What is it about doing taxes and thinking about last year? Every time I prepare my tax returns, I find myself thinking "Was it really just last year that I..." or "Wow, last year we sure spent a lot on...."
It's also a time to plan ahead. If I got a sizable refund for a certain year, then I know I overpaid taxes (No, I do not think of it as a tremendous gift from Uncle Sam, despite what he might wish). So I consider ways to reduce my taxes paid to avoid such refunds in the future. All in all, it's almost like having a New Years Eve reflection and a New Years Day Resolution - only in dollars and cents.
This post probably has no deeper meaning. I just find myself doing my taxes and thinking about the recent past and the oncoming future. At least I know I won't be paying so much in taxes for a while. That's one benefit of living on a graduate school stipend, and of having three beautiful children.
On a somewhat related note, someone (okay, it was my accountant) asked me today if I got in. He wasn't negative about it, but he was probably the first person who seemed to really suggest that I ought to wonder IF I will get in. I made my case to him, explaining the reasons why I felt sure that at least one school would accept me. I didn't list "I feel called from God to do this" among my reasons (perhaps I should have), but I explained why schools might find me a good choice. I'm not down about it, but it did give me a momentary pause. A "what if" moment. But it passed. I cannot let doubt stand in my way. I know I will get in somewhere, if not multiple places. Then I can quit doubting acceptance and start doubting what exactly I am getting myself in to (just kidding, mostly). I am looking forward to knowing where I can go.
-- Robert
Showing posts with label Accounting. Show all posts
Showing posts with label Accounting. Show all posts
Tuesday, January 20, 2009
Thursday, December 11, 2008
High Tech Rednecks
Over the past two weeks, we have decided to start scanning all bills of lading for our invoices. We have also started scanning many other things, or using a really great program called CutePDF which creates a "printer" that actually saves the printed file as a pdf file. We house the files in a central folder system where we can the retrieve them for email or store them for digital documentation.
Honestly, setting the system up has been a lot of fun. After deciding to do it, we consulted with a computer expert and he suggested we do a double or triple backup. First, he suggested having a second hard drive that exactly copies everything on the primary (called RAID) constantly. By having duplicate drives, a simple failure of one of the drives would not mean a total loss of the data. Second, he suggested having an external hard drive that backed up at least daily, either the entire system or new files (as small as our data set is, the whole system backs up in under an hour). The third option he mentioned by didn't go into great detail about was online backup. We decided to use Carbonite because it has unlimited backup online for $49/year for one computer (which is all we truly need to back up). It runs whenever the computer is idle and backs up all new or changed files. Then if some real calamity struck the business (tornadoes and tropical storms are common to this area), at least the data is still there.
So in a few weeks, we have gone from a company with a lot of paper files to one "going green". In our case, though, the "green" motivation was the improved speed of cash flow, not so much the number of trees we claimed each year. We have found several customers willing to accept documents by email (cutting the cost of copying and mailing as well as the time lost as they went through the mail) and others willing to accept faxes (just as efficient). More will decide to accept them in the future, especially with the incentives likely to come from a Democratic Congress and president.
We will be ready.
Or at least my company will be - I'll be off researching how small businesses are responding to "green matters" as compared with large corporations (not likely).
-- Robert
Update: I just backed up over four gigabytes of data with Carbonite in less than half a day (after that process, only new or changed files will need to be uploaded, but most of the data is protected).
Honestly, setting the system up has been a lot of fun. After deciding to do it, we consulted with a computer expert and he suggested we do a double or triple backup. First, he suggested having a second hard drive that exactly copies everything on the primary (called RAID) constantly. By having duplicate drives, a simple failure of one of the drives would not mean a total loss of the data. Second, he suggested having an external hard drive that backed up at least daily, either the entire system or new files (as small as our data set is, the whole system backs up in under an hour). The third option he mentioned by didn't go into great detail about was online backup. We decided to use Carbonite because it has unlimited backup online for $49/year for one computer (which is all we truly need to back up). It runs whenever the computer is idle and backs up all new or changed files. Then if some real calamity struck the business (tornadoes and tropical storms are common to this area), at least the data is still there.
So in a few weeks, we have gone from a company with a lot of paper files to one "going green". In our case, though, the "green" motivation was the improved speed of cash flow, not so much the number of trees we claimed each year. We have found several customers willing to accept documents by email (cutting the cost of copying and mailing as well as the time lost as they went through the mail) and others willing to accept faxes (just as efficient). More will decide to accept them in the future, especially with the incentives likely to come from a Democratic Congress and president.
We will be ready.
Or at least my company will be - I'll be off researching how small businesses are responding to "green matters" as compared with large corporations (not likely).
-- Robert
Update: I just backed up over four gigabytes of data with Carbonite in less than half a day (after that process, only new or changed files will need to be uploaded, but most of the data is protected).
Thursday, October 9, 2008
An Analysis of the Banking Fallout - Article Review
Yesterday Glenn Beck shared a letter he wrote to his sister about how we as a nation came to be in the situation we're in financially. I think he states a lot of it far better than I could hope to, and I appreciate that he did not point the finger at one party, but he did name names when particular individuals had acted or made statements clearly showing they played a role.
In simple terms, though, what he said was greed drove it all. I think he has hit the nail on the head. Politicians greedy for power, bankers greedy for profits, individuals greedy to have things NOW instead of waiting for when the time was appropriate, builders greedy to put up more and more homes while credit terms were so loose... greed greed greed.
It really is sad that such a base, animalistic drive got us here. Regulations were ignored, overlooked, or sequestered. Risk was ignored because it was all being passed on to someone else who didn't care about it. Everything spun out of control.
Fortunately, the economy is still functioning. Rampant inflation (caused at least in part by these slackening credit terms) has not managed to destroy it yet. People are still employed at high percentages, and they go to work and do their job, then come home and purchase goods and services from other people. We have not reached a total fallout, nor will we it would appear thus far. So hope remains. Today may seem dark, but tomorrow - or several hundred tomorrows from now - we can still hope for a brighter day. And maybe, just maybe, that day will bring with it the wisdom learned in the midst of these trials.
-- Robert
In simple terms, though, what he said was greed drove it all. I think he has hit the nail on the head. Politicians greedy for power, bankers greedy for profits, individuals greedy to have things NOW instead of waiting for when the time was appropriate, builders greedy to put up more and more homes while credit terms were so loose... greed greed greed.
It really is sad that such a base, animalistic drive got us here. Regulations were ignored, overlooked, or sequestered. Risk was ignored because it was all being passed on to someone else who didn't care about it. Everything spun out of control.
Fortunately, the economy is still functioning. Rampant inflation (caused at least in part by these slackening credit terms) has not managed to destroy it yet. People are still employed at high percentages, and they go to work and do their job, then come home and purchase goods and services from other people. We have not reached a total fallout, nor will we it would appear thus far. So hope remains. Today may seem dark, but tomorrow - or several hundred tomorrows from now - we can still hope for a brighter day. And maybe, just maybe, that day will bring with it the wisdom learned in the midst of these trials.
-- Robert
Thursday, March 27, 2008
Feeling Like Icarus
Since I had to explain this title to someone I know to be intelligent, I feel it necessary to remind anyone reading who Icarus was. Icarus was a young man who was given wings to fly, but they were attached with wax, so he was warned not to fly too close to the sun. He did anyway, and and fell. So, this week I have felt a little bit like Icarus.
When an opportunity comes along to do something new, something different, something that will help me grow in my experience and knowledge, I feel inclined to consider it. When that opportunity could mean greater wealth, more flexibility of schedule, and the chance to live anywhere I might want to, again I pause and think, "What if?"
I am not typically someone who always looks from greener pastures. I do not go through life whimsically changing to suit my fickle moods. No, I'm the guy who's had the same haircut since childhood (or at least since college depending on how narrowly one defines sameness). I'm the guy who buys two pairs of the same shoes whenever I find what I want so I won't have to shop for them again anytime soon. I prefer to keep my life relatively simple.
In other words, I am not the sort of person who religiously reads job listings. I have a great job, after all. I get to spend a lot of time with my family, and I make a good living doing things I enjoy. I am what some might call "fat and happy" or at least satisfied. Satisfaction, though, should never come to one so young. Clearly, I need to branch out.
Thus I find myself looking at some wings and considering what some would call an ill-fated flight. To further muddy the waters and digress from the supposed subject of this post, I must look back nearly six years. I felt a strong leading to go back to school at that time. I knew that I was supposed to go back after a strong sign came in the form of a high score on the GMAT, the "SAT" of graduate business school. So I returned, planning to get a fairly general degree that would broaden my marketability. I already had an accounting background, so I was determined to focus away from finance or accounting in my program. Then I heard two professors speak, and I knew why I had returned to school. The first was a finance professor who explained why everyone needed to take his class, and then finish the sequence in finance to fulfill the international component of the program. The second was a professor of entrepreneurship who explained how many businesses had started from his program and how many competitions his teams had won (more than several other top schools combined). I knew I had to take both sequences, along with consulting, to focus my degree on small business financial consulting. With the work I had already done, my accounting background, and this new degree, I knew I could help people improve their small businesses.
The problem with having a perfect job description for a career is that the job needs to exist. After graduate school, I found one such job opportunity, but I was deemed underqualified by the business school offering it - they needed someone to head up small business development center. I did not even get an interview, but instead a nice letter explaining how many others had applied. I realized the job market was poor, and my chance to use my new skills would not be found. I turned back to my former business, knowing I had a better chance to use my skills there than anything else I would find. Obviously it paid off, since I now own part of that business.
Then came the email at a time when my business was struggling. "Do you know anyone who would be interested in this position?" it asked innocently. I had read about the company my MBA classmate started in his regular company newsletters and often thought, "That sounds an awful lot like what I wanted to do with my MBA. Go figure." I never did more than take notice of it, though. After all, my job was secure and my life was good. Still, the email explained exactly what they were looking for, and if it had said "We were hoping to hire Robert" in the description of necessary skills, it could not have been more clearly made for me. CFO solutions for small business who cannot afford a full-time financial person sounds a lot like small business financial consulting to me. Knowing the owner of the company never hurts, especially when I know him to be honorable, ethical, and hard-working. He and I think a lot alike, in fact. The timing could not have been more right (or more wrong if I didn't want to rock the boat). So I emailed him to learn more. The pay sounds great, the chance to learn and grow is wonderful, the flexibility of the schedule seems ideal, and the fact I could do it from anywhere I want makes it hard to overlook. The training - especially the chance to help train other people when I'm older and want to share my knowledge - and benefits package put the icing on the cake.
Then comes the second guessing. Can I really make what he suggests? Would the schedule really be so perfect? Do the benefits matter? Is the risk that I fail worth the chance that I succeed? Am I discounting what I have too much and not discounting this opportunity enough? Is my life so bad that I even need to change? On and on it goes. And so I feel like Icarus. I have flown too close to the sun, or at least my eye is on the sky instead of down here on Earth, dealing with what is already on my plate.
-- Robert
P.S.: I do not mean for this post to sound depressing. I know it is great to have the opportunity to choose between to wonderful jobs, especially in such a market. I just wanted to vent.
When an opportunity comes along to do something new, something different, something that will help me grow in my experience and knowledge, I feel inclined to consider it. When that opportunity could mean greater wealth, more flexibility of schedule, and the chance to live anywhere I might want to, again I pause and think, "What if?"
I am not typically someone who always looks from greener pastures. I do not go through life whimsically changing to suit my fickle moods. No, I'm the guy who's had the same haircut since childhood (or at least since college depending on how narrowly one defines sameness). I'm the guy who buys two pairs of the same shoes whenever I find what I want so I won't have to shop for them again anytime soon. I prefer to keep my life relatively simple.
In other words, I am not the sort of person who religiously reads job listings. I have a great job, after all. I get to spend a lot of time with my family, and I make a good living doing things I enjoy. I am what some might call "fat and happy" or at least satisfied. Satisfaction, though, should never come to one so young. Clearly, I need to branch out.
Thus I find myself looking at some wings and considering what some would call an ill-fated flight. To further muddy the waters and digress from the supposed subject of this post, I must look back nearly six years. I felt a strong leading to go back to school at that time. I knew that I was supposed to go back after a strong sign came in the form of a high score on the GMAT, the "SAT" of graduate business school. So I returned, planning to get a fairly general degree that would broaden my marketability. I already had an accounting background, so I was determined to focus away from finance or accounting in my program. Then I heard two professors speak, and I knew why I had returned to school. The first was a finance professor who explained why everyone needed to take his class, and then finish the sequence in finance to fulfill the international component of the program. The second was a professor of entrepreneurship who explained how many businesses had started from his program and how many competitions his teams had won (more than several other top schools combined). I knew I had to take both sequences, along with consulting, to focus my degree on small business financial consulting. With the work I had already done, my accounting background, and this new degree, I knew I could help people improve their small businesses.
The problem with having a perfect job description for a career is that the job needs to exist. After graduate school, I found one such job opportunity, but I was deemed underqualified by the business school offering it - they needed someone to head up small business development center. I did not even get an interview, but instead a nice letter explaining how many others had applied. I realized the job market was poor, and my chance to use my new skills would not be found. I turned back to my former business, knowing I had a better chance to use my skills there than anything else I would find. Obviously it paid off, since I now own part of that business.
Then came the email at a time when my business was struggling. "Do you know anyone who would be interested in this position?" it asked innocently. I had read about the company my MBA classmate started in his regular company newsletters and often thought, "That sounds an awful lot like what I wanted to do with my MBA. Go figure." I never did more than take notice of it, though. After all, my job was secure and my life was good. Still, the email explained exactly what they were looking for, and if it had said "We were hoping to hire Robert" in the description of necessary skills, it could not have been more clearly made for me. CFO solutions for small business who cannot afford a full-time financial person sounds a lot like small business financial consulting to me. Knowing the owner of the company never hurts, especially when I know him to be honorable, ethical, and hard-working. He and I think a lot alike, in fact. The timing could not have been more right (or more wrong if I didn't want to rock the boat). So I emailed him to learn more. The pay sounds great, the chance to learn and grow is wonderful, the flexibility of the schedule seems ideal, and the fact I could do it from anywhere I want makes it hard to overlook. The training - especially the chance to help train other people when I'm older and want to share my knowledge - and benefits package put the icing on the cake.
Then comes the second guessing. Can I really make what he suggests? Would the schedule really be so perfect? Do the benefits matter? Is the risk that I fail worth the chance that I succeed? Am I discounting what I have too much and not discounting this opportunity enough? Is my life so bad that I even need to change? On and on it goes. And so I feel like Icarus. I have flown too close to the sun, or at least my eye is on the sky instead of down here on Earth, dealing with what is already on my plate.
-- Robert
P.S.: I do not mean for this post to sound depressing. I know it is great to have the opportunity to choose between to wonderful jobs, especially in such a market. I just wanted to vent.
Tuesday, March 18, 2008
So You Had a Bad Day
I am back-dating this post to explain my Tuesday. If it sounds like I am being intentionally ambiguous, it's because I am.
My Tuesday started with some real concerns about where things in my life were headed. By the end of work, I had at least sorted out some of the reasons for fearing the worst, thankfully. Still, any time something comes along with enough inertia to knock me off course or at least give me pause like that, I tend to stop and reflect. Questions like "Am I doing the right thing?", "Is this what I am meant to be doing?" or "Where do I go from here?" pop into my mind. I think it is healthy to have a little self-reflection now and then, and it doesn't always have to be positive. I spent a lot of time reflecting Monday and Tuesday night. There are still no clear answers. Is that a good thing? Time will tell. For now, I know I have some things to consider, and I still have a bit of a waiting game to play with regard to my business. We still have to wait a week and a half for the results of our bid from last month. Fingers are crossed, prayers uttered, and shooting stars have been wished on... and time goes on.
My apologies if this post makes no sense to anyone but me. I just had to write my thoughts down somewhere, and what better place than for all the world to see?
-- Robert
P.S. I have often enjoyed playing the song "So You Had a Bad Day" when bad things happen, thus the title.
My Tuesday started with some real concerns about where things in my life were headed. By the end of work, I had at least sorted out some of the reasons for fearing the worst, thankfully. Still, any time something comes along with enough inertia to knock me off course or at least give me pause like that, I tend to stop and reflect. Questions like "Am I doing the right thing?", "Is this what I am meant to be doing?" or "Where do I go from here?" pop into my mind. I think it is healthy to have a little self-reflection now and then, and it doesn't always have to be positive. I spent a lot of time reflecting Monday and Tuesday night. There are still no clear answers. Is that a good thing? Time will tell. For now, I know I have some things to consider, and I still have a bit of a waiting game to play with regard to my business. We still have to wait a week and a half for the results of our bid from last month. Fingers are crossed, prayers uttered, and shooting stars have been wished on... and time goes on.
My apologies if this post makes no sense to anyone but me. I just had to write my thoughts down somewhere, and what better place than for all the world to see?
-- Robert
P.S. I have often enjoyed playing the song "So You Had a Bad Day" when bad things happen, thus the title.
Thursday, March 13, 2008
Approaching Debt Freedom (sort of)
I love to listen to calls on Dave Ramsey's show on Friday because that is the day when people call to scream "WE'RE DEBT FREE!" I completely empathize with the sentiment of wanting to make that statement. My only problem with making it, though, is that people make it before they truly are. They don't consider having a mortgage as not being debt free. I definitely consider my mortgage when thinking about debt, because it weighs on me more than any other debt I have ever had. Looking at a payment breakdown and seeing well over half the principal and interest going to interest, and then another chunk going to escrow, it feels like the payments will never end. I hate the idea of being a slave to anyone or anything, and debt makes me feel like a slave. So I want to call and screams "WE ONLY OWE ON THE HOUSE!" in a few weeks, but that doesn't sound nearly as powerful. So, my phone call on debt freedom will just have to wait.
How long will it wait? I now have three timelines outlined for our mortgage payoff. We can live reasonably well, pay a lot extra, and be done with it in just about four years. Eight years to pay off a thirty-year mortgage feels pretty good, and not suffering too badly to do it sounds great. But somehow I didn't feel like we were really getting in the mindset of a Total Money Makeover if we had a lot of nonessential spending still built into our budget, so I examined it again. This time, I came up with a timeline of around three years, which requires us to avoid spending money on a home improvement project we had in mind until we're done, and generally cuts out any excess above necessities, a small entertainment budget, and two vacations. Still, I wanted to see if I could come up with a way to break the three-year barrier. So I reduced the spending to essentials, one inexpensive vacation a year (think, visiting relatives), and all our entertainment budget stripped down to only include one major fun thing a month that we have committed to doing, but not much of anything else.
Two years and three months came back. I checked my inputs, thinking that couldn't really be true. Still, the chart showed two years and three months. Could we live like no one else for two years with the goal being to live like no one else forever after (across the bottom of every page in Dave Ramsey's book it says "live like no one else, so you can live like no one else"). Somehow, I think I could. I have been a college student living on a tight budget twice. My wife has lived on a tight budget much more than I have. Our kids probably wouldn't notice much if we cut a lot of the excess out of our lifestyle for a couple of years, and it would be good for them to see us do it. Children who see their parents pinch pennies learn to do it themselves in many cases. If we teach them why, they certainly have a chance to understand the value of sacrifice, which is a good lesson for anyone to learn.
Can we do it? Can we really pay off our house that fast? My mind says "Just Do It!" like a Nike Ad. My heart worries for my wife and children and the things they'll give up (my own sacrifices are much easier to me than anything I can ask of them). Still, two years compared to fifteen or twenty feels like a wonderfully short time. Can we do it? Here's hoping.
-- Robert
How long will it wait? I now have three timelines outlined for our mortgage payoff. We can live reasonably well, pay a lot extra, and be done with it in just about four years. Eight years to pay off a thirty-year mortgage feels pretty good, and not suffering too badly to do it sounds great. But somehow I didn't feel like we were really getting in the mindset of a Total Money Makeover if we had a lot of nonessential spending still built into our budget, so I examined it again. This time, I came up with a timeline of around three years, which requires us to avoid spending money on a home improvement project we had in mind until we're done, and generally cuts out any excess above necessities, a small entertainment budget, and two vacations. Still, I wanted to see if I could come up with a way to break the three-year barrier. So I reduced the spending to essentials, one inexpensive vacation a year (think, visiting relatives), and all our entertainment budget stripped down to only include one major fun thing a month that we have committed to doing, but not much of anything else.
Two years and three months came back. I checked my inputs, thinking that couldn't really be true. Still, the chart showed two years and three months. Could we live like no one else for two years with the goal being to live like no one else forever after (across the bottom of every page in Dave Ramsey's book it says "live like no one else, so you can live like no one else"). Somehow, I think I could. I have been a college student living on a tight budget twice. My wife has lived on a tight budget much more than I have. Our kids probably wouldn't notice much if we cut a lot of the excess out of our lifestyle for a couple of years, and it would be good for them to see us do it. Children who see their parents pinch pennies learn to do it themselves in many cases. If we teach them why, they certainly have a chance to understand the value of sacrifice, which is a good lesson for anyone to learn.
Can we do it? Can we really pay off our house that fast? My mind says "Just Do It!" like a Nike Ad. My heart worries for my wife and children and the things they'll give up (my own sacrifices are much easier to me than anything I can ask of them). Still, two years compared to fifteen or twenty feels like a wonderfully short time. Can we do it? Here's hoping.
-- Robert
Tuesday, March 4, 2008
Commitment to a Plan
Last night, Ellie and I bough a book we have planned to buy for a week or more, and that we've had an interest in for several months, The Total Money Makeover by Dave Ramsey, which teaches basic principles to get personal finances in order. This month, we will actually be completely out of debt except for our home, but we've gone about debt elimination in a fairly unfocused manner. We want to stay out of debt, so we've decided to implement a plan, probably based on Dave Ramsey's Baby Steps. We will be effectively starting on step three beginning now. The most important element of any financial plan is a budget. The second most important element is adherence to the budget. I, for one, believe in building budgets that offer the flexibility not to become unlivable. If I have to live every day (or even week or month) to the penny, then I know I can't do it. If, instead, I have some "slop" in the system, then I can definitely handle it.
I love this line from the introduction to this book: "What I have discovered is that some of the most profound and life-changing truths you will ever discover are very simple." Indeed, in today's culture, we celebrate complexity as "sophistication" but often the best ways to live are extremely simple to the point of being boring. Boring does not make headlines, boring does not make it onto reality television, and boring definitely does not light the average person's fire. Unfortunately, life is seldom lived the way it is depicted in magazines or on The Real World, and so most people prefer to live life on the edge. "Buy now, pay later" is the modern-day mantra. The latest furniture sale I've heard is now three-years no interest (I can't recall if it was also no payments). Most appliances can be purchased with no payments for twelve months. Consumerism has overtaken our lives. We've gone well past keeping up with the Jones. Now many people have trouble keeping up with minimum payments. Listening to Dave Ramsey's show brings me great peace because I realize I have never gone as far into debt as many of his callers, few of whom have less than $10,000 in credit card debt (and most of them are behind on several payments).
I have been able to live my life floating on the sea of cash flow for years. I am ready to trim my sails toward financial freedom, though. Dave Ramsey can be the wind I trim them to, but I still have to captain the ship, and my family has to be on board. Here's hoping we're not bailing water again anytime soon.
-- Robert
I love this line from the introduction to this book: "What I have discovered is that some of the most profound and life-changing truths you will ever discover are very simple." Indeed, in today's culture, we celebrate complexity as "sophistication" but often the best ways to live are extremely simple to the point of being boring. Boring does not make headlines, boring does not make it onto reality television, and boring definitely does not light the average person's fire. Unfortunately, life is seldom lived the way it is depicted in magazines or on The Real World, and so most people prefer to live life on the edge. "Buy now, pay later" is the modern-day mantra. The latest furniture sale I've heard is now three-years no interest (I can't recall if it was also no payments). Most appliances can be purchased with no payments for twelve months. Consumerism has overtaken our lives. We've gone well past keeping up with the Jones. Now many people have trouble keeping up with minimum payments. Listening to Dave Ramsey's show brings me great peace because I realize I have never gone as far into debt as many of his callers, few of whom have less than $10,000 in credit card debt (and most of them are behind on several payments).
I have been able to live my life floating on the sea of cash flow for years. I am ready to trim my sails toward financial freedom, though. Dave Ramsey can be the wind I trim them to, but I still have to captain the ship, and my family has to be on board. Here's hoping we're not bailing water again anytime soon.
-- Robert
Sunday, February 10, 2008
The Corporate Tax - The Most Regressive Tax in America
Most people I know debate whether taxing a corporation more is good or bad, or whether giving corporations tax breaks is good or bad. Corporations pay very high tax rates. The fact is that taxing corporations at all is bad for everyone.
What is a corporation, after all? A corporation is an entity funded by investors and lenders, run by managers in charge of creating a profit for the investors and repaying the lenders by creating a product or providing a service for a group of consumers. In a legal sense, a corporation is a distinct entity, but in a practical sense it is a group of people. It is also an employer of people in most cases.
What effect does taxing a corporation have on the economy? First, it reduces the capacity of that corporation to employ people because of the reduction of funds. It also reduces the ability of that corporation to research new products or improve existing ones. Worst of all, it forces the corporation to raise prices to compensate for the reduced revenue. What happens when fewer people are employed, less product development occurs, and prices rise? It hurts the poor, and creates more poverty. Those with less income are less able to afford basic goods and services, and with fewer people employed there are more people who have less income.
So, in short, a tax on corporations is the most regressive tax around. A regressive tax is one that taxes the poor more than the wealthy. Another example with be any form of sales tax not refunded or reduced for the poor. Corporate taxes have the same effect because they create inflation through the ideas mentioned above, which is just one more reason they should be unilaterally repealled and the FairTax should be adopted. By taking the inflation out of the market, taxes can be paid in a smarter way while more jobs become available, more research is done, and prices go down for everyone. The FairTax represents a win-win that both political parties should be falling over themselves to pass.
What is a corporation, after all? A corporation is an entity funded by investors and lenders, run by managers in charge of creating a profit for the investors and repaying the lenders by creating a product or providing a service for a group of consumers. In a legal sense, a corporation is a distinct entity, but in a practical sense it is a group of people. It is also an employer of people in most cases.
What effect does taxing a corporation have on the economy? First, it reduces the capacity of that corporation to employ people because of the reduction of funds. It also reduces the ability of that corporation to research new products or improve existing ones. Worst of all, it forces the corporation to raise prices to compensate for the reduced revenue. What happens when fewer people are employed, less product development occurs, and prices rise? It hurts the poor, and creates more poverty. Those with less income are less able to afford basic goods and services, and with fewer people employed there are more people who have less income.
So, in short, a tax on corporations is the most regressive tax around. A regressive tax is one that taxes the poor more than the wealthy. Another example with be any form of sales tax not refunded or reduced for the poor. Corporate taxes have the same effect because they create inflation through the ideas mentioned above, which is just one more reason they should be unilaterally repealled and the FairTax should be adopted. By taking the inflation out of the market, taxes can be paid in a smarter way while more jobs become available, more research is done, and prices go down for everyone. The FairTax represents a win-win that both political parties should be falling over themselves to pass.
Friday, February 1, 2008
A New Month
A lot of business scramble at the end of a month or the beginning of the next one to "close the books". What exactly does that mean? In accounting, before computers, the records of a business were literally kept in books called ledgers. The ledgers related to income and expense have to be closed each period, which means they have to be brought to a zero balance. Entries to close income look like this:
---------------------------------Debit ----------------Credit
Income -------------------------[balance in income]
--------Retained earnings ----------------------------[same amount]
The reason the amount is the same on both sides is that accounting entries always have to balance. The retained earnings account is a long term measure of the earnings of a business that have not been distributed to owners.
The entries to close expense accounts look reversed:
---------------------------------Debit------------------Credit
Retained earnings-------------- [balance in expense]
------------------Expense -----------------------------[same amount]
The reason the entry is reversed is because expenses reduce retained earnings (which have a "credit" balance. All accounting is done with debits and credits, and no, that does not refer to debit cards or credit cards. Here's a lesson in what those two words actually mean: debit means "left" and credit means "right" and they refer to the left and right of the ledger. The reason for credit and debit cards being called what they are is how they are accounted for at a bank - a credit card increases a debt, which is a liability account; liability accounts have "credit" or right side balances. A debit card comes directly out of an cash account, which is an asset; assets have "debit" or left side balances.
The beginning of a new month seemed like a good time to explain those terms. Thankfully, I don't have to close the books, because my Quickbooks software does all of that work for me. I just have to handle a payroll this morning, which is also made much easier thanks to software.
-- Robert
---------------------------------Debit ----------------Credit
Income -------------------------[balance in income]
--------Retained earnings ----------------------------[same amount]
The reason the amount is the same on both sides is that accounting entries always have to balance. The retained earnings account is a long term measure of the earnings of a business that have not been distributed to owners.
The entries to close expense accounts look reversed:
---------------------------------Debit------------------Credit
Retained earnings-------------- [balance in expense]
------------------Expense -----------------------------[same amount]
The reason the entry is reversed is because expenses reduce retained earnings (which have a "credit" balance. All accounting is done with debits and credits, and no, that does not refer to debit cards or credit cards. Here's a lesson in what those two words actually mean: debit means "left" and credit means "right" and they refer to the left and right of the ledger. The reason for credit and debit cards being called what they are is how they are accounted for at a bank - a credit card increases a debt, which is a liability account; liability accounts have "credit" or right side balances. A debit card comes directly out of an cash account, which is an asset; assets have "debit" or left side balances.
The beginning of a new month seemed like a good time to explain those terms. Thankfully, I don't have to close the books, because my Quickbooks software does all of that work for me. I just have to handle a payroll this morning, which is also made much easier thanks to software.
-- Robert
Friday, December 14, 2007
But I Have More Money in the Bank Than Ever!
So often, small business owners get fooled into following their bank balance. They think, "Well, I know at the end of last month I had less than I do right now, so of course I'm making money."
Cash is not a measure of profitability. I know accounting to most people is Greek for math voodoo, but without understanding some basic principles of how to account for transactions, many a business owner is lost in the sea of numbers. The fact is, cash rarely has any correlation to profit. For instance, what happens when a company dramatically increases sales suddenly? They're hoepfully increasing their profit at the same time. But what about cash? If they sell on credit, then their cash may actually decrease. They may have to purchase more inventory, pay salespeople their commission, or otherwise use cash while they wait to get paid. In my business, I pay a driver the day he gives me his paperwork for a load, but I wait thirty days (in most cases) to get paid. During our heaviest billing periods, we have to borrow on a line of credit to keep up with our volume of sales. If we only watched our bank balance, we might do something silly like reduce sales to avoid losing money. The other danger of not understanding this inverse relationship that some companies face is selling themselves out of business. One competitor of ours hired someone they knew would bring in a lot of new freight, hoping his increase in sales would save them since they were running out of cash. Instead, his increase in sales destroyed their business as they were forced to change payment policies and drivers lost all trust in them. Not long after, they closed their doors.
Cash is definitely important to monitor. Cash is definitely nice to have, too. Understanding how little it has to do with profit, though, is paramount to grasping what a business really does day to day, and whether that business is profitable or not.
-- Robert
Cash is not a measure of profitability. I know accounting to most people is Greek for math voodoo, but without understanding some basic principles of how to account for transactions, many a business owner is lost in the sea of numbers. The fact is, cash rarely has any correlation to profit. For instance, what happens when a company dramatically increases sales suddenly? They're hoepfully increasing their profit at the same time. But what about cash? If they sell on credit, then their cash may actually decrease. They may have to purchase more inventory, pay salespeople their commission, or otherwise use cash while they wait to get paid. In my business, I pay a driver the day he gives me his paperwork for a load, but I wait thirty days (in most cases) to get paid. During our heaviest billing periods, we have to borrow on a line of credit to keep up with our volume of sales. If we only watched our bank balance, we might do something silly like reduce sales to avoid losing money. The other danger of not understanding this inverse relationship that some companies face is selling themselves out of business. One competitor of ours hired someone they knew would bring in a lot of new freight, hoping his increase in sales would save them since they were running out of cash. Instead, his increase in sales destroyed their business as they were forced to change payment policies and drivers lost all trust in them. Not long after, they closed their doors.
Cash is definitely important to monitor. Cash is definitely nice to have, too. Understanding how little it has to do with profit, though, is paramount to grasping what a business really does day to day, and whether that business is profitable or not.
-- Robert
Subscribe to:
Posts (Atom)