Administrator

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Terms Everyone In Business Should Know

Q: I’m a little new to the business realm and just recently hired an accountant. When we talked about how my company made money, I was a little stumped by some of the terms he used. What’s the best way to brush up my “business acumen” so to speak?

A: At the core of every successful business, from a global giant to a corner store, are the same fundamentals of moneymaking: cash flow, margin, velocity, return and growth. Additionally, at the core of every successful business leader is an intuitive understanding of the relationships among them.

When you have business acumen, you realize the importance of every job within the company. A mailroom clerk with business acumen knows that getting checks to the accounts receivable department more quickly will ease the company’s cash flow. Likewise, a sales rep with business acumen knows that higher-margin products will increase the company’s return.

However, when you are starting a business or the complexity of your job increases, it’s easy to lose sight of the fundamentals. So the following are the most basic financial terms/concepts that anyone in the business world should be familiar with:

Cash Flow. No business survives long without it. You should know how much cash your business generates and how much cash it consumes. What are the sources of it? What drains it? What’s the timing of the inflows and outflows and how is it changing? More revenues (sales) often means more cash. But growing a business consumes cash. How fast can the company expand without straining its cash flow?

Margin. When people talk about the bottom line, they generally mean net profit margin – the money the company earns after paying all its expenses, interest, and taxes. But gross margin is important, too. Gross margin is the difference between a product’s selling price and what it costs to make the product (the “costs of goods”), expressed as a percent of the selling price. Changes in it can signal important shifts in a business. When PC makers saw their 32 percent gross margins decline to 20, they knew (or should have known) the competitive landscape had changed.

You have to know how changes inside or outside the business affect gross margin. Are there new entrants in the market who are winning customers? A competitor who’s found a clever way to reduce costs and prices? A change in the pricing power of suppliers?

Velocity. Velocity refers to speed, turnover, or movement. How much revenue do you turn over, or generate, for each dollar of inventory? If you have $1 million in inventory for the year and revenues of $10 million, your inventory velocity is 10. This tells you how fast you’re moving raw materials through the factory, turning them into finished products, and moving those products off the shelf to customer – the faster, the better.

Service businesses can track velocity, too. For banks, velocity of equity – how much revenue is generated per dollar of equity – is a useful measure. The concept applies to every business.

Return. Return is the ratio of money gained or lost on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. The money invested may be referred to as the asset, capital, principal, or the cost basis of the investment. Return is important because it’s one of the “true” indicators of how your business’ assets are performing – which is imperative when comparing one year to the next.

Growth. Growth is just a measure of the increase/decline from one time period to the next. Every business needs to grow revenue, cash and assets to stay in business. How do you grow in a way that keeps the other aspects of money making in balance? There’s no formula – people with business acumen figure it out. Street vendors in villages around the world use business acumen every day. They have to – their next meal often depends on it.

Hopefully the above gets you started in your quest to increase your financial understanding of business. Yet, the best way for you to improve this is to just get out there, study and read as much financial literature possible, learn from what occurs in your business and read the case studies from other businesses.

By Administrator|2012-05-24T22:42:14-06:00May 24, 2012|Categories: Business Talk|Tags: business terms, terms business people should know|Comments Off

The Importance of Networking or Self Investment

Q: In Corporate America, one often hears that they should network. I do a good job and always receive good marks on my performance reviews. Why should I have to network on top of this, especially when I have limited free time?

A: Unfortunately, we as employees tend to think that “doing a good job” is the key to getting ahead. The startling reality in today’s economy is that doing a good job is just the base line to be considered for a position. I mean, as a manager you wouldn’t try to hire someone who couldn’t do a good job would you? Likewise, things such as past work experience, professional credentials and educational experience (e.g. bachelors, masters, PhD) are only keys that open the door so that you aren’t excluded from the party.

If you’re doing it right, networking isn’t something that takes lots of extra time in your life. If you see everyone as a potential associate or friend, you can network during any mundane daily activity, from waiting in line at the cafeteria to peddling at the gym to commuting on the train. “People think of networking as going to a function,” says Karen Susman, a Denver-based coach and speaker on networking. “You need to realize you are building your network everywhere all the time.”

Some conversations will be fleeting while others will lead to the people you meet becoming a part of your circle. The key is being open to – and staying in touch with – those who cross your path. This is the essential ingredient in creating your own luck. At some point, you may learn about something that can benefit you professionally before the rest of the world finds out. For Mr. Rogers, it was a work colleague that led to him filling their position when they took another role within the company. Had they not had a relationship, he would not have had the opportunity to put his name and face in front of the hiring manager before others were even aware the position would be opening up.

While it is true that some networking tactics do take time, many don’t actually take too much. Busy executives who excel at career management say they set aside only a few extra minutes a day to touch base with professional contacts. Tim Ayers, Director of Global Services Marketing for Tellabs, a communications company in Naperville, devotes about five minutes daily to call or email some of the approximately 900 people in his computerized database. They include colleagues, vendors and others he’s worked with in the past.

Mr. Ayers notes the benefits: When he lost his job in Chicago during the telecommunications meltdown, he found a new position through a networking contact. Talking with others regularly also helps him do his job better because it keeps him informed about trends and potential candidates for Tellabs openings, he says.

Here are five simple tips to make networking an easy, time effective and potentially career enhancing part of your typical workday:

Show interest in others. When working with fellow colleagues, ask questions and get them to talk about themselves and their business experience. The more you know about someone, the more you’ll know about how they may be able to help you in the future.

Build relationships. Strangers won’t put their reputations on the line for you. Consider dropping an email or going out to lunch with any new person you meet. The stronger the relationship becomes, the better your chances of creating an ally in your career development.

Don’t be selfish. Remember, networking is a two-way street. You have to be willing to give to the other person in order to receive. If you become aware of some helpful information, make sure your network contacts are aware of it.

Prepare an “elevator speech.” Write a summary of what you want people to know about you that can be delivered in less than 30 seconds. You never know when that VP may bump into you in the hall and ask you “so what do you do?”

Maintain your network. Keep in touch with those in your network. Remember, the majority of jobs go unpublished or the candidate is “identified” by the time it is. Your next exciting opportunity may come from a network contact that thinks it would be perfect for you!

By Administrator|2012-05-20T22:42:02-06:00May 20, 2012|Categories: Business Talk|Tags: importance of networking, networking, self investment|Comments Off

Innovative Ways To Save Money

Q: I am getting married this year and really need to stash some cash away. I’ve got some time before the big day, but what is the fastest way to save up a few thousand dollars?

A: Usually when we stress the importance of saving money, people start to moan and groan. Well, we’re hear to tell you from experience, saving a few extra pennies a year is not as hard as it sounds. You just have to piece some things together, kind of like a jigsaw puzzle, to get to the big picture. Combine a few of these ideas and we’re positive you will be able to stash away $2,000 or more this year:

Collect Coins. The ones in your wallet, purse, coat, etc. that is. Every time you spend cash and get change back, take it and put it in a jar or something. Doing this for a month typically can add up to $20 to $60 depending on your spending habits. Annual Savings = $240 – $720.

Put Your Insurance Company on Trial. Some may notice that their insurance rates have gone nowhere in the past 5 years despite them getting older – which is extremely annoying. So why not look at changing companies? Also, look at that deductible you are obligated to pay in the event of an accident. If changing companies or your deductible from $500 to $1,000 can save an extra $40 a month it may be worth it. While you’re at it, see if you can bundle the companies that provide your insurance if you currently have more than one. You may be able to get another 15% discount just for doing more business with them. Annual Savings = $300 – $400.

Create a 45-Day Month. If you have a bi-weekly or monthly recurring expense, why not do it a little less often? By putting some time between how frequently you perform activities like haircuts, messages, manicures, etc. you will cut down on their annual frequency. With 3 less hair appointments at an average of $20 for the men and $50 for the ladies, the savings add up. Annual Savings = $250 or more.

Cut the Landline. Some people still have both a cell phone and a landline. Why not drop the home line and just go cellular? For an extra $10 a month you could add some minutes to cover yourself and ditch the home phone. This is only advisable if you are not extremely ill, accident-prone or need the line for DSL or home alarm, but for most it is a possibility. Annual Savings = $300.

Flex Those Benefits! Using pretax dollars always has an advantage in that it cuts your taxable income. By using a Flexible Savings Account (FSA), you can use pre-tax dollars to save for medical expenses. It’s really easy for a person who puts $2,000 into an FSA to see a $600 reduction in their tax liability if you are in the 25% tax bracket. Where does that $600 reduction wind up? In your tax refund of course! The only downfall is that FSA’s are a “use it or lose it” program – meaning any money not used at the end of the year is forfeited. Thus, estimating how much you will spend on medical expenses is crucial. Annual Savings = $600 or more.

Stop Drinking Like A King. While the Remmy, Chris and Henn-o taste good, they are definitely not for the weak of financial heart. Neither are those $12 martinis! So why not scale down the liquor to some wine or less expensive brand of liquor and help both your body and your wallet? This can shave at least $50 a month off your bar tab if you are a frequent drinker. Annual Savings = $600.

Stop Paying A Premium. The truth be told, most cars will run on just about any grade of gas you can find, including that ethanol blend you find in the sticks of Southern IL. Unless you have a “high performance” engine that will not run properly on premium gasoline, ditch it in favor of some cheaper go juice. By switching to a lower octane gas, you can easily save 10 to 20 cents per gallon. While this may only equal $2 to $4 per fill up, it can equal close to $50 a year. Annual Savings = $50

Punch A Gift Horse In The Mouth! We often mention this around Christmas time but we’ll mention it here and now. We all like to give things to our friends and family – sometimes we even feel obligated to do so. But don’t feel obligated to spend more on gifts than you can afford to. The average outlay on gifts during the holiday season of 2011 was close to $1,000 per household. Add in some birthdays, weddings, anniversaries, valentine’s days and that number can quickly get out of control. So, scale back a little, give within your means and don’t worry about the rest. People who really care about you place more importance on you being in their life then they do on what gift you give them. Annual Savings = $750.

By Administrator|2012-05-08T21:08:04-06:00May 8, 2012|Categories: Accounting Talk|Tags: innovative ways to save, ways to save money|Comments Off

10 Ways To Make Next Tax Season Better

So tax season has come to an end, but the memories of the last minute filers still burn brightly in our dreams. The filers who waited because they KNEW they owed. The taxpayers who had to go on extension because of missing documentation. The people who cried because there was nothing we could do to help their situation. Well, this post is for all of YOU!

Next tax season doesn’t have to be like this year. Nothing pains us more than not being to help someone out of their situation. To that end, here is our list of the top things you should do right now so that next year is less painful and hopefully easier on your pocketbook:

Start a filing system. Ask any attorney what the golden rule is and they will tell you “he who has the most paper wins.” This is the rule that the IRS goes by as well. Most taxpayers pay more in taxes than they should because of inadequate documentation. If you give donations to charity, drive your personal vehicle in connection with work, real estate, a medical condition or charity; it’s important for you to log these items. Unreimbursed business expenses are another area where documenting expenses is crucial. To ensure nothing is missed come next year, start a filing system to keep all of your paperwork. This can be as simple as a drawer where you dump everything until January 2013 or as elaborate as a spreadsheet. The point is make sure you keep all your documentation in one place that is easy for your to find.

If you owed, adjust your withholdings NOW. The amount of the refund you receive or balance due to the government is simple arithmetic. Withhold enough and you’ll get money back; fail to do so and be prepared to write Uncle Sam a check. If you owed last year, talk to the fine folks in your HR or payroll department now and have your withholdings adjusted on your W4. It’s already April, which means you’ve missed out on four months of withholding at the correct rate. The longer you delay, the greater the probability will be that you’ll owe again next year.

If you recently got married, change your withholdings. Newlyweds often forget to adjust their withholdings, but doing so can sometimes be detrimental to your bank account. Married couples sometimes find that their combined income pushes them into a higher income bracket. However, if you fail to make the necessary adjustments, you’ll quickly learn that you didn’t have enough withheld to cover your tax obligation. Follow the steps listed above to avoid this painful lesson.

Manage your pre-tax benefits. The easiest way to pay less in taxes is to reduce your taxable income. The best way to achieve this is to take advantage of all the pre-tax benefits that your company offers. This includes 401(k) contributions AND associated match, utilizing pre-tax transit and parking benefits as well as contributing to a Flexible Savings Account (FSA) or Health Savings Account (HSAs). Money is contributed to these items before your take home pay is calculated. As your pay will be reduced by these items, so will the corresponding amount for which the associated taxes are calculated upon. The result? A reduced tax base and less money paid to Uncle Sam.

Begin contributing to a retirement plan. If you’re not contributing to a 401(k) or other retirement plan, you’re passing up some of the best tax savings available. Contributions to 401(k) plans are not subject to federal or most state income taxes. Your contributions and employer match will grow tax-deferred until you withdraw them during retirement. You could save between 20 and 40% of your contribution in taxes. If you’re already contributing to a 401(k) or other employer-sponsored plan, increasing your contributions early in the year will increase your tax savings and your earnings over time.

Start contributing to an IRA. If your employer doesn’t offer a retirement plan, contributing to an IRA each year can get you some of the same tax savings. For instance, if you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income. For increased earnings on your IRA, don’t wait until April 15th to open it. The earlier in the year you make your contribution(s), the faster it will grow.

Schedule a midyear evaluation. There is nothing that your tax preparer can do for you regarding your tax liability once December 31^st rolls around. June will be here before you know it which means that half the year will already have passed. Schedule some time with your preparer to discuss your situation and any changes that you think may impact your tax bill next year (e.g. marriage, new child, job change or loss, etc). That way you all can begin to plan accordingly and make the necessary adjustments so that neither of you are get surprised with a big tax bill.

Run a tax projection. Once you’ve had a chance to get your tax situation reviewed, have your tax preparer run a tax projection. Make sure that you incorporate things such as capital gains from stock sales, mutual fund trades, execution of stock options, bond redemptions, unemployment compensation, medical expenses, etc. It’s easy for taxpayers to make a few decisions (such as pulling out money early from a 401(k)) and not realize that there are multiple tax consequences (like the 10% early withdrawal penalty). By having a tax projection run, you can see what those consequences are and prepare for any unintended ramifications.

Shift income if you make over $70K. If you are single and make over $70K, consider shifting your income via some of the following strategies to reduce the amount of taxes you pay:

Rearrange your investments to reduce taxable income. You want investments that generate interest income inside retirement accounts, and investments that generate capital gains and losses outside of retirement accounts.
Realize capital losses to offset capital gains.
Bundle expenses to maximize itemized deductions.
Increase retirement plan contributions as limits rise. Each October the IRS announces the new contribution limits for 401ks, IRAs, and other retirement plans. Check the 2012 contribution limits, and be sure to adjust your payroll contributions to put the maximum amount into your plans.

If nearing retirement, check to see if your retirement income will be taxable. The downfall for most retirees is that they begin to start receiving income from their investment vehicles but aren’t necessarily having taxes withheld (due to how the accounts work). If you are nearing retirement, be aware that the following income is typically taxable:

Withdrawals from Traditional IRAs, 401ks, or other retirement plans. If a plan was funded with pre-tax dollars, whether by you or your employer, it will result in taxable retirement income when withdrawn.
Pension income. Most pensions are a source of taxable retirement income.
Interest income, dividend income and capital gains inside of after-tax accounts. Interest, dividends and capital gains that occur within tax-deferred accounts, such as IRAs, 401k plans or variable annuities, are not taxable in the year they occur. Instead, all gains are deferred and you only pay tax when you take a withdrawal.
Withdrawals from an annuity. When you take withdrawals from a fixed or variable annuity (one that is not owned by an IRA or retirement account) the IRS rules say any gain must be withdrawn first, and this gain is taxed as ordinary income. Once all gain has been withdrawn, you would be withdrawing your basis, or principal. Withdrawals of basis are not counted as taxable retirement income.

By Administrator|2020-09-16T11:16:21-06:00April 30, 2012|Categories: Tax Talk|Tags: how to make tax season better, how to make tax season easier|Comments Off

My Time As A TurboTax Ask A Tax Expert

October 2011. There I was staring at Craigslist searching for roles, projects, gigs and jobs that I could use to supplement the income from tax work that would soon begin with our new office. One role in particular struck me; one where you would be giving tax advice remotely during tax season. This sounded right up my alley but I was skeptical. “This is on Craigslist? Is this legit? What company is this for?” Long story short – it was legit and it was being offered by the fine folks at Intuit, the same company behind the TurboTax brand. So now what?

I applied for the role and shortly after Christmas I got the call that they would like to speak to me. After what I’ll call a “challenging” computer assessment (which I thought I crashed and burned in) I got the call inviting me to join the team. I happily accepted and got ready for a month of training and then a month of working on the floor taking calls and chats from customers. Boy, was the fun just about to begin!

Our training cohort (Wave 7) had about 30+ individuals in it from all walks of life, geographic locals and disciplines (Attorneys, CPAs and Enrolled Agents). Some were like me who were “relatively” new to the tax game while others were battle tested veterans who had been in the industry for 20+ years. Want to talk about feeling like a rookie? I can say that I truly appreciated learning some things from the people who had seen it all, knew the specifics of the IRC regulations and could rattle off IRS publications and forms as easily as someone who is fluent in a second language.

Training flew bye with the blink of an eye and before I knew it, it was time to jump into the pool and either sink or swim. The first few days were a little stressful as I became acclimated to how the phone and computer interface operated with my equipment (in particular my headset). Yet after a few days, taking calls was pretty seamless and that’s when I began to really experience what the role had to offer.

When it comes to operating a tax practice, every office is a unique animal. What I mean by this is that the nature of the clientele AND the preparer are usually interlinked. If you are a newer preparer such as myself, the chances of your client base containing a significant amount of retirees is probably not high. Thus, the number of returns that I would work on that would involve retiree topics (e.g. annuity payments, required minimum distributions, IRA to Roth conversions, etc) would be limited. But what happens when you are connected to taxpayers who have questions from all over the country, across varying social economic groups and from all ages? You learn!

During my time on the floor, I handled numerous questions ever single night. Some would come in that I had an “expert” working knowledge of while others made me want to scream in terror as I had no idea how I was even going to tackle it. Yet, the questions that terrorized me in my initial discussions with customers proved to be my biggest learning moments. I remember the question about an individual who had bartering income and needed some help figuring out where to report it. There was the question from a New Jersey taxpayer on why their Federal NOL wasn’t showing up on their state return. And then there was the one about the mixed use property and a Section 208A ordering of expenses.

In each one of those interactions I had to learn something in a short amount of time. Sometimes I was learning about the tax law, sometimes tax forms, sometimes the software itself. In addition to learning, I had to ensure that the guidance I provided to the taxpayer was sound and grounded in fact. Lastly (but certainly not least) I had to ensure that the taxpayer understood what I was conveying and agreed that I had actually solved their issue. Individually none of those things are complicated nor stressful. However, when you combine them all and repeat the process several times within a few hours, let’s just say that you have to stay on your toes!

As I write this post, April 17^th 2012 is coming to a close and the clock is swiftly ticking towards the deadline to file on time. Over the next few days I will begin to transition out of the Ask A Tax Expert role as well as wind down the office for the offseason. Yet in looking back, I think I have to admit that I was fortunate to find that ad on Craigslist that one October day. Through this experience I had the opportunity to meet some really nice professionals, challenge my tax knowledge and learn about things I might not have touched for years to come. And just like the work I do in my practice, I had the opportunity to really and truly help make a difference in the lives of several individuals.

The work I did was not life or death surgery. Yet if you ask the callers whom I helped resolve their issues, you might get a different take on what they think I did! To all my ATE colleagues, it was a pleasure working with you and I hope our paths cross again in the future. To all the folks at Intuit, thanks for allowing me the opportunity to participate.

Until next time.

By Administrator|2012-04-17T15:19:58-06:00April 17, 2012|Categories: Who's The Boss?|Tags: ask a tax expert, turbotax ask a question, turbotax ask a tax expert, turbotax ask an expert, turbotax ask an expert fee|Comments Off

Our 1st Tax Season

Okay, so the title is a little misleading given that we’ve been around since 2005. But this post is supposed to be a look back on our first “retail office” tax season. As posted earlier, we had a pretty eventful time getting the office set up once we decided we were going to launch it this season. We outlined some goals for ourselves, plotted the course of action and set off on our journey. So what happened?

While the season still technically has a few days left (returns aren’t due until April 17^th) we think we have a pretty good read on the past three months. While we didn’t hit our target numbers on a few fronts, we didn’t do too shabby given that we were essentially starting this location with zero brand recognition and it was its first year of existence. In the end we engaged roughly 55 clients, processed 65+ individual and business returns (not including accompanying state returns), secured two recurring accounting clients and performed a host of accompanying services.

What Went Well

Delivering exemplary customer service. Without having a major brand name on your office, you’ve got to figure out a way to differentiate yourself from all the other tax shops. While CPAs prepare and review the returns that come through our doors, for most customers this isn’t that much of a selling point. But what we did find out is that if we upped the service level by doing a few simple tasks (e.g. explain the return to the customer line-by-line, display a genuine interest in their situation, promptly answer any post filing questions), the customer felt that they got more from us than their past preparer. Result? A happy customer that tells us they’ll be coming back!

Leveraging our networks. We all know someone. “You need your car fixed? We’ve got a guy for that!” The most successful marketing for a financial services firm is word-of-mouth; preferably from satisfied customers. When you’re looking for services from professionals such as accountants, doctors, etc. you tend to ask the people you know who they’d recommend. Thus, we continually engaged our network to let them know this was our first season with the new office. We also asked them to mention us to their friends if they liked us, thought we were competent, liked our work, etc. Remember, it’s not always what you know but who you know.

Sourcing alternate work from Craigslist. Craigslist has a reputation of being a mythical land where everyone is a scammer looking to take your money. While there is some truth to this, in reality there are plenty of people who are just looking for a deal and someone who can provide it for them. We didn’t get any tax work from Craigslist ads, but we did get some quick bookkeeping, business plan and other types of one time work. We’re not talking thousands of dollars here, but the income did help keep the cash flowing into the bank account between tax clients.

Being persistent. This is pretty simple. You’re new, you need revenue and you’d better not give up. Sales don’t just fall from the sky, they take time and cultivation. This is particularly true if you are a new business and customers don’t know who you are. Someone might want to come into our office because they are dissatisfied with their current provider. However, they might have some concerns as this is the first year they’ve seen our office. For us this may mean a few phone calls, a face to face and ultimately a follow up visit where the client finally engages us. Point is it often takes multiple contacts to seal any deal. Be persistent and professionally pursue all potential clients until you either 1) win their business or 2) they decide you’re not a good fit for their needs. Reaching either of these two outcomes is the ONLY acceptable option.

What We’ll Change

Marketing efforts. For the 5000 door hangers we distributed in the neighborhood, only one client was generated. In general, we started our marketing late in the season (i.e. January), probably didn’t do enough “multiple contacts” with community marketing and didn’t spend enough to generate a meaningful ROI. With that said, we’ll start our community efforts around September in 2012, but will also do more “year-round” marketing (e.g. newsletters, client recognition, etc) as well as increase our marketing spend.

Independent sales force. One thing we employ in our company are independent sales reps. These fine people generate leads and get a commission for doing so. While we had good results with this program, we fell a little short of expectations. The main reason for this was we didn’t recruit a big enough sales force nor did we do it early enough. Come mid 2012, we’ll change this which should help us hit our marks next year.

Hours of operation. If the theme of the previous two points was we didn’t start early enough, then this one would be we didn’t stay late enough. Due to the transition from Corporate America to Main Street America, the office hours designed maybe weren’t as good as they could have been. While the office was open until 6:30PM during the week and 5PM on both weekend days, it could have been later. This would have allowed us to potentially capture more of the “after work” crowd who just couldn’t get to us before we closed shop. We’ll probably move to later hours in 2013.

So what does 2013 hold? Well, we’ve already executed our lease renewal option for the remainder of 2012. This means the office WILL be back in 2013! Hopefully some of those potential clients who wanted to visit us but thought that we were “fly-by-night” will see we’re here for the long haul and stop in next season. Through making the changes outlined above, we’ll attempt to double in size and continue what we hope will be a pretty sustainable growth trend. Lastly, we plan to make our client engagement even more frequent, more personal and more value additive. Will 2013 be more successful that our 1^st season? Only time will tell but we’re thinking so.

Until next time.

By Administrator|2012-04-14T14:10:16-06:00April 14, 2012|Categories: General Ramblings|Tags: my first tax season, our first tax season|Comments Off

Relationships and Money

Q: My girlfriend and I are in a rather serious relationship and I am thinking about asking her to marry me. One thing that bothers me is that we tend to argue a lot about money – our views are just different. I’ve been told that money can ruin a marriage so I’m just not sure what to do at this point. Any ideas?

A: It seems like most people in relationships argue about money to some degree. Some argue about spending too much, making too little, not saving enough – the list is almost endless. Yet, at some point you’ve got to stop and ask yourself, is it the money that’s the problem or is it just the result of another issue?

The primary reason that couples argue about money is that they fail to gain “alignment” regarding a particular situation. He wants the Chevy Camaro and she wants the Lexus IS – the two items aren’t aligned so let’s start WW III to see who wins! Arguing in general isn’t healthy, and it sure won’t solve any money problems that you’re having. The key is to figure out what the problem is and solve it. In the above case the problem is: we need a car without too hefty of a monthly note. Once the focus is shifted to addressing that problem, then we can address what car we can afford.

Here are some ways for people to constructively talk, not argue, about their money:

Is it really the money? As stated above, the cause of most “money arguments” isn’t really the money itself. It could be related to one person making more than the other. It could be that you all are sharing expenses but not in a way that is “even” according to how much you individually make. When you figure out what the real problem is you should address it and not the money. For example if you make 55% of the monthly income and she makes 45%, why not try splitting the joint bills that way? You’ll both be shouldering your appropriate amount of the expenses and it may make you feel as if you are really being treated as equals.

Don’t shout, talk it out. Shouting gets you nothing but a night on the couch and some high blood pressure – both of which are unnecessary. When you have differing views about a particular item, ask some questions to find out what the issue is. Make sure that you listen to what the other person has to say before you respond. Most of all just make sure that you are respectful of the other person’s views. No one likes to feel as if his or her opinion isn’t important. Besides, you wouldn’t yell at your boss so why would you yell at someone you love?

Set the goals and then put them on autopilot. Let’s say you both want to buy a house and agree that you should be saving up for that gigantic down payment. But when she gets your joint credit card bill she sees that you charged $500 on new stereo components for your car. Then you all argue about who is dedicated to the goals and why one person is holding you both back. Sound familiar? The easy fix is once you set goals, automate their funding so neither of you has to worry about it materializing. Set up a separate bank account, have the money deducted from each of your checking accounts and call it a day. Automate to eliminate the arguing.

Make it a family affair. Family finances are not the sole responsibility of one person – no matter who the breadwinner is. Couples have to make it a priority of discussing THEIR finances TOGETHER – this can’t be stressed enough. So once a month the two of you should sit down and go over the money earned, bills paid, expenses incurred, progress towards goals, banking statements, etc. If you all see something that starts an argument, take a step back and look at your long tem goals. How does whatever you all are arguing, excuse us, talking about fit into your long-term goals? By putting your finances into the open, you all shouldn’t be surprised by something when you see the bill for it.

Work out the kinks BEFORE not AFTER the wedding. Don’t think that the words “I do” will solve anything that you have a problem with now – it will just make you committed to those differences. If you have concerns about your partner’s approach to finances, or vice versa, make sure you all realistically confront those differences. If one person is a spend thrift and the other person is Ebenezer Scrooge, you all need to figure out if there is some type of middle ground between you two. If the other person doesn’t want to change, you might want to reevaluate the relationship. Simply thinking that not discussing the issue will make it go away is like hoping that a bill collector just forgets your phone number – it ain’t gonna happen! Besides, if you don’t address the problem now and you all do have very different perspectives, then you are setting yourself up for one stressed-out marriage – we know some good therapists if you want the numbers.

By Administrator|2012-04-10T14:33:53-06:00April 10, 2012|Categories: Accounting Talk|Tags: couples and money, money ruins relationships, problems, relationships and money, relationships and money advice|Comments Off

Dealing With Adversity

As I started to get up off the ground I began the usual “check and see if anything is hurt” routine. I’ve fallen off my bike dozens of times before so it’s usually no big deal. Only problem this time was the fact that something “was” actually hurt. I stood there looking (in disbelief) at what appeared to be a dislocated wrist. “Maybe if I just pop it back in place everything will be okay?” is what I was thinking. Too bad I’d later find out that it was broken.

Two weeks prior to the above escapade, I crumpled in the front end of my car when a lady decided she wanted to stop in the middle of the intersection on a green light. She had no insurance and the damage wasn’t worth me paying the deductible from mine. A few weeks prior to that some other random challenge raised it’s ugly little head. What’s going on in my life? Who did I make mad? Why are all these “challenges” presenting themselves? Why is this happening NOW, when we’re trying to grow the business? Why, why, why?

The next time an obstacle presents itself to you, you’re probably going to consider one of these four routes:

Escape You feel as if the challenge is too much for you so running away feels like a good option. Only problem with this is that the obstacle isn’t really gone. It’s just waiting for you to find it again so it can continue to apply its unwelcome pressure on your life.

Conformity This is the “okay, you win” approach. When faced with an obstacle you are really at a point where you are “stuck” so-to-speak. You can’t move forward (easily) and you probably can’t go back to the way things were. If you conform, you’re really just a notch above escaping. What you’re saying is “a known evil is better than an unknown one. The challenges of life are just too overwhelming. Conformity, surrender or assimilation are the only realistic options.”

Fight One approach is to fight whatever the challenge is. You can do this via denial, obstinacy or just flat out refusal. While it may appear that you are winning by not giving in, the reality is you are not making any progress or solving the situation.

Belief Call it meditation, reflection, prayer or spirituality. While the aforementioned will help comfort the soul and mind, they are only a part of the answer. Wanting something to be different will typically not change the situation by itself. Change takes more than just desire.

This brings us to the option not listed – moving forward. Let’s face it, life is difficult. However, our attitude is what determines whether we benefit from misfortune. The same furnace that melts gold also hardens clay. When faced with the heat of life you can either become hardened, callous and cynical or you can let it hammer, forge and shape you into a better and stronger person. Case in point? Dick and Rick Hoyt.

When I was younger I never really understood all those adages like “when the going gets tough, the tough get going.” Yet then again, I also thought that “making ends meet” was some type of weird food process. Anyway, the point is that all of those sayings have a point which is, you have to move forward.

I got up off the ground, drove myself to the ER and got my arm fixed. I’ve adapted my computer to work with my left hand, which isn’t my dominant one. I’m counting down the days to when I can start rehab. But most importantly, I’m grateful that it’s not worse. Be thankful for whatever situation you are dealing with because someone far worse off would give anything to be in your shoes.

By Administrator|2012-03-26T14:20:53-06:00March 26, 2012|Categories: Who's The Boss?|Tags: dealing with adversity, dealing with adversity in life|Comments Off

Advantages of Investing With Pre-Tax Dollars

Q: My employer offers several “pre-tax” investing options. I have considered enrolling in one, but was curious if they are really worth all the hype people make about them?

A: When it comes to investing, there is no such thing as “is it worth it.” There are few things in life that will provide you with a greater benefit than investing in your financial future. Having a sizeable and secure asset base allows for many things. Some of these include peace of mind, reduced anxiety, freedom as well as the knowledge that you will be provided for in the future. There is no worse feeling than having the desire to do something but not being able to because of financial limitations. So when it comes time to retire, you don’t want to be forced to prolong the daily grind because you don’t have enough cash.

The current tax law encourages making certain investments on a pre-tax basis. Some of these investments include 401(k) plans, deductible IRAs and SIMPLE plans; all of which are funded through payroll withholding arrangements. Yet many people fail to take full advantage of these investment vehicles for various reasons.

Investing money on a pre-tax basis has two major benefits that tend to be overlooked. These include becoming a disciplined saver and investing a greater amount of money when compared to investing on an after-tax basis. When individuals enroll in any of the programs named above, the amount they stipulate to be invested is automatically withheld from their paycheck. Therefore, the participant doesn’t have to remember to make a contribution because it’s done automatically. This is especially beneficial for those who tend to procrastinate or let money burn a hole through their pockets. Plus, the individual tends to not miss the deducted funds because they never see the money.

Where the true benefit can be seen is in the differential between the amounts available to invest, as well as the return on investment. Let’s say, for example, an individual contributes $11,000 of their gross wages to their company 401(k) plan through payroll deductions. This amount will not have federal or state taxes withheld when the contributions are made. Also, when they receive their W-2 form around January of the next year, this amount will not be included as income. Consequently the tax liability calculated on their income tax return will be lower because the income base will be smaller.

The employee will also benefit from their pre-tax investment with regards to growth. Because their $11,000 was not reduced by tax withholdings, it is larger when compared to an after-tax equivalent. This larger amount forms the base for the investment to grow or compound over time. In turn, a larger investment base leads to faster growth over the life of the investment and a bigger payout when the funds are eventually withdrawn.

In comparison, if this person had made their investment using after-tax dollars, two things would be different. First, they would have only $7,920 to invest because the original $11,000 would have been reduced by tax withholdings (assuming the person was in the 28% tax bracket). Because of this smaller investment base, the growth that would occur would be smaller when compared to the pre-tax base. Second, the $7,920 could be further reduced when it came time to pay income taxes. This would arise because the person could have to include any returns earned (like savings account interest) as part of their income base on their tax return. The result? The tax liability calculated could be higher, triggering increased tax payments.

Yet despite all the good things about pre-tax investments, there is one primary downside. No matter how hard an individual may try, they can not entirely escape paying taxes. Although pre-tax dollars aren’t taxed when the funds go into the plan, they are taxed when they come out. Furthermore, not even death can alleviate the tax obligation on these saving plans. Whatever remains in the account at the time of your death will be taxed prior to distribution to your heirs. Yet in many people’s eyes, the benefits of investing with pre-tax dollars tends to outweigh all the above.

By Administrator|2012-03-22T11:01:18-06:00March 22, 2012|Categories: Accounting Talk|Tags: investing with pre tax dollars, pre tax investments, pre tax vs after tax investing|Comments Off

The Importance of “Follow Through” in Business

So there you are, sitting at your desk when the phone rings. You pick it up and guess who it is? Your next “potential” customer! They’re interested in doing business and want you to send them a quote. Sounds simple enough right? So like any customer service oriented individual does, you send them the quote and go about your day.

For most small business owners and employees there is never a shortage of tasks to handle. For every customer who is simply prospecting, you have one who wants to purchase your product or service right now. What typically winds up happening is that you shift your focus to the paying customer and the one who was prospecting? Unfortunately, they usually wind up lost in the shuffle.

Now, what separates the stellar businesses from those that are merely successful is a little thing called follow through. It’s not all that hard to implement and in the end, it can yield substantial results. Here are some important things those in charge of your company’s sales or marketing function should keep in mind.

Single exposures don’t seal deals. Most potential customers won’t make a decision based on one sales or marketing exposure. Thus, follow-up contact is essential to success. Sales companies have found that a customer needs, on average, seven exposures to a product or service before responding.

Implement a system. The buzzword being thrown around these days is customer relationship management or CRM. Stated simply, CRM typically involves technology to organize, automate, and synchronize business processes – principally sales activities, but also those for marketing, customer service, and technical support. The goal is to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service. While you don’t have to fork over loads of money for a fancy CRM system, you should at least have a way to 1) track who contacted you, 2) capture what was said during each contact and 3) remind you to initiate follow up contact.

Customers get busy too. Often times business owners don’t want to follow up for fear of coming across as badgering or being a pest. Yet, sometimes a customers lack of response is simply because they’re busy. A friendly reminder or two, is sometimes all that is needed to prompt them to contact you and move forward.

Ask for the sale. Too many small business people lose thousands of dollars in sales every month because of one simple mistake; they don’t ask the customer to buy! The easiest way to do this is to ask them an involvement question that doesn’t allow them to answer “no.” For example, you could say “Okay (name), based on what you were looking for, how do our services fit with what you had in mind?” If they say “it fits perfectly!” you can go straight to “Okay, we just need a deposit of XX dollars. Which credit card would you like to use…”

Don’t forget your existing customers. Marketing expert Dan Kennedy recommends a 10-12 step MINIMUM “touch” with your clients and selected prospects every year. During these interactions, you’re NOT selling them something … but rather giving them useful information to further your relationship. The competition is always trying to seduce and woo them away from you. If you fail to remind them why you’re important and valuable, you could unintentionally send the message that you aren’t, which is not what you want. So make sure you regularly engage your current customers; it shows you value the relationship and who doesn’t like to be appreciated?

By Administrator|2012-03-10T23:19:43-06:00March 10, 2012|Categories: Business Talk|Tags: follow through, follow through in business|Comments Off

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