Posted by Bill McDermott on Fri, Feb 03, 2012 @ 10:52 AM
Our guest blogger this week is Dennis Hooper. Dennis has a great web site about building future leaders. He is a leadership development coach, helping leaders build organizations of excellence.
Dennis tells us how a leader creates an organization of excellence.
"I use the term “organization of excellence” with my clients. Over many months, they slowly begin to understand what creating one genuinely requires. Saying the phrase is easy; transitioning beyond the existing culture is a lot of work! Old habits are not easy to change.
I suggest leaders learn all they can about encouraging their organizations toward excellence. I have some very strong beliefs about what that entails. I share the basic concepts in this week’s article, and I will expand on those concepts in future weeks.
First, to develop an organization toward excellence requires a conscious commitment to service. Individuals in organizations of excellence have a clear understanding of who they serve, and “good enough” is rarely sufficient.
The Bible says to “do your work as unto the Lord.” Some people consider the direction in the Bible to be a constraining set of rules. Not me! I view the Bible as God’s way of letting us know how to best utilize and enjoy His creation. I invite you to consider how God’s commandment to “do your work as unto the Lord” might be His direction for achieving great joy.
I speculate that many employees would say they are paid to serve their bosses. However, employees of organizations of excellence know to whom they provide their service--customers!
What about those employees whose work doesn’t put them in direct contact with the “external” customers who ultimately pay everyone’s salary? These employees serve “internal” customers, individuals who use the output of another employee’s work to perform subsequent tasks.
One employee’s finished product is the raw material of the next employee. If the first employee’s work is done poorly, the internal customers can’t do their work properly.
Leaders in every department should pause periodically and ponder with their direct reports who “the customer” is for those working in that area. Further, every employee should seek clarity regarding what that customer needs and what that customer considers excellent quality in the product or service provided. Feedback is abundant in an organization of excellence.
We sometimes can be seduced into believing the customer has no alternative but to obtain that product or service from us, but every customer has choices. What we might consider “good enough,” the external or internal customer might consider inadequate.
Leaders consciously instill in every member of the organization the concept of asking questions to see what can be improved. Many organizations focus on continuous learning as a method for continuous improvement. We learn a lot by asking the basic standard questions of “What?”, “How?”, “When?”, “Where?”, “Who?”, and “Why?”
To whom are these questions asked? The internal and external customers, of course. Having a continuously inquisitive orientation to the outcomes and processes of one’s work will periodically expose improvement opportunities. Over time, that develops into a reputation for excellence.
People in organizations of excellence consciously analyze the concept of service, who the customer is (internal and external), what the customer needs and wants, and what the customer considers to be outstanding quality in those products and services.
Further, there is continuous effort to improve, and these improvement efforts come from an orientation of questioning what is currently being done, looking for learnings about whether and how it might be done better.
Posted by Bill McDermott on Tue, Jan 31, 2012 @ 11:35 AM
Your loan package will likely be the first impression your banker will have of you and your business. A banker will begin to critique it immediately.
Here’s how to make the best of it.
- Three years of financial statements (balance sheet and income statement), interim financial statements less than 90 days old with the comparative financial statement for the same prior year period. Occasionally, a bank will require business tax returns
- A personal financial statement (on the bank’s form) will be required with at least 2-3 years personal tax returns
- A 1 page background and history of the company
- A 1 page summary describing your loan request, loan amount, purpose, repayment, collateral and any other terms and conditions that are important to you
Depending on the type of business loan you’re requesting, there are a few other items
- An SBA loan will require a statement of personal history (SBA form 912), a personal financial statement (SBA form), a request for tax returns (SBA form 4506 T) and a business debt schedule (SBA form)
- A line of credit will require an aging of accounts receivable and accounts payable to match the date of the interim financial statement you provided
- A commercial mortgage loan will require a legal description, copies of any leases and a purchase contract for a purchase transaction
With these items, you should pass the critique with flying colors. A few things to avoid in loan packages:
- Avoid fluff. Fluff is information that may be important to you, but not to your banker. If your loan package has no historical financials or personal financial information, you may have too much fluff.
- Avoid partial copies of tax returns or historical financial statements. Bankers want the complete return and complete financial statements including the notes that are included in CPA prepared statements.
Need help putting together your loan package? Contact us today!
Posted by Bill McDermott on Wed, Jan 25, 2012 @ 11:35 AM
The Fiscal Check-up is one of several small business financial solutions for your company. The information contained in it can be an important part of your loan package or bank presentation to your banker.
I want to focus today on your company balance sheet. Many business owners don't spend time much time with their balance sheet. The income statement is their primary focus because they want to be sure the company is profitable.
However, analyzing your balance sheet for liquidity, leverage and activity is vitally important. Here's why:
- If you're going to the bank to ask for a loan, you better be sure that you have at least 20% of your capitalization in shareholders equity. Your bank is willing to tolerate 20-25% equity, but usually not less than that.
- Cash is king in today's economic environment and you want to be sure you have as much cash on hand as possible.
- There are a couple of other measures of liquidity other than cash, working capital (current assets-current liabilities) and your current ratio of at least 1.5-1. A good rule of thumb is one month's sales in working capital.
Another important piece of The Fiscal Check-up is measuring your activity in the areas of receivables, inventory and payables.
- Whatever your credit terms (net 30), check to see how your customers are paying you and has there been any significant change from the prior year. Do you have any receivables that should been written down or off?
- Look at how fast or slow your inventory is turning. Any change from last year? Any stale or obsolete inventory that you need to deal with?
- Same exercise with your accounts payable, take your purchases and divide them by your payables to get your average payables turn. Divide that number in to 365 to get the actual days. How does that number compare to your actual terms?
Focusing on your balance sheet can give you some insight in to what changes are going on in your liquidity and leverage. Both items together can make a huge difference in the outcome of your loan request with the bank.
Schedule a Fiscal Check-up today! If you'd like to see how a Fiscal Check-up might be fit in to your overall financial strategy, call or email us for a free 1 hour consult.
Posted by Bill McDermott on Mon, Jan 23, 2012 @ 01:50 PM
We are pleased to announce our new "Inside the Vault Process," which helps provide financial solutions for small business success. Our services can be packaged and performed on a monthly basis, or a la carte to specifically fit your company's needs. We will also offer seminars for your company's employees to help educate them on the financial side of your business. Our simple, informative classes will put you and your employees on one cohesive thought process to help your company reach its financial goals.
Read more about our services here:
The Inside the Vault Process
Bill McDermott, Founder of MFS
Years before I even began thinking about starting a company, a common complaint by business owners was that it’s hard to have a relationship with a banker. Second, it was hard to have a relationship with a banker that truly understands your business.
Also, once a business owner has a relationship with a banker, the banker is moved and they have to start all over again with a brand new banker. The Recession and tight credit environment brought new concerns of how business owners could find the financing needed to handle their cash flow. Many businesses today are just struggling to survive.
The banking community, for many business owners, appears to be a secretive labyrinth, filled with surprises and an unfair house advantage. It doesn’t have to be that way. Banking, if pursued with appropriate knowledge and know-how, can benefit a small business more than any other service.
That’s what McDermott Financial Solutions is all about. We are about taking you inside the vault and arming you with the tools you need to allow the banks to help you and your company thrive.
Our "Inside the Vault Process" may not solve every problem, but among other techniques, it will prepare you to talk to your banker, develop brief presentations that could help your company for years and further the vision that you had when you founded or assumed leadership of your business.
I know about the tactics and tools because I’ve used them on both sides: I was a banker for more than 30 years and I developed this company in the worst possible economic environment. I’ve seen these methods work.
The "Inside the Vault Process" helps the business owner by providing the services needed to solve issues in the areas of banking and finance and get you to your financial destination.
For more information on our new process, contact us today for a free one hour consultation to see how our services can help your company reach its financial goals.
Posted by Bill McDermott on Fri, Jan 13, 2012 @ 03:14 PM
Ok, I was a little overdue for my annual physical (should've been in June). Work's been busy, our daughter got married in June. I'm full of excuses. I took time off between Christmas and New Years and made an appointment with my doctor for a physical.
The results were pretty much what I expected. However, there were a few new things to treat. The doctor told me to make a few changes to get back to optimum performance. I'm a little overweight (probably more than a little). So, I need to eat better and exercise more. Check. I use to be able to manage this with better diet or more exercise, at my age it now takes both. I have a new medication to get some of my blood levels more in line with where they should be. Ok, wasn't expecting that one. Check.
Just like your body changes as you age, your company changes too. This current economic environment of slow growth and tight credit can literally starve your business for cash. Cash flow tight? Maybe your clients are paying you a little slower. (Maybe you have one or two in there that aren’t paying you at all)
Did you have an operating loss last year or the year before, maybe you borrowed the money to fund it rather than kick in your own. Now the bank says it’s time to pay up but you don’t have the cash. What are you going to do? Maybe you have a little too much debt and are having a hard time finding financing.
It’s time to stop putting it off like I did, get a financial health check up for your business. Find out what it’s going to take to get your business back to optimum performance.
Schedule a Financial Health Checkup Today!
Join the conversation, if you have any comments on the keys to financial health of your business, please share them here!
Posted by Bill McDermott on Fri, Jan 06, 2012 @ 08:22 AM
“Forbearance Agreement” is an intimidating phrase to most business owners. It conjures up all types of feelings that bank is going to liquidate your business, you’ve lost control and you feel very vulnerable. However, it doesn’t have to. Here’s a case study of how a company stayed in a forbearance agreement for 18 months and has a game plan for success to move forward.
1) First, the company broke two loan covenants which brought both parties to the table. The line of credit and mortgage loans had cross collateralize and cross default provisions.
2) The company had multiple locations and an analysis of each location indicated that several had to be closed to get to a core profitable operation. Our bank presentation included a step by step process of how we were going to shrink the operation, liquidate inventory of the closed stores and sell off the real estate of the locations we were closing.
3) The process of closing multiple locations and transferring assets to other stores took about a year. In the meantime, the bank insisted on monthly financial reporting and field audits to insure that the level of receivables and inventory adequately protected them. Unfortunately, this was costly to my client.
4) Selling real estate in a down market can be a frustrating process. However, we successfully negotiated short sales for the locations with the help of a real estate agent and the bank.
5) By closing locations, we successfully reduced expenses and created a core operation that was profitable. The reduced debt level dramatically improved our break even point and we reduced inventory by about 60% during the 18 month period
6) We are in the process of finding a bank that can take out our existing debt with the bank and get out from under the forbearance agreement.
If you have a forbearance agreement and don’t see a way out, contact us today for a free 1 hour consult.
Join the discussion, if you have a comment or question about forbearance agreements, please ask it below.
Posted by Bill McDermott on Wed, Jan 04, 2012 @ 09:54 AM
You may be doing some strategic planning as you begin the year. Here's some business banking advice on what to expect and what you banker may have on their mind concerning the economy. Excerpts from a recent publication.
- Georgia's unemployment rate has stubbornly remained near 10 percent through much of 2011. Housing and financial services sectors continue to weigh on the state's economic performance
- Corporate relocations and busines startups are rebounding but the hiring associated with new projects is lagging behind previous recoveries.
- Georgia needs a new game plan, low cost of living and temperate climate used to attract businesses and residents to the state is inadequate given the globalization of the economy and the IT revolution
- Georgia still ranks as the third best business climate in the country according to recent Site selection surveys of corporate real estate executives
- We will continue to benefit from Hartsfield's global access and long standing ties to Germany, Japan and Korea.
- Also, Savannah has the been the nation's fastest growing port in the country over the past 10 years
- According to the Georgia Department of Economic Development, they assisted 360 companies in expanding their operations or locating a new facility in Georgia in the last fiscal year
- This is assistance is expected to contribute over 22,000 jobs in the state in the coming years. Noted expansions included Gulfstream Aerospace, Toyo Tire and FedEx Ground
In conclusion, Georgia continues to make slow, but steady progress. A national recovery of the housing industry may be a prerequisite for Georgia's recovery. Georgia's pace of recovery will accelerate slightly in 2012. GDP in Georgia should rise about 2.5%. Businesses are expected to add about 40,000 jobs, primarily in professional and business services sectors. It is expected for growth in Atlanta to slightly outpace the rest of the state.
If this email was helpful for your financial strategic planning, please send it to a friend.
I would welcome your comments in the comment section below. What's your outlook for 2012?
Posted by Bill McDermott on Mon, Jan 02, 2012 @ 03:04 PM
USA Today came out with an article last week stating that banks are making more business loans. "Banks have turned on the spigot, boosting lending at rates as high as 8.2% since July according to the Federal Reserve"
In a quote from Stuart Hoffman, chief economist at PNC Bank, the reason for this improvement is the economy is improving and community banks are picking up the slack while large banks remain cautious. Business lending has increased 20% in August 2011 vs August a year ago.
Bill Dunkelberg, chief economist of the National Federation of Independent Businesses states that in a recent survey only 3% of business owners state that lack of credit is their number 1 problem, trailing taxes and regulation.
I'm sorry, I'm just not seeing it. The Federal Reserve in Atlanta stated in their 4th quarter report that only large banks (in excess of $10 billion) had loan growth in 2011 and that was only in the first and second quarters. Loan growth has stagnated in the second half of the year according to the Fed-Atlanta. Loan growth actually fell 8% year over year in the Atlanta Fed District. Also, Georgia leads the nation in bank failures in 2011 with 23, 7 of those occurring between August and November.
The spigot is turned back on? Loan growth? Isn't credit still a serious problem for business owners?
Comments please. What are you seeing out there? Is it easier to get a business loan or is credit still tight? Join the discussion!
Posted by Bill McDermott on Fri, Dec 30, 2011 @ 08:44 AM
Bank critics claim that banks are being too tight fisted with their funds and not lending them out to small businesses. Banks say that because of low interest rates, they are not being adequately compensated for the risk they take. The fight goes on and the disenchantment grows on both sides. Here’s what going on in the industry so you can understand why banks aren’t lending and you can’t get the financing you need to run your business.
The New York Times recently did an article stating that banks are flooded with cash. The reason for that is the financial markets have concerned investors greatly and they have pulled money out of investments to place it in bank deposits.
Banks have dropped interest rates about as low as they can to the dismay of depositors. However, the supply of money exceeds the demand for it. Historically, banks have been able to loan those deposits out and make money on the spread (the lending rate minus the deposit rate). However, the pace of lending activity can’t keep up with the inflow of deposits.
What’s more, the profitability of each new loan has shrunk. The Federal Reserve effectively sets the floor off which banks price their lending rates, its decision to lower interest rates to near zero means the banks earn less money on the deposits they lend out.
Bankers state they would like to make more loans so that they could earn more money. But there are too few of what they call “quality borrowers,” whose credit record, income and assets suggest they would reliably pay the bank back. The return the bank makes doesn’t justify the risk. In addition, since the return the bank makes is lower, that means the risk has to be lower also.
Some banks have resorted to fees on deposit accounts, debit cards and are pushing treasury management service fees to offset what they don’t make in the lending arena.
This is not an attempt to rationalize bank behavior, just to explain it. The solution for you as the business owner is to find a bank that is of sufficient size to spread these costs out over a large client base and has the capital and deposit base to lend to you despite these factors. It’s also important to you that you have the attributes of what one banker describes as a “quality borrower” mentioned above.
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Posted by Bill McDermott on Wed, Dec 21, 2011 @ 12:51 PM
Georgia business owners need to understand that their state unemployment taxes are going to increase in 2012.
Bill McDermott, McDermott Financial Solutions
A $21 per employee per year increase in the state unemployment tax will be implemented in 2012 to help repay a loan that the state of Georgia made with the federal government.
The AJC ran an article in March 2011 that said the state of Georgia had borrowed $672 million from the federal government to pay tens of thousand of unemployed Georgians and the tally rises daily. WSB reporter, Condace Pressley stated on December 15th that the loan has increased to $720 million. Georgia is one of 30 states to borrow money from the federal government for this purpose.
The double-digit unemployment combined with insufficient tax contributions from employers, depleted the trust fund. The state had halted payment into the fund by most employers more than a decade ago. In 1999, the $2 billion trust fund was flush so payments to the fund were suspended.
Georgia business owners will bear the brunt of this tax increase. They can’t pass it on to employees. One business owner was quoted during an interview “it’s just another nail in the coffin for small business owners. I’m trying to figure out how to offset the burden”
House Bill 292 was passed in May 2011 and will postpone a decision to restore the fund down the road. It would also reduce the unemployment tax businesses are supposed to pay beginning in 2012. While taxes will still increase, the amount of the increase would have been more if HR 292 had not been passed.
The Georgia Budget and Policy Institute opposed the bill. “Nobody wants to advocate for raising taxes significantly on employers when the economy is still recovering from recession” said Clare Richie, a senior policy analyst with the non-partisan research group.
If you have questions about how this increase will impact your company, please consult with CPA for details.