you’ve got business loans, you’re still paying off your own student loans or are concerned about your children’s future, consider consolidating or refinancing your loans.

10. Invest in a Roth IRA

To begin paying a lower rate of taxes and not paying taxes on withdrawals, consider converting your traditional IRA or 401 (k) to a Roth IRA.

Just make certain to keep your marginal tax bracket in check before you make any switches. If you make a change before December 31, you make change back if you get second thoughts for any reason.

11. Consider the right retirement risk-management strategy

Study cost-effective options for your retirement income now. You’ll need to allow for market volatility and your long-term healthcare as a retiree.

12. Find a professional to advise you

You’re best advised to find a great financial-planning professional. Look for credentials such as the CFP®, ChFC®, CLU®, CFA® or RICP®.

From the Coach’s Corner, for hundreds of informative thoughts to ponder and relevant articles, visit these pages:

Finance, marketing and sales, human resources, technology and tech security.

“Planning is bringing the future into the present so that you can do something about it now.”

-Alan Lakein


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.




5 Tips to Build Your Business Credit, Access Capital



As you’ve learned, starting a business is your hardest challenge ever. Many businesses report it’s getting harder and harder to increase revenue.

So growing a business is a big challenge.

Sometimes a business needs access to capital to grow. But in order to grow, it helps to build credit profiles to land financing.

Budget your time to take the right precautions. Put yourself in the best-possible position to access capital so your business is ready to grow.

ID-100112287 imagerymajesticHere are five tips:

1. Establish a banking relationship

A good banker has experience with a wide myriad of companies and probably for your sector, too.

Your banker can help you get credit-ready with financial solutions. You’ll need them for your immediate business needs and your long-term goals.

Keep your banker up-to-date on your ongoing business and financing needs.

2. Erect a strong credit profile

Your good credit is a valuable asset. You must have good financial habits personally and in your business.

In considering whether to advance you money, your banker has multiple concerns. It’s not limited to your credit score.

Your banker will ascertain the health of your business such as your cash flow, your payment history, your debt-to-income ratio and your customer base.

3. Review all financing options

Your banker is best-suited to review your best opportunities to obtain capital. They include a line of credit, equity financing, venture capital and angel capital.

Your banker might also advise to consider an SBA 7(a) loan.

4. Closely monitor your cash flow

Your banker will look at your profit situation and cash flow to determine your credit capacity. You must demonstrate you have enough cash to meet your financial commitments.

So regularly review your cash flow.

5. Split your business and personal accounts from each other

Many small businesses make the mistake of not having dedicated business accounts. Co-mingling of funds will lead to disaster.

Moreover, it demonstrates the soundness of your business when you’re asking for credit and money. And it helps you keep better records of your business income and expenses.

From the Coach’s Corner, here are links to related articles:

Tips to Get the Lowest-cost Small Business Loan
— Small business owners are facing unnecessary financial risks because they increasingly seek debt consolidation and loan refinancing as the result of high interest rates and onerous fees, according to a small-business lender. Here’s what to do.

Drowning in Student-Loan Debt? How to Pay it Off in 1 Year — You’re not alone if you’re drowning in student-loan debt. The average college graduate in 2015 was saddled with student loans totaling $35,000, which takes 10 to 20 years to pay off. Here’s what you can do to stay afloat.

Debt Consolidation Will Sink You without These 6 Tips — If you’re not careful in your debt-consolidation plan to bundle your debts for a lower interest rate and minimum payments, you might get into more financial problems. Here are six precautions.

8 Financial Vows for a Young Couple’s Successful Marriage — Young people have starry eyes when they plan to marry. Certainly, they look forward to a lifelong bliss together. Unfortunately, about half of first marriages end in divorce. Often, it’s over money disagreements.

Money – Your Net Worth Matters More than What You Earn — When it comes to finance, most business owners and other individuals strive to increase their wealth to have more opportunities. The trouble with some, however, is that they focus on income and not their net worth. That means, of course, spending less than they earn.

“You can’t be in debt and win. It doesn’t work.”

-Dave Ramsey


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is also a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy imagerymajestic at www.freedigitalphotos.net

Financial Advice for Powerball Lottery Winners



So you’ve been faithfully trying the Powerball lottery, and finally struck gold.

Congratulations! The odds seemed to be an impossible dream for you to win a mega drawing.

Assuming you did. Now what?

There are financial precautions you should take.

Yep, be smart about it. Unless you plan carefully, your mega windfall will result in a nightmare.

Tips include:

1. Deliberate in your decision-making

Resolve to be analytical in how you handle your winnings. There’s a lot to think about.

2. Don’t forget about income taxes

Multimillion dollars in winnings, means you two things. 1. You’ll have to pay taxes. 2. You’ll be in the highest federal tax bracket – 39.6 percent.

Not only that, unless you’re in a state like Washington where there are no income taxes you’ll be hit with a state income tax bill.

Worse, if you buy your ticket outside your home state, you’ll be hit with taxes for both states.

3. Taking a lump sum

Decide what’s best – taking a lump sum or a payment over 20 years. For many people, it’s best to take the money in a lump sum. This will mean your money will earn more interest.

Be aware you’ll have to pay a significant amount in taxes upfront.

However, if you invest wisely you’ll have more money in 20 years than if you accepted 20 annual installments.

“We’ve all heard stories of lottery winners, rock stars, heirs and heiresses, and professional athletes becoming millionaire morons who wake up rich but are broke by nightfall.”

-Robert Kiyosaki

4. Go for installments, if you plan to spend the money right away

It’s true, you’ll be better off in the long run if you take the amount in-full. However, if you have plans to spend the money, go the installment route.

But spread it out over the years.

5. Suppose you die unexpectedly, know what happens

If you die, the winnings can be passed to your spouse without being taxed. However, if you’re unmarried and depending where you live, your heirs will face estate taxes probably for more than 40 percent.

From the Coach’s Corner, more advice on finance:

Before You Travel Abroad, Take 6 Financial Precautions Today — Whether you’re traveling to a foreign country for business or pleasure — there are at least six steps you should take. You need to do more than just making sure that your passport is current, planning your itinerary or deciding what to pack.

Protect Your Bank Accounts So You Can Sleep at Night — Imagine for a moment — you’re sitting at your desk enjoying a second cup of morning coffee. Then, your phone rings. It’s a call from your bank to discuss possible fraud. Your bank is concerned about possible suspicious activity with your accounts, and wants to make sure you’re not a victim.

9 Secrets for Success in Real Estate Investing — Whether you want to work with investor partners or go solo, real estate investing can be a profitable business. By performing due diligence, developing a system and working hard, real estate investing works.

Tax Deductions for Small-Residential Property Landlords — As investments go, small residential property landlords enjoy the most tax benefits. In a down year, rental property tax deductions can make a big difference whether you enjoy profits or suffer losses.

Financial Tips for Taking the Plunge to Buy a Business — So you’ve decided to take the plunge in buying a business. Congratulations. I salute such bravery. Owning a business represents one of America’s great fundamentals — our free-enterprise system.
You’ll have multiple financing options.

Even Ordinary Folks Need 10 Best Strategies for Estate Planning — Updated March 27, 2015 It’s a mistake to think estate taxes only apply to the super rich. Estate taxes hurt ordinary folks. Estate taxes are especially problematic for farmers and small businesspeople, alike, who own their buildings and have capital tied up in equipment to grow crops or to produce products.

“My wife said to me: ‘If you won the lottery, would you still love me?’ I said: ‘Of course I would. I’d miss you, but I’d still love you.’”

-Frank Carson


 _________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.




Applying for Bank Loan? Here’s How to Shorten the Process



Business owners generally have two concerns when trying to get a bank loan or line of credit. Either they can’t qualify or they face scrutiny beyond belief.

Wouldn’t it be great to save time and shorten the process?

You can if you know what banks want and if you treat a banker like you would a prospective customer – by qualifying the banker by asking three key questions.

ID-10089370Before exploring this topic, here are three miscellaneous thoughts:

— Firstly, it’s worth noting I don’t recommend trying to borrow money for marketing or ongoing operations. And don’t borrow against your credit cards or mortgage. You’re asking for trouble, especially if you’re a young business.

— Secondly, avoid alternate sources of funding unless you’re guaranteed a very low interest rate. Crowdfunding is popular but remember you’d give away autonomy. A traditional bank loan is best for your credit reputation, and will enhance your future credit worthiness.

— Thirdly, never open an e-mail from an alleged lender offering you a loan. Those are “phishing” scams in attempts to get your vital financial information.

Generally, to qualify for a loan you must be able to provide positive answers to 10 questions:

1. Consistent cash flow

You must be able to show you have a solid revenue stream and stable cash flow. That generally means operating a credible business and showing a successful three-year track record.

2. Sufficient collateral

It’s possible to get a loan or line of credit without collateral, if can you show a pattern of success and own a home. But for many entrepreneurs, banks want collateral to loan money.

3. Debt-to-income ratio

If you’ve got debt or have other outstanding loans, banks won’t come through with a loan. Multiple requests for loans from other sources on your credit report is a red flag to banks.

A bank is a place that will lend you money if you can prove that you don’t need it.

-Bob Hope

4. Customer base

You should have a diverse portfolio of customers. Banks look with a jaundiced eye at businesses that have a small base of customers. If you’re a tavern or entertainment business owner, you face long odds for a loan.

5. Minimal credit history

Banks, of course, have credit-score standards. You must have a reasonable history of obtaining credit and paying it off. Most often, banks require a credit score above 700.

If your credit report shows errors, know that you have options.

6. Personal guarantee

A bank will want you to guarantee in-writing that you’ll be responsible for the loan and that you’ll pay it off.

7. Insufficient time in business

Banks look for business credibility. That means showing them a significant track record laced with profits.

8. Economic conditions

If the economy is uncertain, the banker will be concerned. The banker wants you to be able to pay in a timely fashion. Therefore, you must have a stellar record of profits and low costs to reassure the banker.

9. Authoritative management

You must personally have a stellar business reputation for honest and expert management of your business. That’s why effective self-marketing matters.

10. Questionable sector prospects

If your sector or industry has well-known problems or is in a pattern of decline, you’re wasting your time in seeking a bank loan.

After you study the questions and determine you’ll qualify for a loan, you’ll still face a ton of scrutiny when you apply.

“The income tax has made more liars out of the American people than golf has.”

-Will Rogers

Got your documents ready? To shorten the process, treat a banker as you would a prospective customer by asking three key questions:

— Who makes the decision?

When you approach a banker, ask who will make the decision. Does the loan officer or branch manager make the decision or will it be a committee in another location?

The more people involved in the decision process means additional questions and often an inefficient use of your time.

— What information is required?

Normally, you’ll be asked for your personal and business information. At the minimum, the banker will request your previous years of financials and a current financial statement. They often prefer recent tax returns.

If you’re asking for a large loan, they’ll probably want a business plan. A real estate loan will necessitate a current appraisal. A delay in responding with documents will be a red flag for a banker. So respond ASAP.

— How do they want the information?

Learn what will be accepted verbally, and ask if they want either hard or digital copies.

Good luck!

From the Coach’s Corner, here’s more information:

Tips to Get the Lowest-cost Small Business Loan — Small business owners are facing unnecessary financial risks because they increasingly seek debt consolidation and loan refinancing as the result of high interest rates and onerous fees, according to a small-business lender. Here’s what to do.

Debt Consolidation Will Sink You without These 6 Tips — If you’re not careful in your debt-consolidation plan to bundle your debts for a lower interest rate and minimum payments, you might get into more financial problems. Here are six precautions.

When there’s No Cash, 8 Tips to Organically Grow Your Business — Organically growing a business is lot like organic farming. Organic farmers pay attention to the signs of nature as a planting guide. They use rich sources of organic matter to build and maintain soil fertility. If you’re like many entrepreneurs, it probably makes sense to grow organically. You might not have another choice.

You Can Creatively Manage Your Cash Flow 7 Ways — If you’re taking the pulse of your business, of course, the first thing to consider is your cash flow. If your cash flow is poor, you feel poor because you can’t pay the bills nor can you use money for what you’d like to do. Your image can also suffer with vendors or with customers, if you don’t manage your cash flow.

Management — 5 Frequent Causes of Cost Overruns and Failures — Extensive research shows how and why corporate projects result in cost overruns and failures. The academic study is entitled, ‘Yes Men’ Are Killing Corporate Projects. The research reported rampant misreporting of project statuses at all levels of the companies. The errant information is prompted from cultural predispositions to career aspirations.

“Those who are careless in trifles give a precedent for remissness in important duties.”
Plutarch – Life of Æmilius Paulus


 __________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy of imagerymajestic at www.freedigitalphotos.net

Finance Checklist for Strategic Planning, Growth



Strategic planning in finance for growth means avoiding trendy fads. Instead, it requires an ongoing down-to-earth approach in order to create value.

Idealism is fine if it’s counter-balanced with pragmatism to improve business performance.

Continually, you must be practical in asking the right questions about your current status.

So identify your barriers and determine the realistic solutions as opportunities for growth.

There are at least seven steps for strategic planning in finance for growth.

ID-100120484 ddpavumbaThey are:

1. Determine whether your current approach is adequate for growth.

Whether it’s through organic growth or via mergers and acquisitions, make sure you’re making the right investments for growth.

Furthermore, analyze your costs to see if you have the right processes in place in order to make the right decisions about spending money.

2. Consider restraints holding you back

True, sometimes there are external marketplace problems you can’t readily solve such as legal, regulatory or tax issues. But there are solutions from which you can benefit, especially internally.

Typically, there are at least six questions to ask:

— Do we need better cash flow?

— Do we need new products?

— Do we have the right human capital?

— Do we need to change your company’s culture and mindset?

— Do we have the right business processes?

— Do we need to change your marketing?

Once you determine the restrictions, strategize on how to solve them.

3. Clear the table of your biggest headaches

Virtually all businesses suffer from uncertainties. The trick is to fully analyze the uncertainties and alleviate them.

Here’s an example:

One of the most under-rated of our nation’s presidents helped the nation heal from uncertainty during a major crisis. That was President Gerald Ford in Watergate. He had great wisdom and the courage to do the right thing.

One of his major acts would cost him reelection.

At the time, many Americans didn’t appreciate his pardon of President Richard Nixon. What Mr. Nixon did caused a Constitutional crisis.

But historians later agreed Mr. Ford’s action was the fastest approach to end the nation’s long nightmare.

President Ford’s most-used phrase to solve problems: “Let’s clear the table and move forward.”

So whatever your major headaches are, identify them. Implement solutions with brilliance and tenacity.

4. Know where you’re spending the most money, and analyze your return on investment

Look at your biggest expense. Ask yourself: “How is it working?”

Then, determine how you can get a better ROI. This simple act can often dramatically improve your immediate cash flow.

5. Evaluate the big picture of your company financial objectives

Determine if your current strategies will help your company reach its financial goals. Many companies unfortunately implement the wrong behavior.

The behavior must synch with the goals to obtain the desired results.

If you suspect you’re on the wrong path, start an internal dialogue by asking questions. You want participation from all concerned executives.

6. Identify your marketplace threats and leverage your financial planning and analysis capabilities

Examine the strategies of your competitors. Are they making moves that threaten your company’s future?

Consider your financial planning and analysis alternatives in order to cope and triumph over your threats.

7. Continually evaluate what isn’t working

You might be targeting the wrong sector or customers. Keep mind Pareto’s Principle: 80 percent of the effects come from 20 percent of the causes.

For instance, 80 percent of your problems are created by 20 percent of your customers. Or 80 percent of your sales are derived from 20 percent of your customers.

But are the customers profitable enough?

Determine what functions aren’t scaling your business and generating returns. Then, do something about it.

As famed entertainer and well-to-do businessman Bob Hope used to say: “Get it done.”

From the Coach’s Corner, here are additional relevant tips:

Strategic Challenges — What’s a CFO to Do about Sustainable Growth? — Sustainable growth ranks as global companies’ No. 1 strategic planning challenge – in which chief financial officers will be playing a major role, says a study.

You Can Creatively Manage Your Cash Flow 7 Ways — If you’re taking the pulse of your business, of course, the first thing to consider is your cash flow. If your cash flow is poor, you feel poor because you can’t pay the bills nor can you use money for what you’d like to do. Your image can also suffer with vendors or with customers, if you don’t manage your cash flow.

Profit Margins: 11 Tips to Increase Sales and Minimize Markdowns — Imagine being able to sell your products at full or nearly full margins. How would you like a dream situation – not having to mark down your products? It’s important to develop and implement responsive, multi-dimensional strategies to maximize your sales.

6 Tips to Turn Your HR Department into a Profit Center — At least 50 percent of a company’s profits are contingent on employee problems. If you have challenges in one department, odds are you have HR issues in other departments. In fact, human capital is the No. 1 reason why CEOs lose sleep. Many businesses often need an objective source of information and expertise from critical thinkers. It’s true you can turn your human resources department into a profit center.

For the Best Cash Flow, Manage Your Inventory Costs with 8 Tips — With proper inventory management, you can lower your expenses and increase your cash flow. For many businesses, it means taking a look at your inventory costs.

Employee Retirement Plans: Preferences of Employers — Study — Trust is the No. 1 reason employers choose retirement plan providers for their employees, according to a landmark study of 809 companies across a full spectrum of industries in 2014. But for the first time we learn which are the top three providers that companies trust the most and why — and that only 9 percent of employers trust financial institutions to manage their employees’ retirement plans.

“About the time we can make the ends meet, somebody moves the ends.”

-Herbert Hoover


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy of ddpavumba at www.freedigitalphotos.net

Avoid Fights over Money in Business Partnerships with 7 Tips



When a business has cash flow issues, a key issue that comes up every day is money.

As a partnership, you have a shared responsibility to discuss issues on principles without arguing in an ad hominem manner.

Your company is doomed if you ever attack your partner’s character or sarcastically belittle the person’s traits. It’s an unproductive way to try to undermine your partner’s argument. Neither party wins.

Whenever there are arguments, it’s important both persons clean off their street. No person is always 100 percent right.

ID-100100980 (1) David Castillo DominiciWhat’s a partnership to do in money matters?

Whether its setting a budget, hiring people or investing in equipment, partners can’t avoid money discussions.

A good financial system is vital for your business.

Not only will a properly prepared financial statement tell you what’s transpired in your business, it will give you a snapshot regarding your future (see Primer for Best Practices in Preparing Financial Statements).

Your mindsets should be focused on productive judgment and sensitivity. Otherwise, financial disagreements last too long and result in negativity and sarcasm.

The Greek word for sarcasm, sarcaz0, means to tear flesh. Is that what you want? Probably not.

For entrepreneurs, other than good communication, the most difficult part of launching a business is preparing financial projections.

“Eight out of 10 companies fail in the first two years due to insufficient cash,” warns esteemed financial consultant Roni Fischer (see Budget Planning Tips for a Micro Business).

For productive discussions about money, here are seven steps:

1. Discuss financial philosophy before forming the partnership. Your financial habits and mutual goals should be discussed in advance.

A discussion about philosophic principles is vital. Running and growing a business is a dynamic process because of changing conditions — internally and externally in the marketplace. Mutual agreement in advance on money principles is imperative to lay a foundation for success.

Each prospective partner should be able to anticipate with 90 percent accuracy on how the other person will behave in any developing situation. Negative surprise will kill your partnership.

If you spot any red flags in your prospective partner’s comments, don’t make the mistake of thinking you can change the other person. The individual’s judgment was formed a long time ago.

Issues that evolve over time might be a catalyst for disagreement. The trick is to take all steps to preserve your relationship. You must first remember it’s important to reach a fair compromise – with win-win negotiating skills.

You’ll want both parties to feel positive after the negotiation is complete (see The 22 Dos and Don’ts for Successful Negotiations).

2. Keep the focus on transparency. Financial discussions aren’t as sexy as other topics. But make sure financial planning remains part of your business operation and vision.

Continue to discuss what matters most about cash flow. Acknowledge each other’s feelings. Whatever you folks discuss about goals and values, money should be part of it.

Both partners need to know your company’s financial situation at all times. You must be aware of your real-time financial condition. In this way, both of you will have a practical sense before making financial commitments.

Unless you have a lot of startup experience, it can be a little tricky to make down-to-earth financial projections for your new company. Pragmatic assumptions are important in such a forecast (see Startup Financial Planning: How to Get a Pragmatic Forecast).

3. Continue to identify priorities. That means having short-term and long-term goals. Discuss what you want to achieve and the best roads to get there.

For instance, agree on how you’ll manage the sweet spot — between your price-optimization and costs. Avoid the typical 11 pricing mistakes (see Strategies for Stronger Profits by Optimizing Prices).

4. Fine-tune your working budget. A financial plan will keep you focused on how to responsibly achieve your goals. It should cover timetables and how to save for investments in people and equipment.

“Always aim at complete harmony of thought and word and deed. Always aim at purifying your thoughts and everything will be well.”

-Mahatma Gandhi

Document everything. Keep a paper trail. Uncertainty can kill hope in business. Best practices in management mean having the right information to alleviate uncertainty in business. For that you need the right tools.

One important tool – know your break-even point (BEP). A BEP analysis should be an integral part of your financial planning (see Why and How to Determine Your Break-Even Point).

5. Have an agreement on your roles. How and who will manage your day-to-day finances?

It’s preferable to have multiple revenue streams. Agree on how the revenue will be saved or invested.

Anticipate problems and who will act. For example, what will you do if you get a call from your bank about possible suspicious activity with your accounts, and your banker wants to make sure you’re not a victim (see Small Business Tips to Protect Your Bank Accounts).

6. Each partner should consult each other in major decisions. You have a shared responsibility to see that the company prospers. This means shared responsibility in major expenditures, hiring or investments.

Even if one person has responsibility in managing money, both parties should have equal standing in how and when to spend it.

That also means both parties should be equally in involved if sales decrease and hurt profits. You should work together to turn the problem into an advantage (see 8 Strategies When Sales Drop and Costs Cut into Your Profits).

7. Be respectful when there’s a difference of opinion. Remember the reasons that drew you to the other person as a partner. Money disagreements can easily morph into heated arguments.

Money should be a tool for success, not a catalyst for arguments. If you share your mutual visions and communicate with transparency, you’ll more easily minimize stress and keep the focus on growth.

In chaotic times, it’s common for businesspeople to be fearful and reactionary when they must cut expenses. But entrepreneurs need to be unemotional so that they make decisions that will bolster their objectives.

They can take the emotion out of their decision-making — by eliminating stress factors – if their priorities are clearly defined with values (see Cutting Costs — 9 Best Practices to Avoid Making Reactionary Decisions).

From the Coach’s Corner, related content:

Think About 9 Key Questions Before You Form a Partnership — Sure, there are good reasons to partner in business. A business has more flexibility with more than one owner. Also, two or more partners can help accelerate a company’s growth. But it can also be a hindrance, especially when there isn’t unanimity on business issues.

Checklist to Increase Your Startup’s Cash Flow — It’s true that cash flow is the salient dynamic that leads to the failure or success of a business. Whether your new company’s performance is stagnant or you’re growing quickly, cash flow is paramount. There are at least 11 ways you can increase cash flow for your business to function properly.

Hunting for Profit? How to Become a Lion, King of the Jungle — The quest for profits is challenging if you’re lost in a jungle of uncertainty. But success is possible if you emulate a lion hunting for its prey.

12 Tips for Profits to Keep Your Business Dreams Alive — To keep your dream alive in this economy, you must find ways to adapt and do it quickly.

“Always aim at complete harmony of thought and word and deed. Always aim at purifying your thoughts and everything will be well.”

-Mahatma Gandhi


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.




Photo courtesy David Castillo Dominici at www.freedigitalphotos.net

How to Manage Those Annoying Hidden Evergreen Clauses



A big frustration for businesspeople in financing and leasing business and commercial equipment comes after they fail to read the fine print in contracts.

Commonly found in financing and leasing contracts, evergreen clauses are designed to keep customers committed to an agreement beyond the original term.

To the rescue: LeaseQ, www.leaseq.com.

LeaseQ provided insider tips to business owners on coping with evergreen clauses. Based in Boston, LeaseQ is one of the leading providers of business and commercial equipment leasing and financing to small and large companies.

ID-10056727 Stuart MilesEvergreen clauses basically allow the lease term to automatically renew at the end of the lease, unless one party or the other provides notice to the other of their intent not to renew – usually no less than 30 days before the end of the current term.

Typical evergreen-clause wording

Evergreen clauses may be worded any number of ways, but they do share common characteristics, namely that they keep the contract active longer, and do provide a mechanism, however nebulous, for ending the agreement.

They may also create serious hurdles to be overcome before the agreement can be nullified.

Evergreen clauses are designed to benefit the one providing the service, but can become a headache for the person receiving the service.

You see, most people simply do not review lease agreements months or years into the term. The clause sneaks up and is in effect before anyone is aware of it.

Evergreen clauses should be identified and agreed to only for very good reason, such as the locking in of a given price or rate. In most cases, they are best avoided, with simple refusal to sign unless the clause is removed. In many cases, lining it out and initialing where it was done will be enough to void the clause.

Try to negotiate elimination of the clause from the contract (see:  The 22 Dos and Don’ts for Successful Negotiations).

LeaseQ tips

If for whatever reason, it is impossible to avoid the evergreen clause, then evoking the clause is the single best method of protection.

Two of the most common include:

  1. Sometime before: This agreement shall automatically renew for another one year term, unless either party provides notice to the other of its intent to terminate this agreement not less than 30 days before the end of the then current term.
  2. Sometime within: This agreement shall automatically renew for another one-year term, unless either party provides notice to the other of its intent to terminate this agreement within 30 days of the end of the then current term.

Evoking the first example is the easiest, since it simply involves sending notice to the other party. The second is harder, since it involves creating a calendar item and sending notice of intent not to renew within the time frame.

For that matter, evergreen clauses are annoyingly prevalent everywhere — even in some antivirus provider agreements.

Good luck and read the fine print.

From the Coach’s Corner, here are additional finance tips:

4 Tips to Save on Your Professional Liability Insurance — Threats from possible business lawsuits are everywhere.

8 Strategies When Sales Drop and Costs Cut into Your Profits — If your sales are down and costs are hurting your profits, you’re not alone. The irony is you can do something about it — with these eight tips.

Cutting Costs: 9 Best Practices to Avoid Making Reactionary Decisions — It’s important not to be emotional when facing difficult decisions. To avoid making fearful — reactionary decisions — here are nine best practices.

For the Best Cash Flow, Manage Your Inventory Costs with 8 Tips — When your products aren’t selling, obviously, it hurts. Products just lurking in your warehouse are costing you money. Here are eight inventory tips.

Tips on Understanding the Mindset of IRS Auditors — More businesspeople have complained about the mean-spirited treatment at the hands of IRS agents than any other federal agency. Here’s how to communicate with them.

“My problem lies in reconciling my gross habits with my net income.”

-Errol Flynn


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy of Stuart Miles at www.freedigitalphotos.net

Finance: The Intrigue of Sovereign Wealth Funds



Some eyebrows were raised during the last week of the 2012 presidential campaign when the second-oldest son of Republican presidential nominee Mitt Romney journeyed to Moscow.

Matt Romney was there to sound out potential Russian investors for his firm, Excel Trust, a U.S. shopping center developer. 

Mr. Romney is a senior vice president for the real estate investment trust with $820 million in assets. It distributes 90 percent or more in dividends. That allows investors to avoid double taxation.  

His Russian trip was surprising for two reasons:

Firstly, it was just before the epic event in his father’s career, and perhaps our debt-ridden nation.

Secondly, his father had criticized the Obama Administration for a soft-yogurt stance with President Vladimir V. Putin’s government.

You might recall the missile-defense controversy when Mr. Obama was caught on videotape telling Russia’s Dmitri A. Medvedev “…after my election, I have more flexibility.”

During a presidential debate, Mr. Romney asserted: “I’m not going to wear rose-colored glasses when it comes to Russia or Mr. Putin. And I’m certainly not going to say to him, ‘I’ll give you more flexibility after the election.’ ”

Despite the politics, there was a potential prize for the younger Romney’s company – a massive amount of money – part of Russia’s sovereign wealth fund (SWF). 

Origin of SWF concept 

Not to over simplify, an SWF is a government-owned investment fund that a country invests globally in a variety of ways. SWFs funds are often managed in nations’ banking systems or are invested by government agencies for a financial return. 

Governments generally generate SWFs out of budgetary surpluses. Budget surpluses? Hmm. That’s why a member of the Romney clan would go abroad for funds, and why the company that runs Heathrow Airport sold a 10 percent stake to the China Investment Corporation.

Now, even tiny Angola has entrepreneurs salivating — it created a $5 billion sovereign wealth fund in October 2012. 

In 1953, oil revenue prompted Kuwait to form its investment vehicle even before the country left the United Kingdom. The Kuwait Investment Authority is now believed to be worth at least $300 billion. 

So, the concept has been around for decades, but the term was coined in 2005 by Andrew Rozanov when he wrote “Who holds the wealth of nations?” in the Central Banking Journal. 

Before you ask, yes, several SWFs were invested on Wall Street in Citigroup, Merrill Lynch and Morgan Stanley amid the financial crash. 

Espionage potential 

But SWFs can be a mixed bag. For example, such foreign investments can cause national security concerns.  

Incredibly, a Chinese company, Sany Group Ltd. is suing President Obama in U.S. District Court because he issued an order preventing the firm from consummating a deal for four Oregon wind farms. Sany’s subsidiary, Ralls Corp., bought the wind farms this year.  

The younger Romney hasn’t been the only one on a hunting trip for funds. U.K. Prime Minister David Cameron toured the Middle East seeking sovereign wealth to fund job creation. Seeking funds for Britain’s wind farms and other sectors, he met with the managers of the region’s largest sovereign wealth funds.”Our job is to support neighboring countries to develop industries that are complementary to China’s growth,” published reports quoted Mr. Lou Jiwei, chairman of the China Investment Corp. “We hope a stronger Chinese economy can benefit our neighbors.”

With all the sovereign wealth worldwide, it’s ironic that the most-prosperous nation in the world is so debt-ridden, and 23 million Americans can’t find family wage jobs. Wouldn’t be nice if the U.S. would rack up budget surpluses instead of $16+ trillion in debt and greatly reduced the unemployment rate?

Now that’s an intriguing thought.

P.S. Here’s a hint: Perhaps you’ve caught on — if you have investment skills, these developments would appear to be career-enhancing opportunities.

From the Coach’s Corner, here are articles on financial matters:

“The Obama administration’s large and sustained increases in debt raise the specter of another financial crisis and large future tax increases, further chilling business investment and job creation.”

-Glenn Hubbard


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.




Private ESOPs Are Where the Action Is – in Economic Value, Job Growth



Private employment stock ownership plans (ESOPs) are thriving. That’s according to a study by a former advisor to the Simpson-Bowles bipartisan deficit reduction commission and a fellow at the American Enterprise Institute.

Economist Alex Brill, who conducted 2012 study, found that ESOPs as S corporations grew their jobs by 60 percent over this past decade. Of course, such a rate of growth is really an anomaly.

Other private-sector employment rolls have been stagnant.

ID-10066167 Ambro“The unique strengths of employee ownership drove company gains and jobs in the past decade, while helping insulate S-ESOP businesses from the adverse effects of the recent recession,” wrote Mr. Brill in the study.

It’s entitled, “An Analysis of the Benefits S-ESOPs Provide to the U.S. Economy and Workforce.”

ESOPs are tax-exempt retirement plans that consist of company stock held on behalf of the company’s employees.

They are company-funded retirement plans that do not require any contribution from workers.

Congress first changed U.S. tax rules to allow S corporation businesses to be ESOP-owned in 1998. There are more than 11,000 ESOPs in the U.S.

Mr. Brill studied a decade’s worth of data from 56 ESOPs, and Labor Department figures from 2002 to 2009.

The study’s salient results:

  1. S-ESOP companies showed substantially more employment growth in the pre-2008 recession period than private businesses.
  2. S-ESOP companies regained momentum faster than other private firms after the recession.
  3. S-ESOP companies in the manufacturing sector particularly benefited from the S-ESOP business structure, which buffered manufacturers through especially challenging recent economic times.

It’s generally believed that ESOP workers are substantially more invested in the success of their workplaces. They know it will affect their own economic well-being.

A University of Pennsylvania study earlier showed that S-ESOP companies generate about $14 billion in retirement savings for their workers that otherwise wouldn’t have been possible.

If a company has a positive workplace culture, an ESOP is worth considering as a good exit-strategy for a retiring business owner.

From the Coach’s Corner, one of the nation’s most publicized ESOPs, United Airlines (UAL), was an exception to the success of the other 11,000 ESOP success stories.

UAL became an employee-owned public company, 55 percent of the shares, in 1994. Employees gave up some $700 million in wages and conceded some work rules. In exchange, the workers bought out the boss and stockholders.

But clearly since then, UAL has had a turbulent history. It’s been unprofitable with passenger-service issues and an unhappy workforce. In essence, UAL has taught us several lessons in strategic planning. (See Strategic Planning Lessons: Why United Airlines Was Forced to Merge with Continental.) 

“If you mean to profit, learn to please.”

-Winston Churchill 


__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy of Ambro at www.freedigitalphotos.net

Next Page »

Seattle business consultant Terry Corbell provides high-performance management services and strategies.