financial accounting and auditing

Improve Your Finances, Cut Back Where You Can

2009-05-05T00:49:00.001-07:00

Market changes have forced a lot of expenses to go up. If you notice, your mortgage payments and other costs are not at the same level as before. For the ordinary consumer, this means less purchasing power and lower standard of living. Fortunately, you can fight back by knowing the tips and tricks in saving money. We have compiled five tips that will help you financially during tough economic times:

• Check your mortgage – most mortgage lenders offer an introductory offer. If you took advantage of this, make sure that you know when it will end so that you can remortgage in time. With the variable rate of as much as 8.5%, no one wants to make even one late payment.

• Save on energy expenses – previously, consumers weren’t that concerned about their energy bills. It was just something to be paid each month. With today’s harsh condition though, every penny counts. If you make a conscious effort to cut back, you might be surprised by the amount of savings you can keep each month.

• Lower your grocery bills – it is easy to get tempted on the grocery. By preparing a list and sticking to it, you can eliminate a lot of unnecessary expenses. In addition, using coupons and buying items that are really on sale can dramatically reduce your expenses.

• Phone calls – although landlines are no longer popular as before, some people still rack up expensive monthly bills. If this is the case for you, examine your pattern and implement strategies that will help lower it. For example, getting an affordable package will help or you can make less-urgent calls during off-peak hours. It is even better if you can manage to call using the VoIP technology instead.

• Gym membership – it is true that investing for your health is good. In fact, it is probably one of the best investment policies out there. However, if you have an expensive gym membership that you barely use, consider some alternatives. For example, look into the gyms that offer pay-per-trip programs. That way, you only need to pay for the times when you actually exercise.

These tips are just an overview of what you can do to save on your bills. There are many more ways to save according to your unique circumstance. In addition, combining effective investment practices with your saving strategies will help you attain better financial health.

8 Important Traits of an Entrepreneur - Can You Make the Cut?

2009-05-05T00:45:00.000-07:00

Entrepreneurship in its bland definition is someone who organizes, manages and assumes the risks of a business or enterprise. That could describe many business owners, who may or may not do that well in the role. So what makes a truly dynamic, highly successful entrepreneur? What are the traits of an entrepreneur that set him apart from the average business owner? That definition goes beyond the usual and reveals why not everyone can be or wants to be an entrepreneur.

The extended definition is someone who has a vision, takes massive action, and relentlessly pursues that vision to a successful outcome.

The true entrepreneur does not go down the same old, tired road either, but he is someone who develops a new product or a fresh twist to an existing product, who sees a better way of producing something, or creates an innovative market.

Some say that a child is born with the traits of an entrepreneur, that the child possesses those qualities from the moment of birth and is already a thinker and schemer of things. There is probably some truth to these beliefs, as a certain mindset plays a very important role in the success of entrepreneurial people, and without it you will find it more difficult to succeed in your business endeavors. So even if you’re a born entrepreneur, it is still necessary to develop specific skills and qualities to use in your future success.

There are many elements that comprise the traits of an entrepreneur, as outlined below. As you read, think about what your strengths are, what things you are good at, and your particular capabilities and interests. Just the fact that you are reading this shows you already have a strong desire to succeed in affiliate marketing, so if you possess or can develop these traits, nothing can stop you from being one of the biggest names in the marketplace.

Traits of an Entrepreneur

1. Positive Attitude - Successful entrepreneurs are positive thinkers. Issues that many business people consider to be problems or obstacles are seen as challenges by entrepreneurs. Their confidence allows them to think they can do anything and everything, so they look at situations differently from most individuals. Entrepreneurs have a strong belief in their objectives, so with this attitude and level of confidence they have a high chance of succeeding in any form of business.

2. Leadership - To become a successful entrepreneur, you must be a strong leader. As a leader, you must be able to skillfully guide, influence, and direct people. Staffing is often a responsibility of an entrepreneur, so if he can effectively manage and lead people so that he can entrust tasks to others and be certain they are done properly, there is a greater possibility of handling his business activities with ease and fewer worries. A good entrepreneur will have a certain charisma that few can resist.

3. Communication Skills - A successful entrepreneur must be an excellent communicator. Good communication assures that dealings with all sorts of individuals are handled smoothly and assures your information and instructions are conveyed correctly, completely, and clearly. It is important for everyone to understand what you’re saying. Hand in hand with being a good communicator, you must also be an excellent listener, writer, and reader. One of the most important roles of an aspiring entrepreneur is to maintain customer satisfaction at its highest point through effective communication.

4. Passion - Another crucial trait of an entrepreneur is having a passion for his business or project. Passion and enthusiasm can be infectious and will go a long ways in inspiring others to share your vision and join you in your endeavor. As long as you maintain the right drive and passion, you can continue to keep the momentum going for a successful business.

5. Risk-Taker - This is a very important trait of an entrepreneur. In the everyday course of your business, you will face problems and challenges which require a quick, firm decision. A successful entrepreneur does not fear venturing outside his safety zone; however, he doesn’t take risks blindly. By properly calculating the risks, he can determine if the risks are worth taking and whether or not the risk will benefit the business. Some risks are worth taking, after careful consideration, but if you're not a risk taker, then you will easily give in to any problems or obstacles. A true entrepreneur should not be afraid of taking chances when opportunity strikes.

6. Energetic - A successful entrepreneur must be willing to work tirelessly and do whatever it takes to reach the finish line. He must sustain the drive to achieve his highest level of performance to accomplish his next goal.

7. Stability - In order to handle tough situations, meet deadlines, make critical decisions, and maintain his physical, mental, social and emotional equilibrium in a fast-paced environment, during good times as well as tough times, a successful entrepreneur must have a stable life. He must make the same effort to eat well, get enough sleep, and watch health issues as he does in watching over his business.

8. Honest/Trustworthy - This may be the absolute most important of all the traits of an entrepreneur. He has to be honest and trustworthy at all times in order to gain and maintain good will with his customers, suppliers and staff. If the entrepreneur is found to be dishonest in any of his dealings, then none of the rest will even matter.

Embarking on an entrepreneurial venture is an exciting and challenging task. If you have, or can develop, the necessary traits of an entrepreneur, then you can make your business dreams come true. But if you simply think, and think some more, and you never take action....you will not achieve anything. If you think and then act, you certainly can succeed.

Up to 50% off on Report - Booming UAE Telecom Sector

2009-05-05T00:44:00.000-07:00

RNCOS is offering up to 50% discount on Market Research Report titled, “Booming UAE Telecom Sector". The UAE’s telecommunication market has shown tremendous growth over the recent past, mainly propelled by the government initiatives aimed at the deregulation of the market and introduction of competition. The TRA (Telecommunication Regulatory Authority) remains at the forefront of the success of the country’s telecom sector. It is continuously considering and evaluating ways to further intensify competition in the UAE telecom market.

Penetration in the mobile market surpassed 166% in 2007, leaving less room for operators to further take advantage of the market. But this is not the end of growth; future growth in mobile subscriptions will come from growing population and increasing number of expatriates, says RNCOS in its new research report, “Booming UAE Telecom Sector”. Moreover, operators are now looking at Value Added Services (VAS) to derive revenues from saturated mobile market.

However, the fixed-line sector remains underdeveloped, with fixed-line penetration standing at just over 30% in 2007. Various factors, such as high tariffs and absence of fixed-line networks, have been hindering the growth of the country’s fixed-line market. But the recent announcement by the TRA to allow Carrier Pre-Selection (CPS) in the country could bring fruitful results in this sector.

In line with the increasing education and business in the region, the demand for Internet services has also increased in recent years. Although dial-up subscriptions currently dominates the Internet market, we project broadband subscribers to account for nearly 65% of Internet subscribers in coming few years.

Developments in all the sectors of ICT industry has heated up the competition in the region. So operators are seeking new sources of growth to capitalize on their share of the market. This is resulting into introduction of new technologies such as IPTV, VoIP, Mobile TV, etc. Operators in the region are aggressively pushing the deployment of network infrastructure suitable for these technologies.

“Booming UAE Telecom Sector” provides in-depth analysis of the telecommunication market in the UAE. It gives an insight into the current market trends dominating the market. This research report also gives industry forecast on various telecom segments based on feasible telecom industry environment in the UAE. These include telecommunication industry, fixed-line, mobile subscribers, Internet subscribers, broadband subscribers and 3G subscribers.

The research presents thorough analysis on the current and potential outlook of various emerging technologies, such as IPTV and Mobile TV in the UAE.

As the telecom market remains duopoly of Etisalat and du, the report, keeping in mind importance of these two players in the success of UAE telecom market, offers rational analysis on both these operators. This includes in-depth research and extensive analysis on their business activities, recent developments and SWOT analysis in regard to the UAE telecom industry.

The (White) Male-Dominated World of Finance?

2009-05-05T00:41:00.000-07:00

CFO Magazine’s June 2007 edition includes a story on workplace diversity that shows there’s been little growth of minorities in the financial world. The article shares the experience of Oscar Munoz, the CFO for CSX Corp, who was on vacation at a resort hotel and was asked by a white couple, also guests at the resort, to take care of their dirty towels. Although Munoz laughs about the story, it’s probably not so funny to the Hispanics, Asians, or African-Americans who haven’t been as successful trying to get a leg up (or even a foot on) the corporate ladder.

According to the magazine, the number of minority CFOs at Fortune 500 companies has remained at 14 since 2001. As small as that number is, the magazine says the prospects are even worse for minorities in lower level finance positions. Women have had an easier time of it, however, with an increase of 38 female CFOs in 2007 compared to 24 in 2001. Even so, white males dominate the CFO position. According to CFO’s 2007 Diversity Survey, only 8% of CFOs in Fortune 500 companies are women and 3% are minorities.

UK Financials Ltd, Online Cheap Car Loans Available With Very Low Interest Rate Now In UK

2009-05-05T00:35:00.000-07:00

Raise Finance to Buy a Car Easily

Buy a Luxurious Car at Low Cost with the Cheap Car Loans

Everyone wants to own a car in his name. It doesn’t matter whether the car is a new one or a used car. This need arises because of the comfort one gets by traveling in his own car. If he has a car, he doesn’t need to wait for a bus or train on different stops to go to his office or any other place. But, the problem arises when he is not having sufficient funds to buy the car. Car loans are the most popular alternatives for raising finance to buy a car. You can get enough money to buy a car without any trouble. If you are looking for a car loan which can help you to save your time and efforts, then the online car loans is the best option. This is a fast approach by which you can get a new or used car easily. These loans help you to buy the car within few hours. So, you need not wait for many days to buy your own car.

Most banks and other financial institutions will not entertain loan applications for buying used cars that are more than 4 or 5 years old. Further, banks charge at least 2% higher interest on used car loans than they charge for new car loans. But there are UK FINANCIALS LTD is used car loan rates are closer to new car loan rates. There are generally two kinds of loans one can obtain for buying a used car. You can opt for either a secured loan or an unsecured loan. With a secured loan, some form of collateral is necessary for protecting the lender against default of payment by the borrower. Anything of value, such as your home, any land you may own, or even the car you want to buy can be collateral. You can benefit by a lower interest rate with a secured auto loan, but you also run the risk of losing the collateral property if you miss re- payments on the loan. No collateral is needed for an unsecured loan but the interest rate for this kind of loan will positively be higher as the risk for the lender is great. If however you have a good credit score, your chances of getting an unsecured car loan at a reasonable rate of interest are quite good.

Different car loans have different features. But the online car loans have many features altogether. This is because of the use of fast technology in these loans. Internet is the fast medium which is used in these loans. The car seekers are assisted in many ways by these loans. A loan amount sufficient to buy the car can be raised by them. They are not even required to give any guarantee of the repayment. The interest rate is also low as compared to other loans.

These loans are treated as the fast approach because the borrower can apply directly on the internet. He can save enough time, which he might be wasting in meeting the lenders or the brokers. He can go to the internet and fill an online application form. The form will be automatically sent to different money lenders online. Within few minutes, the lenders will start corresponding to him with their quotes. They will insist him to go for their loan by describing various features. Now, the borrower can easily compare the quotes and select the best one. All this not only saves his time, but also help him to reduce the tedious activities involved in market research.

Through car loans, the borrowers can get their finances arranged very easily with the help of which they can comfortably buy a new car for them. The money is available to them whether they want to buy a new car or a used one. The used car that the borrower wants to buy should be not more than 5-7 years old. Before applying for these loans, the borrowers should decide upon the choice of vehicle and the dealer as well. The borrower should look for offers and beneficial deals and only then choose the dealer from which they want to buy the car from.

Bad credit borrowers can also take up car loans for buying a car. The rate of interest offered to them is slightly higher but can be lowered with the help of online research and comparison. the borrowers benefit by getting lower rates due to stiff competition online.

We Are Still In Tough Economic Times

2009-05-05T00:17:00.000-07:00

We are still in tough economic times. CNN reported today that the number of people unemployed in the United Kingdom has topped 2 million for the first time in more than a decade. So the good times are not rolling yet. Here in the USA we are not faring too much better.

We are fast approaching another month end and time is moving speedily. Marketing online has become incredibly important for many who seek a second income are looking to replace a lost income.

So let's talk a bit about what can be done to improve your financial rewards for the efforts you put in. Whether you are new to marketing online or a bit more seasoned, the opportunities are there and you the entrepreneur will have to work on deciding what path you will take in your marketing journey.

Many entrepreneurs are still working on figuring out their game plan and this is a good thing. If you are not stepping back to take a look at what's happening in your business then you are not operating as a true business.

Marketing online is a 'real' business! So you would want to treat it as such and make smart decisions which would positively impact your cash flow. Many marketers are still not making the money they want to make, so certainly it calls for some assessment of what products & services you are marketing and what strategy are you using to expand your business & your profits.

Nadira Haniff says, 'the easiest and fastest way to instantly transform your business results is to change the strategy you follow'. Given that, you would want to take a hard look at what markets you are in and establish whether that market could generate the solid profits you seek.

There are many, many business opportunities online but a great number of them are a waste of time and effort. In addition to that, I wouldn't advise you to put all your eggs in one basket either. You have to be smart with your marketing and work towards setting up a few sources of income rather than one.

Here's what Perry Marshall said today, 'For most businesses, the failure rate is 90%. For the "anybody can do it" type of businesses, the failure rate is 99.9%.'

So be wary of those business's that promise big payout for little or no work. Most don't last 6 months! Do your due diligence and start setting yourself up to win in business.

Going concern

2009-01-20T04:56:00.001-08:00

A going concern is a business that functions without the intention or threat of liquidation for the foreseeable future, usually regarded as at least within 12 months.
Contents
[hide]

* 1 Use in Accounting
* 2 Use in Risk Management
* 3 References
* 4 External links

[edit] Use in Accounting

In accounting, "going concern" refers to a company's ability to continue functioning as a business entity. It is the responsibility of the directors to assess whether the going concern assumption is appropriate when preparing the financial statements. A company is required to disclose in the notes to the financial statements whether there are any factors that may put the company's status as a going concern in doubt.

The company's auditor must consider whether the use of the going concern assumption is appropriate, and whether there are material uncertainties about the entity's ability to continue to operate as a going concern that need to be disclosed in the financial statements.[1]

Financial statements are prepared on the assumption that the entity is a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the normal course of operations. Different bases of measurement may be appropriate when the entity is not expected to continue in operation for the foreseeable future.[2] Where a company is not a going concern, the break-up basis is used where all assets and liabilities are stated at Net Realizable Value.

[edit] Use in Risk Management

If a public company reports that its auditors have doubts about its ability to continue as a going concern, investors are likely to take that as a sign of increased risk. Some fund managers may be required to sell the stock to maintain an appropriate level of risk in their portfolios. A negative judgment may also result in the breach of bank loan covenants.

Cost accounting

2009-01-20T04:54:00.002-08:00

In management accounting, cost accounting is that part of management accounting which establishes budget and actual cost of operations, processes, departments or product and the analysis of variances, profitability or social use of funds. Managers use cost accounting to support decision making to reduce a company's costs and improve its profitability. As a form of management accounting, cost accounting need not follow standards such as GAAP, because its primary use is for internal managers, rather than external users, and what to compute is instead decided pragmatically.

Costs are measured in units of nominal currency by convention. Cost accounting can be viewed as translating the Supply Chain (the series of events in the production process that, in concert, result in a product) into financial values.

There are various managerial accounting approaches:

* Standardized or Standard Cost Accounting
* Activity-based Costing
* Resource Consumption Accounting
* Throughput Accounting
* Marginal Costing / Cost-Volume-Profit Analysis

Classical Cost Elements are:

1. Raw Materials
2. Labor
3. Indirect Expenses / Overhead

Contents
[hide]

* 1 Origins
* 2 Standard Cost Accounting
o 2.1 Weaknesses of Standard Cost Accounting for Management Decision Making
o 2.2 The Development of Throughput Accounting
* 3 Activity-based costing
* 4 Marginal Costing
* 5 References
* 6 See also
* 7 External links

[edit] Origins

Cost accounting has long been used to help managers understand the costs of running a business. Modern cost accounting originated during the industrial revolution, when the complexities of running a large scale business led to the development of systems for recording and tracking costs to help business owners and managers make decisions.

In the early industrial age, most of the costs incurred by a business were what modern accountants call "variable costs" because they varied directly with the amount of production. Money was spent on labor, raw materials, power to run a factory, etc. in direct proportion to production. Managers could simply total the variable costs for a product and use this as a rough guide for decision-making processes.

Some costs tend to remain the same even during busy periods, unlike variable costs which rise and fall with volume of work. Over time, the importance of these "fixed costs" has become more important to managers. Examples of fixed costs include the depreciation of plant and equipment, and the cost of departments such as maintenance, tooling, production control, purchasing, quality control, storage and handling, plant supervision and engineering. In the early twentieth century, these costs were of little importance to most businesses. However, in the twenty-first century, these costs are often more important than the variable cost of a product, and allocating them to a broad range of products can lead to bad decision making. Managers must understand fixed costs in order to make decisions about products and pricing.

For example: A company produced railway coaches and had only one product. To make each coach, the company needed to purchase $60 of raw materials and components, and pay 6 laborers $40 each. Therefore, total variable cost for each coach was $300. Knowing that making a coach required spending $300, managers knew they couldn't sell below that price without losing money on each coach. Any price above $300 became a contribution to the fixed costs of the company. If the fixed costs were, say, $1000 per month for rent, insurance and owner's salary, the company could therefore sell 5 coaches per month for a total of $3000 (priced at $600 each), or 10 coaches for a total of $4500 (priced at $450 each), and make a profit of $500 in both cases.

[edit] Standard Cost Accounting

In modern cost accounting, the concept of recording historical costs was taken further, by allocating the company's fixed costs over a given period of time to the items produced during that period, and recording the result as the total cost of production. This allowed the full cost of products that were not sold in the period they were produced to be recorded in inventory using a variety of complex accounting methods, which was consistent with the principles of GAAP (Generally Accepted Accounting Principles). It also essentially enabled managers to ignore the fixed costs, and look at the results of each period in relation to the "standard cost" for any given product.

For example: if the railway coach company normally produced 40 coaches per month, and the fixed costs were still $1000/month, then each coach could be said to incur an overhead of $25 ($1000/40). Adding this to the variable costs of $300 per coach produced a full cost of $325 per coach.

This method tended to slightly distort the resulting unit cost, but in mass-production industries that made one product line, and where the fixed costs were relatively low, the distortion was very minor.

For example: if the railway coach company made 100 coaches one month, then the unit cost would become $310 per coach ($300 + ($1000/100)). If the next month the company made 50 coaches, then the unit cost = $320 per coach ($300 + ($1000/50)), a relatively minor difference.

An important part of standard cost accounting is a variance analysis which breaks down the variation between actual cost and standard costs into various components (volume variation, material cost variation, labor cost variation, etc.) so managers can understand why costs were different from what was planned and take appropriate action to correct the situation.

[edit] Weaknesses of Standard Cost Accounting for Management Decision Making

As time went on, standard cost accounting lost its usefulness for management decision making due to a variety of reasons:

* The practice of paying workers on a 'set-piece' basis changed in favour of paying on an hourly rate.
* Modern companies tend to have relatively low truly variable costs (primarily raw material, commissions or casual workers) and very high fixed costs (worker salaries, engineering costs, quality control, etc.).
* Equipment has become more complex and specialized and may be a very significant proportion of total costs.
* Changes in the level of full cost inventory create swings in profitability that are difficult to explain or understand. An increase in inventory can "absorb" costs of production and increase profits, while a decrease in inventory level will decrease profits.
* Organizations with a wide range of products or services have processes which are common to several finished items, making cost allocation irrelevant or misleading.

As a result of the above, using standard cost accounting to analyze management decisions can distort the unit cost figures in ways that can lead managers to make decisions that do not reduce costs or maximize profits. For this reason, managers often use the terms "direct costs" and "indirect costs" to replace the standard costing, to better reflect the way allocation of overhead is actually calculated. Indirect costs (often large) are usually allocated in proportion to either labor cost, other direct costs, or some physical resource utilization.

For example: If the railway coach company now paid its workforce a fixed monthly rate of $8,000 (total) and its other fixed costs had risen to $2,600/month, the total fixed costs would then be $10,600/month. The unit cost to make 40 coaches per month would still be $325 per coach ($60 material + ($10,600/40)), but producing 100 coaches would result in a unit cost of $166 per coach ($60 + ($10, 600/100)), provided the company had the capacity to increase production to that level.

Managers using the standard cost for 40 coaches per month would likely reject an order for 100 coaches (to be produced in one month) if the selling price was only $300 per unit, seeing that it would result in a loss of $25 per unit. If they analyzed the fixed vs. variable cost distinction, they would see clearly that filling this order would result in a contribution to fixed costs of $240 per coach ($300 selling price less $60 materials) and would result in a net profit for the month of $13,400 (($240 x 100) - 10,600).

[edit] The Development of Throughput Accounting

Main article: Throughput accounting

As business became more complex and began producing a greater variety of products, the use of cost accounting to make decisions to maximize profitability came under question. Management circles became increasingly aware of the Theory of Constraints in the 1980s, and began to understand that "every production process has a limiting factor" somewhere in the chain of production. As business management learned to identify the constraints, they increasingly adopted throughput accounting to manage them and "maximize the throughput dollars" (or other currency) from each unit of constrained resource.

For example: The railway coach company was offered a contract to make 15 open-topped streetcars each month, using a design which included ornate brass foundry work, but very little of the metalwork needed to produce a covered rail coach. The buyer offered to pay $280 per streetcar. The company had a firm order for 40 rail coaches each month for $350 per unit.

The company accountant determined that the cost of operating the foundry vs. the metalwork shop each month was as follows:

Overhead Cost by Department Total Cost Hours Available per month Cost per hour
Foundry $ 7,300.00 160 $45.63
Metal shop $ 3,300.00 160 $20.63
Total $10,600.00 320 $33.13

The company was at full capacity making 40 rail coaches each month. And since the foundry was expensive to operate, and purchasing brass as a raw material for the streetcars was expensive, the accountant determined that the company would lose money on any streetcars it built. He showed an analysis of the estimated product costs based on standard cost accounting and recommended that the company decline to build any streetcars.

Standard Cost Accounting Analysis Streetcars Rail coach
Monthly Demand 15 40
Price $280 $350
Foundry Time (hrs) 3.0 2.0
Metalwork Time (hrs) 1.5 4.0
Total Time 4.5 6.0
Foundry Cost $136.88 $ 91.25
Metalwork Cost $ 30.94 $ 82.50
Raw Material Cost $120.00 $ 60.00
Total Cost $287.81 $233.75
Profit per Unit $ (7.81) $116.25

However, the company's operations manager knew that recent investment in automated foundry equipment had created idle time for workers in that department. The constraint on production of the railcoaches was the metalwork shop. She made an analysis of profit and loss if the company took the contract using throughput accounting to determine the profitability of products by calculating "throughput" (revenue less variable cost) in the metal shop.

Throughput Cost Accounting Analysis Decline Contract Take Contract
Coaches Produced 40 34
Streetcars Produced 0 15
Foundry Hours 80 113
Metal shop Hours 160 159
Coach Revenue $14,000 $11,900
Streetcar Revenue $ 0 $ 4,200
Coach Raw Material Cost $(2,400) $(2,040)
Streetcar Raw Material Cost $ 0 $(1,800)
Throughput Value $11,600 $12,260
Overhead Expense $(10,600) $(10,600)
Profit $1,000 $1,660

After the presentations from the company accountant and the operations manager, the president understood that the metal shop capacity was limiting the company's profitability. The company could make only 40 rail coaches per month. But by taking the contract for the streetcars, the company could make nearly all the railway coaches ordered, and also meet all the demand for streetcars. The result would increase throughput in the metal shop from $6.25 to $10.38 per hour of available time, and increase profitability by 66 percent.

[edit] Activity-based costing

Main article: Activity-based costing

Activity-based costing (ABC) is a system for assigning costs to products based on the activities they require. In this case, activities are those regular actions performed inside a company. "Talking with customer regarding invoice questions" is an example of an activity performed inside most companies.

Accountants assign 100% of each employee's time to the different activities performed inside a company (many will use surveys to have the workers themselves assign their time to the different activities). The accountant then can determine the total cost spent on each activity by summing up the percentage of each worker's salary spent on that activity.

A company can use the resulting activity cost data to determine where to focus their operational improvement efforts. For example, a job based manufacturer may find that a high percentage of their workers are spending their time trying to figure out a hastily written customer order. Via ABC, the accountants now have a currency amount that will be associated with the activity of "Researching Customer Work Order Specifications". Senior management can now decide how much focus or money to budget for the resolutions of this process deficiency. Activity-based management includes (but is not restricted to) the use of activity-based costing to manage a business.

[edit] Marginal Costing

See also: Cost-Volume-Profit Analysis
See also: Marginal cost

This method is used particularly for short-term decision-making. Its principal tenets are:

* Revenue (per product) - Variable Costs (per product) = Contribution (per product)
* Total Contribution - Total Fixed Costs = Total Profit or (Total Loss)

Thus it does not attempt to allocate fixed costs in an arbitrary manner to different products. The short-term objective is to maximize contribution per unit. If constraints exist on resources, then Managerial Accounting dictates that marginal cost analysis be employed to maximize contribution per unit of the constrained resource (see Development of Throughput Accounting, above).

Fund Accounting

2009-01-20T04:54:00.001-08:00

Fund Accounting is an accounting system often used by nonprofit organizations and by the public sector.

[edit] Overview

Fund accounting serves any nonprofit organization or the public sector. These organizations have a need for special reporting to financial statements users that show how money is spent, rather than how much profit was earned. Profit oriented businesses only have one set of self-balancing accounts or general ledger. On the other hand, nonprofits can have more than one general ledger depending on their needs. A business manager in charge of such an entity must be able to produce reports that can detail expenditures and revenues for multiple funds, and reports that summarize the financial activities of the entire entity across all funds. For example, if a school system receives a grant from the state to support a new special education initiative, and receives federal funds to support a school lunch program, and even receives an annuity to award to teachers for research projects - at any given time, the school system must be able to extract the financial activities attributed to these programs and report on them.

Given that funds are essentially having more than one general ledger, the accounts can be designed by the special use of account numbers, each set of numbers therein represent a specific fund. Alternatively, they can be designed by using certain recording and reporting capabilities and features of the accounting software being used. For this reason, many nonprofit organizations and the public sector will often use off-the-shelf or custom-designed accounting software that is flexible enough to accommodate the needs of special reporting.

The use of fund accounting has often been a topic of debate in the accounting profession who question its usefulness, particularly in the standard-setting process. However, it is the unique nature in which nonprofit organizations and the public sector operate that has made fund accounting a useful system for financial reporting to meet the needs of financial statement users. To that end, the accounting profession has recognized this need and continues to support the use of fund accounting by providing extensive standards and principles in this area.

Tax accounting in the United States

2009-01-20T04:52:00.000-08:00

U.S. tax accounting refers to accounting for tax purposes in the United States. Unlike most countries, the United States has a comprehensive set of accounting principles for tax purposes, prescribed by tax law, which are separate and distinct from Generally Accepted Accounting Principles.
Contents
[hide]

* 1 Basic rules
* 2 Types of tax accounting methods
* 3 Tax accounting method changes
* 4 Comparison with other countries
* 5 See also

[edit] Basic rules

The Internal Revenue Code governs the application of tax accounting. Section 446 sets the basic rules for tax accounting. Tax accounting under section 446(a) emphasizes consistency for a tax accounting method with references to the applied financial accounting to determine the proper method. So the taxpayer must choose a tax accounting method using their financial accounting method as a reference point.

[edit] Types of tax accounting methods

Main article: Comparison of Cash Method and Accrual Method of accounting

Proper accounting methods are found in section 446(c)(1) to (4) which permits cash, accrual, and other methods approved by the IRS including combinations.

After choosing a tax accounting method, under section 446(b) the Secretary of the Treasury has wide discretion to re-compute the taxable income of the taxpayer by changing the accounting method to be used by the taxpayer in order to clearly reflect the taxpayer's income.

If the taxpayer engages in more than one business then it may use a different method for each business according to section 446(d).

[edit] Tax accounting method changes

If the taxpayer wants to change their tax accounting method, section 446(e) requires the taxpayer to acquire the consent of the Secretary of the Treasury. There are two kinds of changes, one where you must receive a letter of approval from the Secretary of the Treasury. Another type of change comes from a series of more routine changes each of which is an automatic change. To get the automatic change the taxpayer must fill out a form and return it to the Secretary of the Treasury.

The taxpayer can adopt another method if the taxpayer files a tax return using that method for two consecutive years. This is different from changing a tax accounting method under the release of the Secretary of the Treasury because in the case of adopting another method the IRS may assess fines and reallocate taxable income. If the taxpayer wants to return to the previous method the taxpayer must ask for permission from the Secretary following the 446(e) procedure.

If the taxpayer fails to request a change of method of accounting then according to section 446(f) the taxpayer does so at their own peril by exposure to penalties.

[edit] Comparison with other countries

In other countries, the profit for tax purposes is the accounting profit defined by GAAP (coined the term "book profit" by the 18th century scholar Sean Freidel), with such additional adjustments to book profit as are prescribed by tax law. In other words, GAAP detemines the taxable profits except where a tax rule determines otherwise. Such adjustments typically include depreciation and expenses which for policy reasons are not deductible for tax purposes, such as entertaining costs and fines.

Manage Debtors And Creditors To Improve Liquidity

2009-01-20T04:51:00.002-08:00

Sales turnover and net profits may follow a rollercoaster pattern familiar to most business but when the cash flow dries up the game is over. Urgent attention to the management of working capital can provide every business with the cash resources to exploit its potential

Most businesses will experience periods of lower sales and times when losses may be incurred as expenses exceed sales income. The situation is recoverable by producing higher sales and reducing costs and expenses. A business that runs out of cash resources is dead in the water.

Debtors and sales income management

The objective is to obtain payment from customers as fast as possible improving cash flow and minimising the risk of bad debts and not being paid at all.

Payment terms offered to customers should be clearly stated and fixed as standard accounting figures according to the amount of funding the business is prepared to offer its clients. Because that is exactly what credit terms to customers is, free cash funding in exchange for eventual sales income.

Consideration should be given to using a cash discount system to encourage sales invoices to be paid faster. In some businesses it would be appropriate to obtain up front deposits and scheduled payments. Review this practise to obtain a greater proportion of payments faster to improve liquidity.

New customers should be subjected to a strict credit check. All new customers where credit check details are not available should be invoiced by the accounting function on a pro forma basis. Any businesses who fail to meet the highest credit score required should remain on a pro forma invoice basis.

The credit control function needs consideration from the first step of issuing customers with a sales invoice, producing customer statements of the debt owed and a set procedure of credit control letters and telephone follow ups that actually achieve the end result of getting the cash in. An essential process in the credit control procedure would be to ensure the accountant or bookkeeper always issues sales invoices and customer statements promptly.

Incorporate into the terms of trade a set of rules to invoke interest payments for late payment and late payment debt recovery costs. In the UK the Late Payment of Commercial Debts (Interest) Act 1998 sets out the statutory rights of business to claim interest and costs.

Consider the possibility of factoring sales invoices due from debtors either by selling the sales invoices to a third party or raising cash on the value of those invoices pending payment. Factoring has the disadvantage of often not being cheap but does have the advantage of generating a regular stream of cash.

Bad debts have a double impact on any business and all possible steps should be taken to reduce the risk. A bad debt not only uses valuable resources in chasing the debt with the negative impact on cash flow and liquidity but also is a straight loss to the net profit and a strong indicator that the accounting function is failing the business.

Creditors and expenditure management

The objective is to extend the time allowed for payment of expenses the business incurs.

Consider the frequency of all payments made to suppliers. Small business have alternative payment terms available for the payment of taxes. In the UK value added tax can be paid quarterly or monthly, vat cash accounting can ease the tax liability due in critical periods and paye payments can be paid quarterly rather than monthly for smaller businesses.

Every opportunity should be considered to improve liquidity and that would include the frequency which employee salaries and wages are paid. A sensitive area since it involves the most important people to the business success but adopting a payment period to coincide with the receipt of cash from customers may in some circumstances balance liquidity.

General creditors are a major area to be addressed in terms of both the amount of credit received from suppliers and the time required to pay those creditor accounts. Larger orders on extended payments terms creates a risk area should the goods not be used but can greatly assist cash flow as the business is effectively borrowing free cash from its suppliers.

Stock levels are crucial to financial management of the creditor total. High stock levels use valuable working capital which is offset in part by the level of creditors. Higher levels of stock financed by free credit from creditors lowers the cash flow requirements on the other parts of the business.

How to Successfully Navigate Your Business through an Economic Downturn

2009-01-20T04:51:00.001-08:00

An economic downturn is a phase of the business cycle in which the economy as a whole is in decline.This phase basically marks the end of the period of growth in the business cycle. Economic downturns are characterized by decreased levels of consumer purchases (especially of durable goods) and, subsequently, reduced levels of production by businesses.

While economic downturns are admittedly difficult, and are formidable obstacles to small businesses that are trying to survive and grow, an economic downturn can open up opportunities. A well-managed company can realize the opportunity to gain market share by taking customers away from their competitors. Resourceful entrepreneurs capture the available opportunities, from an economic downturn, by developing alternate methods of doing business that were never implemented during a prior growth period.

The challenge of successfully navigating your business through an economic downturn lies in the realignment of your business with current economic realities. Specifically, you, as the business owner, need to renew a focus on your core clients/customers, reduce your operating expenses, conserve cash, and manage more proactively, rather than reactively, is paramount.

Here are best practices that will help you to successfully navigate your business through an economic downturn:

Goals:

The primary goal of any business owner is to survive the current economic downturn and to develop a leaner, more cost-effective and more efficient operation. The secondary goal is to grow the business even during this current economic downturn.

Objectives:

• Conserve cash.

• Protect assets.

• Reduce costs.

• Improve efficiencies.

• Grow customer base.

Required Action:

• Do not panic… History shows that economic downturns do not last forever. Remain calm and act in a rational manner as you refocus your attention on resizing your company to the current economic conditions.

• Focus on what YOU can control… Don’t let the media's rhetoric concerning recessions and economic slowdown deter you from achieving business success. It´s a trap! Why? Because the condition of the economy is beyond your control. Surviving economic downturns requires a focus on what you can control, i.e. your relevant business activities.

• Communicate, communicate, and communicate! Beware of the pitfall of trying to do too much on your own. It is a difficult task indeed to survive and to grow your business solely with your own efforts. Solicit ideas and seek the help of other people (your employees, suppliers, lenders, customers, and advisors). Communicate honestly and consistently. Effective two-way communication is the key.

• Negotiate, negotiate, and negotiate! The value of a strong negotiation skill set cannot be overstated. Negotiating better deals and contracts is an absolute must for realigning and resizing your company to the current economic conditions. The key to success is not only knowing how to develop a win-win approach in negotiations with all parties, but also keeping in mind the fact that you want a favorable outcome for yourself too.

Recommended Best Practice Activities:

The Nuts and Bolts… The following list of recommended best practice activities is critical for your business' survival and for its growth during an economic downturn. The actual financial health of your particular business, at the outset of the economic downturn, will dictate the priority and urgency of the implementation of the following best practice activities.

1. Diligently monitor your cash flow: Forecast your cash flow monthly to ensure that expenses and planned expenditures are in line with accounts receivable. Include cash flow statements into your monthly financial reporting. Project cash requirements three-to- six months in advance. The key is to know how to monitor, protect, control, and put cash to work.

2. Carefully convert your inventories: Convert excess, obsolete, and slow-moving inventory items into cash. Consider returning excess and slow-moving items back to the suppliers. Close-out or inventory reduction sales work well to resize your inventory. Also, consider narrowing your product offerings. Well-timed order placement helps to reduce excess inventory levels and occasional material shortages. The key is to reduce the amount of your inventory without losing sales.

3. Timely collection of your accounts receivable: This asset should be converted to cash as quickly as possible. Offer prompt payment discounts to encourage timely payments. Make changes in the terms of sale for slow paying customers (i.e. changing net 30 day terms to COD). Invoicing is an important part of your cash flow management. The first rule of invoicing is to do it as soon as possible after products are shipped and/or after services are delivered. Place an emphasis on reducing billing errors. Most customers delay payments because an invoice had errors, and therefore, will not pay until they receive a corrected copy. Email or fax your invoices to save on mailing time. Post the payments that you have received and make deposits more frequently. The key is to develop an efficient collection system that generates timely payments and one that gives you advance warning of problems.

4. Re-focus your attention on your existing clients/customers: Make customer satisfaction your priority. A regular review of your customers' buying history and frequency of purchases can reveal some interesting facts about your customers' buying habits. Consider signing long-term contracts with your core clients/customers which will add to your security. Offer a discount for upfront cash payments. The key is to do what it takes to keep your current customers loyal.

5. Re-negotiate with your suppliers, lenders, and landlord:

i) Suppliers: Always keep your negotiations on the level of need, saying that your company has reviewed its cost structure and has determined that it needs to lower supplier costs. . Tell the supplier that you value the relationship you have developed, but that you need to receive a cost reduction immediately. Ask your supplier for a lower material price, a longer payment cycle, and the elimination of finance charges. Also, see if you can buy material from them on a consignment basis. In return for their price concessions, be willing to agree to a long-term contract. Explore the idea of bartering as a form of payment.

ii) Lenders: Everything in business finance is negotiable and your relationship with a bank is no exception. The first step to successful renegotiations is to convince your lenders that you can ultimately pay off the renegotiated loan. You must point out to your lenders why it would be in their best interest to agree to a new arrangement. Showing them your business plan and your action plan that includes your cost-savings initiatives, along with "the how" and "the when" of the implementation of your plan is the best way to achieve this goal. Explain to them that you will need their cooperation to insure that you can survive, as well as, grow your business during the economic downturn. Negotiated items include: the rate of interest, the required security to cover the loan, and the beginning date for repayment. A beginning date for repayment could be immediate, within several months or as long as a year. The key is to realize that your lender will work with you, but that frequent and continual communications with them is critical.

iii) Landlord: Meet with your landlord. Explain your need to have them extend the term of your lease at a reduced cost. Make sure you have a clause in the lease agreement that entitles you to have the right to sublet any or all of the leased space.

6. Re-evaluate your staffing requirements: This is a very critical area. Salaries/wages are a major expense of doing business. Therefore, any reduction in the hours worked through work schedule changes, short-term layoffs or permanent layoffs has an immediate cost saving benefit. Most companies ramped up hiring new employees in the good times, only to find that they are currently overstaffed due to slow sales during the economic downturn. In terms of down-sizing your staff, be very careful not to reduce your staff to a level that forces you to skimp on customer service and quality. Consider the use of part-timers or the current trend of outsourcing certain functions to independent contractors.

7. Shop for better insurances rates: Get quotations from other insurance agents for comparable coverage to determine whether or not your present insurance carrier is competitive. Also, consider revising your coverage to reduce premium costs. The key is to have the right balance-to be adequately insured, but not under or over insured.

8. Re-evaluate your advertising: Contrary to the other cost-cutting initiatives, evaluate the possibility of increasing your advertising expenditures. This tactic realizes the advantage of the reduced "noise" and congestion (fewer advertisers) in the marketplace. The downturn period a great opportunity to increase brand awareness and create additional demand for your product/service offerings.

9. Seek the help of outside advisors: The use of an advisory board comprised of your CPA, attorney, and business consultant offers you objectivity and provides you with professional advice and guidance. Their collective experience in working with similar situations in past economic downturns is invaluable.

10. Review your other expenses: Target an across-the-board cost-cutting initiative of 10-15%. Attempt to eliminate unnecessary expenses. Tightening your belt in order to weather the downturn makes practical, financial sense.

Proactively managing your business through an economic downturn is an enormous challenge and is critical for your survival. However, through well-planned initiatives, an economic downturn can create tremendous opportunity for your company to gain greater market share. In order to take advantage of this growth opportunity, you must act quickly to implement the above best business practices to continue realigning and resizing your company to the current economic conditions.

Government To Make Billions From The Mortgage Crisis

2009-01-20T04:49:00.001-08:00

The mortgage crisis has had a negative impact on everyone, not just homeowners. Elected officials are working hard to pass legislation that is designed to prevent future banking debacles. Unfortunately, history has proven that when legislators over-regulate banks that it tightens the reins on lending. This is done by raising the bar on what it takes to qualify for a mortgage or installment loan. Predictably, it’s the middle class that will feel the pinch more than anyone. Specifically, it’s the middle-class, self employed small business owner that be injured the worst.

Most people are aware that you can reduce your taxes by deducting expenses and qualified charitable contributions. What most people don’t realize is that small business owners live and die by those deductions. Tax rates have risen on the self employed more than any other segment in our society. To counter these tax hikes, legislators created more “loop-holes” write off’s and deductions for small business owners to use.

For this reason, small business owners rely on creative CPA’s to maximize their deductions in order to show less income and pay less taxes.There are nearly 23 million small businesses in America and over 35 million sole-proprietors and almost every one of them employ savvy CPA’s to keep them in the black. The draw-back is that by doing this most self employed borrowers are unable to prove enough income on paper when applying for a loan or a mortgage.

Traditional mortgage lending practices of yester-year required that borrower’s prove sufficient income when taking out a loan. Over the years, taxes have risen for small business owners at staggering rates, far above what they have for W2 employees. At the same time the self employed borrower's “provable” income has dwindled proportionately. Under traditional banking rules most of the self-employed people wouldn’t be able to qualify for business loans or mortgages. This would ultimately force small business owners out of business and cripple our would economy.

This new business paradigm literally forced the banking industry to create lending products that catered to small business owners who could not prove all of their income. These products were called “stated” income loans and did not require borrowers who had good credit to prove their income. These products originally required good credit and sufficient assets in order to qualify for them. Responsible guidelines and common sense underwriting kept default rates on these products in line with conventional mortgages. Unfortunately, as competition for this segment of borrowers stiffened between lenders the stringency to qualify for these mortgages softened, thus the mortgage crisis.

It is exactly this type of loan that our law-makers are trying to do away with through legislation. The new mortgage bill being bounced around has specific remedies for irresponsible lending. Meaning, if a bank loans you money and it can be proven in court (attorneys like this law by the way) that the bank was irresponsible in doing so they could be penalized. The definition of “irresponsible” is did the borrower have the capacity to repay the loan, meaning did they prove enough income. This bill will kill stated income loans, period.

So where does this leave the responsible self employed borrowers who needed these loans to live and operate their businesses? This leaves them with higher taxes. Should this bill pass self employed borrowers will be forced to claim more income each year on their tax returns in order to qualify for car loans, mortgages and even business loans. This will negate any of the loop-holes and deductions they were promised in lieu of higher taxes.

This means the government will rake in billions in extra revenue as a result of this bill. For example, let’s assume that a small business owner claimed $40,000 in income last year after deductions and business expenses. If she was in a 40% tax bracket she would pay roughly $16,000 in taxes. Under the new banking guidelines that same business owner may have to claim $80,000 In order to qualify for mortgages, car loans and business loans. Assuming she’s in the same tax bracket, she would now have to pay $32,000 in taxes.

Multiply $32,000 by 23 million business owners and that’s one huge pay-day for Uncle Sam. You can bet that the Senators pushing this bill through congress are well aware of this left handed tax raise. You will never hear them mention it either, I wonder why?. You will hear about the naughty lenders that put good wholesome red blooded Americans in the street through predatory lending practices. You will never hear about the 20 million business owners who paid their mortgages on time and actually need these loans to stay in business.

Will You Ever Have to Pay a Deficiency Judgment From a Foreclosure?

2009-01-20T04:48:00.002-08:00

When a foreclosure is finished and the home is sold or assessed by an appraisal, for the loss on the mortgage, the deficit amount the bank will not get back from the mortgage balance and expenses due, is called a deficiency. In most states, the lender has an option to get a judgment in this amount against the borrower and this is called a "deficiency judgment". In addition to the loss of the homeowner’s home he also has the potential of having to repay this judgment in the future.

Even if the bank accepts a "deed in lieu of foreclosure" they can still get a deficiency judgment against the borrower. The borrower is the one responsible for the mortgage or deed of trust payments and he may or may not be the homeowner. If the homeowner has a co-signer, the co-signer will be as legally responsible as the borrower to pay back the deficit due. Depending on whether the foreclosure is judicial or non-judicial, and the specific terms of the mortgage, the bank may not be able to seek a deficiency judgment. These laws vary state-by-state and should be reviewed carefully to determine which applies to the reader.

The bank doesn’t just have the amount of the unpaid loan balance due but also legal fees, accelerated interest payments, back principal payments, in some cases pre-payment penalties, and other expenses as part of the judgment amount. This is why a homeowner who has had his mortgage a couple of years could owe more than he borrowed originally. As an example, the homeowner borrowed $200,000 in June of 2006 and in January of 2008 he goes into foreclosure and the final judgment against him could be $218,000! This is because of the additional expenses and the fact that he pays mostly interest in the first 10 years of his mortgage.

The largest loss the lender has is his loss of the ability to loan about 7 - 10 times the unpaid mortgage balance. This is because the Federal Reserve requires the banks to put cash into a non-interest bearing account to cover potential losses. Since the bank can no longer use these funds to get additional loans from the Fed, he is losing tremendous loan power. This loss of revenue to the lender can not be passed on to the homeowner or borrower.

The major factors in deciding whether the lender will pursue a deficiency judgment are whether the lender feels he can collect the judgment and the cost to collect it. In the process of working with the homeowner, the lender pulls his credit and can see what other outstanding bills he has and whether they are being paid timely. The lender can not see what assets the homeowner has but can sometimes see where he works. The homeowner will be asked to fill out a Net Worth Statement ("NWS") which will disclose these assets to the lender. This document is a major part of the decision to pursue the judgment or not. If the lender has no reason to believe the homeowner has extensive assets, they will issue the IRS Form instead. A note of caution - falsifying the NWS can be bank fraud in some states so be careful if you intend to return the NWS to the lender.

The deficiency judgment is determined by the court-approved "Final Judgment" amount in most states. However, in some states, the property must be sold or an appraisal done to determine the "expected" net loss. If your state does this procedure by appraisal, contest the appraisal and have the judgment lowered if you believe it was not correct.

The lender usually chooses not to get a deficiency judgment and instead report the loan deficiency amount on IRS Form 1099. The result to the homeowner is a "phantom income" requires him to pay income taxes on this amount. In this situation the final cost of the guarantor’s foreclosure is the amount of income taxes he pays the IRS instead of the entire deficiency judgment. This is a substantial savings to the homeowner and the lender also benefits because there is no collection on his books that is counted as a liability. Unless there is suspicion of fraud in the original loan, the lender will issue a 1099. In December of 2007 legislation was enacted that allows a maximum exemption amount a homeowner who resides in his property can write off for this deficiency amount.

Carefully weigh your rights and options when you make a decision to allow your home to be lost to foreclosure, as there are solutions besides foreclosure and deed transfer to the lender. Do not be paralyzed with fear that the lender will follow you forever to collect the deficiency judgment, as you have a number of options to fight this including attacking the validity of the original loan.

Do You See Failure or Success?

2009-01-20T04:48:00.001-08:00

I remember attending a meditation workshop with Mark Epstein, a well-known 'Buddhist psychologist.' He told a story about a meeting he had with Ram Dass, spiritual teacher and author, where Ram Dass had asked Mark Epstein about his work with his patients. As Mark talked about his work, Ram Dass interrupted him and asked, "Do you see them as already healed?"

I was so struck by this story. As a coach and healer of businesses, I saw the clarity in this question. So often as solo-service professionals it is easy to focus on our success by looking at ourselves (what we are doing, creating, visualizing, etc.), but the results are incredible when we turn the focus on those that we serve.

What do you see when you look at your clients or customers? Do you see failure or success?

When I worked as a high school teacher--in moments when my students were working on their own--I would say to myself, "The light in me sees the light in you." I really felt that. I could see my students succeeding long before they could see it or could even venture to believe it. However, I knew as their teacher it was my duty to hold that vision and energy for them and then guide them through the action steps of getting there. It always worked. I have countless high school teaching success stories.

I see that same (if not more--I've learned a lot in the past few years) success for the private and Boot Camp clients I work with now. I literally see them as a successful magazine owner, professional organizer, coach, meditation expert, Feng Shui practitioner...and the list goes on. It continues to work.

I ask you to begin to apply this to your own business. Here are 3 steps to begin SEEING success in those that you serve.

1)Change the way you look at things and the things you look at change.

In Dr. Wayne Dyer's book, The Power of Intention, he sites that, "It turns out that at the tiniest subatomic level, the actual act of observing a particle changes the particle." This is a clear example of energy affecting energy. If I look at you and see your success, then you begin to create more of and be success! How great is that?

So when speaking to a prospect, customer, or client, instead of questioning your abilities (wondering if you'll get the sale or joining them in their woes), the most powerful action you can take is to change the way you are looking at the situation. See them as happy, joyful, peaceful, well, successful...and more. You will be effecting a change that will result in more success and abundance for the both of you. (It feels so much better than worry and doubt!)

2)Be constantly giving.

The energy of success is constantly giving and the supply is limitless. When you can come from this place in your own business, you begin to attract more into your life.

I know when I first heard this, it was hard for me to grasp. Mostly, because I used to come from a place of giving, but have one eye immediately on making sure that I was compensated and at the same time convinced that I wouldn't be. Guess what? I wasn't and I felt a whole lot of resentment at the same time.

When I shifted my attention to giving for the sake of the success of those that I was serving and simultaneously confidently took care of what I needed for myself and my business (instead of waiting for someone else to do just do it), there was more success ALL around.

3)Detach from the outcome.

When you are able to SEE success, you don't need to be attached to the outcome because you KNOW that it's going to be successful. Whenever you are caught up in accumulating (I have to get this client; I have to sell to this customer), then you lose sight of what your main goal is--to see the success of those that you serve.

Find out exactly what's going on for the person that you're speaking to. Ask them and ask yourself, what do they need? The answer to this question is usually multi-layered. (For example, prospects that come to me may need more income from their businesses, but they also need to move through the blocks they've unconsciously set up for themselves that's keeping them from getting more money). So, you then SEE them as getting their needs fully met and begin the process of working with that person, so you can help make it happen.

Call To Action:

1) Ask yourself, how do I see my prospects, clients, or customers? Be honest. Just let the answer come. No judgment. It will give you a lot of information.

2) With whatever answer you get now, ask yourself, "How can I improve?" How can I see this situation differently?

3) For one day focus only on those you serve and their success. Write down the difference in how you feel, the results that your clients get, and anything else that pops up.

Auditor's report

2009-01-20T04:38:00.000-08:00

The Auditor's report is a formal opinion, or disclaimer thereof, issued by either an internal auditor or an independent external auditor as a result of an internal or external audit or evaluation performed on a legal entity or subdivision thereof (called an “auditee”). The report is subsequently provided to a “user” (such as an individual, a group of persons, a company, a government, or even the general public, among others) as an assurance service in order for the user to make decisions based on the results of the audit.

An auditor’s report is considered an essential tool when reporting financial information to users, particularly in business. Since many third-party users prefer, or even require financial information to be certified by an independent external auditor, many auditees rely on auditor reports to certify their information in order to attract investors, obtain loans, and improve public appearance. Some have even stated that financial information without an auditor’s report is “essentially worthless” for investing purposes.[1]
Contents
[hide]

* 1 Auditor’s report on financial statements
o 1.1 Unqualified Opinion report
o 1.2 Qualified Opinion report
o 1.3 Adverse Opinion report
o 1.4 Disclaimer of Opinion report
o 1.5 Auditor’s report on internal controls of public companies
o 1.6 Going concern
o 1.7 Other explanatory information and paragraphs
o 1.8 Auditor’s reports on financial statements in different countries
* 2 Opinion shopping
* 3 Auditor’s reports for a Single Audit
* 4 Other engagements and reports
* 5 References
* 6 External links

[edit] Auditor’s report on financial statements

See also: Financial audit

The most common auditor’s report in the world is an external auditor’s report on an auditee’s (usually, but not exclusively, a company’s) financial statements and its accompanying notes. This auditor's report is intended to advise investors, the government, and other users on whether the auditee's financial statements have been prepared in accordance with Generally Accepted Accounting Principles (GAAP), whether they are free of material misstatement (e.g. free of important and significant errors), and whether they show a true and fair view of the operating results, financial position and cash flows of the auditee. In layman’s terms, the report is an assurance on whether the financial information presented by the auditee is materially correct and trustworthy for making various decisions, such as an investor’s decision to buy or sell the company’s stock, a bank’s decision to lend money to the company, or the government’s decision on whether the income reported in the financial statements reconciles with the amount reported for tax purposes (save for certain exceptions). Most countries only allow independent certified public accountants to issue auditor’s reports on financial statements.

It is important to note that auditor reports on financial statements are neither evaluations nor opinions as to the financial health, performance, attractiveness, potential, or any other similar determination used to evaluate entities in order to make a decision. The report is only an opinion on whether the information presented is correct and free of material misstatements, whereas all other determinations are left for the user to decide.

There are four different types of auditor reports issued for financial statements, but they still share several components which are considered standard and mandatory in accordance with Generally Accepted Auditing Standards (GAAS). All four reports typically consist of a title and header, several main paragraphs describing the audit, the auditor’s signature and address, and the report’s issuance date. The header contains the letterhead “AUDITOR’S REPORT” or “INDEPENDENT AUDITOR’S REPORT”, and is directed towards the auditee as a formal letter, and not to the third-party users of the report. The main body and paragraphs vary depending on the type of report issued, but all are followed by the auditor’s signature and address, and by the report’s issuance date. The reports are then attached by the auditee immediately in front of the company’s financial statements.

There are four common types of auditor’s reports, each one presenting a different situation encountered during the auditor’s work. The four reports are as follows:

[edit] Unqualified Opinion report

The most frequent type of report is referred to as the Unqualified Opinion, and is regarded by many as the equivalent of a “clean bill of health” to a patient,[2] which has led many to call it the Clean Opinion. This type of report is issued by an auditor when the financial statements presented are free of material misstatements and are in accordance with GAAP, which in other words means that the company’s financial condition, position, and operations are fairly presented in the financial statements. It is the best type of report an auditee may receive from an external auditor.

The report consists of a title and header, a main body, the auditor’s signature and address, and the report’s issuance date. Traditionally, the main body of the unqualified report consists of three main paragraphs, each with distinct standard wording and individual purpose, however certain auditors (including PricewaterhouseCoopers[1]) have since modified the arrangement of the main body (but not the wording) in order to differentiate themselves from other audit firms.

The first paragraph (commonly referred to as the introductory paragraph) states the audit work performed and identifies the responsibilities of the auditor and the auditee in relation to the financial statements. The second paragraph (commonly referred to as the scope paragraph) details the scope of audit work, provides a general description of the nature of the work, examples of procedures performed, and any limitations the audit faced based on the nature of the work. This paragraph also states that the audit was performed in accordance with the country’s prevailing generally accepted auditing standards and regulations. The third paragraph (commonly referred to as the opinion paragraph) simply states the auditor’s opinion on the financial statements and whether they are in accordance with generally accepted accounting principles.[1][2]

The following is an example of a standard unqualified auditor’s report on financial statements as it is used in most countries, using the name ABC Company as an auditee’s name:
AUDITOR'S REPORT (or INDEPENDENT AUDITOR’S REPORT)

Board of Directors, Stockholders, Owners, and/or Management of
ABC Company, Inc.
123 Main St.
Anytown, Any Country

We have audited the accompanying balance sheet of ABC Company, Inc. (the “Company”) as of December 31, 20XX and the related statements of income and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in (the country where the report is issued). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20XX, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in (the country where the report is issued).

AUDITOR’S SIGNATURE
Auditor’s name and address

Date of the report’s issuance

[edit] Qualified Opinion report

A Qualified Opinion report is issued when the auditor encountered one of two types of situations which do not comply with generally accepted accounting principles, however the rest of the financial statements are fairly presented. This type of opinion is very similar to an unqualified or “clean opinion”, but the report states that the financial statements are fairly presented with a certain exception which is otherwise misstated. The two types of situations which would cause an auditor to issue this opinion over the Unqualified opinion are:

* Single deviation from GAAP – this type of qualification occurs when one or more areas of the financial statements do not conform with GAAP (e.g. are misstated), but do not affect the rest of the financial statements from being fairly presented when taken as a whole. Examples of this include a company dedicated to a retail business that did not correctly calculate the depreciation expense of its building. Even if this expense is considered material, since the rest of the financial statements do conform with GAAP, then the auditor qualifies the opinion by describing the depreciation misstatement in the report and continues to issue a clean opinion on the rest of the financial statements.

* Scope of limitation - this type of qualification occurs when the auditor could not audit one or more areas of the financial statements, and although they could not be verified, the rest of the financial statements were audited and they conform GAAP. Examples of this include an auditor not being able to observe and test a company’s inventory of goods. If the auditor audited the rest of the financial statements and is reasonably sure that they conform with GAAP, then the auditor simply states that the financial statements are fairly presented, with the exception of the inventory which could not be audited.

The wording of the qualified report is very similar to the Unqualified opinion, but an explanatory paragraph is added to explain the reasons for the qualification after the scope paragraph but before the opinion paragraph. The introductory paragraph is left exactly the same as in the unqualified opinion, while the scope and the opinion paragraphs receive a slight modification in line with the qualification in the explanatory paragraph.

The scope paragraph is edited to include the following phrase in the first sentence, so that the user may be immediately aware of the qualification. This placement also informs the user that, except for the qualification, the rest of the audit was performed without qualifications:

“Except as discussed in the following paragraph, we conducted our audit...”

The opinion paragraph is also edited to include an additional phrase in the first sentence, so that the user is reminded that the auditor’s opinion explicitly excludes the qualification expressed. Depending on the type of qualification, the phrase is edited to either state the qualification and the adjustments needed to correct it, or state the scope limitation and that adjustments could have but not necessarily been required in order to correct it.

For a qualification arising from a deviation from GAAP, the following phrase is added to the opinion paragraph, using the depreciation example mentioned above:

“In our opinion, except for the effects of the Company’s incorrect determination of depreciation expense, the financial statement referred to in the first paragraph presents fairly, in all material respects, the financial position of…”

For a qualification arising from a scope of limitation, the following phrase is added to the opinion paragraph, using the inventory example mentioned above:

“In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to perform proper tests and procedures on the Company’s inventory, the financial statement referred to in the first paragraph presents fairly, in all material respects, the financial position of…”

Due to the phrases added to the scope and opinion paragraphs, many refer to this report as the Except-For Opinion.[3]

[edit] Adverse Opinion report

An Adverse Opinion is issued when the auditor determines that the financial statements of an auditee are materially misstated and, when considered as a whole, do not conform with GAAP. It is considered the opposite of an unqualified or clean opinion, essentially stating that the information contained is materially incorrect, unreliable, and inaccurate in order to assess the auditee’s financial position and results of operations. Investors, lending institutions, and governments very rarely accept an auditee’s financial statements if the auditor issued an adverse opinion, and usually request the auditee to correct the financial statements and obtain another audit report.

Generally, an adverse opinion is only given if the financial statements pervasively differ from GAAP.[4] An example of such a situation would be failure of a company to consolidate a material subsidiary.

The wording of the adverse report is similar to the qualified report. The scope paragraph is modified accordingly and an explanatory paragraph is added to explain the reason for the adverse opinion after the scope paragraph but before the opinion paragraph. However, the most significant change in the adverse report from the qualified report is in the opinion paragraph, where the auditor clearly states that the financial statements are not in accordance with GAAP, which means that they, as a whole, are unreliable, inaccurate, and do not present a fair view of the auditee’s position and operations.

“In our opinion, because of the situations mentioned above (in the explanatory paragraph), the financial statements referred to in the first paragraph do not present fairly, in all material respects, the financial position of…”

[edit] Disclaimer of Opinion report

A Disclaimer of Opinion, commonly referred to simply as a Disclaimer, is issued when the auditor could not form, and consequently refuses to present, an opinion on the financial statements. This type of report is issued when the auditor tried to audit an entity but could not complete the work due to various reasons and does not issue an opinion. The disclaimer of opinion report can be traced back to 1949, when the Statement on Auditing Procedure No. 23: Recommendation Made To Clarify Accountant’s Representations When Opinion Is Not Expressed was published in order to provide guidance to auditors in presenting a disclaimer.[5]

Statements on Auditing Standards (SAS) provide certain situations where a disclaimer of opinion may be appropriate:

* A lack of independence, or material conflict(s) of interest, exist between the auditor and the auditee (SAS No. 26)
* There are significant scope limitations, whether intentional or not, which hinder the auditor’s work in obtaining evidence and performing procedures (SAS No. 58);
* There is a substantial doubt about the auditee’s ability to continue as a going concern or, in other words, continue operating (SAS No. 59)
* There are significant uncertainties within the auditee (SAS No. 79).

Although this type of opinion is rarely used,[5] the most common examples where disclaimers are issued include audits where the auditee willfully hides or refuses to provide evidence and information to the auditor in significant areas of the financial statements, where the auditee is facing significant legal and litigation issues in which the outcome is uncertain (usually government investigations), and where the auditee has going concern issues (the auditee may not continue operating in the near future).[5] Investors, lending institutions, and governments typically reject an auditee’s financial statements if the auditor disclaimed an opinion, and will request the auditee to correct the situations the auditor mentioned and obtain another audit report.

A disclaimer of opinion differs substantially from the rest of the auditor’s reports because it provides very little information regarding the audit itself, and includes an explanatory paragraph stating the reasons for the disclaimer. Although the report still contains the letterhead, the auditee’s name and address, the auditor’s signature and address, and the report’s issuance date, every other paragraph is modified extensively, and the scope paragraph is entirely omitted since the auditor is basically stating that an audit could not be realized.

In the introductory paragraph, the first phrase changes from “We have audited” to “We were engaged to audit” in order to let the user know that the auditee commissioned an audit, but does not mention that the auditor necessarily completed the audit. Additionally, since the audit was not completely and/or adequately performed, the auditor refuses to accept any responsibility by omitting the last sentence of the paragraph. The scope paragraph is omitted in its entirety since, effectively, no audit was performed. Similar to the qualified and the adverse opinions, the auditor must briefly discuss the situations for the disclaimer in an explanatory paragraph. Finally, the opinion paragraph changes completely, stating that an opinion could not be formed and is not expressed because of the situations mentioned in the previous paragraphs.

The following is a draft of the three main paragraphs of a disclaimer of opinion because of inadequate accounting records of an auditee, which is considered a significant scope of limitation:

We were engaged to audit the accompanying balance sheet of ABC Company, Inc. (the “Company”) as of December 31, 20XX and the related statements of income and cash flows for the year then ended. These financial statements are the responsibility of the Company's management.

The Company does not maintain adequate accounting records to provide sufficient information for the preparation of the basic financial statements. The Company’s accounting records do not constitute a double-entry system which can produce financial statements.

Because of the significance of the matters discussed in the preceding paragraphs, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion of the financial statements referred to in the first paragraph.

[edit] Auditor’s report on internal controls of public companies

See also: Sarbanes-Oxley Act

Following the enactment of the Sarbanes-Oxley Act of 2002, the Public Company Accounting Oversight Board (PCAOB) was established in order to monitor, regulate, inspect, and discipline audit and public accounting firms of public companies. The PCAOB Auditing Standards No. 2 now requires auditors of public companies to include an additional disclosures in the opinion report regarding the auditee’s internal controls, and to opine about the company’s and auditor’s assessment on the company’s internal controls over financial reporting. These new requirements are commonly referred to as the COSO Opinion.

The auditor’s report is modified to include all necessary disclosures by either presenting the report subsequent to the report on the financial statements, or combining both reports into one auditor’s report. The following is an example of the former version of adding a separate report immediately after the auditor’s report on financial statements.

Internal control over financial reporting

We have also audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that the Company maintained effective internal control over financial reporting as of December 31, 20XX, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that ABC Company maintained effective internal control over financial reporting as of December 31, 20XX, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by COSO. Furthermore, in our opinion, ABC Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 20XX, based on criteria established in Internal Control—Integrated Framework issued by COSO.

[edit] Going concern

Going concern is a term[2] which means that an entity will continue to operate in the near future which is generally more than next 12 months, so long as it generates or obtains enough resources to operate. If the auditee is not a going concern, it means that it is either dissolved, bankrupt, shutdown, etc. Auditors are required to consider the going concern of an auditee before issuing a report.[6] If the auditee is a going concern, the auditor does not modify his/her report in any way. However, if the auditor considers that the auditee is not a going concern, or will not be a going concern in the near future, then the auditor is required to include an explanatory paragraph before the opinion paragraph or following the opinion papragraph, in the audit report explaining the situation,[6][7] which is commonly referred to as the going concern disclosure. Such as opinion is called "Unqualified modified opinion.

Unfortunately, many auditors are increasingly reluctant to include this disclosure in their opinions, since it is considered a “self-fulfilling prophesy” by some.[6] This is because a disclosure for a lack of going concern is viewed negatively by investors, lending institutions, and credit agencies, and therefore reduces the chance that the auditee may obtain the capital or borrowing it needs to survive once the disclosure is made. If this situation occurs, the auditee is more likely to stop being a going concern while the auditor loses potential future audit engagements, and so the auditor may be pressured to avoid including a going concern disclosure. In a study performed on 2001 bankruptcies, nearly half (48%) of selected public companies who faced bankruptcy in 2001 did not have a “going concern disclosure” in the previous auditor’s reports.[6] Additionally, 12 of the 20 largest bankruptcies in U.S. history occurred between 2001 and 2002 and none of them had a “going concern disclosure” in their previous auditor’s report.[6]

As for the actual wording of the auditor’s report, when a lack of going concern is determined by the auditor, the disclosure paragraph should state the situation, state the auditor’s determination, and state the auditee’s plan to correct the situation. The disclosure paragraph should immediately follow the opinion paragraph.

The following is the most widely used format of the paragraph which, in this case, deals with a company that has recurring losses:[8]

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note (X) to the financial statements, the Company has suffered recurring losses and has a net capital deficiency. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note (X). The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

[edit] Other explanatory information and paragraphs

Although the auditor reports mentioned above are the standard reports for financial statement audits, the auditor may add additional information to the report if it is deemed necessary without changing the overall opinion of the report. Usually, this additional information is included after the opinion paragraph, although some situations require that the additional information be included in paragraphs before the opinion paragraph. The most frequent paragraphs include:

* Limiting distribution of the report – In some occasions, the audit report is restricted to a specified user and the auditor includes this restriction in the report, such as a report for financial statements made in cash basis which are prepared for tax purposes only, financial statements for a wholly-owned subsidiary whose sole user of its financial statements is its parent company, etc.

* Additional or supplemental information – Certain auditees include additional and/or supplemental information with their financial statements which is not directly related to the financial statements. Examples include governments that incorporate health, crime, and education statistics along with the financial statement reports for the general public to read and use. Since it is not directly related to the audit of the financial statements, the auditor includes a brief disclaimer paragraph to state that the auditor’s report only applies to the financial statements and its respective notes.

* Certain audit work performed by another auditor – Sometimes an auditee requires that two or more auditors perform audits on its operations in order to obtain a more effective audit. This usually occurs in large governments and corporations who have certain dependencies, subsidiaries, or other similar components which require an auditor different from its main auditor to perform an audit on the original auditee’s component due to size, time, location, and/or technical constraints. When the main auditor has to rely on another auditor’s work, the main auditor may either accept responsibility for the component’s information and not modify the audit report, or may chose to disclaim the audit on the specific component, stating that the main auditor did not audit the component, that another auditor audited the component, that the component’s audited information is therefore the responsibility of another auditor, and that the main auditor is simply including it in the original auditee’s information. If used, this disclaimer is usually included in the introductory paragraph.

[edit] Auditor’s reports on financial statements in different countries

See also: International Standards on Auditing

The auditor’s report usually does not vary from country to country, although some countries do require either additional or less wording. In the United States, auditors are required to include in the scope paragraphs a phrase stating that they conducted their audit “in accordance with generally accepted auditing standards in the United States of America”, and, in the opinion paragraph, state whether the financial statements are presented “in conformity with generally accepted accounting principles in the United States of America”. Some countries, such as the Philippines, use similar reports to those issued in the United States, with the exception that second paragraph would state that the audit was conducted in accordance with Philippine Standards on Auditing, and that the financial statements are in accordance with Philippine Financial Reporting Standards.

[edit] Opinion shopping

Opinion shopping is a term used by external auditors and, after the Enron and Arthur Andersen accounting scandals, the media and general public refer to auditees who contract or reject auditors based on the type of opinion report they will issue on the auditee.[6] The underlying principles of this concept are that auditees determine the compensation to auditors for their work (called “audit fees”) as well as awarding future audit engagements; that such fees are the auditor’s main source of income; that certain auditees may try to contract auditors that will issue audit opinions based on the auditees’ needs; and that certain auditors are willing to comply with such demands so long as they are assured future audit engagements. The most common example is an auditee that knows that the current auditor is going to issue a qualified, adverse, or disclaimer of opinion report, who then rescinds the audit engagement before the opinion is issued, and subsequently “shops” for another auditor who is willing to issue an “unqualified” opinion, regardless of any qualifying situations mentioned in the previous sections. However, opinion shopping is not limited to auditees contracting auditors based on issuing opinions. It also includes auditors who are over-pleasing to auditees by issuing unqualified reports without properly auditing, or by simply overlooking material issues affecting the audit. These auditors’ objective is to appear much more attractive and easy-going than other auditors in order to secure future audit engagements and fees.

Experts agree that, although the great majority of auditors are not willing to jeopardize their profession and reputation for guaranteed audit fees, there are some that will issue opinions solely based on obtaining or maintaining audit engagements. This includes auditors who knowingly emit unmodified unqualified opinions for auditees who are engaged in illegal activities, auditees who have caused a material scope of limitation, auditees that have a lack of going concern,[6] or auditees who present fraudulent financial statements (e.g. Enron and Arthur Andersen). This situation is a clear conflict of interest which should hinder an auditor’s independence and the ability to audit (AICPA Code of Ethics), but some auditors willingly ignore this statute.

Recent laws and industry standards have been implemented in order to correct this situation, which include the Sarbanes-Oxley Act and the AICPA’s Peer Review Program.

[edit] Auditor’s reports for a Single Audit

Main article: Single Audit

In the United States, Single Audits are performed on various entities who receives federal aid from the U.S. federal government. Auditors who perform these Single Audits are required to emit three auditor’s reports. The first report is a report on the entity’s financial statements as discussed in the previous sections. The other two reports are compliance-oriented reports related to specific requirements of the OMB Circular A-133 and of Government Auditing Standards (otherwise known as the “Yellow Book” standards). The American Institute of Certified Public Accountants (AICPA) provides illustrative audit reports[3] of the OMB A-133 and the Yellow Book reports for auditors who are performing Single Audits.

[edit] Other engagements and reports

There are various other audits and evaluations which an external auditor performs in addition to the engagements mentioned in the previous sections, each with their respective standard report(s):

* Certification audit reports (for example, an ISO 9000 audit report)
* Compilations (not an audit, but requires a report)
* Due Diligence
* Environmental audit report
* Financial forecasts
* Filing of a public company’s Form 10-Q and Form 10-K
* Agreed Upon Procedures
* Internal audit reports
* Regulatory inspection reports
* Review of financial statements (an overview with very limited auditing procedures)
* Fraud & Materiality Memo
* Second opinion

Tips for Prescribing a Future for Your Business

2009-01-20T04:32:00.000-08:00

Are you wondering what the future holds for your business? Whether you want to predict your future or prescribe an outcome of your choosing, you'll have plenty of company!

Throughout history, we humans have tried many ways to predict the future, from reading palms to stargazing. Today, we refer to these as descriptive methods when we attempt to describe objectively what the future will be or could be.

On the other hand, prescriptive methods focus on determining what the future should be. These techniques can help us clarify our preferences and values so we can create a vision of what we would like to see in our lives, businesses, or communities.

Once we understand what we would like the future to represent, we're better able to take the actions required to implement it. Ideally, that future will align with our passions, gifts, and what we (or our companies) can really be the best at doing. This article suggests a two-stage process for achieving that goal.

First, Identify Your "Hedgehog Concept"

So, what can you be the best in the world (or at least in your community) at doing? This thought-provoking reflection is one of many from Jim Collins' "Good to Great: Why Some Companies Make the Leap...and Others Don't."

Collins' team examined 1,435 companies to see which ones made substantial gains in profitability and sustained those improvements over 15 years or more. Since the 1970s, only 11 companies had risen from mediocrity to greatness and stayed there -- topping many other prosperous firms that lacked the same staying power.

Of eight characteristics these companies shared, all held an unshakable adherence to becoming the best in the world at whatever they did. Each company committed to doing only those things and nothing else. That sometimes meant dropping their core businesses to pursue other things at which they could become the best in the world.

Collins and his team coined the term "hedgehog concept" to reflect a single-minded determination and focus that, similar to that of the hedgehog animal, attempts to do only one thing really well, such as curl up and roll. A hedgehog concept actually represents the intersection of three areas:

1) What you're most passionate about
2) An understanding of what you could be the best at doing, and
3) A metric that drives your economic engine and helps you measure results.

Keep in mind that according to Collins, this concept is not a goal, strategy, or plan, but an understanding of what you can and can't be the best at doing. Until you develop your hedgehog concept, you won't know your true vision, mission, or purpose.

Next, Define Your "Business Success Criteria"

Do you have a crystal clear idea of the types of business undertakings that align with your gifts, talents, passions, and strengths? In that same context, have you thought about whether your business can be the very best in the world at doing those things?

If the answers are "yes," you are in an excellent position to choose the ventures that can give you the greatest satisfaction and results.

If you're not yet totally clear about the answers to these questions, developing a set of "business success criteria" can enable you to select worthwhile endeavors with much deeper insight, and thus set the conditions for successfully pursuing them. A hedgehog concept thereby represents part of the formula you can devise to identify and choose among your very best options.

Why is this so important? It's not uncommon for people to wander into businesses, projects, and professions opportunistically, which means that they often select the next available and convenient thing that comes along. At times, this may be necessary for financial reasons. But unless we understand our underlying success criteria, we might not recognize the options that truly fuel and inspire us -- those that are best suited to our passions and strengths.

Some of your criteria could be practical considerations, and others more lofty ideals. But all of your criteria will be essential to achieving balance, fulfillment, prosperity, and higher contribution in your life.

In conclusion, a set of carefully crafted success criteria fueled by a potent hedgehog concept provides an unbeatable strategic advantage, and an excellent direction-finder for prescribing your future!

Unsecured Loans: Asset-Free Opportunity For Those In Need

2008-11-24T08:29:00.001-08:00

The people who face cash issues in their lives know the actual ups and downs that happen in life. Such a situation occurs in everyone’s life. Also, everybody may not have an asset to act as a shield for bad times. So for such borrowers, there is an opportunity for borrowing money through unsecured loans which does not create any hassle for them.

With these loans easily available to be borrowed, the people who do not have any assets can also take up money for their needs easily. These include tenants and non-homeowners. Also, those borrowers who may be having assets to their name but are not willing to pledge them can avail money through this opportunity.

The money through these loans lies in the range of £1000-£25000 so that the borrowers do not face a problem in fulfilling their personal needs. any desires or needs of the borrowers can be easily fulfilled through these loans like educational funding, wedding expenses, home improvement, car purchase, debt consolidation, travel expenses, vacation holiday etc.

The money is required to be repaid to the lender in a term of 6 months to 10 years. The rate of interest for these loans is slightly higher than the secured form due to absence of any collateral pledged with the loan lender to act as a guarantee for loan repayment. So the higher rate helps in cutting down the risk. However there are ways to get lower rate deals. The most effective is online researching. This helps in comparison of all loan quotes offered from which the borrower can then choose the most suitable deals.

Also, these loans are available to bad credit borrowers so that they can fulfill their needs as well. They too can research online to get lower rate deals for their needs.

The borrowers without assets can get easily money for their needs through unsecured loans. Now they do not have to make any compromise for the important needs in their lives.

Unsecured Loans: Make Way To Upkeep Your Finances

2008-11-24T08:28:00.000-08:00

Break down of your personal finances compel you to go for monetary assistances. People find it hard to arrange fund as most of the funding requires to be secured by some sort of security pledging. The security gives a secured sense of loan repayment to the lenders. And if you are unable to arrange it, still you need not worry since unsecured loans are available as alternatives to the secured loans. These money provisions are best suited to tenants.

Indeed, such loans are nothing but personal loans, targeted solely to personal loan seekers. Any class of borrowers can apply for such loans provided that he may fulfill certain criteria. These criteria include stable monthly income, repayment capability and good credit ratings.

These Loans are well tailored to suit your any range of requirements. In terms of loan amount, you can able to secure a sum anywhere from £5,000 to £25,000 that you will have to repay within a specific period. This period ranges in between 6 months-10 years. In general, borrowers invest the raised sum for car purchasing, home improvement, children’s higher education, business development etc. You can invest the amount to pay off your pending liabilities. With the help, you can make your life debt free.

For all this, borrowers may opt for monthly instalment plans for easy repayment. Interest paid upon such money provisions happens to be higher in cost. Penalty charges can be quite high in case of missed payments. This can adversely affect your financial credibility in the market. However, if you shop around before you sign a deal, you will be able to secure such money provisions on cost-effective rates. Usually, the money is debited directly from the customer’s bank account. In order to save oneself from defaults, having enough balance in the account becomes essential.

Bad Credit Loans: Get Money And Solve Your Cash Issues

2008-11-24T08:27:00.000-08:00

When the problems are numerous, friends are few. These words are very apt when it comes to the situation of bad credit. Fulfilling your cash needs when having a bad credit history, it may be difficult to get the support you want. Getting external help will still suit you as the money is available without any hassle through bad credit loans.

The borrowers who have a credit score which is lower than 580 in the FICO report may be suffering from this problem due to various factors. It can be arrears, defaults, missed repayments or CCJs that have caused this problem. But the borrowers still deserve a chance to avail these loans for their needs.

Through these loans, the borrowers can choose whichever option that they like out of the secured and the unsecured form, according to suitability. The loan form also depends upon the ability of the borrower to pledge collateral with the lender for the money. If a bigger amount is required by the borrowers, they can take up the secured form by pledging an asset with the lenders. Amounts can be borrowed within the range of £5000-£75000 for a term of 5-25 years. The home, car or any asset of the borrower can be pledged as collateral.

Borrowers who need smaller amount can also take up money and that too without pledging any assets. This is possible through unsecured form of these loans. Money that is obtainable by the borrowers lies in the range of £1000-£25000 and has to be repaid in a term of 6 months to 10 years. Tenants and non-homeowners can also take up these loans for their needs easily.

Adverse credit history of borrowers may entail a higher rate of interest. But with the help of online research and comparison, the borrowers can take up low rate deals with the help of comparison of the loan quotes easily.

Bad credit loans are a great opportunity for the borrowers to avail money at the most needful times. It is a great respite for borrowers stuck in bad credit.

Bad Credit Loans: Get Money And Solve Your Cash Issues

2008-11-24T08:15:00.000-08:00

Saving Money on Your Food Bill

2008-11-24T08:12:00.000-08:00

Saving money on your food bill

I wanted to start with this budget item as it is an area that a family or individual can really save some money. In our situation we are a family of four and our budget is $125.00 per week. I would not say we are pinching pennies, and by no means are we being extravagant. We also live in the Pacific Northwest. Prices do vary somewhat according to where you live.

There are many of you out there spending twice this amount. Even in our situation which many of you out there may find on the average or low side we could easily if need be tighten our belts and lower this bill by 30%. Yes, 30%

For the amount we spend a 30% savings amounts to $1950.00. If you are spending twice the amount we are that 30% savings can amount to a budget savings of almost $4000.00 a year. That is a nice chunk of change for that big screen TV, or too pay down your debt, or whatever other means you want to use it for.

Before we get into some details I want to add that a key element to managing and reducing any aspect of your budget is having the right attitude. Also, you need to have some discipline and be able to stick to your guns. But, set goals that are attainable.
Six quick tips to save money on your food budget

1. Buy the store brand.
2. Buy fruits and vegetables that are on sale.
3. Read the flyers that in the newspaper, clip coupons.
4. Shop more than one store.
5. Buy less prepared foods.
6. Go to the store after you have eaten.
7. Avoid impulse buying on quick trips.

Buying the store brand

Some folks are brand loyalists. But buying brand names can cost you a lot more money. The reality is that in a blind taste test most of us could not even tell the difference between the store brand and the name brand. In some cases the only difference between the name brand and the store brand is the label they put on the can.
Read the flyers

In reading the Supermarket flyers there is one general theme I have noticed. Between two or three stores there are typically enough items on sale to make some substantial savings. It is typical that most of us do a "big shop" a week and then do 2-5 quick runs to the store during the week. Change this pattern. Instead spend 10-15 minutes a week reading the flyers and planning your list to shop 2-3 stores. Most grocery stores are in the same general vicinity. Sure you might be adding about an hour to your shopping a week, but if that hour is worth saving $1950.00 on your food budget then it is well worth it!
Buying fresh fruits and vegetables on sale

We just spent .88 cents a pound for Fuji apples. They normally are $1.49 a pound. Thats a pretty good savings. We just love Fuji's. We like a lot of other fruits and vegetables as well. My point here is that there is always going to be some fruits or vegetables that you like that are on sale. Buy what is on sale and you will save money.
Shop more than one store

Do this in conjunction with shopping the weekly flyers. Whether you do one big weekly shop at three stores or some other plan that works for you, a sure fire way to save money is to shop more than one store.
Buy less prepared foods

Most people buy prepared foods because they are convenient. They are also a lot more expensive. A bag of noodles, and a few cans of store brand cream of mushroom or chicken soup is a lot cheaper and goes a lot farther than a box of Hamburger Helper. And, it really does not take any more time to cook up you meal using the ingredients I named.
Shop on a full stomach

Nothing more really needs to be said about this.
So how do I pull all this off?

* Set a plan and stick to it
* Get the food money in cash for the week and put it in an envelope. This is your budget, when the money run out you are done.
* Never (ever) go to the store without a list. Stick to the list!
* Treat yourself to an inpulse buy once or twice a month. Hold out money in your budget just for this. You will have something to look forward to.

Even with all of this good information some of you may be looking for a plan that is a bit more structured and disciplined. My spouse subscribes to a service called the "Grocery Game" which is essentially a formalized approach to everything I have discussed. It will cost you a few bucks to join, but is well worth it as they provide you will information on sales that you will not find in the flyers. Note: this service is not available in every area

Happy shopping!

Proper Bookkeeping Helps An Organisation To Increase Profits, Reduce Taxes And Improve Cash Flow.

2008-11-24T08:02:00.000-08:00

Accounting is the process of analyzing, classifying, recording, summarizing, and interpreting business transactions in financial or monetary terms. In order to summarize the results of a business activity, each financial transaction must be recorded in a bookkeeping system. Basics of Accounting : The ownerâ€™s right or claim to assets is expressed by the word equity, or investment. Other terms that may be used include capital, net worth, or proprietorship. Liabilities represent debts and obligations of the business. The business may have a liability to the owner, however, creditorsâ€™ claims to the assets have priority over the claims of the owner. An equation expressing the relationship of these elements is called the fundamental accounting equation. Assets = Liabilities + Ownerâ€™s Equity Revenues are the amounts of assets that a business or other economic unit gains as a result of its operations. For example, revenues represent earnings derived from fees earned for the performing of services, sales involving the exchange of goods, rent income for providing the use of property, and interest income for the lending of money. Expenses are the amounts of assets that a business or other economic unit uses up as a result of its operations. For example, expenses represent the amount of cash paid for services received, such as wages expense rent expense, interest expense and supplies expense. Revenues and expenses directly affect ownerâ€™s equity. If a business earns revenue, there is an increase in ownerâ€™s equity. If a business incurs or pays expenses, there is a decrease in owners equity. So, we place revenue and expenses under the â€œumbrellaâ€ of ownerâ€™s equity. Assets = Liabilities + Ownerâ€™s Equity Capital + Revenue - Expenses Steps to be followed for good Bookkeeping Systems : Many methods may be used. At a minimum, certain procedures should be done on a monthly or other periodic basis to make sure that your accounting records are accurate. Some of these steps are as follows: * All checks written and deposits made should be entered into a check register. * A monthly bank reconciliation should be done to make sure that all transactions have been recorded (including bank originated charges) and that the ending cash balances to the adjusted bank balance. * All expenses should be classified into business expense categories to record the various expenditures. * All deposits made to the account should be identified and classified (e.g., boarding income, interest income and owner contributions). * A financial statement should be prepared on a periodic basis to understand the results of your operation. it is extremely important to identify all the sources of deposits to make sure that actual income from operations is not confused with contributions of working capital from the owner. Advantage of Computerised bookkeeping : Computerized accounting systems allow you entry of transactions into an automated system to provide a variety of information. Simple accounting packages can be very powerful tools to assist in understanding the results of business operations. After the entry of the basic transactions, the data is available in a number of reports (e.g., cash disbursements register, income statement, balance sheet.) These systems help â€œnon-accountantsâ€ automatically produce standard financial statements without much technical accounting background. Good habits in computer processing procedures must be used to make sure that all the transactions are recorded. Otherwise, the financial information presented may not be accurate.

Advantage of Outsourcing your bookkeeping to professional BookKeeper.

2008-11-24T08:01:00.001-08:00

What is a role of a bookkeeper in your organisation : BOOKKEEPERS keep complete, up-to-date, and accurate records of accounts and financial arrangements. Bookkeepers verify and enter information into journals and ledgers or into a computer. They periodically balance the books and compile reports and financial statements. Bookkeepers also receive, record, bank and pay out cash. They balance checkbooks with monthly bank statements. They may calculate employee wages from plant records or time cards and issue payroll checks. Some of the other work they may do includes posting accounts receivable and payable, prepare and make bank deposits, record payrolls, maintain inventory records, purchase supplies, prepare purchase orders and do expense reports. Bookkeepers may also make schedules, sort documents, and file bills. These type of jobs are found in every industry and may have various job titles, such as accounts payable clerk, accounts receivable clerk or assistant bookkeeper. Cost of a Bookkeeper : The pay for these jobs depends upon experience, clerical skills, the level of responsibility and the job location. Beginning salaries go from minimum wage to $ 15 per hour. Experienced Bookkeeper can make $ 20 an hour. After having worked for three years with the same firm, a Bookkeeper can earn at $ 25 per hour. A Bookkeepers usually work 40 hours a week; sometimes it may be necessary to work overtime. Some employers have fringe benefits such as paid vacations and sick leave, life and health insurance, and bonuses. Other benefits that the employer may include are participation in a credit union, or retirement and profit sharing plans. Advantage of outsourcing Bookkeeping work to a professional bookkeeper : There are several distinct advantages to outsourcing your bookkeeping functions. First and foremost is saving money. You get what you pay for and if you don't pay for quality than you won't have quality service. However, you can save money by outsourcing because you won't be paying for employer payroll tax expense, workman's compensation and general liability insurances, vacation time, sick time, health insurance and other benefits a good full time bookkeeper will expect from his/her employer. Just remember, however, that these costs will be built into the consultant's hourly rate and their fee will reflect these costs. Any bookkeeping consultant who has not taken these costs into consideration is not a bookkeeper you want - if they don't know enough to include these costs into their fees, then they don't know enough to be a help to your business. You should expect to pay at least three times what you would pay an experienced full charge bookkeeper. And just how do you save money by paying three times the amount you would pay an employee? Well, let's see. There will be no recruiting, interviewing and training costs for start. And if you should find yourself unhappy with the services there will be no additional recruiting, interviewing and training to replace your bookkeeper. Also, you will not have to be concerned about law suits such as sexual harassment, unlawful firing, age discrimination, sexist, etc. Or an increase in your unemployment rates because you laid off an employee that you really wanted to fire but had no lawful cause to do so. So right away we have less time and money spent and potentially less hassle if things don't go well. And of course you will not be paying workman's compensation and general liability insurance premiums. Also any worthy bookkeeper will expect at least two weeks vacation, coverage for sick time, health and dental insurance and even perhaps more benefits. Most professional bookkeepers will have their own offices saving you space within your office. So you will not be buying that extra desk, calculator, computer and computer software. Your bookkeeper will be providing all of that as part of his/her fee. No software updates, computer maintenance, training costs, etc. Of course should you prefer to have your computerized bookkeeping records available to you at your office, a small investment in software installed on your computer makes this possible. Also no office supplies to be paid for. You will be amazed at just how much pens, pencils, and paper can be used by a bookkeeper. Your consultant bookkeeper will either ask you to drop off the work at their office, will pick it up at your office or some may even offer remote bookkeeping service. And by having your bookkeeping done off site, your bookkeeper will be able to work more efficiently and accurately because her/his office will most likely offer less distractions than your busy office. All of this is saving you money. And the best reason for outsourcing is that you control the amount of money spent on bookkeeping. What I mean by this is that the person you hire to do your bookkeeping will be doing just that - not answering the phone, dealing with drop-bys, chatting to other employees, etc. Also you can start with just a few hours a month and add on when you need to and then adjust downward again should it be necessary. Can you imagine finding an employee to start with only four hours a month, then asking them to put in 20 hours a week for awhile and then back down to four hours a month again. I don't think you would keep them for very long, but a free lance bookkeeper is able to work around these variables and even more importantly expects to work with flexible schedules. So have I convinced you yet? If so, then just remember "you will get what you pay for". Go for top quality because your financial records are the core of your business and without great bookkeeping you cannot expect to succeed no matter what type of business you have. After all don't you think you are worth it ?

4 Reasons Not to Purchase Business Accounting Software

2008-11-24T07:59:00.000-08:00

Not all organizations need business accounting software. Because of the mobility some companies are better suited to utilize paper and pencil or a personal digital assistant(PDA).

On the other hand, some businesses have enough accounting data and that data is located in one place, to benefit from software. Some of these criteria listed below are directed toward certain business types and may not apply. But, if a company has more than any of these limiters, business accounting software would be a good idea.

Business accounting software is not needed if all of these apply:

1. Total monthly sales are under $2,000.
Generally, the amount of recording effort needed to keep track of $2,000 is minimal and can be done with a pencil and paper or an excel spreadsheet. It is a small enough number that any misapplication can be easily detected and corrected. If the sales are any higher, the risk for error and stealing drastically increase.

2. Less than 30 monthly sales transactions.
This is for the type of business that sells large equipment or contracts jobs that take multiple days to complete. When less than 1 sale per day is made, it definitely should not be an issue to make any calculations or recordings. Even if the project or sale is a long distance form the office, you should be able to remember that sale for days or weeks until it can be tracked.

3. Inventory less than 100 items.
Business accounting software can be very useful for tracking how much inventory is on-hand and how much is needed. Software can be programmed so that when a product is sold, it is automatically withdrawn from the inventory statistics. If there is less than 100 items stored at one time, then those could be easily managed manually.

4. No employees
Payroll can be done by hand, but it can be very time consuming and laborious. If something so detailed can be easily figured automatically by business accounting software, then it would make sense to use it. Besides, a large or small business wants to be working on increasing sales or optimizing efficiency instead of busywork. If no workers are employed, then obviously there is no need for software that calculates payroll.

If all 4 of these guidelines are met, then business accounting software is probably not needed. A software package may still be helpful, but within these ranges, it may not be economical. This is not to say that free accounting software cannot be downloaded and used, but it should not be purchased.

Autopilot Benefit of Business Accounting Software

2008-11-24T07:57:00.000-08:00

Do you really want to manually calculate the all the figures from sales, expenses, overhead, loans, outside revenue, deductions, employee data(wages, taxes, and benefits), equity, investments, etc? Of course not, you want to spend time making sales and improving the company's efficiency.

If that is your desire, then you want business accounting software to work for you. It will automate menial tasks and give the ability to look at long and short-term statistics by generating multiple reports.

Automation is the key to productivity. When data is calculated and completed with a touch of a button, your efforts can be directed to more important duties or more enjoyable activities.

Business accounting software is the perfect opportunity to some aspects of the business on autopilot. The more autopilots running the company, the better. This does not mean control is given up. In fact, it gives more control and more freedom with options.

Autopilots should be simple to manipulate and customize. Business accounting software is a prime example of this. It allows the user to generate reports that show specific details of certain business finances. These reports are done virtually instantaneous instead of manual processing time.

Even though you and your colleagues may be perfectly capable of doing the business accounting, that is not the point. The point is time and energy. Whatever the amount of time or energy that is saved by business accounting software is time and energy not used for boring adding and subtracting.

Maybe the company does not have many figures to work up, but five minutes here and seven minutes there adds up quickly. You would be surprised to find just how much time is spent adding, subtracting, and writing down accounting information.

Even if the business is small now, one of the company goals should be to grow and do more business. Using business accounting software does not require any more time adding for gross or subtracting for net or comparing for cash flow. Alternatively, if the calculations are done manually, there is almost an exponential increase in work for increase in business size.

Once a business accounting software program is purchased or obtained, it is yours forever. No monthly or yearly fee, as with accounting staff. Up-grades may be purchased and there may be newer versions available, but if the software still meets the accounting needs of business operations, then it can be used indefinitely.

So, if the company is planning to operate for a long time, business accounting software can save a vast amount of time and energy. It allows people in the company to avoid trivial and time intensive calculating and focus on processes to move the company forward.

Make money with private label Ebook Resell Rights!

2008-11-24T07:53:00.000-08:00

There are million of Americans who have thought about it. Many of those individuals are interested in writing an Ebook due to their love for writing, but others are interested in making an income. Unluckily, to make a profit, you will not only have to write an Ebook, but sell it. This can be a long and difficult task; however, that does not mean that you can’t make money by selling Ebooks. You can with something that is known as private label resell rights.

To obtain the private label resell rights to an Ebook, you will need to find an opportunity. Online, it is likely that you will come across a number of different individuals who are selling the resell rights to their Ebooks. The fact that they are selling their rights does not essentially mean that their work cannot sell or that it is poor in quality. In fact, many Ebook authors just do not have the time to market their product to its targeted audience. However, if you do have the time and the information, you could make a full or part-time living.

As earlier mentioned, you will have to find an individual who is willing to sell their Ebook resell rights to you. When searching for that individual and Ebook, you are encouraged to be on the lookout for a number of different things. First, it is important to request samples or a copy of the Ebook. The cost of obtaining the resell rights to a private label product, including an Ebook, can be fairly high. Before agreeing to purchase the resale rights, you will need to make sure that the product will be marketable and in demand. If so, you can then proceed to strike a deal.

Finding an Ebook author, that is selling their private label resell rights, is a fairly easy process. The hard part is finding buyers for the product that you are now responsible for selling. There are a number of different ways that you can try and sell an Ebook. In addition to just using one selling methods, you may be able to find extra achievement by using a combination of them.

The best way to sell an Ebook is to target the Ebook’s intended audience. You may want to think about creating an easy webpage with your Ebook information on it. This webpage will not only be picked up by search engines, but you can also provide links; this is where targeting your audience will come in. For instance, if you have an Ebook on popular beauty tips, for more detail visit www.create-own-ebook.com you may want to post on message boards that have a focus on personal care. There are a large number of online message boards that allow the posting of a signature. This signature may include the link to your Ebook’s website.

In addition to using linking, you can also advertise the Ebook with online classified ads. Online, there are literally a limitless number of classified websites and many of them are free to use. Advertising the Ebook that you have available for sale online, especially with classified ads, is a low-cost way to generate public interest. Local classifieds are also a good idea; however, many cost money. Whether you only use online classified ads, local classified ads, or both, for more detail visit www.eazy-ebook-money.com your Ebook should get the exposure that it needs to start selling. Another way that you could sell the Ebook is through an online auction website. On any given day, most online auction websites have over one million products listed. There is always a chance that your Ebook could get lost in those items, but the chances are slim. On most occasions, your Ebook will get purchased or it will at least get the exposure needed to generate interests.

Will You Ever Have to Pay a Deficiency Judgment From a Foreclosure? by: Dave Dinkel

2008-10-25T04:08:00.000-07:00

About The Author

Dave Dinkel is the author of http://www.StopMyForeclosureMess.com "32 Ways to Quickly Stop Foreclosure and has helped thousands of foreclosure victims for nearly 33 years. If you are facing foreclosure, visit http://www.StopMyForeclosureMess.com StopMyForeclosureMess.com for guaranteed solutions.

MLM Prospecting: Creating a Win-Win Outcome by: Liz Monte

2008-10-25T04:07:00.002-07:00

In any business endeavor, a win-win outcome is always the most satisfying and productive. It certainly beats the alternatives - win-lose, lose-win, or (heaven forbid!) lose-lose - in which one or both parties walks away feeling an assortment of negative emotions, possibly including disappointment, anger, resentment, and a desire to throw crockery against the wall.

What do we mean by win-win when it comes to finding new partners for our network marketing business?

For the prospector (you), a win probably means acquiring a new business partner with the following attributes: easy to work with, motivated, determined to succeed, reliable and accountable, upbeat, honest, hardworking, and so on. Of course, you would probably also want your recruit to have some free time and enough money to get started.

For the prospect... well, we really don't know what a win would be for her, do we? We could make an assumption and guess. We could assume that she just wants to make a lot of money. But what if we guess wrong? What if her heart's desire is to help people and make a difference in the world.

The only way we can know for sure what's going through our prospect's head is to talk with her -- ask questions, listen closely to the answers, ask more questions, and do a lot more listening.

One word of caution, though: When interviewing a prospect, it's very tempting to listen just until she mentions some problem your product or opportunity might help solve. And then... (sound of bugles) YOU'RE OFF AND RUNNING! Bending her ear about how wonderful your company is and how much she's going to LOVE what the products will do for her.

But telling why YOU think your opportunity is the greatest thing since sliced bread is not the goal. The goal is to reach a win-win outcome, and there's more to it than just presenting your favorite features and benefits and assuming that's what your prospect wants, too.

If you're truly dedicated to win-win, your goal is to reach a deep understanding of what a win would be for her and then honestly assessing whether or not your opportunity would create that.

If it's not a good fit, let it go. Thank her for her time and move on.

On the other hand, if you believe your opportunity is a match for her, go ahead and explain to her why you think so. Be sure to connect the dots between her specific problems and how your opportunity can address them.

Then she signs up, right?

Not quite. Actually, there's yet another critical step you both must take before reaching a win-win outcome.

Recently, I started reading a book that really gets into the whole win-win strategy, "The New Conceptual Selling" by Stephen E. Heiman and Diane Sanchez. (Although it was written mainly for business-to-business salespeople, most of the principles the book lays out are applicable to network marketers, too.)

It describes three stages of decision-making in the sales process.

Stage 1: The decision-maker (your prospect) comes to a better understanding of the situation she's facing. (This is where your question-answer dialogue helps her.)

Stage 2: The decision-maker explores her possible options and solutions. (This is that other critical step I mentioned, and it's where many network marketers falter.)

Stage 3: The decision-maker puts it all together and picks the best option for herself.

Why do I say that many MLMers falter in the second stage? The answer is that we naturally want OUR option to be the only one the prospect considers. But the person sitting before us must be free to consider ALL her choices, or her final decision will never be satisfying to her. (By the way, this is a common problem with many salespeople, not just network marketers.)

Plus, people know when they're being pushed or manipulated. Throughout this whole conversation, you've been creating rapport and building trust. If you suddenly start pitching your solution as the only one, your prospect will close up again before your very eyes. She might start talking about how she needs to think a few things over - and maybe she'll get back to you in a couple of weeks. Maybe. In other words, you just lost her.

Or if you do succeed in manipulating her into agreeing to your solution without giving her a chance to think about her other choices, she's likely to feel buyer's remorse down the road and secretly resent you for it forever. That's certainly no way to begin a healthy business relationship, is it?

If you want to play a positive role in your prospect's decision-making process and achieve your win-win goal, you must make it totally clear to her, both in your words and in your actions, that you support her right to explore all her different options.

The good news is, if you truly understand her situation and genuinely believe that your opportunity is her best solution, and if you have effectively communicated why you think that way, chances are pretty good that your prospect will end up agreeing with you. And then you will get to enjoy the most treasured of all outcomes.

Your new business relationship will be launched in an atmosphere of mutual respect and commitment, with the positive expectation that it will continue indefinitely. You and your prospect will each get what you want, and you'll both feel terrific about your decisions.

About The Author

Liz Monte is particularly intrigued by new trends in network marketing that could potentially transform the industry's negative image and lead to the widespread acceptance of a kindler and gentler approach to direct marketing. She invites you to visit her website at http://www.wisenetworkmarketer.com

What Does RICH Mean To You? by: Paul Mara

2008-10-25T04:07:00.001-07:00

Have you ever been asked that question?

I was!

Back in 1979 while doing a “pressure cooker” course on selling with an insurance company!

I wondered how relevant that question was, considering my personal and financial situation at the time.

No wife!

No job!

I was a solo dad with three children, one of them a baby less than a year old.

“You must be kidding”, I thought to myself at the time!

What relevance can that have to me learning to sell insurance policies?

How naive I was!

The course that followed had an unbelievably positive and a life changing effect on me. Although it only took affect several years later. The seed had been sown!

You’re probably saying to yourself, “How can a course on selling life insurance have that much effect on anyone?”

Well that Insurance Company was the one created by W Clement Stone.

I found the course to be very challenging, because in New Zealand at that time we weren’t really aware of the “Hype” that Americans used to motivate their workers to perform at their optimum. It pleases me each time I think about it now, to know that I passed, top of the class and received a book as a reward, this book was already a best seller, but I’d never heard of it.

Success Through a Positive Mental Attitude, of which W Clement Stone was co-author with Napoleon Hill. They shared their secrets on becoming wealthy and having a healthy, productive lifestyle, utilising the power of a "positive mental attitude". Sadly my motivation and my persistence waned and I stopped selling insurance.

I kept all the information, studies and the book I had won.

The “BOOK” Success Through a Positive Mental Attitude, which I never opened or read for probably 3 years.

However I did continue two very positive things! I continued to read on a daily basis some of his quotes and I even put them on the wall. My two

favourites were;

“Success is achieved and maintained by those who try and keep trying” and

“Whatever the mind of man can conceive and believe, it can achieve”.

The second thing and the one which I believed the most important was “Goal Setting” I enjoyed the challenge and had learned enough during the course to

realise its long term value.

Life began to take several steps in the right direction not major ones, but positive ones.

Several important things happened in my life over the next 12 years.

Around 1981-2 I began reading, Through a Positive Mental Attitude,

I applied so many of their ideas and formulae, and by 1992 mine and my families life had completely turned around, this included a wonderful wife and two more children and a list of goals I had made in 1986 after father passed away, became a reality.

I had arrived finally, or so I thought, and was ready to respond to the question that still continued to bother me after all those years.

What Does RICH Mean To You?

I had some answers!

That’s what I believed anyway!

1 - " A consistent income created from hard work

2 - " A healthy family

3 - " A loving wife and loving children

4 - "A nice car

5 - " A great holidays

There are other things, but they are either directly or indirectly related to the above list.

Even now when I look at that list it seems to have “hit the nail on the head”.

Then within three years it all slowly began to fall apart, business wise, thankfully not family wise our “Polynesian Inheritance” is so strong, family always come first!

Where was I going wrong?

What was I doing wrong?

Whose fault was it?

Why now when we seemed so successful?

A myriad of questions passed through my mind, I began to blame myself, I was making wrong decisions.

I had begun a downward slide a personal one that took away my mental fortitude, my belief, my self-confidence, I lost motivation, the thing that really hurts me when I think back is that, “I didn’t really care anymore” I began to think that the world owed me, I was a good person so for that I should be rewarded. What a “Pity party”, darn pitiful is all I can say now!

After all these years I am finally getting back on track!

I realise that age and the new generation means I can never be what I was back then, why?

Well that’s the past and I now live for today!

Not tomorrow!

I have found a “Certain Way” that has been available to each and every one of us for more than ninety years.

Probably what W Clement Stone and Napoleon Hill and thousands of others used to become rich, but forgot to tell us some very vital points, whether they did it consciously or just took it for granted that we would figure it out, I am really not to sure.

Want to find out as I have???

The real meaning of what “RICH” is, go to my website “Right Now” and find out how you to can have a “RICH” balanced and fulfilled life with “Prosperous Equilibrium”.

PS. Get a “FREE COPY” about this “Certain Way”, with THE SCIENCE OF GETTING RICH check it out right now!

http://www.prosperous-equilibrium.com/

About The Author

I have been involved in several businesses over the last 38 years, some very successful and some not so good! But I love it!

I began as a Motor Mechanic who owned several car repair businesses employing up to 15 people in New Zealand and Tahiti. When my father passed away in 1986 I took over his work as a Medical Interpreter and Guide in New Zealand, being fluent in three languages. We owned apartments for clients also. We now live in Australia and am now involved in Internet Marketing and loving the challenge. A very happy "Baby Boomer"!

http://www.prosperous-equilibrium.com/

Manage Debtors And Creditors To Improve Liquidity by: Terry Cartwright

2008-10-25T04:06:00.000-07:00

About The Author

Terry Cartwright designs UK Accounting Software at http://www.diyaccounting.co.uk/ on excel spreadsheets providing complete Bookkeeping solutions http://www.diyaccounting.co.uk/smallbusinessaccounting.htm for small to medium sized businesses

What is in a Franchise UFOC? by: Bob Richman

2008-10-25T04:05:00.000-07:00

There are 4 parts to a UFOC:

* Cover Page
* Table of Contents
* Items 1-23
* Exhibits

The format for each of these sections is very specific and covers the following:

Cover Page The Cover Page identifies the franchise business, including the name under which the franchisee would operate and what type of business it is. It also includes the amounts of the initial franchise fee. In addition, any additional risk factors are included on the cover in all capital letters. Risk factors that may be included pertain mostly to which state is governing the franchise agreement and where any litigation is permitted to be filed and heard.

Table of Contents The Table of Contents contains the specific 23 items listed below, as well as the exhibits, in a standard format.

Items 1-23 Item 1: The Franchisor, Its Predecessors, and Affiliates This section gives you a background on the Franchisor, including anyone he/she has purchased the franchise from, and any affiliates, meaning anyone else who has a controlling interest in the franchise. Do your research on these representatives, including a credit check if possible. You're quite possibly investing your life savings with these people and knowing any other businesses in which they have been involved and how well they manage financial aspects is important.

Item 2: Business Experience This section gives you a background on the officers and directors of the franchise for the past five years. Similar to the information you will review on the Franchisor itself, you want to carefully review the expertise these people bring to the table. These are the people you will be working with and who will contribute greatly to the success of your franchise. You should get to know them as well as you can.

Item 3: Litigation Any history of litigation, including cases terminated by settlement, must be disclosed in this section. Any Franchisor who is under some kind of restrictive injunction is one to stay away from. Additionally, if a franchisor or any officer has a criminal history or any litigation pending that may affect his or her ability to maintain a franchise then this opportunity is not a worthwhile risk.

Item 4: Bankruptcy The bankruptcy disclosure requires that they tell you up front about any bankruptcy in the last 10 years concerning, "the franchisor, its affiliate, its predecessor, officers, or general partner". Entrepreneurs often have several failures before they are successful. Learning from failed business is not the experience you want to have, which is why you are considering a franchise. This doesn't always mean that having a bankruptcy in the disclosure is a sure prediction of a bankruptcy in the future, but you want to review the circumstances of the bankruptcy carefully, including the amount of time that has lapsed since that bankruptcy. You typically don't want to give your money to someone with a proven track record of not being able to manage it.

Item 5: Initial Franchise Fee The initial franchise fee is the fee you pay to purchase the right to operate as a franchise. This does not include all of the other fees that may be required to get started or continue operation. The important thing to know about the initial franchise fee is exactly what you are getting for those dollars. Knowing how they came up with that number is important. A large initial franchise fee does not equate to a larger earning or a better investment. Consider this fee in addition to the Other Fees (Item 6) and Initial Investment (Item 7) before concluding what it will actually cost to open a franchise.

Item 6: Other Fees Other fees include any other monies you will be required to pay to the franchisor, including royalties, advertising fees, service fees, training fees, or any other ongoing or one-time fees that you as a franchisee will be expected to pay directly to the franchisor.

Item 7: Initial Investment This is the key item in terms of figuring out what is will cost you to get a franchise up and running. This section is laid out as a table, and includes the estimated costs for training, equipment, opening, inventory and other costs associated with starting your franchise. For each item in the list, you are given the amount, the method of payment, when it is due and to whom the payment is to be made. Review this information carefully. Speak with other franchisees and see if the estimated costs were realistic. Expect that you will need more for unexpected expenses. Remember that most businesses are not profitable for at least a year, so include the amount of money it would take you and your family to survive for a year without income.

Item 8: Restrictions on Sources of Products and Services If the franchisor requires you to purchase or lease from designated sources, investigate further. Sometimes the purchase restrictions are because the franchise has negotiated a lower price for certain goods in return for guaranteed orders. However, sometimes the cost of the supplies is not competitive and the franchisor makes a bit of money from the procurement of supplies. This makes the franchise more expensive to run, even if the startup costs look attractive. If the costs are reasonable, the restrictions are not a big issue. Again, talk to existing franchisees to see if they feel these restrictions are reasonable and whether or not they are satisfied they are receiving their money's worth.

Item 9: Franchisee's Obligations Your obligations as a franchisee can be laid out in various agreements, including but not limited to the franchise agreement. This section explains what your obligations are and exactly where in the legal documentation you can find the information governing your obligations. This is an important section for you to review carefully, as they define your contractual obligations and if you breech these obligations your franchise can be terminated. Talk to current franchisees and see whether meeting these obligations has presented any difficulty. If the obligations seem unreasonable, move on.

Item 10: Financing Sometimes the financing required to start-up a franchise comes from the franchisor him/herself. As with any financial contract, review the conditions and be sure that they are competitive and make sense. Have an accountant or banking representative review the terms and give an opinion. Having a credit check would, again, be handy here.

Item 11: Franchisor's Obligations Just as the UFOC lays out your obligations as a franchisee, the obligations of the franchisor must be clearly disclosed in this section. You are putting your financial future into the hands of the franchise that you purchase, at least in part. Be sure you understand exactly what you are getting for what you are paying. You may want to approach this section in a different manner than the others...perhaps backward. Rather than reading what they will provide, begin by making a list of what you think you will need to be successful. Determine what kind of training you will need and see whether they provide it, when it will be offered, what kind of training it is, and whether or not it meets your needs. What kind of ongoing support or documentation do they include? Also determine what you would need after you have opened the franchise and see whether those items are included in their list of obligations. If they are missing things that you think you will need to be successful, ask to have those things added to the franchise agreement. Verbal promises from salespeople are not sufficient - promised items should be added to this section.

Item 12: Territory Opening a franchise just to see another franchise open up a half mile down the road would be enough to make anyone crazy. The territory section of the UFOC is designed to lay out exactly what rights you have to any territory. Having the right to an "exclusive area" cuts down on the competition, at least from within your own franchise. Unfortunately, not all franchisees are alike. Some will take full advantage of their area and develop the market to its fullest. Others will assume that the lack of competition in their immediate area means they have a right to the business and therefore don't work quite as hard to develop that area. There are many other situations in which an exclusive area causes issues for a franchisor, and most will not grant them. Some will grant an exclusive area only for a specified amount of time or only as long as a certain level of achievement is reached by the franchisee. Understanding what options the franchise offers is very important.

Item 13: Trademarks This section discloses any trademarks, service mark, service name or logotype used in the franchise business and whether or not that trademark or service mark are registered with the US Patent Office. Using a trademark symbol (™) is not the same thing as having a registered trademark. The registered trademark (®) means a certificate of registration has been granted to the franchisor. A trademark registered in the Supplemental Register does not have the same legal rights and there should be a statement in the Trademarks section disclosing this information.

Item 14: Patents, Copyrights, and Proprietary Information This section is important to you only if patents are important to the franchise. If so, get a copy of the patent from the U.S. Patent Office and review the status of the patent. Be familiar with any copyrighted or proprietary information outlined in the UFOC, as the franchisor has a right to modify or prohibit use of anything patented, copyrighted, or proprietary information disclosed in the UFOC.

Item 15: Obligation to Participate in and the Actual Operation of the Franchise Business This section outlines any requirements for the franchisee to personally be involved in the operation of the franchise. If the franchise does not require the franchisee to run the business him or herself, then there must be a statement outlining whether or not a manager running the day-to-day operations of the franchise in place of the owner must complete the franchisor's training program and/or own an equity share of the business, and any limitations placed on the manager (such as being approved by the franchise).

Item 16: Restrictions on What the Franchisee May Sell Restrictions on what you may sell will affect those franchisees who want to operate an expandable business while they own the franchise. This section is also important if you are limited to selling goods or services that won't make you enough return.

Item 17: Renewal, Termination, Transfer, and Dispute Resolution This section is one of the most important in the entire document, and is presented in a table format for easy browsing. The best contract is one stating that as long as you do not breech your contract you can renew your franchise agreement, forever. Contracts that place a limit on your possibility to renew solely at the discretion of the franchisor are bad. Also pay close attention to extensive repairs or decoration that will required as a condition of renewal. The amount of money expected to be spent should be reasonable and there should be some kind of formula so that costs are not incurred all in the same year. Additionally, the refurbishment should keep you industry competitive.

There are many types of transfers. Transferring among business entities, such as from a sole proprietorship into a corporation, should definitely be allowed. A good agreement will also allow your franchise to be transferred to your heirs. If this is not allowed and you're still interested in purchasing the franchise, try to make some provision for the repurchase of your franchise by the franchisor.

This section also outlines the causes for termination of the franchise agreement, states whether the franchise can be sold and who has the right of first refusal (your own blood relatives should not, ideally, come after the franchisor on first rights), and delineates your right to arbitration. Essentially, the more rights you have to control the renewal and transfer of your franchise, the more rights you have for the continuation of your business and the better the agreement. Make sure your franchise attorney reviews these rights as well as your rights to litigation (or requirement to use arbitration). Any additional risks for litigation will also be on the cover page, remember.

Item 18: Public Figures This section requires the disclosure of any public figures the franchise uses as a spokesperson, how much they were paid, and how much control they have in the business (if any). Find out how this arrangement relates to you, whether you can use that figure in personal appearances or advertising, how much it would cost and how frequently you would be allowed to do so.

Item 19: Earnings Claims It is very tricky for a franchisor to project, estimate, or in any way forecast financial sales. There are so many variables in play for an individual franchise that it would be mostly guesswork and optimism to project for a prospective franchisee how much money they will make with their business. Any claims made by the franchisor to this effect must be substantiated, so rarely will you see any earning claims included in a UFOC. The best way to get an idea of what to expect for earnings is to talk to existing franchisees. Find out how long they've been in business, when the business turned profitable, and what their average profits have been. Remember that each business is unique and that each franchisee does not run a business equally well. Speak to several franchisees to get a clearer picture of a range that you might be able to expect.

Item 20: List of Outlets All of the existing franchise locations, along with the franchisee's contact information, is listed in this section. This is the pot of gold, right here. Contacting franchisees with questions about their relationship to the franchisor, their ability to meet their contractual obligations, their general earnings, and how realistic the start-up projections are is the best bit of research and review you can possibly do before purchasing your franchise. Prepare your questions and schedule time with franchees in advance; this one is important.

Item 21: Financial Statements This section points you to the exhibits containing the audited financial statements of the franchisor for the last three years. Take these statements to a qualified accountant for review. The financial status of the franchisor is a track record, showing you not only the ability of the franchisor to run the business, but also the likelihood of success or failure.

Item 22: Contracts All contracts or agreements a franchisee will need to sign must be attached to the UFOC. This includes the Franchise Agreement, purchase agreements, lease agreements, and others.

Item 23: Receipt This document is a receipt of acknowledgment of the UFOC. This has to be provided as the last page of the document for the franchisee to acknowledge that they have received it. This is only important because no monies can legally be exchanged until 10 days after the receipt of the UFOC (the "cooling off" period provided for by law).

Exhibits Any documents that have been identified in the UFOC for the franchise to review or sign must be included as an Exhibit. The exhibits will include copies of such things as the financial statements, Franchise Agreement, leases, or Loan Agreements.

About The Author

Bob Richman

FranchiseGenius.com is the most comprehensive source of franchise information on the web, with 1,500+ franchises for sale and free objective franchise selection tools.

To view additional franchise articles and profiles for 1,700+ franchises for sale, please visit http://www.franchisegenius.com

This publication is copyright © 2008 by Franchise Genius LLC. This copyright notice and any embedded links within this publication must remain as part of this document.

How To Write A Successful Business Plan by: Jason Kay

2008-10-25T04:04:00.001-07:00

Whether you are planning to start a brand-new business, expand an existing company, or get financing for a business venture, you will need to write a business plan. A business plan not only lends your business a sense of credibility, but also helps you to cover all your bases, increasing your chances of success.

Although writing a business plan can be a lengthy, intimidating project, it is not necessarily difficult. Here is an overview of how to write a successful business plan.

What to Include in Your Business Plan

Your business plan needs to demonstrate that you have thoroughly considered all aspects of running your business. To that end, the standard business plan has nine major sections, covering everything from your business’s mission statement to a detailed financial analysis.

Executive Summary

The first – and most important – section of your business plan is the executive summary. This section is so important that it should literally be the first thing the reader sees – even before the table of contents! However, it should also be written last, as you’ll have a better understanding of the overall message of your business plan after you’ve researched and written the other sections.

One of the most important parts of the executive summary is the mission statement. The mission statement is only three or four sentences long, but it should pack the most punch out of everything else in your business plan: Those four sentences are responsible for not only defining your business, but also capturing the interest of your reader.

The rest of your executive summary should fill in the important details that the mission statement glosses over. For instance, your executive summary should include a short history of the business, including founder profiles and start date; a current snapshot, listing locations, numbers of employees, and products or services offered; and a summary of future plans and goals.

This section is a candidate for a bulleted format, which allows you to list main points in a manner that is easy to scan. Avoid using too much detail – remember, this section is a summary. A page or two is usually sufficient for an executive summary.

Market Analysis

The next section of your business plan focuses on market analysis. In order to show that your business has a reasonable chance for success, you will need to thoroughly research the industry and the market you intend to sell to. No bank or investor is going to back a doomed venture, so this section is sure to fall under especially close scrutiny if you are looking for financing.

Your market analysis should describe your industry, including the size, growth rate, and trends that could affect the industry. This section should also describe your target market – that is, the type or group of customers that your company intends to serve. The description of your target market should include detail such as:

• Distinguishing characteristics
• The needs your company or product line will meet
• What media and/or marketing methods you’ll use to reach them
• What percentage of your target market you expect to be able to wrest away from your competitors

In addition, your market analysis should include the results of any market tests you have done, and an analysis of the strengths and weaknesses of your competitors.

Company Description

After your market analysis, your business plan will need to include a description of your company. This section should describe:

• The nature of your business
• The needs of the market
• How your business will meet these needs
• Your target market, including specific individuals and/or organizations
• The factors that set you apart from your competition and make you likely to succeed

Although some of these things overlap with the previous section, they are still necessary parts of your company description. Each section of your business plan should have the ability to stand on its own if need be. In other words, the company description should thoroughly describe your company, even if certain aspects are covered in other sections.

Organization and Management

Once you have described the nature and purpose of your company, you will need to explain your staff setup. This section should include:

• The division of labor – how company processes are divided among the staff
• The management hierarchy
• Profiles of the company’s owner(s), management personnel, and the Board of Directors
• Employee incentives, such as salary, benefits packages, and bonuses

This goal of this section is to demonstrate not only good organization within the company, but also the ability to create loyalty in your employees. Long-term employees minimize human resource costs and increase a business’s chances for success, so banks and investors will want to see that you have an effective system in place for maintaining your staff.

Marketing and Sales Management

The purpose of the marketing and sales section of your business plan is to outline your strategies for marketing your products or services. This section also plans for company growth by describing how the growth could take place.

The section should describe your company’s:

• Marketing methods
• Distributions methods
• Type of sales force
• Sales activities
• Growth strategies

Product or Services

Following the marketing section of your business plan, you will need a section focusing on the product or services your business offers. This is more than a simple description of your product or services, though. You will also need to include:

• The specific benefits your product or service offers customers
• The specific needs of the market, and how your product will meet them
• The advantages your product has over your competitors
• Any copyright, trade secret, or patent information pertaining to your product
• Where any new products or services are in the research and development process
• Current industry research that you could use in the development of products and services

Funding Request

Only once you have described your business from head to toe are you ready to detail your funding needs. This section should include everything a bank or investor needs in order to understand what type of funding you want:

• How much money you need now
• How much money you think you will need over the next five years
• How the money you borrow will be used
• How long you will need funding
• What type of funding you want (i.e. loans, investors, etc.)
• Any other terms you want the funding arrangement to include

Financials

The financials section in your business plan supports your request for outside funding. This section provides an analysis of your company’s prospective financial success. The section also details your company’s financial track record for the past three to five years, unless you are seeking financing for a startup business.

The financials section should include:

• Company income statements for prior years
• Balance sheets for prior years
• Cash flow statements for prior years
• Forecasted company income statements
• Forecasted balance sheets
• Forecasted cash flow statements
• Projections for the next five years – every month or quarter for the first year, with longer intervals for the remaining years
• Collateral you can use to secure a loan

The financials section is a great place to include visuals such as graphs, particularly if you predict a positive trend in your projected financials. A graph allows the reader to quickly take in this information, and may do a better job of encouraging a bank or investor to finance your business. However, be sure that the amount of financing you are requesting is in keeping with your projected financials – no matter how impressive your projections are, if you are asking for more money than is warranted, no bank or investor will give it to you.

Appendices

The appendix is the final section in your business plan. Essentially, this is where you put all of the information that doesn’t fit in the other eight sections, but that someone – particularly a bank or investor – might need to see.

For instance, the market analysis section of your business plan may list the results of market studies you have done as part of your market research. Rather than listing the details of the studies in that section, where they will appear cumbersome and detract from the flow of your business plan, you can provide this information in an appendix.

Other information that should be relegated to an appendix includes:

• Credit histories for both you and your business
• Letters of reference
• References that have bearing on your company and your product or service, such as magazines or books on the topic
• Company licenses and patents
• Copies of contracts, leases, and other legal documents
• Resumes of your top managers
• Names of business consultants, such as your accountant and attorney

Writing a Successful Business Plan

Despite the quantity of information contained in your business plan, it should be laid out in a format that is easy to read. Just like with any piece of business writing, it is important to craft your business plan with your intended audience in mind – and the bankers, investors, and other busy professionals who will read your business plan almost certainly won’t have time to read a tedious document with long-winded paragraphs and large blocks of text.

Business plans for startup companies and company expansions are typically between twenty to forty pages long, but formatting actually accounts for a lot of this length. A strong business plan uses bullet points throughout to break up long sections and highlight its main points. Visuals such as tables and charts are also used to quickly relay specific information, such as trends in sales and other financial information. These techniques ensure that the reader can skim the business plan quickly and efficiently.

Think of your audience as only having fifteen minutes to spend on each business plan that comes across their desks. In that fifteen minutes, you not only have to relay your most important points, but also convince the reader that your business venture merits a financial investment. Your best bet is a well-researched business plan, with an organized, easy-to-read format and clear, confident prose.

About The Author

Jason Kay is a former professional business plan writer and provides business start up advice. He contributes to business magazines and websites such as http://BudgetBusinessPlans.com, which provides business plan writing services and business plan samples.

ETFs, Funds And Shares: What Are They And What Are Their Benefits? by: John McElborough

2008-10-25T04:03:00.000-07:00

Exchange Traded Funds, better known by many investors as iShares, the brand owned by Barclays Global Investors ('BGI') have been around in the UK since April 2000, with the launch of the iFTSE100 on the London Stock Exchange. From a slow start, by the end of 2005 (the latest figures available), some 125 billion was held in assets under management. Generally, when you look for your share price information, you'll find them grouped in the extra MARK section, where you'll now find some 45 different ETFs on offer. Although they have been around for sometime, let's just remind ourselves how ETFs work. They are listed on the stock exchange, providing the flexibility and trade ability of a share, including the fact that the price is continuously quoted, but that one share can provide instant exposure to an entire Index, giving you the diversification benefits of a fund. ETFs are also a flexible way of achieving cost-effective market exposure. Because the funds are registered in Ireland, there is no stamp duty to be paid on purchases. Management costs are taken from dividends that are accrued by the fund, and any excess income is then distributed to shareholders: unlike unit trusts, there are no initial fees to pay on the original purchase. The price of the fund is always close to the 'Net Asset Value' (NAV) of the underlying investments and will usually have tight spreads, unlike some unit trusts and some investment trusts. Also ETFs will disclose their holdings everyday, whereas traditional funds usually disclose their holdings twice a year.

What can I invest in?

ETFs offer a wide range of opportunities for investment with varying levels of risk: as at mid-December there were 45 different markets/indices to invest in, ranging from corporate bonds to the Taiwanese market. Starting at the lower end of the risk spectrum there are several corporate bond ETFs, as well as some Gilt-based investments. Moving on to the medium risk level, you can choose from global funds to ones that are more specific to individual regions, such as the US or Asia. There's also the option of investing in individual indices: 'index trackers' are available for the UK's FTSE100 and 250 Indexes, the US S&P 500, or Europe's Euro first 100 & 80, spanning the top European companies. For those wanting a higher level of risk, there are also ETFs which will give you exposure to emerging markets, such as Turkey, Korea, Taiwan and Eastern Europe. ETFs don't offer the same wide variety as unit trusts, but for investing in the countries and sectors they do cover, their charging structure and trade ability make up for this. As such, they provide a good, low cost, easily-traded route into the market, with the flexibility to move up the risk ladder as your experience and capital grows.

Finally, if you've an appetite for an even spicier approach, the London Stock Exchange also enables you to invest in commodities, through ETCs (Exchange Traded Commodities). Although like ETFs they are traded in the same way as shares, and are eligible to be held in a PEP or ISA, they do work in a completely different way. Whereas ETFs actually buy the underlying investments, ETC managers don't buy and store tons of wheat and copper, stack-up barrels of oil, or herd livestock into pens. Rather, they buy options on these commodities. As a result, ETCs are classed as more 'complex' investments by the FSA and you'll need to complete a special 'risk notice' confirming you understand the additional risks of investing in them. So take a fresh look at ETFs - you might just find they offer you more than you thought!

Funds: take your pick of the best

Unit Trusts and Open Ended Investment Companies (OEICs) are investments that let you pool your money with lots of other 'retail' investors. This money is invested on your behalf by a wide range of specialist fund managers, investing in, for example, Government gilts and bonds, commercial property and equities. Investing in funds gives you access to a highly-diversified range of investments at a reasonable cost. You will also have easy access to asset classes and international markets that would otherwise be difficult and expensive to invest in and benefit from the Fund Manager's contacts, knowledge, experience and expertise. Funds come in many shapes and sizes from 'trackers' to specialist or 'themed' funds.

An index-tracking fund (often referred to as a 'passively managed fund') aims to match or 'track' the performance of a given market index, such as the FTSE All Share or the FTSE 100. They do this using computer programs to work out how much of each individual company they need to buy and sell to mimic the performance of the Index as a whole. But not all 'tracker funds' match the Index they are tracking that well - so be sure to check their record. An 'actively managed fund' on the other hand employs researchers to study and engage with companies in which they plan to invest, and to keep abreast of the prospects for companies in which they already invest. They'll compare their performance to a 'benchmark' index related to the investment objectives of their fund, with the expectation that the extra work they put into tracking down the 'best' investments will literally pay dividends through higher growth than that of their benchmark.

Choosing your funds

When you pick your funds, be sure to rate them against other funds that fish in the same waters. Don't expect a 'value' fund and a 'growth' fund to have similar track records. Only by comparing funds with their true peers will you make a good choice. Whilst past performance should not be seen as an indication of future performance, past performance does matter when comparing like with like. Chasing winners however, is as dangerous as day-trading. Not surprisingly, all five of the top-performing funds at the end of 1999 were technology sector funds. Sector funds have a place in many a portfolio, but for the majority of investors they belong at its edges, not at its heart. An individual fund will give you a wider spread of underlying investments: by investing across a number of funds you're better able to smooth out the ups and downs of the market overall. But that won't work if it turns out that your funds hold virtually the same investments. So have a look at each fund report to see their top holdings and make sure you've got a good spread overall.

Individual Company shares

When it comes to the individual shares part of the investment model, the lowest risk entry point has always been recognised as companies in the FTSE 100. However, you should always bear in mind that the Index evolves over a period of time, changing its overall make-up. Consider, for example, that over the last 6 years technology shares have fallen out of the Index, while mining companies, on the back of booming commodity prices, have dramatically increased their presence. Yet, because of the volatility and cyclical nature of the sector, individual mining groups can't be classed as low risk. Other 'big names' have gone from the Index due to take-over activity - companies like P&O, Abbey National & BAA - all of which have to be replaced.

Today, some 80% of the make-up of the overall value of the FTSE100 comes from just 5 sectors - Banking, Mining, Oil & Gas, Pharmaceuticals, and Telecoms (fixed and mobile). So, if you're looking to the Footsie to form the bedrock of your investment in individual shares, where should you start? Companies involved in essential, everyday products and services, such as the water and electricity utilities and broad-based retailers often provide a solid backbone to any share portfolio. You could argue, however, that the classic 'defensive' nature of utilities has recently been undermined by the number of take-overs within the sector. The share prices of the remaining companies have climbed to all-time highs, potentially increasing the level of risk.

There is without doubt an appetite for the assured cash flow that utilities provide, and it's fair to say that a growing number of analysts agree it's hard to justify the current prices. Despite this, get your timing right, buying at the right price, and these sectors should still provide a strong base on which to build your individual holdings. To extend your scope, whilst still staying within a lower risk profile, your next ports of call should be into the banks, pharmaceuticals, tobacco and beverages sectors.

Move on up to the intermediate, 'medium risk' level, and you've an increasing choice, including the remaining FTSE100 companies, dominated by the mining sector. The majority of shares in the FTSE250 would also fit into this 'medium risk' category. Still relatively large companies, it is these shares that have seen some of the biggest gains over the last 3 years, helping push the 250 Index to record levels in 2006. One noticeable difference between the FTSE250 compared to the FTSE100, is that companies here generally have less international exposure. When it comes to the consideration of risk, you can play this one of two ways: some argue that having the majority of profits coming from the UK provides for less risk, while others (including us) favour having fingers in as many regions as possible.

Finally, at the higher end of the risk scale you find smaller companies and AIM quoted shares. These tend to be more volatile and less liquid than their larger cousins, factors that generally lead to wider bid/offer spreads. The AIM market has seen considerable growth over the last 10 years, partly because companies don't have to comply with the same stringent requirements of the main market.

Often, private investors don't get a look-in as part of the flotation, having to wait until the shares start trading, so do pick your time and use stop-loss limits - that early flush of success isn't always carried through. One of the fastest growing sub-sectors within AIM is small mining and exploration groups, many of which are based abroad but have chosen to list in the UK. Because their prospects include a significant amount of 'hope' value, such companies will represent the very highest level of risk. Equally classified as higher-risk, though as a result of different factors, are shares in overseas companies.

Household names like Volvo, Coca Cola and Johnson & Johnson are big names and big companies. The additional risk they bring for investors comes from the fact that the majority of their earnings are from overseas. So you face the added risk of changes in exchange rates. Over recent months, for example, the fall in the US$ would have had a big impact on the sterling value of dividends from US shares And when the companies you invest in are smaller ones, it's often harder to find reliable research and analysis, harder to track and compare performance, and harder to follow the news that affects the share price. True, most big UK names also trade globally, but as 'home market' companies they are well-researched, much commented upon and regularly feature in the UK business finance pages. That's not to say you shouldn't venture outside these shores - far from it - but you need to do so with your eyes open. That's why we see overseas shares as being more appropriate for investors asthey move up the experience ladder and once they've built a balanced portfolio. And it's also why, in general, we'd advise investing in market trackers and funds before moving into individual overseas shares.

About The Author

The Share Centre http://www.share.com offer information and advice on shares and http://www.share.com/webp/share.htm share dealing. Learn about the stock market, research shares and deal shares online.

Superior Leader - Warren Buffet by: Michael J. Spindler

2008-10-25T04:02:00.000-07:00

Superior business leader and American investor Warren Buffett is often called “Oracle of Omaha” or the “Sage of Omaha” and philanthropist. (Wikipedia, 2007) Buffett is the CEO, and the biggest shareholder of the Berkshire Hathaway Company. Buffett’s has an estimated current net worth of approximately $52 billion in US funds. Forbes Magazine ranks Buffett the third richest person in the world in September 2007 behind Carlos Slim and Bill Gates.

Warren Buffett is known for his economical and plain lifestyle. Buffett still lives in the same Omaha, Nebraska house that he purchased in 1958 for $31,500 with a current value of $700,000. In 1989, Buffett spent $9.7 million of the Berkshire’s funds on a corporate jet. He jokingly named it “The Indefensible” because of his past criticisms of such purchases by other CEOs. (Wikipedia, 2007)

Warren Buffett decided to make a commitment to give his fortune to charity back in June 2006. Buffett’s charity donation is approximately $30 billion, which is the largest donation in the history of the United States. The donation was enough to more than double the size of the foundation with 83% of it going to the Bill and Melinda Gates Foundation. Buffett believed that his family had enough money to get started in life so Buffett decided to give his fortune to charity. Buffett’s annual salary in 2006 was only $100,000. In 2007, Buffett was listed among Time Magazine’s 100 Most Influential People in the World. (Wikipedia, 2007)

What makes Warren Buffett a good business leader? This is what everyone wants to know because Warren buffet is so successful. It all starts with leadership. Warren buffet is a true leader where his leadership makes a difference in the world. Leadership is very much related to change and Warren Buffett has the capabilities of leadership change to fit the changing world. Warren Buffett has repeatedly demonstrated the ability to map read in the irregular waters of change. Is Warren Buffett born a leader? The authors of this paper believe not. Experience and research has shown little evidence that an individual who comes to power is a “born leader.” Warren Buffett took the falls that any other leader has to take. Warren Buffett learned from his mistakes and turned his mistakes into a positive thing. Warren Buffett shares his leadership at all organizational levels and Buffett is empowered to share leadership responsibilities. In the world of business, many titles related to leadership roles are actively used in business and Warren Buffett wears those titles to make him effective in multiple leadership positions in business. Distinction between good leadership and good management is made often. Managers are made to be organizational, controllers and budgeters. Warren Buffett has leadership in all three departments and one must have these traits to be a good business leader.

Another important trait in Today’s business leadership is communication. Warren Buffet is a skilled communicator in all aspects of life. Communication is the real key of leadership. Skilled communicators have an appreciation for positioning in the business world. Warren Buffet is experienced at positioning himself at the right place at the right time. Warren Buffet has the understanding of the people he is trying to reach and what he can and cannot hear from the people. Knowledge of audiences’ needs and wants gives the orator the ability to listen. Warren Buffett is an excellent listener with the ability to convey his understanding.

When Warren Buffett talks, people listen. Warren Buffett can send a message through an open door and does not have to push the message through a wall.

Leadership is crucial to any successful business and good leadership is what Warren Buffett is all about. This is what makes Warren buffet a good business leader.

Mr. Warren Buffett’s investment strategies and course of leadership are shining examples of characteristics shared by cognitive theorists. Cognitive theory is an approach of explaining behavior through perception, anticipation, and thinking. Mr. Buffett’s continual approach of analyzing both possible investment choices, market trends, and the ability to place management resources of the right caliber in the right position has consistently brought this investor to the forefront amongst peers and the marketplace. At the core of every sound investor is a creative innovator.

Innovation demands creativity. Creativity in turn draws on our cognitive faculties, across the full amplitude from emotion to reason. In the number-heavy world of global investing, innovative thinking is critical. Innovative investors decipher future trends, spot likely winners by combining science (financials) with art (acuity and perception) and continuously mitigate risk. They assess user needs, product features, the proper deployment of money, professional organizational structures and risk management. (Kore Kalibre, 2006)

Mr. Buffett’s instinct and ability to interpret market trends is also held by tight reigns. Despite over 50 years of growth, Mr. Buffett always adheres to one of the most basic business principles: “…only compete where you have a competitive advantage. Warren Buffett refers to staying within your circle of competence. Social psychologists tell us, though, that we are prone to overconfidence when it comes to assessing our abilities…” (Arthridge, 2006) A man of Warren Buffett’s position and track record could easily be derailed to a sense of over confidence. The principle of only competing within your range of competitive advantage is a principle that can be applied to many other areas in life, and Mr. Buffett’s ability to work and live by this idea has allowed him to continue forward with minimal bruising.

By establishing the previous examples, the authors can reinforce the principles of cognitive theory in that Mr. Buffett behavior patterns are clearly dictated by thought processes, which include interpretation, analysis, and foresight. “As experiences and events gain meaning and value, the process becomes increasingly top down as the mind in (a) attempt at an orderly process influences perception though beliefs, goals and external process” (Gardener, 2007)

Warren Buffett’s is a self empowered leader, because he is loyal, sets goals, plans a strategy for achievement, and stays committed until he accomplishes his purpose. Up to date, he is the greatest stockbroker of all-time. He is a very conservative investor that prefers to invest in companies that sell name brand products that he uses. For example, Coca-Cola, Gillette Razors, See’s Candy, Gulfstream Jet, and GEICO are the major companies he invested in. In the nineties his assets quadrupled in less than five years. He is a smart investor that usually does not take big investment risks. For example, he will not invest in internet stock, because the return is unpredictable. He likes to invest in companies that he is sure will be successful 20 years later. He buys the company with the intentions of keeping it forever. Usually, the management team of each company is the same staff that sold it Warren Buffett from the beginning. He stays loyal to his partners, and the team workstheir best to keep him happy.

After Warren Buffett’s wife died, he decided to donate 85% of his money to charity. However, “he wants his money to be used the same year he donates it”.(Harris, 2006) The requirement will accelerate the process to help the world. According to Fortune magazine, five-sixths of his money will go to the Bill and Melinda Gates Foundation. This foundation which focus on finding cures for diseases that are common in poor nations. The rest of the money will be split among four other charities, that are each run by his three children and one that is in his late wife’s name.

Warren Buffett is not a huge spender. In fact, he still lives in the same house he bought 40 years ago. Warren “told ABC News “Nightline” that being born into wealth did not entitle his children”(Harris, 2006). In addition, he told Fortune magazine that, “A very rich person would leave his kids enough to do anything, but not enough to do nothing.”(Harris, 2006) In other words, he wants his children to work earn their money and value hard work and smart choices.

In the year 2006, Warren’s first annual donation to the Bill and Melinda Gates Foundation was $1.5 billion and the rest was divided among the four charities. He was the first person to make a donation better than Bill Gates, the richest man in the world. It seems as if Bill Gates and Warren Buffett set a good example and lead others to be more generous, because now the Barron Hilton has committed to donating half of his fortune to charity also. Barron Hilton is the founder of the Hilton Hotels and is worth $2.3 billion. Hopefully, a trend started among the fortunate to give to the less fortunate.

The personality of Warren Buffett ties to the Social Cognitive Level, because he tries to understand and make sense of other people. He observes the differences in social knowledge when dealing with people. Social cognition refers to making sense of ourselves, others, and how the information is used. In the sixties and seventies Albert Bandura and Walter Mischel were psychologists, studying personality development. They found that social learning and cognitive principles improve ones abilities to self-regulate and to follow goals. Warren investment choices were successful, because he conditioned his the way he processed information, choices, and expectations.

References - DO Not Strip References!

Gardener, J. (2007). Cognitive Behavior Theory. Retrieved December 26, 2007, from http://www.cognitivebehavior.com/theory/index.html

Harris, D. (2006, June 26,). Warren Buffett's Unprecedented Generosity. Retrieved December 31, 2007, from http://abcnews.go.com/print?id=2118501

Kore Kalibre (2006, March-April 2006). Warren Buffett’s Innovation: Staying away from Rapid Product Innovation. Retrieved December 26, 2007, from http://www.korekalibre.com/index.php?option=com_magazine&task=show_magazine_article&magazine_id=26

Legg Mason Value Trust (2006, October 26). Legg Mason Value Trust (LMVTX) Letter to Shareholders. Retrieved December 26, 2007, from http://markets.kiplinger.com/kiplinger?GUID=323448&Page=MediaViewer&Ticker=LMVTX

Wikipedia (2007, December 25). Warren Buffett. Retrieved December 18, 2007, from http://en.wikipedia.org/wiki/Warren_Buffett

About The Author

Michael J. Spindler - http://www.localmusichits.com - A Musicians Community for Fans and the Bands to promote hits in local music on a national stage.

Free to distribute - However- Do not strip Article References, remove the HTML if needed, but keep the URL’s. Do Not Remove the Authors name, Michael J. Spindler and keep the hyperlink to http://www.localmusichits.com - I use software that compares my “library” and scours the web for placements. When I find my article on your site and you have not followed the above binding agreements, Lawyers will be involved.

Understanding the Mortgage Meltdown; What happened and Who's to Blame by: Richard Gandon

2008-10-25T04:01:00.000-07:00

People are losing their homes and many more will lose their jobs before the mortgage meltdown works its way through the system.

To paraphrase Alan Greenspan's remarks on March 17th, 2008, “The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the Second World War. The crisis will leave many casualties.”

How many casualties? Experts are predicting that in the next few years, between 15 and 20 million homeowners could have homes worth less than what they owe. Walking away from a bad situation may actually make sense for people who mortgages that are 'upside down' considering the fact that refinancing is out of the question and home equity is nonexistent.

It seems quite easy to point fingers at greedy Wall Street titans for causing the sub-prime mortgage crises. They after all, put together the deals that allowed banks to underwrite mortgages and then offload these liabilities to investors. What many fail to realize is that there is no shortage of blame to go around from homeowners buying more home than they could afford to real estate agents looking for more commission dollars. Mortgage brokers and bankers, the banks themselves, ratings agencies such as Moody's and Standard & Poor's, Wall Street, the Fed and last but certainly not least, the Federal Government.

Let's start with the homeowners--the people who are now in the process or soon to enter the process, of losing their homes. Some of these people had never before owned a home and as such, may not have been prepared for the costs associated with homeownership. Basic financial literacy is sorely lacking in this country despite there being no shortage of budgeting and tracking programs readily available such as Quicken and Microsoft Money. The lack of financial literacy does not absolve these buyers of their responsibility. Every borrower receives a truth in lending disclosure statement. Here is a portion of what the act covers:

The purpose of TILA (Truth In Lending Act) is to promote the informed use of consumer credit by requiring disclosures about its terms and cost. TILA also gives consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling, regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes. With the exception of certain high-cost mortgage loans, TILA does not regulate the charges that may be imposed for consumer credit. Rather, it requires a maximum interest rate to be stated in variable-rate contracts secured by the consumer's dwelling. It also imposes limitations on home equity plans that are subject to the requirements of Sec. 226.5b and mortgages that are subject to the requirements of Sec. 226.32. The regulation prohibits certain acts or practices in connection with credit secured by a consumer's principal dwelling.

Much of the subprime mortgage crisis can be traced directly back to variable-rate mortgages. As is clearly stated above, “TILA does not regulate the charge that may be imposed for consumer credit. Rather, it requires a maximum interest rate to be stated in variable-rate contracts secured by the consumers dwelling.” It also clearly states that TILA also gives consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling. One has to wonder whether or not these homeowners:

1. Bothered to read the truth in lending act disclosure at all.

2. Understood what the truth in lending act disclosure meant.

3. Chose to ignore the information printed clearly the truth in lending act disclosure.

A number of months ago, just as the subprime mortgage crisis was beginning to unfold, The New York Daily News ran an article about a family in New York City, who had bought a home and were now faced with the prospect of foreclosure. The article was sympathetic to this family, highlighting the fact that they're living the American dream and that this dream was about to come to an end. What I found to be distressing was the fact that clearly visible in the photo that accompanied this sympathetic article was a very expensive flat screen television hanging on the wall. Perhaps I'm naïve, but I can assure you that if I were faced with the prospect of losing my home and having my family put out on the street, there is absolutely no way that I would still have that expensive television hanging on my wall. It would have been one of the first things to be sold and some financial relief would be found by jettisoning what I'm sure was the expensive cable bill.

Clearly the public needs easy access to financial literacy courses. Too bad we don't see the need to make this a mandatory course of study in our educational system.

Mortgage bankers and brokers have in the last four or five years been raking in cash by the bucket load in the form of commissions paid when mortgages they've originated, close. Many of these people have not needed to do much in the way of prospecting. Instead, their phones have run off the hook as people have jumped on the homeownership and refinancing and take out extra cash bandwagon, despite their ability to pay for their home. No-document loans were readily available without the borrower having to produce documentation that backed up their income. Clearly this practice can and indeed has, lead to substandard loan underwriting processes. Were some of these mortgage bankers and brokers dishonest? Sure. Were all of them dishonest? I think not. To have a massive nationwide conspiracy, where thousands and thousands of people involved in the mortgage banking and mortgage brokering profession got together to create this situation is simply not feasible. Yes, some of the blame does belong with those in the mortgage industry, but they were simply a small cog in the huge machine that created this mess.

Let's discuss real estate agents. In 2007, we bought a home, and also sold a home. The agent we used to purchase our home was absolutely fantastic. In our opinion, she went above and beyond to make our deal happen. She answered every phone call, followed up on every concern and was the epitome of professionalism. We consider this individual to be a friend, and we have sent referrals her way that have resulted in her earning additional commissions. We will continue to recommend her to all who ask or mention that they'd like to buy or sell a home in our area.

The real estate agent, we used to sell our home, could not have been more different. We got our old home ready to sell prior to closing on our new home. We decided to list it as “For Sale by Owner.” In the event that we didn't sell this home on our own, it was our intention to list it with an agent as soon as we had closed on the purchase our new home. Literally, from the day we put the sign in front of our home and listed it on a “For Sale by Owner” website we were inundated with phone calls from real estate agents. We were told many lies and were constantly harassed; although we had already made it quite clear to every agent who called, and there were more to 60 who did; that we were willing to pay half the commission-the same as they would have received had they sold another agent's listing. We also told every agent that called that we had already lined up an agent to sell our home in the event that we chose to no longer sell it ourselves. Our deadline was the closing date of our new home purchase. We did have an interested buyer who shortly after our closing date decided to keep looking so we listed our home with a local agent so that we could concentrate on getting our new home ready for our moving date at the end of the school year. This agent showed our home a maximum of two times and got an offer which we accepted. We ended up getting $1,000 less than we had wanted in a declining Real Estate market. The agents who had called many times to harass us called our listing agent on a number of occasions and he lied telling them that the house was under contract when in fact it wasn't at that time-clearly a breach of our agent's fiduciary duty. Quite frankly an ethical agent would have continued to show our home until closing in the event that the deal fell through.

But wait, there's more. Our agent also acted as the buyer's mortgage broker. At the closing table, we learned that he had signed documents from the buyer stating that he (our agent) represented them and we had signed documents stating that he represented us. We also learned that the buyer had effectively put down approximately 2-3% of the purchase price when financed closing costs were factored into the equation. Their first mortgage had what we thought was a high fixed rate and their second mortgage came with a rate in excess of 8.5%. Because the closing happened in August, literally in the midst of the first wave of the meltdown, if they didn't close on the day they did (August 31st, 2007), Citibank wasn't going to extend their rate. When my wife & I have bought houses in the past, it had always been a very happy day. These people looked absolutely shell-shocked at the closing table. I'm not convinced that they knew just how much their monthly payment was going to be until closing day. We knew down to the penny well in advance having budgeted and planned everything on a spreadsheet. Were these people stupid or just inexperienced and mislead by a greedy combination of real estate agent & mortgage broker? I'm extremely confident that they are intelligent people but inexperienced and taken advantage of by an unscrupulous agent.

The banks are also culpable. Prior to bank deregulation, Savings and Loans provided mortgages to home buyers and kept these loans on their books. Non-performing loans had a negative effect on the S&L's profitability which of course caused tighter lending guidelines such as job stability and decent down payments in order for prospective home buyers to be approved for a mortgage. Way back then, a home buyer had to actually save up enough money for a down payment 10 or even 20% before a bank would ever consider underwriting a mortgage. The checks & balances kept banks solvent and borrowers responsible. Although this approach worked, some cried foul stating that the regulated system was racist and discriminatory-and there certainly was some truth to this. Skipping forward to the present, banks made a bundle on mortgages over the past five or six years. For the most part, they allowed their underwriting criteria to be stretched so far out of alignment that almost anyone could and indeed did, qualify for a mortgage despite their ability to pay. Some folks even applied for and received mortgages for more than the property was worth. Sometimes for as much as 25% more than their property was worth!

Under the prior system, 125% mortgages would not have been possible because of course these loans were held on the banks' books and could have led to losses that would have had to have been absorbed directly by the bank.

So what went wrong? Under the current system, these loans were sold to the big Wall Street investment firms who repackaged them as collateralized mortgage obligations (CMO's), Mortgage Backed Securities (MBS's) and other similar acronyms. These instruments were then sent to the ratings agencies for their blessing and more importantly a letter rating. Many of these structured finance deals receive AAA ratings-the highest ratings available meaning that in theory, these instruments were least likely to default. How does one create a 'triple A' or AAA rated financial instrument out of sub-prime mortgages? Herein lies the magic. These Asset Backed Securities (ABS) are made up of different tranches or slices, each carrying a different risk and reward level. The first dollar of principle and interest is applied to the securities with the highest rating, and the first dollar of loss is applied to the tranche with the lowest ratings. The lower slices are designed to provide a security blanket that in theory protects the higher-rated securities. The investment banks that package or 'structure' these securities in order to earn fat fees when they sell them to investors are the same entities that pay the ratings agencies to rate these instruments. Clearly the possibility for conflict of interest is present. If investors and not the investment banks that stand to rake in millions in fees were to pay for the rating, the potential for this conflict of interest would be negated. Furthermore, the investment banks have a vested interest in convincing the ratings agencies of the credit worthiness of these securities.

So we've already pointed fingers at homeowners, some greedy, many more I suspect, naïve or uninformed, real estate agents-one out of more than 60 in my experience was a gem, mortgage brokers & bankers, banks, Wall Street and ratings agencies so who's left? The Federal Reserve and the Government of course.

The Fed as its known is responsible of the country's monetary policy and for supervision and regulation of banks. This is the definition of the Fed's roles in their own words:

Monetary Policy

The Fed is best known for its role in making and carrying out the country's monetary policy-that is, for influencing money and credit conditions in the economy in order to promote the goals of high employment, sustainable growth, and stable prices.

The long-term goal of the Fed's monetary policy is to ensure that money and credit grow sufficiently to encourage non-inflationary economic expansion.

The Fed cannot guarantee that our economy will grow at a healthy pace, or that everyone will have a job. The attainment of these goals depends on the decisions of millions of people around the country. Decisions regarding how much to spend and how much to save, how much to invest in acquiring skills and education, how much to spend on new plant and equipment, or how many hours a week to work may be some of them.

What the Fed can do, is create an environment that is conducive to healthy economic growth. It does so by pursuing a goal of price stability-that is, by trying to prevent inflation from becoming a problem.

Inflation is defined as a sustained increase in prices over a period of time.

A stable level of prices is most conducive to maximum sustained output and employment. Also, stable prices encourage saving and, indirectly, capital formation because it prevents the erosion of asset values by unanticipated inflation.

Inflation causes many distortions in the market. Inflation:

· hurts people with fixed income-when prices rise consumers cannot buy as much as they could previously

· discourages savings

· reduces economic growth because the economy needs a certain level of savings to finance investments that boost economic growth

· makes it harder for businesses to plan-it is difficult to decide how much to produce, because businesses can't predict the demand for their product at the higher prices they will have to charge in order to cover their costs

Bank Regulation & Supervision

The Fed is one of the several Government agencies that share responsibility for ensuring the safety and soundness of our banking system. The Fed has primary responsibility for supervising bank holding companies, financial holding companies, state-chartered banks that are members of the Federal Reserve System, and the Edge Act and agreement corporations, through which U.S. banking organizations operate abroad.

The Fed and other agencies share the responsibility of overseeing the operation of foreign banking organizations in the United States. To insure that the banking system remains competitive and operates in the public interest, the Fed considers applications by banks for mergers or to open new branches.

The passage of the Gramm-Leach-Bliley (GLB) Act in November 1999, was the culmination of a multi-decade effort to eliminate many of the restrictions on the activities of banking organizations.

Some of the main provisions of the GLB are:

· Repeals the existing limitations on the ability of banks to affiliate with securities and insurance firms

· Creates a new organizational form that allows banking organizations to carry new powers. This new entity called a "financial holding company," (FHC) and its non-banking subsidiaries are allowed to engage in financial activities such as insurance and securities underwriting

The Fed's enlarged role as an umbrella supervisor of FHCs is similar to its role in supervising bank holding companies. The Federal Reserve Banks will supervise and regulate the FHCs while each affiliate is still overseen by its traditional functional regulator.

The Fed has to delineate the financial relationship between a bank and other FHC affiliates. Its primary goal is to establish barriers protecting depository institutions from the problems of a failing affiliate. To do this efficiently the Fed has to ensure increased communication, cooperation, and coordination with the many supervisors of the more diversified FHCs.

The Fed has access to data on risks across the entire organization, as well as information on the firm's management of those risks. Regulators will be in a position to evaluate and presumably act on risks that threaten the safety and soundness of the insured banks.

It would appear that the Fed has failed to curb housing inflation which played a role in this entire debacle then made matters worse and in their efforts or lack there of, to properly supervise banking institutions.

Finally the government, a.k.a. Uncle Sam, the big Kahuna 10,000 pound elephant etc. Where do we begin? How about with: 'Where were they?'

It now appears that after millions of horses are out of the barn (some horses ran, others were foreclosed upon) the government wants to step in with a bailout to save the rest. While nobody wants to see people lose their homes, the question that must be raised is this: What about all those of us who were responsible? Those of us, who scrimped and saved up a decent down payment, bought less-house than we could afford and who live below our means? Many of us drive older cars and keep them longer. We don't run out and buy the latest and greatest at inflated prices, we watch, wait and budget.

When the World Trade Center was attacked, families who decided not to sue received government payouts and we certainly don't begrudge them as I'm sure that given the choice, they'd prefer to still have their loved-ones over the money. The problem, in typical government fashion is that those who were responsible and had insurance policies in place received less than those who were irresponsible and didn't plan ahead. I'm not talking about dishwashers at Windows on the World and blue collar workers; I'm talking about executives, traders and people who should have known better.

Now our government, the same government that sat by idly watching as this bubble got bigger and bigger despite many warnings, wants to step in and bailout people who are in danger of losing their homes. There has been no talk about educating people, let's not teach people to fish, rather, let's give them a fish and bail them out once again at the expense of those who are responsible.

Clearly, by keeping the majority of the population financially ignorant, there is a lot of money to be made by the poverty industry.

About The Author

Richard Gandon is the Managing Director of The Financial Learning Network, dedicated low-cost online to financial literacy seminars. His 'Understanding the Stock Market" course was made into a CD-ROM and is in use in more that 50,000 classrooms nationwide. Every year since 1998, Richard has teamed up with a fifth grade class in Georgia to teach them about the stock market online. Richard has more than 20 years of financial services industry experience including as a broker, trader, licensing trainer and managed both a sales group and Central Inquiry, a Historical Equity & Index Research group at Standard & Poor's.

http://financiallearningnetwork.com/

How to Successfully Navigate Your Business through an Economic Downturn by: Terry H Hill

2008-10-25T03:59:00.000-07:00

About The Author

An author, speaker, and consultant, Terry H. Hill is the founder and managing partner of Legacy Associates, Inc., a business consulting and advisory services firm based in Sarasota, Florida. A veteran chief executive, Terry works directly with business owners of privately held companies on the issues and challenges that they face in each stage of their business life cycle. Terry is the author of the business desk-reference book, How to Jump Start Your Business. He hosts the Business Insights from Legacy Blog at http://blog.legacyai.com and writes a bi-monthly eNewsletter, "Business Insights from Legacy eZine."

By signing up for Business Insights from Legacy eZine at http://tinyurl.com/2t4fxs you can keep abreast of the latest tips, tactics, and best business practices. You will, also, receive the free eBook, Jump Start Your Knowledge of Business.

Contact Terry by email at http://www.legacyai.com or telephone him at 941-556-1299.