Corpcentre's Blog

January 19, 2010

Positive Cashflow Critical to Small Business

If you’re in business for yourself, you know that maintaining the status quo is not nearly enough. You must continually think of ways to spur growth in your business. While there is no specific recipe for success, there are several helpful tips that can be considered.

Positive cash flow is critical to any business. As such, it is vital to know your financial standing at any given point in time. Looking at the books at the end of month is simply inadequate. Keep your records as current as possible, updating them daily if you can. After all, shouldn’t you be in constant control?

Often, business owners ponder how to improve sales. One suggestion is to truly focus on your clients. Research their needs and problems and provide the solutions. A proven path to success is to give the client exactly what they need, rather than convince them to settle for less. Build a bond based on mutual need.

As important as sales may be, they are worthless if the customers don’t pay. Collections are often a major stumbling block for businesses. Some experts suggest that working with the clients is better than dictating terms. Try to mutually agree on terms of payment. Sometimes, it may advantageous for the top executive to personally collect serious debts. After all, the same money pays all salaries.

Stability in business is also vital. Retaining good employees is often no less important than holding on to key customers. Of course, what’s to stop the competition from luring your top employees? Building a strong bond with your staff can help with retention. Employees keenly involved with the company, who appreciate how they contribute to the company’s success, are far less likely to be recruited elsewhere.

Finally, look for the best people to work for you. Don’t just rely on resumes. Almost anybody can write a creative one. Use interviews to seek out true potential and look for potential personal chemistry.
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January 14, 2010

The End of Low Interest Rates

The period of low interest rates is coming to an end. According to current forecasts, the rates will start rising midway through 2010. For many Canadians who went on holiday shopping sprees, stretching their credit limits to the max, the rise could spell sudden difficulty or disaster.

The Bank of Canada has warned that the biggest risk to the country’s financial system is record household debt. Canadian households spent an average $71,360 last year, two per cent more than 2007. Approximately 20 per cent represented housing expenses.

As many Canadians wish to unload their mortgages as soon as possible, they are struggling to meet payments due to accelerated pay-downs on principal. Combining these high payments with other debts has put a stranglehold on many consumers.

It is crucial to take control of your debts before they control you. Experts suggest developing a plan of action to tackle your debts before problems arise.

It may be wise to suspend accelerated pay-downs on your mortgage. Use the extra cash from the lower mortgage payments to tackle the credit cards and other debts. Refrain from adding debts to your cards while you reduce the balances. Remember that higher unpaid balances carry higher rates of interest. It may also be advisable to take a consolidation loan at a lower rate of interest and pay off the cards. Also, try not to use more than one or two credit cards.

Sometimes, debts can get the best of us. Don’t be afraid to seek help from credit counselors, if you feel that you are beginning to drown in debt. These professionals can help you before you panic and assist you in gaining control of your financial situation.
 
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January 5, 2010

Risk Management: The Financial Safety Margin

Investing is a part of our culture. Many of us invest a portion of our income for our needs, present and future. However, investing carries with it an element of risk. Therefore, it makes good sense to build a safety margin into your personal investment plans.

Playing the stock market is virtually a national pastime. However, as recent history has proven, the value of stocks can plummet, sometimes quite rapidly. Therefore, some investors will attempt to pay the lowest possible price for stocks. If the floor should fall out from under that stock, you stand a good chance of recouping most of your money.

Even if your cash flow is healthy at present, always be prepared for the inevitable. Many jobs today are not 100% secure. Take a couple of months of living expenses and tuck the money away in a savings account or money market.

The dream of many newlyweds is the purchase of their first home. Many, though, make the mistake of sinking all their available cash into that purchase and further committing both their salaries to make the monthly mortgage payment. If you can’t afford the mortgage on one salary, think twice! If one job should disappear, you could face serious problems.

At the other end of the spectrum are those heading into their retirement years. Is your investment portfolio secure? Will you be able to rely on it? If you assume that the portfolio will generate a double-digit annual return, you may be surprised. Markets have proven to be rather volatile. It would be wiser to assume a much lower rate of return. Also, when you calculate withdrawals from your initial portfolio, experts advise withdrawing no more than an inflation-adjusted 4% each year. This amount will allow you to remain in a fairly stable condition, however the market moves.

Remember that investments mean risks and a safety margin is your best insurance policy.

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January 3, 2010

Three Cheers for Canadian Finances

Filed under: Bank of Canada,banks,canada economy,recession,world economy — corpcentre @ 4:37 pm

Let’s face it – Canada’s reputation is not one of the glitzy stars of the world. It is rather conservative, moderate, and perhaps even a bit dull at times. But, those exact qualities allowed the nation to remain strong and secure during the recent recession. At the same time that the U.S. economy has been floundering with no end yet in sight, Canada weathered the storm that lasted just eight months.

Canada’s well managed banking sector was a key factor in saving the day. The country’s strict regulatory system, combined with a conservative banking culture and superior credit conditions, paved the way for stability. The recession saw the loss of more than 122 banks in the U.S. Not a single Canadian bank closed and none needed bailouts.

Certainly there has been Canadian unemployment. But, our workforce shrinkage of 2.5% was half of our American neighbours.

Let’s look at the GDP. Canada’s fell 5.4% but that’s far less than other nations like Germany’s 14.4% fall or Japan that plummeted by a whopping 15.2%.

Sub-prime mortgages dealt a death blow to U.S. banks, comprising almost 20% of the mortgage market. Canadian banks were a lot more cautious and only 7% of the market was comprised of sub-prime mortgages. Furthermore, banks in Canada rarely sold their mortgages and kept a tight reign, thus reducing the risks of default.

Conservative Canadians are more reserved? Quite possibly so, if one considers personal finances. Canadian household debt measures approximately 102% of income while the U.S. ratio is 114%. When Americans had to start repaying their debts, Canadians were able to take advantage of low borrowing rates and boost consumer spending.

Do Canadians have the last laugh? Not really. The recession has hurt everyone and is far from over around the world. But, whereas the great credit bubble burst in other countries, and many are still reeling from the effects of the recession, Canada has shone brightly as a model of fiscal prudence and responsible financial management.
 
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December 30, 2009

A Stronger Financial System

Ever wonder what happens behind the scenes of banks? For example, how does the bank manage its money?

Part of the system involves banks lending money to one another for short terms. The system is known as repurchase agreements, or repos for short. In order to raise money, a bank sells bonds or other collateral to another bank but agrees to buy back the collateral at a later date. Repos are part of a market that involves traders at the various banks trading with each other and shuffling the collateral back and forth.

All was well and good until the recent recession. The banks began to be leery of the solidity of other banks. The time proven system of trading began to fail, leaving even the healthiest of banks with a potential cash shortage.

Anticipating a possible major blow to the Canadian banking system, the Bank of Canada, together with the country’s securities industries, began creating a plan to revamp the system and ensure crucial funding for the country’s banks.

The plan involves establishing a central clearinghouse. Banks would no longer trade with each other but, rather, with the clearinghouse. This would eliminate questions of stability of other banks. Also, a central clearinghouse would be able to give a bank a clearer picture of their repos transactions, thus affording the bank a better way to manage its capital.

The Bank of Canada hopes that this new system will begin to be implemented by mid-2010 and will increase the overall safety and solidity of the Canadian banking system.

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December 25, 2009

Corporate Social Responsibility: Better to Give Than to Receive

Filed under: canada economy,Corporate social responsibility,environmental — corpcentre @ 5:01 pm

In a business world infatuated with inflating the bottom line, it is a comfort to know that many business leaders have not forgotten their own humble beginnings or the needs of those less fortunate than they.
 

Corporate social responsibility has been gaining momentum across Canada the last few years. Witness the fact that the annual summit conference of the Canadian Business for Social Responsibility attracts an overflow crowd of luminaries from the business world. This year’s conference was even graced by the attendance of Prince Charles.
 

Business leaders have begun to realize that giving back to the communities that helped them grow is an essential part of the business cycle. Whether management supports charitable work by their employees on company time, makes available products at huge discounts for those in need, or provides services free of charge, all contribute to helping the people that helped the businesses.
 

This is not to say that corporate social actions are totally altruistic. Being socially responsible is a wise investment that is sure to pay high dividends. A public that perceives the human side of a business is far more likely to identify with it rather than with the cold corporate entity that is far removed from society.
 

Of course, it’s not just about management rolling up its sleeves. Many companies encourage their employees to join their social action programs. Quite often, small company programs have a way of mushrooming into larger, community-wide programs. If the spirit is right, most people want to take part.
 

Businesses do have to take care, though, not to overextend their kindness. There is an inherent danger that could arise from wanting to “overdo it”. Remember that you are operating a business for profit. Make sure that your needs are met and then begin disbursing from that point on.

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December 18, 2009

Canadian PM: Stimulus Package Temporary

Filed under: canada economy,global economic growth,recession — corpcentre @ 4:14 pm
On a recent official visit to China, Canadian Prime Minister Stephen Harper took the opportunity to use a press conference as a venue for giving a Canadian economic update and to send messages home about the Canadian government’s stimulus package.
 
The timing of the report may have seemed slightly peculiar but a portion of the diplomatic visit was dedicated to promoting Canadian business, investments and trade with China. Harper hopes that this trip will improve and expand business opportunities with China. Canada’s relationship with China is the country’s second largest, aside from the U.S. Bilateral merchandise trade with China tops $53 billion a year, although China exports four times as much as it imports from Canada. China has lifted a ban on pork import from Canada, a $50 million potential market, but this is still far from an equal balance.
 
Mr. Harper sent a message home that the government’s stimulus program has given a jump-start to the economy but Canadians should be aware that it is a temporary program. The government has warned that stimulus funds must be spent by March 2011 or will be lost. Government officials are quick to point out that termination of the stimulus funds will allow the current projected deficit of $57 billion to be cut in half. Opponents of the government, though, point out that trimming the deficit is not the only issue at hand.
 
The stimulus package was designed to help a recession struck nation by providing employment for Canadians. Critics note that the Harper government has not released figures on how many jobs were created through the stimulus programs. Furthermore, Statistics Canada announced that the economy had grown by only 0.4 per cent in the third quarter, a rate slower than most of the Group of Seven countries.
 
Mr. Harper paints a picture of cautious optimism yet it remains unclear whether Ottawa has indeed managed to invigorate an ailing economy.

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December 17, 2009

A Province Divided

It would appear that all is not well in Canada’s westernmost province. The implementation of the Harmonized Sales Tax (HST) looms on the horizon for July 2010 and the ground underfoot is shaky with protests and counter-protests.
 
Critics of the new tax claim that the Liberal government of Gordon Campbell organized strong support from within the business community to endorse the HST. The business community refutes any such instigation by the government. Business leaders in B.C. claim that, following Ontario’s lead in adopting this new tax, they realized that the inherent benefits far outweigh the disadvantages and, thus, have supported the government’s tax proposals. They see the new tax as a way to stimulate the province’s productivity which, according to experts, has been “dismal” for the last two decades. While big business agrees that there will be short term problems with the HST, they feel that the tax will lead to long term economic improvement in investments, competitiveness, and consumer prices.
 
Consumers are slow to give their endorsement. That which is good for business means taking more from the consumer’s pocket. The bottom line is that consumers will now pay more for many goods and services that will carry the HST tag but are currently exempt from PST or GST. This disgruntlement has given way to public protest about other government policies that have not found favour with the public.
 
As a result of the recession, the B.C. government has been forced to curtail some budgets and trim expenses on existing programs. Indeed, with the new budget looming, the public is awaiting the latest round of budget cuts. A prevailing opinion is that the HST was adopted in order to funnel more money into an ailing provincial budget at the public’s expense. During the election campaign, Premier Campbell pledged a deficit ceiling of $495 million. As this summer approached, that pledge grew to a whopping $1 billion and the end of summer saw a projection of that estimate being tripled. With numbers like these being bantered about, neither side is quite sure about the true economic state of the province.
 
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December 15, 2009

Harmony in B.C.? The implementation of the Harmonized Sales Tax (HST)

July 1, 2010 is rapidly approaching in British Columbia. While it will be a national holiday as it is every year, it is also the date that the province will implement the Harmonized Sales Tax (HST). The jury is still out on whether it will be good for the province or not.
 
The answer, at this point, depends solely on who is asked. There are clearly going to be winners and losers in this new tax. The decision to implement the new tax is final. The actual impact is still theoretical.
 
It seems that the majority of the B.C. business community is clearly in favour of the HST. With 130 jurisdictions around the world using an HST style tax, B.C. simply cannot ignore joining the fray, if it wishes to compete for business investment. The province must offer the same tax advantages to the business community, lest businesses move elsewhere to obtain the benefits. Similarly, with e-commerce on the rise, retailers and manufacturers are competing with provinces like Ontario, which voted to adopt the HST.
 
A major challenge lies with the hospitality industry and other business sectors that currently don’t have to charge PST, or services that don’t have to charge GST. Under the new HST, these businesses and services will have no way getting back the HST. In essence, here will be the new tax burden with no relief in sight. Also, the average consumer will pay more taxes. Consumers cannot claim any portion of the HST but will pay more for products and services that are currently tax exempt but will not be so under the new HST.
 
Economists claim that implementing the HST is the right move for B.C. Come July 2010, B.C. will see if the economists are correct.
 
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December 9, 2009

Canada Goes Self-Employed

The truth is out. The latest trend in the business world is self-employment.
 
The recent recession has manifested itself in many ways across the nation. For many Canadians who found themselves unemployed as a result of cutbacks, downsizing, etc., the choice was despair or repair. The former meant waiting until something new comes along. The latter meant channeling one’s talent and energy into a new venture as one’s own boss. Statistics Canada revealed some fascinating employment figures. In April of this year,some 36,000 new full time jobs were created across the country. Nearly all these jobs were from self-employed Canadians. Overall, this translates into one in six Canadians being self employed.
 
Of course, becoming self employed is easier said than done. The process requires a large measure of self determination to make your idea work. In addition, self discipline is required in no small measure.
 
It may seem like a great convenience to get up in the morning and already be at work, if you’re working from home. The danger is as great as the convenience. Experts have offered various tips to help you along.
 
It is imperative to make a distinct separation between work and home lives. Temptation to get distracted with household issues is very easy. Making your business succeed requires utmost full time concentration. If you wouldn’t run out for milk and the cleaning at your old job, don’t do it now.
 
Remember that you used to go to work at an office? Set up a distinct office at home and go there in the morning. Keep regular hours at your office. Get dressed for work in the morning.
 
These are but a few steps in maintaining a work ethic that will enable you to focus on the task at hand; launching a successful new job with an extremely determined boss – you!

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