The Fortune That Lies Hidden In Your Salary - Discover it - Make Money At Home.
There's a fortune hiding in everyone's salary or pay check but most people can't find it.
With the average person spending countless hours in front of a TV screen to be entertained and blot out the JOB (Just Over Broke) syndrome, small wonder that making money from home is not a priority for most people.
A salary check gives you that rich feeling; but is that money yours?
Or just a loan until next week, when you have to do the same thing all over again...
The average person spends more than they earn, hence the National Debt figures. But not many people realize that their pay check is a great way to propel themselves forward, into earning more than they spend.
It's called; make money at home and thousands of people are doing just that... making a second income, which will eventually replace and exceed their current income.
It is a fact that as a single person, you can't work thousands of hours per week. But your Boss does it every week. It's called leverage. He pays you a sum of money for doing a set amount of work. That output is worth more than he actually pays you. He is leveraging upon your efforts to make himself rich.
So, why not make your own money, while working at home? And leveraging other people's efforts...
To make money at home, all you need is a computer, some investment capital and the right business. You also need determination, integrity and patience.
Replacing your income is a gradual process but the main elements for success mean a change in your lifestyle and some self sacrifices. Those changes do not normally have to be drastic, just measured. If you sit down and calculate how much money is wasted every month on things that are non-essential to your well being, or superfluous to your requirements, you would soon find the finance is easily available.
Many people have worries about their job security, so doesn't it make sense to develop another income source, while you are still earning and well able to finance that business through start-up?
Wouldn't it be nice to quit your job, instead of waiting for a redundancy notice? Do you realize how hard it is to start something, when your salary stops coming in?
Doing something right now, that enhances your future lifestyle, is the right way forward. Just thinking about it will never get you started and leaving it too late could have devastating effects for you and your family.
Most people do not realise that time is the most important factor in building that second income stream. You can't throw money at it, to make it successful. You have to build it yourself. Call it Insurance ... Of the very best kind.
About the Author
Michael A Fowler, M.B.A. is the editor of the Internet's premier work at home resource: Work from Home Journal.
An Online Trainer, Mentor and Coach, Michael has been helping people to succeed online since 1998.
http://www.the-mba-way.com | Goldcard43@aol.com
http://debt411.blogspot.com/atom.xml - Debt elimination programs and informative articles that give you the knowledge to correct your own credit and credit report.
Tuesday, September 13, 2005
Store Card Versus Credit Card - Which Should You Choose? by Craig Brown
Store cards and credit cards have their advantages and disadvantages, but which is best for you. In this article we point out some basics to help you take control of your spending.
Store Cards
Do you have a store card? How many do you have? Do you know how much you are spending on each?
Store cards are a great idea if you use them properly, but they can cause huge amounts of personal financial damage if you don't take control.
When you are offered a store card here a few things to bear in mind:
1. Get very clear on what the offer is exactly. Most stores will offer a card with a promotional deal - say 10% off any purchases that day and for the next week. So what exactly is the offer and how long does it last?
2. Sometimes store cards are heavily pushed during a sale. Again, what's the offer - for example, do you get 10% off sale items too?
3. What are the privileges you get as a store card holder? Do you get a discount every time you shop? Do you get reward points of some kind? Do you get special preview events for new ranges? And what are the details - how many points, how many previews a year?
4. How much credit are they offering you? And can you handle it - or will it make you feel like a kid in a candy store?
5. What are the repayment terms exactly? What's the minimum repayment? What's the APR - during the offer period and after the offer period?
6. Are you bothered? It's easy to take up what seems like a great offer with no effort on your part. But remember you would probably have bought the things you are buying even if there was no store card being waved in your face. Do you really want another piece of plastic, another debt?
7. Can you get the things you want cheaper elsewhere anyway? Most things you usually can do.
8. Can you pay for the things you want using your credit card? Credit cards usually have a much lower APR than store cards - so unless you can afford to make repayments in full, you could well lose in interest payments what you gain in special offers.
Credit Cards
The same kind of questions can be asked about credit cards:
How many do you have? Do you know what you're spending? Are you in control? What are the special offers - low interest, 0% balance transfers, etc? What's the credit limit and can you handle it? What are the repayment terms, including APR?
The major differences from a store card are that you can use a credit card almost anywhere, and that the APR is usually a lot lower. It's also a lot easier to control your spending if it's all on one card.
So when you've weighed up both kinds of card, what should you do? Here's a couple of ideas:
1. For general use, have just one credit card. Keep the credit limits low and in control.
2. If you are offered a store card and there's an unbeatable opening offer on your purchase, take it. Then, if you can't pay off the debt in one go, use your credit card to pay it off so that you at least get lower interest charges. Next, when your shiny new plastic card arrives, cut it up! Seriously. If you don't destroy it you (or someone in your family) will spend on it and the debt spiral will continue.
For information on credit cards check out the American Credit Cards Guide: http://www.americancreditcardsguide.com
About the Author
Craig Brown
Store Cards
Do you have a store card? How many do you have? Do you know how much you are spending on each?
Store cards are a great idea if you use them properly, but they can cause huge amounts of personal financial damage if you don't take control.
When you are offered a store card here a few things to bear in mind:
1. Get very clear on what the offer is exactly. Most stores will offer a card with a promotional deal - say 10% off any purchases that day and for the next week. So what exactly is the offer and how long does it last?
2. Sometimes store cards are heavily pushed during a sale. Again, what's the offer - for example, do you get 10% off sale items too?
3. What are the privileges you get as a store card holder? Do you get a discount every time you shop? Do you get reward points of some kind? Do you get special preview events for new ranges? And what are the details - how many points, how many previews a year?
4. How much credit are they offering you? And can you handle it - or will it make you feel like a kid in a candy store?
5. What are the repayment terms exactly? What's the minimum repayment? What's the APR - during the offer period and after the offer period?
6. Are you bothered? It's easy to take up what seems like a great offer with no effort on your part. But remember you would probably have bought the things you are buying even if there was no store card being waved in your face. Do you really want another piece of plastic, another debt?
7. Can you get the things you want cheaper elsewhere anyway? Most things you usually can do.
8. Can you pay for the things you want using your credit card? Credit cards usually have a much lower APR than store cards - so unless you can afford to make repayments in full, you could well lose in interest payments what you gain in special offers.
Credit Cards
The same kind of questions can be asked about credit cards:
How many do you have? Do you know what you're spending? Are you in control? What are the special offers - low interest, 0% balance transfers, etc? What's the credit limit and can you handle it? What are the repayment terms, including APR?
The major differences from a store card are that you can use a credit card almost anywhere, and that the APR is usually a lot lower. It's also a lot easier to control your spending if it's all on one card.
So when you've weighed up both kinds of card, what should you do? Here's a couple of ideas:
1. For general use, have just one credit card. Keep the credit limits low and in control.
2. If you are offered a store card and there's an unbeatable opening offer on your purchase, take it. Then, if you can't pay off the debt in one go, use your credit card to pay it off so that you at least get lower interest charges. Next, when your shiny new plastic card arrives, cut it up! Seriously. If you don't destroy it you (or someone in your family) will spend on it and the debt spiral will continue.
For information on credit cards check out the American Credit Cards Guide: http://www.americancreditcardsguide.com
About the Author
Craig Brown
How to get a mortgage even if you have a bad credit rating by Mandy Parsons
If you are having trouble getting a mortgage, you need to remember one thing:- Persistence. If you give up trying, you will NEVER get that mortgage. It's also worth noting that there are a great many variables that determine whether a lender will approve you for a loan. SOme of these variables are outside your control (criminal record, CCJs, Bankruptcy, Previous foreclosures etc) while others can be influenced by you in order to improve your chances of a mortgage approval.
Some lenders specialize in 'sub prime' loans -loans to customers with less than perfect credit histories. These are the lenders you should be targeting. Sometimes, they have a set time limit from a foreclosure or bankruptcy before they will approve you for a mortgage (often between 24 and 36 months). Sometimes they don't, and you can be approved for a loan the same day you are discharged from bankruptcy. Obviously, they charge higher interest rates to reflect the greater risk that you now represent, but hey! No loan, or a slightly more expensive loan?!
Ultimately, we here at www.mortgagedown.com think that what determines whether or not your mortgage is approved is your 'credit score'. Anything over '600' and most lenders will happily approve your loan, no matter what little 'stains' there are on your record. The process of creating your credit score is mostly automatic these days, and this is what you need to understand in order to bask in the glory of a 600 plus credit score when applying for a mortgage.
So how do you make sure your credit score is above the 600 level so you can get 100% financing? First off, stay RIGHT away from so called 'credit repair' agencies. They will often do more harm than good, and you will be handing over your cash for absolutely nothing or worse. What you can do is try and ensure your record is as 'clean' as possible. First step, obviously, is to check your credit rating for any inaccuracies. You have a statutory right to see what financial information any company holds =bout you, and this includes your credit rating. Ensure paid off charges are shown accurately as paid off - this is the biggest reason for bad credit scores when the record is in fact pretty clean. Every past charge that your have since paid off should be checked, and once you have done this, you can demand a letter of confirmation that the account is now fully paid up. You can, in fact, cause severe problems for any credit agency not reflecting the true state of your credit affairs.
If your target loan company needs proof the charges have been paid off, you can ask for the same from your other lenders - for a small fee (sub $100 usually) they will provide notarized letters confirming your account is now paid off and closed. This will reflect well in your credit score within 2 or 3 working days. Next, credit specialits at www.mortgagedown.com advise that you pay off as much as you can on any credit cards or other loans outstanding. Obviously, the less outstanding debt you have, the better your credit score will be in terms of going for a new mortgage. In fact, if you 'max out' credit lines or cards, this will reflect VERY badly on your credit score.
Finally, be careful not to approach too many lenders in too short a time period. Repeated attempts to get credit can themselves lower credit scores. Remember that even if you score less than 600, it is still possible to get that mortgage, but you may need to 'shop around' a little, and you will almost certainly pay an extra fee or higher interest as a penalty. Beware of companies claiming that 'if they can't get you the loan, you can't get one period' because ultimately, whether or not you get a loan is down to you!
About the Author
Mandy is the resident credit rating expert at www.mortgagedown.com
Some lenders specialize in 'sub prime' loans -loans to customers with less than perfect credit histories. These are the lenders you should be targeting. Sometimes, they have a set time limit from a foreclosure or bankruptcy before they will approve you for a mortgage (often between 24 and 36 months). Sometimes they don't, and you can be approved for a loan the same day you are discharged from bankruptcy. Obviously, they charge higher interest rates to reflect the greater risk that you now represent, but hey! No loan, or a slightly more expensive loan?!
Ultimately, we here at www.mortgagedown.com think that what determines whether or not your mortgage is approved is your 'credit score'. Anything over '600' and most lenders will happily approve your loan, no matter what little 'stains' there are on your record. The process of creating your credit score is mostly automatic these days, and this is what you need to understand in order to bask in the glory of a 600 plus credit score when applying for a mortgage.
So how do you make sure your credit score is above the 600 level so you can get 100% financing? First off, stay RIGHT away from so called 'credit repair' agencies. They will often do more harm than good, and you will be handing over your cash for absolutely nothing or worse. What you can do is try and ensure your record is as 'clean' as possible. First step, obviously, is to check your credit rating for any inaccuracies. You have a statutory right to see what financial information any company holds =bout you, and this includes your credit rating. Ensure paid off charges are shown accurately as paid off - this is the biggest reason for bad credit scores when the record is in fact pretty clean. Every past charge that your have since paid off should be checked, and once you have done this, you can demand a letter of confirmation that the account is now fully paid up. You can, in fact, cause severe problems for any credit agency not reflecting the true state of your credit affairs.
If your target loan company needs proof the charges have been paid off, you can ask for the same from your other lenders - for a small fee (sub $100 usually) they will provide notarized letters confirming your account is now paid off and closed. This will reflect well in your credit score within 2 or 3 working days. Next, credit specialits at www.mortgagedown.com advise that you pay off as much as you can on any credit cards or other loans outstanding. Obviously, the less outstanding debt you have, the better your credit score will be in terms of going for a new mortgage. In fact, if you 'max out' credit lines or cards, this will reflect VERY badly on your credit score.
Finally, be careful not to approach too many lenders in too short a time period. Repeated attempts to get credit can themselves lower credit scores. Remember that even if you score less than 600, it is still possible to get that mortgage, but you may need to 'shop around' a little, and you will almost certainly pay an extra fee or higher interest as a penalty. Beware of companies claiming that 'if they can't get you the loan, you can't get one period' because ultimately, whether or not you get a loan is down to you!
About the Author
Mandy is the resident credit rating expert at www.mortgagedown.com
Three Keys For Getting Out Of Debt by Seth Lutnick
Getting out of debt gives you a euphoric feeling, it's absolutely liberating. It's a feeling you want with all your heart. The good news is, with the three principles outlined in this article, you can turn yourself in the direction of financial independence and take control of your future. That euphoric feeling will coming around sooner than you think.
Before we get started, let's get started. You read that correctly. The hardest part of any project is often just getting started. There are 101 reasons for procrastination, ranging from fear of success to fear of failure. We can get overwhelmed by the scope of large tasks. It's too much, it's daunting, and we get daunted.
So here is the Pre-1 A step that will get you started: set yourself up. You don't have to start making calculations, you don't have to start working out budgets, you just have to take a piece of paper, a calculator or a software program, and sit yourself down at a table. Once you're there, going forward becomes easy. So many big things in our lives take literally 10 minutes, but we invest them with far too much worry and therefore never get to them. Just getting set up isn't that threatening, so we can do that. And once we've gotten set up, we've created the momentum to carry us to the fulfillment of our goals.
OK, now let's look at the three principles.
Principal number 1: Know Everything.
You've heard the saying, "knowledge is power." It is especially true in getting out of debt. You have to know exactly how much money you earn, how much money you spend, how much money you owe. It is simple mathematics, and the more detail you have, the more control you have.
Gaining knowledge activates the brain. Our brains work very much like a computer. When you give a computer a task to complete, the computer keeps on working at it until it gets done. So, too, when we give our brains a job, they can perform amazing feats. By knowing every detail of your finances, you will be giving your brain the job of finding a solution to your situation. It seems like it happens automatically. Stay on top of the details of your situation, and you'll find the answers coming almost by themselves.
Principal number 2: Spend Importantly.
Great people don't fear failure. They actually appreciate it as a great teacher, so they can improve in the future. Most of the time our debt is a result of a failure of our spending systems. We either do not pay attention to how much we spend, or we just lose control of it. Let's face it, credit cards are a very mixed blessing. Most often, we spend huge amounts on things that are neither necessary nor important. Let's look at this in more detail.
There are three types of spending we do. First, there are necessities, such as groceries, medical costs, clothing and shelter and so forth. The second type is for those things that are important, but not essential. They might include piano lessons, membership at a gym, dinner at a restaurant with your family, and other similar expenses. The third type are those things that are neither important, nor essential. These are luxuries, plain and simple: a Caribbean cruise, a TV set the size of a small skyscraper, the fanciest sports car, at the casino... you get the picture. Notice which category is usually the most expensive. Yes, the third type. By eliminating spending in this area, at least until you are solvent, you will help yourselves greatly.
I will add that it is a good idea to give some money to charity, whatever little amount you can afford. It may not make sense at first glance, but giving charity does something very important. It gives you a proper perspective on the value of money. Even if you give just a few dollars, you will come to view money as something to be used for important purposes, not to be squandered on unnecessary things.
Principal number 3: Make It Easy for Yourself.
Just as getting set up is the easiest way to get started on any object, making smart rules for how you spend is the easiest way to control your spending. The main culprit here is temptation. If spending is too easy, temptation has a lot power over us. If we make it harder to spend, temptation will fade away.
For example, if I left my credit cards at home, and only had a few dollars in my wallet, I would not be tempted in the least to buy that beautiful new suit in the window. I wouldn't even miss it! Similarly, when I have three credit cards, and two of them are within my spending limits, temptation is much greater than if I only had one credit card and I was already at my limit.
Making it easy for yourself means keeping yourself as far away from temptation to overspend as possible. Effective diets happen in the supermarket. If you don't buy those oversized cookies, you won't have them and you won't be tempted by them. That's why you should never go shopping when you're hungry. Make rules that will keep you from spending on anything that is beyond your budget. Use only cash for essentials, close down superfluous credit card accounts. Make it easy to stay the course.
Putting It Together
As you proceed in your journey towards solvency, make sure that you stick to these three principles. Constantly review your progress and keep "knowing everything." This will allow you to create and implement a surefire plan for getting out of debt for good. Good luck!
About the Author
Seth Lutnick is, in addition to being a recording artist and concert performer, a personal consultant with expertise in project planning. Visit www.getitdone.biz for a fully detailed plan of How to Get Out of Debt, and ideas and resources for personal action planning.
Before we get started, let's get started. You read that correctly. The hardest part of any project is often just getting started. There are 101 reasons for procrastination, ranging from fear of success to fear of failure. We can get overwhelmed by the scope of large tasks. It's too much, it's daunting, and we get daunted.
So here is the Pre-1 A step that will get you started: set yourself up. You don't have to start making calculations, you don't have to start working out budgets, you just have to take a piece of paper, a calculator or a software program, and sit yourself down at a table. Once you're there, going forward becomes easy. So many big things in our lives take literally 10 minutes, but we invest them with far too much worry and therefore never get to them. Just getting set up isn't that threatening, so we can do that. And once we've gotten set up, we've created the momentum to carry us to the fulfillment of our goals.
OK, now let's look at the three principles.
Principal number 1: Know Everything.
You've heard the saying, "knowledge is power." It is especially true in getting out of debt. You have to know exactly how much money you earn, how much money you spend, how much money you owe. It is simple mathematics, and the more detail you have, the more control you have.
Gaining knowledge activates the brain. Our brains work very much like a computer. When you give a computer a task to complete, the computer keeps on working at it until it gets done. So, too, when we give our brains a job, they can perform amazing feats. By knowing every detail of your finances, you will be giving your brain the job of finding a solution to your situation. It seems like it happens automatically. Stay on top of the details of your situation, and you'll find the answers coming almost by themselves.
Principal number 2: Spend Importantly.
Great people don't fear failure. They actually appreciate it as a great teacher, so they can improve in the future. Most of the time our debt is a result of a failure of our spending systems. We either do not pay attention to how much we spend, or we just lose control of it. Let's face it, credit cards are a very mixed blessing. Most often, we spend huge amounts on things that are neither necessary nor important. Let's look at this in more detail.
There are three types of spending we do. First, there are necessities, such as groceries, medical costs, clothing and shelter and so forth. The second type is for those things that are important, but not essential. They might include piano lessons, membership at a gym, dinner at a restaurant with your family, and other similar expenses. The third type are those things that are neither important, nor essential. These are luxuries, plain and simple: a Caribbean cruise, a TV set the size of a small skyscraper, the fanciest sports car, at the casino... you get the picture. Notice which category is usually the most expensive. Yes, the third type. By eliminating spending in this area, at least until you are solvent, you will help yourselves greatly.
I will add that it is a good idea to give some money to charity, whatever little amount you can afford. It may not make sense at first glance, but giving charity does something very important. It gives you a proper perspective on the value of money. Even if you give just a few dollars, you will come to view money as something to be used for important purposes, not to be squandered on unnecessary things.
Principal number 3: Make It Easy for Yourself.
Just as getting set up is the easiest way to get started on any object, making smart rules for how you spend is the easiest way to control your spending. The main culprit here is temptation. If spending is too easy, temptation has a lot power over us. If we make it harder to spend, temptation will fade away.
For example, if I left my credit cards at home, and only had a few dollars in my wallet, I would not be tempted in the least to buy that beautiful new suit in the window. I wouldn't even miss it! Similarly, when I have three credit cards, and two of them are within my spending limits, temptation is much greater than if I only had one credit card and I was already at my limit.
Making it easy for yourself means keeping yourself as far away from temptation to overspend as possible. Effective diets happen in the supermarket. If you don't buy those oversized cookies, you won't have them and you won't be tempted by them. That's why you should never go shopping when you're hungry. Make rules that will keep you from spending on anything that is beyond your budget. Use only cash for essentials, close down superfluous credit card accounts. Make it easy to stay the course.
Putting It Together
As you proceed in your journey towards solvency, make sure that you stick to these three principles. Constantly review your progress and keep "knowing everything." This will allow you to create and implement a surefire plan for getting out of debt for good. Good luck!
About the Author
Seth Lutnick is, in addition to being a recording artist and concert performer, a personal consultant with expertise in project planning. Visit www.getitdone.biz for a fully detailed plan of How to Get Out of Debt, and ideas and resources for personal action planning.
Coaches, Do You Make These 7 Deadly Cash Flow Mistakes in Your Practice? by Caroline Jordan MBA
Managing cash flow is every small business owner's most important function. Avoid these seven deadly mistakes to make sure you aren't creating cash flow problems in your coaching practice.
1. Using the "Fly By The Seat of Your Pants" Accounting Method.
When tax time rolls around do you find yourself pawing through piles of paper on your desk looking for credit card receipts from your business trip? Or are you upside down digging under the seat of your car trying to figure out where all your gas receipts are? Are you wondering if that coffee stained piece of paper is an invoice from a supplier? Do you have a vague feeling that someone, somewhere owes you money but, you just can't remember who it is? If so, you're probably guilty of operating with the "Fly By the Seat of Your Pants" accounting method.
Using this accounting method has a tremendous impact on your business's cash flow. Unless you have a system to track your business finances, you'll always be operating in the dark and in danger of imitating George of the Jungle as he slams into a tree.
2. Not Knowing What the Numbers Are All About.
Once you have a real honest to goodness useful accounting system, that's where the real fun starts. You've got a bunch of numbers but what in the world do you do with them?
Understanding what the numbers mean is crucial to your cash flow. Are sales trending up or down? Are expenses rising faster than sales? Is one coaching package more profitable or better selling than another? How many clients do you need to meet expenses each month? Can you take a paycheck this month? The answers all lie in the numbers.
3. Mismanaging Credit: I Owe You, You Owe Me.
There are two ways to mismanage credit in small business:
1. Granting credit without wise credit policies 2. Using credit with no plan of how to pay the bill.
Both have a huge impact on your cash flow and are often closely related. Here's a scenario to demonstrate that point. You have two opportunities: you can work on a big project for a corporate client or you can take on several small clients. You might think the big client is the way to go but how long will it take you to get paid? Often, large companies take their time paying--sometimes 60 or 90 days, sometimes longer. You may find that you've tied up a tremendous amount of your time with no cash flow to pay your bills. The smaller clients could provide you with more immediate cash flow without tying up all your time.
And it's easy when times get tough to pull out your credit card to cover your current expenses. But doing this with no plan of how you'll pay the bill gets many small business owners in hot water fast.
4. Ignoring the relationship between Receivables and Payables.
Do your Receivables and Payables "play nice" with each other? In a perfect world your receivables (what customers owe you) would be paid just in time for you to pay your payables (what you owe your vendors). But, if you're a small business owner you know Rule #1 is "Stuff Happens". The customer you thought would pay his bill this week, doesn't. So the bills you thought you could pay this week, don't get paid.
Are your Payables in balance with you Receivables? If what you owe to others is far more than what is owed to you, then, Houston, you have a problem.
And it's not just the balance that's important, it's the quality as well. If your receivables are as old as your Aunt Tilly, chances are good you'll never see the cash.
5. Focusing on profit instead of cash flow.
Ahh, Profit. The ultimate goal of every business. Or is it? Did you know that many businesses that fail are operating at a profit? How can that be? For the small business, cash flow is the ultimate goal. No cash flow. No business. Period. What's the difference? Mostly the difference is in the decision making process. "If I take on this big job, it will earn me a huge profit, but if I take on five smaller jobs, I'll have cash to pay my bills." Yes, you want to be profitable but every decision has to be measured against the effect it will have on cash flow.
6. Forgetting your debt to society.
Some bills are easy to forget. Bills like insurance, payroll taxes, estimated taxes. They sort of sit out there, almost off the radar screen. They don't have to be paid right away. It's easy to forget them until BAM! they're due and they're due right now. And you better have the money to pay them or you're in hot water. Then, cash flow problems result as you rob Peter to pay Paul. It can take months or even years to recover.
7. Spending your company's future on a speed boat.
Haven't you always wanted a speed boat? Or a fancy car? Or an all expense paid trip to the Bahamas? It might be tempting to try to pass your personal purchases off as tax deductible business expenses. But, it's a bad idea for two reasons.
The folks who work at the IRS are over-worked but they're not stupid. The last thing you need is an audit. An audit that could reveal your transgressions and could result in an unexpected tax bill plus penalties and interest. Again, huge cash flow headache!
Here's the other reason it's a bad idea. Are you spending your company's future on frivolous or unnecessary expenses? Small businesses operate close to the edge. Unless you have a reserve to see you through the tough times, you're always in danger of being on the wrong side of that edge. You've got to take care of the goose that lays the golden eggs first. Then, you can pay yourself a properly taxed bonus and buy all the toys you want.
About the Author
Caroline Jordan, MBA is a small business consultant and creator of Cash Flow Master, a Fast Track, No Holds Barred, Crash Course in Small Business Cash Flow. For more Cash Flow tips and techniques visit http://www.TheJordanResult.com/mastering.html
1. Using the "Fly By The Seat of Your Pants" Accounting Method.
When tax time rolls around do you find yourself pawing through piles of paper on your desk looking for credit card receipts from your business trip? Or are you upside down digging under the seat of your car trying to figure out where all your gas receipts are? Are you wondering if that coffee stained piece of paper is an invoice from a supplier? Do you have a vague feeling that someone, somewhere owes you money but, you just can't remember who it is? If so, you're probably guilty of operating with the "Fly By the Seat of Your Pants" accounting method.
Using this accounting method has a tremendous impact on your business's cash flow. Unless you have a system to track your business finances, you'll always be operating in the dark and in danger of imitating George of the Jungle as he slams into a tree.
2. Not Knowing What the Numbers Are All About.
Once you have a real honest to goodness useful accounting system, that's where the real fun starts. You've got a bunch of numbers but what in the world do you do with them?
Understanding what the numbers mean is crucial to your cash flow. Are sales trending up or down? Are expenses rising faster than sales? Is one coaching package more profitable or better selling than another? How many clients do you need to meet expenses each month? Can you take a paycheck this month? The answers all lie in the numbers.
3. Mismanaging Credit: I Owe You, You Owe Me.
There are two ways to mismanage credit in small business:
1. Granting credit without wise credit policies 2. Using credit with no plan of how to pay the bill.
Both have a huge impact on your cash flow and are often closely related. Here's a scenario to demonstrate that point. You have two opportunities: you can work on a big project for a corporate client or you can take on several small clients. You might think the big client is the way to go but how long will it take you to get paid? Often, large companies take their time paying--sometimes 60 or 90 days, sometimes longer. You may find that you've tied up a tremendous amount of your time with no cash flow to pay your bills. The smaller clients could provide you with more immediate cash flow without tying up all your time.
And it's easy when times get tough to pull out your credit card to cover your current expenses. But doing this with no plan of how you'll pay the bill gets many small business owners in hot water fast.
4. Ignoring the relationship between Receivables and Payables.
Do your Receivables and Payables "play nice" with each other? In a perfect world your receivables (what customers owe you) would be paid just in time for you to pay your payables (what you owe your vendors). But, if you're a small business owner you know Rule #1 is "Stuff Happens". The customer you thought would pay his bill this week, doesn't. So the bills you thought you could pay this week, don't get paid.
Are your Payables in balance with you Receivables? If what you owe to others is far more than what is owed to you, then, Houston, you have a problem.
And it's not just the balance that's important, it's the quality as well. If your receivables are as old as your Aunt Tilly, chances are good you'll never see the cash.
5. Focusing on profit instead of cash flow.
Ahh, Profit. The ultimate goal of every business. Or is it? Did you know that many businesses that fail are operating at a profit? How can that be? For the small business, cash flow is the ultimate goal. No cash flow. No business. Period. What's the difference? Mostly the difference is in the decision making process. "If I take on this big job, it will earn me a huge profit, but if I take on five smaller jobs, I'll have cash to pay my bills." Yes, you want to be profitable but every decision has to be measured against the effect it will have on cash flow.
6. Forgetting your debt to society.
Some bills are easy to forget. Bills like insurance, payroll taxes, estimated taxes. They sort of sit out there, almost off the radar screen. They don't have to be paid right away. It's easy to forget them until BAM! they're due and they're due right now. And you better have the money to pay them or you're in hot water. Then, cash flow problems result as you rob Peter to pay Paul. It can take months or even years to recover.
7. Spending your company's future on a speed boat.
Haven't you always wanted a speed boat? Or a fancy car? Or an all expense paid trip to the Bahamas? It might be tempting to try to pass your personal purchases off as tax deductible business expenses. But, it's a bad idea for two reasons.
The folks who work at the IRS are over-worked but they're not stupid. The last thing you need is an audit. An audit that could reveal your transgressions and could result in an unexpected tax bill plus penalties and interest. Again, huge cash flow headache!
Here's the other reason it's a bad idea. Are you spending your company's future on frivolous or unnecessary expenses? Small businesses operate close to the edge. Unless you have a reserve to see you through the tough times, you're always in danger of being on the wrong side of that edge. You've got to take care of the goose that lays the golden eggs first. Then, you can pay yourself a properly taxed bonus and buy all the toys you want.
About the Author
Caroline Jordan, MBA is a small business consultant and creator of Cash Flow Master, a Fast Track, No Holds Barred, Crash Course in Small Business Cash Flow. For more Cash Flow tips and techniques visit http://www.TheJordanResult.com/mastering.html
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