30 May 2009

Check This...

I remember when I opened my first checking account. Everyone stressed the importance of balancing my checkbook. I heard it at the bank when they gave me the check register and showed me how to enter the date, then the name of the transaction and then how much was going in or coming out. Finally, I was instructed to use my math skills to add and subtract those amounts. A negative number was a sign of trouble. The lesson was further stressed by mother with every deposit to the account (I was only 16 at the time and she was making all of the deposits).

The reason I bring this up is because I have heard and noticed a lot of people having trouble balancing their checkbooks. It's not, well not always, because they can't add or subtract but because of all of the different types of transactions that we use our accounts for. Back then your only options to get money out of your account was to write a check or go to the bank. Even wire transfers were a complex process.

Today, we have automatic drafts, ATMs, debit transactions, on line bill pay and check writing. Unfortunately, those check registers have not kept up the times. Some people have duplicate checks but I find it hard to believe that you will only have one additional transaction to record between checks. The traditional check registers are usually kept with your check book but not with your debit card which causes some people to forget to record those debit transactions.

So what do you do? I have two systems that you can try. Hopefully, one will fit your situation or it may become a combination of the two. Either way, you have to find a system that works because banks don't mind covering an overdraft payment when they know they can charge more than $30 each time you make a 'mistake.'

Option 1: Keep a journal of your spending. I write down everything that I spend in a small notebook and code the transactions – whether it's cash, check, ATM or automatic draft. This helps to see where all of my money is going and not just the money in my account. At the end of the month, I sometimes face a rude awakening like one month I was going to gas station to buy coffee almost every morning for about $1.08 per day. Doing that everyday for a month was more than $20. I could have made my own coffee, bought that French vanilla creamer that I love, a package of paper cups and box of sweet and low for less than that.

Option 2: Keep a separate checking account for your bills and one for your personal spending which usually occurs with a debit card. If you know how much you spend on bills each month, you can set up an account with that much money each month and only use that account to write checks for household expenses. The second account can be the fun money. This is also helpful for people with budgeting problems because you aren't able to dip into the household money.

Your money matters and you need a solid system to help you keep track of it.

25 May 2009

Rules of the Game

Imagine playing a game with four people and each person has a different set of rules to the game. How do you know if you are winning or losing? This is the premise that many businesses are operating on because they don't have a set of rules for their employees or an employee handbook. An employee handbook is your rule book for workplace behavior, policies and procedures. Although you may assume that everyone knows the rules and are playing by the same rules, how do you really know?

Let's say you hire two employees and they start work on the same day. You have an orientation and give them the exact same rules at the exact same time. Two weeks later, one employee begins breaking one of the rules while the other is following procedure. You chastise the 'bad' employee for their behavior and they respond, “I didn't know I wasn't supposed to do that.” Without proper documentation that those rules were explained, the employer has no evidence that the employee is acting improperly – even if employee #2 is doing all of the right things.

Every employer that maintains employees should have an employee manual that spells out how they want their employee's to behave and what the employee can expect from their work environment. These guidelines should be clearly spelled out and can not show bias in any form. Your manual should include, at least, the following sections:

  • Attendance policy – when do you expect your employees to come to work, when are they allowed breaks and at what time can they leave?
  • Use of company property – will you allow employees to check personal email during down time or is personal use of computers prohibited?
  • Confidentiality - are your employees privy to confidential client information and if so what happens if they betray that confidentiality?
  • Dress code – what image do you want your employees to portray? Will you have a business casual dress code or will they be allowed to wear what they want? Will they be allowed to wear denim on Fridays or required to wear a suit and tie everyday?
  • Safety and accident rules – how will you prevent workplace accidents? Are there any rules that should be followed to decrease your liability and the probability of an accident occurring?
  • Substance abuse – what will be your policy regarding employees using illegal substance? Will you have a zero tolerance policy which means they can not use illegal substances under any circumstance thus requiring random drug testing or will you only require that they not use illegal substances while working?
  • Sexual harassment – it is imperative that your company have a sexual harassment policy that lets everyone know that this behavior will not be tolerated and that spells out disciplinary action for violating the policy.
  • Performance reviews - all employees should receive a performance review at least once per year (preferably quarterly) so that they know how you feel about their work. Each person should be judged using the same criteria which should be spelled out in advance so that they know what your expectation is for their performance.

Additionally, employees want to know what benefits they can expect from their employer. Having these benefits in writing ensures the employees that everyone is being treated fairly and equally. The following sections are the most popular guidelines for compensation and benefits:

  • Payroll – everyone wants to know when and how they will be getting paid (weekly, bi-weekly, monthly, etc). Also, will you require direct deposit or will they be able to pick up their checks at a certain location at a specific time?
  • Holidays – you should establish at the beginning of each calendar year which holidays your business will be closed for and which holidays your employee will be compensated.
  • Vacation/Sick Leave – you should decide if you will allow your employees to have paid vacations and how they will accrue sick time off. How do they earn time off – after one year, six months, etc? You must also consider policies for funeral leave, jury duty, military service and the family and medical leave.

It can be a pain to put this manual together because it requires time and effort (something many of us don't have much of) but ensuring your employees are all playing by the same rules is a smart way to mind your business and reduce your legal liability.

04 May 2009

Charge It!

As we continue to navigate through this digital revolution, more and more people are forsaking paying for items, even some bills, with cash or checks. The convenience of using debit/credit cards has made life for the consumer much smoother. However, what happens when a business does not accept debit/credit cards? Are you in jeopardy of losing customers because your business has failed to keep up with the technological revolution? Unfortunately, you are.

Your business may receive multiple calls per day from telemarketers asking if you accept credit cards, do you want to accept cards, can they set you up to accept credit cards? Although you may want to jump in to merchant processing (that's the technical name for taking consumer money through credit cards), there are a few factors that you should consider.

Accepting debit/credit cards is a process that involves you taking your customer's bank information and submitting it through a terminal which sends the information to a merchant service using digital transmission. The computer system determines if your customer has enough money to process the transaction and then sends you an approval or denial message. The company takes the money from the client's account, charges you a fee or series of fees for processing the transaction and then sends you the balance. When choosing a company to process your credit/debit payments, consider the following factors to find the best company to work with.

How will you be accepting payments? Some companies will charge a different fee based upon whether you are operating a web store (accepting payments on line), accepting payments over the phone or swiping the card in person. Accepting payments in person will generally have a lower fee because there is a reduced possibility of fraud – someone using someone else's card – since you are able to verify the existence of the card and the person using it.

How much is the set up charge? Often companies will charge a nominal fee to set up your account however if you are a shrewd business person you may be able to have this fee waived.

How much will the terminal cost? You may have the option of renting a credit terminal or paying up front for the machine. It may seem cheaper to rent but you should take the monthly cost and multiply it by the number of months in your lease agreement and compare that with the cost to pay upfront. You may be surprised at the difference in price. If a machine costs $59.95 to rent over a 48 month period or $595 to purchase, is it cheaper to pay the $595 or $2,877.60 over 4 years? However, you must also consider your budget. Can you afford to pay the entire amount upfront? If not, ask if they sell refurbished machines. These are machines that were returned to company because of a malfunction, got fixed and are now being sold at a discounted rate.

Ask about the fees. Tell them that you want to know about every fee associated with this service regardless of the likelihood of you incurring the fee. These include application fees, cancellation fees, statement fees, gateway fees, monthly service fees and monthly minimum fees. You must factor these fees into your monthly budget. For example, if you are paying $115 in fees each month and processing an average of $150 in transactions, you are actually only netting about $35. In this case, it may not be worth it for you to process credit transactions or you should find a less expensive company to work with.

There are also fees associated with processing each transaction. First there is the discounted rate which every Visa, Master card, American Express, etc charges for processing a transaction using their card. Usually this fee is a percentage which can range between 1% and 3% depending upon whether you are swiping or keying in the card data. The other is a transaction fee which is charged per authorization and can range from $0.20 to $0.50. For example, if your merchant service charges 2.44% per transaction and $0.24 per authorization and you have a charge of $33.00; you will pay $1.05 for the transaction.

The next consideration is funding. Funding is how and when your merchant service gets you your money. Some banks offer merchant services and will transfer the funds directly to your account, however, you may pay higher fees for this convenience. If you choose a third party merchant, it may take up to five business days to receive your money. Always ask when your fees will be deducted from your account and how you will funded for the payments received.

Keeping up with modern technology is essential to every business' growth, however you must be smart and mind your business. It's not always about how much you make, but how much you keep.

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