Why basic financial planning is essential for business cash flow

Basic accounting and bookkeeping is essential for all businesses - but especially small businesses.

I asked Seth David of Nerd Enterprises "what is the number one accounting and cash flow mistake that all small businesses make?"

The biggest mistake I see businesses make is that they don’t plan. When I moved to California I was living in a half way house. Before I took a job, I had to add up what my expenses were going to be each month so that I could see what I needed to earn at a minimum to live.

It wasn’t much, but if I just went and took a job without knowing, I could have found myself in a situation where I wasn’t making enough money to pay my bills. So when I sat down in the first job interview I already knew what I needed bare minimum. I padded the amount in case I may have missed something, and in all likelihood I would need to add expenses along the way.

Of course I wanted to further pad that so that’s where the negotiating comes in. When I am looking at jobs I know I need to look at jobs that are paying at least as much as I need at a minimum.

Now let’s say I find that for what I do, jobs simply aren’t paying that much. I have to go back to my budget and adjust the income based on what I think I can get. From there I look at the net to see if I am short and if so by how much.

If I am short I have to make adjustments somewhere, starting with things I don’t really need and then seeing if I can live with “less” of the things I do need.

The banking crisis and back to basics

Trying to think about what to write as I've followed the banking-mortgage-money crisis is like trying to figure out where to jump on to a merry-go-round that's in full motion.

But for individuals it comes back to controlling what you can control: your career prospects, saving instead of spending all your money, and getting rid of high interest rate debt like credit cards.

Is the economy "melting down" as it appears by the headlines? Think of this: companies still produce goods and services, families still need houses and apartments to rent or own, and 93% or so of Americans are employed.

Fiscal responsibility isn't just a political term but it's a societal truth that all of us must grasp and embrace. In past years, politicians have urged Americans to spend in order to avoid recessions. That has helped lead to problems of personal debt. Instead, families should be urged to save to build wealth and operate from a position of strength.

Take action. I know for me, when I take action then I don't feel like a helpless victim. Here is an I wrote which you may find helpful on just that topic.

Stick with the basics while you read up on the financial whirlwind happening around us. Focus on what you can control in your financial life not what you can't control.

Allocating Your Assets: Where Do You Put Your Money

Successful cash flow for a business or a family is not only about having money come in, but it also means how you preserve your cash and build your assets.

How should families allocate their assets?

Here is an article I wrote on tips for asset allocation:

Asset Allocation 10 tips

Having wise advice is as important as saying "put your money into 'xyz stock' or 'abc mutual fund'."

So I recommend looking for a financial planner or advisor who is passionate about what they do, who comes across as honest and is not necessarily selling only his or her own products.

But allocating assets also means planning your estate and having a law firm draw up a family trust.

In our case, we have a special needs daughter who will not be able to live independently so one of the best gifts we could give her is planned for security in the event something happens to us.

The Cost of Crisis Management

Crisis management -- I've been thinking how there must be a cost to crisis management.

Years ago, while working at one organization needing to raise money, consultants would march through and everyone tried to solve the financial cash flow crunch with immediate, short-term solutions.

Understandable.

But mid-term to longer-term planning was set on the shelf.

While working with small but growing businesses crisis management strikes when there's a problem clearly identifying a service provided. It's tempting, especially for creative services firms, to try and provide a service that you normally don't provide.

Have there been studies done about the cost of crisis management and not being able to correct a course of action?

Is there a way to avoid crisis management?

Here are my thoughts.

Take a long term view of where your company should be.

Or, for families, take a long term view of where you want your family finances to be.

Write it down on paper. Then work backward to fill in the missing pieces.

It's like asking assessment questions which I write about on
http://marketingtips-marketinghelp.blogspot.com/.

I'll write more specifically about avoiding crisis management in the next post, too.

Building Passive Income for Your Family

In observing financial habits in my own family, and in observing the financial habits of other families,

I’ve come to the conclusion that people are always looking to:

• Save money



• Make money



• Invest money

The third item, investing, is what allows families to build wealth over the long term. But how that money is invested can cause problems or lead to success. I recently invested in a fixer-upper home in western Pennsylvania to fix and either flip or rent out. It looks like renting it out will be our best option.

What’s an attraction to real estate? The thought of passive income or building future wealth.

Is building a passive income possible? Yes. Now the more passive income you want to build the more knowledge and study of different methods may be required.

I recently did an email interview with Naomi Trower of Southern California.

She and her husband own a real estate business, http://mypremierloan.com and online businesses:

• http://passive3kpaydays.com


• http://ntrower.ordermygift.com


• http://ntrower.qhealthzone.com

I came across Naomi’s profile on http://hubpages.com/profile/nctrower and I was intrigued and asked to interview her.


Don: Your bio on Hubpages states you were in engineering. What type of engineering and what made you decide to pursue real estate?

Naomi: My degree is Industrial & Systems Engineering with a focus in Manufacturing Engineering and Facilities Project Engineering. I worked for The Boeing Company for 10 years.

I've always had an interest in real estate and investing and believe it's a great investment. I'm an advocate of Robert Kiyosaki and his principles and enjoy learning from successful people.

Don: What are the greatest challenges in starting your real estate business and what advice do you have for other people wanting to start their own company -- especially if they have families such as yours?

Naomi: The greatest challenge in starting our real estate business is getting our name out there and promoting ourselves. Once we overcame that hurdle, the business just poured in mostly by word of mouth because of our expertise. Another challenge is keeping and maintaining qualified people in our business organization. We have had agents for extended periods of time but it's rare to find those who are fully committed and dedicated on a consistent basis.

Don: What should a business owner know about cash flow in order to be successful?

Naomi: Cash flow is key and there are so many avenues to use other people's money to grow and build your business. Research your particular need whether it's collecting invoices, issues with inventory or the need for a loan to expand.

Don: Do you feel "passive income" is possible? If so, how and why and what amount?

Naomi: Yes passive income is totally possible. We have passive income from our rental properties and from our internet business. There are various ways to earn passive income via the internet whether its from affiliate marketing or direct sales. We earn various amounts from $20/month up to $2500/month.

Don: What have you learned from your internet business and what tips do you have for others?

Naomi: We have learned that there is so much information on the internet to earn money and it's growing daily. The internet is one avenue that is recession proof. If anything there are more and more people turning to the internet to find ways to work for themselves.

Our tips would be to research out any new business and do your due diligence. Once you decide to move forward, make sure it is something that you are passionate about because it will help you to get up in the morning with hope and determination. We highly recommend interviewing different people who would be your mentors in your future business. It is vitally important to know how available they will be to you and what kind of training is in place to ensure your success.

Don: Thank you, Naomi, for your interest in helping others with their family cash flow and income needs.

By the way, if you’re in Southern California and want to learn about real estate in the Santa Clarita Valley contact Naomi’s company http://mypremierloan.com

Ways to Make Extra Money

Making Extra Money

We recently sold some items on eBay and I'm going to post about that soon. There are many ways to make extra money. Selling on eBay requires a learning curve. Yes, you can do it. But it's a bit of a hassle until you've sold a few items.

This is an article I found on Hubpages which shows 3 ways to make extra money. It's written by a single mother in San Francisco. How To Make Extra Money

Do you have a favorite way of earning extra money? Is it through a hobby or a skill you've developed?

If you'd like to share specific thoughts on how to earn more money for your family share the tips with us.

Here is a way to evaluate earning additional income:

How long will it take you to learn (such as selling on eBay - be prepared for a 5 - 7 hour learning curve where you make very little)?

How far will you have to drive?

Is it something you enjoy? If so, and even if the pay isn't great, then it could still be fun and worth your time.

Worried about Your Bank or Your Home?

Cash flow worries seem to be hitting all around us. I drove near the Indy Mac bank headquarters in Pasadena this morning while people were lining up to get their money out. Is there a banking crisis?

The number of foreclosures seems to be mounting, too. Is there a housing crisis? Stocks have dipped below the 11,000 mark for the first time in two years. Mounting economic woes?

Or do the current conditions stem mostly from lenders and borrowers being irresponsible with their money?

I spoke with Richard Streitz, Realtor, of Baldwin Real Estate Services to get his opinionand ask him if people who are facing foreclosure will be unable to purchase a house for years to come.

He reminded me these cycles occur about every 10 years. Richard explained how Real Estate Owned properties were so prevalent in the ‘80s that Freddie Mac opened a design center. Richard believes real estate will be back to normal levels around 2012.

Here’s hopeful news for families going through the pain of foreclosure. If the problem is widespread, then banks look more favorably on your condition. As Richard explained, banks see you’re not the only one and your condition is weighted accordingly.

So, does this mean this is a good time to buy? Or will we hit more of a bottom in the market in the next several months to a year.

Here are my observations:

Don’t give in to fear. Panic can easily sweep across society. I know I can worry. But I suggest you read this article that I wrote several months ago based on an interview with a financial planner.

If stocks have dipped, then it could be a good time to buy.

Since the economy is never 100% stable, don’t stop saving or investing for the long term. Diversify your portfolio.

Don’t build up debt you can’t control if that’s possible.

If you’re a business, especially a service business, then make sure your accounts are healthy and your vendors are able to deliver their goods and services to you.

If you have doubt, begin networking or marketing for additional clients and build a contingency plan.

I know for me, action helps fight off worry and potential panic when I think about cash flow. And here is an encouraging article to read if you are going through foreclosure.

Find an Apartment to Rent

You want to find an apartment to rent that meets the needs of your family.

But how do you know which is the best apartment unit or home?

Here are useful tips on finding and renting an apartment from Robert Barbera, of Barbera Properties who informs renters on looking for apartments with pride of ownership. Barbera Properties operates 26 apartment buildings and single family homes in Southern California's San Gabriel Valley.

1 LOCATION and CURB APPEAL
Robert Barbera says ask yourself if the apartment building is in a location you like and if the building’s exterior has appeal to you.

“The first thing is if it doesn’t have street appeal then walk away. If it has street appeal then go further,” said Robert.

2 THE MANAGER’S ATTITUDE
The next test is meeting with the apartment manager and listening to how he or she speaks with you.

“If the manager approaches you with the right attitude then you're on the right track. If they feel like they’re doing you a favor then walk away,” he said. “The manager has to be engaging and they also have to show pride in their apartment. Because if they’re not proud of their property then you should walk away.”

3 PRIDE OF OWNERSHIP
Mr. Barbera says a manager or property owner who takes pride in the appearance of the exterior and the upkeep of the interior will gladly respond to calls from tenants for necessary repairs. Ask the manager or property owner about how quickly they respond to maintenance calls.

“It works so much better for us to be on the ball and get over there and correct he situation,” said Robert. “The person felt they had a complaint, it’s taken care of and now its out of the way.

“If you have deferred maintenance it gets worse and worse until you get in there and make it better.”

You can also ask if the management company surveys their tenants. Asking for tenant feedback is a regular practice for Barbera Properties.

4 THE APARTMENT UNIT’S APPEAL

“When you get to the apartment, do you like what you see? Are the fixtures clean and updated? Then check for the condition of countertops, wear on carpeting and the bathrooms.

“In short, everything should be a test.”

Robert Barbera believes there should be a partnership between the tenant and the property owner to ensure a quality experience.

To view a current listing of available apartment units in Pasadena, Arcadia or other cities of the San Gabriel Valley, log on to http://www.barberaproperties.com/.

Apartment Owners and Landlords Facing Foreclosure

Foreclosures are hitting apartment owners and landlords.

Talk about a cash flow problem that affects everyone.

You rent an apartment or single family home. You’re current on your bills so there’s no danger you’ll have problems because your rental unit is being foreclosed on – correct? Think again.

Renters are learning that apartment owners and landlords are facing foreclosure. Suddenly, renters are given a notice to vacate and they may only have days to prepare. News reports from across the country are picking up on the growing problem.

Apartments in foreclosure are also found in what are traditionally lower cost housing markets such as Bakersfield, California and Riverside County, California.

California Apartment Association estimates that 25% of foreclosed single family homes have renters living in them. The organization states that landlords and property management companies have ethical concerns regarding tenant security deposits.

So what can you do? There is a web based service that can let you see if your landlord is facing foreclosure. Or, if you’re about to move in to an apartment, you can see if your prospective landlord is facing foreclosure.

Check for Foreclosure.com states “Unfortunately, landlords, banks, and mortgage companies are under no obligation to inform tenants of looming foreclosures, so it's all perfectly legal.”

The site is a subscription service but it also offers a free trial.

The companion site, Tenant Foreclosure.com offers a real life story of a husband and wife who lost several thousand dollars.

"In December 2007, D. Bradshaw and his wife rented a house in Las Vegas for $1,500 a month. Little did they know that four months before they moved in, the house had fallen into foreclosure because their new landlord failed to pay his mortgage.

As soon as they moved in, a notice was posted on the door that the house would be auctioned off in just three weeks. They had paid the landlord $5,500 in move-in costs plus a $2,500 option to by the house the following year.

But in less than a month they would be evicted with no place to go.They took their case to court. The judge realized the couple had been snookered out of $8,000 by a deadbeat landlord and gave them an extra 10 days to move.

Unfortunately, that was the only concession the judge could award because real estate laws favor landlords and banks, not renters."

The site also has a blog
Renters in Crisis.

Stay Tuned: Clever Marketing Idea

I have a few more posts to write this week on personal finance.

But next week, you'll learn how a chamber of commerce in a small California town is helping residents cut household expenses.

It's a clever marketing idea that any business can apply.

The chamber members thought carefully on how they could really help residents lower some costs and boost their chamber membership in the process.

It's another way of looking at both personal and business cash flow.

Class of 2008: Your Money is Up to You

Dear Graduates:

You have the joy of completing your studies and entering the next chapter of your life during a presidential election year when rhetoric of tough economic times and fears about jobs reach a fever pitch.

You may not pay much attention if you're headed to college and you're focused on your cell phone plan, new shoes, parking permits, meal plans and more. Or maybe you're entering the job market and those first paychecks mean the chance to find the hippest happy hours or get the financing on the new car you've always wanted. Or that daily mocha latte with a $ 3.95 price tag won't be a problem.

Oh, and you can complain about gas prices like every one else as you step out of the store with the rich aroma of coffee spiraling in to your nostrils.

A new job means the chance to spend money like you've never spent before!

However, a new job also means the chance to lay the foundation for a financial future where you are in control even if your paycheck won't make your fellow graduates green with envy.

The choice is yours and it may require putting on blinders and developing disciplined habits similar to an athelete who knows the value of focused training.

The actions you take today, and the attitude toward money that you have, will largely determine how much debt or how much equity you will have in the next 15 years to 20 years.

The good news is if you develop the attitude of an investor, instead of just being a spender, and you begin saving with small amounts you will have the choices to keep investing and growing wealth even if economic times get tough.

I will pull together key resources for you to read and access. They're easy to find and many are free.

I'll even be so bold as to say the size of your paycheck doesn't matter as long as you have the mindset of an investor and I hope you'll take the time to read more.

Investing in Real Estate - Your Team

Investing in real estate

or

flipping homes

to re-sell requires a team with solid knowledge, honesty and a solid work ethic. Finding everyone who meets these requirements isn't easy and it can result in delays. So you have to plan contingencies.

This week, the demo started on the house I invested in. I live and work about 2,500 miles away but I'm getting calls each day from the person supervising the work. He came to me with good references.

One of the reasons I trusted him early on was because before the work started, he spent 3 1/2 days with me helping set up our supplier network and going to the bank with me.

He himself is not making much money on the project but he said the reason why is he wants this job to go well so we can do it again.

He also tried to soften my expectations on how much money I would make. But we ran the numbers, budgeted together for all our expenses including dry wall, paint, siding and all other supplies.

Trust is a mighty big factor. Certainly, you can trust a person before the work gets started and then run into problems later. But if you can't trust them from the beginning then don't bother getting started at all.

It's better to walk away from what seems to be a profitable deal if you don't have the people in place who can truly help you.

Real Estate Investing Adventure

My real estate investing has taken a major step forward this week. I finished a 4-day whirlwind tour of Latrobe, Pennsylvania and I'm going to get about 5 hours of sleep before catching my flight back to Pasadena, California.

Over the weekend, I'll try to give a step-by-step picture of how I purchased a HUD property and I'm looking at a healthy profit margin.

During the trip I was able to achieve quite a few objectives before the rehab work actually starts on the house:

• See the house and the peeling paint, smelly carpet, etc


• Plan with the person who will supervise all the work


• Get Builder's Risk insurance


• Set up a local account at Commercial Bank


• Meet some of the suppliers


• Budget, revise numbers


• Open an account at Home Depot


• Get a quote from an electrician


• Go to Latrobe City Hall


• See comparable houses

I'm encouraged by the plans we have for the house and the direction in which we're going to take the fix-up. I'm also encouraged since the profit potential appears healthy.

I'll be 2,500 miles away while the work is going on but I have confidence it should proceed since the people doing the work are motivated.

I'll get to sleep and try this weekend to detail my step-by-step approach to real estate investing that you can follow or you can use to give me advice if you're more experienced.

Airline Tickets Cheap . . . Guess Where to Go?

I'm flying roundtrip on Northwest Airlines from Los Angeles to Pittsburgh (with one stop each way) and I purchased the tickets for $231.

I purchased them only one week before flying.

Who did I use?

The Northwest Airlines web site.

I had checked Expedia and Travelocity. But then my wife try the airline directly -- which I did.

An advantage for me was having flexibility in my travel schedule since I'm flying alone and I have no meetings scheduled. I'm flying back to check on a small fixer-upper we just purchased.

Originally, I was going to fly on a Friday and return on a Tuesday. Most prices were in the $380 range and up.

Then I checked flying on a Saturday and returning on either a Tuesday or Wednesday.

Prices were showing up on all sites from $450 to $700.

Then I decided to see how much it would cost leaving on a Tuesday . . . great price!!!

Booking directly through the airlines can be a real cost saver.

Last Christmas, we flew one way from Los Angeles to New York on Delta. And then we flew one way from Pittsburgh to Los Angeles on US Airways. Both segments for 5 people was $1,300 total during a holiday period.

We booked one leg through Travelocity and the return directly through US Airways.

I just enrolled in the Northwest World Perks club, too.

We're also enrolled in US Airways frequent flyer club. My son has enough miles for a free trip. But we went to transfer the miles and US Airways was going to charge a $25 fee and $00.01 per mile in addition. So transferring the 17,000 miles I needed would have cost me $195.

So I'm better off flying Northwest.

Cash Flow at Home Idea

What's potentially one of the greatest dangers to your personal cash flow?

Layoffs?

Clunky car needing fixed again?

Perhaps.

But what about your kids?

Yep, those little bundles of joy you brought home (or in our case the ones we adopted) could suck the living cash flow right out of your house and bank account as they age into their teen years.

So here are some ideas to help them get a better handle on money and how to handle their income:

• Allowance
- teach them to budget starting small

• Budgeting
- let them pay for their own cell phone!

• Mutual Fund Investing
- give them a basic under- standing of what $25 a month can do for their future.

• Post Bills on the Refreigerator

We did this last tip. We posted our household gas bill for one month on the refrigerator and my wife used a Sharpie to circle the total we owed. It helped us in explaining to them why shorter showers are one way to help us save money.

While one of these tips in and of themselves only offer a small education, nevertheless put them into practice over many months and they will eventually develop a mindset to handle their money.

Also, I'm beginning to talk to my kids who are in their late teens and early 20s, about becoming an investor and not just a consumer.