Monthly Archives: December 2017

Financial Management Guides

Having a good book keeping system is a great thing for your business, but it is what you do with the information in the books that matters the most.

You need to establish effective methods for financial management and control to accomplish important daily financial objectives and overall financial goals.

Having a good financial management system would help you become a better macro-manager as it would: help you manage proactively rather than reactively; help you plan ahead for financing needs, and make your loan approval process easier whenever you need credit. It would also help you provide more useful financial planning information for investors and have access to a great decision-making tool to make your operation more profitable and efficient.

It is not enough to have great products, services or marketing strategies, if you don’t manage your money well and you run out of cash all your effort will be in vain.

You must understand that entrepreneurs generally fail for one reason; they run out of money. To avoid failure therefore, you must understand the fundamentals of financial management. Once you understand the basic principles and concepts, you would be able to understand the pattern of your finances enough to make wise strategic decisions and you would be able to recognise the warning signs of an impending crisis.

You also need to have an effective managerial aptitude of the finances in your business or department. To achieve this you need to manage your finances with regards to: planning, monitoring and reporting.

Planning -taking a look at the future of the business and ensure that you will be financially healthy in the short and long-term.

Monitoring -keeping a watchful eye on the finances of the business so that when it derails you can act immediately to bring it back on track.

Reporting -having a clear picture of how your business has performed financially in the last financial period (month, quarter, year, etc), and using the information to guide your decision making for the next financial period.

These three points can be broken down into nine financial principles:


1. Keep to the cash flow budget
No matter how lucrative or promising a business is, when you run out of cash, the business will fail. Therefore budgeting helps you focus on the money as you plan for the future of your business. The truth is that accounting debits, credits, accruals and provisions are confusing and misleading. Watching your cash in the bank is a much easier method when planning. Besides it is the cash in the business bank account from one month to the other that really matters.

2. Build your financial models yourself
When the owner or manager outsources the building of the business’ financial models and forecasts to someone else, that business owner would have difficulty understanding the minute details and vital relationships within the business. He or she would not know how to change the model when circumstances in business change. If you are not sure that you can design and build your own business model or you have never done it before, then hire a professional to teach you; start with a simple financial model and cash flow forecast in a simple spreadsheet package. You and the professional can do it together on your first attempt.

3. Focus on the timing of the income
Whatever business you do, most customers will always plead that you allow them pay you late, but your suppliers will try to get you to pay them early. So if you let your customers have their way all the time, they would grab one arm each and pull until they rip you apart.

Debt is cash that you have no access to even in times of need. It is more useful to the debtor than it is to you. A manager of a small company narrated how his company “ran away” when it almost went broke from doing business with a leading retail store in Victoria Island, Lagos. He said his company had to wait until “the goods were sold” before they got paid for their supplies and his staff had to keep calling the store for their money.

You must be aware of the terms of payment and ensure that what you are negotiating is favourable to you; failure to do this could very well be the difference between success and failure.

4. Understand the nature of different types of cash outflows/expenses
Basically there are two types of cash outflow/expenses. They are the fixed expenses and the variable expenses. Fixed expenses are expenses that are a fixed sum irrespective of what is happening with the business. Examples of these are rent and salaries. You pay the same sum no matter how the business is doing. Variable cash outflows are expenses that change with the activities of the business. Examples of these are commissions and courier.

Fixed cash outflows can be very risky for your business. For instance, if a retailer records very low sales in a particular month, the company would pay less for delivery to its customers and it would pay less in sales commissions to its sales people. However it would pay the same amount in rent even though it failed to meet it sales targets. On the flip side, if business picks up and the retailer makes huge sales, the rent stays the same and the extra profit is saved.

The variable expenses might also pose a risk as these are affected by the retailer’s activities. They could easily increase with the profit and eat into it.

Note that variable expenses could also increase even when the profit has not increased. This is because variable expenses increase with the activity, and not all activities are profitable. The good news is that variable expenses can be checked. Where there is difficulty in checking a particular variable expense (that is contributing to the profit), then the business owner should consider converting that variable cash outflow into a fixed cash outflow. For instance, the increase in a retailer’s sales could increase the sum he spends on deliveries to his customers (where sales deliveries are offered for free). The retailer could change his contract with the courier company; switching from a pay-per-delivery contract to a monthly payment of a flat fee – bearing in mind that the same amount would be paid should the sales fall in the following month.

5. Keep both the daily details and the bird’s eye view in mind
Both the short term and long term progress matters; the loss of one could cost you the other. When your accountants send you those financial reports, do you really comprehend the information and the implications of what the reports are saying, and do you know how to apply whatever information those reports are giving you to make informed decisions? Your reporting system should factor in every detail that would help you and your team make short term and long term progress.


6. The bank balance does not lie
It is what your business account’s bank balance says that should guide you the most. The forecasts and analysis come next. If the account is empty, then you did badly -where it counts.

7. Mark out your break-even point
Identify your break-even point. If you have not put a cost to research time, or factored in the generator-diesel, newspapers and journals, and even mobile phone call credits then you do not know your break-even point.

8. Stay up to date
You cannot afford to be overly pedantic with your finances anymore than you can afford to be lackadaisical. Maintain a balance in between.


9. Report results with a purpose
Bear in mind what the reports are meant to achieve as you put them together.

Is It Ever A Mistake To Re-Finance

Home re-financing always seems like a great idea as often it looks like you will have lower payments, better terms on the loan and even cash out some of the equity in your home na have some cash in your pocket. There are not many people out there that would turn that down. However when considering a home loan re-finance it is important to take the timing and the costs of the new loan into consideration. All loans charge fees and if the trimming is not right you can lose large amounts of money to fees. Also if your credit score has lowered or the interest rates have not dropped enough it can be a costly mistake. This article lists some of the worst times to consider a new loan.

Recouping the Closing Costs

In determining whether or not it is a good time the homeowner should determine how long they would have to retain the property to recoup the closing costs. This is significant especially in the case where the homeowner intends to sell the property in the near future. There are loan calculators readily available which will provide homeowners with the amount of time they will have to retain the property to make it worthwhile. These calculators require the user to enter input such as the balance of the existing mortgage, the existing interest rate and the new interest rate and the calculator return results comparing the monthly payments on the old mortgage and the new mortgage and also supplies information about the amount of time required for the homeowner to recoup the closing costs.

When Credit Scores Drop

Most homeowners believe a drop in interest rates should immediately signal that it is time to re-finance the home. However, when these interest rates are combined with a drop in the credit score for the homeowner, the resulting re-financed mortgage may not be favorable to the homeowner. Therefore homeowners should carefully consider their credit score at the present time in comparison to the credit score at the time of the original mortgage. Depending on the amount interest rates have dropped, the homeowner may still benefit from re-financing even with a lower credit score but it is not likely. Homeowners may take advantage of free quotes to get an approximate understanding of whether or not they will benefit.

Have the Interest Rates Dropped Enough?

Another common mistake homeowners often make is to re-finance whenever there is a significant drop in interest rates. This can be a mistake because the homeowner must first carefully evaluate whether or not the interest rate has dropped enough to result in an overall cost savings for the homeowners. Homeowners often make this mistake because they neglect to consider the associated closing costs. These costs may include application fees, origination fees, appraisal fees and a variety of other closing costs. These costs can add up quite quickly and may eat into the savings generated by the lower interest rate. In some cases the closing costs may even exceed the savings resulting from lower interest rates.

Can It Be Beneficial Even When It Is A “Mistake”?

In reality re-financing is not always the ideal solution, but some homeowners may still opt for taking this route even when it is technically a mistake to do so. This classic example of this type of situation is when a homeowner does this to gain the benefit of lower interest rates even though the homeowner winds up paying more in the long run for this option. This may occur when either the interest rates drop slightly but not enough to result in an overall savings or when a homeowner consolidates a considerable amount of short term debt into a long term mortgage. Although most financial advisors tend to warn against this type of financial approach, homeowners sometimes go against conventional wisdom to make a change which may increase their monthly cash flow by reducing their mortgage payments. In this situation the homeowner is making the best possible decision for his personal needs.

There are many times and factors that go into a re-finance and if the indicators above seem to say it is not a good time then it might be better to back off and wait. These indicators above however are just a guide and some of the common things to look out for. They are not hard and fast rules and they can not account for each persons individual needs. So after taking all of the above factors into consideration if a re-fi still looks like the only way out then go for it.

Complete Personal Finance Guidebook

For years, personal finance has been like the murky waters a person could fear to dive in, let alone understand anything about, since even the simplest definitions sound complicated. Yet, the subject of personal finance is important, because money is important.

Even when a professional financial advisor is hired to manage one’s assets, it is imperative that the person is able to follow the control and management of his finances and that he recognizes the options available to him. Among people in the most successful professions, a few have sunk into complete ruin, because they trusted someone else with their earnings since the matter of money felt inaccessible to them.

For me also–after reading several books on money management and general finance, attending a few courses, and subscribing to a few e-mailings–the subject still remained somewhat of a mystery, until I came across Jeff D. Opdyke’s “The Wall Street Journal,” an excellent reference book with the added title of “Complete Personal Finance guidebook.”

The book lives up to its title by condensing and refining the knowledge in the immense quagmire o finance and offering practical clarifications to the reader like a pill easy to swallow. The writer informs and educates the beginners and the advanced with seven chapters on banking, borrowing, budgeting, investing, planning, insurance, and taxes.

Embellished with charts, lists, and special sections, the chapters include everything concerning personal finance. At the end of the introduction, Opdyke says:¬†“In short, consider this book your cheat sheet to the finances of your life. And it all begins at your local bank.”¬†Then, he goes on to explain the intricacies of banking in the first chapter.

From FDIC to cap rates, to annuity rules, and to how the IRS chooses to audit taxpayers, the information throughout the book covers an immense territory; yet, its language is clear and instructive, and the contents are well researched and skillfully organized. Reading this book can make any ordinary citizen reassess many issues concerning the way he manages his money or the way he lets others manage it.

Jeff D. Opdyke is a financial reporter who has covered investing and personal finance for The Wall Street Journal for the past twelve years. In his column in the Journal, he writes with a personal touch about his home life and how it affects his work as well as informing the readers on money matters. Besides “The Wall Street Journal. Complete Personal Finance Guidebook,” the author has a companion workbook, “The Wall Street Journal Personal Finance Workbook,” sold separately, and another earlier book, “Love and Money: A Life Guide to Financial Success” Opdyke lives in Baton Rouge, Louisiana, with his wife and their two children.

Tips to Plotting Out Your Finance

Managing finances is not all that it is cracked up to be. The typical breadwinner or the person who handles the allocation of money in the family would certainly attest to that. Translate this to the corporate setting and you would certainly say that this is about a hundred times more difficult than it was in the simple home setting. Managing finances is never as easy as it may seem, not by a long shot at all. This is precisely why you need to implement an efficient finance scorecard to foster better financial management. Despite how tedious the whole process might be, you would still need to look into it because the effectiveness of the distribution of funds and resources would depend on this.

Financial management would actually demand a lot of techie knowledge because you would be handling the balancing of funds and the application of finance principles to ensure fair and productive allocation of resources. If you have a finance management team in your company, then you surely must see its members rendering several hours of overtime, especially when it is just about that time of the month when the team has to show the members of the upper management team how the company’s funds and resources have been used – basically, where these were put into.

We all know how effective a managerial tool the balanced scorecard of BSC is. Moreover, this tool can be applied in just about any industry in the corporate world today, so as long as its application is done accordingly. How can this tool be applied in financial management then?

You have to understand that the BSC is basically the management team’s way to have a bird’s eye view of what is going on in the enterprise. With the BSC applied to finance management, it would then be easier for the team to pinpoint the strengths and weaknesses of the finance management team itself as well as the endeavors that it has taken upon. Moreover, from the name of the tool itself, the BSC takes on a balanced approach towards measuring the performance of the team itself. Thus, you are sure to have metrics and key performance indicators or KPIs plotted on the scorecard that are all objective and unbiased.

Another features of the BSC is that it actually provides a guide that the finance management team’s evaluator could make use of when conducting the process of evaluating the company’s financial processes. With this guide as basis in ensuring the effective performance of the team regarding managerial duties, there would be more room for your company to garner more savings

Financing Options For Your Next

Once you have negotiated the price for your vehicle, it is time to think about how you are going to pay for it. If the price is low enough that you can pay cash, it is the best way to go. Cash is always the cheapest way and usually dealers will give you a good deal on cash payment. But if you need to finance a car, there are several options. You can use a dealerships finance office to find you a bank, you can use dealerships (in house) financing or you can find your own bank.

Lets discuss them separately so you know what you are going to be dealing with. Car financing is a big business for the banks and the dealers. Usually a bank makes money on the interest and the dealer on every deal they make. We have seen the paychecks of the finance department managers and we know firsthand how they work.

Generally speaking, it is going to be more expensive to go through the dealers bank, since the dealer has to make money and the bank makes a profit; and you are the one that pays for it.

In house (dealer) financing may be cheap as far as the loan fees and charges are concerned, but interest is going to break your bank.

The best way other than cash is to find a bank that will finance your car. Go to your local bank where you do your everyday banking and ask them what options are available for you. Usually they are very good to their customers.

Assuming you have an above average credit score, you should be able to get a competitive rate. Banks know that once you go to the dealership, the finance department will try to get you a loan, so your local bank will keep the interest rate lower than a dealer might offer you.

As a common sense strategy, go to the websites like Kelly Bluebook and, do the research about the current interest rates on car loans; it will give you more bargaining options and power to negotiate a successful loan term.

As far as the financial side of a loan is concerned, there might be a down payment required. If you make a down payment you should ask for a lower interest. Remember that you paid part of a loan and the bank gets your car as collateral.

The more cash you pay, the lesser the loss that bank is exposed to, so be tough, you are the customer, you can always go to the other bank or a dealer to get a better rate. Do not say it in their face but show that you are aware of the options you have.

A Guide to Auto Financing

Nobody wants to be the dumb buyer in a car buying deal. You have to be smart or you end up losing more money than you ought to. It is a very common scheme among car buyers to first get money in order to buy a new car with good Car Parts.

The term is called “auto financing” and it simply means how you pay for a vehicle. You can finance a car by taking out an auto loan to own a car, in which case, you have two options: You either use the money from the loan to buy the car or use it for lease.

Auto financing

If this isn’t your first time buying a car, you might already know that the salesman or your car dealer will be checking your credit report before starting with the negotiations. But this is not the only way you can go to get that new car of yours. The seller will try to sweeten the deal and offer you special car finance situations in exchange for throwing yourself totally at his mercy. That is not a path you have to choose.

The key is preparation. Knowing what auto financing options you have before you get to the dealership will mean that you can take charge of your credit and take charge of your car loan.

Just remember, when you negotiate with the salesman for the most favorable auto loan, nothing is permanent until you have it in writing. So haggle and then haggle some more. Once negotiations seem to be over, that’s when the sales contract is prepared.

Inflated Interest Rates

To have the deal agreed upon by you and the salesman be put in writing in a binding contract is top on the list of the things you must do involving auto financing. Often involved at this part of the procedure is to determine monthly auto loan payments based on an interest rate. Now, as you well know, the interest rate varies from car buyer to car buyer. Your credit is only one of the factors and if the interest rate a car buyer qualifies for is inflated, then the dealership can make extra profit off your loan. That’s just one of the pitfalls in auto financing.

Independent Auto Financing

When you have the approved auto financing option on hand, you can then proceed with the deal as a “cash buyer” so to speak as you already have the cash in hand from the loan and you are just buying the car from the dealer with that money. Car salesmen prefer customers to be “monthly payment” buyers as this makes it easier for them to obscure the total cost of the vehicle, to the detriment of your savings. So wizen up and take that independent auto financing option available.

Set a Price Range

Having a budget is a sensible thing to do. If you set a sensible price range for yourself, then you have less reason to go beyond that range and succumb to the temptation of overspending. If you’re really firm on that budget, no amount of sales talk can sway you. One good tip is to ensure that your monthly car payments and related expenses do not exceed about 20% of your monthly net income.

Discounted Financing vs. Rebate

Here’s the dilemma to car buying: Many dealers offer an option between discounted financing or a rebate, but not both. Discounted financing means that you get zero-percent financing while rebate means that you get a certain amount of cash sometime after purchase. The common error many car buyers make is that the zero-percent loan will deliver the most savings. But will it really?

Get the Cash Rebate

In most cases, it’s better to get the cash rebate and apply it against the purchase price of the vehicle. If you already have a pre-approved car loan, then that’s even better because you have positively no need for extra financing from your dealer. Just use your car loan to finance the car and let the rebate handle some of the charges.

You will have to choose how long you want your lease to be and how much you’re willing to pay upfront at Auto Village. The obvious choice, of course, would be to pay as little as possible, but be sure to weigh other options as well. After that, the car is yours for the period stipulated in the lease contract.