Business Tip # 17 - Capital

A while back, we did a piece on how the bank's establish the credit worthiness of a small business loan or the "Five C's of Credit".

Following up this week we'll go over Capital.

Capital is the built up reserves a business holds. Capital can be liquid or not.

Many banks will attempt to evaluate your liquid capital; your current assets (cash, accounts receivable, inventory) less your current liabilities (accounts payable, accrued expenses, short term debt obligations).

Depending on the business, a well capitalized company will have a current ratio (current assets divided by current liabilities) of at least 2 to 1. Meaning that the company has $2 in current assets for every dollar in current liabilities.

A prudent banker becomes concerned if this ration deteriorates over time.

For instance, if a company's current ratio is less than 1.0 to 1, it indicates that the company does not have the resources to pay it's current debt obligation. In addition, it could indicate that the company has a good deal of uncollectable receivables and/or obsolete inventory that cannot be sold.

Review your current ratios over time and notice your company's trends. it may tip you off as to why your feeling a liquidity pinch.

Wednesday's Tax Tip #19 - IRS Tax Processing

Not so much a tax tip this week, but an interesting item.

Hat Tip. TaxProf

2008 FILING SEASON STATISTICS
Cumulative through the weeks ending 5/18/07 and 5/16/08
Individual Income Tax Returns	2007	2008	% Change
Total Receipts	129,150,000	143,138,000	10.8%
Total Processed	119,827,000	130,342,000	8.8%
E-filing Receipts:
TOTAL	77,076,000	86,347,000	12.0%
Tax Professionals	54,932,000	59,975,000	9.2%
Self-prepared	22,145,000	26,372,000	19.1%
Web Usage:
Visits to IRS.gov	142,282,000	205,654,000	44.5%

Wednesday's Tax Tip #18 - Rebate checks

If you are wondering where your rebate check might be here is a schedule of the release dates.

If you had your 2007 federal income tax refund direct deposited, you rebate check will direct deposited.

Last two SSN digits:	Payments will be transmitted no later than (and received by the end of the day of):
00 through 20	May 2
21 through 75	May 9
76 through 99	May 16

If you did not have a direct deposited refund you schedule will be as follows.

Last two SSN digits:	Payments will be mailed no later than (and received a few days after):
00 through 09	May 16
10 through 18	May 23
19 through 25	May 30
26 through 38	June 6
39 through 51	June 13
52 through 63	June 20
64 through 75	June 27
76 through 87	July 4
88 through 99	July 11

If you have any questions about your individual circumstance , please email me at gtvcpa@yahoo.com

Business Tip #16 - Who are you?

Several years ago, I read an article about economics of Formula One racing and was stuck by a quote from the head of Tag Heuer, the high end watch maker.

Roughly quoting, "we probably spend too much in advertising through Formula One but we do it because that's who we are".

I'm not a believer in frivolously spending money on expenses but I was struck by his belief in "that's who we are".

So if you own a business do you know "who you are?"

I often preach about having a vision that runs throughout your organization, from employees to vendors to customers. You'll find, in the most successful small businesses, a community that is united by that business.

Some questions to ponder as it relates to your business.

1) Who is your "ideal" customer?
2) If you had to communicate to these customers face to face, where would you go to "bump into them"?
3) If your business were to support one charity that all of your customers would support, what charity would it be?

I like to tell people that many of my clients are the people who will pay you in ducks and chickens, which is fine with me because that works with my personality. But if I want to meet more of those people as prospects; I'd be wasting my time going to a formula one race. I'd be better served heading to a NASCAR race.

When you start to ask these types of questions, a certain theme starts to develop. With that theme, your selection of vendors becomes clearer, how you find the "right" employees becomes clearer, etc.

I'm often use the example of "mob" attorneys who end in trouble. More often than not it starts with something innocent; like defending a gangster with a DUI charge. But that person brings in his buddy who's in trouble, then another. The next thing you know, you're going to parties populated with gangsters.

Eventually that attorney gets wrapped up in a mess. All because he never really questioned where his business was headed.

So if you want to really make your business go, know who you are!

Wednesday's Tax Tip #17 - Rebate schedule

Here is a schedule of when the government rebate checks will be sent out.

Please note, if you had your 2007 tax refund direct deposited, this rebate will be direct deposited.

Wednesday's Tax Tip #16 - Capital Gains

Often times, taxpayer's are afraid to sell a stock for fear of triggering a capital gain.

In general the tax implication should be one of the last issues you consider when sell a capital stock. As I like to tell my clients, I would much rather have you pay capital gains tax on income than deduct losses.

Here is the decision making rationale I believe the owner's of capital assets should consider.

Can I make more money leaving my investment where it at or is there an investment where it will earn more?

For instance, assume you have a stock that you paid $15,000 for and now it's worth $24,000. you're decision should negate the $9,000 gain to date. The investment question should be, where can I invest that $24,000 where it will earn more? Maybe you decide to keep it where it's at because you like the long term prospects of the industry/company.

Maybe you decide there's a better place to invest that money, in which case you sell. But if you decide to hold on to that stock because you will have to pay $1,350 in capital gains tax, you may find that it costs you more money.

Let's assume that investment, now worth $24,000, drops to $22,000, you have just lost $2000 in real dollars, just because you didn't want to pay the capital gain; and you still have the capital gain tax.

Ideally, you would analyze your investment portfolio continually to maximize your gains. But time makes that impractical.

I would recommend that you corner your broker or account manager on a quarterly basis and review your portfolio and adjust your investments accordingly.

Hopefully, you've got quite a few capital gains, it means you're making money.

Personal financial tip #17 - Getting rich

So you want to get rich?

Just perusing our client base, you will find that there is one common theme among our wealthiest clients. That theme? CONSISTENCY.

Most of our wealthiest clients live in nice but modest homes and rarely moved. Most of them work(ed) steady jobs with little transition. Most had little in terms of marital transition (divorces & marriage). Few waste their money on "toys" such as boats or high end autos.

But all of them did one thing, steadily saved.

In fact, very few of them had/have high paying corporate jobs. You would be surprised at how many of our wealthiest clients are school teachers; a testament to the lack of career transition.

We are all bombarded by messages in our society telling us we can have it all. But I've seen it time and time again that people who chase wealth in a Don Quixote like fashion end up poorer than those who simply have a plan and work the plan, dollar by dollar.