My Solution.. Getting cash to small business

Hello my name is Harvey Goldstein. I’ve been a practicing CPA for a very long time. I used to be the managing partner one of the largest CPA firms in Southern California. I’ve had quite a great professional successful career.

In 1980s I had the good fortune of being appointed by President Ronald Reagan to his National Productivity Advisory Committee. Our game plan was to provide suggestions to the president on how to improve the productivity of the United States.

If you recall in the early 80s when Ronald Reagan was elected president we were living in one of the worst economic times since the Depression. The President believed that increasing productivity would help our country restore its economic well-being. Our committee had met on many occasions. So the real question about this committee was since we were studying productivity were we productive? Frankly no. We wrote a report. I still have a copy of it in my garage. It was just another one of those Washington committees that meet prepare a report that nobody reads.

The Congress during the early 80s was attempting to do everything it could to come up with an economic plan to help increase employment and improve our economic conditions. As you may know most of the members of Congress spend most of their time sitting in committee meetings discussing ways to improve the economy and making laws we don’t want. Since most of the members of Congress have been around for a long time and have spent most of their careers in committee meetings they really don’t have any idea what it takes to help business people to improve their lot. Yes some of the members may have been in business but their real business is government. They live in the beltway and never see the real world. Today history repeats itself. Again we have some of the same members of Congress sitting on their butts behind the protection of the Beltway coming up with the same ideas as in the 80s.

Just listen to the rhetoric. Nothing new.

Reduce capital gains to help small businesses raise capital.
Will a reduced capital gain rate really induce people to make an investment in a small business? What is the incentive of investing in a high risk venture when it’s success may come, if at all, some time in the distant future? Incentives should be quick and not something to wait for.

 Or how about providing employment incentives so that people in business will hire? Think about this: If I’m a small business owner does it make any sense for me to hire a person who I might have to pay anywhere from $20-$25,000 or more per year and the government is going give me an incentive of $5,000 to hire that person? It’s a joke. Where will I get the other $15-$20,000 to pay them? And does it make sense to hire somebody I probably I don’t need as this time?

In addition to they’re now talking about giving banks billions of dollars to loan to small business. Is that believable? I think not. When a small business owner walks into the bank hands them a financial statement that shows a shrinkage in sales and a shrinkage in profits would any banker loan them money? I doubt it. The goal of the bank is to get paid back. Looking at declining business is a risk the bank will not take. These were all the same ideas and solutions that they were presented during the 80s. What we need is money, cash, green you know that stuff that pays the bills. What should be done?

During my travels in the 80’s to attend my not so productive committee in DC I started to come upon an idea that would provide a sufficient incentive for individuals to take a chance on investing in a small business. It’s just too simple.

But here goes. Instead of providing an incentive to hire people and an incentive if the business succeeds why not provide an incentive for direct investment into the business up front. I hate to use the terms which in the eyes of the government and the Internal Revenue Service is a real no-no but to why not make the investment in a small business a legal tax shelter.

When in DC I had presented the idea to a number of members of Congress in the 80s and they said to me “write a bill”. So I sat down with my tax partner and we came up with “The Small Business Investment Incentive Act.” It provided that a group of investors could invest up to $250,000 into a small business and take a tax deduction for the investment. This gives the investor a tax benefit immediately upon the investment in the business as opposed to waiting for some future success to reap a tax benefit. If all businesses have the same tax benefit then all businesses are on an equal footing. Therefore investors will be looking for better businesses to invest in since the incentive is the same for all. If the business becomes successful and the investors receive their money back through the sale of their interest in the business at that time they would pay back the tax incentive they received when they invested. Anything over and above their original investment would be taxed at a capital gains rate. 27 years ago this idea was introduced to Congress and had a whopping 26 sponsors.

The bill went nowhere. Actually in the 1986 White House conference on small business it was considered the number 11th most important issue that small businesses at the conference had supported and wanted adopted. Now is the time to get The Small Business Investment Incentive Act on the books. This is a direct incentive for providing cash to a small business. Cash that can be used for expanding, marketing, hiring or anything that might make that business successful and sustain itself during these difficult times.

If you think this idea makes sense please send this information to everybody you know
and if you would like a copy of The Small Business Investment Incentive Act as originally introduced in 1983 go to www.Cashplan.com a copy is there.

 That’s My Solution

Making Money Helping Your Client

Making Money Helping Your Client

I have been a managing partner of an accounting firm for over 30 years. During the course of that 30 years I have had many conversations within the firm on how our firm can differentiate itself from others.

We have spent many hours wracking our brains out to figure out what the distinguishing factor is.  As you know accounting firms do bookkeeping, tax returns reviews and audits typical historical analysis of the past.  Is our audit or bookkeeping better than all others. Does the client know the difference or even care about the difference.

What makes us different?

The answer: provide your client a look into their future and help them navigate it.

Accountants generally provide their clients a look at the past. As you know the past is over and there is nothing that anyone can do to change it.. it was

The best part of looking into the future:  if you don’t like what you see you can change it.

So I’ve created an additional revenue stream by providing budgeting and cash flow planning services.

Here’s what we do.

I sell the service by not asking my clients the traditional questions most accountants will ask, “do you want help in preparing you company budget? Or would you like us prepare a cash flow forecast?” All negative concepts to the typical entrepreneur.  

 I say he is “I have a tool that will help you predict how much cash you will have in the bank at the end of every month for the next 12 months. Would you like to know?”  90% of the time the answer is a resounding yes.

Next:

Step 1. I get a copy of  the company financial statements.

Step 2. I have a low level staff person enter the information into my favorite program

Up Your Cash Flow. Why is it my favorite program I developed it J.

We never create a formula and we never build a model.  Everything is built into the program and is fully menu-driven.

Step 3.  We go over the preliminary draft of the information with the client get updated assumptions and finish the forecast. With a typical client it takes about three to four hours for a complete Profit and Loss forecast, Cash flow forecast and forecasted budgets.

Step 4. We meet with the client every month thereafter, update the forecast for any changes necessary and do a comparative analysis. By the way this is all face time which the client  loves.

Were helping them manage where there going.

For more details on how to do this contact us.

Free Gift With Purchase? How About Just The Free Gift…

 Link to Free Gift:  http://upyourcashflow.com/Join/onhour.php                                                                  

 Los Angeles, California, September 14, 2009 – Everyone likes something for nothing. However, there’s an old saying, “When it’s too good to be true, don’t believe it.” Granville Publications Software is going to destroy that old saying by providing the business community, free of charge, The One Hour Forecast. Imagine a product that is FREE, helpful and NOT a gimmick.

Harvey A. Goldstein, CPA, founder of Granville Publications Software, has been in the business of accounting for over forty years. Throughout his career, he has realized the importance of knowing where your business is headed. As a result, he developed Up Your Cash Flow, a highly comprehensive budgeting and cash flow forecasting tool.

Goldstein states, “It’s time for entrepreneurial businesses to stop dwelling on the past and to start focusing on the future. Every business person must know the answer to these questions at all times:

How much cash will you need?
When will you need it?
Where will you get it?
If you know the answer to these three questions at all times, I guarantee you’ll sleep better at night.”

Goldstein believes that looking into the future is so important that he has decided to provide the entrepreneurial business community The One Hour Forecast, a business budgeting and cash flow forecasting program.  It is the perfect time-saving solution for companies who want a general idea of where their business is headed in the next 12 months. It forecasts the future financial activities of the business: profit and loss, cash flow and balance sheets.  The software is not an Excel template. Therefore, the user will not develop models or formulas. The forecasted reports are all completely integrated.

Why is such a valuable product being offered for free? Goldstein believes the accounting profession has let their clients down by placing little emphasis or value on projecting or forecasting what is going to take place. Accountants spend their time telling clients where they’ve been, and little time on what is going to happen. Now is the time to emphasize the future.

He also believes that if people use The One Hour Forecast and find it helpful, they may need a more comprehensive forecast. Granville would like their main product, Up Your Cash Flow, to be the product of choice.

Goldstein sounding like a television pitchman says “But wait, there’s more! In addition to the free One Hour Forecast, we are providing free training. Yes, training absolutely FREE.”

Time is one thing many people don’t have enough of. But, Granville estimates that anyone can afford one hour of their time dedicated to forecasting next year’s profit and loss and cash flow.  Knowing the future is absolutely critical in these difficult times.

LINK TO SOFTWARE:

http://upyourcashflow.com/Join/onhour.php

LINK TO TRAINING CALANDAR:

http://upyourcashflow.com/cm/Home.html

CONTACT:

Robin Bard
rbard@dslextreme.com
(800) 873-7789

Harvey Goldstein – Harvey Goldstein is available for interviews, presentations, etc.

hgoldstein@dslextreme.com
(800) 873-7789

Our gift to the business community

I have spent a great deal of my professional career in the management field.  As a result of being in management I have come to believe that planning for the future is an absolute necessity. Unfortunately too many accountants are NOT used  to looking ahead. Its not in their training. But who is best to help entrepreneurs plan for their future. YOU ARE!  Therefore I am providing you a  tool at NO CHARGE to get started in the planning process. Its  The One Hour Forecast. SEE www.upyourcashflow.com/Join/onhour.php

Up Your Cash Flow XT 2009: The One Hour Forecast (FAQ’s)

Is training required?

No. However, since we want our user’s experiences to be positive, we will be providing 30 minute online training sessions weekly. The training schedule can be found within the program.

 Why did you develop The One Hour Forecast?

The One Hour Forecast was originally developed for accountants to develop a financial forecast in one hour.  The accountants can start helping their clients manage their future activities as well as develop a new source of revenue for themselves.       

Why do you call it The One Hour Forecast?

We believe that it should take no more than one hour to develop the forecast.

The gathering of data necessary to complete the forecast will probably be the most time consuming portion of the process. The data is as follows: estimated sales over the next 12 months, the prior 12 months sales month by month, the prior 12 months collections on sales, month by month, term loan and credit line information and a current financial statement.

What type of reports are developed using the one hour forecast?

You will be able to create a completely integrated set of profit and loss projections for 12 months, cash flow projections for 12 months, and forecasted balance sheets for the same period.

Can the reports be printed?

Yes, the program is a complete budgeting and forecasting program.

How much detail can be developed in the one hour forecast?

The detail within The One Hour Forecast is brief. You may create a sales forecast, forecasted cost of goods sold (using material labor and overhead) and adjust inventories. Expenses will be limited to variable expenses, fixed expenses, depreciation, term debt (interest and principle) and credit line financing. Even though the amount of detail is limited, a very useful budget/forecast is developed.

Can you develop more than one forecast within the program?

Yes. You may have up to 99 forecasts within the program. Switching back and forth between the forecasts is easy to do.

Can data be saved?

Yes. You may also copy data into a zip file and move it between computers, etc.

Why are you providing The One Hour Forecast free of charge?

Two reasons. First, I have spent most of his career managing an accounting firm. During his career, he concluded that the accounting industry spends a great deal of time telling their clients where they’ve been as opposed to informing their clients where they are going.  As a result of his management perspective, he believes that knowing what lies ahead is far more important than what took place in the past. He would like to see more accountants, particularly those in public practice, spend more time helping their clients navigate their future. In today’s environment, a look into the future is an absolute necessity.  Who best to provide this information to the business community than the accounting profession?

To get the accountants to help their clients in the area of planning, he has decided to provide The One Hour Forecast to the accounting profession free of charge.

Second, if accountants begin to help their clients by forecasting their future, we look forward to Up Your Cash Flow XT2-2009 becoming their program of choice.

Link to software: www.upyourcashflow.com/Join/onhour.php

Is Your Spread Sheet Telling You The Truth?

Quite a Difference.
A company recently asked us to convert their basic profit and loss budget, which they had prepared in an Excel spreadsheet, into a full financial forecast with cash flows and balance sheets.
Utilizing our proprietary software package, Up Your Cash Flow XT2-2009, we mapped their numbers from their Excel document and into our program and ran the analysis. However, when we completed the task, our numbers simply would not reconcile to their spreadsheet budget. In fact, there was a 1.5 million dollar difference. Their spreadsheet budget had indicated a $3.5 million loss. We only calculated a $2 million loss. Quite a difference indeed.

We contacted the company to inform them about the issue and to see if they could reconcile the differences. They later called us back and humbly told us that their spreadsheet was wrong.

She Loved Her Spreadsheet.
Several years ago a consultant requested our assistance in developing her client’s budget. g We set up a meeting for the next day, where we would employ our software Up Your Cash flow XT2-2009 to build a comprehensive financial analysis. The consultant had prepared the budget in Excel and showed up with a number of spreadsheets. . I asked her why she did that, since I was going to teach her how to prepare her company’s budget using our program. She had no real answer, only that she “felt comfortable” with Excel. So we took the numbers from her spreadsheets and entered them into XT2-2009. Right on cue, we came up with different results when we ran the analysis.

We spent a few minutes trying to figure out why the numbers were different. Finally we took out a calculator and started checking her spreadsheet. The numbers on her spreadsheets did not properly add up. Big surprise!

Every Accountants Nightmare!
Several years ago I became aware of an accounting firm that was hired by a bank to prepare a set of financial forecasts for an investment which the bank was considering. The accounting firm went to their “trusty Excel guru” to prepare the forecast. After countless discussions with the client and numerous changes to the forecast, the client and the “Excel guru” were satisfied with the results.

The client took this information to their Board of Directors. Based on a review of the projected results as presented in the forecast, the board decided to make the investment

In the meantime the accounting firm provided the bank with a $25,000 invoice for services rendered.

Several years later, the partner who had been responsible for the project was notified by the bank that they were considering filing a malpractice action since they discovered that the projections made by the firm’s “Excel guru” were wrong. The partner immediately investigated the information submitted to the bank and of course discovered flaws in the formulas and calculations made.

Ultimately the firm returned the $25,000 fee and fortunately the malpractice claim was dropped.

Is Your Spreadsheet Telling You The Truth?
Yes, of course your spreadsheet tells the truth. The biggest problem is the over confidence of the preparer. There are many people who consider themselves experts in the preparation of spreadsheets which they think entitles them to not thoroughly double check what they have created or give somebody else permission to validate their work. it.

Enter Cash-flow Software XT2-2009
Up Your Cash Flow XT2-2009 is the perfect financial forecasting tool for any business. It’s developed personally by me, Harvey Goldstein CPA and built upon my 45 years experience at the pinnacle of public accounting. Up Your Cash Flow XT2-2009 software was designed specifically for accountants, business consultants, controllers, financial managers and entrepreneurs to provide a comprehensive look into the future.

And most importantly, as we’ve discussed here today, no spreadsheet formulas to worry about, no models to build and zero frustrating integration issues – its all automated and built into this amazing software. This is not an Excel template. It’s a powerful standalone program rich in functionality yet simplistic in operation. And best of all, no more countless hours spent SEARCHING FOR ERRORS!

Develop a Dynamic Financial Plan
Cash flow forecasting deals with the how, when and where of a company’s financial future. Cash flow forecasting is future-thinking and answers:
• How much cash will I need?
• When will I need it?
• Where will I get it?

There is no better solution in the marketplace than XT2-2009 for efficient and effective cash flow forecasting – start building your dynamic financial future today.

HAG

Planning your vacation? Planning your cash flow? Read on!

When you’re getting ready to take a vacation, the first thing you do is contact your travel agent to help you plan the vacation. Or, you read brochures, contact friends for ideas, make transportation plans, book hotels and start selecting sights to see. A major effort is spent on planning for this special time.

But when it comes to your business, do you spend the time to plan for profitability and cash flow? It is interesting how individuals will plan and prepare for their vacation but how little time is spent planning for the rest of the year? Why not? Too difficult? Too abstract? Crystal ball gazing? There are many reasons not to plan but planning is an absolute necessity in these very difficult times. Especially planning of cash flow.

Would you like to know how much cash you’ll have in the bank at the end of each month for the next 12 months. Who wouldn’t? It’s easy to find out, just develop a cash flow forecast that makes sense.

Cash flow forecasting is one of the most important forms of business planning. Cash flow is a business’s backbone; without the cash, a business would not be able to survive and grow. It is extremely important for a business to know where their cash is going and to use this precious resource efficiently. By developing a cash flow forecast you will have the answer to the most important questions: How much cash will I need and when will I need it?

When a business has financial problems, the fix may not always be about the need for more sales. If there is a possible way to foresee the future, then why not use it to your business’s advantage?  By forecasting your business’s cash flow and by using this information as a tool, your chances for success will greatly increase.

You don’t want to be on vacation in Hawaii without your swimsuit, sunscreen and hotel reservations—and the same goes for a business. You must be prepared for any situation that may arise.

Have a great rest-of-the-week.

Harvey A. Goldstein, CPA
1-800-873-7789 x1233
harvey@gohagit.com
www.gohagit.com | www.cashplan.com | www.hgoldsteincpa.com

Next week: how to use a cash flow forecast to manage the business.

Are You Having A Cash Flow Nightmare?

A number of years ago I started a software company that developed a specialized cash flow forecasting and business budgeting software program designed to help management forecast future financial activities by predicting profit or loss, and future cash flow requirements of their business. The main premise of the program was to provide an understanding of how long cash will last and if a profit will be made. Having this information would provide management sufficient time to secure funds to keep the business running if cash was to become scarce.

I started my company with about $200,000. I knew it would be more than enough to get the company into a profitable position. After several months the burn rate of cash was far beyond my expectations. I was just about out cash and my resources were tapped out.

One night at around 3 AM, I was in great pain. I was having a cash flow nightmare. I was starring at the ceiling with major anxiety wondering what do I do?  What made it worse I was the managing partner of a very successful CPA firm in Southern California. We had never had a cash flow problem and had never run out of cash. Here I was having a new painful experience…the pain of running out of cash. Not knowing what’s going to happen. It was awful. The anxiety was beyond anything I had ever felt during my business career. I knew it was just days before my dream was to end.

Have you guessed it yet? I developed a cash flow software program designed to predict profit and cash flow and I hadn’t used it for my own business.  Here I was a CPA telling people how important it is to predict profitability and cash flow and not following my own advice. Shame, shame on me for not practicing what I have preached for so many years.

I immediately jumped out of bed, threw on some jeans and headed for my laptop. I needed to get a handle on just how long the little cash I had would last. I entered my assumptions, crunched the numbers…and was shocked to discover that the disaster I was sure of was at least three months away. Suddenly, there was no more anxiety; I had some time left to fulfill my dream. Best of all, I had the time to do what was needed to get the resources and keep the company going.

So now, by my own experience, I discovered sleepless nights are not unusual. In fact, they are all-too-common. Whenever I ask entrepreneurs if they have ever had a cash flow nightmare as I described, I get a resounding yes!

Most anxiety is produced from fear of the future. Today more then ever a glimpse of what lies ahead is an absolute must. So I’ve started a new venture, along with providing the software I spoke of, called gohagit.com. We help companies develop an Early Warning System so entrepreneurs can take a look at where they’re going. If they don’t like what they see there will be plenty of time to take action before its to late. By the way, my software company just celebrated 20 years in business!

Harvey

*Contact me if you would like some guidance or to talk about our service or our software. You can reach me at 1-800-873-7789 or harvey@gohagit.com
www.cashplan.com | www.gohagit.com

Small Biz Owners Less Optimistic on Economy

Some 40 percent of small business owners feel less optimistic about the economy than they did three months ago during the inauguration of President Obama, according to a recent poll conducted by the City Business Journals Network, a publisher of more than 40 local business journals across the country.

By contrast, 26 percent of small business owners felt more optimistic during that same time frame.

Just 27 percent indicated that they believe their business will benefit from the $787 billion economic stimulus plan. As national health care is once again on the president’s radar, some 66 percent expressed concern that health care reform would increase their cost of doing business.

More than three quarters of the respondents (78 percent) said that banks that received TARP funds should boost their lending to small businesses. 

This article is from SMB Finance Magazine.

How optimistic are you? Tell us how you feel by leaving us a comment.  The more we all know the better right?

Something To Think About … Eliminating Mark To Market, Will It Work? Probably Not!

Written by Harvey A. Goldstein, CPA
President & CEO of GoHagit, Inc.

Maybe I’m crazy, but I’m sure you’ll let me know after reading this. It seems as if, for all the “brilliant” people in DC, they don’t have a definitive solution to the banking problem.  They keep pouring money into the system and hope the banking and other economic problems go away.   

Now they’ve convinced the world and the FASB that eliminating the “mark to market” accounting standards will help reduce the problem.  They think that a simple accounting entry (a book entry with no real economic substance) may be part of the solution.  I don’t think so.

 

I know that lack of money is part of the banking problem, but I believe that accounting rules are also at fault.  I contacted Congressman Elton Gallegly, a Republican friend of over 20 years, spoke with his staff, explained my thoughts, and was asked to send a memo to them.  In my fantasy I thought that, because of my solution, I’d be the talk of DC.  I wasn’t.

 

Here’s a summary of what I told the Congressman’s staff.  If I’m miles off base, please let me know.

 

Mark to market means that the assets of the bank are reduced to market value.  Example:  Bank raises $2 million from investors so has equity (capital) of $2 million and $2 million in cash.  Balance sheet looks like this:

 

Cash     $2,000,000

Equity   $2,000,000

 

Regulators say, (I simplified this), the bank can lend the $2 million because they have $2 million in equity (capital).  Bank lends $1 million for mortgages.  Balance sheet now looks like this:

 

Cash                 $1,000,000  (original $2 million less the $1,000,000 they loaned)

Mortgage asset   1,000,000

Equity               $2,000,000

 

Bank can still lend an additional $1 million because capital will allow it to loan $2 million and it has loaned only $1 million. 

 

Accountants say the market value (mark to market) of the mortgages are only $500,000, so the bank must now record a write off — take a paper loss (no impact on cash) of $500,000.  Balance sheet now looks like this:

 

Cash                 $1,000,000

Mortgages            500,000 (Original $1 million less $500,000 write off)

Total assets       $1,500,000

 

Equity               $2,000,000

Less loss              (500,000)

Net equity         $1,500,000

 

Regulators now say the bank no longer has $2 million in equity, therefore it can loan only $1.5 million (again simplified) because that’s all the equity it has remaining.  But the bank has already loaned a million (the original mortgages). So it has only a half million left ($2 million original equity less half million loss, less $1 million already loaned).

 

Notice that the bank still has $1 million in cash (liquidity), but can lend only one-half million.

 

The bank now lends the remaining half million allowed.  Balance sheet looks like this:

 

Cash                 $   500,000

Mortgages          1,000,000 (original million less half million write off plus half million new loans)          

Total assets       $1,500,000

 

Equity               $2,000,000

Less loss              (500,000)

Net equity         $1,500,000

 

 

Note that the bank still has a half million in cash but can’t lend any more.

They were limited to equity (capital):

 

Original equity               $ 2,000,000

Actually Loaned            $(1,500,00)

Reduced by paper loss   $ ( 500,000) 

Lending left                   $ 0

 

So what to do:

 

1.       Have the government invest more money to increase equity (they already did this), therefore the bank can lend more. This costs taxpayers a whole lot of money.

 

2.       Let the bank add the paper losses back to their capital calculation which would allow it the ability to lend the additional half million in my example above with no use of taxpayer funds.

 

I realize the example is very simplified, but my simple mind says why not?  Explain to me why it wouldn’t work.

 

Now they want to buy the “toxic assets” of the bank.  Well that’s OK if the bank needs cash.  However, rather then buy the “toxic assets,” let other banks or the FED make the banks loans with a government guarantee instead of government funds. 

 

Are we creating another problem buy selling the “toxic assets”?  Maybe!  It seems to me that if the government buys the “toxic assets” for less then their book value, the bank will show losses on the sale of the “toxic assets” and impair their capital even more.  Of course the solution to this is would be more government bailout money to cover the reduced capital resulting from the sale of “toxic assets.”  A circular equation?

 

Eliminating marking to market is not going to be helpful.  What will help?  Easing, for a period of time, the capital requirements for lending.  Government stops putting up the bucks and just guarantees inter-bank lending activities and other lending activities. This could stop the treasury printing presses.

But it seems to me that giving the money is what the government wants to do. Why? How about de facto nationalizing of the banks.

 

Something to think about!  

 

www.gohagit.com

 

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