Be The Prophet In You

Not too long ago I came home after an exceptionally bad day. A day where you don’t know whether to tell the world to go to Hell or just sit down and cry. Every entrepreneur has days like this. A little while later, I was putting my four year old, Ashton, to bed. He leaned over to me with big blue eyes and tousled blond hair and out of the clear blue sky said “Mommy, did you know the good guy always wins?”

After choking back my tears and desire to scream, I realized that I certainly wasn’t feeling that way. But, in that light, this was just what I needed to put the dire circumstances of my horrible day in perspective.

Did you know that the reason a prophet is so successful or considered all-seeing is that, in almost every case, once they tell their student their fate, it becomes so? This is because that student believes it to be true. Think about it in a negative light – if a fortune teller read your fortune and told you that your fate was to be hit by a bus, would you not starting looking over your shoulder just a few times more to look out for careening motor coaches?

What if we use this theory to our advantage? How often have you needed to cover payroll only to find that exactly what you needed, after much work, was produced? What if you aimed for a higher amount? Say $5,000, $10,000 or $50,000 above what you believe you need? Then, covering payroll doesn’t sound so hard does it?

It reaches to other areas of your business as well. Raising capital, producing dividends, increasing sales, it all works the same way. You expand your outer boundaries and what you can accomplish as a business owner or in any other facet of your life expands as well. It is all in your perspective and belief in this to be true.

Whatever your goals are for 2015, sit back down with them and add ten or twenty percent. Add more if you want to. Are you projecting 20% growth in sales this year? Make it 25% and get out there and make it happen. A 10% increase in net income? Up it to 12% and go do it. You are the new vision that will make it so. I had let my bad day get the better of me. It beat me down. Instead, I needed to be my own prophet. Just like you, I felt I was a good guy and, damn it, come Hell or high-water, like the old saying tells us, I was going to win.

As a business owner or business leader, we are our own worst critics and sometimes our most staunch barriers. Break this cycle with a belief system of success. Because when you change your view, what you are looking at will most definitely change. Be the prophet in you.

 

Do What You Kick Ass At

You know what you kick as at doing. Deep down. Yeah, it's there. I recently watched one of those reality show where various contestants belt out notes that only our canine friends can hear and was reminded of an area I most decidedly do not kick ass at- singing.

I was not born with gifted vocal cords. Talk your ear off? That I can do (just ask my husband). Scream my head off at a baseball/football/basketball game? Sure. I am THAT crazy person. But singing? Not a chance. I even dread singing happy birthday at a kids birthday party (seriously). Always flat, sounding like some poor drowned animal. What can I say? Those girls (and guys) that belt out inhuman notes in front of audiences? Beyond my wildest imagination.

Numbers. Now, that's my thing. Not regurgitating sections of the Internal Revenue Code - although I can do that too. Numbers. I love them. I'm not talking about mental math - I can't tell you the square root of 925,444 on a dare. (I had to use my calculator. It's 962.)

But I can tell you whether I think a small business is going to make it - or if I don't, then what it would take to get them there. I can also tell you how much cash they are spinning off, what the net profit margin is, what their shareholders are making and what they should be making, how their AR is turning over, how aged their AP is, what it would take to turn their cashflow around, and whether their underwriter at their bank will most likely approve their line of credit. I can also tell them if their bookkeeper is incompetent, honest or just pissed off. And I can tell you all of this while taking into consideration the personal goals of the owners, their goal for their company and how much money they want to make.

I am not telling you all of this as part of my marketing. I am telling you this as a no nonsense, seriously aggressive nudge to inspire you to do what you love and what you are good at. The two miraculously intertwine and the planets align when you are there. If you do what you love, you will never work a day in your life. Get out there, do what you love and kick some ass!

The Beauty of the Subscription Box Trend

Whether you live in a large city or a rural farm, you get mail. For most people nowadays, the mail is pretty lame, right? It includes underwhelming items like useless advertisements that nobody cares to look at (that are equally as wasteful for the environment), bills, bills and not-so-much more (including bills).

However, there is one part of the mail system that can really brighten anyone’s day: the part where you get something you like. Whether it’s a birthday card, a present for graduation or something you purchased for yourself, receiving gifts and goodies in the mail is wonderful, like a blast from the way it once was. It’s like Christmas, but delivered from a man in a van wearing a brown suit or a blue hat (depending on your carrier). And, now it's a business model that's not only genius but incredibly profitable.

What’s really impressive about the entire subscription box trend has to be how quickly it has expanded. For years we’ve had wine of the month and other “of the month” clubs, but it wasn’t until just a few years ago that the concept was applied to consumer goods that we use on a consistent basis (like razor blades).

The idea is genius, and the trend has caught fire over the past year. Although there is yet to be a credible estimation of businesses operating under the subscription-box business model, estimates are well into the thousands.

So, what’s so great about them anyway? Well, let’s see. Their valuable, often offering discounts for subscribing to a service. Their fun, delivering new products that most of us often haven’t heard of. And, they support smaller companies, often ones we didn’t know existed.

While we don’t have an exact financial analysis for exactly how the subscription box has affected the online economy, we’re tipping our Team VAST hats to the subscription box for delivering everything from kitty litter to snacks to pet food to medication to razors right to our doorsteps (or offices) each month and for being a newish fantastic business model.

In the spirit of Christmas, check out Buzzfeed’s 20 Fantastic Subscription boxes, perfect for anyone on your list this year.

VAST: Proud Sponsor of the Reno Instagrammys

Lights … camera … filter!

The Reno Instagrammys went off with a flash of bling, glamour and smiles as locals from all over the Biggest Little City headed out for a night to raise money for the Holland Project, an all-ages arts and music initiative by young people, for young people, in the Truckee Meadows.

The Reno Instagrammys are more than just a fundraiser, however. In fact, the event stands as yet another marker of the ever-changing music and arts culture fostered here in Reno. And when events like this, in just their first year, pack a full house it’s a sign that the community is all in favor of further fostering that future. With more than 500 participants, 200 event attendees and 50 winners, the night was packed (literally) full of fun.

the Reno Instagrammys

VAST CFO was proud to be a Corporate Sponsor at this awesome inaugural event benefiting the Reno music and art community, raising more than $6k for the musical and artistic wellbeing of Reno’s youth. Better yet, our very own marketing executive slash professional butt-kicker, Chelsie Kern, helped co-found this awesome charity event.

As events such as these continue to grow, whether they be charities for the Holland Project or organized events to promote small businesses such as the Reno MidTown Artwalk, our team here at VAST can’t help but sit back with a sense of pride. While we may not have the opportunity to help every small business in Reno, Tahoe or the surrounding areas, our work ensures that the culture-rich communities formed by small businesses continue to survive.

The VAST team could not have been more proud to see the Reno Instagrammys go off with such booming success. Check out some of our VAST rockstars on the red carpet at this year’s Intagrammys (above).

 

Virtual Accounting: Where you Need it When it Matters

It's the world we live in: everything is digital. From cloud-based document sharing through Google and Dropbox to applications like Venmo offering instant person-to-person financial transfers, it seems that everything will be digital within only a matter of years. And while some things are better left in their old traditional ways, company accounting and financial management is not one of them. Here are the top three benefits that Team VAST brings its clients by granting them access to their finances anytime, any place.

Time-Sensitive Decisions

How many times have you had to check your bank account before making a large purchase? Chances are, more than once. Having access to your company’s financial data when making time-sensitive decision can be the difference between a great new purchase or the cause of your company’s Christmas bonus death. With virtual accounting, you have access to updated information you need when you want it, on your time – not your accountant's.

Financial Safety

Although when you use a certified virtual accounting firm such as VAST you can rest assured that your finances are being protected, it never hurts to know that your money is where it should be. Whether you need to check the status of a transaction or you are just keeping an eye on your accounts, let online virtual accounting lay your worries to rest.

Travel the Easy Way

Using virtual accounting for your small, medium or large business grants you the freedom to travel without the worry of leaving the financial information you need behind. With online virtual accounting services, you have all the information you need no matter where you are, from Berlin to Burbank.

VAST provides small businesses all over the world with the best virtual accounting services. Let us help you transition your finances into the 21st century today. Surely, you won’t regret it.

Call it Virtual Accounting, Call it Outsourced Accounting: Either Way, We’re Scary Good

Keri Pruitt

Whether you call it virtual accounting or outsourced accounting, there is no denying the convenience, accessibility and accuracy that having your accounting handled virtually can provide. As entrepreneurs ourselves here at VAST, we know what it is like to run a business. Through successes and failures, there is always a shortage of one commodity: time. Sometimes, we're guessing, it seems like you spend the entire day running your tail off and end up not getting a single task checked off your list. When you add accounting into the mix, the demands on your time are only increased.

This is where we can help. If you were to visit our office, and meet our staff, we are certain you would be impressed; we are the valedictorians of virtual. VAST has developed a system that keeps your information consistently up-to-date. As soon as we get information, your account is updated and done so in a manner that anyone can follow. Therefore, if your account representative is out of the office for a day, we know exactly how to pick up where they left off. This gives our outsourced accounting service the feel as if we were right in the office with you.

All of your accounts payable and receivable can be forwarded directly to us. We will handle all the work of digging through the complicated numbers and deliver easy to understand reports that can be accessed anywhere, any time. With outsourced accounting, your information is always at your fingertips, which allows you to make those important decisions and focus your time on building your business. VAST is your partner in success; we are dedicated to giving you all the tools you need to succeed and we are scary good at what we do.

Happy Halloween from all of us at VAST.

3 Big Tax Tips for the Busy Entrepreneur

No need to burden you with every little tax code in the book on this one. While there are dozens of tips that could potentially help your business, there is no need to overcomplicate the issue. The last hassle a business owner needs is a cumbersome list of tax tips to try and keep in mind throughout the year or to waste their day digging through complicated tax lingo. Here are three big tax tips that will help you drive through each tax year safely.

1.     Personal and business expenses are friendly but not intimate. Too many entrepreneurs allow their expenses to comingle in their accounting. While it may seem like they are hitting it off, in reality they are making your tax preparation far more complicated. Just like in a relationship, when things get complicated someone always ends up getting hurt. In this case, the only person who can get hurt is you, so keep those hands above the waist and visible distance between your business and personal expenses.

2.     Procrastinators, check your bags at the door. Don’t wait for the last minute, keep up to date on your estimated quarterly payments. Procrastination gets the best of us all at times. While it may be warranted to put off a trip to the DMV, and those ever-so-cheerful clerks, taking your time about getting around to your taxes is no bueno. Get those quarterly payments in on time, every time. When January rolls around and you are going through your reporting, you will be glad you did.

3.     Tax preparation is a team sport. Don’t wade off into the deep end alone. By hiring a knowledgeable and dedicated virtual accounting service your information will always be accurate and well organized. Come tax season you can call on your team to be there for the assist. Plus, we will maximize your potential for deductions, ensuring that you don’t pay more than you owe.

The IRS may be big and bad, but you don’t have to be the one who gets caught alone in the woods unprepared. These three tips can help you get safely through tax season without any surprises laying in wait at the end of the journey.

Virtual Accounting Service

VAST is a Reno-based virtual accounting service offering Virtual Bookkeeping, Outsourced Accounts Payable and Receivable and much more.

How Online Bookkeeping Can Save Your Bottom-Line

At VAST we’re aware that business owners have a lot on their plates. The demands of business ownership can be daunting, and we find many businesses are looking for a way to streamline their processes and keep costs as low as possible. Online bookkeeping is one of the most practical ways to do this. VAST takes care of time-consuming tasks–like virtual account payable, virtual accounts receivable and virtual payroll services–and gives you a more open schedule to focus on the tasks you actually want to spend your time on–meeting with clients, staff karaoke nights, fantasy football–whatever you fancy. Because VAST is virtual, we cut costs by removing the necessity for a staff accountant. When you go virtual with your accounting, you eliminate the need for extra office space and remove the expenses of employee benefits for another staff member. Our online bookkeeping services make it so you are able to keep an eye on the accounting without the need to diligently manage the process yourself. With VAST, everything accounting related is easily accessible, always kept up-to-date and stays neat-freakishly organized.

VAST has a wide range of experience with an adaptable, one-of-a-kind system that will ensure your accounting needs are covered, even as your company grows and evolves. VAST works to maintain efficient and reliable services for your business. We are flexible and ready to customize our online bookkeeping services to more effectively meet your business’s needs. If you are curious about virtual accounting and would like to know more about VAST, we would love to speak with you. Contact us today and see what VAST has to offer you. It’s time to go virtual with your accounting.

Mid-year Budgeting: Tips for Keeping your Budget from Taking a Mid-year Nap

Laura Daily of The News-Herald noticed that some annual budget meetings are similar to setting personal aspirations for a new year. She writes, “Like the familiar, ‘I’m going to lose 10 pounds,’ New Year’s resolution, you probably set some fiscal goals for 2013.” She suggests that sometimes these goals create minor problems that likely need some fine tuning halfway through the year. Daily compares mid-year budgeting to a, sometimes much needed, physical exam that we might get to identify unhealthy areas and to project how fiscally healthy our business will be by the end of the year. If you met with an accountant at the beginning of the year, it could be helpful to call them up and ask them to remind you exactly what your budget goals were for the year–freshen up if you will. If you didn’t meet with an accountant, it could be worthwhile to consider finding one who will work with you to analyze where you’re at now and how to make it to the end of the year with the most success.

Taking a look at where your business was this time last year might also help you project how the rest of the year will go. By comparing this year to last year, you might be able to determine where your business needs to pull back, or where you could possibly afford to take some risks.

Of course, nothing beats careful cash flow monitoring and regularly visiting your budget to keep you accountable. If you are concerned about your budget, or are looking for confirmation that you are on the right track, VAST would be more than happy to work with you. We offer outstanding and efficient accounting and financial services that can help you finish the year in good financial health.

Resources “7 Budget Tips for Small Business.” apparelopolis.com. n.d. Web. 4 June. 2013.

Daily, Laura. “Mid-Year Budget Checkup: Are Your 2013 Finances Still Healthy?” Denverpost.com. 3 Jun. 2013. Web. 4 Jun. 2013.

Get In Your Happy Place… With Money

Maslows_Hierarchy_of_Needs.svg_1 What is it that makes money so emotional? Is it having it that scares us so much? After all, not too many things in life are described as being “filthy” when present in abundance such as the term “filthy rich.” Instead, it’s more common to be scared of not having enough of it.

How far does that fear go? Is it so extensive that you fear you’ll be unable to keep up with the Jones’? Is it deeper than that and you fear the lifestyle to which you’ve grown accustomed would be jeapordized? Or is it less superficial and more primal?

Maslow’s heirarchy of needs is based on the psychology of human motivation. He starts at the bottom of the pyramid with the primal needs – things like food, water and sleep. These are the most basic needs that in our modern society are satisfied with money. We no longer live in the B.C. era where we can throw on a loin cloth, grab a spear and be just hunters and gatherers. The bulk of what sustains us is derived by our exchange of money for our basic needs. So, damn right, there’s fear in not having enough money to provide these things.

After that, the levels get more complicated. Not because the content of the pyramid doesn’t make sense. Of course, we understand the higher levels of safety, love/belonging, esteem and sometimes self actualization. Many would argue that the higher levels have varying degrees of direct and inverse relationships with money. But the reality is, many of the aspects of these higher levels also often are obtained with money. It doesn’t matter if your definition of a lot of money is ”private jet” money or “hiking through Nepal” money, it all takes money.

Look at your business. As an entrpereneur, you’ve had ebbs and flows in your cash position. Some of the ebbs may have threatened satisfaction of your basic, bottom of the pyramid needs. How many entrepreneurs can you think of that lost it all when they closed their doors? On the other hand, the flows provided the luxury of being able to focus on the higher level needs. After all, when you aren’t in a panic about paying bills, aren’t you automatically more confident, creative and spontaneous?

Take a closer look at your relationship with money. Think of it as positive, not negative. You love your company and you love what you do. But, chances are, that if it did not pay you and satisfy the various needs of your family, you would not or could not continue to do it. And that’s okay. Embrace your and your company’s ability to profit and thrive!

 

Implementing a Six-Month Budget Plan to Finish Out the Year

“No one’s ever achieved financial fitness with a January resolution that’s abandoned by February.” -Suze Orman Having a well-structured and practical budget can make all the difference for a moving-and-grooving business. With still half of the year left, there is time to get on track and reconfigure your company’s approach to money management. Creating a budget is a simple and valuable tool that will help to eliminate financial uncertainty as you finish out the year.

As you begin to develop a budget, being aware of the current industry is important because it will allow you to more accurately project revenue for the rest of the year. Design a spreadsheet to help you keep track of your business’s cost and revenue. Keeping track of how much money is coming in and how much your business is spending will help you identify where you could potentially cut costs, or where some extra funds might need to be allocated.

As you notice where your funds are going, take the time to investigate what other deals are being offered. Shopping around for different suppliers is a great way to help you cut costs. It’s not too late in the year to make these changes; in fact, making changes like this could greatly benefit your business as the year comes to a close.

If you are a small business, a six-month budget leaves room for revision and will call for you to reevaluate at the end of the year, which keeps you in touch with your business’s finances and allows you to make any necessary changes as you grow and expand.

As almost anyone will tell you, having a budget in place helps your business run more efficiently. Implementing one mid-year, or revising the one you may have started at the beginning of the year, can assist your business in achieving a successful second half of the year. By keeping track of your business’s money, you will be more prepared to handle those pesky unexpected year-end costs, and will continually be aware of where you stand, which will help you finish the year on top. Whether you are unsure where to begin, or you need help navigating the process, VAST offers the accounting and financial services to help ensure your mid-year budget writing is simple and effective. Contact us today.

References “Six Steps to a Better Business Budget.” investopedia.com. Feb 26. 2009. Web. 24 May. 2013.

Making Sense of Profit and Loss Statements (P&L Statements)

One of the most valuable tools in the small business owner’s belt is an accurate profit and loss statement. It provides exceptionally beneficial information about the progress of your business and allows you to make projections about the future. A P&L Statement, when prepared correctly, measures the profit accrued by a business against the loss. This, basically, indicates whether your business is gaining profit or losing revenue over a specified period of time. Usually done monthly, quarterly and/or annually, P&L Statements keep you informed on the financial state of your company. With accurate tracking of where and when the business is performing strongly, coupled with opportunities for improvement, you can make valuable decisions about what is working for the company and what is not.

At VAST we hear murmurs here and there about business owners either not receiving clean P&L Statements or not paying much attention to them at all because they are unclear what they are viewing. But, with our virtual accounting services, we handle the difficult work for you. We will track your income and your expenses automatically. Depending on our agreement, we will provide a full Profit and Loss Statement as frequently as requested; we can even consult on how often you should be reviewing your P&L Statements based on your type of business. Our reports are complete and easy to read, making your job simpler and more manageable.

Gain an edge with your business’s financial future with hassle-free and timely P&L Statements provided by VAST. Our services always keep your busy schedule in mind, handling all possible details to streamline your day and free you to focus on more pressing business matters. Virtual accounting has never been easier than with VAST. We provide the services that make accounting reliable and powerful; it’s the VAST solution.

What is Virtual Accounting?

Tax season has again blown by and we are certain that it resulted in the loss or graying of at least a few hairs on every business owner’s head. Well, maybe not those proactive entrepreneurs who take advantage of our virtual accounting services, as we’ve made the process of keeping accurate books and accessing valuable accounting information as easy and efficient as possible for our clients. VAST’s system puts to work industry-leading accounting professionals to make your bookkeeping simple and reliable throughout the year so your business is prepared for tax season. It is a frequent occurrence for many business owners to face extra charges from tax preparers to “clean up” their books before processing annual tax information. It is understandably frustrating considering that many of these business owners employed professional accountants to manage their books.

With VAST, our expertise can reduce the necessity for these extra charges. Typically, for less than the cost of having an on-staff bookkeeper, we can handle your accounting with the expertise of high-level professionals. This makes our system the choice of many business owners across the nation because it allows them to free their time from managing an in-house professional if they choose. However, our flexibility also allows them to keep their accountant if they wish and work with us to provide better tools and techniques to enhance their accounting.

By the time tax season rolls around next year, we could have your books fit to impress even the most stringent tax preparer. We are committed to offering services that are custom tailored to your needs, but no matter how many services you would like VAST to take care of, you can expect unsurpassed excellence and attention to detail. Our financial professionals are of the highest caliber and endure constant checks to ensure their work is precise.

Save your hair, VAST is only a phone call away.

Moments of Brilliance

Puppy-2 A few years ago I walked into a fundraiser armed with a mission: I was going to buy a puppy. And, much to my husband’s chagrin, the one thing in this world that I never lose is a live auction. So several glasses of wine and many thousand dollars later, I walked out of the event the proud owner of a golden retriever named Hunter.

Hunter was the byproduct of a strong belief of mine that a boy has to have a dog. And therefore, the three boys in our household became the benefactors to a not-so-bright but full-of-love puppy that they adore and that adores them. I woke up the morning after that event with a husband, mother and nanny that all fully and quite vocally questioned my decision to bid on and ultimately take home that pup. But never did I question my belief that “a boy must have a dog.”

As a business owner, you have these moments of decisiveness; you have to. While they may not feel so resolute at the time, I call them moments of brilliance. No one will talk you out of what you know is right. You may have a day now and then that makes you question your ability as an entrepreneur–maybe an employee quit, maybe a bill collector called again, maybe a large client complained, maybe tax season snuck up and slapped you with an unplanned tax bill. Maybe all of the above.

Guess what? You’re not the only one that has days like this. These are the days that separate the mice from the men–the companies that thrive from the companies you once heard about.

Pull yourself together, focus on your company’s vision and stay the course. You know where your company will be. You can see what the company of your future looks like. Peer over the current day and look to the day ahead.

As with many future dreams of my company, I envisioned a day in the future with that scruffy puppy and the boys. And now years later, watching my five year old sleeping with his arm around that dog’s neck, I swear I can see a smile on both of their faces. Now it’s one thing to be determined to buy a puppy and benefit a good cause. It is completely another to stay focused and determined so that you can enjoy those moments of brilliance in your company.

Here are three tips for staying in focus and in charge so you can enjoy those Moments of Brilliance more often.

1. Focus on your sureties. These are the things in your company and your life that only you can do. There are a million aspects to your company that you undoubtedly are capable of handling and it is easy to step in and take over if you see a train sliding off the tracks. But if you handle everything that comes through your door, you will not have time left in the day to focus on the areas that only you can handle. The same is true in your personal life. If you can pay someone fifty dollars to do your laundry and in the same time frame earn $200 in your business, then don’t do you own laundry! Stay focused on the areas of your life that absolutely require you and only you.

2. Take the time to think. With the crescendo of communication, questions, demands, and responsibilities in your life, you can sometimes feel like you just jump from crisis to crisis all day every day. You need to make time to think, plan and strategize. If you can’t step back once in a while to really focus on forward thinking strategy, the results you obtain will be through default rather than choice.

3. Fiercely manage and protect your time. Even by following the two tips above, there will be that time creep that happens. For example, when someone walks into your office and says “Do you have a minute?”, how often are they actually out of your office less than sixty seconds later? They aren’t. Unexpected calls, the onslaught of emails and unplanned meetings will use up your day and prevent you from getting to your priorities. Schedule the critical things you need to get done as actual appointments with yourself. This is not just for projects at work, but also working out, spending time with your kids and making sure you make doctor’s appointments to take care of yourself while you take care of everyone/thing else that needs you.

 

As Seen in Northern Nevada Business Weekly: The Lease vs Buy Decision – Harder than Ever? Or not?

As a business owner, the decision of whether to buy or lease your company’s office space can be difficult. The decision making process needs to start by determining whether you have the decision to make in the first place. Think of it this way: You go to your favorite restaurant and you have a great dinner. You battle with deciding whether to have the cheesecake or the tiramisu for dessert. After a long back and forth with yourself (and your diet), you finally decide on the cheesecake only to have the waiter tell you that you can’t have it because they just sold the last slice. Bummer!

Deciding to buy and then being told by your lender that you can’t is no different. You find that great new building and you envision yourself toasting your first sale in the new spot with champagne, only to find that you can’t get the financing you need to do it.

Before you start daydreaming about your new digs, here are some questions to ask yourself and your lender. The latter is important because regardless of what you think your company can do, your lender has to also be convinced and you have to fit their parameters.

Therefore, make sure you know and are comfortable with the following:

1. Your Personal Credit Score and Net Worth - As a small to mid-sized business, you will usually be required to sign a personal guarantee on the loan. Therefore you personally will go through underwriting along with your company. Your credit must be in good shape.

2. The Appraised Value of the Building - Appraisals are all over the map right now and often defy logic. Make sure that you have an unbiased idea of what the building is worth before you begin the process of loan approval. If the building does not appraise, you will not be approved for the loan amount you need for the purchase. At that point, you are either not buying it, or you will have to come out of pocket for the difference.

3. Your Company’s Ability to Afford the Rent - You will be paying yourself rent. As you are going through underwriting, simply showing that your building is cash flow positive when fair market rents are collected is not enough. You need to demonstrate that your company can afford the fair market rent that makes the building cash flow positive. If it can’t, you will not be approved in the underwriting process.

Once you have worked through these basics, then you can sit back and make the decision of whether to lease or buy. Here are some additional things to consider once you are at that point.

What to consider when buying:

1. A pro is that it’s yours. A con is that it’s yours. Many business owners are currently strapped with above market lease rates that they are paying themselves because they have to cover the debt. When you are your own landlord, there are many advantages. But, when you are your own landlord, there is no crying foul on rent increases. You pay what you have to pay to cover the expenses of owning the building regardless of where the market takes lease rates. On the positive side, you can pay yourself fair market rent and make the building profitable as your debt decreases. Alternatively, you could decrease the rent you collect from yourself if that makes sense for your financial and tax situation.

2. Buying offers tax writeoffs that leasing does not. When you purchase a building, there are many different ways to record the purchase on your records. One is to throw the whole thing as real property onto your tax return. If you do this, the building will be depreciated over between 27 and 39 years. A better way to record it is to do what’s referred to as a cost segregation study. This study breaks the building down into its parts and depreciates it accordingly. For example, a building can be broken down into fixtures, landscaping, paint, roof, electrical, etc. all of which have a shorter life for depreciation purposes than that 39 year building plunked onto your balance sheet.

Some things to consider when leasing:

1. Your rent or lease payment is an expense and not an investment. No portion of your rent payment is paying down principal. The biggest downside to leasing is that you are not building equity in the property you occupy. Based on the above, this can be either an advantage or disadvantage depending on which way lease rates are headed. But at the same time, you have less commitment with a lease. While you do have to commit to a lease term while renting from someone else, if your company’s needs change after moving to a specific location, you are not married to that spot once your lease is up.

2. Landlords are offering very attractive incentives in the form of lease concessions and TI Allowances. A T.I. Allowance or Tenant Improvement Allowance is a dollar amount that your landlord gives you for improvements you need to make to tailor the space to your needs. If you are tight on cash and can take the time to look for a motivated landlord, you can enjoy the benefit of reduced lease rates, and have the opportunity to have the landlord pay to get your new space ready for you. These concessions can be a set dollar amount or an amount per square foot and can be of huge value to a company when relocating. Beware though that there can be clauses in lease agreements that repay the concessions to the landlord over your lease term or in the event you terminate the lease. Sometimes the forfeitures of these concessions can be very expensive, so read all documents very carefully.

The decision to lease or buy has never been easy, regardless of the economic landscape. Knowing the pros and cons of each approach will help you decide what is best for your company’s continued success.

The Hubbub with Bank Reconciliations

One of the most tedious, time consuming accounting tasks for small business owners is conducting bank reconciliations. As a result, they are often neglected and overlooked. However, this is not a healthy business move. Knowing exactly where your company stands financially every month empowers your business. Plus, banks are not infallible and are capable of making mistakes that cost your business money. While it usually requires a decent amount of time to reconcile your balance per bank with your balance per books, the result is an efficient and accurate understanding of your business’s financial status. In order to make this process as quick and accurate as possible, we have listed three tips to make bank reconciliations as headache-free as possible.

  1. Adjust the balance per bank. There are three main reasons why your bank statements may be incorrect: deposits in transit, outstanding checks and bank errors. If you made a deposit the night before your statement came out it is unlikely for it to be reflected on the statement. Checks that you have sent out but have not been cashed by the recipient will certainly not be reflected on your statement. Finally, check every deposit and withdrawal for accuracy. Clerks enter hundreds of numbers every day and are capable of making mistakes. Once all errors and discrepancies are identified, add or subtract them accordingly from the statement’s balance.
  2. Adjust the balance per books. This is virtually identical to the process used for adjusting the balance per bank. However, you are looking for some different discrepancies: bank charges, interest and once again errors. Banks have charges relating to everything from monthly fees to NSF fees. These will not be reflected on your books, nor will interest earned. After checking for errors, these all need to be added or subtracted from the book’s balance.
  3. Compare the adjusted balances. This is where you find out if your hard work has been fruitful. The adjusted balances should be exactly the same. If they are not, then you have likely missed something and need to comb through the process again.

Performing bank reconciliations can take practice to be able to complete in a reasonable amount of time, but the more you do it the better you will be at knocking it out quickly and accurately. As your business grows and time becomes scarce you might consider hiring VAST to perform all of your business’s accounting tasks. As one of the most professional and resourceful external accounting services in Reno and beyond, VAST gives you and your business endless accounting options.

Banks vs Entrepreneurs Part Three of Four - The Trial

In the first two parts of this series, I talked about how the banking environment has changed for the small business owner—and not for the better. If banking as we used to know it is in fact gone, what do we do if we absolutely still have to get financing? The answer: We find the product that we believe will work, complete our due diligence and then patiently endure the trial affectionately referred to as “underwriting.” Although the process is known as underwriting, you will likely never see, meet or talk with the underwriter. Through some form of middleman—who has also likely never seen the mysterious, wizardly underwriter—you will repeatedly hear phrases such as “the underwriter is requesting this.”

In my creative mind, the underwriter takes the form of a mythological beast whose lair is in the bank’s basement, and periodically its minion throws down raw meat and K-1’s for it to devour. Back in the real world, I probably get five requests a week from loan officers wanting documents on my clients—all to please the underwriter of Oz.

Below I’ve listed four quick and dirty tips to consider before applying for anything and agreeing to endure the underwriting process:

1. Know Your Picture Before you Apply

As a small business owner, you will most likely be required to sign a personal guarantee. Therefore, your personal credit score and not just your company’s score prove very important. We all know that late payments, bankruptcies and foreclosures wreak havoc on our credit reports. But beware; inquiries can be just as toxic, as they all show on your credit report when someone does a “hard pull” of your credit report. Most lenders will pull credit first and ask questions later. As a proactive measure, pull your own credit before applying so that you know what is out there. Pulling your own credit as a “soft” pull will not hurt your credit score.

2. Don’t Waste Your Time Applying for Something You’re not Going to Get or Don’t Want

Ask questions up front. Most banks will offer up their general ranges of terms. Don’t be lulled into the sales pitch: “we can’t give you personalized terms until we have an approval.” The bank’s unwillingness to give you even a general idea of what to expect is a warning flag. They could pull your credit and then offer you a loan with exorbitant terms you never would have accepted under any circumstances. Play hardball on this; get general guidelines so you know you actually want to proceed.

3. Know Your Ratios – Debt to Income and Credit Card Utilization

As an entrepreneur, you obviously pass the acid test of knowing how to leverage. Your bank is going to want a really low Debt-to-Income Ratio (meaning, how much are your total minimum monthly payments as a percentage of your verifiable income?). This can get complicated if you have volatile income in periods of growth or reinvestment. If your W-2s fluctuate all over the map, you will no doubt spook the underwriter. Also, if you have joint debt with a spouse and are applying for a loan individually, be prepared for questions related to how you cover the debt. If you aren’t having your spouse sign on the dotted line, then you can’t include their income when qualifying. This knocks many prospective borrowers out of the ring in the first round. The other focus is on Credit Card Utilization which is calculated by taking your balance per your credit report and dividing by you credit limit. If your cards are maxed out or have large balances, you have high utilization and you won’t get financing. In short, pay them down before you apply for more debt.

4. Set Up a File with the “Usual Suspects”

Loan packages take time to prepare. They take even more time if you are not organized.

A typical loan package usually includes two to three years of business tax returns, two to three years of personal tax returns, a personal financial statement, business financial statements, bank statements, W-2s (if you are salaried), all of your K-1s, rent rolls for rental properties, lease agreements, a 4506-T to pull your tax return transcripts, 1099s for sole proprietors, and anything else the underwriter can dream up—including your first born.

It takes much less time and effort for the underwriter to ask you for the info than it will take you to put it together. By being organized, you can drastically reduce the time it takes to provide a loan package. Click here to receive a copy of our personal financial statement template to use for giving personal financials to your bank in a jiffy.

I know, I know, all of this sounds dreadfully pessimistic. But, by doing some homework and not desperately applying for loan after loan, you’ll avoid mucking up your credit and spending all of your time putting together lengthy loan packages to no avail.

Once you are ready to move forward with applying, throw your hat in the ring with the underwriters. With the above items under control, you will have a much better chance of getting the financing you need – even in this tough lending environment.

Banks vs Entrepreneurs Part Two of Four – Choosing your Weapon

cartoon-dec6-2012 As I mentioned in the first part of this series, the banking environment these days can be pretty frustrating, often resembling something out of a Tim Burton movie—dark, twisted and leaving you shaking your head saying “What the hell just happened?” In this installment of Banks vs Entrepreneurs, I’ve outlined the importance of weighing your options when looking to borrow capital and grow your business.

While the title of this series clearly pits banks against entrepreneurs, I want to be clear that I’m not casting aside all banks and bankers. There is a list, albeit a very short one, of traditional bankers that I recommend. In most cases, the bankers on the short list work with you and they take into consideration things like cash flow, prenuptial agreements, related LLC’s—random pieces that are unique to every entrepreneur. Upon request, I’m more than happy to share my short list; I’m just not going to post it publicly for fear of adding more flames to the already burning bridges with the other ones that routinely make my life miserable.

As an entrepreneur or small business, traditional financing can be a nightmare. With regard to “nontraditional” financing, there are so many different paths out there that knowing which one to take—and what to expect once you choose—can be not only confusing but also time consuming.

The preliminary questions to answer are boundless: Is it business or personal? Do you need a loan or a line? Amortizing or interest only? Secured or unsecured? Are you willing to sign a personal guarantee? What’s your debt-to-income ratio? What’s your credit score? What’s your credit card utilization? What do you have that can be used as collateral? What’s the loan-to-value on that collateral? Ugh!

Your particular situation will dictate what financing options you really have available. What I usually find after I produce loan package after loan package for traditional underwriters is that if the entrepreneur is not abjectly declined for credit, they are left with few possible options. Don’t panic. There are alternatives—many of which are based more on future potential as opposed to relying simply on past performance or current balance sheets.

One of my favorite non-traditional routes is peer-to-peer lending, which can be thought of as the eBay of loans. Those who pursue this can usually get up to about $35,000 from a whole lot of people that want to lend a fraction of the loan. When all is settled, you can come away with a pretty reasonable rate and the total is paid over three to five years. Two companies that are great for this are Lending Club and Prosper.

Another option is to consider factoring services that will buy part or all of your accounts receivable—usually for reasonable discount rates. This works by the service giving you an advance on your accounts receivable. Some factoring services will have you remit payments to them, some will just electronically take the future deposits from your checking account and some will have your customers pay them directly. Be sure you know which approach they take before signing anything, as you need to know up front and be comfortable if your customers will be contacted by the factor.

You could also go the route of venture capital (VC). This approach often has the advantage of high-level expertise that is provided in the form of a management overlay or a consulting arrangement. Be prepared to give up ownership if you do pursue VC and if your profession allows it (for example, doctors, lawyers and CPAs are just some examples that prohibit non-licensed individuals from ownership without certain criteria in place).

If you are really creative, you can build quite a bit of liquidity by pooling things like credit cards that offer cash advances at miniscule rates, commercial overdraft lines of credit of up to $20,000 that do not charge fees for advances, and loans on retirement plans where you are literally paying yourself the interest that accrues on the payments. You obviously want to use a combination of these with a careful thought-out plan, but these can often be a quick and easy resource to solve short-term liquidity problems.

Beware, as some non-traditional options can be dangerous. Be cautious of astounding fees and interest rates. One example of an option with exorbitant interest rates is one commonly called a Merchant Loan. The lender gives you a set amount and it is usually deposited into your account at lightning speed, which makes it very tempting to accept. Then you are set up for daily payments that are automatically taken from your account. A recent deal I saw was for $30,000 and had payments of $302 per business day for about seven months. The owner of the company thought that $302 sounded reasonable and his daily credit card sales would cover it. The actual annual percentage rate worked out to be over 104%!

Armies of business owners that I talk to are bound and determined to get away from needing banks at all, which is a major reason why I decided to write this series. Because entrepreneurs are running for the nearest exit wherever possible, eventually the lending environment is going to have to change. However, in the meantime, if you do a little bit of homework, you can save yourself from the usurious interest rates of predatory lenders, unnecessary inquiries that screw up your credit and endless loan packages that waste your time.

You know your business and you have a pretty good idea of your financial picture. Don’t hope for a miracle. In the current banking environment you need to make a plan and be prepared to ask the important questions. Weighing all of your options is the first piece of homework to do in order to arm yourself for the battle of ultimately getting financing. By taking the steps I will continue to detail in this Banks vs Entrepreneurs series, you will be in a better position to be successful, get the best deal and know what you are getting yourself in to.

 

Banks vs Entrepreneurs Part One of Four – The Standoff

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cartoon-nov15-2012 Once upon a time, there was a banking environment that was fueled by the American dream and a belief in human potential. If you’ve been in business for more than a few years now, you probably recall an infinitely different world of lending than we have now.

When I was qualifying for my first house, all I needed were two simple letters: one from my parents saying they had “gifted” me the $10k I needed for the down payment and another letter from my employer at the time saying “this girl shows some potential and we will be giving her raises.” And then, voila! I had a house that was more than I could ever afford on the slave’s wage I made at the time, but, according to their parameters, I qualified.

These days, the playing field is different; there is an insurmountable disconnect between an entrepreneur and a banker. Maybe it’s just that I have an underlying distrust of organizations that still close for Columbus Day—I mean come on people, even kindergartens are open on Columbus Day.

As an entrepreneur, you’re focused on the future, the dream, and the prospect of your vision. You exhaust those around you with titillating stories of your company’s obvious success. You believe to the depths of your soul that your idea has doubtless profit potential. However, your bank couldn’t care less. Bankers have their eyes firmly affixed on the rearview mirror. The premise of traditional lending is not to care what you can do, but instead what you have done. And just as I’ve said again and again, the former can be an exponential representation of the latter for many an entrepreneur.

What’s on your tax return? They ask as they begin to interrogate you into oblivion on standard entrepreneurial protocol such as hedging and risk-taking. They persecute you for the credit reports, balance sheets and personal guarantees that ensue. All of this because of the L word of all L words—LEVERAGE. There is not an entrepreneur out there without it, but it makes most lenders reach for the Tums.

Now my opinion differs from many of my clients’ lenders on how much of this rigmarole is actually necessary rather than just CYA. The simple fact remains: Lending as we used to know it is gone and we need to be ready for the time, frustration and expense that will be needed to navigate this new regulatory structure.

Please stay tuned for the rest of this four-part series that discusses information you need to know in order to thrive in this new environment—from vocabulary to reporting. In the next three postings, we will discuss alternatives to traditional financing, surviving the underwriting process, and what to expect once the loan is in place. So, let’s get leveraging!

 

Playing Not to Lose vs Playing to Win

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cartoon-nov8-2012 “It is a characteristic of wisdom, not to do desperate things.” – Henry David Thoreau

This post is going to go against a lot of what I have told you in previous posts. But then on the flip side it will reinforce other posts even more. Confused? Understandably.

Take budgets for example. I have talked a lot about how important these are, but sometimes that approach can backfire. It’s not that you shouldn’t budget, project and forecast the important drivers of your business. But, it is easy to let the process get the best of you and get to the point that it can actually overwhelm and paralyze you. How many times have you seen a positive trend in your numbers and it automatically pumped you up? You felt confident – cocky even. But then, you may do a projection and see that you will have a problem down the road covering payroll or paying debt. This information then scares you, could make you panic, thus causing you to play not to lose. You transition into triage mode and act from the perspective of fear. It is so difficult to change this mantra, to switch gears, and to get your head back in the game.

On the flip side, playing to win drives your passion, vision, and goals into fruition. You play to win and you win. You meet budgets, cover payroll, exceed expectations and much, much more.

So, what is a business owner to do when this advice sounds nothing less than schizophrenic? Listen to both pieces of advice. Forecast and project. Have a plan to execute your idea. But, don’t get shackled by the idea that you are limited by those models or, even worse, that if those models give you bad news, that you play to just save yourself and not to thrive.

Any player, coach, fan, or anyone close to an athlete can tell you that playing to win is the most powerful weapon out there and that playing not to lose can be poison. Strike the balance between a well executed plan but yet a bright and persevering passion for your goal and you will no doubt win.