Saturday, September 12, 2009
MONEY WORRIES
Money definitely does not guarantee happiness. Our attitude towards money or our money management aptitude could have significant implications for our emotional state and happiness. Researchers have observed that money has surprisingly little relation to personal happiness above the poverty line. With the current global financial crisis, personal financial management and stability have become a major concern. However, money woes are quite common in times of abundance. Again it comes down to attitude and discipline.
While some people are constantly in a state of anxiety over their finances, others live free of anxiety and worry whatever the situation. This state of peace occurs when you have freed yourself from being enslaved by money. Go through the checklist below to see if you have totally mastered you finances.
Do you avoid discussing finances because of the anxiety it causes?
Is money often a subject of family squabbles?
Do you spend compulsively?
Do you constantly worry about your bills and debts?
Do you know your exact total income?
Do you know exactly how much you spend on personal needs?
Do you know how much you owe (or are owed) on the whole?
Do you pay bills and debs with money earmarked for other things
Do you pay your bills late e.g school fees, utility charges, e.t.c?
Do constantly reschedule your debt payment?
Do you take out new loans to pay off old ones?
Do you have any savings?
Do you find it difficult to finance monthly running expenses.
Check how you score on this list. Like I said last week, you may need to adjust your lifestyle. Change in the way you handle your finances may bring you more peace of mind and a happier life. “Money is the root of all evil.” This is quite a popular saying. But I beg to disagree. Money is an essential and critical resource. When well managed, it gives you the freedom to pursue more important things. It need not be a source of constant worry or sorrow.
Since it has been established that both the rich and poor may be enslaved by money. Moreover the richest men in the world have often expressed a desire to be without money in exchange for some other things. “I am not to be envied. How can my wealth help me? I am sixty years old and I cannot digest my food.” This statement was credited to Andrew Carnegie. He was then one of the richest men in the world. But his wealth could not buy him what he desired most then – good health.
The struggle to get and keep wealth will leave little time or energy for any other thing if not kept in perspective. It is therefore clear that both the ‘poor’, ‘the rich’ and ‘the on the way there’ need to keep a right attitude in other to leave free of worries.
While some people are constantly in a state of anxiety over their finances, others live free of anxiety and worry whatever the situation. This state of peace occurs when you have freed yourself from being enslaved by money. Go through the checklist below to see if you have totally mastered you finances.
Do you avoid discussing finances because of the anxiety it causes?
Is money often a subject of family squabbles?
Do you spend compulsively?
Do you constantly worry about your bills and debts?
Do you know your exact total income?
Do you know exactly how much you spend on personal needs?
Do you know how much you owe (or are owed) on the whole?
Do you pay bills and debs with money earmarked for other things
Do you pay your bills late e.g school fees, utility charges, e.t.c?
Do constantly reschedule your debt payment?
Do you take out new loans to pay off old ones?
Do you have any savings?
Do you find it difficult to finance monthly running expenses.
Check how you score on this list. Like I said last week, you may need to adjust your lifestyle. Change in the way you handle your finances may bring you more peace of mind and a happier life. “Money is the root of all evil.” This is quite a popular saying. But I beg to disagree. Money is an essential and critical resource. When well managed, it gives you the freedom to pursue more important things. It need not be a source of constant worry or sorrow.
Since it has been established that both the rich and poor may be enslaved by money. Moreover the richest men in the world have often expressed a desire to be without money in exchange for some other things. “I am not to be envied. How can my wealth help me? I am sixty years old and I cannot digest my food.” This statement was credited to Andrew Carnegie. He was then one of the richest men in the world. But his wealth could not buy him what he desired most then – good health.
The struggle to get and keep wealth will leave little time or energy for any other thing if not kept in perspective. It is therefore clear that both the ‘poor’, ‘the rich’ and ‘the on the way there’ need to keep a right attitude in other to leave free of worries.
MIND THE KOBOS
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Before I go in to today’s issue, I would like state that Last Week’s article was an excerpt from ‘Awake Magazine, March 2009 edition.’ This credit was omitted in the process of transmitting our materials to the editor. I take full responsibility for this and regret any inconvenience.
Mind the ‘kobos’ and the ‘Nairas’ will take care of themselves. I think there is a popular saying that goes along this line which I can not readily recall. However my point today stems from something my late mum has said to me like a million times. “Kobo kobo l’owo nlo”. The literary meaning of this is money leaves you kobo by kobo. In a more generic perspective what she was usually trying to say was “You loose your wealth a Kobo at a time”
To this end, she asked for an account of every last kobo when ever she sent me on errands. I could hold on to any money in excess of N100 (the naira had much more value then) because she believed it was big money I would not dare spend on frivolities. All loose change was dropped at a corner of her desk and she knew how much was there at any point in time. She had little tolerance for sales attendant who said “there is no change” in a ploy to get you to give them a tip. She would insist on her change but was more likely to be quite generous when it was least expected.
How does this affect us as business people? In my experience, I would say very greatly. Having worked with some very big corporate bodies, I am amazed at how wasteful may entrepreneurs are. In many of these companies, you must account for every spending. All expenses are carefully scrutinized and ruthlessly negotiated. You do not process any invoice if there is a minute change in prices without your prior agreement. You do not give out a check before the due date and there is a strict schedule for collection of debts and due liabilities.
However, I have discovered that many of our small business owners lack financial discipline. Letting go of money is a sign of being ‘big’ and as such they would not demand for a full account of spending. They give their staff so much slack in financial matters that they practically encourage them to become fraudulent.. Just as a typical bank worker, knows he has to retire any cash advance, your staff should know that they should explain to you how they have utilised the resources you place at their disposal.
I am not talking about penny pinching here, but penny watching. (or should I say kobo watching. If you have to account for the last N5,000 you spent it probably would not be a problem. But try and recollect what you did with the last five N50 or N100 notes that came into to possession individually as loose change and that may be a hard nut. Note that N5000 consists of just fifty N100 pieces. My point is this, many of us are busy running around chasing million naira deals while we daily loose a fortune through our lack of attention to the finer details.
For a take home, pay attention to seemingly small expenses – phone usage and charges, bills, bank statement, bank charges, transport cost e.t.c. These are the things that gradually erode your profits.
A CASE FOR FINANCIAL RECORDS 1
Many of us have cultivated the habit of speaking positive words about ourselves or our businesses. This is commendable as it is important to maintain a positive outlook. However, we must note that the real language of business/(business people) is not words but numbers. Every people group (tribes, professional bodies, religious sects, age groups e.t.c.) has a peculiar language of its own. In business, the internationally acceptable medium of telling your business story is the Financial Statement. As business people, it is very important that we learn this lingo. This is what the bankers, investor, financial analyst, funding bodies e.t.c. understand.
The best layman’s definition of the financial statement is – a set of reports telling the financial story of a business; or a means of conveying financial information to users. It is made up of 3 major reports discussed below.
The Profit and Loss Statement: This is a report that gives details of profit related transactions that caused retained profit to change over a period of time. It should be noted that only activities that affect profit are reported in this statement. Consider these 2 business women.
Miss Dominion is the MD of Dee Pictures. Her retained income for 2007 was N20m. Dee Pictures earned N170m during the year by selling stocks worth N95m and spent N55m on running expenses. It has N20m left over as retained profit.
Miss Ninaji is the MD of Newman Films which earned N200m by selling stock worth N90m in 2007. The Company’s total operating expenses was N35m leaving her with N75m. However, she spent N65m on renovation of her factory (which was set ablaze by hoodlums during the elections) and therefore has N10m left as retained profit.
These details were extracted from the P&L statement of the companies. From this, it is clear that the profit volume alone is not a true indication of the company’s health. If you compare N12m retained earnings with N5m, you could easily conclude that Miss Dominion is a better business woman. However, Newman Films has done better on the whole despite the gap in the retained earnings. But for the N65m capital expenditure, they would return a much higher profit than Dee pictures. The cost/income ratio is better and they are on top of their operating expenses.
An accountant would analyze these figures further to understand the under listed amongst other things.
Ø Volume of trade Vs Retained Earnings
Ø The quality of the trade i.e Trade Cost Vs Income; Investment Vs Earnings e.t.c.
Ø Exceptional activities i.e. huge income or expenses that is not likely to be repeated.
The Cash Flow Statement: This summarizes the transactions that cause a change in the company’s cash balance over a given period. The Net Cash Flow (NCF)is the difference between the cash flowing in and out of a company. Sometimes a company does very profitable business, but has no cash. This report is the most effective tool to manage the difference between the profit and cash flow.
The best layman’s definition of the financial statement is – a set of reports telling the financial story of a business; or a means of conveying financial information to users. It is made up of 3 major reports discussed below.
The Profit and Loss Statement: This is a report that gives details of profit related transactions that caused retained profit to change over a period of time. It should be noted that only activities that affect profit are reported in this statement. Consider these 2 business women.
Miss Dominion is the MD of Dee Pictures. Her retained income for 2007 was N20m. Dee Pictures earned N170m during the year by selling stocks worth N95m and spent N55m on running expenses. It has N20m left over as retained profit.
Miss Ninaji is the MD of Newman Films which earned N200m by selling stock worth N90m in 2007. The Company’s total operating expenses was N35m leaving her with N75m. However, she spent N65m on renovation of her factory (which was set ablaze by hoodlums during the elections) and therefore has N10m left as retained profit.
These details were extracted from the P&L statement of the companies. From this, it is clear that the profit volume alone is not a true indication of the company’s health. If you compare N12m retained earnings with N5m, you could easily conclude that Miss Dominion is a better business woman. However, Newman Films has done better on the whole despite the gap in the retained earnings. But for the N65m capital expenditure, they would return a much higher profit than Dee pictures. The cost/income ratio is better and they are on top of their operating expenses.
An accountant would analyze these figures further to understand the under listed amongst other things.
Ø Volume of trade Vs Retained Earnings
Ø The quality of the trade i.e Trade Cost Vs Income; Investment Vs Earnings e.t.c.
Ø Exceptional activities i.e. huge income or expenses that is not likely to be repeated.
The Cash Flow Statement: This summarizes the transactions that cause a change in the company’s cash balance over a given period. The Net Cash Flow (NCF)is the difference between the cash flowing in and out of a company. Sometimes a company does very profitable business, but has no cash. This report is the most effective tool to manage the difference between the profit and cash flow.
Thursday, September 10, 2009
Everybody Blow Your Trumpet! 2
Following from my discussion last week, blowing your trumpet it your responsibility and it is a task you cannot delegate carelessly. The second point to note in this series is nobody will blow you trumpet if you fail to blow it yourself.
Nobody will do it for you: If any one around is offering to blow your trumpet, be wary. Check to know the real cost of such an offer, bearing in mind that money is not the only price. Only professional image makers take on such responsibilities and then they get paid for it. If any other person makes you an offer, ask what went down with their trumpets. Ceteris Paribus, they should be busy with their own trumpets. Usually those around you who offer to sing your praises are sycophants.
The person offering to play your trumpet may have an agenda that would be furthered by blowing your trumpet. If your instrument is well tuned; or you have cultivated an audience; or you have influence in certain circuits, such people come around with all sorts of helpful offers. While at it, they could slip their music in between your notes. The danger is you may be half way through playing the music before you notice. Moreover it may be difficult to stop and start over especially if you are playing in public. If you do stop, you will be in need of a lot of damage control which may be costly or time wasting.
In spite of all the above, you do need people who will blow your trumpet in business. I mean people who can speak for you without misrepresenting you. One of hardest resources to find in business is good human resource. I mean good staff. This is especially so for small and medium enterprise owners. Your employees are the ones that do your marketing. They receive your calls. They talk to suppliers and customers on your behalf. They are the Front Desk Officers who receive your guests.
Needless to say, they have to know what you are thinking, what you mean to say, when and where to say it and to whom they can speak. A word said amiss could mean huge losses for you. I am sure many of us have experienced rude sales girls and boys before. Sometimes we speak up about their rudeness or sometimes we just walk away and take our business with us. You can imagine how much you loose if this happens just once a day. That translates to about 200 lost customers per year.
· Be careful about whom and to what you lend your voice. Some people are eager to associate with you to get noticed or for their own reasons.
· Ask for a recap of your last message when giving out instructions. You must ensure they got your message right.
· Your representatives must know what you want said how to say it. Invest in training them so they represent you well.
In all manage your communication from end to end. You are responsible for what goes out and you must check the feed back. Many have missed huge jobs and contracts due to miscommunication.
A common illusion is that if you make more money, you will have less worry. Intellectually, this is what many believe, but in practice the reverse in the case. Many people take on financial commitment without seeing the exact numbers. Their decisions are based on a ‘sense’ or ‘feeling’ or blind faith. Such people will continually increase their spending with every increase in cash availability.
“John D. Rockefeller reportedly kept track of every penny he spent from the age of 16 until his death at the age of 98” - (Reported biographers). He never paid a bill without examining it and understanding it. Now this might seem like a tall order to meet, but it is definitely a habit worth emulating. Business men need to be on top of their activities especially spending. It is easy to spend 3 months income in advance in a period of peak cash inflow. Attention to accounts and financials will prevent such an occurrence.
Apart from writing biographies, the financial records has major interests for a budding entrepreneur. Every business person needs to keep track of the flow of money in/out of the business. If this is done well, then the actual cash in hand or in the bank must always be equal to what you have in the records. You need to understand that plenty of cash generating activities is not what makes a business. Most times business run into trouble during periods of huge cash inflow. The temptation to spend more than you have actually earned is ever present. Many people spend the deposit given to them in advance for services or products. They realize their error when there is no fund to finance the production of the goods at the delivery period.
One way to manage the spending stress and reduce the grey hairs is to have a spending plan. If you carefully list all your revenue, it will make it easier to apportion what you have. You can spend to the best of your ability and not beyond. Below is a template of a simple spending plan. It can also be used to monitor the actual spending.
If you can prepare this ahead of the season and stick to your plan, you will be happier and will spend with less anxiety.
Be sure to include all your income under the revenue. Salary, Dividend, Rental income, Sales income e.t.c.
Tick off your fixed expense items first. E.g mortgage/rent, insurance premiums, lease repayments, loan repayment e.t.c
Do not compare expenses with cash inflow. Your spending decision should be based on your earnings not just cash balance. If you get sudden cash windfall should not cause a huge change in your spending plan.
You must record your credit purchases and include a gap for paying them off.
On a weekly basis, compare your total spend with your revenue. If there is a shortfall, check the various categories of variable expenses to see what you can reduce. Also compare your total expenditure with your budget to be sure you are on course.
· Be careful about whom and to what you lend your voice. Some people are eager to associate with you to get noticed or for their own reasons.
· Ask for a recap of your last message when giving out instructions. You must ensure they got your message right.
· Your representatives must know what you want said how to say it. Invest in training them so they represent you well.
In all manage your communication from end to end. You are responsible for what goes out and you must check the feed back. Many have missed huge jobs and contracts due to miscommunication.
A common illusion is that if you make more money, you will have less worry. Intellectually, this is what many believe, but in practice the reverse in the case. Many people take on financial commitment without seeing the exact numbers. Their decisions are based on a ‘sense’ or ‘feeling’ or blind faith. Such people will continually increase their spending with every increase in cash availability.
“John D. Rockefeller reportedly kept track of every penny he spent from the age of 16 until his death at the age of 98” - (Reported biographers). He never paid a bill without examining it and understanding it. Now this might seem like a tall order to meet, but it is definitely a habit worth emulating. Business men need to be on top of their activities especially spending. It is easy to spend 3 months income in advance in a period of peak cash inflow. Attention to accounts and financials will prevent such an occurrence.
Apart from writing biographies, the financial records has major interests for a budding entrepreneur. Every business person needs to keep track of the flow of money in/out of the business. If this is done well, then the actual cash in hand or in the bank must always be equal to what you have in the records. You need to understand that plenty of cash generating activities is not what makes a business. Most times business run into trouble during periods of huge cash inflow. The temptation to spend more than you have actually earned is ever present. Many people spend the deposit given to them in advance for services or products. They realize their error when there is no fund to finance the production of the goods at the delivery period.
One way to manage the spending stress and reduce the grey hairs is to have a spending plan. If you carefully list all your revenue, it will make it easier to apportion what you have. You can spend to the best of your ability and not beyond. Below is a template of a simple spending plan. It can also be used to monitor the actual spending.
If you can prepare this ahead of the season and stick to your plan, you will be happier and will spend with less anxiety.
Be sure to include all your income under the revenue. Salary, Dividend, Rental income, Sales income e.t.c.
Tick off your fixed expense items first. E.g mortgage/rent, insurance premiums, lease repayments, loan repayment e.t.c
Do not compare expenses with cash inflow. Your spending decision should be based on your earnings not just cash balance. If you get sudden cash windfall should not cause a huge change in your spending plan.
You must record your credit purchases and include a gap for paying them off.
On a weekly basis, compare your total spend with your revenue. If there is a shortfall, check the various categories of variable expenses to see what you can reduce. Also compare your total expenditure with your budget to be sure you are on course.
Everybody Blow Your Trumpet! 1
Everybody blow your trumpet; paa ra param pa ra ra…
So goes the lyrics of an old Christian chorus. I recall every time it was sung in church then, it was like a competition of who had the loudest voice. It was a simple chorus in the popular call and response format of most traditional songs. The lead singer would call out ‘Everybody blow your trumpet’ and the whole congregation would launch into the ‘paa ra…’ response with gusto; hands raised to their mouths holding imaginary trumpets.
I also recall a friend’s cynical comments about the scene. He wondered who was listening amidst such noise and also sneered at the boredom playing just one instrument would bring – whatever happened to trombones, flutes, guitars, drums and others. When the pastor mounted the rostrum, I wondered if he had heard our side talk from his exalted seat several rows away. His first question as he began his sermon was a rhetoric. – ‘If you do not blow your own trumpet, who will do it for you?’
Thirteen years on, and now in business, I remember that episode and conclude - They both had valid points. I watch many entrepreneurs saddled with such a sense of modesty they cannot talk about their business achievements. In this series I will talk about my insights as I reconsider that very brief episode. Blow your trumpet; No one else will; Somebody is Listening; Learn to make good music.
Blow your Trumpet: I think every business owner needs to take lessons in this. It is a highly essential ingredient in the formula for business success. We are programmed by our culture, parents and religion to be modest about our achievements. I remember my dad constantly emphasizing the ‘empty barrels’ trait or should I say bane (i.e Noise). I have tried to keep as far away from it as possible.
Now having been in both the corporate and entrepreneurial world, I consider bragging as an essential skill to have. Being in employment helps you track and talk about your successes. There are job descriptions and appraisal forms which help to make the act impersonal.. It is not bragging but just a business routine.
However, in business you need to help your audience – customers and prospects understand that you do know your field. It is critical that you have a few ‘before and after’ stories that tell of your skills and successes in an inoffensive manner. Yes, your good works will speak for itself, however that does not mean you become dumb. You alone can tell your full story as it is. It is the biggest part of your public relations campaign and a key tool in getting more customers and subsequently more business.
You only need to always keep the following in mind:
It is not bragging if you have done it: learn to simply tell the story.
Do not exaggerate, in plain language its called lying.
Learn to blend your story into conversations and occasion.
When your music is applauded, acknowledge the input of others and give them credit. It makes you more believable.
So goes the lyrics of an old Christian chorus. I recall every time it was sung in church then, it was like a competition of who had the loudest voice. It was a simple chorus in the popular call and response format of most traditional songs. The lead singer would call out ‘Everybody blow your trumpet’ and the whole congregation would launch into the ‘paa ra…’ response with gusto; hands raised to their mouths holding imaginary trumpets.
I also recall a friend’s cynical comments about the scene. He wondered who was listening amidst such noise and also sneered at the boredom playing just one instrument would bring – whatever happened to trombones, flutes, guitars, drums and others. When the pastor mounted the rostrum, I wondered if he had heard our side talk from his exalted seat several rows away. His first question as he began his sermon was a rhetoric. – ‘If you do not blow your own trumpet, who will do it for you?’
Thirteen years on, and now in business, I remember that episode and conclude - They both had valid points. I watch many entrepreneurs saddled with such a sense of modesty they cannot talk about their business achievements. In this series I will talk about my insights as I reconsider that very brief episode. Blow your trumpet; No one else will; Somebody is Listening; Learn to make good music.
Blow your Trumpet: I think every business owner needs to take lessons in this. It is a highly essential ingredient in the formula for business success. We are programmed by our culture, parents and religion to be modest about our achievements. I remember my dad constantly emphasizing the ‘empty barrels’ trait or should I say bane (i.e Noise). I have tried to keep as far away from it as possible.
Now having been in both the corporate and entrepreneurial world, I consider bragging as an essential skill to have. Being in employment helps you track and talk about your successes. There are job descriptions and appraisal forms which help to make the act impersonal.. It is not bragging but just a business routine.
However, in business you need to help your audience – customers and prospects understand that you do know your field. It is critical that you have a few ‘before and after’ stories that tell of your skills and successes in an inoffensive manner. Yes, your good works will speak for itself, however that does not mean you become dumb. You alone can tell your full story as it is. It is the biggest part of your public relations campaign and a key tool in getting more customers and subsequently more business.
You only need to always keep the following in mind:
It is not bragging if you have done it: learn to simply tell the story.
Do not exaggerate, in plain language its called lying.
Learn to blend your story into conversations and occasion.
When your music is applauded, acknowledge the input of others and give them credit. It makes you more believable.
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