While more and more records are being kept electronically (a subject for another day!), most of us are still challenged by the boxes and boxes (or paper sacks?!?) of receipts, bank statements and other papers we keep to do our tax returns each year. Records retention is an especially never-ending problem for small business (all business!?!).
Five categories, based on passage of time, can be a very useful approach to both the storage and retention issues to be faced in dealing with the piles and piles of paper (as I noted, we will discuss electronic storage devices and issues at a later date). Care must be taken in assigning individual items to the categories, but these five categories seem to work well, for most people and organizations:
Category 1: Items to tossed in approximately a month or two.
Category 2: Items to retain through the year until tax returns for the period have been prepared.
Category 3: Items to retain for three or four years after tax returns are filed (including extensions).
Category 4: Items to retain for six or seven years after tax returns are filed.
Category 5: Items to retain "forever" - that is, as long as the business exists or owns certain property.
Each of these categories have criteria that should be used in applying a particular item to that category. To a limited extent, some items may shift from category to category, depending on changes in tax laws, for example. We will look at each of these issues in a future post.
Dr. Bill - I love to share, I hope you do to! ;-)
Friday, April 24, 2009
Tuesday, April 14, 2009
Creditworthiness - is a loan right for you?
Creditworthiness has never been more important than it is today. In December of 1997, I wrote an article in "Dance Teacher Now" magazine, that highlighted the 5 C's - the five areas of concern regarding Creditworthiness - here are the highlights:
Capacity to repay is the most critical of these five factors. Lenders are in business to see that loans are repaid with interest in a timely manner.
Character is actually your payment history on existing credit relationships - both personal and commercial.
Capital is the money you personally have invested in your business, and it is an indication of how much you have a risk should the business fail.
Collateral or guarantees are additional forms of security you can provide the lender. Prospective lenders want to know about your contingent sources of revenue should normal revenues decline, for whatever reason.
Conditions to a loan focus on the intended purpose of the money advanced. Is it for current operations, for expansion, or for a new building or equipment? The lender will need to understand these conditions in order to be able to allocate loan funds to you.
We can look at a lot of other relevant factors, and at these factors in more detail, but an initial focus on these five will give you a quick idea of whether applying for a loan from a financial institution is likely to be successful for you.
Dr. Bill - I love to share. I hope you do to! ;-)
Capacity to repay is the most critical of these five factors. Lenders are in business to see that loans are repaid with interest in a timely manner.
Character is actually your payment history on existing credit relationships - both personal and commercial.
Capital is the money you personally have invested in your business, and it is an indication of how much you have a risk should the business fail.
Collateral or guarantees are additional forms of security you can provide the lender. Prospective lenders want to know about your contingent sources of revenue should normal revenues decline, for whatever reason.
Conditions to a loan focus on the intended purpose of the money advanced. Is it for current operations, for expansion, or for a new building or equipment? The lender will need to understand these conditions in order to be able to allocate loan funds to you.
We can look at a lot of other relevant factors, and at these factors in more detail, but an initial focus on these five will give you a quick idea of whether applying for a loan from a financial institution is likely to be successful for you.
Dr. Bill - I love to share. I hope you do to! ;-)
Monday, April 6, 2009
Consider an Advisory Board
Small businesses are notorious for "going it on your own." The founder is normally strong-willed and focused - that is the strength of the small business. However, no one person is strong in all areas where expertise is required to succeed in the business arena. Most small businesses are not in the position to hire all the expertise required to face all challenges.
One answer to this dilemma is the "Advisory Board." This can take a variety of forms - the key, in fact, is that it be tailored to the specific needs of the specific small business and small business owner or management team. The advisory board can be a very loose, informal set of relationships with selected people - all the way to very formal arrangements. The best way to start, frequently, is simply to identify a person or persons with solid experience in the identified area of need - and go talk to them. You will usually be surprised how receptive people will be to discuss your concerns. Let them know, up front, that you recognize and value their expertise - and that you would like to learn from their experience.
From that initial encounter, let the results be your guide. If you feel comfortable talking with the person, you may want to arrange further discussions, and perhaps, ask that person to consider an on-going relationship. Sometimes, advisory boards meet as a group - often, however, the simple one-on-one relationship provides the needed information, assurance or confirmation that is needed. This may be sufficient for your needs. In other situations, for instance where you are considering a major new activity or change in your business, it might become beneficial to have the several advisers you have identified meet together to provide a broader set of viewpoints.
What have been your experiences? I'd like to hear what you, my reader, thinks about this issue. Comment below, and we can continue the discussion.
Dr. Bill I love to share. I hope you do to! ;-)
One answer to this dilemma is the "Advisory Board." This can take a variety of forms - the key, in fact, is that it be tailored to the specific needs of the specific small business and small business owner or management team. The advisory board can be a very loose, informal set of relationships with selected people - all the way to very formal arrangements. The best way to start, frequently, is simply to identify a person or persons with solid experience in the identified area of need - and go talk to them. You will usually be surprised how receptive people will be to discuss your concerns. Let them know, up front, that you recognize and value their expertise - and that you would like to learn from their experience.
From that initial encounter, let the results be your guide. If you feel comfortable talking with the person, you may want to arrange further discussions, and perhaps, ask that person to consider an on-going relationship. Sometimes, advisory boards meet as a group - often, however, the simple one-on-one relationship provides the needed information, assurance or confirmation that is needed. This may be sufficient for your needs. In other situations, for instance where you are considering a major new activity or change in your business, it might become beneficial to have the several advisers you have identified meet together to provide a broader set of viewpoints.
What have been your experiences? I'd like to hear what you, my reader, thinks about this issue. Comment below, and we can continue the discussion.
Dr. Bill I love to share. I hope you do to! ;-)
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