Money Talks 4

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Publisher: Gregory A. Barford

Writer: Gregory A. Barford

Graphic Designer: Alex Barford

Money Talks is a controlled circulation publi-

cation of Gregory A. Barford, CPA, PC. To get

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BLB: The Index Stays High, Rates Stabilize

Lending to small business continues on a torrid pace. Leasing companies have become very aggressive with rates being offered in the range of 2.5% to 3.5 % for equipment purchases. Banks have been unable to match these rates. Leasing com-panies are able to offer these rates as a result of reducing the loan proceeds to the dealer in the range of 2% to 3%. Another words, a piece of equipment purchased for $100,000 on a lease, will return $97,500 to the dealer of the equipment.

Small banks are still very competitive for lines of credit, real estate purchases, and business purchases. Rates for these types of loans are in the 4% to 5% range. I encourage all business owners to use there local community banks rather than larger national banks. The service, continuity, and peace of mind from local banks deserve your business. Do not be fooled by large bank’s lower rates and fees. Large banks will change loan officers, sell your loan, and other anxiety causing actions.

Integrity ... Competence ...Communication …

Solutions for your business, financial, and accounting needs.

Let’s focus on the profit potential of your business!

Bank Lending Barometer (BLB)

Score Lending Description

76-100 Jackpot Here's the Money! We'll do the paperwork

later.

51-75 OK Let's see what we can do.

26-50 Tight I would lend you the money, but underwrit-

ing is killing most of my deals now.

0-25 Very

Tight

I know you have 100% cash pledged for the

loan, but we don't have the money.

WINTER 2014

0

20

40

60

80

LeasingCompanies

Local Banks RegionalBanks

NationalBanks

7868

6254

BLB Index - Forecast Spring2014

INSIDE

Technology:

Quickbooks- Up-

grades and Down-

load of Banking and

Credit Cards

2

Personal Financial

Planning:

Divorce Lawyers– It

Is A Racket

Cash Flow:

Bitcoin– No Way

Obama Care:

The Agony Continues

3

BLB—Bank

Lending

Barometer

4

EDITORIAL

WINTER 2014

Business and Personal Finance News From Gregory A. Barford, CPA, CFP (Certified Financial

Planner), Registered Investment Advisor: Business and Financial Advisor

Brought To You By:

There is a lot of political pressure to increase the federal minimum wage presently at $7.25 an hour to $10.10. The possibility of this increase becoming law is uncer-tain at the federal level. Nevertheless, a few states have a higher wage that is gen-erally $1.00 higher and some of these states are: DC, California, Illinois, New York, New Jersey, Washington, Oregon, etc. At the same time, a number of states are considering increasing the minimum wage to much higher levels. Worst of all, rogue counties within certain states have increased the minimum wage to levels of $13 an hour.

The end result of any increased minimum wage is higher unemployment. Most of the minimum wage jobs are in food service, retail and service businesses. Busi-nesses large and small are making plans to reduce positions and add the additional work to the remaining staff. For example, fast food is planning to implement auto-matic ordering and payment of food without a person being involved. Employers might require tipped employees to turn over tips to the house to offset higher mini-mum wage costs. There will be fewer retail workers out on the sales floor.

Once the government gets well entrenched in raising the minimum wage and say-ing what kind of health insurance a business has to provide and pay for, there is no limit where it can go. For example, the next items on the agenda will be mandatory paid time off, day care expenses, limited ability to terminate workers, etc. A sample of my clients shows that 96% of them pay much more than the minimum wage. Therefore, it would appear that the minimum wage is irrelevant to them. Not quite. Increases in minimum wage can tend to increase non minimum wage levels. However, in this weak business climate, my informal survey of a few clients indicate, that most of them will not increase their non-minimum wage base pay. Thus, there will be some resentment of experienced workers to minimum wage workers. I believe as a business owner and consultant that hiring minimum wage workers are risky. Moreover, I believe you have to pay above average wages and provide reasonable benefits to your employees. At the same time, you need to expect and demand a lot from your employees so that you serve your customer like there is no tomorrow and make a lot of money. The best thing about the minimum wage is the incentive it provides to a person who wants to get ahead; to get ahead you need to work harder, take responsibility and acquire new skills.

WINTER 2014 Business and Personal Finance News From Gregory A. Barford, CPA, CFP (Certified Financial Planner),

Registered Investment Advisor: Business and Financial Advisor WINTER 2014 2

Technology– QuickBooks:

Upgrades and Download of

Banking and Credit Cards

Upgrades Any user of QuickBooks version 2011 will have to up-grade to the 2014 version by May 1, 2014. As part of completing your year end work for many of our cli-ents, we will make sure that you have the right Quick-Books version. The upgrade cost for one user is about $200 from QuickBooks. The upgrade is necessary so that the payroll tax tables will work. In addition, QuickBooks technical support will not trouble shoot problems for 2011 versions beyond the May date.

Downloading Transactions QuickBooks has a download feature that will import banking transactions from your bank into the pro-gram and let you assign the proper categories to the downloaded transaction. On the surface it sounds like a great feature, but it is very good feature only for companies with no employees. Likewise, the feature of downloading credit card transactions can be a time saving feature. However, where there are employees handling cash, checks and credit cards, the downloading of bank transactions can mask theft or misplaced funds. The reason why the downloading can mask accounting irregularities is because the owner only looks at what went into the bank-not what should have gone into the bank. See the table below, which shows what cash receipts should have been recorded and what was deposited into the bank the next day.

When we take on a new client who does this download-ing, we strongly recommend they change their account-ing to stop the downloading, and set up a system that tracks total cash receipts. The systems are not hard to set up, and there is minimal staff time to enter the daily cash receipts into QuickBooks. If the client can use QuickBooks as a point of sale software, this is a very easy, efficient solution and provides excellent tracking of sales and cash receipts. The QuickBooks point of sale software works the best for retailers. Nevertheless, there are industry specific software products that are far supe-rior to QuickBooks point of sale products. We capture summary information (such as sales by rev-enue source, bank deposits, and receivable change) from the front end software and design templates in Quick-Books to enter this information. These templates can be entered in QuickBooks in under 5 minutes on a daily ba-sis. When the template is entered daily into QuickBooks the checkbook is automatically updated for deposits, rev-enue, and summary receivables. Before we go on, let’s explain the difference between front and back end and complete accounting.

An QuickBooks is an example of a back end package , and there are numerous examples of front end packages: medical, dental, optometry, large project management, government contracting, vending, etc. Thus, we blend the front end to the back end. Front end packages do not do any of the back end tasks. Even though some will say they do, do not believe them. Also, some front end pack-ages will say they do downloads into QuickBooks, but any that I have tried have been a nightmare.

Cash Receipts- What Should

Have Happened

Deposit Download-ed-What Happened

7/17/13 $1,358 7/18/13 $1,242

7/18/13 $2,253 7/19/13 $2,189

Task Front End Back End

Scheduling Yes No

Insurance Billing Yes No

Multi Patient Fields Yes Some

Recall Appointments Yes No

Receivable Management Yes Yes

Sales Reports Yes Some

Inventory Management Yes Yes

Payroll No Yes

Accounts Payable No Yes

Financial Statements No Yes

Money Talks WINTER 2014 Business and Personal Finance News From Gregory A. Barford, CPA, CFP (Certified Financial Planner),

Registered Investment Advisor: Business and Financial Advisor WINTER 2014

Personal Financial Planning: Divorce Lawyers– It Is A Racket A survey of my clients who have used lawyers for divorce reveals the following: on average each side goes through at least 2 lawyers before it is completed. This is more than other types of legal situations needing a lawyer. Most di-vorce lawyers over promise what they can deliver, and they churn out bills for work that is very dubious. I have seen this first hand many times. At the end, the parties are very close to the initial property settlement, but are out of pocket about $50K in unnecessary legal fees. It is always another $10K for something. The most successful divorces I have observed are the ones where the parties went to mediation. Moreover, after the divorce the parties are more reasonable with each other than when lawyers are involved. Lawyers play a part in me-diation usually at the end to verify the documents. The ac-tual mediator is usually well experienced and is very famil-iar as to how the court would wind up dividing the property anyway. The mediator meets with each party to understand what each party wants property wise and other issues. The mediator premise is: this is how I have typically seen the court divide property and this is what I feel could work for both parties. The spouses do not have to meet with each other during the mediation process. The emotional damage is very intense, and mediation may not be possible. Moreover, the demands of one of the spouses may be so extreme that only the lawyers and the court can deal with it. Nevertheless, mediation is becoming more popular and I encourage parties to use it as this will keep more money for each spouse as opposed to giving it to the lawyers.

Cash Flow: Bitcoin– No Way My research indicates that the Bitcoin is very risky and I feel it could be a fraud. The concept is that you will accept payment from someone with this Bitcoin, and this will be credited to your account. In turn you can use this Bitcoin to make payment for your purchases. These transactions are supposedly maintained and secured on the Internet. These Bitcoins are not secured by assets such as currency or precious metals Moreover, even if the Bitcoin were secured by these assets, in a total crash of the Bitcoin system who knows how much you would receive and when. The Bitcoin market is very volatile with supposed conversion into vari-ous currencies. Basically, this Bitcoin is a bunch of IOU’s (I owe you). Therefore, do not participate at all in this Bitcoin payment option. One of the promotions of the Bitcoin says, “The Bitcoin will soon replace the U.S.

3

dollar,” this is the beginning of the hype to get more people to use the program. My gut feeling is that the Bitcoin is more of a fraud than a new payment type.

Obama Care: The Agony Continues

My own personal experience has been agonizing with the ef-fects of Obama Care. My old health insurance policy was can-celled as of January 2014, and I had to obtain a new policy. The shopping experience along with the help Care First of Maryland (Blue Cross and Blue Shield) was very satisfying. I set up my policies for automatic payment beginning January 2014. Then the first week of January occurred and the agony began. Instead of Care First automatically deducting from my bank account for the new policy, they deducted from my bank account an old policy from 3 years ago and did 5 months’ worth of payment for $1,559. Trying to reach the customer service at Carefirst was a night-mare. Hold times longer than 45 minutes was very common, hang up dial again first thing in the morning, same long wait time. I was eventually able to talk to three different people on separate occasions. None of the reps could tell me why I was charged $1,559. One said I should get a credit but did not know when I would get it, and another one said a credit was issued to be used for future payments, I could not find this credit on my account or get through to a supervisor. Calling “dial a prayer” was more useful for me, I got courage, and I paid online for a new policy for fear of being cancelled for nonpayment. Then, I disputed the erroneous $1,559 charge on my bank account, and wrote a letter to my state health insurance commissioner requesting their help to get me to a responsive Carefirst person who has power to fix things quickly. The insurance companies are under enormous pressure to figure out the ever changing facets of Obama Care. The rush of business has been too much for them to handle. The insur-ance companies’ reputation as financially sound and serving the needs of their customers had been unmatched by any oth-er business. Now this reputation has been tarnished because of Obama Care. Nevertheless, I encourage any person with any health insur-ance issue that cannot be resolved quickly through the insur-ance company to contact the state health insurance commis-sioner. These state health insurance commissioners in most states are unbiased and can get results quickly.