Wednesday, December 10, 2008

How Bad Can It Get?

This is reprinted with permission from Bridget Sullivan Mermel. This really helps us to keep perspective on the current economic times.

So I revisited an article that Bert Whitehead published recently. Originally written in 2001 after 9/11, the article addresses the often unacknowledged fears that the country as a whole is experiencing. Yes, even the upbeat folks like me and my clients share the fears. Bert has been in the business since the 1970s, and his home base is outside of Detroit, which I think both contribute to his broad perspective. So, after I reread his recent article, I decided to scrap what I planned, and send along what Bert has to say in full.

It's time to get our heads out from under the covers and face our worst fears. The financial crisis is world-wide, and the U.S. is actually better off than most countries. Iceland is bankrupt, and others (including Russia) are teetering. What happens when a crisis turns into a complete collapse?

Keep in mind that the worst possible outcomes are short-term. We'll take a look at those and
then look at the reality of the long-term.

Short-term Possibilities:

Scenario #1: Complete Financial Collapse.
Likelihood = 1% - 2%.

This could rival the Great Depression scenes we see in old movies with bread lines, tent towns of
homeless, etc. You're not able to use your credit cards, or write checks. In the worst case, where
faith in US dollar evaporates, bartering or using gold becomes the basis of commerce.

This extreme outcome could be produced in our current economy if one or two extremely destructive exogenous events occur in the next year or so. These traumatic events could be anything from a huge California earthquake, Al Qaeda usurping power in Saudi Arabia and
strangling the world's oil supply, or severe weather changes brought on by global warming, etc.

We have suggested that clients who are genuinely concerned about this worst-case scenario keep 1-2% of their portfolio in gold bullion.

Scenario #2: World-wide Deflation.
Likelihood = 5-20%.

Countries try to protect their economies using tariffs, which sets off retaliation in other
countries so global commerce dries up. Shortages become a way of life. Widespread
deprivation kindles violence, terrorism escalates, and a large scale war may loom.

Even in this case, the dollar would likely be the world's safe haven. Decreasing prices enable
those who have cash or U.S. Treasury bonds to survive and prosper.

Scenario #3: Recession Reaction.
Likelihood = 15-35%.

Panic sets off contraction in consumer spending which cascades through the economy. Classic
recession response, including lay-offs, unemployment of 10-15% in US, higher in other countries. The Euro may be destabilized by conflicts in monetary policies of member nations. Cutbacks in inventories closes factories; bankruptcies increase. Portfolio Panic Reaction leads many people to take foolish risks.

We work closely with clients to manage their endogenous risks, rebalance portfolios accordingly, make sure that adequate liquidity is maintained.

Scenario #4: Volatility Eruption.
Likelihood = 25-40%.

We are likely experiencing this phase now. Market prices in securities, commodities, housing, etc. take huge swings in waves of panic trading. Investors retreat to the sidelines, so trading volumes vacillate. This is how the market finds price balance, by testing the extremes. This could be a relatively short phase followed by onset of recession which could be severe, or gradually recover as markets begin to bounce back.

This is most difficult time for investors. In today's economies this scenario usually stirs
government intervention in the markets. This brings the danger that the money supply is
increased faster than productivity gains which can trigger spiraling inflation. Having a long-
term fixed rate mortgage is the best protection against inflation. Survival in this phase requires
clients to turn off the TV.

Scenario #5: Bounce Back.
Likelihood = 15- 35%.

If governments are successful in shoring up confidence in their economies, and adequate
liquidity is available in capital markets, stable commerce will again emerge. Housing prices
will drop to the point where entrepreneurs can buy up excess inventory and rent out homes
with a positive cash flow. New business formations provide most new employment
opportunities.

The stock market is likely to start rebounding a year or so before this phase kicks in. Clients
guided by Functional Asset Allocation, which we preach, will prosper in this stage since they
will not have sold off their stock holdings. Those who have continued dollar-cost-averaging, (e.g. through their 401-k's, etc.) will enjoy rapid accumulation in their portfolios.

Long-term Outlook:

Likelihood = 98-99%.

As this downturn is relatively severe, it may take another 2-3 years to substantially recover.
Then we will enjoy approximately 5.5 years (on average) of prosperity, which we will soon take
for granted. On the next downturn, we will be again surprised. We will go through though
another down-cycle as we have for the past century. Again we will think that 'it is different
this time.' A year or so into that downturn we will again anguish about "How Bad Can It
Get?" Then I will send out this article again, as I did seven years ago in Nov. 2001…

Sleep well tonight! Bert

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Tuesday, December 09, 2008

How To Use Social Networking To Get Clients

By Biana Babinsky, online business coach, expert and author

Do any of these thoughts pop into your head when you hear online social networking mentioned?

- "People who I meet through online social networks are not interested in my services and products. I spend a significant amount of time networking and answering questions online, but have nothing to show for it. I did not gain a single client from the social networking forums in which I participate."

- "I put my profile on many social networking sites, but did not get any results."

- "I have tried it a few times, didn't see any results and don't think I will be using it again."

If you are not getting results from social networking, you need to adjust how you network. Here are five tips to help you do just that.

- You Should Always Network In The Right Forums. If your networking objective is to get clients, you should network in social networking communities that your potential clients frequent. For example, if you are a career coach, you should network in the communities frequented by your target market (people who want to get jobs, switch jobs, find a new career, etc).

If you are frequenting a community created around your favorite TV show, you will have fun discussing the show, but are not likely to generate new coaching clients.

- Network On A Regular Basis. If you are only networking when you need to get clients, you are wasting your time. Networking is not a one-time action; rather, it is a process of having others get to know you and building relationships with them. You need to use online social networks continuously to raise your online visibility and develop relationships with others.

- Network, Don't Sell. A business owner told me once "I keep posting about my business on every social network every chance I get, but have no takers." This person is not really networking. Rather, he is selling his products and services instead of building relationships. Networking is about creating awareness for your products, not blatantly advertising them.

- Provide Information About Your Business. While some people try to sell their products more then they should, there are others who don't tell people anything about their business when networking online. Remember, if people you are networking with have no way of learning more about you your business, they will not be able to do business with you.

How do you let others know about your business? Use a signature at the end of every message you post when networking online. Make sure your signature contains some information about your business and a link to your web site, so that everyone reading your posts can learn more about you and your business.

- Invite Others To Subscribe To Your Newsletter. The best way to continue building relationships with people you meet on social networks is to ask them to subscribe to your newsletter.

Use your signature when you are networking online to invite people reading your message to subscribe to your newsletter. When they do, you can continue building relationships even if you or they stop networking on the forum altogether.

About The Author: Biana Babinsky is the online business coach, expert and author who teaches business owners how to create a marketing mindset that will help them get clients and make more money. Get her free report, "5 Keys For Getting Clients During Recession", at http://www.EffectiveOnlineMarketing.com

Reprinted with Permission

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Monday, December 08, 2008

Tax Deadlines for 2008

Yep, it's that time of year again to begin getting everything up to date for your accountant and think about tax planning for 2009. I've put together some dates together for you since this is what is going to be top of mind once the New Year hits.

December 31, 2008

  • Last day to pay deductible expenses for the 2008 return. This does not apply to IRA, SEP or Keogh contributions (which can be made after December 31st).
  • Last day to make the minimum required withdrawal of funds from a traditional IRA account and avoid a penalty if you turned age 70 1/2 before 2008.
  • Last day to set up a Keogh retirement account if you plan to make a 2008 contribution

January 15, 2009
  • Q4 2008 federal estimated tax payment is due unless the 2008 return is filed by January 31, 2009. Note: Check your local state for different filing dates.

February 2, 2009
  • This is the deadline for providing 1099s and W-2s to those people you paid in 2008. If you are business or rental property owner that paid $600 or more for services of individuals (other than employees) during the year, you will need to provide 1099s to those workers by this date. "Services" can mean anything from labor and professional fees to rents on property. The normal due date is January 31, but because it falls on a weekend, the due date is the next business day.

March 2, 2009
  • This is the deadline for filing (sending) 1099s and W-2s to the government. The normal due date is February 28, but because it falls on a weekend, the due date is the next business day.

April 1, 2009
  • This is the last day to withdraw funds from your traditional IRA if you turned 70 1/2 in 2008 and haven't taken your 2008 distributions yet. In addition, this is the last day to withdraw funds from a SEP or Keogh plan for individuals who are retired and turned age 70 1/2 in 2008. Failure to take the required distributions can result in substantial penalties.

April 15, 2009
  • Deadline for individuals to file a 2008 federal tax return or request an extension of time to file.
  • Q1 2009 federal estimated tax payment is due
  • First installment of the 2009 defined benefit pension plan contributions are due

Start marking your calendars.

Cheers,
Virtual Cathy

posted by The Office Grapevine at 10:42 AM 0 comments

Wednesday, December 03, 2008

December 2008 Accounting Tip - Payroll Accruals

I just got this from one of my many newsletters and wanted to pass it along to those of you who do your own bookkeeping. It comes to us from AIPB (American Institute of Professional Bookkeepers).

The last day of 2008 is Wednesday, December 31. The first day of 2009 is Thursday, January 1. If your company is on the accrual basis, GAAP requires accruing an expense in the year it is incurred.

Thus if you pay employees for the last week in December on Friday, January 2, you must book Monday-Wednesday (Dec 29-31) as 2008 wage or salary expense and Thursday-Friday (Jan 1-2) as 2009 wage or salary expense.

Example:
Your company's workweek is Monday-Friday, your payroll is $25,000, and you distribute your payroll on Fridays. How do you book your payroll for the last week of December 2008?

On Wednesday, Dec. 31, 2008, record the journal entry to accrue wage expense for Monday-Wednesday (Dec 29-31, 2008). This expense will be 3/5, or 60%, of that workweek.

To compute this amount:
$25,000 weekly payroll x 60% = $15,000 accrued payroll expense for 2008.

For the journal entry, contact me and I'll send you the journal entry.

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Tuesday, December 02, 2008

Social Networking - A Facebook Tip

As most businesses have found, Social Networking is truly the wave of the marketing future. There are many ways to be a part of this phenomenon. The three main networks you will hear mentioned are Facebook, Twitter and LinkedIn. There are many others for specific industries like FOHBOH, but those three are widely known and accepted in professional circles.

I'm a user of all three platforms. I've found it a great way to keep in touch with colleagues and family. I like knowing about networking events in my area, learning some interesting technological tricks and getting support from my network when I have a huge presentation or sharing exciting news.

The reason for this post is that I came across some interesting information about the Top 13 Reasons your Facebook account will be disabled. Click here to read the entire article.

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posted by The Office Grapevine at 9:18 AM 0 comments

Thursday, November 27, 2008

Getting Back Into the Swing Early

It has been over a year since I've posted to my own blog. A friend of mine just recently commented on this to me and said, "Either get something up there or take it down."

As we head into the holiday season, one thing that always comes up is how much family, friends and significant others really mean. We talk about the need to stay in touch more, the desire to start out the new year as a new you, etc.

From a business perspective, this usually means getting budgets and plans in order. My first question is always, do you have any of these completed? If you don't then it's time to consider doing these things.

They can be done very easily through a quick analysis of your business financials. Run a quick Profit & Loss statement. You'll know where you're spending your money and you'll know where you can cut just by getting that macro-level look. I always start there.

Next, look at how you are spending your business dollars. Are you tracking how the money being spent is coming back to you in new business or upgraded business from your current client base? This is another key area that will help you grow your business over the long term.

With the amount of bookkeeping for small business that we do, this is one area where we focus so we can help our clients make smarter choices on expenses. You may not be at that corporate-style budget stage in your business, but that does not mean you can keep spending like your business is a hobby.

This current economy is going to be a challenge but business will continue to be done. Those of us who are ready, have plans in place and maintain good customer service will come out as strong businesses with a great profit to show for it.

With that in mind, you can get that extravagant gift tomorrow morning if you are a Black Friday shopper. Now, click here, so you can plan your early Friday morning shopping.

Cheers,
Virtual Cathy

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Monday, September 17, 2007

FOR THE WEEK BEGINNING SEPTEMBER 17, 2007

INSPIRATION FOR TODAY:
"The real voyage of discovery consists not in seeing new landscapes, but in having new eyes."
~ Marcel Proust

DON'T FORGET TO PACK YOUR INSIGHT!
How wonderful it is to learn new things and see new places! How would we ever grow as individuals if we never experienced anything different from that which we see and do in our daily lives? Two different voyages come to mind, however, when considering the discovery of that which is "new" - an outward journey and one which turns inward.

Your outward "voyage of discovery" takes you to different places and new people. You begin to understand other things outside yourself. This can be as simple as discovering new-found beauty on a wilderness "adventure" or having an engaging conversation with someone from a completely different part of the country or the world. The goal here is not just looking at new things, but looking at things in a new way! A change of scenery can cause a change of mind.

But you can still experience a voyage of discovery even if you don't travel anywhere, even if you don't meet anyone new today. You don't have to change your surroundings, just the way you look at them - with "new eyes." Sometimes stepping back and looking again at the Big Picture can reveal things that you never saw before. The solution to an ongoing problem can suddenly manifest itself. You can finally discover a way to handle someone who has been "difficult."

This can often be the key to unlocking the door to your happiness - finding a way to change yourself instead of changing what surrounds you. For all those situations that seem to be out of your control, you have to realize that you are always in control of yourself. So much stress comes from frustration. Don't keep running up against that rock that represents your problems. Try to act like the water that simply flows around the rock as it continues its journey downstream. Your inward voyage of change can have dramatic results on how you see what's around you! Enjoy your new outlook!

(Originally published March 29, 2004)

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