Tag Archive for 'expenses'

Washington’s New Hashtag: #WithoutAnySenseOfShame

Let me tell you a story.

A boss gives an employee a project on January 1st that could easily be completed right away. This project had significant financial implications for the company. Month after month the boss checks in with the employee but finds the project still isn’t completed. The employee hasn’t done his job.

Finally, in the middle of December, almost a year later, the employee delivers the finished project as if there’s been a great accomplishment, but with two pieces of bad news: There are only two weeks left for the project to contribute to this year’s business, plus the project just delivered will be useless on January 1 without being completely reworked.

No doubt right now you’re yelling, “Who keeps an employee like this?” Or perhaps you’re saying, “This is a joke, right? No organization operates like that.” Sadly, this scenario is not only true, it’s been happening in a real organization, like in the movie Groundhog Day, for several years.

The employee in my story is Congress and the employer is America’s small business owners. The projects are 52 tax extenders which Congress has chosen to reapprove annually rather than make them permanent.

Many of these extenders are key factors in growth strategies, plus cash and tax planning for millions of businesses. Perhaps the most prominent is section 179 of the tax code. Part of this section allows and sets a limit for direct expensing of capital items in the year of acquisition, rather than depreciating those items over years.

For several years the Section 179 expensing limit, and the amount awaiting re-approval, was $500,000. But if this provision isn’t renewed it drops to $25,000. And just like in my story, instead of finishing the project permanently, Congress keeps renewing this extender each year, which wouldn’t be so bad if they did their work in January. But in 2014, without any sense of shame, Congress passed another one-year extension for the $500,000 level on December 16.

The expensing provision might not change whether you make the investment, nor the price of the purchase, but it does impact cash flow and tax planning for the year of acquisition, which is a big deal for most small businesses. If you were trying to make a 2014 equipment purchase decision, you had less than two weeks – over the holidays – to get that equipment in service in order to take advantage of the expensing option.

When you’ve read my past criticism of the anti-business practices of the political class in Washington, this is but one example. Like it or not, the tax code is very much a part of business investment decisions for companies large and small. And when investment decisions impeded at the micro level of a single purchase are aggregated across millions of businesses, it has a negative impact on economic growth. It’s not difficult to see how Congress’s failure to do their job has contributed to the moribund 2% annual GDP growth we’ve been suffering since 2009.

So here we are again feeling like it’s Groundhog Day because, like last year, Congress still hasn’t renewed the tax extenders for 2015. Next time someone asks why non-politicians are polling so high in the presidential campaigns, tell them this story.

Write this on a rock … Washington’s new Twitter hashtag should be: #WITHOUTANYSENSEOFSHAME.

Jim Blasingame is author of the award-winning book, The Age of the Customer: Prepare for the Moment of Relevance.

The Three Clocks Of Small Business

Ti-i-i-ime is on my side - yes it is.

So sang the legendary Rolling Stones singer, Mick Jagger. As lyrics in a ballad this is a nice sentiment, even romantic. But in small business, it’s hogwash.

In the marketplace, there are actually three clocks at work: one for operating expenses, one for sales, and one for cash. Rarely are any on the side of a small business.

The clocks that tick on sales and cash collections often seem to have hands that drag or even get stuck, while the clock that is in control of expenses is so well oiled and finely tuned that the hands seem to fly around the face.

Let’s take a look at the three clocks of small business.

Operating Expense Clock
Every month, like clockwork, whether sales are good, cash collections are on schedule or profits exist, payroll must be met, rent must be paid, taxes must be remitted, plus phone bills, utilities statements, insurance premiums, etc., ad nauseum, must also be paid.

The Operating Expense Clock is hardwired to Greenwich, England for accuracy within a nanosecond per millennium, and nothing stops it short of a global, thermo-nuclear holocaust, coinciding with a direct hit from Halley’s comet. The only way to influence this clock is through operating efficiencies - you won’t be billed for something you don’t buy.

Sales Clock
This clock runs off the customer relationships you’ve created so that sales result each month. You project when each sale will occur by qualifying prospects and attributing a “clock” to each potential transaction so that you can budget future sales volume.

The Sales Clock is completely logical and intuitive. A sale will be made made only when a prospect’s purchase requirements have been met.

Cash Clock
What is not so logical or intuitive is the Cash Clock and its relationship to the other two clocks. Think of it like this:

Cash is to sales as snow is to winter:

  • You can have winter without snow, but you can’t have snow without winter,
  • You can have sales without cash receipts, but you can’t have cash receipts without sales.

And expenses are like weather: You get some every day.

But what every small business owner knows is that for every one glitch in the mainspring of the Sales Clock, there are 1000 sprocket failures that can slow or stop the Cash Clock. Consequently, this clock requires constant attention and maintenance.

Murphy’s Law flourishes inside of the Cash Clock and is a frequent resident in the Sales Clock. But the Operating Expense Clock is totally immune to Mr. Murphy’s insidious law and rocks on just like The Rolling Stones.

Recently, on my small business radio program, The Small Business Advocate Show, I talked about the three clocks of small business. I also had a conversation about cash in an interview with Brain Trust member, Phil Holland, founder of My Own Business. Take a few minutes to listen to these conversations on this important topic and, as always, be sure to leave a comment.

My commentary:
My interview with Phil Holland:




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