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Month: August 2017

The Business Financial Information You Need For Funding

Posted on August 17, 2017 in Uncategorized

Most small business owners are quite eager to find avenues to help their enterprise grow into a thriving business. One key approach to help propel businesses forward is securing additional working capital, in order to get the business to the next level.

Usually, this means that the entrepreneur needs to go to a lending institution to get a small business loan. When meeting with a loan officer for this purpose, detailed business financial information will be required.

The most pertinent financial information that you will need to collect in preparation for applying for a small business loan are the basic financial reports that virtually all businesses of any size generate on a monthly or quarterly basis. These financial statements provide potential lenders with a profile of the financial situation of the business. They are also invaluable in providing the business owner with the management knowledge they need to strategically improve their ongoing business plan.

The most basic form of business financial information consists of a collection of financial statements and reports, which are prepared according to strict, standardized accounting principles. Since accounting practices and principles have long been standardized and accepted worldwide, virtually anyone with even a basic understanding can quickly understand the financial picture of a company that is painted by these basic reports.

The main reports that are generally part of a company’s financial information are the following: the balance sheet, the cash flows statement, the profit and loss report, and the overall financial statements, which include highlights and summarize each of the other reports. While the financial statement provides a review, the individual reports go into specific detail for the period of time that the report covers. Many times, when monthly reports are generated there are also quarterly and yearly reports generated that help to provide insights into the overall, financial trend of the business.

The purpose of the balance sheet is to provide the details of all of the current assets of the business, all of the liabilities that the business is obligated to pay, and the resulting business equity. In order for this financial information to be most useful, it should separate the current assets and current liabilities from the listing of the long-term assets and the long-term liabilities.

The profit and loss part of financial information is the report that most commonly covers longer periods of time, usually per business quarter or year. These profit and loss statements often include comparison charts for the previous time period going back long enough to help to identify the important trends.

Without this comparison, it might be easy to assume a business is doing well simply because it is profitable, yet overlook the fact that it is less profitable than the previous year. These trends will be very important to the lenders as it gives them insights about the success of working capital management overall.

When preparing a statement of cash flows, it can be compiled by either using the indirect or the direct method. Generally, this kind of business financial information is better with more detail because the fuller the detail, the clearer the view of the business’s financial situation. Most loan officers agree that for the purposes of obtaining financing, the more detailed the information the better because it shows that the business has nothing to hide.

Protecting Your Personal Financial Information (PFI)

Posted on August 16, 2017 in Uncategorized

Individuals and SMBs (Small/Medium Businesses) look to the Financial Services Industry to help them invest in their economic futures. Managing funds and controlling monetary risk are what these financial professionals do, yet sharing your information with a financial specialist has an amount of risk itself.

What types of information are shared? When accounts are opened or transferred as an individual or SMB, personal identifying information is inevitably transmitted between you and your financial services representative (and sometimes their support staff). This information includes and is not limited to:

  • Name
  • Address
  • Social Security Number
  • Account Numbers (e.g. when doing a rollover or transferring banks or credit cards)
  • Date of Birth
  • Employment History and Income
  • Current Assets and Portfolio information

Much of this information is done in person or online via a secured website, but often SMBs and individual clients look to their brokers, account representatives and customer service personnel to answer specific questions to their accounts. More and more, these information transactions take place electronically.

How can client information be at risk if the paperwork is taken care of safely in person or via a secured web process? Personal financial information (PFI) can be compromised as a one-on-one relationship with your financial services professional grows and builds. Sometimes connecting with a financial services firm is done on the phone, other times via email. It’s the security of email communication between client and firm/organization where your PFI is put at risk.

A quick question or message sent off to a financial services organization appears to instantaneously pass from your computer to the recipient’s inbox. In reality, email messages make transitory stops along the way. As emails are directed by proprietary servers to their final destination, messages which arrive at each of these stops are often stored, and sometimes copied or even scanned before being sent on to their final destination. Email security goes beyond being aware of the current phishing scheme, where unscrupulous data thieves pose as someone from your trusted financial institution. Information interception isn’t just about who forwards your message on, but is also about who may seize that message when it’s en route.

Financial firms though guided by government acts, restrictions and guidelines sometimes don’t appear to have concrete policies when dealing with email between client and the firm’s employee. Compliance and risk officers to who manage the firm’s policies must deal with nuances outlined by Sarbanes-Oxley, Gramm-Leach-Bliley Act, and Securities and Exchange Commission (SEC) regulations. Each of these governmental mandated policies dictate how your personal financial information (PFI) is handled digitally, but don’t delineate the best method of PFI protection.

Andy Purdy, acting director of the National Cyber Security Division of the Department of Homeland Security in a February 2006 interview with CNet/News.com identifies the importance in protecting PFI and other important digital assets:


“I think consumers and small businesses and large enterprises and the government are all important when trying to reduce the cyber-risk. We’re trying to raise awareness with partners of the responsibility and techniques consumers can use to help secure their systems.” (1)

A client’s PFI is a commodity which can be bought and sold on black market data warehouses. Digital thugs look to harvesting email information in a variety of means. What can individual clients and SMBs do to ameliorate the situation while staying connected to their financial services firm? Data encryption easily facilitated process of securing sensitive information like PFI. If one of these black market digital thugs happens to intercept an encrypted message (unless they have somehow gotten the encryption keys) they will not be able to decipher the message. If the email thug attempts to break any one of the commonly used encryption algorithms, they likely wouldn’t be able to do so within their lifetime.

Business owners and individual investors can work a lifetime to become financially successful and stable. Having sensitive information like one’s PFI at risk via email can shatter that financial stability.

Risk in communicating with these services can be contained through being aware of email risks, phishing scams and using encryption tools to secure financial communiqué. Though quite broad in nature, Financial Services in each of its facets as lender, investment manager or funding arm can take an additional step in their client’s economic success. Using encryption tools enables the individual client or SMB to stay in close contact with these stewards of their financial future.

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End Notes:

1.) Joris Evers, “Newsmaker: Locking down America’s Net defenses” 16 February 2006, CNet New.com – http://news.com.com

Sharing Financial Information With Your Employees

Posted on August 14, 2017 in Uncategorized

A common question amongst business owners is “how much information should we share with the employees?”. In businesses with multiple principals, there is often disagreement about sharing the financial information. Some owners want to be transparent, so employees understand their decisions, but others are nervous that the information will be used against them. Transparency into the numbers can yield great results if it’s done correctly. Here are some tips for sharing financial results:

1) Never share information on payroll and benefits. It’s just not good sense to let everyone have this information. When you do share financial information, make sure this information is concealed. For example, if you only have one employee in sales and sales salary is on the income statement, you’ll want to consolidate that account with others to keep the information confidential.

2) Generalized financial information should be sufficient. When you share information, be careful about giving too much detail. Employees probably don’t need to know about every single transaction and you’ll certainly want to be careful about letting them know how much money the owners are taking home from the business. Sharing key metrics with dashboard graphs and charts will keep employees informed without giving away too much information. Remember: A picture is worth a 1,000 words.

3) Knowledge is power – educate when you share. You’re most likely sharing information with employees who didn’t go to business school, so just giving them a few graphs or information on profitability isn’t really going to be helpful. If you want them to start thinking like business owners, you need to make sure they know what the numbers mean. For example: Telling someone you have a net profit of 10% doesn’t mean anything unless they know the target net profit is 15%. Now they understand you aren’t as profitable as you should be…and you can have a conversation about how to increase profits.

4) Solicit employee opinions. If you’re being transparent with the numbers, it makes sense to give your employees a voice. Your employees are an amazing source of information. You’re doing your business and employees a disservice if you aren’t giving them an opportunity to help. If you aren’t hitting your financial targets, ask your employees for their opinions on how to solve the problem. They know what’s working and what’s not working in your business. When you step on the transparency bandwagon, be prepared to allow transparency in both directions. It’s not just you sharing with your employees; getting them to share is just as important.

5) Explain your decisions. When employees are aware of the financial metrics of the business, it becomes much easier to explain your decisions. If an employee wants a new computer and there’s no cash right now, you can put the ball back in their court. You know and they know, it’s just not the right time. You can even take it a step further. Let them bring you a business case for the expenditure they would like to make. How will spending this money improve our business and the bottom line? Getting your employees to bring solutions instead of problems…that’s priceless.

Transparency with the numbers can be great. It can help you motivate employees and get them thinking like business owners. The trick is sharing enough information to allow your employees to understand the decision making processes, but not so much that you overwhelm or give away sensitive information.

Copyright (c) 2011 Kelly Totten

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Process Of Accounting For Financial Information

Posted on August 12, 2017 in Uncategorized

The financial information of your company is the direct measure of the performance of your business. The time-honored method of arriving at the accurate financial information of your business is through accounting. Let’s discuss the importance and nuances of process of accounting for financial information.

The Significance of Accounting

The rationale behind accounting is to meet the following objectives:

• Accounting is essential to determine the current standing of your business in the market.

• The financial information derived through accounting forms the basis for a sound, short or long-term, economic planning for your organization.

• The reports prepared serve as a testimony of your firm’s performance for your clients, investors, creditors and bodies like tax authorities and financial institutions.

The Process of Accounting

The process of accounting is triggered as soon as a monetary transaction occurs. It ends when the accounting books are closed at the end of a particular reporting period. An accounting cycle can be elucidated step by step as discussed below.

The following steps are executed all through the accounting period:

1. Identification of a Transaction
An event is identified as a fiscal deal and the relevant source document like a proof of purchase or a purchase order is generated.

2. Transaction Analysis
The transaction is quantified, the accounts affected are identified and it is determined whether it is a debit or a credit.

3. Journal Entry
The accounting transaction is recorded in an apt journal in a chronological order. It could be sales, purchase, cash receipt, expenditure or a general journal.

4. Ledger Posting
The journal records are transferred to appropriate accounts in a ledger.

The following steps are carried out towards the end of the accounting period:

5. Calculation of Trial balance
A trial balance is calculated to ensure that the debit and credit entries posted in the ledger are accurate; in which case the sum total of debit balances would equal that of credit balances.

6. Adjustment of Entries
Accruals like depreciation expense and interest payable, and pre-payments are recorded as adjusting entries in a journal and then posted to a suitable account in the ledger.

7. Calculation of Adjusted Trial Balance
A new trial balance is arrived at after considering the adjusting entries.

8. Financial Statement Preparation
This is the most crucial aspect of the process of accounting. Financial statements are a representation of the change in the fiscal output of a business over the entire financial period. It is classified into the following components:

a. Income statement – A measure of one or more of revenue, expenditure, profit and loss.

b. Balance Sheet – A statement of assets, liabilities and business equity.

c. Cash flows statement – It is a summary of cash movement related to investments, operations and economic activities of a business during the accounting period.

d. Statement of Equity changes – This is a report tracking movement in equity accounts viz. share capital, dividends paid and retained earnings during the financial year.

9. Closure of Entries
The temporary accounts’ balances are reduced to zero by transferring those to permanent accounts. Journal entries are closed and posted to ledger accounts in order to achieve this.

10. Calculation of the Final Trial Balance
This is calculated to ensure zero discrepancy in permanent account balances.

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