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.

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.

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.

Don't make it personal

Setting up a business banking account separate from your personal account may save you hours of productivity for other tasks. It will allow you to not only track your purchases without having to figure out if it is a personal or business expense but it will also allow you to establish a relationship with your business banker which could come in handy when your business is ready to grow and begin asking for financial assistance. There are a few points to consider when choosing the bank for your account:

• Do you prefer a local bank or a national chain? A local bank will provide more personalized service and chances are greater that you will have direct interaction with the bank president. On the other hand, if your business requires that you travel outside of your local area, you may want to consider a chain because you will be able to get assistance in a wider area.
• Do you want to integrate your accounting software with your account? Some banks only integrate with certain software programs. If you chose your software first then you want to make sure your bank is compatible with that program.
• Do you want merchant services available through your bank? Some banks offer merchant services through a third party, however, using their preferred company may allow you instant access to your funds or 24 hour access. Using an outside merchant processor may be cheaper (we will go into more detail in a later article) but there may be a delay in getting the funds transferred to your account.
• Do you want to process your payroll through the bank? You may have a different system for processing payroll but some banks offer free checking for your employees if the bank is managing your payroll which not only includes paying your employees but also paying your employee taxes.
• How many transactions will you have each month? You must consider how frequently you will be making deposits (daily, weekly, merchant service transactions) and withdrawals (payroll, vendors, bills).
  

Most banks offer different levels of business banking accounts depending upon the amount of transactions that you anticipate and the amount of money you plan to leave in the account. When you are ready to open your account, most bankers will require the following documents (always call the bank first to double-check):

• A copy of your letter from the IRS listing your EIN (employer identification number)
• A copy of your business license
• A deposit to fund the account
• A driver's license (or other government issued identification)
• A partnership agreement if you are a partnership or a copy of your articles of incorporation if you are a corporation
  

All parties wanting access to the account should be present when the account is open. Mind your business and keep your personal and business banking separate!

Your business needs protection

You pay to insure your home. You pay to insure your car. If you can, you pay to insure your health. However, many small business owners fail to attain insurance to protect themselves and their business from worse case scenarios. Business insurance, like home insurance, can be purchased to protect your business from fire, theft and other losses. Although neither of us have the time to review every type of business insurance, we will review five of the most common types: Liability, Property, Key Man, Automobile and Home Office.

• Liability insurance for businesses is a protection against liabilities that you may incur during your day to day business activities. This type of insurance is especially helpful if you are manufacturing a product because of the risk that can be associated with someone becoming harmed while using your product. Many small business owners do not have the capital in their business to protect against such a catastrophic injury.
  
• Property insurance is used to protect the physical assets of your building whether you rent or own your space. This is helpful in the event of a fire, flood or other disaster because it can offset some of your replacement and repair costs.
  
• 'Key Man' insurance is a policy taken out on a key employee of the business to hedge against the financial losses that the business would incur in the event of that employee's death or illness. Many banks or loan programs may require this type of policy if the revenue stream of the business is dependent upon a key person.
  
• Automobile insurance is necessary for your personal liability but if you use your vehicle for business purposes, you may need a special insurance – non-owned automobile coverage. Additionally, many small business owners have begun using car magnets to advertise their business; however, you should make sure your car is insured as a business vehicle if you are doing so because you may not be covered under your personal policy when traveling.
  
• If you are operating your business from your home, you may not need a special type of policy; however, you should take an inventory of all of your home office equipment and insure that it is covered under your home owner's/ renter's policy as office equipment.
  

When purchasing insurance for your business, consult a reputable insurance agent that specializes in insurance for businesses. Don't be afraid to visit with two or three agents and get quotes. Warning: don't try to price match because an agent may try to meet or beat another agent's quote by adjusting your liabilities and deductibles. You want to compare apples to apples so decide on the level of insurance that you need - go home, compare the information and ask more questions if you need to. This is a key component of minding your business.

Dunn and Bradstreet has your (business) number

Many small business owners do not understand why they have a difficult time establishing credit for their business. They are confused when credit applications ask for their Dun & Bradstreet number. They wonder who is Dun & Bradstreet (D&B) and why would they have my number?

Dun & Bradstreet is a provider of credit information on businesses. Just as your social security unlocks the vault to your personal financial information, a D&B number will do the same for your business. The reports are used by businesses and financial institutions seeking to extend credit to your business. Much like a personal credit report, the lender will submit updates on your payment history and terms of their agreement so that other lenders can make informed decisions about your business.

So, why would you get a D-U-N-S Number rather than continuing to use your social security number or tax identification number? It’s not because it is free because there is a fee to create a D&B credit profile. I believe this is done, not as a primary means of generating income, but because it creates a barrier to entry. Not all businesses have the cash flow to purchase the number, which means they are probably not in a position to take advantage of credit opportunities.

Dun & Bradstreet also allows businesses wishing to extend credit the opportunity to purchase reports of varying degrees about the potential client. This method of qualifying reduces the assumed risk because there is a history of the business’ ability to handle credit. Additionally, the business owner is able to separate their personal credit from the business, which could prove advantageous for businesses with high inventories or those needing to lease equipment. Tying these purchases to your personal credit will reduce your ability to make personal purchases without seeming overextended.

Mind your business and research how a D-U-N-S Number can increase your business’ credit and creditability.

How long will you stay retired?

Ever wonder why some people retire and then a few years later they are back at work? It's because the average American does not have enough money to retire and stay retired. Therefore, they must find additional employment to supplement their shortfall. I've seen people reaching the age of retirement with $200,000 in their retirement account and they feel good about their prospects of a happy life after work. What they fail to consider is that they are currently living a $40,000 per year lifestyle. The probability that you will cut back more than 20-25% of your annual lifestyle is not realistic. Let's do some simple math - $40,000 divided by $200,000 equals about five years of retirement. So, what do you do?

As you near or plan for retirement, there are some decisions that you have to make:
What do you want to do during retirement? Some people like working and want to continue working but doing what they choose to do rather than what they have to do. In this case, research how much that job would pay and factor that as part of your income during retirement. It will reduce the amount that you will have to draw from your retirement account. If you want to sit home and watch TV everyday, that will also effect your monthly retirement income. Your electric and cable bill may increase but your driving expenses may be lower. Whatever you plan to do, develop an idea of how much that is going to cost you per month and per year so that you will know how much you need to live comfortably then multiply that by a realistic live expectancy and you will have a ball park of how much you need to have in an account when you make your retirement toast.

What about social security? It is a personal decision to consider social security in your retirement income. For most people, the amount they will receive from social security will not be enough to sustain their lifestyle and you may want to retire before the age that will allow you to draw full social security. Therefore, you should base that decision upon the annual statements that you receive from the government detailing the expected amount that you will receive based upon the year you retire.

How much should I be saving toward retirement? My advice is to save as much as possible but you should consult a financial advisor about where to save your money. Most employers offer a retirement plan such as a 401k and may even offer a percentage match. If you employer offers a match, then you should take advantage of that. For example, if your employer matches 50% of the first 6%, then they will match 3% of your 6% which would be a total savings of 9%. If you are nearing the age of retirement and don't feel as though you have saved enough, there are catch up provisions that will allow you to save more.

What if I can't save more? Some people are in a position where they have no more to save. If this is you then you should plan to work longer at your current job, work part time during retirement or plan to spend less. It is important to make these decisions before you retire rather than getting to year four and seeing the money begin to run out and panic because you don't know what you are going to do.

Retirement is a privilege. It is something that you earn by having a plan and making good decisions. Traditionally, Americans were able to retire comfortably because they bought a home in their 20s or 30s with a 30 year fixed mortgage, didn't spend more than they earned and kept a little nest egg tucked away. By the time they were ready to retire, the kids were out of the house, the house was paid for and they had a little money in the bank. Some sold their homes and lived off the equity while others enjoyed living rent free with minimal expenses and collected a little check every month. Today, we are so debt ridden and upside down in our mortgages, we can't afford to save without withdrawing the money the next week and the prospect of a comfortable retirement is an illusion that may never be attainable.

Your money matters and you need a plan to deal with your current situation so that you can make the good decisions that will lead to a comfortable retirement. Don't think that one day you will wake up, be 65 and able to walk away from your job. If that's your strategy, you may be 75 in a work force competing with 25 year olds.