Budgeting for the Small Business

Thursday, 4 February 2016

A budget is a projection of future revenues and expenses for the organization preparing it. It is comprised of a balance sheet, income statement and cash for the coming year. During the year individual months can be compared to results. At the end of the year full years can be compared.

Why Create a Budget?

A budget allows you to monitor your company's operations. Your yardstick is whole dollars. Closely monitoring your operations: revenues, costs, profits and cash flow allows you to adjust as needed to stay on track and reach your goals.

How to Use a Budget?

A budget is a financial yardstick to measure the organizations effectiveness in reaching the goals set by management. A budget also lets creditors know that management plans ahead in anticipation of foreseeable needs.

A Budget Will Show:

Projected revenues and the expenses needed to reach the profit goals. If your revenue projections turn out to be inadequate for the total expenses, adjust your plan by acting to raise sales, or adjust your plan by acting to cut costs. Every organization should have a budget before making any long-term decisions such as: leasing property or equipment, or purchasing equipment. The place to make adjustments is on paper where they are less costly.

The three main parts of a budget are total revenues, total cost and profits.

Total Revenue

Sales are the reason for budgeting. It is important to estimate sales based on past history and anticipating any future events that could have an impact -- including inflation. Sales are the base from which costs and profit can be estimated.

Total Costs

Total cost includes fixed, variable, and semi-variable. It is complicated because fixed costs are not dependent on a level of operations, but can change due to inflation. Variable costs change directly with the level of sales activity. Semi-variable costs have a fixed and a variable component. Inflation and Other Adjustments (price increases). A budget will be as good as the numbers used to make it. Therefore, it is important that your estimates and calculations be as accurate as possible.


Profit after tax should be large enough to make a reasonable return on your investment of dollars and time. Your targeted profit should allow for this. You can research your industry to determine if your investment is justified.

The Budgeting Process

When creating a budget, you must consider: What is your profit goal, how much will it cost to achieve, and what level of sales will support profit and costs. It is safer to overestimate costs and underestimate revenues associated with the products or services you offer.

Constructing a Budget

You can start with a forecast of sales or a forecast of profits. For practical purposes a forecast of revenues would be preferable. Then forecast the expenses necessary to make the profit target. A product oriented company would have to also forecast gross profit based on anticipated purchases, returns, freight in, etc. Adjustments would be made based on the resulting net profit after taxes and interest. The adjustments could be annual or monthly. Actual would be compared to budget monthly.

The Master Budget

A master budget is only necessary if you are tracking more than one process, activity or department. In that case you would prepare separate budgets that are interconnected by a master budget. This is typical of cost centers or profit centers.


A budget focuses the activities of an organization so that everyone is working toward common goals. Employees feel more a part of the organization and it helps them realize their importance to the organization in achieving the goals.

Why I Always Use an Investment Adviser

I like to pay myself first by socking money away in my retirement account. I know that's standard dogma for financial management, but it is sound advice. I know it to be true for many reasons, one of which is that I spent several years as a registered representative. That means I held investment licenses and could offer investment vehicles to the public as a broker. I helped a lot of people set up their retirement accounts and gave that bit of advice to almost all of them.

Now, though, I am out of that business. I still know enough to manage my own investments but I choose to use a financial adviser instead.

I know that brings up two questions. The first is: "Why would you use an adviser when you already know about investments?" That's an easy question to answer. He'll do a better job of it than I will. That leads to the second question: "Why will someone else do a better job than you?"

When you're in the investment business you eat, drink, sleep, live and breathe investments. Your finger is on the pulse of the market all the time, if you are good at your job, because you need constantly updated information. A professional investment rep can spend his time doing that.

I, on the other hand, spend my time doing other things.

There is a term in economics that explains it well, called "opportunity cost." Without going into complicated definitions it boils down to a simple idea. If I spend my time managing investments I am not spending my time doing my real job, which brings in revenue. That's why I shove that responsibility off on someone else whose job requires them to spend time managing investments.

Another way to put it would be that you probably let a doctor help you with health concerns. You might be able to go to medical school and learn to do your doctor's job all by yourself, but it's just not a wise way to spend your time.

I get regular statements from my adviser. We talk on the phone regularly. He calls me the moment the market changes and I need to act. It relieves me of the need to worry about these things so I can focus on the rest of my life.

I Worry About My Mortgage

Thursday, 21 January 2016

Like many Americans, I worry about my mortgage. It isn't something that keeps me up at night, and thankfully I have always been able to make my mortgage payments. However, it is something that is an ongoing concern from a financial standpoint. Granted, I do not have any complaints about my mortgage, even though this is the top consumer reason that Americans complain to the government. I have refinanced a couple of times, and I have always had pretty easy experiences with banks. Still, it can be a little stressful to owe so much money.

A sense of obligation
You play scenarios in your head, even if they are a bit negative. What happens if I lose my job? What happens if there is a major natural disaster that severely damages my house? Since I live in Southern California, prices are high and there is always the possibility of major earthquake damage. Obviously I made the decision to buy a house, so I can't blame anyone for this added responsibility. The good news is that I do not have any other debt, but that mortgage is a large amount of money.

Market fluctuations

We purchased a house in the late 1990s, which means that the value appreciating a great deal in the first few years of ownership. Obviously the value then went down quite a bit and has only recently started growing again. Therefore, I have equity, but realistically that equity doesn't do me much good because I do not intend to sell anytime soon. Therefore, the ebbs and flows of the housing market do not cause me much excitement or stress. I won't worry about the value of my house until years from now when I get ready to sell it.

Looking forward to the end

At this point, I am very much looking forward to being done with my mortgage. I have a number of years to go, but it is still something to anticipate with some level of excitement. There are financial "experts" who suggest that it isn't always a good idea to pay off a mortgage early since it is helpful to have mortgage interest to deduct. I understand that mentality, but I will still work hard to pay it off as quickly as possible. It is hard to put a price on peace of mind.

First Person: Here's Why Rising Interest Rates Could Be a Bullish Sign

Wednesday, 20 January 2016

It appears that one of the reasons that the Dow Jones Industrial Average declined 2% during the week ended June 21 (and was down 4% on Wednesday and Thursday alone) was investor concerns that interest rates, which have already begun to rise, will continue to go up in 2013 and 2014. These concerns were triggered by the Chairman of the Federal Reserve Ben Bernanke's comments that the Fed plans to slow its bond purchases over the next year and to end this program in 2014 if economic growth continues to strengthen.

I believe that investors reacted negatively to these comments in part because of worries that higher interest rates actually could slow economic growth and put an end to the bull market. Such concerns may be overdone, based on recent stock market history. Here's why.

I looked at interest rate and stock market performance as far back as 1950 to determine whether rising rates and a slumping stock market go hand in hand. I used the rate on 10-year Treasuries as my measure of interest rates and the Dow Jones Industrial average as my proxy for the stock market.

During the 63-year period from the end of 1949 through 2012, 10-year Treasury rates increased in 35 years and in 28 of those 35 years (or 80% of the time) the stock market was up. Moreover, the average increase in the Dow Jones Industrial Average in the 28 up years was more than 16%. These results suggest that expectations of higher interest rates, rather than being a reason to sell stocks, may, in reality, be a reason for optimism about the outlook for stock performance.

Why stocks have performed so well in the face of rising interest rates is unclear, although one possibility may be that rising rates are a sign of a strengthening economy that is boosting demand for capital. Assuming that stronger economic growth is likely to translate into higher corporate earnings, this can be a recipe for stock market gains.

While past stock market performance during periods of rising interest rates is encouraging, there is, of course, no certainty that this pattern will repeat. After all, in seven of the 35 years cited, the market declined. Also, the U.S. and world economies are more integrated today than ever before and, as a result, what happens overseas can affect economic growth here at home. Some analysts mentioned investor worries about the possibility of a slowdown in China's growth as another factor in last week's stock market decline.

Hiring a Professional Translator – 4 Reasons It Helps Your Business

Tuesday, 19 January 2016

In this fast paced world, geographical boundaries have been pushed to their limits, all thanks to the internet. Gone are the days when someone with a small store in the Middle East could only dream about selling their products to customers in South America. If you own an online business, you most likely know how internet has helped economies throughout the globe. However, when dealing with people or other businesses located in foreign countries, there are more than quite a few things that should be essentially taken care of. To reduce the risks and enhance your possibilities of profitability, having all documents translated to the other language can be of significant help.

As a matter of fact, any business (regardless of its size) which deals in international transactions could use the services of a professional translator. If your store features English as the only language, or if your documents are in English and have to be presented to a potential business partner who is a non-English speaker, professional translation services can save your day. True, you may use one of the many translation software available, but neither are they accurate, nor are they reliable. In fact, they could possibly lead you to an embarrassing situation rather than help you gain more clients or customers.

How Does a Professional Translator Help Your Business?

The employment of professional translators (individuals or firms) is of utmost importance if you intend to do business in a country which you are not familiar with, culturally or language-wise. Below are three reasons you should keep in mind if you are in need of a translator, but are having second thoughts about hiring one.

Quality – One may argue about the employment of a translator when the job can be done by hiring a bi-lingual staff. Quality is where the difference lies. While a person who understands two different languages can be a helpful resource, he or she certainly cannot replace the quality of work done by a professional translator. Moreover, translation services take the effort of going through a document in various levels, thus
editing and proofreading it several times.

Specialty – Businesses now have specific needs. While some need general text to be translated, there are other clients who require translation of niche documents. These may include technical docs, or articles for publication in medical or other scientific journals. Professional translation services employ translators who are specialists in these field, and can translate your documents with unmatched expertise.

Consistency – This is probably the most important aspect in any business. If you have a technical document translated with inconstant terms that eventually forces the reader/user to learn new terms, chances are they will probably go someplace else which offers a better understanding of the same product. Consistency is of immense importance, and in all aspects of business.

Additionally, if you are a small business, you may sometimes find it overwhelming to meet the demands of a growing customer base. If you were to manage your translations internally, this would mean extra time and resources spent on your part. In contrast, if only the work is outsourced to a professional translator, he/she will ensure that the work is done as per international standards, thus giving you an edge over your competitors.

Match your Potential with the Right Graduate Job

Wednesday, 6 January 2016

ou know what your skills are, but do you know which skills employers are looking for? Match your potential with the right graduate job!

By now you have read thousands of tips and suggestions on how to identify and highlight your skills in your CV in order to impress the potential employer. But one thing you have to keep in mind is the employer will be impressed just in case your skills match the ones they are looking for, no matter how good you resume is. It’s very important to find the right job by matching your own skills with the ones required for a particular job vacancy.

Recent graduates are facing an increasing competition on a job market and a harsh financial environment which makes a graduate job search a hard and stressful experience. Discouraging market circumstances along with the lack of working experience may seem impossible to overcome, but it is not that hard if you learn how to make your profile interesting for the employer you want to work for.

This is especially important when you are looking for your first graduate job or graduate training, since the first working experiences determine the future development of your career. It’s difficult to glean your top talents without proper professional experience, however there are tools out there to help. You can find suitable tools that offer free psychometric tests, questionnaires to identify strengths and weaknesses, and job matching tools online. Certain sites offer full career reports and other assessment features in order to kick-start careers and to help them on their way to get their graduate jobs. In these hard times, discovering your skills and matching them with the required ones will prepare you for an easier job-hunting process and help you get the right graduate job.

One you have identified your top skills and potential areas of strength, make sure you reference these skills for every job that you are applying for. Don’t just throw your CV around and hope that someone takes notice. Look for jobs that specifically address your strong points, and make sure that you craft a CV that demonstrates your competence in each required skill set.

Recent graduates have a tendency to be unfocused and scattered in their approach to job search. If you are looking for your first professional job or are looking to break into a new industry, highlighting your skills and talents is the next best thing to demonstrating professional experience. In order to demonstrate your skills, make sure that your CV talks about your personal strengths, data points from psychometric or other tests, academic achievements, and a list of your interests (narrowly focused on the job that you are applying to.)

Finding your first job or entering a new line of work can be a difficult task, but it is one of the most important steps in life. Finding the right job that matches both your potential and abilities is the first step to any successful career. If you take the time to plan your approach and develop your CV properly, you will stand above most applicants.

First Job Interview: How to Prepare

Tuesday, 5 January 2016

In this day and age, jobs are scarce. You may find yourself looking for work for many months before something comes up. If and when an interview opportunity does come up many people make the mistake of not preparing enough. What you need to realise is that with the current economic situation there will be highly qualified professionals seeking low qualified jobs, it won’t be uncommon to see highly qualified and experienced individuals applying for low level graduate jobs, competition will be fierce.

You really do need to do everything possible to impress the interviewee. Remind yourself of all the work you’ve put in with your job search and don’t let the interview opportunity go to waste by being unprepared. The more interviews you have the more confident you’ll become; you’ll get familiar with the process and the type of questions you can expect to be asked. Your first interview is always nerve-racking and preparation is essential.

There are numerous ways to prepare for an interview.
  • First and foremost you need to prepare yourself for contact with the employer. It’s common that in the week before the interview you’ll be in contact quite a few times. They may choose to call you or email you. If you don’t already, get used to having your phone with you all the time, you never know when an employer’s going to contact you. Missing calls will not look good, whereas answering first time shows you’re well organised. You may also want to have a pen and pad at hand so you can take essential notes, for example interview times and locations etc.
  • Your email also needs to be on top form, you can see a lot about someone’s language skills via their emails. Again with emails you need to be prompt, if it means leaving your email open all day, so be it. Getting back to your employer a day late will show that you’re unorganised and perhaps uninterested. Your email structure is important, it’s advised that you do some research on the internet into formal email structures. Also try and take an intellectual approach and use as many ‘big words’ as possible.
  • Your appearance is key. It’s always advised that you wear a well fitted suit to an interview; even if you’re told that the dress code is casual I’d still wear a suit, you need to do everything possible to impress the interviewee. As well as a suit, you need to make sure you style your hair smartly as to look professional.
  • Prepare answers for those predictable questions. For example:
    • Why are you good for this job?
    • What do you know about the role?
    • What are your strong points/weaknesses?
    • How will you use your skills in this role?
  • Do as much background research on the company/industry as possible. Find out if they have a website, if they do, read as much as possible. Research the role on the internet and speak to friends/family that are in a similar industry. This is crucial.
When attending the interview there are many things you need to do, they may seem obvious but are essential and can’t be overlooked.
  • Manners are key, you need to remain polite from the moment you step foot in the building to the moment you leave. Greet the interviewee with a smile and a firm hand shake, tell them it’s nice to meet them and when they ask how you are remember to ask them how they are. Sit down when told to do, don’t slouch, and make eye contact – but not too much eye contact.
  • You need to answer questions confidently, speak loud and clearly throughout. There is however a fine link between confidence and arrogance so be careful.
  • Most importantly (you’ll hear this a lot), be yourself, don’t be too robotic and don’t be fake. Nobody likes someone who’s fake, the interviewee will know that you’re nervous, there’s no need put on an act.