Developing a Personal Cash Flow Strategy

We all know that money make the world go round. It is important to have enough money to meet your day-to-day needs and to support you current cash needs. Developing strategies to help generate the flow of cash is important in determining how much cash flow you will have. Developing a personal cash flow helps people maintain their lifestyles and focus on their needs.

There are benefits to having a personal cash flow strategy. It help maintain your lifestyle, you can increase charitable giving, or pass money to heirs. With the appropriate strategies, you can keep a cash flow regardless of the current market cycle, and meet your ongoing cash needs. There are seven steps to help increase and maintain your cash flow:

1.       Define Your Cash Goal: Focus on what you need from day-to-day, week-to-week, and month-to-month. Set financial goals that you are comfortable with and that fit your basic needs and lifestyle. You should set a target amount and establish a date when you want to reach the goals you set. You can set short term that last only months or long-term goals that could last decades.

2.       Define Your Source of Cash: List all the source you expect to receive money from, other than your financial assets, with the amounts and dates for each source. This could be a paycheck, social security, etc.

3.       Define You “Number”: This is your target number that will allow you to be comfortable and pay your bills on time. This number should also include a cushion that could sustain you for six months to two year depending on how much of a cushion you feel you need to sustain your lifestyle over the time.

4.       Define Your “Window”: The “window” is the amount of time you must be “locked-in” to your cash flow for you to feel comfortable that you will be able to maintain your lifestyle. You don’t want a down turn in the market to make an abrupt change in your lifestyle.

5.       Develop an Investment Strategy: Talk with an advisor to help you figure out what would be the best course of action for investments. Establish your risk tolerance, and what would be an acceptable minimum return for each investment. 

6.       Implement and Monitor You Wealth Plan: This is the step where you monitor and adjust you investments to get the cash flow you planned. You can allocate funds into different investments and review the performance making sure that your goals are in track and completed in the time allotted.

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The Differences between For-Profit and Not-For-Profit Accounting

When dealing with not-for-profit accounting and for-profit accounting there are many similarities. For example, the tracking and reporting of income and expenses, and payroll taxes, but there are some very important differences that make nonprofit organizations different from the general for-profit businesses.

The most notable difference is the functional expenses that the IRS requires nonprofits to report. Functional expenses include itemized expenses across management (general and administrative), fundraising, and program areas. The necessity to report these particular forms of expenses comes from the nonprofit’s need to push its resources towards the mission of the organization.

So what does this mean for not-for-profit accounting? It means that there has to be an established system that defines how you will allocate expenses across the functional areas and into the specific programs. An example of this would be if the administrative function takes up 20% of the office space, then you assign 20% of an expense such as paper to the administrative functional area.

To help determine how much a program or activity actually cost the nonprofit organizations can use a cost allocation plan. This plan when accurately done can give a clearer picture of the organization’s finances. Several acceptable methods can be used to determine the organizations finances. Two of these are applying direct/indirect costs, and allocations based on percentage of payroll or physical space used (like the example above). A combination of these is also acceptable, but to determine which is best for your organization consult an accountant.

Nonprofits also have to track revenue in the form of contributions. This included unrestricted and restricted funds, donated goods, in-kind contributions, pledges, etc. There also has to be a standard value placed on donated services. This is necessary to record donated services   such as volunteer time in the organizations financial statements.

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Basic Reports for Nonprofit Organizations

Like many organizations and businesses, there are specific reports that nonprofit organizations have to provide when reporting about their organization. These report not only help determine the financial health of the organization, but many are also required by funders when applying for grants. The reports also convey important financial information to the board of trustees and the government.

The following are the basic financial reports that nonprofit organizations should include:

  • Statement of Financial Position: This is also referred to as a balance sheet. This summarizes the assets, liabilities and net assets of the organization at a specific date. It is like taking a picture of the organization at that particular period.
  • Statement of Activity: This is the income and expense statement. It shows an overview of the financial activity over a period in time. This statement will also show income with the expenses taken out, which will result in a profit or a loss.
  • Statement of Cash Flow: This statement summarizes the resources that are available to the organization during the reporting period and how the resources were used. This is one of the most useful reports because it shows the income coming and the expenses going out. A statement that shows projected cash flow can also be helpful to the board in determining if there will be any shortfalls or overages for the budget period.
  • Statement of Functional Expenses: This report is for all expenses related to the program services and supporting services. Expenses for each program and shown divided into the various programs. The expenses under the supporting services are usually divided into two sections, the management and the general expenses, and fundraising expenses.

There are other report that can be used such as government information returns, payroll tax returns, reports to founders, management reports, budget monitoring reports, and analysis of statements and investment reports. The report that your nonprofit needs is determined on an individual basis. Remember nothing replaces a qualified accountant that can take care of all the needs of the nonprofit.

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Assessing Internal control Procedures

There are different kinds of audits. The IRS can audit your financial records, but another way to audit is assesses the systems and procedures of your company. Assessing internal controls is an important component to establishing the integrity of a business. By assessing the internal controls, a business owner finds places where they can improve procedures.

When a company goes through an internal audit, there are certain procedures looked at. The first thing is how external factors, such as the environment, economy, or technology, are affecting the business. They also look at how the company has modified their internal controls in response to the external influences.

The auditor also evaluates how management assesses internal controls. Each publically traded company creates a written self-assessment document which demonstrates how well it believes the internal controls are working. This is a good exercise for non-publically traded companies. It demonstrates how well you know your internal controls. When performing a self-evaluation you should review the controls for significant accounts. You should also determine which locations, if you have multiple locations, should be evaluated. Management should also assess the design and operating effectiveness of its controls.

Once management has a chance to review, the current controls it is the auditors turn. They will review what is written and determine how well management is performing. The auditor will fill out a yes and no questionnaire that allows them to evaluate the company’s structure, who performs which employee performs each operating task so the auditor can track down the person who performs the task.

The final step is to test the controls. The auditor will design the test and decide which procedures to test. The test included five procedures which include talking to management, looking through the companies documents, observing the company’s operations, and conducting walkthroughs to trace a transaction, and finally do reperformance by redoing the company’s work though a specific transaction.

This can be a complicated process, but in the end it will make your company stronger and more efficient.

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What is Expected of a Leader

Everything we do in business or life there is a leader that takes the helm. You can become the leader of others or someone else can lead you. The quality of the leadership determines whether the group succeeds for fails. How you chose to lead can vary by situation, but you always have a chance to pick you leading style. As you consider what style of leader you want to be, keep in mind that good leaders can have a combination of several factors. The following is a look at different factors that influence you as a leader.

Leading with you head

Leaders that lead with their heads are a chief strategist. They devise a plan, measure progress towards a goal; helps create the mission, works out solutions to problems. They dream about the future of the team and look at how opportunities can reshape the team’s success. Head leaders know how to maximize their resources. They also ensure the continuity and growth of the team.

Leading with your heart

Heart leaders lives and defends the teams values and agreed upon behaviors. They are a champion for the people. They are motivators, and look for ways to help the team grow and evolve their skills and abilities. Hearts give credit to team members for successes and instill a spirit of fun and excitement into the team’s mission.

Leading with your face

When you lead with your face, you are the team’s ambassador. Faces take responsibility for the team’s failures ad meets disappointment head on. They are involved and committed in the group’s mission, and are the accessible member of the team.

Leading with your voice

This leader shares the team’s vision with other members and stockholders. They plan for and execute internal and external control to make sure everyone is informed. The voice leader established the tone for the group and raises issues and concerns related to lack of progress. They are straight talkers.

Leading with your hands

Leaders that lead with their hands are team players. They assist the team in removing roadblocks. Hand players are problem solvers. They follow through with their promises and make others do the same. Hand leaders undertake the difficult tasks and execute the tough decisions that are for the greater good. They also model the expected behaviors.

Becoming a leader can be unexpected for many, but when that role is thrust upon you, it is important to know what kind of leader you are. Many leaders are not just one type, but there is usually a dominate part to your leadership.

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Finding Your Professional North

In today’s age, the world keeps spinning even when we find ourselves lost and looking for our true north. Like on a compass it is important to learn how to keep following your set path even when obstacles are in your way.  Finding your professional north is the just as important. There are endless possibilities, and infinite paths to choose from while on your path to discovery. Below are a few ideas to keep in mind while you conduct your search:

  • Make a Decision: The first step is finding what you want to do. For some people they know going into college or even earlier, but other take the winding path to discovery. That initial decision is what is important.
  • Set your Path: Ok, so you have figured out where you want to go, but how do you get there. Creating goals to guide you down the path using them like mile markers to mark how far you have come and how far you have left to go.
  • Take Breaks: Everyone gets tired, and sometimes the miles are long and hard. It is important to rest and renew your passion for what you want to do. If you are tired you can lose focus and miss your goal.
  • Practice Makes Perfect: Everyone needs practice to be able to get better. You have to put the time in to get better. Practice your craft, take classes to learn new things, put into practice what you learn. You cannot become a master overnight so keep practicing.
  • Find Your Motivation: What drives you? How can you become better? Find what inspires you and use it to move you forward. It could be someone, a meeting, a picture, etc. This will get you through tough times, and help you push through to the other side.
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Empowering People to Tell the Truth

Truth is important to everyone, but sometimes it is hard to tell someone, especially if the person is in a position of power. In business, open and honest communications between a worker and supervisor is crucial to a high-functioning organization.  Workers have to have a certain amount of courage to stand up to a superior, and deliver information that can ruffle feathers. It is important as a supervisor to have people that are willing to tell you the truth. Is there a way to encourage truthfulness in employee? Below are some traits that employers can develop with their staff to encourage candor and open communication in the work place.

From our working experience, we all know what drives us to keep quiet, and fear is top of the list. Many things can create this fear in workers, including:

  • Bullying, abrasive, or abusive behavior
  • Closed-mindedness
  • Complacency
  • Overextended and too busy to listen
  • Avoidance of Conflict

These all lead to the breakdown in communication, but there are steps we can take to help build the workers up to be more open and receptive. It is the responsibility of leadership to overcome these breakdowns, and to build a better communication environment so workers feel safe and comfortable in speaking the truth without fear.

To ensure open communication and candor in an organization or business the following are steps you can take to have appositive impact for you and your workers.

  • Be consistent and aware of the signals you send.
  • Do not tolerate disrespectful or bullying behavior in any of the works, including yourself.
  • Understand the influents ye you have on other people and use your powers for good.
  • Actively listen to people, and make sure they know you are listening and you appreciate what they say even if you don’t agree with it.
  • Set up clear boundaries, and make sure they know what is off limits to change.

Establishing a clear, open, reliable communication with staff members will be invaluable to your company. Foster the development and watch the results grow.

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Eliminating “Phantom” Income

Ponzi schemes can affect anyone, and in the last several years, the IRS has taken the initiative to help taxpayers eliminate fictitious income generated by the scheme. If the taxpayer uses the safe harbor under Rev. Proc. 2009-20, they may elect to deduct 75% of their loss in the tax year of discovery as loss a theft even if pursuing a third-party recovery. If they are not pursuing a recovers 95% of the amount can be deducted. By using this safe harbor, investors are unable to amend returns or re-characterize income reported that deal with the Ponzi scheme.

What makes income “phantom.” Income considered phantom, is only constructively received or if paid, it is  with the capital funds of the taxpayer or other investors to perpetuate and conceal the scheme. It cannot be earned as a promoter of the scheme.

There are a couple options for taxpayers if they do not use the safe harbor. The first is to deduct the theft loss under Sec. 165(c)(2). They would include the amount invested in the Ponzi scheme, including previously stated income and less cash withdrawn. The deduction can be taken in the year it was discovered, or if there is the possibility of recovery of the money, when that option no longer exists.

The second option is to amend returns for open years under Sec. 61. This allows you to remove constructively received income and treat withdrawals of cash previously reported as income as nontaxable return of capital. The taxpayer must establish the amount of fictitious income and treat the income as never occurring during the open years.

It can be a harsh reality to those involved in a Ponzi scheme. It is always important to research the investment before putting money in. Having a good financial advisor or accountant can be essential to investors making healthy choices for their portfolio.

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Don’t Be a Job Hopper

Now, everyone is looking for that one job that will excel him or her to the next level, or that elusive perfect job. They are continually looking for the next big thing and may even bounce from job to job. Many recruiting experts define “job-hopping” as switching organizations every two years or less. From a business standpoint, this is a bad label to have for several reasons.

In the end, a job-hopper can cost the company money. If a person comes into the company and they invest in them time and training, the company is out money when that person takes the skills they have learned to a different company. It will also cost them more money to train and recruit another person to fill that empty spot. Research has shown that it cost on average of $12,800 to replace a worker.

While strategic job-switching can help workers advance in their careers, or stay motivated, engaged and productive, continued quick changes can be a red flag to hiring managers. Many times it is up to the candidate to justify their job history, but candidates that have gaps or regular job changes can be their own biggest obstacle to getting their desired job.

One thing that can help reverse the effects of job-hopping is career advancement. If the candidate can show that the jobs taken were to advance their career, then that can help negate the perception of job-hopping. Some job managers also take into consideration the unstable economy of the last five years, when considering a job candidate.

It is not all bad. When considering a switch in jobs, consider these few questions:

  • Why do you want the new opportunity? Is it the job you want or will it help improve you career?
  • Have you looked within your current company? The company may have a similar job opening you could try for instead of looking elsewhere.
  • Where is the greatest long-term potential and stability? Pick a job that has the best chance for you to advance and build your skills. This is where you want to be long-term.
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Types of Communicators

In the business world everyone communicates to get their point across, but it is important to know that everyone has a different communication style. There are five types of communication styles: assertive, aggressive, passive-aggressive, manipulative, and submissive. Each has their own characteristics and it is important to understand how each style can affect the conversation.

The assertive communicator is the easiest to communicate with because they are able to express themselves in an effective way without hurting other people’s feelings. The receiver can trust them, you always know where they stand, and they earn respect.  They maintain good eye contact and are socially gifted.

Aggressive communicators are demanding and only agree with someone who agrees with their opinion. They believe that they are always right and the only opinion that matter is theirs. The person on the receiving end of the communication feels humiliated, hurt, afraid, or resentful. This is the hardest to communicate with because they will never see someone else’s side.

The passive-aggressive communicator may appear to be passive, but underneath they are hiding their aggressiveness with sarcasm, complaining, and deviousness. There are not trustworthy and usually two-faced. The person communicating with them often feel confused, angry, hurt, or resentful.

Submissive communicators are very quiet and tend to agree with everyone. They will feel like a victim, are easy to get along with, and avoid conflict. They are soft spoken and the person talking with them often feels frustrated, guilty, and can discount them because they do not know what they want.

The last form of communicator is the manipulative communicator. These people are cunning, controlling of other in a devious way, and they can make people feel obligated to them. They can make the person they are talking to feel guilty, frustrated, angry, and they usually do not know where they stand with a manipulator.

Each style has its own challenge when talking to them. If you understand the style of communicator you are talking to you will have a better chance of being able to get your point across.

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