Clients of some investment firms will soon have the opportunity to download podcasts of financial research for easy listening.
They may be the cure for insomnia for most people, but relevant market research has extensive demand among the power brokers on Wall Street and elsewhere. Since the iPod and iTunes have found their way into so many people's lives, it's very logical that some firms should capitalize on iPod users who wield briefcases and board meetings each workday.
Several financial firms have started or will start podcasts, the Wall Street Journal noted in a report. Well-known bond expert Bill Gross of Pimco has his monthly podcast downloaded 5,000 times a month.
John Caldwell, a chief investment strategist at McDonald Financial Group, does a Monthly Market Commentary podcast and others related to personal finance for the company. However, his last podcast on iTunes is dated March 7th, so this may be less timely than others. (How about an update, John?)
Bear Stearns will be the latest to join the podcast field, the article said. But unlike Gross or Caldwell, those podcasts will only be available to clients of the investment bank.
Even though podcast listening has not been widely adopted, with reports that only one percent of Internet users listen to them currently, the financial sector could be a driver for podcast adoption with its customer base.
These firms generate lots of reports for their clients. A powerful Wall Street firm could afford to hire or contract with voice artists to read those reports for recording on a regular basis.
An investment bank could make certain strategic investments itself, perhaps giving iPods pre-loaded with some recent reports to select clients along with specific instructions on subscribing to future podcasts.
Thursday, November 27, 2008
The Next Wave at Work
A report in the Financial Times on social media in the workplace highlights some terrific examples from companies who talk about the benefits to be gained from deploying blogs, wikis and RSS.
Dresdner Kleinwort Wasserstein:[] More than 450 DrKW employees have internal blogs and the bank has built an internal wiki with more than 2,000 pages which is used by a quarter of its workforce. After just six months, the traffic on the wiki exceeds that on the entire DrKW intranet. [] The wiki is also used with video clips to substitute traditional manuals in training new recruits. [] DrKW uses Really Simple Syndication (RSS) technology to inform employees when the contents of wikis or blogs are changed. (The FT reported in December 2004 on DrKW's use of blogs for internal communication.)
KnowNow: [] KnowHow's hosted service aggregates content from blogs, newsfeeds and applications such as Oracle. The content is filtered to match the interests of each user and pushed out as RSS alerts, either to a Google browser bar, a dedicated RSS reader or an instant messaging client. The FT feature concludes with a good thought for those who worry about employees spending time on blogs, from DrKW's JP Rangaswami:[] Is blogging a good use of company time? They are going to have these conversations anyway - in the lift, for example - and if the topic is boring, people lose interest. It is self-policing.Financial Times Social networking becomes work
Dresdner Kleinwort Wasserstein:[] More than 450 DrKW employees have internal blogs and the bank has built an internal wiki with more than 2,000 pages which is used by a quarter of its workforce. After just six months, the traffic on the wiki exceeds that on the entire DrKW intranet. [] The wiki is also used with video clips to substitute traditional manuals in training new recruits. [] DrKW uses Really Simple Syndication (RSS) technology to inform employees when the contents of wikis or blogs are changed. (The FT reported in December 2004 on DrKW's use of blogs for internal communication.)
KnowNow: [] KnowHow's hosted service aggregates content from blogs, newsfeeds and applications such as Oracle. The content is filtered to match the interests of each user and pushed out as RSS alerts, either to a Google browser bar, a dedicated RSS reader or an instant messaging client. The FT feature concludes with a good thought for those who worry about employees spending time on blogs, from DrKW's JP Rangaswami:[] Is blogging a good use of company time? They are going to have these conversations anyway - in the lift, for example - and if the topic is boring, people lose interest. It is self-policing.Financial Times Social networking becomes work
The Real Value of Communication
Headline findings from the 2005/2006 Communication ROI Study from employee benefits and HR consulting firm WatsonWyatt:
Companies that communicate effectively have a 19.4 percent higher market premium than companies that do not.
Shareholder returns for organizations with the most effective communication were over 57 percent higher over the last five years (2000-2004) than were returns for firms with less effective communication.
The 2005/2006 study found evidence that communication effectiveness is a leading indicator of financial performance.
Firms that communicate effectively are 4.5 times more likely to report high levels of employee engagement versus firms that communicate less effectively.
Companies that are highly effective communicators are 20 percent more likely to report lower turnover rates than their peers.
Companies that communicate effectively have a 19.4 percent higher market premium than companies that do not.
Shareholder returns for organizations with the most effective communication were over 57 percent higher over the last five years (2000-2004) than were returns for firms with less effective communication.
The 2005/2006 study found evidence that communication effectiveness is a leading indicator of financial performance.
Firms that communicate effectively are 4.5 times more likely to report high levels of employee engagement versus firms that communicate less effectively.
Companies that are highly effective communicators are 20 percent more likely to report lower turnover rates than their peers.
Saturday, November 22, 2008
Four Steps to Overcome Collaboration Obstacles
A thoughtful feature in the Financial Times discusses the question of why in-house collaboration in organizations is so difficult, with the consequent impact on effective working.
The article highlights some accepted theories about this, including these:[The first theory] is that most companies have "first generation organisation structures and second generation management capabilities". Internal synergies will only come with the right organisation structure - overlapping accountabilities for products, geographies and functions - and when managers have acquired the right skills and attitude - a "matrix in the mind of managers". Under this view, a company should restrict its ambitions until it has developed the appropriate structures and skills.
The second theory comes from authors such as Gary Hamel of London Business School and Rosabeth Moss Kanter of Harvard. They say that most managers suffer from the "not-invented-here" syndrome, a character flaw that is amplified when they are given responsibility for divisions or business units. Hell-bent on making a success of their unit, they ignore links with other departments and reject anything they see as interference. The remedy, under this view, is to reduce the importance of structural units while drilling managers in collaborative behaviour and giving them incentives for co-operation.The bold text is my emphasis. All of this rings a few bells for me from a previous work experience. So I like the argument of the author of the FT feature (Andrew Campbell, a director of the Ashridge Strategic Management Centre) who sees an entirely different way of addressing this, and offers four steps managers can take to overcome collaboration obstacles:
1. Managers should put more effort into calculating the size of the prize. This is not a question of broad concepts such as best practices or savings on group purchases. It needs to be a cost-benefit analysis of a tightly defined synergy opportunity.
2. Once the prize is clear, managers can investigate why collaboration is not already happening [and] go beyond broad concepts such as not-invented-here attitudes to understand why sensible managers are not doing what appears to be the sensible thing.
3. Once the reason for inaction is clear, managers can assess whether they have the skill and will to unblock the problem. Sometimes it requires hard choices in terms of restructuring or personnel changes, sometimes hands-on expertise on the part of managers.
4. Look out for downsides - distraction costs, contamination risks, loss of accountability, initiative and motivation. There is a dark side to collaboration that is all too apparent in some companies. In these organisations, it is politically correct to collaborate, regardless of the cost.
Campbell's conclusion is that by applying these four steps, senior managers can create synergies without the upfront investment implied by the current received wisdom and without the risks associated with blurred accountability and restructured organisations.
The article highlights some accepted theories about this, including these:[The first theory] is that most companies have "first generation organisation structures and second generation management capabilities". Internal synergies will only come with the right organisation structure - overlapping accountabilities for products, geographies and functions - and when managers have acquired the right skills and attitude - a "matrix in the mind of managers". Under this view, a company should restrict its ambitions until it has developed the appropriate structures and skills.
The second theory comes from authors such as Gary Hamel of London Business School and Rosabeth Moss Kanter of Harvard. They say that most managers suffer from the "not-invented-here" syndrome, a character flaw that is amplified when they are given responsibility for divisions or business units. Hell-bent on making a success of their unit, they ignore links with other departments and reject anything they see as interference. The remedy, under this view, is to reduce the importance of structural units while drilling managers in collaborative behaviour and giving them incentives for co-operation.The bold text is my emphasis. All of this rings a few bells for me from a previous work experience. So I like the argument of the author of the FT feature (Andrew Campbell, a director of the Ashridge Strategic Management Centre) who sees an entirely different way of addressing this, and offers four steps managers can take to overcome collaboration obstacles:
1. Managers should put more effort into calculating the size of the prize. This is not a question of broad concepts such as best practices or savings on group purchases. It needs to be a cost-benefit analysis of a tightly defined synergy opportunity.
2. Once the prize is clear, managers can investigate why collaboration is not already happening [and] go beyond broad concepts such as not-invented-here attitudes to understand why sensible managers are not doing what appears to be the sensible thing.
3. Once the reason for inaction is clear, managers can assess whether they have the skill and will to unblock the problem. Sometimes it requires hard choices in terms of restructuring or personnel changes, sometimes hands-on expertise on the part of managers.
4. Look out for downsides - distraction costs, contamination risks, loss of accountability, initiative and motivation. There is a dark side to collaboration that is all too apparent in some companies. In these organisations, it is politically correct to collaborate, regardless of the cost.
Campbell's conclusion is that by applying these four steps, senior managers can create synergies without the upfront investment implied by the current received wisdom and without the risks associated with blurred accountability and restructured organisations.
Reuters Financial Glossary Wiki
Reuters is hosting a Financial Glossary Wiki, a fascinating case study for the way enterprises will host professional communities.
For a major enterprise, this venture contains a degree of Risk:
The probability that an investment or venture will make a loss or not make the returns expected. This probability can be measured. There are many different types of risk including basis risk, country or sovereign risk, credit risk, currency risk, economic risk, inflation risk, liquidity risk, market or systematic risk, political risk, settlement risk, systemic risk and translation risk.
The Glossary was initially based upon their second edition, which is available for purchase. Then they baked it out with an internal soft launch. The value of this approach is you prototype in private while building a community of employees prior to launch. The opposite of the Wikitorial debacle. Content is licensed as Creative Commons Attribution Non-Commercial, a fundamental underpinning of the social contract, and they have adopted Wikipedia's Neutral Point of View and other values.
A well hedged position. So what is the potential reward? Reuters is putting itself at the center of it's industry in cultivating shared language. The renewable resource becomes a focus of attention that can be directed in respect of the social contract. The community that may form, their greatest challenge going forward, could contribute tangible word of mouth benefits. This is community marketing, people -- an essential move as trust and influence shifts from institutions to peers. And very significant institutions are starting to get it.
Ross Mayfield is CEO and co-founder of Socialtext, an emerging provider of Enterprise Social Software that dramatically increases group productivity and develops a group memory.
He also writes Ross Mayfield's Weblog which focuses on markets, technology and musings.
For a major enterprise, this venture contains a degree of Risk:
The probability that an investment or venture will make a loss or not make the returns expected. This probability can be measured. There are many different types of risk including basis risk, country or sovereign risk, credit risk, currency risk, economic risk, inflation risk, liquidity risk, market or systematic risk, political risk, settlement risk, systemic risk and translation risk.
The Glossary was initially based upon their second edition, which is available for purchase. Then they baked it out with an internal soft launch. The value of this approach is you prototype in private while building a community of employees prior to launch. The opposite of the Wikitorial debacle. Content is licensed as Creative Commons Attribution Non-Commercial, a fundamental underpinning of the social contract, and they have adopted Wikipedia's Neutral Point of View and other values.
A well hedged position. So what is the potential reward? Reuters is putting itself at the center of it's industry in cultivating shared language. The renewable resource becomes a focus of attention that can be directed in respect of the social contract. The community that may form, their greatest challenge going forward, could contribute tangible word of mouth benefits. This is community marketing, people -- an essential move as trust and influence shifts from institutions to peers. And very significant institutions are starting to get it.
Ross Mayfield is CEO and co-founder of Socialtext, an emerging provider of Enterprise Social Software that dramatically increases group productivity and develops a group memory.
He also writes Ross Mayfield's Weblog which focuses on markets, technology and musings.
Web Application Security and Sarbanes-Oxley Compliance
An important issue facing companies today is Sarbanes-Oxley compliance, but, as the U.S. Sarbanes-Oxley Act of 2002 (SOX) is relatively new, the implementation of the regulation has not been fully established.
The requirements of SOX compliance focus on establishing a system of checks and balances for corporate financial reporting and are designed to hold executives, accountants, and auditors of public corporations to higher standards. While the requirements for SOX compliance only directly affect public corporations, there has been a trickle-down effect to private companies serving as business associates, consultants, and outsourced service providers. Given this, both public and private companies need to have an understanding of Sarbanes-Oxley compliance to ensure that their daily business practices are aligned with its specific requirements.
Achieving Sarbanes-Oxley compliance is not impossible, but there are a few key elements beyond ethical leadership that are necessary to achieve and maintain it. Public corporations must implement the proper information access controls and possess the appropriate tools to ensure that information is kept secure. These, combined with practical security policies and processes, will go a long way toward keeping corporate executives out of the hot seat with regulatory officials and will also provide value well beyond SOX compliance.
Overview of SOX
The SOX legislation was enacted on July 30, 2002 and falls under the umbrella of the U.S. Securities and Exchange Commission (SEC). SOX differs from other recent legislation involving information security and privacy as it revolves around the protection of financial records and helps ensure the accuracy of financial reports as an indirect means for regulating corporate behavior. The requirements set forth for Sarbanes-Oxley compliance apply to all U.S. public companies, foreign filers in U.S. markets, and privately-held companies with public debt.
Sarbanes-Oxley compliance affects multiple business units across the organization, from the CEO and the CFO to the IT and security departments. However, SOX contains various sections that directly affect the IT and information security functions in today's corporations. To maintain SOX compliance, these departments must implement access and integrity controls on financial information, as well as system monitoring and audit trails -- requirements similar to common risk management processes typically present within most public corporations.
Of the several dozen sections in SOX, Section 404 - Management Assessment of Internal Controls is the one that affects IT and information security the most. In order to establish SOX compliance, an annual internal control report is required to:
1. state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting
2. contain an assessment, as of the most recent fiscal year of the issuer, of the effectiveness of the internal control structure and procedures for the issuer for financial reporting
For the purposes of Sarbanes-Oxley compliance, the SEC has defined internal control over financial reporting as it relates to information security to include the maintenance of records and reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets related to financial statements.
SOX Compliance and Web Application Security
From a fundamental information security and controls perspective, it is clear that Web application security is crucial to Sarbanes-Oxley compliance. The requirements for SOX compliance apply to any system that processes or maintains financial data. Given that most corporate financial records are stored, accessed, and maintained in electronic format which often have Web-based components, there is a significant correlation between this information and Web applications.
In addition, there is a reporting component required for SOX compliance that ties into Web applications. Web servers, database servers, and often the applications themselves have a logging function that creates audit trails for tracking who, what, and when. These trails not only provide the details necessary for system monitoring and troubleshooting but are often used in a forensics capacity to investigate attacks against Web applications. Audit trails can also assist with and provide documented proof that ongoing Web application security assessments and audits required to achieve Sarbanes-Oxley compliance are taking place.
As with most information security initiatives, the requirements for SOX compliance are policy driven in areas such as:
User authentication
Password management
Access controls
Input validation
Exception handling
Secure data storage and transmission
Logging
Monitoring and alerting
System hardening
Change management
Application development
Periodic security assessments and audits
If security policies designed to maintain Sarbanes-Oxley compliance are not in place and enforced with adequate business processes and technical controls, Web applications can easily expose financial systems to danger.
Beyond implementing the necessary policies and processes, another important element of Sarbanes-Oxley compliance is to focus on detecting vulnerabilities so they can be fixed before they are discovered and exploited. An information risk assessment looks at all aspects of the information security infrastructure and determines specific information threats, vulnerabilities, and risks. Analyzing Web applications that are critical front-ends to many of today's corporate financial information systems is a critical part of this assessment, and the ongoing audits required for SOX compliance provide third-party validation that Web application security is where it needs to be in order to protect the integrity of financial information and reporting systems.
Software Products That Can Help
Public corporations have many technological options for supporting the various internal controls needed to achieve Sarbanes-Oxley compliance and protect sensitive systems. However, the problem with relying on traditional network security products like firewalls, intrusion detection systems, and encryption to ensure SOX compliance is that most Web-based attacks can still occur without being detected or responded to effectively. Attackers can be prevented from accessing the network altogether by performing proactive Web application vulnerability assessments.
While manual testing can be a valuable way to find contextual vulnerabilities, it would likely take an unreasonable amount of time to achieve results. Several types of commercial and open-source software tools can help Web developers, QA analysts, and security auditors find and fix Web application vulnerabilities. These tools can help determine initial risks in source code and production systems, as well as perform preventative testing during the software development lifecycle and post-deployment phases. With these tools, Web developers, QA analysts, penetration testers, and security auditors can run full, partial, or customized scans on Web applications or Web services on hosts throughout the enterprise that are associated with Sarbanes-Oxley compliance.
These tools can be used to identify initial risks in source code and production systems, as well as to perform preventative testing for SOX compliance during the software development lifecycle and post-deployment phases. With these tools, Web developers, QA analysts, penetration testers, and security auditors can run full, partial, or customized scans on Web applications or Web services on hosts throughout the enterprise that are associated with the financial reporting process to ensure Sarbanes-Oxley compliance.
In addition, these tools can be used as a starting point for the creation or revision of security standards, policies, and processes that are necessary for SOX compliance. This will help ensure that all the initial time, money, and effort spent to establish Sarbanes-Oxley compliance are smart investments.
When searching for Web application security software tools to help with Sarbanes-Oxley compliance, it's important to consider the following features:
Overall ease of use
Testing flexibility (i.e., manual stepping, automated crawling, or input variations)
Customizable security policies
Automatic updates and application patches for new Web vulnerabilities
Prioritization of discovered Web security vulnerabilities
Level of reporting (i.e., executive, technical, QA)
Support for specific software platforms and development languages
Vendor or open source team reputation and long-term viability
Costs related to acquiring, using, and supporting the tool
Conclusion
The bottom line is that SOX compliance and information security are not one-time events. Organizations must work diligently and consistently to ensure that Web application weaknesses are found and threats are defended against as quickly as possible. This can only be done effectively with minimal costs by using powerful, integrated design, static analysis, and Web application vulnerability assessment tools. There is no more flexible or useful way of performing security assessments and ongoing audits on Web applications to help prepare the organization for Sarbanes-Oxley compliance than by utilizing the right software tools.
It's critical to remember that SOX Section 404 and Sarbanes-Oxley compliance are just a piece of the overall puzzle; IT departments won't (nor should they) control or drive all SOX compliance initiatives. However, they can certainly help the cause of Sarbanes-Oxley compliance by deploying technologies that automate and enforce the necessary internal controls for financial reporting systems.
For Further Reading
The generally accepted internal control framework for Sarbanes-Oxley compliance is published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Refer to www.coso.org for more information.
The requirements of SOX compliance focus on establishing a system of checks and balances for corporate financial reporting and are designed to hold executives, accountants, and auditors of public corporations to higher standards. While the requirements for SOX compliance only directly affect public corporations, there has been a trickle-down effect to private companies serving as business associates, consultants, and outsourced service providers. Given this, both public and private companies need to have an understanding of Sarbanes-Oxley compliance to ensure that their daily business practices are aligned with its specific requirements.
Achieving Sarbanes-Oxley compliance is not impossible, but there are a few key elements beyond ethical leadership that are necessary to achieve and maintain it. Public corporations must implement the proper information access controls and possess the appropriate tools to ensure that information is kept secure. These, combined with practical security policies and processes, will go a long way toward keeping corporate executives out of the hot seat with regulatory officials and will also provide value well beyond SOX compliance.
Overview of SOX
The SOX legislation was enacted on July 30, 2002 and falls under the umbrella of the U.S. Securities and Exchange Commission (SEC). SOX differs from other recent legislation involving information security and privacy as it revolves around the protection of financial records and helps ensure the accuracy of financial reports as an indirect means for regulating corporate behavior. The requirements set forth for Sarbanes-Oxley compliance apply to all U.S. public companies, foreign filers in U.S. markets, and privately-held companies with public debt.
Sarbanes-Oxley compliance affects multiple business units across the organization, from the CEO and the CFO to the IT and security departments. However, SOX contains various sections that directly affect the IT and information security functions in today's corporations. To maintain SOX compliance, these departments must implement access and integrity controls on financial information, as well as system monitoring and audit trails -- requirements similar to common risk management processes typically present within most public corporations.
Of the several dozen sections in SOX, Section 404 - Management Assessment of Internal Controls is the one that affects IT and information security the most. In order to establish SOX compliance, an annual internal control report is required to:
1. state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting
2. contain an assessment, as of the most recent fiscal year of the issuer, of the effectiveness of the internal control structure and procedures for the issuer for financial reporting
For the purposes of Sarbanes-Oxley compliance, the SEC has defined internal control over financial reporting as it relates to information security to include the maintenance of records and reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets related to financial statements.
SOX Compliance and Web Application Security
From a fundamental information security and controls perspective, it is clear that Web application security is crucial to Sarbanes-Oxley compliance. The requirements for SOX compliance apply to any system that processes or maintains financial data. Given that most corporate financial records are stored, accessed, and maintained in electronic format which often have Web-based components, there is a significant correlation between this information and Web applications.
In addition, there is a reporting component required for SOX compliance that ties into Web applications. Web servers, database servers, and often the applications themselves have a logging function that creates audit trails for tracking who, what, and when. These trails not only provide the details necessary for system monitoring and troubleshooting but are often used in a forensics capacity to investigate attacks against Web applications. Audit trails can also assist with and provide documented proof that ongoing Web application security assessments and audits required to achieve Sarbanes-Oxley compliance are taking place.
As with most information security initiatives, the requirements for SOX compliance are policy driven in areas such as:
User authentication
Password management
Access controls
Input validation
Exception handling
Secure data storage and transmission
Logging
Monitoring and alerting
System hardening
Change management
Application development
Periodic security assessments and audits
If security policies designed to maintain Sarbanes-Oxley compliance are not in place and enforced with adequate business processes and technical controls, Web applications can easily expose financial systems to danger.
Beyond implementing the necessary policies and processes, another important element of Sarbanes-Oxley compliance is to focus on detecting vulnerabilities so they can be fixed before they are discovered and exploited. An information risk assessment looks at all aspects of the information security infrastructure and determines specific information threats, vulnerabilities, and risks. Analyzing Web applications that are critical front-ends to many of today's corporate financial information systems is a critical part of this assessment, and the ongoing audits required for SOX compliance provide third-party validation that Web application security is where it needs to be in order to protect the integrity of financial information and reporting systems.
Software Products That Can Help
Public corporations have many technological options for supporting the various internal controls needed to achieve Sarbanes-Oxley compliance and protect sensitive systems. However, the problem with relying on traditional network security products like firewalls, intrusion detection systems, and encryption to ensure SOX compliance is that most Web-based attacks can still occur without being detected or responded to effectively. Attackers can be prevented from accessing the network altogether by performing proactive Web application vulnerability assessments.
While manual testing can be a valuable way to find contextual vulnerabilities, it would likely take an unreasonable amount of time to achieve results. Several types of commercial and open-source software tools can help Web developers, QA analysts, and security auditors find and fix Web application vulnerabilities. These tools can help determine initial risks in source code and production systems, as well as perform preventative testing during the software development lifecycle and post-deployment phases. With these tools, Web developers, QA analysts, penetration testers, and security auditors can run full, partial, or customized scans on Web applications or Web services on hosts throughout the enterprise that are associated with Sarbanes-Oxley compliance.
These tools can be used to identify initial risks in source code and production systems, as well as to perform preventative testing for SOX compliance during the software development lifecycle and post-deployment phases. With these tools, Web developers, QA analysts, penetration testers, and security auditors can run full, partial, or customized scans on Web applications or Web services on hosts throughout the enterprise that are associated with the financial reporting process to ensure Sarbanes-Oxley compliance.
In addition, these tools can be used as a starting point for the creation or revision of security standards, policies, and processes that are necessary for SOX compliance. This will help ensure that all the initial time, money, and effort spent to establish Sarbanes-Oxley compliance are smart investments.
When searching for Web application security software tools to help with Sarbanes-Oxley compliance, it's important to consider the following features:
Overall ease of use
Testing flexibility (i.e., manual stepping, automated crawling, or input variations)
Customizable security policies
Automatic updates and application patches for new Web vulnerabilities
Prioritization of discovered Web security vulnerabilities
Level of reporting (i.e., executive, technical, QA)
Support for specific software platforms and development languages
Vendor or open source team reputation and long-term viability
Costs related to acquiring, using, and supporting the tool
Conclusion
The bottom line is that SOX compliance and information security are not one-time events. Organizations must work diligently and consistently to ensure that Web application weaknesses are found and threats are defended against as quickly as possible. This can only be done effectively with minimal costs by using powerful, integrated design, static analysis, and Web application vulnerability assessment tools. There is no more flexible or useful way of performing security assessments and ongoing audits on Web applications to help prepare the organization for Sarbanes-Oxley compliance than by utilizing the right software tools.
It's critical to remember that SOX Section 404 and Sarbanes-Oxley compliance are just a piece of the overall puzzle; IT departments won't (nor should they) control or drive all SOX compliance initiatives. However, they can certainly help the cause of Sarbanes-Oxley compliance by deploying technologies that automate and enforce the necessary internal controls for financial reporting systems.
For Further Reading
The generally accepted internal control framework for Sarbanes-Oxley compliance is published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Refer to www.coso.org for more information.
Friday, November 21, 2008
MS Gives Financial Boost To Small Biz
Microsoft announced a strategic alliance with StartupNation, a small business financial consulting medium, to provide entrepreneurs with better access to important financial and accounting information.
"Most of the risks that cause businesses to fail are within an entrepreneur's control," said StartupNation Co-founder Rich Sloan.
"As over half of all small business owners currently don't use software to organize their accounting, we've teamed up with Microsoft to showentrepreneurs how technology can reduce financial and cash risks and provide solutions to the many accounting challenges entrepreneurs face every day," he continued.
Microsoft says beginning this month it will provide guest experts to offer advice via StartupNation's nationally syndicated call-in radio program, StartupNation's "Nitty Gritty" newsletters, and podcasts.
The arrangement also serves as a promotional tool for Microsoft's Office Small Business Accounting 2006, an integrated management suite for small businesses with financial, sales and marketing software operating in conjunction to improve business efficiency.
Jason L. Miller is a staff writer for WebProNews covering technology and business.
"Most of the risks that cause businesses to fail are within an entrepreneur's control," said StartupNation Co-founder Rich Sloan.
"As over half of all small business owners currently don't use software to organize their accounting, we've teamed up with Microsoft to showentrepreneurs how technology can reduce financial and cash risks and provide solutions to the many accounting challenges entrepreneurs face every day," he continued.
Microsoft says beginning this month it will provide guest experts to offer advice via StartupNation's nationally syndicated call-in radio program, StartupNation's "Nitty Gritty" newsletters, and podcasts.
The arrangement also serves as a promotional tool for Microsoft's Office Small Business Accounting 2006, an integrated management suite for small businesses with financial, sales and marketing software operating in conjunction to improve business efficiency.
Jason L. Miller is a staff writer for WebProNews covering technology and business.
Developing Realistic Financial Assumptions in Your Business Plan
Many investors skip straight to the financial section of the business plan. It is critical that the assumptions and projections in this section be realistic.
Plans that show penetration, operating margin and revenues per employee figures that are poorly reasoned, internally inconsistent or simply unrealistic greatly damage the credibility of the entire business plan. In contrast, sober, well-reasoned financial assumptions and projections communicate operational maturity and credibility.
For instance, if the company is categorized as a networking infrastructure firm, and the business plan projects 80% operating margins, investors will raise a red flag. This is because investors can readily access the operating margins of publicly-traded networking infrastructure firms and find that none have operating margins this high.
As much as possible, the financial assumptions should be based on actual results from your or other firms. As the example above indicates, it is fairly easy to look at a public company's operating margins and use these margins to approximate your own. Likewise, the business plan should base revenue growth on other firms. Many firms find this impossible, since they believe they have a break-through product in their market, and no other company compares. In such a case, base revenue growth on companies in other industries that have had break-through products. If you expect to grow even faster than they did (maybe because of new technologies that those firms weren't able to employ), you can include more aggressive assumptions in your business plan as long as you explain them in the text.
The financials can either enhance or significantly harm your business plan's chances of assisting you in the capital-raising process. By doing the research to develop realistic assumptions, based on actual results of your or other companies, the financials can bolster your firm's chances of winning investors. As importantly, the more realistic financials will also provide a better roadmap for your company's success.
As President of Growthink, Dave Lavinsky has helped the company become one of the premier business plan development firms. Since its inception, Growthink has developed over 200 business plans. Growthink clients have collectively raised over $750 million in financing, launched numerous new product and service lines and gained competitive advantage and market share. Growthink has become the firm of choice for venture capital firms, angel investors, corporations and entrepreneurs in the know. For more information please visit
Plans that show penetration, operating margin and revenues per employee figures that are poorly reasoned, internally inconsistent or simply unrealistic greatly damage the credibility of the entire business plan. In contrast, sober, well-reasoned financial assumptions and projections communicate operational maturity and credibility.
For instance, if the company is categorized as a networking infrastructure firm, and the business plan projects 80% operating margins, investors will raise a red flag. This is because investors can readily access the operating margins of publicly-traded networking infrastructure firms and find that none have operating margins this high.
As much as possible, the financial assumptions should be based on actual results from your or other firms. As the example above indicates, it is fairly easy to look at a public company's operating margins and use these margins to approximate your own. Likewise, the business plan should base revenue growth on other firms. Many firms find this impossible, since they believe they have a break-through product in their market, and no other company compares. In such a case, base revenue growth on companies in other industries that have had break-through products. If you expect to grow even faster than they did (maybe because of new technologies that those firms weren't able to employ), you can include more aggressive assumptions in your business plan as long as you explain them in the text.
The financials can either enhance or significantly harm your business plan's chances of assisting you in the capital-raising process. By doing the research to develop realistic assumptions, based on actual results of your or other companies, the financials can bolster your firm's chances of winning investors. As importantly, the more realistic financials will also provide a better roadmap for your company's success.
As President of Growthink, Dave Lavinsky has helped the company become one of the premier business plan development firms. Since its inception, Growthink has developed over 200 business plans. Growthink clients have collectively raised over $750 million in financing, launched numerous new product and service lines and gained competitive advantage and market share. Growthink has become the firm of choice for venture capital firms, angel investors, corporations and entrepreneurs in the know. For more information please visit
Blog Censorship And The Impact On Doing Business In China
The many conversations in recent weeks about blog censorship in China won't lead to any meaningful conclusions, I reckon.
While the first amendment rights to free speech that many bloggers passionately post about is a US concept (and hardly likely to make inroads in China any time soon), it is something I also strongly believe in. And like many bloggers whose posts I've read, I think people in China should be able to talk as openly and freely as I can here in The Netherlands.
Restrictions on personal freedoms of speech in China are tightening even more, though, with bloggers there as a target according to a story in the Financial Times last week:
[...] New rules require all bloggers to register with the government the true name of the site author by June 30 or face their blog being shut down. Web crawlers will be deployed to seek and block unregistered sites. Financial penalties for non-compliance are prohibitive - up to RMB1m ($121,000). Internet service providers will also be held liable for providing hosting services to banned sites.
The FT's article included some detailed commentary on what such restrictions on personal expression could mean for foreign companies doing business in China:
[...] Where the regulations may have a bigger impact is on the growing number of offshore companies - and their chief executive officers - who are using blogs to communicate with customers. Bob Lutz of General Motors and Jonathan Schwartz of Sun Microsystems are just two examples of chief executive bloggers. Companies that have blogs - and that are also pursuing a China investment strategy - will need to make a decision and take advice on how such blogs may or may not come within the purview of the new regulations.
A number of companies, in particular search engine companies, are choosing self-censorship at this time.
The FT concluded with a question: How will the people the global corporations most need to influence in China - the local population - respond longer term to a company's decision to adhere to local law versus prioritising free speech?
It's a good question but, as with the blog censorship conversations I mentioned earlier, I can't see any black-and-white answers.
While the first amendment rights to free speech that many bloggers passionately post about is a US concept (and hardly likely to make inroads in China any time soon), it is something I also strongly believe in. And like many bloggers whose posts I've read, I think people in China should be able to talk as openly and freely as I can here in The Netherlands.
Restrictions on personal freedoms of speech in China are tightening even more, though, with bloggers there as a target according to a story in the Financial Times last week:
[...] New rules require all bloggers to register with the government the true name of the site author by June 30 or face their blog being shut down. Web crawlers will be deployed to seek and block unregistered sites. Financial penalties for non-compliance are prohibitive - up to RMB1m ($121,000). Internet service providers will also be held liable for providing hosting services to banned sites.
The FT's article included some detailed commentary on what such restrictions on personal expression could mean for foreign companies doing business in China:
[...] Where the regulations may have a bigger impact is on the growing number of offshore companies - and their chief executive officers - who are using blogs to communicate with customers. Bob Lutz of General Motors and Jonathan Schwartz of Sun Microsystems are just two examples of chief executive bloggers. Companies that have blogs - and that are also pursuing a China investment strategy - will need to make a decision and take advice on how such blogs may or may not come within the purview of the new regulations.
A number of companies, in particular search engine companies, are choosing self-censorship at this time.
The FT concluded with a question: How will the people the global corporations most need to influence in China - the local population - respond longer term to a company's decision to adhere to local law versus prioritising free speech?
It's a good question but, as with the blog censorship conversations I mentioned earlier, I can't see any black-and-white answers.
Corporate Responsibility Reporting Enters the Mainstream
International accounting firm KPMG has published the results of its latest survey on corporate responsibility reporting.
The survey report shows continuing support for corporate responsibility and open communication by the leaders of many of the world's most successful and biggest companies:
Corporate responsibility (CR) reporting in industrialized countries has clearly entered the mainstream, with Japan and UK in the lead. There has been a dramatic change from purely environmental reporting up until 1999 to sustainability reporting in 2005, encompassing social, ethical, environmental and economic indicators. The CR performance has definitely caught the eye of the financial sector which is reflected in the two-fold increase in reporting in this sector since 2002.
In the report's introduction, Mike Rake, Chairman of KPMG International, says: "The survey reflects the growing importance within the business community of corporate responsibility as the key indicator of non-financial performance, as well as a driver of financial performance. It also reflects the responsibility that business has to be transparent and accountable not just to shareholders but also to the wider community."
With its comprehensive coverage of over 1600 companies - including the top 250 companies of the Fortune 500 and top 100 companies in 16 countries - the survey provides a truly global picture of reporting trends over the last ten years.
The bottom line:
[...] The important business drivers for corporate responsibility for companies are:
to have a good brand and reputation
to be an employer of choice
to have and maintain a strong market position
to have the trust of the financial markets and increase shareholder value
to be innovative in developing new products and services and creating new markets.
The survey report shows continuing support for corporate responsibility and open communication by the leaders of many of the world's most successful and biggest companies:
Corporate responsibility (CR) reporting in industrialized countries has clearly entered the mainstream, with Japan and UK in the lead. There has been a dramatic change from purely environmental reporting up until 1999 to sustainability reporting in 2005, encompassing social, ethical, environmental and economic indicators. The CR performance has definitely caught the eye of the financial sector which is reflected in the two-fold increase in reporting in this sector since 2002.
In the report's introduction, Mike Rake, Chairman of KPMG International, says: "The survey reflects the growing importance within the business community of corporate responsibility as the key indicator of non-financial performance, as well as a driver of financial performance. It also reflects the responsibility that business has to be transparent and accountable not just to shareholders but also to the wider community."
With its comprehensive coverage of over 1600 companies - including the top 250 companies of the Fortune 500 and top 100 companies in 16 countries - the survey provides a truly global picture of reporting trends over the last ten years.
The bottom line:
[...] The important business drivers for corporate responsibility for companies are:
to have a good brand and reputation
to be an employer of choice
to have and maintain a strong market position
to have the trust of the financial markets and increase shareholder value
to be innovative in developing new products and services and creating new markets.
Wednesday, November 19, 2008
Search Spamming Reported Found On Financial Times Website
Web marketter Ken McGaffin says he found an invisible link on the Financial Times' website acting as search engine spam. He shows a screenshot of the link, invisible and then made visible by selecting it. Apparently FT responded by making the link visible.
I don't care anymore. This is the fourth time I've reported on a reputable website doing something of this sort. I'm refusing to be outraged anymore. Oh, I'll still post about it, but I'm not going to let it piss me off. Let this be the spammers problems. If you sell a link to some website and hide it, just to pass along PageRank to a website, you will get found out, and hopefully 100 or more bloggers will write about it. Then, when people search for your website, maybe they'll see the word "dishonest" in a high ranking article about your company. And you'll deserve it, you certainly will.
Take a look at the Google results for "Matt Mullenweg". Number six? Why its my post about him gaming Google (and I love Matt's software like crazy, but he still deserved to be outed). On a search for "Syndic8", number three is Andy Baio on their trangression, and number 2 on a search for the "Stanford Daily" reveals Asa Dotzler's post on theirs.
There are few companies with the Google juice to get around this. Thus far, every company that has been found out has very bad Google results, and that seems quite fitting. (via Techdirt)
I don't care anymore. This is the fourth time I've reported on a reputable website doing something of this sort. I'm refusing to be outraged anymore. Oh, I'll still post about it, but I'm not going to let it piss me off. Let this be the spammers problems. If you sell a link to some website and hide it, just to pass along PageRank to a website, you will get found out, and hopefully 100 or more bloggers will write about it. Then, when people search for your website, maybe they'll see the word "dishonest" in a high ranking article about your company. And you'll deserve it, you certainly will.
Take a look at the Google results for "Matt Mullenweg". Number six? Why its my post about him gaming Google (and I love Matt's software like crazy, but he still deserved to be outed). On a search for "Syndic8", number three is Andy Baio on their trangression, and number 2 on a search for the "Stanford Daily" reveals Asa Dotzler's post on theirs.
There are few companies with the Google juice to get around this. Thus far, every company that has been found out has very bad Google results, and that seems quite fitting. (via Techdirt)
Search Dominates New Advertising Spending
Google and Yahoo are eating lunch on what used to be the expense accounts of the largest advertising and information venues in the world.
Both Google and Yahoo reported record revenues last quarter, income that is expected to grow rapidly over the coming years. As the leaders of the search advertising pack, Google and Yahoo represent the wide end of an expanding wedge. According to Safa Rashtcy a senior analyst at investment bank Piper Jaffray, search revenues will increase by a staggering $18 billion over the next five years. Projected revenues are expected to surpass $10 billion in 2006, $13 billion in 2007, $16 billion in 2008, and $19 billion in 2009. By the end of the decade, revenues generated by search are projected to be in the $25 billion range.
A report issued yesterday by search industry research and analysis firm Outsell says this growth is coming at the direct expense of the largest traditional media firms. The world's ten largest traditional information distributors are Reed Elsevier, Thomson, Gannett, Pearson, Tribune, Reuters, McGraw-Hill, VNU, Wolters Kluwer, and the Daily Mail and General Trust. In 2003, their collective revenue was approximately $56 billion, growing by about $4 billion to top $60 billion in 2004.
Google and Yahoo combined generated about $6.5 billion in revenues last year. The year before, their combined revenues equaled about $2.5 billion. In other words, the combined growth of the two largest search firms over 2004 surpassed the combined growth of the 10 largest traditional media firms. Last month, Advertising Age predicted that search engine revenues would exceed those of the major TV networks by the end of this year. The Interactive Advertising Bureau said that revenues generated by all forms of Internet advertising in the United States alone grew by about 33% from 2003 to 2004 with overall revenues approaching $10 billion.
Between the two, Google and Yahoo are starting to starve growth for traditional media and advertising firms. Outsell's report " Financial Performance Scorecard, Full Year 2004 ", written by lead analyst Chuck Richard, concludes that Google and Yahoo are, "Clearly diverting advertising revenue from the established information companies,...literally sucking the financial air out of the room." It also places the world's newspaper of record, the New York Times on a crisis watch list labeled "Sinking Stones", citing low revenue growth and challenges attracting new readers throughout the traditional news publishing industry.
This movement of money away from traditional advertising venues is starting to manifest in serious changes in the traditional media sector, prompting a new round of lay-offs, consolidation and acquisitions. As an example, over the past three months, the New York Times laid-off over 190 workers, most of which worked in advertising and sales for its smaller newspaper holdings in Boston and the US mid-west. At the same time, recognizing that much of the news that is fit to print will never see the stain of ink but will be found online, the NYT also purchased the search directory About.com. Around the same time, the publisher of the venerable Wall St. Journal, Dow Jones & Co. purchased leading online financial publication, Marketwatch.com. The Wall St. Journal also announced this week it would soon be producing content for the financial section of the Washington Post.
According to the Outsell report, there is an imbalance in ROI between traditional advertising and paid-search marketing resulting in a situation where traditional ad-purchases cost far more per converted sale than online advertising. Advertisers are paying too much for the returns gained in traditional advertising while paying less for better returns from paid-search advertising. This imbalance is expected to correct itself over time as search advertising matures and the various players work to increase their shares of the wealth.
In a speech to Goldman Sachs' annual Internet conference, Yahoo CEO Terry Semel said that 2005 was all about improving search monetization as measured by the amount of revenue Yahoo can claim from each search. Catching up with Google's AdWords is clearly a priority for Yahoo which spent 2004 constructing their own algorithmic search engine to compete with Google's. While organic listings may be considered a loss leader by search engines like Yahoo or Google in the search marketplace, they provide their owners with an overall view of the Internet, its users, and their own users.
Over the years, Yahoo has compiled a great deal of information about the nature of the Internet and the surfing habits of its individual users. It will be using this data to better personalize the targeting of paid-ads to its individual users. "We think it's a real competitive advantage," Semel said, "because the enormous number of pages that Yahoo users peruse offers an equally enormous inventory for targeted advertising."
Google and Yahoo might be among the biggest players but there are dozens of smaller paid-search players distributing advertising in their massive shadows. Ask.com and FindWhat.com both doubled revenues over the past year while acquiring European search firms Excite and Espotting respectively. MSN is also expected to enter the paid search advertising field before the end of the second quarter of 2006.
Search marketing has long been promoted as the most cost effective means of communicating to a massive audience that continuously pre-qualifies itself. Increasingly, the search engines are using information about specific users to individually target advertising based on the known habits of those users. That's a neat trick traditional marketing venues simply can't perform and perhaps the most compelling reason for a movement of massive amounts of money away from traditional marketing and into the search marketing sector. The future will be uniquely interesting.
Both Google and Yahoo reported record revenues last quarter, income that is expected to grow rapidly over the coming years. As the leaders of the search advertising pack, Google and Yahoo represent the wide end of an expanding wedge. According to Safa Rashtcy a senior analyst at investment bank Piper Jaffray, search revenues will increase by a staggering $18 billion over the next five years. Projected revenues are expected to surpass $10 billion in 2006, $13 billion in 2007, $16 billion in 2008, and $19 billion in 2009. By the end of the decade, revenues generated by search are projected to be in the $25 billion range.
A report issued yesterday by search industry research and analysis firm Outsell says this growth is coming at the direct expense of the largest traditional media firms. The world's ten largest traditional information distributors are Reed Elsevier, Thomson, Gannett, Pearson, Tribune, Reuters, McGraw-Hill, VNU, Wolters Kluwer, and the Daily Mail and General Trust. In 2003, their collective revenue was approximately $56 billion, growing by about $4 billion to top $60 billion in 2004.
Google and Yahoo combined generated about $6.5 billion in revenues last year. The year before, their combined revenues equaled about $2.5 billion. In other words, the combined growth of the two largest search firms over 2004 surpassed the combined growth of the 10 largest traditional media firms. Last month, Advertising Age predicted that search engine revenues would exceed those of the major TV networks by the end of this year. The Interactive Advertising Bureau said that revenues generated by all forms of Internet advertising in the United States alone grew by about 33% from 2003 to 2004 with overall revenues approaching $10 billion.
Between the two, Google and Yahoo are starting to starve growth for traditional media and advertising firms. Outsell's report " Financial Performance Scorecard, Full Year 2004 ", written by lead analyst Chuck Richard, concludes that Google and Yahoo are, "Clearly diverting advertising revenue from the established information companies,...literally sucking the financial air out of the room." It also places the world's newspaper of record, the New York Times on a crisis watch list labeled "Sinking Stones", citing low revenue growth and challenges attracting new readers throughout the traditional news publishing industry.
This movement of money away from traditional advertising venues is starting to manifest in serious changes in the traditional media sector, prompting a new round of lay-offs, consolidation and acquisitions. As an example, over the past three months, the New York Times laid-off over 190 workers, most of which worked in advertising and sales for its smaller newspaper holdings in Boston and the US mid-west. At the same time, recognizing that much of the news that is fit to print will never see the stain of ink but will be found online, the NYT also purchased the search directory About.com. Around the same time, the publisher of the venerable Wall St. Journal, Dow Jones & Co. purchased leading online financial publication, Marketwatch.com. The Wall St. Journal also announced this week it would soon be producing content for the financial section of the Washington Post.
According to the Outsell report, there is an imbalance in ROI between traditional advertising and paid-search marketing resulting in a situation where traditional ad-purchases cost far more per converted sale than online advertising. Advertisers are paying too much for the returns gained in traditional advertising while paying less for better returns from paid-search advertising. This imbalance is expected to correct itself over time as search advertising matures and the various players work to increase their shares of the wealth.
In a speech to Goldman Sachs' annual Internet conference, Yahoo CEO Terry Semel said that 2005 was all about improving search monetization as measured by the amount of revenue Yahoo can claim from each search. Catching up with Google's AdWords is clearly a priority for Yahoo which spent 2004 constructing their own algorithmic search engine to compete with Google's. While organic listings may be considered a loss leader by search engines like Yahoo or Google in the search marketplace, they provide their owners with an overall view of the Internet, its users, and their own users.
Over the years, Yahoo has compiled a great deal of information about the nature of the Internet and the surfing habits of its individual users. It will be using this data to better personalize the targeting of paid-ads to its individual users. "We think it's a real competitive advantage," Semel said, "because the enormous number of pages that Yahoo users peruse offers an equally enormous inventory for targeted advertising."
Google and Yahoo might be among the biggest players but there are dozens of smaller paid-search players distributing advertising in their massive shadows. Ask.com and FindWhat.com both doubled revenues over the past year while acquiring European search firms Excite and Espotting respectively. MSN is also expected to enter the paid search advertising field before the end of the second quarter of 2006.
Search marketing has long been promoted as the most cost effective means of communicating to a massive audience that continuously pre-qualifies itself. Increasingly, the search engines are using information about specific users to individually target advertising based on the known habits of those users. That's a neat trick traditional marketing venues simply can't perform and perhaps the most compelling reason for a movement of massive amounts of money away from traditional marketing and into the search marketing sector. The future will be uniquely interesting.
Tuesday, November 18, 2008
Nike Breaks New Ground In Communication Transparency
Communicating on corporate responsibility doesn't get more transparent than this. The Financial Times reports ...
Today Nike breaks a three-year silence on social reporting as it publishes its 2004 corporate responsibility report. This is Nike's first report since a 2002 California supreme court ruling that the company could be sued by Mark Kasky, a labour rights activist, over statements it made about its labour practices. But that is not all: the sports equipment company has also broken new ground in transparency by publishing a complete list of suppliers on its website.
Financial Times Nike makes the step to transparency (paid subscription required)
Nike also issued a press release yesterday about their report. Fluffy corporate speak doesn't detract from the significant news value of what Nike announced, as founder and chairman Philip H. Knight says in the introduction to the corporate responsibility report:
We've been fairly quiet for the past three years in Corporate Responsibility because of the Kasky lawsuit. So we're using this report to play a little catch-up and draw a more complete picture. It makes for a long report, but I urge you to read it from cover to cover. And then some: because probably the most significant piece of disclosure linked to this report is actually on our Web site. It's a listing of all factories that produce Nike-branded products, worldwide.
Not only that, Nike says it is soliciting direct feedback on its report. That's transparency.
By the way, you have to love how Knight describes his current role at Nike:
My job is to listen to ideas, maybe cook up a few of my own, and make decisions based on what's good for the shareholders and for the company.
Download the report (PDF) from Nike's website.
Fellow communicator Allan Jenkins wrote an excellent analysis of Nike and the Kasky lawsuit from the PR perspective in a 6-page article for the April-May 2003 issue of Communication World, IABC's magazine for members. If you're an IABC member, you can download the PDF of that article from IABC's website.
Neville Hobson is the author of the popular NevilleHobson.com blog which focuses on business communication and technology. Neville is currentlly the VP of New Marketing at Crayon. Visit Neville Hobson's blog: NevilleHobson.com.
Today Nike breaks a three-year silence on social reporting as it publishes its 2004 corporate responsibility report. This is Nike's first report since a 2002 California supreme court ruling that the company could be sued by Mark Kasky, a labour rights activist, over statements it made about its labour practices. But that is not all: the sports equipment company has also broken new ground in transparency by publishing a complete list of suppliers on its website.
Financial Times Nike makes the step to transparency (paid subscription required)
Nike also issued a press release yesterday about their report. Fluffy corporate speak doesn't detract from the significant news value of what Nike announced, as founder and chairman Philip H. Knight says in the introduction to the corporate responsibility report:
We've been fairly quiet for the past three years in Corporate Responsibility because of the Kasky lawsuit. So we're using this report to play a little catch-up and draw a more complete picture. It makes for a long report, but I urge you to read it from cover to cover. And then some: because probably the most significant piece of disclosure linked to this report is actually on our Web site. It's a listing of all factories that produce Nike-branded products, worldwide.
Not only that, Nike says it is soliciting direct feedback on its report. That's transparency.
By the way, you have to love how Knight describes his current role at Nike:
My job is to listen to ideas, maybe cook up a few of my own, and make decisions based on what's good for the shareholders and for the company.
Download the report (PDF) from Nike's website.
Fellow communicator Allan Jenkins wrote an excellent analysis of Nike and the Kasky lawsuit from the PR perspective in a 6-page article for the April-May 2003 issue of Communication World, IABC's magazine for members. If you're an IABC member, you can download the PDF of that article from IABC's website.
Neville Hobson is the author of the popular NevilleHobson.com blog which focuses on business communication and technology. Neville is currentlly the VP of New Marketing at Crayon. Visit Neville Hobson's blog: NevilleHobson.com.
Real Organization Transparency
Companies everywhere talk a lot about how important their employees are and the contribution they make to overall success. But most companies don't do this with the public openness and transparency demonstrated by CMS Cameron McKenna, an international law firm headquartered in London.
View CMS Cameron McKenna's demostration.
The Financial Times reports that CMS Cameron McKenna is believed to be the first law firm to publish a "human capital" report, something that the UK government wants many more employers to do. The 24-page document detailing a variety of people-related measurements and policies will be circulated initially among staff and clients, but is also available now on open download (PDF) from the firm's website.
The FT quotes Dick Tyler, managing partner, saying that the report represents an attempt to move beyond the usual platitudes about people that abound in professional service industries. The aim here is to give concrete, statistical expression to the firm's commitment to its staff.
"The centrality of people is usually just asserted," he says. "But we wanted to demonstrate, through transparent reporting, that we spend as much time thinking about our people as we do about clients."
The report does make interesting reading. It includes the type of information that you wouldn't expect to see publicly about any company in such detail. For instance, it has statistical information about how many days certain types of employees were away on sick leave. It includes detailed information about the firm's recruitment objectives and employee benefits packages.
There's a detailed section on employee engagement and communication, with explanations on precisely how the firm 'engages' its employees.
Such frankness does present risks, though. If rival firms decide to produce human capital reports, the FT says, HR policies and statistics can be compared across the legal profession.
However, Mr Tyler says in the FT report that the risks are dwarfed by the advantages. "When we decided to do this, we were aware there were risks - as with financial performance measurement, you never know what the next set of numbers will reveal about you," he says. "But we took the view that the benefits of accountability and openness outweighed the downsides."
This could be the start of a trend.
View CMS Cameron McKenna's demostration.
The Financial Times reports that CMS Cameron McKenna is believed to be the first law firm to publish a "human capital" report, something that the UK government wants many more employers to do. The 24-page document detailing a variety of people-related measurements and policies will be circulated initially among staff and clients, but is also available now on open download (PDF) from the firm's website.
The FT quotes Dick Tyler, managing partner, saying that the report represents an attempt to move beyond the usual platitudes about people that abound in professional service industries. The aim here is to give concrete, statistical expression to the firm's commitment to its staff.
"The centrality of people is usually just asserted," he says. "But we wanted to demonstrate, through transparent reporting, that we spend as much time thinking about our people as we do about clients."
The report does make interesting reading. It includes the type of information that you wouldn't expect to see publicly about any company in such detail. For instance, it has statistical information about how many days certain types of employees were away on sick leave. It includes detailed information about the firm's recruitment objectives and employee benefits packages.
There's a detailed section on employee engagement and communication, with explanations on precisely how the firm 'engages' its employees.
Such frankness does present risks, though. If rival firms decide to produce human capital reports, the FT says, HR policies and statistics can be compared across the legal profession.
However, Mr Tyler says in the FT report that the risks are dwarfed by the advantages. "When we decided to do this, we were aware there were risks - as with financial performance measurement, you never know what the next set of numbers will reveal about you," he says. "But we took the view that the benefits of accountability and openness outweighed the downsides."
This could be the start of a trend.
Soros Conviction and Fine Still On
Billionaire George Soros' conviction for insider trading was upheld by a French appeals court.
His fine of 2.2 million euros ($2.87 million) was upheld as well.
According to a Financial Times article,
Hungarian-born Soros had appealed a French court's 2002 decision which found him guilty of using insider information regarding a failed 1988 corporate raid on bank Societe Generale to make $2 million on the company's stock.
The financier turned philanthropist told the appeals court last month he did not believe he had done anything wrong."
Mr. Soros was not in attendance at the court hearing.
WebProNews Breaking eBusiness NewsYour source for investigative ebusiness reporting and breaking news.
His fine of 2.2 million euros ($2.87 million) was upheld as well.
According to a Financial Times article,
Hungarian-born Soros had appealed a French court's 2002 decision which found him guilty of using insider information regarding a failed 1988 corporate raid on bank Societe Generale to make $2 million on the company's stock.
The financier turned philanthropist told the appeals court last month he did not believe he had done anything wrong."
Mr. Soros was not in attendance at the court hearing.
WebProNews Breaking eBusiness NewsYour source for investigative ebusiness reporting and breaking news.
Blogs And Wikis Change The Dynamics Of Business
Tom Foremski, publisher of Silicon Valley Watcher and ex-FT correspondent, writes a terrific piece ...
... in Financial Times on a new phase of the internet that's emerging, fuelled by a new class of technologies coming out of Silicon Valley that don't even have a name yet, but have the potential to be disruptive in their application.
Blogs and wikis are shaping up to become one of the most important features of "internet 2.0," Tom says, which could become recognized as the "killer applications" of the next few years:
Let me explain why I think these technologies are so groundbreaking. [...] The content of blogs is not the interesting part - it is the underlying blogging software and its ability to automate the many tasks required to run a website. No technical skills are required of the writer, beyond being able to use a browser and the ability to type.
For less than $100, blogging software such as the popular Movable Type, from Six Apart, is a good enough replacement for online content management systems costing more than 1,000 times as much.
The disruptive potential Tom speaks about is to do with communicating and distributing content via mechanisms such as trackbacks and RSS:
Trackback automatically detects if someone has published a link to your blog post, and it will publish their comment on your blog. [...] The response of readers to a news story, for example, can be plainly seen in real-time. It also means that other bloggers, by writing a comment and publishing a link to the original story, become distributors of that content to their readers. And it shows that if the content is relevant, an audience will find it, and also personally recommend it to others through their blogs.
RSS is another way to distribute blog content. It allows readers to subscribe to a blog and read the content without having to visit the originating site. RSS makes it possible to aggregate the content from several sites within software called a "newsreader."
Tom's article adds to the growing pool of information in business media about such new communication channels that's now becoming almost a flood.
Financial Times Blogging technology opens doors for enterprises (paid subscription required)
Tom was a participant in the New Communications Forum 2005 conference in California last month - which he mentions in the FT article - on the blogging and journalism panel discussion. He said then:
Blogs are an incredible medium and will change the economic dynamics of whole sectors of industry. [...] If you create value, people will find you and talk about you. It's an automatic feedback mechanism. As a media pro, I can see so many ways of using blogs. I can experiment with new forms of writing that's away from the old print model. Concentrate on compelling and original content, the rest will take care of itself.
... in Financial Times on a new phase of the internet that's emerging, fuelled by a new class of technologies coming out of Silicon Valley that don't even have a name yet, but have the potential to be disruptive in their application.
Blogs and wikis are shaping up to become one of the most important features of "internet 2.0," Tom says, which could become recognized as the "killer applications" of the next few years:
Let me explain why I think these technologies are so groundbreaking. [...] The content of blogs is not the interesting part - it is the underlying blogging software and its ability to automate the many tasks required to run a website. No technical skills are required of the writer, beyond being able to use a browser and the ability to type.
For less than $100, blogging software such as the popular Movable Type, from Six Apart, is a good enough replacement for online content management systems costing more than 1,000 times as much.
The disruptive potential Tom speaks about is to do with communicating and distributing content via mechanisms such as trackbacks and RSS:
Trackback automatically detects if someone has published a link to your blog post, and it will publish their comment on your blog. [...] The response of readers to a news story, for example, can be plainly seen in real-time. It also means that other bloggers, by writing a comment and publishing a link to the original story, become distributors of that content to their readers. And it shows that if the content is relevant, an audience will find it, and also personally recommend it to others through their blogs.
RSS is another way to distribute blog content. It allows readers to subscribe to a blog and read the content without having to visit the originating site. RSS makes it possible to aggregate the content from several sites within software called a "newsreader."
Tom's article adds to the growing pool of information in business media about such new communication channels that's now becoming almost a flood.
Financial Times Blogging technology opens doors for enterprises (paid subscription required)
Tom was a participant in the New Communications Forum 2005 conference in California last month - which he mentions in the FT article - on the blogging and journalism panel discussion. He said then:
Blogs are an incredible medium and will change the economic dynamics of whole sectors of industry. [...] If you create value, people will find you and talk about you. It's an automatic feedback mechanism. As a media pro, I can see so many ways of using blogs. I can experiment with new forms of writing that's away from the old print model. Concentrate on compelling and original content, the rest will take care of itself.
Nissan Announces Financial Results
Nissan announced its financial results for the first nine months of fiscal year 2004, as well as its third-quarter performance.
In the first nine months, net consolidated revenue rose 13.5%, compared with the same period in the previous year, to 6.099 trillion yen (US $56.22 billion, euro 45.69 billion) due to robust sales in the U.S. and a continuous improvement in European operations.
Nissan's operating profit from April to December totaled 612.1 billion yen (US $5.64 billion, euro 4.59 billion), up 2.1% from the same period last year, while its operating profit margin came to 10.0%. Ordinary profit amounted to 611.9 billion yen (US $5.64 billion, euro 4.58 billion), up 3.9%. Net income after tax totaled 373.0 billion yen (US $3.44 billion, euro 2.79 billion), an increase of 2.7% compared with last year.
The nine-month results include the 50% proportional consolidation of Dongfeng Motor Co., Ltd., Nissan's joint venture in China, and the full consolidation of Siam Nissan Automobile Co., Ltd., its sales and manufacturing company in Thailand.
Globally, Nissan sold a total of 2,412,000 vehicles in the first nine months, an increase of 10.3% compared with the previous year, building on new products launched in fiscal year 2003, as well as new products released mainly in the second half of fiscal year 2004.
In the third quarter alone, Nissan's net consolidated revenue advanced 14.9%, compared with the same period in the previous year, to 2.092 trillion yen (US $19.28 billion, euro 15.67 billion).
The company's operating profit in the October-to-December quarter totaled 208.7 billion yen (US $1.92 billion, euro 1.56 billion), up 5.1% from the same period a year ago, while its operating profit margin came to 10.0%. Ordinary profit amounted to 210.6 billion yen (US $1.94 billion, euro 1.58 billion), up 6.0%. Net income after tax totaled 134.2 billion yen (US $1.24 billion, euro 1.01 billion), an increase of 6.9%.
Nissan sold a total of 816,000 vehicles worldwide in the third quarter, up 13.4% compared with the prior year.
Nissan is maintaining its forecast for the fiscal year, although the company faces a continued challenging environment characterized by higher incentives, higher commodity prices, raw material shortages and higher interest rates. Nissan has forecast full fiscal year net revenue of 8.176 trillion yen, operating profit of 860 billion yen, ordinary profit of 846 billion yen and net profit of 510 billion yen. The forecast is based on exchange rates of 105 yen/dollar and 125 yen/euro.
WebProNews Breaking eBusiness NewsYour source for investigative ebusiness reporting and breaking news.
In the first nine months, net consolidated revenue rose 13.5%, compared with the same period in the previous year, to 6.099 trillion yen (US $56.22 billion, euro 45.69 billion) due to robust sales in the U.S. and a continuous improvement in European operations.
Nissan's operating profit from April to December totaled 612.1 billion yen (US $5.64 billion, euro 4.59 billion), up 2.1% from the same period last year, while its operating profit margin came to 10.0%. Ordinary profit amounted to 611.9 billion yen (US $5.64 billion, euro 4.58 billion), up 3.9%. Net income after tax totaled 373.0 billion yen (US $3.44 billion, euro 2.79 billion), an increase of 2.7% compared with last year.
The nine-month results include the 50% proportional consolidation of Dongfeng Motor Co., Ltd., Nissan's joint venture in China, and the full consolidation of Siam Nissan Automobile Co., Ltd., its sales and manufacturing company in Thailand.
Globally, Nissan sold a total of 2,412,000 vehicles in the first nine months, an increase of 10.3% compared with the previous year, building on new products launched in fiscal year 2003, as well as new products released mainly in the second half of fiscal year 2004.
In the third quarter alone, Nissan's net consolidated revenue advanced 14.9%, compared with the same period in the previous year, to 2.092 trillion yen (US $19.28 billion, euro 15.67 billion).
The company's operating profit in the October-to-December quarter totaled 208.7 billion yen (US $1.92 billion, euro 1.56 billion), up 5.1% from the same period a year ago, while its operating profit margin came to 10.0%. Ordinary profit amounted to 210.6 billion yen (US $1.94 billion, euro 1.58 billion), up 6.0%. Net income after tax totaled 134.2 billion yen (US $1.24 billion, euro 1.01 billion), an increase of 6.9%.
Nissan sold a total of 816,000 vehicles worldwide in the third quarter, up 13.4% compared with the prior year.
Nissan is maintaining its forecast for the fiscal year, although the company faces a continued challenging environment characterized by higher incentives, higher commodity prices, raw material shortages and higher interest rates. Nissan has forecast full fiscal year net revenue of 8.176 trillion yen, operating profit of 860 billion yen, ordinary profit of 846 billion yen and net profit of 510 billion yen. The forecast is based on exchange rates of 105 yen/dollar and 125 yen/euro.
WebProNews Breaking eBusiness NewsYour source for investigative ebusiness reporting and breaking news.
Wholesale Prices Lower Than Expected
U.S. Producer prices for wholesale goods went down 0.7% in the month of December in a decline that was larger-than-expected.
Food and energy prices rose 0.1% while processed fuel went down 4%.
According to a Financial Times article,
"So far there has been no indication that companies have been passing rising costs onto the consumer. Margins in US companies have been high enough to absorb the extra cost.
Nevertheless, the minutes of the Federal Reserve's last meeting did point to concern over the inflationary outlook for the medium term. The Fed appears confident about the outlook for growth and employment and has been expecting price pressures to intensify."
Over 2004, the Producer Price Index has rose to 4.1%, from 4% in the previous year which marked the highest annual increase in 14 years.
WebProNews Breaking eBusiness NewsYour source for investigative ebusiness reporting and breaking news.
Food and energy prices rose 0.1% while processed fuel went down 4%.
According to a Financial Times article,
"So far there has been no indication that companies have been passing rising costs onto the consumer. Margins in US companies have been high enough to absorb the extra cost.
Nevertheless, the minutes of the Federal Reserve's last meeting did point to concern over the inflationary outlook for the medium term. The Fed appears confident about the outlook for growth and employment and has been expecting price pressures to intensify."
Over 2004, the Producer Price Index has rose to 4.1%, from 4% in the previous year which marked the highest annual increase in 14 years.
WebProNews Breaking eBusiness NewsYour source for investigative ebusiness reporting and breaking news.
Talking To Consumers + Blog Mining
Does talking to consumers plus blog content mining equal a new effective way to conduct market research ... I think so ...
Financial Times:"When Procter & Gamble is deciding whether to put its advertisements on television or elsewhere, it puts a call in to Nicosia, Cyprus. The same holds true for Nissan and dozens of other leading corporations and marketing-services agencies.
The calls are requests for help and go to Nicosia because the city is the home of Integration, a small consultancy that has gained prominence by taking on one of the biggest questions facing advertisers: how to pick the best medium for a particular marketing message."
This interesting report in the FT last month focuses on the work of Integration and its founder and CEO, Oscar Jamhouri, a former executive of the BBDO ad agency. It discusses in some length Jamhouri's approach to market research.
For example:
"For a measurement guru, Mr Jamhouri's methods are surprising. Rather than use the hard data of advertising and sales figures, he bases his findings on meetings with consumers. He tries to get round the limits of question-and-answer sessions by prodding them to behave as they would in a sales situation. Then he listens. [...] Based on this interaction, Integration rates the impact of each contact in a category - its "contact clout factor" - and produces a score, or "brand experience share", that advertisers can use to decide between media.
This kind of measurement will only grow in importance, Mr Jamhouri argues, because consumers are getting more difficult to reach through television advertising. A new, more furtive generation of consumers is emerging and the big task facing advertisers will be to find them, he says.
"Ninety per cent of the success of a brand (in the past) was built on the mass media," he says. "P&G was the king of mass media. They knew how to manage it and that made them a success." Now, "there has been an explosion of media and contact consumption and the challenge is where do we get these guys. How do we reach them? How do we engage?""
For the answer to Jamhouri's questions - How do we reach them? How do we engage? - take a look at the ideas contained in a report in the Wall Street Journal, also last month, reporting on how some companies are now paying close attention to blogs as part of their market research:
The Wall Street Journal:"The growing popularity of blogs and other online forums has prompted companies to pay more attention to what is being said about them on the Internet, and has given rise to a new kind of market research aimed at finding useful information in the sea of online chatter."
The Journal quotes the (now well-known) case study of the Kryptonite bike lock fiasco and what can happen when a company doesn't pay attention to what its consumers are saying in a medium where news, good or bad, travels very fast.
Add these two things together and you have an effective market research method.
Neville Hobson is the author of the popular NevilleHobson.com blog which focuses on business communication and technology. Neville is currentlly the VP of New Marketing at Crayon. Visit Neville Hobson's blog: NevilleHobson.com.
Financial Times:"When Procter & Gamble is deciding whether to put its advertisements on television or elsewhere, it puts a call in to Nicosia, Cyprus. The same holds true for Nissan and dozens of other leading corporations and marketing-services agencies.
The calls are requests for help and go to Nicosia because the city is the home of Integration, a small consultancy that has gained prominence by taking on one of the biggest questions facing advertisers: how to pick the best medium for a particular marketing message."
This interesting report in the FT last month focuses on the work of Integration and its founder and CEO, Oscar Jamhouri, a former executive of the BBDO ad agency. It discusses in some length Jamhouri's approach to market research.
For example:
"For a measurement guru, Mr Jamhouri's methods are surprising. Rather than use the hard data of advertising and sales figures, he bases his findings on meetings with consumers. He tries to get round the limits of question-and-answer sessions by prodding them to behave as they would in a sales situation. Then he listens. [...] Based on this interaction, Integration rates the impact of each contact in a category - its "contact clout factor" - and produces a score, or "brand experience share", that advertisers can use to decide between media.
This kind of measurement will only grow in importance, Mr Jamhouri argues, because consumers are getting more difficult to reach through television advertising. A new, more furtive generation of consumers is emerging and the big task facing advertisers will be to find them, he says.
"Ninety per cent of the success of a brand (in the past) was built on the mass media," he says. "P&G was the king of mass media. They knew how to manage it and that made them a success." Now, "there has been an explosion of media and contact consumption and the challenge is where do we get these guys. How do we reach them? How do we engage?""
For the answer to Jamhouri's questions - How do we reach them? How do we engage? - take a look at the ideas contained in a report in the Wall Street Journal, also last month, reporting on how some companies are now paying close attention to blogs as part of their market research:
The Wall Street Journal:"The growing popularity of blogs and other online forums has prompted companies to pay more attention to what is being said about them on the Internet, and has given rise to a new kind of market research aimed at finding useful information in the sea of online chatter."
The Journal quotes the (now well-known) case study of the Kryptonite bike lock fiasco and what can happen when a company doesn't pay attention to what its consumers are saying in a medium where news, good or bad, travels very fast.
Add these two things together and you have an effective market research method.
Neville Hobson is the author of the popular NevilleHobson.com blog which focuses on business communication and technology. Neville is currentlly the VP of New Marketing at Crayon. Visit Neville Hobson's blog: NevilleHobson.com.
Women Turning to Blogs for Financial Advice
Dow Jones Newswires reports a growing number of investors - particularly women - are turning to blogs for free financial advice that's presented in a friendly, non-aggressive manner.
Free ChicagoTribune.com registration or BugMeNot is required for access, but it's worth the trouble. A passage ...
"Blog operators say women in particular are trolling online blogs to learn market terminology and gain a deeper level of financial sophistication. Blog users say they like to read about another person's uncensored financial experiences before they consult a broker who might be biased toward certain products such as funds or insurance.
Blog operators say women in particular are trolling online blogs to learn market terminology and gain a deeper level of financial sophistication. Blog users say they like to read about another person's uncensored financial experiences before they consult a broker who might be biased toward certain products such as funds or insurance.
Some of the more popular blogs are posted by established columnists or authors, largely because their credentials give them a level of trustworthiness in an otherwise anonymous environment. On America Online, for instance, finance expert Jean Chatzky writes a blog called "Jean's Journal" in which she expounds on topics like holiday spending, budgeting and paying down debt.
AOL is racing to keep up with the demand for blogs, which the service refers to as "journals." The company says it plans to launch more journals by well-known finance experts later this month. In August 2003, AOL gave its members the ability to build blogs, and more than 440,000 journals have been created on topics ranging from personal finance to cooking."
Free ChicagoTribune.com registration or BugMeNot is required for access, but it's worth the trouble. A passage ...
"Blog operators say women in particular are trolling online blogs to learn market terminology and gain a deeper level of financial sophistication. Blog users say they like to read about another person's uncensored financial experiences before they consult a broker who might be biased toward certain products such as funds or insurance.
Blog operators say women in particular are trolling online blogs to learn market terminology and gain a deeper level of financial sophistication. Blog users say they like to read about another person's uncensored financial experiences before they consult a broker who might be biased toward certain products such as funds or insurance.
Some of the more popular blogs are posted by established columnists or authors, largely because their credentials give them a level of trustworthiness in an otherwise anonymous environment. On America Online, for instance, finance expert Jean Chatzky writes a blog called "Jean's Journal" in which she expounds on topics like holiday spending, budgeting and paying down debt.
AOL is racing to keep up with the demand for blogs, which the service refers to as "journals." The company says it plans to launch more journals by well-known finance experts later this month. In August 2003, AOL gave its members the ability to build blogs, and more than 440,000 journals have been created on topics ranging from personal finance to cooking."
Understanding Financial Statements When Approaching Lenders
"The bank is asking for our financial statements", these are 8 words that often bring apprehension to many business owners.
They are a young and maybe struggling company, they need bank financing to survive, and they haven't got a clue what the financial statements are telling them, what they should be looking at, or what the bank wants to see. Many will delay providing the required financial information to the bank, but this is the worst thing you can do. Going to the bank shouldn't bring on apprehension. Having a basic understanding of financial statements and being prepared when you approach a bank, or any investor, will go a long way in reducing your apprehension.
The Basics
The bank, or any investor for that matter, uses financial statements to tell them what happened in the past. Statements are also used as a means to predict what will happen in the future. Creditors are concerned about whether income (cash flow) will be sufficient to cover interest and principal payments on their debt. Of course, predicting profits into the future is an uncertain science. For this reason, creditors use various analytical tools to help them assess and interpret key relationships and trends that will help them judge the potential of success in the future. It also helps them predict whether a firm has sufficient resources to handle a temporary financial crisis.
Financial statements are historical documents covering single time periods. Users of financial statements, however, are not so much concerned about the single time period as they are about the trends over time. Trend analysis is usually completed on key indicators, such as revenues, gross profit margin, operating expenses, and working capital components such as accounts receivable, accounts payable and inventory. Through comparison of ratios and trends you can make informed judgments as to the significance of results. That is why banks or other investors often want 2 or more years of business results before they will lend.
Although trends and ratios are a starting point, they can often raise questions, the answers to which you can only get through analyzing industry trends, economic factors and the company itself. Typically, unless you are a master of presenting information, bank lenders will ask questions of you and your business. This is normal as they are trying to learn as much as possible about you and your business. Once again, be prepared, this will show you understand your business and its finances and that will make the bank more comfortable in lending to you.
The Balance Sheet
Banks primarily lend off the balance sheet and the cash flow statement (primarily operational cash flow). That does no mean that the income statement is not important, it is, but the balance sheet essentially encompasses what happens on the income statement and the cash flow statement tells a lender whether you are actually generating enough free cash flow from which you can make debt payments.
So what is important on the balance sheet?
Working capital Current assets minus current liabilities, working capital tell us how much short-term assets we have to pay off short-term liabilities. The greater the amount of working capital the more funds a company has to finance its growth. A negative number is not good and can signify pending trouble. A typical rule of thumb is a ratio of assets over liabilities of 1.5:1. Questions you need to be able to answer are: trends in the ratio, what are the components of the assets and liabilities and how liquid are the current assets (for example, not all inventory can be liquidated quickly).
Accounts Receivable You want to maintain your receivables in line with industry standard, or better. High growth companies can often have a high growth rate in receivables that they need to finance, but the average number of days outstanding should not get out of hand. If they do, for example climbing from 60 to 90 days or more, this often indicates a weakness in management. If this happens be prepared to have a plan in place to reduce the outstanding receivables. A lender will typically look to answer the following: is there a concentration to a few buyers, what are the age and terms of the receivables, what is the quality of the receivables and what is the value of the receivables in a liquidation scenario?
Accounts Payable As with receivables, you need to maintain payables in line with industry standards. Often, growing companies will let payables stretch to finance growth, this is ok in the short-term as long as the payables don't go overdue and you maintain good relations with your creditors. Once again, the age of the payables will be looked at as well as any concentrations to a few creditors. Make sure all payables are up-to-date and any security priorities should be noted.
Inventory The composition of inventory needs to be evaluated. What amount is work-in-progress and what amount is finished goods? Obsolete inventory needs to be closely monitored. Banks will look at the potential obsolescence of inventory before they lend on the value. Often they are not interested on lending on goods that have no or little value if the business ceases operations. This often frustrates business owners, but it is a reality they need to deal with. Showing that there are strong controls around inventory can often help a business owner's case with the bank. If you are exporting large ticket items internationally, look to having your receivables insured.
Equity (Tangible Net Worth) When I refer to equity, I really mean tangible net worth or the equity in a business less any intangible assets. Intangible assets can include (but are not limited to) goodwill, patents and sometimes prepaid expenses. Depending on the arrangement with the bank, shareholder loans may or may not be considered as part of the equity base. A ratio of tangible net worth to total debt of 1:1 or better is a good goal to shoot for. Basically, the bank wants to make sure that the owner has also invested in the company, that the company can support its present and future endeavors and that it has the ability to withstand any unplanned declines in business.
Debt Having debt is not bad, but having too much debt is. Look at what the make-up of your debt levels are and what the debt has financed. Does the maturity of the debt properly reflect the related assets? Is there any term debt supporting working capital, or revolving debt supporting long-term assets? If the answer is yes then you should look at restructuring the debt to properly reflect the assets. Review the company's debt in relation to the company's cash flow and assess its ability to meet debt obligations. Do you have the required credit available to meet seasonal borrowing requirements?
Inter-company assets/liabilities Keep in mind that the bank will not lend off of inter-company receivables. Next, you should be able to answer the following questions: are the assets liquid and do they have value, can the related company meet its obligations, what are the terms of outstanding debt, is there any off-balance sheet debt or assets, can funds flow freely between the companies?
The Income Statement
The income statement provides information on a firm's operating activities over a specific period of time. In simple terms it is revenues less expenses. However, as is seen by all the accounting scandals recently, how those revenues and expenses are recorded can often be left open to interpretation and manipulation. A lender is well aware of the manipulation that can occur and so will look at the income statement carefully. If there are any "gray" areas the lender will want clarification, so be prepared to be able to answer any questions asked of you. Or, have your accountant prepared to answer any questions.
As with the balance sheet, a lender will rely heavily on trends and key ratios and will want to know the why of any significant movements in these ratios. Key areas they will focus on are the growth or decline in sales, net profit, gross margin and administrative expenses.
Important areas you should be aware of are:
Are you expensing or capitalizing expenditures?
Are operating profits stable?
Are there areas of weakness? If yes, what action is management taking to work on these weak areas?
Are there any extraordinary losses of gains?
Are inter-company transactions having an impact on profits?
What transactions are being completed to minimize profit and tax?
The Cash Flow Statement
The cash flow statement is a summary of a company's cash flow over a period of time. It is basically actual (i.e. not accrual) cash receipts less actual cash payments. A cash flow statement will have 3 parts to it: 1) cash from operations, 2) cash from investing activities and 3) cash from financing activities. The bank will be most concerned about cash from operations as this tells it whether the company can generate sufficient cash from day to day business activities to repay loans. However, it is still important to be able to generate a cash surplus after all activities - i.e. operations, investing and financing. The quality, consistency and sustainability of cash flow is key.
Important areas you should be aware of are:
Changes in working capital - movements in accounts receivable and payable and inventory, especially for a growing company, can mean a company is a net user of cash. This may indicate liquidity problems.
Look at ratios such as sales to cash from operations and interest and principal payments to cash from operations. Negative trends can indicate lack of controls, inefficiencies or bad investment decisions.
Look at factors that may impact total cash flow (cash from all activities) such as dividend distributions and taxes.
Are there any extraordinary items affecting cash flow?
Are there any capital expenditures which may have a negative impact on total cash flow?
Examine the relationship between the change in sales and the change in cash flow. Are there any weak spots such as a declining gross margin? What action is management taking?
As you can see that there is a lot of information that needs to be assessed. That is why it can take a few days to get back with lending decisions, particularly if the statements are complicated. The goal is to provide you with a basic understanding of what is being looked at so you can be prepared when approaching your lender. As always, the more prepared you are, the better chance of success you have.
They are a young and maybe struggling company, they need bank financing to survive, and they haven't got a clue what the financial statements are telling them, what they should be looking at, or what the bank wants to see. Many will delay providing the required financial information to the bank, but this is the worst thing you can do. Going to the bank shouldn't bring on apprehension. Having a basic understanding of financial statements and being prepared when you approach a bank, or any investor, will go a long way in reducing your apprehension.
The Basics
The bank, or any investor for that matter, uses financial statements to tell them what happened in the past. Statements are also used as a means to predict what will happen in the future. Creditors are concerned about whether income (cash flow) will be sufficient to cover interest and principal payments on their debt. Of course, predicting profits into the future is an uncertain science. For this reason, creditors use various analytical tools to help them assess and interpret key relationships and trends that will help them judge the potential of success in the future. It also helps them predict whether a firm has sufficient resources to handle a temporary financial crisis.
Financial statements are historical documents covering single time periods. Users of financial statements, however, are not so much concerned about the single time period as they are about the trends over time. Trend analysis is usually completed on key indicators, such as revenues, gross profit margin, operating expenses, and working capital components such as accounts receivable, accounts payable and inventory. Through comparison of ratios and trends you can make informed judgments as to the significance of results. That is why banks or other investors often want 2 or more years of business results before they will lend.
Although trends and ratios are a starting point, they can often raise questions, the answers to which you can only get through analyzing industry trends, economic factors and the company itself. Typically, unless you are a master of presenting information, bank lenders will ask questions of you and your business. This is normal as they are trying to learn as much as possible about you and your business. Once again, be prepared, this will show you understand your business and its finances and that will make the bank more comfortable in lending to you.
The Balance Sheet
Banks primarily lend off the balance sheet and the cash flow statement (primarily operational cash flow). That does no mean that the income statement is not important, it is, but the balance sheet essentially encompasses what happens on the income statement and the cash flow statement tells a lender whether you are actually generating enough free cash flow from which you can make debt payments.
So what is important on the balance sheet?
Working capital Current assets minus current liabilities, working capital tell us how much short-term assets we have to pay off short-term liabilities. The greater the amount of working capital the more funds a company has to finance its growth. A negative number is not good and can signify pending trouble. A typical rule of thumb is a ratio of assets over liabilities of 1.5:1. Questions you need to be able to answer are: trends in the ratio, what are the components of the assets and liabilities and how liquid are the current assets (for example, not all inventory can be liquidated quickly).
Accounts Receivable You want to maintain your receivables in line with industry standard, or better. High growth companies can often have a high growth rate in receivables that they need to finance, but the average number of days outstanding should not get out of hand. If they do, for example climbing from 60 to 90 days or more, this often indicates a weakness in management. If this happens be prepared to have a plan in place to reduce the outstanding receivables. A lender will typically look to answer the following: is there a concentration to a few buyers, what are the age and terms of the receivables, what is the quality of the receivables and what is the value of the receivables in a liquidation scenario?
Accounts Payable As with receivables, you need to maintain payables in line with industry standards. Often, growing companies will let payables stretch to finance growth, this is ok in the short-term as long as the payables don't go overdue and you maintain good relations with your creditors. Once again, the age of the payables will be looked at as well as any concentrations to a few creditors. Make sure all payables are up-to-date and any security priorities should be noted.
Inventory The composition of inventory needs to be evaluated. What amount is work-in-progress and what amount is finished goods? Obsolete inventory needs to be closely monitored. Banks will look at the potential obsolescence of inventory before they lend on the value. Often they are not interested on lending on goods that have no or little value if the business ceases operations. This often frustrates business owners, but it is a reality they need to deal with. Showing that there are strong controls around inventory can often help a business owner's case with the bank. If you are exporting large ticket items internationally, look to having your receivables insured.
Equity (Tangible Net Worth) When I refer to equity, I really mean tangible net worth or the equity in a business less any intangible assets. Intangible assets can include (but are not limited to) goodwill, patents and sometimes prepaid expenses. Depending on the arrangement with the bank, shareholder loans may or may not be considered as part of the equity base. A ratio of tangible net worth to total debt of 1:1 or better is a good goal to shoot for. Basically, the bank wants to make sure that the owner has also invested in the company, that the company can support its present and future endeavors and that it has the ability to withstand any unplanned declines in business.
Debt Having debt is not bad, but having too much debt is. Look at what the make-up of your debt levels are and what the debt has financed. Does the maturity of the debt properly reflect the related assets? Is there any term debt supporting working capital, or revolving debt supporting long-term assets? If the answer is yes then you should look at restructuring the debt to properly reflect the assets. Review the company's debt in relation to the company's cash flow and assess its ability to meet debt obligations. Do you have the required credit available to meet seasonal borrowing requirements?
Inter-company assets/liabilities Keep in mind that the bank will not lend off of inter-company receivables. Next, you should be able to answer the following questions: are the assets liquid and do they have value, can the related company meet its obligations, what are the terms of outstanding debt, is there any off-balance sheet debt or assets, can funds flow freely between the companies?
The Income Statement
The income statement provides information on a firm's operating activities over a specific period of time. In simple terms it is revenues less expenses. However, as is seen by all the accounting scandals recently, how those revenues and expenses are recorded can often be left open to interpretation and manipulation. A lender is well aware of the manipulation that can occur and so will look at the income statement carefully. If there are any "gray" areas the lender will want clarification, so be prepared to be able to answer any questions asked of you. Or, have your accountant prepared to answer any questions.
As with the balance sheet, a lender will rely heavily on trends and key ratios and will want to know the why of any significant movements in these ratios. Key areas they will focus on are the growth or decline in sales, net profit, gross margin and administrative expenses.
Important areas you should be aware of are:
Are you expensing or capitalizing expenditures?
Are operating profits stable?
Are there areas of weakness? If yes, what action is management taking to work on these weak areas?
Are there any extraordinary losses of gains?
Are inter-company transactions having an impact on profits?
What transactions are being completed to minimize profit and tax?
The Cash Flow Statement
The cash flow statement is a summary of a company's cash flow over a period of time. It is basically actual (i.e. not accrual) cash receipts less actual cash payments. A cash flow statement will have 3 parts to it: 1) cash from operations, 2) cash from investing activities and 3) cash from financing activities. The bank will be most concerned about cash from operations as this tells it whether the company can generate sufficient cash from day to day business activities to repay loans. However, it is still important to be able to generate a cash surplus after all activities - i.e. operations, investing and financing. The quality, consistency and sustainability of cash flow is key.
Important areas you should be aware of are:
Changes in working capital - movements in accounts receivable and payable and inventory, especially for a growing company, can mean a company is a net user of cash. This may indicate liquidity problems.
Look at ratios such as sales to cash from operations and interest and principal payments to cash from operations. Negative trends can indicate lack of controls, inefficiencies or bad investment decisions.
Look at factors that may impact total cash flow (cash from all activities) such as dividend distributions and taxes.
Are there any extraordinary items affecting cash flow?
Are there any capital expenditures which may have a negative impact on total cash flow?
Examine the relationship between the change in sales and the change in cash flow. Are there any weak spots such as a declining gross margin? What action is management taking?
As you can see that there is a lot of information that needs to be assessed. That is why it can take a few days to get back with lending decisions, particularly if the statements are complicated. The goal is to provide you with a basic understanding of what is being looked at so you can be prepared when approaching your lender. As always, the more prepared you are, the better chance of success you have.
Should You Start a Home Based Business?
Whether or not to start a home based business is probably one of the most important questions that you will ever have to answer. If you are even seriously pondering the question in the first place, then it probably means that there are circumstances in your life which are causing you to consider undertaking a venture which will have a significant and far reaching impact on your own life and on the lives of your immediate family memebers as well. Before you take a leap of faith into becoming a small business owner, there are a few areas of your life which will be impacted and which you should seriously consider before coming to any final decision as to whether or not a home based business is right for you.
FINANCIAL
Starting your own home based business can have many financial rewards and put you in control of your own financial future. However, there are a few things to consider before beginning your undertaking.
First, will you start your home based business on a part time basis and keep your day job until you are making enough profit to enable you to quit and devote your full attention to your business? Or would you rather quit your day job now so you can devote your full time and energy to building your business? There are pros and cons to both approaches and only you can decide which one you will feel most confortable with in the long run. If you have enough savings to meet your living expenses for a good six months to a year then it might be worthwhile to quit your day job to focus on growing your business. You'll see results a lot faster and that will give you the momentum you need to keep going. Starting a home based business requires a lot of up front work and if you are doing it on a part time basis it is easier to get discouraged when the results don't materialize as quickly as you had originally planned. On the other hand, having a full time income will enable you to spend more on your business without having to worry about meeting monthly living expenses.
You will also have to set a start up budget for your business as well. Any home based business will require some start up costs, even if they are only minimal at first. For example, if you are going to be doing business on the internet, you will need to register your domain name and pay a monthly fee to have your website hosted. Domain names can be registered for as little as $7.00 and monthly hosting can be obtained for a minimum of about $25.00. You'll also need to determine how much money you are going to devote to advertising your new venture. While there are some very good ways to advertise your business for free, eventually you are going to have to lay out some money to advertise if you hope to see the kind of profits that will make your online business worthwhile. While we are not talking about massive amounts of money here, a few hundred dollars would be a reasonable sum to get some quality advertising to promote your business and allow you to start making some sales which will generate even more cashflow to reinvest in your business.
PERSONAL
Most people who are interested in starting their own home based business cite personal reasons as one of their primary motivations. It seems that more and more people are getting fed up with corporate America these days and it's no secret that the average workday continues to get longer and longer, lunch hours become nonexistent, and the financial security that once came with retirement is no longer a reality for most people. Not only does having your own home based business put you in charge of your own financial future, it also allows you to start spending real quality time with your family. Most people are so exhausted at the end of a typical workday that just getting through dinner without nodding off is a real challenge. With a home based business, you control the hours you work and you automatically add at least one or two additional hours to your day that you would otherwise spend commuting to and from work.
Of course, getting your family adjusted to having you working from home may take some effort in the beginning. If you have very small children at home it can be a challenge to keep them out of your office while you are trying to get work done. If you are the primary caretaker, you will need to work in small spurts throughout the day while the kids are napping or watching a video and then put in a few hours after they go to bed for the night. Once they are in school, the routine becomes a lot easier because you can adjust your schedule around their schoolday and have most of your daily work completed by the time they get home from school.
Life can sometimes be a series of tradeoffs, so spending all that quality time with your family also means that you'll no longer have the social interaction that was once a part of your 9 to 5 routine. Now that you have a home based business, you will have to go out of your way to gain some of that same social interaction. Joining local small business organizations is a great way to make new friends, network and have your business become known in your local community. Alot of these organizations have weekly or monthly meetings with guest speakers at either a breakfast or afer work social event. In any case, socializing will now become a great way to network and spread word of mouth about your new business venture.
MOTIVATION
You have to be motivated to start any home based business. This motivation is twofold. I am talking here about both the internal drive to take action and get your business off the ground, as well as the vision you have in your head of what your business will eventually look like once it is established and what it is you want to accomplish with your business.
A home based business can bring many financial rewards, but alot of people will get discouraged with the up front work that is required to get any business off the ground. I have often heard an analogy used by folks who do business on the internet that I like a lot because I think it is so accurate. The analogy is that starting a home based internet business is like a rocket taking off. For those who are not NASA afficionados, a rocket apparently uses something like 80% of the energy that it will use during it's entire mission just during those first few minutes of liftoff. That momentum then helps carry it throughout the rest of it's journey. It's a lot like that with a home based business. It takes alot of up front energy, but one day you realize that the hardest part is over and you've created enough momentum to help make it easier from now on in. You have to have the motivation to get through those early days, otherwise you'll never create the kind of momentum that you need to see yourself through.
You're also going to need to identify your motivation in terms of what it is you want to accomplish with this business of yours anyway. Do you have a great idea or product that you want to promote? Most people actually don't, and that's okay. Selling your own product is often thought of as the most lucrative way to make money on the internet, but you can still make quite a bit of money by finding other people's products and promoting those as an affiliate. That means for every sale you make, you get a commission. And you can also generate residual income for yourself by recruiting other people to become affiliates under you. But no matter which way you go, you have to like what you're doing and what you're promoting. Starting a home based business will not bring the financial rewards you are hoping for if you are not doing something that makes you feel energized, excited, challenged and, perhaps most importantly, that you are providing a worthwhile benefit to those people who are buying your product or service.
Well, I certainly hope those few points have given you enough to ponder as you go through the process of deciding whether or not a home based business is right for you. I hope you come to the conclusion that it is, because there is no better way that I know of to take control of your own financial future. If you don't take the bull by the horns and do it for yourself, nobody else will. But don't forget to have fun along the way. Pick a home based business that you'll look forward to tending to day in and day out and that benefits other people in some way, and I promise you that the financial rewards will follow......
FINANCIAL
Starting your own home based business can have many financial rewards and put you in control of your own financial future. However, there are a few things to consider before beginning your undertaking.
First, will you start your home based business on a part time basis and keep your day job until you are making enough profit to enable you to quit and devote your full attention to your business? Or would you rather quit your day job now so you can devote your full time and energy to building your business? There are pros and cons to both approaches and only you can decide which one you will feel most confortable with in the long run. If you have enough savings to meet your living expenses for a good six months to a year then it might be worthwhile to quit your day job to focus on growing your business. You'll see results a lot faster and that will give you the momentum you need to keep going. Starting a home based business requires a lot of up front work and if you are doing it on a part time basis it is easier to get discouraged when the results don't materialize as quickly as you had originally planned. On the other hand, having a full time income will enable you to spend more on your business without having to worry about meeting monthly living expenses.
You will also have to set a start up budget for your business as well. Any home based business will require some start up costs, even if they are only minimal at first. For example, if you are going to be doing business on the internet, you will need to register your domain name and pay a monthly fee to have your website hosted. Domain names can be registered for as little as $7.00 and monthly hosting can be obtained for a minimum of about $25.00. You'll also need to determine how much money you are going to devote to advertising your new venture. While there are some very good ways to advertise your business for free, eventually you are going to have to lay out some money to advertise if you hope to see the kind of profits that will make your online business worthwhile. While we are not talking about massive amounts of money here, a few hundred dollars would be a reasonable sum to get some quality advertising to promote your business and allow you to start making some sales which will generate even more cashflow to reinvest in your business.
PERSONAL
Most people who are interested in starting their own home based business cite personal reasons as one of their primary motivations. It seems that more and more people are getting fed up with corporate America these days and it's no secret that the average workday continues to get longer and longer, lunch hours become nonexistent, and the financial security that once came with retirement is no longer a reality for most people. Not only does having your own home based business put you in charge of your own financial future, it also allows you to start spending real quality time with your family. Most people are so exhausted at the end of a typical workday that just getting through dinner without nodding off is a real challenge. With a home based business, you control the hours you work and you automatically add at least one or two additional hours to your day that you would otherwise spend commuting to and from work.
Of course, getting your family adjusted to having you working from home may take some effort in the beginning. If you have very small children at home it can be a challenge to keep them out of your office while you are trying to get work done. If you are the primary caretaker, you will need to work in small spurts throughout the day while the kids are napping or watching a video and then put in a few hours after they go to bed for the night. Once they are in school, the routine becomes a lot easier because you can adjust your schedule around their schoolday and have most of your daily work completed by the time they get home from school.
Life can sometimes be a series of tradeoffs, so spending all that quality time with your family also means that you'll no longer have the social interaction that was once a part of your 9 to 5 routine. Now that you have a home based business, you will have to go out of your way to gain some of that same social interaction. Joining local small business organizations is a great way to make new friends, network and have your business become known in your local community. Alot of these organizations have weekly or monthly meetings with guest speakers at either a breakfast or afer work social event. In any case, socializing will now become a great way to network and spread word of mouth about your new business venture.
MOTIVATION
You have to be motivated to start any home based business. This motivation is twofold. I am talking here about both the internal drive to take action and get your business off the ground, as well as the vision you have in your head of what your business will eventually look like once it is established and what it is you want to accomplish with your business.
A home based business can bring many financial rewards, but alot of people will get discouraged with the up front work that is required to get any business off the ground. I have often heard an analogy used by folks who do business on the internet that I like a lot because I think it is so accurate. The analogy is that starting a home based internet business is like a rocket taking off. For those who are not NASA afficionados, a rocket apparently uses something like 80% of the energy that it will use during it's entire mission just during those first few minutes of liftoff. That momentum then helps carry it throughout the rest of it's journey. It's a lot like that with a home based business. It takes alot of up front energy, but one day you realize that the hardest part is over and you've created enough momentum to help make it easier from now on in. You have to have the motivation to get through those early days, otherwise you'll never create the kind of momentum that you need to see yourself through.
You're also going to need to identify your motivation in terms of what it is you want to accomplish with this business of yours anyway. Do you have a great idea or product that you want to promote? Most people actually don't, and that's okay. Selling your own product is often thought of as the most lucrative way to make money on the internet, but you can still make quite a bit of money by finding other people's products and promoting those as an affiliate. That means for every sale you make, you get a commission. And you can also generate residual income for yourself by recruiting other people to become affiliates under you. But no matter which way you go, you have to like what you're doing and what you're promoting. Starting a home based business will not bring the financial rewards you are hoping for if you are not doing something that makes you feel energized, excited, challenged and, perhaps most importantly, that you are providing a worthwhile benefit to those people who are buying your product or service.
Well, I certainly hope those few points have given you enough to ponder as you go through the process of deciding whether or not a home based business is right for you. I hope you come to the conclusion that it is, because there is no better way that I know of to take control of your own financial future. If you don't take the bull by the horns and do it for yourself, nobody else will. But don't forget to have fun along the way. Pick a home based business that you'll look forward to tending to day in and day out and that benefits other people in some way, and I promise you that the financial rewards will follow......
Understanding Your Cash Flow
The single biggest reason the small business failure rates are so incredibly high today is this one simple fact: Most business owners don't really know what's going on with their most precious asset - their CASH.
Despite the fact that cash is the lifeblood of the business, the fuel that keeps the engine running, most business owners truly don't have a handle on the flow of cash into their business and the flow of cash out of their business.
The reason this problem is so widespread today is that each of us has been taught that managing the financial side of our business means having financial statements.
We have all been taught that financial statements show us the complete view of the financial side of our business.
Well, the truth is they don't.
*Recognize the Limitation of Financial Statements*
There is no doubt the basic financial statements that every business must prepare are very useful; in fact they are a must.
Banks require you to provide them. Investors require you to provide them. They are the common language of business. You cannot succeed in business without them.
At the same time, if you have no other tool for understanding and managing the cash flow of your business other than your basic financial statements, you will always feel out of control. You will be flirting with disaster because you will be neglecting the lifeblood of your business - your cash.
The accounting rules that govern the creation of financial statements are not about tracking the actual flow of cash through your business. They are focused on measuring profit or loss - not cash flow.
That's why a profit in your financial statements does not necessarily mean you created any cash.
By the same token, a loss in your financial statements does not necessarily mean you lost any cash.
I worked with a company recently that routinely reported an annual loss in their income statement of about $1,000,000. The beauty of that business was that it actually generated over $800,000 in positive cash flow.
The rules of accounting required an investment made years before to be amortized (expensed over time) in the income statement. The result was a big non-cash expense in the income statement every year that created a net loss.
But cash flow was unaffected. The cash continued to roll in despite the fact that the rules of accounting required this expense to be included in the income statement.
And the opposite scenario is also true.
The business headlines of the last three years have been filled with companies that showed incredible profits in their income statement. But their cash flow was a very different story.
They ended up in bankruptcy because they actually had a negative cash flow. They used more cash than they generated despite the profit shown in their financial statements.
*Take Control of Your Most Precious Asset*
The solution to this problem is to have a schedule of your actual and projected revenues and expenses in the context of your beginning and ending cash balances. Each month should be presented next to each other so the actual cash balances for previous months are shown next to the expected cash balances for the coming months.
A schedule like this presents the cash flow of your business in a way that makes it crystal clear where your money is going and where you expect your cash balance to be six months from now.
This is the secret to understanding the cash flow of your business.
Despite the fact that cash is the lifeblood of the business, the fuel that keeps the engine running, most business owners truly don't have a handle on the flow of cash into their business and the flow of cash out of their business.
The reason this problem is so widespread today is that each of us has been taught that managing the financial side of our business means having financial statements.
We have all been taught that financial statements show us the complete view of the financial side of our business.
Well, the truth is they don't.
*Recognize the Limitation of Financial Statements*
There is no doubt the basic financial statements that every business must prepare are very useful; in fact they are a must.
Banks require you to provide them. Investors require you to provide them. They are the common language of business. You cannot succeed in business without them.
At the same time, if you have no other tool for understanding and managing the cash flow of your business other than your basic financial statements, you will always feel out of control. You will be flirting with disaster because you will be neglecting the lifeblood of your business - your cash.
The accounting rules that govern the creation of financial statements are not about tracking the actual flow of cash through your business. They are focused on measuring profit or loss - not cash flow.
That's why a profit in your financial statements does not necessarily mean you created any cash.
By the same token, a loss in your financial statements does not necessarily mean you lost any cash.
I worked with a company recently that routinely reported an annual loss in their income statement of about $1,000,000. The beauty of that business was that it actually generated over $800,000 in positive cash flow.
The rules of accounting required an investment made years before to be amortized (expensed over time) in the income statement. The result was a big non-cash expense in the income statement every year that created a net loss.
But cash flow was unaffected. The cash continued to roll in despite the fact that the rules of accounting required this expense to be included in the income statement.
And the opposite scenario is also true.
The business headlines of the last three years have been filled with companies that showed incredible profits in their income statement. But their cash flow was a very different story.
They ended up in bankruptcy because they actually had a negative cash flow. They used more cash than they generated despite the profit shown in their financial statements.
*Take Control of Your Most Precious Asset*
The solution to this problem is to have a schedule of your actual and projected revenues and expenses in the context of your beginning and ending cash balances. Each month should be presented next to each other so the actual cash balances for previous months are shown next to the expected cash balances for the coming months.
A schedule like this presents the cash flow of your business in a way that makes it crystal clear where your money is going and where you expect your cash balance to be six months from now.
This is the secret to understanding the cash flow of your business.
Monday, November 17, 2008
Don't Let The Holidays Detour You From Your Financial Goals
Do you dread going to your mailbox and finding yet another credit card bill? Do you find yourself worrying about how you'll pay your bills from one month to the next ?
Guess what ? You're not alone. Almost half the households in America report having difficulty paying their minimum monthly payments on credit card bills and other debts.
We have become a nation hooked on credit. Recent government statistics on American debt show that:
~ Over 40% of US families spend more than they earn.
~ The typical U.S. household has an average credit-card balance of $8,940.
~ Credit card debt is up 36% from just 5 years ago.
~ 92% of U.S. family disposable income is spent on paying debts, up from 65% in 1975.
How did we get ourselves in such a mess ? According to Dayana Yochim, a journalist and teacher for The Motley Fool, "It's not just that we're borrowing more money and paying it back more slowly; it's that we're spending money we used to consider off-limits."
Yochim points to the popularity of home equity loans and lines of credit as just one example. "Home equity loans are more popular than ever as people borrow against their home to feed their spending binge."
According to a BusinessWeek report, total household debt topped 100% of disposable annual income last year for the first time ever.
"The problem with credit for many people is that it's just too easy to get into a rut with bad spending habits," says Rich Vorland of Consumer Credit Counseling. "Credit gives everyone the instant gratification of getting something they want right now. We don't have to save up for it. We don't have think of how we'll pay for it until the bill arrives."
And therein lies the problem for many holiday shoppers. Too often we pull out the plastic without thinking of how we'll actually pay for the things we buy. How many of us are still paying off credit card debt from last year's holidays? Adding additional debt will only keep you buried in debt for many more years.
For example, let's say you have a credit card debt of $2500 with an APR of 18%. If you only pay the minimum amount due it will take you 20 YEARS to pay off your balance, assuming of course you don't make any other credit purchases. On top of that you will have paid your credit card company a whopping $3,365.51 in interest!
If you've been working to eliminate or pay down credit card debt, don't let the holidays detour you from that goal. Use only cash to pay for the presents you plan to buy. If you must use a credit card, set a goal to pay off that debt within one to two months. Otherwise you'll be right back where you started from or even worse - further and further in debt.
Guess what ? You're not alone. Almost half the households in America report having difficulty paying their minimum monthly payments on credit card bills and other debts.
We have become a nation hooked on credit. Recent government statistics on American debt show that:
~ Over 40% of US families spend more than they earn.
~ The typical U.S. household has an average credit-card balance of $8,940.
~ Credit card debt is up 36% from just 5 years ago.
~ 92% of U.S. family disposable income is spent on paying debts, up from 65% in 1975.
How did we get ourselves in such a mess ? According to Dayana Yochim, a journalist and teacher for The Motley Fool, "It's not just that we're borrowing more money and paying it back more slowly; it's that we're spending money we used to consider off-limits."
Yochim points to the popularity of home equity loans and lines of credit as just one example. "Home equity loans are more popular than ever as people borrow against their home to feed their spending binge."
According to a BusinessWeek report, total household debt topped 100% of disposable annual income last year for the first time ever.
"The problem with credit for many people is that it's just too easy to get into a rut with bad spending habits," says Rich Vorland of Consumer Credit Counseling. "Credit gives everyone the instant gratification of getting something they want right now. We don't have to save up for it. We don't have think of how we'll pay for it until the bill arrives."
And therein lies the problem for many holiday shoppers. Too often we pull out the plastic without thinking of how we'll actually pay for the things we buy. How many of us are still paying off credit card debt from last year's holidays? Adding additional debt will only keep you buried in debt for many more years.
For example, let's say you have a credit card debt of $2500 with an APR of 18%. If you only pay the minimum amount due it will take you 20 YEARS to pay off your balance, assuming of course you don't make any other credit purchases. On top of that you will have paid your credit card company a whopping $3,365.51 in interest!
If you've been working to eliminate or pay down credit card debt, don't let the holidays detour you from that goal. Use only cash to pay for the presents you plan to buy. If you must use a credit card, set a goal to pay off that debt within one to two months. Otherwise you'll be right back where you started from or even worse - further and further in debt.
How to Master the Financial Side of Your Business
I conducted a survey recently to determine the degree to which small business owners have their cash flow under control.
The survey results showed that only 20% of business owners feel like they have the cash flow of their business under control. That means 8 out of every 10 business owners are trying to manage their business without having the financial side of their business under control.
That's a recipe for disaster!
It's like riding along on the freeway in a driving rainstorm and you discover that your windshield wipers won't work. You can't see the cars in front of you or behind you. You slow down to a crawl. You're just hoping and praying the rain stops before you end up in a terrible accident.
In business, you need a clear view into the financial impact of your business decisions so that you put the odds of success in your favor. You have to take control of this part of your business... or it will take control of you.
THE SMALL BUSINESS FINANCIAL DILEMMA
The results of the survey highlight what I call The Small Business Financial Dilemma.
It works like this.
As a small business owner you wear lots of hats. You are in charge of Marketing, Operations, Customer Service, Accounting, Finance, Administration, Human Resources and everything else that must be done to run a successful business.
After a while, some of the work that needs to be done is put off. Often times it's the accounting and financial component of the business that is sacrificed.
A little time passes and you begin to notice you don't really know what's going on with the cash balance. You may be looking at financial statements, but you are confused about what they are telling you about what's going on with your cash balance.
THE RESULTING DILEMMA
Running a small business means you are always making financial decisions and financial commitments. You are making those financial commitments each day and in the back of your mind you are asking yourself these questions:
"Can I really meet these financial commitments I'm making?"
"Am I going to have enough cash to run my business properly?"
Slowly but surely, worry and uncertainty about your cash begins to drag you down. You find yourself spending more and more of your time fighting cash flow fires rather than growing your business and taking care of customers.
THE SOLUTION TO THE PROBLEM
The secret to taking control of your cash flow is to ask yourself two simple questions.
- What is my cash balance right now?
- What do I expect my cash balance to be six months from now?
If you CAN'T answer these two questions, then strap yourself in for a wild ride. You are on a roller coaster ride that's about to become really frightening.
On the other hand, when you CAN answer these two questions, you have just regained control of the financial side of your business. You will experience the almost magical feeling of control that comes from mastering this critical part of your business.
You will feel like I did back in 1991 when I first discovered the secret to taking control of the cash flow of any business. I was amazed how simple the solution was and how it transformed the way I managed the business from that point forward.
NEVER RUN OUT OF CASH
Remember, it's all about the cash. If the cash ever runs out, then everything you worked so hard for goes right down the toilet. That's why the financial side of business is so crucial to your success.
Take the time to ask and answer the two critical cash flow questions each month.
By taking control of your cash flow, you are putting the odds of success in your favor. You are doing your part to avoid becoming a small business failure statistic.
You are making sure you have the financial information you need so you Never Run Out of Cash.
The survey results showed that only 20% of business owners feel like they have the cash flow of their business under control. That means 8 out of every 10 business owners are trying to manage their business without having the financial side of their business under control.
That's a recipe for disaster!
It's like riding along on the freeway in a driving rainstorm and you discover that your windshield wipers won't work. You can't see the cars in front of you or behind you. You slow down to a crawl. You're just hoping and praying the rain stops before you end up in a terrible accident.
In business, you need a clear view into the financial impact of your business decisions so that you put the odds of success in your favor. You have to take control of this part of your business... or it will take control of you.
THE SMALL BUSINESS FINANCIAL DILEMMA
The results of the survey highlight what I call The Small Business Financial Dilemma.
It works like this.
As a small business owner you wear lots of hats. You are in charge of Marketing, Operations, Customer Service, Accounting, Finance, Administration, Human Resources and everything else that must be done to run a successful business.
After a while, some of the work that needs to be done is put off. Often times it's the accounting and financial component of the business that is sacrificed.
A little time passes and you begin to notice you don't really know what's going on with the cash balance. You may be looking at financial statements, but you are confused about what they are telling you about what's going on with your cash balance.
THE RESULTING DILEMMA
Running a small business means you are always making financial decisions and financial commitments. You are making those financial commitments each day and in the back of your mind you are asking yourself these questions:
"Can I really meet these financial commitments I'm making?"
"Am I going to have enough cash to run my business properly?"
Slowly but surely, worry and uncertainty about your cash begins to drag you down. You find yourself spending more and more of your time fighting cash flow fires rather than growing your business and taking care of customers.
THE SOLUTION TO THE PROBLEM
The secret to taking control of your cash flow is to ask yourself two simple questions.
- What is my cash balance right now?
- What do I expect my cash balance to be six months from now?
If you CAN'T answer these two questions, then strap yourself in for a wild ride. You are on a roller coaster ride that's about to become really frightening.
On the other hand, when you CAN answer these two questions, you have just regained control of the financial side of your business. You will experience the almost magical feeling of control that comes from mastering this critical part of your business.
You will feel like I did back in 1991 when I first discovered the secret to taking control of the cash flow of any business. I was amazed how simple the solution was and how it transformed the way I managed the business from that point forward.
NEVER RUN OUT OF CASH
Remember, it's all about the cash. If the cash ever runs out, then everything you worked so hard for goes right down the toilet. That's why the financial side of business is so crucial to your success.
Take the time to ask and answer the two critical cash flow questions each month.
By taking control of your cash flow, you are putting the odds of success in your favor. You are doing your part to avoid becoming a small business failure statistic.
You are making sure you have the financial information you need so you Never Run Out of Cash.
Financial Middleman for Small Business
Small online businesses are mostly represented by home-based entrepreneurs. In this regard any payment scheme or system should meet at least two criterions:
First. It should be relatively cheap. Individuals are usually not enjoying huge investment potential in contrast with legal entities. Second. It should lead to complete automation of financial transactions as a result of lack of time or inability for the majority of entrepreneurs to hire support stuff to serve these transactions.
In short, it all comes down to the shortage of money and time. For these simple reasons, sophisticated e-commerce systems based on merchant accounts are expensive, hard to establish and support for an average entrepreneur. That is why third party payment processors that will handle all online orders on your behalf became widely popular among small businesses. They require very little effort to establish and even less effort to support. In most cases they will provide you with completely automated as well as quick and reliable for your customer way of payment.
This will allow you to accept payments 24/7 focusing your business to work on other tasks and activity.
In practice once set up, the whole customer paying and product delivering process becomes fully automated and consists of the following steps:
1. Customer fills out the order form and clicks on the submit button to pass the order to the payment gateway;
2. Automatic payment gateway routes credit card (e-check etc.) data and purchase amount to the payment processor of the merchant (seller) acquiring bank;
3. Acquiring bank sends authorization request to the payment processor of the customer's issuing bank;
4. Issuing bank validates customer's account, credit limit and authorize the transaction, freezing the specified amount on the customer's account;
5. Issuing bank routes authorization code (or "transaction declined" message) to the acquiring bank's payment processor;
6. Acquiring bank routes payment approval (declined) message to the payment gateway;
7. Payment gateway notifies the merchant (seller) about approved (denied) transaction;
8. Provides customer with the product s/he ordered, the details of shipping etc. or notifies about payment problems;
9. Banks' clearing settle the mutual transfer of funds, crediting the respective merchant (seller) account with the specified amount of purchase.
All these steps due to complete automation process, if we don't speak about phone or mail orders etc., will take somewhat between several seconds to several minutes, still usually faster than when you are billed at the store's pay desk and much faster considering the speed of going for online shopping instead of the "offline".
This publication intended to analyze existent picture of third party processing companies and represent you the comparative facts that would help you to determine your preferences based on business needs and capacities.
The table below will provide you with basic features of the most "visible" today's online payment processing players. Please note, that the online financial market evolves extremely fast, so the table data is accurate as on the February 2003 what I cannot guarantee in a month, all the more in a year, so my advice here is to choose 3-5 most acceptable and affordable financial intermediaries (even if some important for you feature is missing) and recheck their services and fees once more at their web-sites before making any final decision.
------------------------------------------------------------Company Name in alphabetical order:1) Setup fees 2) Monthly fees 3) Commission structure*
2CheckOut:1) $49 2) no 3) $0.45 + 5.5%;
CCNow:1) no ($11.95 for Int.) 2) $9.95 3) $0-$100 - 0%, $100+- 9%(11% for Int.);
ClickBank:1) $49.95 2) no 3) $1 + 7.5%;
IBill:1) no 2) no 3) $0-$9,999 - 15%, $10,000-$24,999 - 14% etc.;
MultiCards:1) $15 or $150 2) no 3) 11.9% or 9.9%;
PayPal:1) no 2) no 3) $.30 + 2.9%;
PaySystems:1) $49.00 2) no 3) $1.00 + 3.95% or $0.45 + 5.5%;
ProBilling:1) no 2) no 3) $0-4,999 - 13.5%, $5,000-12,499 - 12% etc.;
ProPay :1) $35.00 (yearly) 2) no 3) $.30 + 2.9%;
Regsoft:1) no 2) no 3)$0-$30 - $3.00, $30+ - 10%;
Verotel:1) no 2) no 3) $3.75-$75.00 - 13.5%;
V-Share:1) no 2) no 3) $0-$15 - 20%, $15-$100 - $3+4%, $100-$200 -$2+5% etc.
------------------------------------------------------------Company Name in alphabetical order: 1) Credit Cardsacceptance 2) Online Check acceptance 3) Phone(Fax) ordersacceptance 4) Recurring Billing feature
2CheckOut: 1) yes 2) yes 3) no 4) yesCCNow: 1) yes 2) no 3) no 4) noClickBank: 1) yes 2) yes 3) no 4) noIBill: 1) yes 2) yes 3) yes 4) yesMultiCards: 1) yes 2) yes 3) no 4) yesPayPal: 1) yes 2) yes 3) no 4) yesPaySystems: 1) yes 2) yes 3) no 4) yesProBilling: 1) yes 2) yes 3) no 4) yesProPay: 1) yes 2) yes 3) no 4) noRegsoft: 1) yes 2) yes 3) yes 4) noVerotel: 1) yes 2) yes 3) yes 4) yesV-Share: 1) yes 2) yes 3) yes 4) yes
------------------------------------------------------------* Commissions are charged in two most popular ways: * depending on the sales volume, for instance, 10% for $0-$1000 in gross sales and 5% for $1000+ or; * flat fees plus percent of the transaction amount: $2 + 5%, so if you sell your item for $50 the commission is $2+$2.5 (5% out of $50)=$4.5 Note, that commissions shown for credit card billing may be the same or may differ from company to company for online checks and, especially, for phone order processing.
As you see, the table compares the most common features of services, while some secondary options like affiliate program, online auctions support or inability of such companies like PayPal to process all worldwide customers including yours truly, were left behind.
IBill and Verotel, for instance, have retail price maximum limits. The dominating majority of payment processors charge additional fees for chargebacks and refunds, while Regsoft, Verotel or V-share offers a completely risk-free start up, charging commission from actual sales only.
The middleman you will commit to should offer easy ways to administrate your account, view statistics, add/delete products on sale, setup price, tune and customize with your web-site image the order page etc.
Depending on the nature of your main product: tangible or intangible, some companies may or may not meet your needs. Check Verza.com payment processing company for tangible and shippable goods. They are the Mother company of Verotel - division specially designed for intangible products or "bits" sellers.
Carefully read terms & conditions agreement, other regulations as well as charge back policy before signing up for any service.
Find out the offered ordering security options. While some companies provide sophisticated fraudulent control system and supply you with both server secured order form and non-secured order form for your customer convenience, other payment processors had problems even with the coding of their order web-pages, what allowed anyone to literally steal your intangible products by downloading them without payment. That happened because the URL of the so-called "Thank you" page (where sellers arrange their info materials to download) was clearly visible in the source code of the order form. This is unacceptable.
You may also want to test their support system and uptime the same way you do before selecting a web-hosting provider. Because your order page(s) is(are) hosted at the 3rd party payment provider server(s), if they are down for any reason, it may be very sad for your customer to choose a product, click on the order link and get error or "The page cannot be displayed" massage.
As you see there are a lot of points to check and analyze. On the other hand, remember a rule of not complicating things. The key for easy decision-making process is not to avoid research as some people do going for the first offer they see, rather than knowing your needs and capabilities including financial beforehand.
Determine them at the very beginning and search companies accordingly, making the whole research smooth and easy. Besides, on the contrary to, say, domain name choosing, payment processor service is temporal to help you build your online business in a quick, cheap or zero cost way. At some stage due to economy of scale it will be cheaper and more effective for your business to establish personal merchant account with respective e-commerce gateway system.
First. It should be relatively cheap. Individuals are usually not enjoying huge investment potential in contrast with legal entities. Second. It should lead to complete automation of financial transactions as a result of lack of time or inability for the majority of entrepreneurs to hire support stuff to serve these transactions.
In short, it all comes down to the shortage of money and time. For these simple reasons, sophisticated e-commerce systems based on merchant accounts are expensive, hard to establish and support for an average entrepreneur. That is why third party payment processors that will handle all online orders on your behalf became widely popular among small businesses. They require very little effort to establish and even less effort to support. In most cases they will provide you with completely automated as well as quick and reliable for your customer way of payment.
This will allow you to accept payments 24/7 focusing your business to work on other tasks and activity.
In practice once set up, the whole customer paying and product delivering process becomes fully automated and consists of the following steps:
1. Customer fills out the order form and clicks on the submit button to pass the order to the payment gateway;
2. Automatic payment gateway routes credit card (e-check etc.) data and purchase amount to the payment processor of the merchant (seller) acquiring bank;
3. Acquiring bank sends authorization request to the payment processor of the customer's issuing bank;
4. Issuing bank validates customer's account, credit limit and authorize the transaction, freezing the specified amount on the customer's account;
5. Issuing bank routes authorization code (or "transaction declined" message) to the acquiring bank's payment processor;
6. Acquiring bank routes payment approval (declined) message to the payment gateway;
7. Payment gateway notifies the merchant (seller) about approved (denied) transaction;
8. Provides customer with the product s/he ordered, the details of shipping etc. or notifies about payment problems;
9. Banks' clearing settle the mutual transfer of funds, crediting the respective merchant (seller) account with the specified amount of purchase.
All these steps due to complete automation process, if we don't speak about phone or mail orders etc., will take somewhat between several seconds to several minutes, still usually faster than when you are billed at the store's pay desk and much faster considering the speed of going for online shopping instead of the "offline".
This publication intended to analyze existent picture of third party processing companies and represent you the comparative facts that would help you to determine your preferences based on business needs and capacities.
The table below will provide you with basic features of the most "visible" today's online payment processing players. Please note, that the online financial market evolves extremely fast, so the table data is accurate as on the February 2003 what I cannot guarantee in a month, all the more in a year, so my advice here is to choose 3-5 most acceptable and affordable financial intermediaries (even if some important for you feature is missing) and recheck their services and fees once more at their web-sites before making any final decision.
------------------------------------------------------------Company Name in alphabetical order:1) Setup fees 2) Monthly fees 3) Commission structure*
2CheckOut:1) $49 2) no 3) $0.45 + 5.5%;
CCNow:1) no ($11.95 for Int.) 2) $9.95 3) $0-$100 - 0%, $100+- 9%(11% for Int.);
ClickBank:1) $49.95 2) no 3) $1 + 7.5%;
IBill:1) no 2) no 3) $0-$9,999 - 15%, $10,000-$24,999 - 14% etc.;
MultiCards:1) $15 or $150 2) no 3) 11.9% or 9.9%;
PayPal:1) no 2) no 3) $.30 + 2.9%;
PaySystems:1) $49.00 2) no 3) $1.00 + 3.95% or $0.45 + 5.5%;
ProBilling:1) no 2) no 3) $0-4,999 - 13.5%, $5,000-12,499 - 12% etc.;
ProPay :1) $35.00 (yearly) 2) no 3) $.30 + 2.9%;
Regsoft:1) no 2) no 3)$0-$30 - $3.00, $30+ - 10%;
Verotel:1) no 2) no 3) $3.75-$75.00 - 13.5%;
V-Share:1) no 2) no 3) $0-$15 - 20%, $15-$100 - $3+4%, $100-$200 -$2+5% etc.
------------------------------------------------------------Company Name in alphabetical order: 1) Credit Cardsacceptance 2) Online Check acceptance 3) Phone(Fax) ordersacceptance 4) Recurring Billing feature
2CheckOut: 1) yes 2) yes 3) no 4) yesCCNow: 1) yes 2) no 3) no 4) noClickBank: 1) yes 2) yes 3) no 4) noIBill: 1) yes 2) yes 3) yes 4) yesMultiCards: 1) yes 2) yes 3) no 4) yesPayPal: 1) yes 2) yes 3) no 4) yesPaySystems: 1) yes 2) yes 3) no 4) yesProBilling: 1) yes 2) yes 3) no 4) yesProPay: 1) yes 2) yes 3) no 4) noRegsoft: 1) yes 2) yes 3) yes 4) noVerotel: 1) yes 2) yes 3) yes 4) yesV-Share: 1) yes 2) yes 3) yes 4) yes
------------------------------------------------------------* Commissions are charged in two most popular ways: * depending on the sales volume, for instance, 10% for $0-$1000 in gross sales and 5% for $1000+ or; * flat fees plus percent of the transaction amount: $2 + 5%, so if you sell your item for $50 the commission is $2+$2.5 (5% out of $50)=$4.5 Note, that commissions shown for credit card billing may be the same or may differ from company to company for online checks and, especially, for phone order processing.
As you see, the table compares the most common features of services, while some secondary options like affiliate program, online auctions support or inability of such companies like PayPal to process all worldwide customers including yours truly, were left behind.
IBill and Verotel, for instance, have retail price maximum limits. The dominating majority of payment processors charge additional fees for chargebacks and refunds, while Regsoft, Verotel or V-share offers a completely risk-free start up, charging commission from actual sales only.
The middleman you will commit to should offer easy ways to administrate your account, view statistics, add/delete products on sale, setup price, tune and customize with your web-site image the order page etc.
Depending on the nature of your main product: tangible or intangible, some companies may or may not meet your needs. Check Verza.com payment processing company for tangible and shippable goods. They are the Mother company of Verotel - division specially designed for intangible products or "bits" sellers.
Carefully read terms & conditions agreement, other regulations as well as charge back policy before signing up for any service.
Find out the offered ordering security options. While some companies provide sophisticated fraudulent control system and supply you with both server secured order form and non-secured order form for your customer convenience, other payment processors had problems even with the coding of their order web-pages, what allowed anyone to literally steal your intangible products by downloading them without payment. That happened because the URL of the so-called "Thank you" page (where sellers arrange their info materials to download) was clearly visible in the source code of the order form. This is unacceptable.
You may also want to test their support system and uptime the same way you do before selecting a web-hosting provider. Because your order page(s) is(are) hosted at the 3rd party payment provider server(s), if they are down for any reason, it may be very sad for your customer to choose a product, click on the order link and get error or "The page cannot be displayed" massage.
As you see there are a lot of points to check and analyze. On the other hand, remember a rule of not complicating things. The key for easy decision-making process is not to avoid research as some people do going for the first offer they see, rather than knowing your needs and capabilities including financial beforehand.
Determine them at the very beginning and search companies accordingly, making the whole research smooth and easy. Besides, on the contrary to, say, domain name choosing, payment processor service is temporal to help you build your online business in a quick, cheap or zero cost way. At some stage due to economy of scale it will be cheaper and more effective for your business to establish personal merchant account with respective e-commerce gateway system.
Setting Your Financial Priorities
Whether you know it or not, you are always setting your financial priorities. Some may decide that a new stereo system is more inportant than this month's electric bill. This may be a little off the wall but it is still setting your priorities.
Anyone wanting to better manage their money would be wise to determine what their financial priorities are and stick to them. Of course, if you see that these priorities will not put food on the table and pay your bills then you will have to rethink your priorities.
Setting your priorities is simple. You just decide what is the most important aspect of your finances and put that item on top. However, if you decide on that stereo over your electric bill, you may find yourself in the dark with no need for a stereo.
There are basic priorities that pertains to everyone. These are simply a matter of survival. Here is a list of the basics:
WaterFoodShelter
That was a tough one.
What does it take to ensure that our basic needs are met? The main ingredient is a source of income to pay the rent or house payment, pay the utilities, and buy the groceries. This is where you start setting your priorities.
Before you can spend another penny, you have to take care of what you need to survive. Don't put off the rent or house payment, utilities and don't skimp on your groceries and necessary health items. If you do you will start experiencing money problems much sooner than you would if you had delayed paying other bills instead.
What's next? If your source of income happens to come from a job, then I would say your transportation. You have to get back and forth to work so you can afford all of the other stuff. This would include your vehicle payment, gas, insurance and maintenance. If your source of income is not a job then go to the next step.
And Now? Naturally, this would be your other bills. You can even split this category a little further.
First, you have your bills that are secured by property. You should always pay these bills first.
Secondly, your unsecured bills which are probably credit cards.
The reason you should always pay your secured bills first is that it is much more likely that they can take the secured property and probably will unless payment is made. While credit cards companies are notorious for their threats, they very seldom follow through. I'm not saying not to pay them, just that they aren't as high a priority as your secured bills.
Next would be your savings. I really to hate to list savings as your last priority because having a savings can prevent the use of those dreaded credit cards and help in so many ways. If you have the money to cover all of your other priorities then you should always put savings at the top of the list. However, if you don't have enough money to cover your bills and expenses then your savings will have to be the first to go.
Just to recap. The below list is an example of what your financial priorities should look like:
1. Groceries and Necessary Health Items2. Housing (Rent or House Payment)3. Utilities4. Transportation5. Secured Bills6. Unsecured Bills7. Savings
Anyone wanting to better manage their money would be wise to determine what their financial priorities are and stick to them. Of course, if you see that these priorities will not put food on the table and pay your bills then you will have to rethink your priorities.
Setting your priorities is simple. You just decide what is the most important aspect of your finances and put that item on top. However, if you decide on that stereo over your electric bill, you may find yourself in the dark with no need for a stereo.
There are basic priorities that pertains to everyone. These are simply a matter of survival. Here is a list of the basics:
WaterFoodShelter
That was a tough one.
What does it take to ensure that our basic needs are met? The main ingredient is a source of income to pay the rent or house payment, pay the utilities, and buy the groceries. This is where you start setting your priorities.
Before you can spend another penny, you have to take care of what you need to survive. Don't put off the rent or house payment, utilities and don't skimp on your groceries and necessary health items. If you do you will start experiencing money problems much sooner than you would if you had delayed paying other bills instead.
What's next? If your source of income happens to come from a job, then I would say your transportation. You have to get back and forth to work so you can afford all of the other stuff. This would include your vehicle payment, gas, insurance and maintenance. If your source of income is not a job then go to the next step.
And Now? Naturally, this would be your other bills. You can even split this category a little further.
First, you have your bills that are secured by property. You should always pay these bills first.
Secondly, your unsecured bills which are probably credit cards.
The reason you should always pay your secured bills first is that it is much more likely that they can take the secured property and probably will unless payment is made. While credit cards companies are notorious for their threats, they very seldom follow through. I'm not saying not to pay them, just that they aren't as high a priority as your secured bills.
Next would be your savings. I really to hate to list savings as your last priority because having a savings can prevent the use of those dreaded credit cards and help in so many ways. If you have the money to cover all of your other priorities then you should always put savings at the top of the list. However, if you don't have enough money to cover your bills and expenses then your savings will have to be the first to go.
Just to recap. The below list is an example of what your financial priorities should look like:
1. Groceries and Necessary Health Items2. Housing (Rent or House Payment)3. Utilities4. Transportation5. Secured Bills6. Unsecured Bills7. Savings
Are You Swiftly Killing YOUR Financial Future?
Don't get defensive, and don't become offended by the points made in this article -- this is meant to HELP you. So if you're ready to learn how to avoid a common marketing faux pas, then put on your thinking cap and let's get to work! :)
And, what's this suicide marketing "no-no" that's could be killing your profits? That would be...
LACK OF ORIGINALITY.Yep, you heard right. Get your complimentary barf bags from that overhead compartment -- you'll need 'em for this one. Are you sick of hearing the same dried-up cliches over and over again in sales letters, ads, and every day business talk? You know, the ones loaded with overused phrases like"It's a WIN/WIN situation!""Houston ... we have a problem."
"It ain't over 'til the fat lady sings."
"Drive your hit counter CRAZY!"
And so on. If you're not sick to death of the lack of originality displayed at every turn, you soon will be. It makes me think,"Uh oh ... here we go again! Just another marketing know-it-all that thinks (s)he's hot stuff because (s)he's learned a 'popular' catch phrase."I guess some people say,"Everyone else uses it, so it MUST be okay!"Uhhhgggghhh ... Gag me with a spoon!I mean, really. Aren't YOU fed up with all of the "FREE" this and "NOW!" that, "SKYROCKET" this and "BOOST" that? BE ORIGINAL, for goodness sakes. Whether you're willing to believe it or not, this can be affecting your advertising and sales results in a very bad way. And what's worse, some of our International business people or newer clientele may not have a clue as to what these cliches even mean.
And what about:
"This DUMB little ad..."Oh? If it's so dumb, why the heck were people using it? That ad was plastered all over the Internet, and quickly became ineffective for that reason. These people should have gotten a clue AND a THESAURUS. If you're worried that using a thesaurus isn't "modern" enough, you might try http://www.thesaurus.com ;-)Are YOU still assassinating your financial future with this one often-overlooked marketing "no-no?" If so, this is your fair warning. Sure ... SOME of those overused, washed-out cliches may still be working, but for how long? I know it may be tempting, but don't let the Internet and all its splendor overtake you. One quick remedy is to come up with your OWN catch phrase.
It's simple, really.
Create your own metaphor that's easily applicable to the type of business you're in. Can't think of a new one that 'tickles your fancy?' Then try thinking of a well-known saying that ISN'T used commonly in your industry. My own personal saying is
"Do not pass 'Go.' Do not collect two-hundred dollars."You probably know that phrase is well-known to Monopoly players all over the world, but NOT in business. You can apply it to anything you don't want your listener or reader to do, just as you would any of the less original sayings you hear every day.But, 'if push comes to shove' ... just don't use one. ;-) They can cloud your message, and it can make you seem less than creatively inclined. You've been warned -- now it's up to you.
And, what's this suicide marketing "no-no" that's could be killing your profits? That would be...
LACK OF ORIGINALITY.Yep, you heard right. Get your complimentary barf bags from that overhead compartment -- you'll need 'em for this one. Are you sick of hearing the same dried-up cliches over and over again in sales letters, ads, and every day business talk? You know, the ones loaded with overused phrases like"It's a WIN/WIN situation!""Houston ... we have a problem."
"It ain't over 'til the fat lady sings."
"Drive your hit counter CRAZY!"
And so on. If you're not sick to death of the lack of originality displayed at every turn, you soon will be. It makes me think,"Uh oh ... here we go again! Just another marketing know-it-all that thinks (s)he's hot stuff because (s)he's learned a 'popular' catch phrase."I guess some people say,"Everyone else uses it, so it MUST be okay!"Uhhhgggghhh ... Gag me with a spoon!I mean, really. Aren't YOU fed up with all of the "FREE" this and "NOW!" that, "SKYROCKET" this and "BOOST" that? BE ORIGINAL, for goodness sakes. Whether you're willing to believe it or not, this can be affecting your advertising and sales results in a very bad way. And what's worse, some of our International business people or newer clientele may not have a clue as to what these cliches even mean.
And what about:
"This DUMB little ad..."Oh? If it's so dumb, why the heck were people using it? That ad was plastered all over the Internet, and quickly became ineffective for that reason. These people should have gotten a clue AND a THESAURUS. If you're worried that using a thesaurus isn't "modern" enough, you might try http://www.thesaurus.com ;-)Are YOU still assassinating your financial future with this one often-overlooked marketing "no-no?" If so, this is your fair warning. Sure ... SOME of those overused, washed-out cliches may still be working, but for how long? I know it may be tempting, but don't let the Internet and all its splendor overtake you. One quick remedy is to come up with your OWN catch phrase.
It's simple, really.
Create your own metaphor that's easily applicable to the type of business you're in. Can't think of a new one that 'tickles your fancy?' Then try thinking of a well-known saying that ISN'T used commonly in your industry. My own personal saying is
"Do not pass 'Go.' Do not collect two-hundred dollars."You probably know that phrase is well-known to Monopoly players all over the world, but NOT in business. You can apply it to anything you don't want your listener or reader to do, just as you would any of the less original sayings you hear every day.But, 'if push comes to shove' ... just don't use one. ;-) They can cloud your message, and it can make you seem less than creatively inclined. You've been warned -- now it's up to you.
Subscribe to:
Comments (Atom)