Become Your Own Personal CFO

PR 004- SI - 29_02_12-276Budgets and personal finances are not most people’s favourite topics, and certainly not one of mine. Even bank executives have problems in this area, but if you’re an entrepreneur so do you. You’re concentrating so much time on your business, your personal check book takes a back seat. Then one day you are met with the startling fact that you’re not saving enough for lean times and you panic.

Well, just apply your professional talents to the situation and become your own personal CFO. By using your CFO eyes on the situation, it somehow tempers the pain of dealing with your own money. To get started, here are 5 rules for treating your personal finances like a business:

1. Be Your Own Board of Directors. To make good decisions, you must know what you’re trying to achieve. In business, Board of Directors write mission statements to keep the company on track with goals. At home, it’s up to you to define your mission and make sure you’re fulfilling it by writing down your goals. Not just your financial goals either, but your “life” goals.

2. Know Your Operating Costs. Do you know what you spend every month on average? Businesses do because they base their budgets on historic spending patterns. Most people, however, don’t know what it costs to keep their lives running. You can make out detailed budgets, but find out at the end of the month that you haven’t stuck to it. So instead of doing a budget that dictates how much to spend, do a “cash flow statement” that records how much you actually spend each month broken into several categories.

3. Know Your Net Worth. Companies measure progress toward goals through balance sheets which list their assets and liabilities. Your net worth is your balance sheet where you list everything that you own. That means your checking and savings accounts, investments, car, house, etc. minus everything you owe. Track your net worth quarterly to make sure you’re moving toward your personal goals. Without this step, you might not see the impact of your money decisions until it’s too late.

4. Forecast Money Decisions Results. When a business makes important decisions, they use a process called “scenario planning”. They look at the possible outcomes of one choice compare to another. You can use the same process to make smart money decisions. For any choice, pick two options, and then look at what each answer would do to your cash flow and net worth. Remember, there are no “good” or “bad” choices – only choices that put you closer or farther from your goals.

5. Track Progress by Annual Reports. Just as companies assess their progress in their annual reports, you need to review your list of priorities every year. Have you accomplished any goals? Have your spending patterns changed? Did you spend less than you earned? Did you save as much as you planned?

You need to treat your money like you treat your business. Give it the time it deserves, because in the end the time you spend is really an investment in yourself and your dreams.



10 Easy Ways To Organize Your Business Finances

Follow these 10 easy steps to reduce the stress of business money matters.

Whether you are a new entrepreneur or a more experienced business owner, taking control of your finances can feel like a part-time job.  Some simple tips can help you streamline your time, organize your finances and reduce the stress of business money matters.
1.  Keep Your Bills in One Place
When the mail comes, make sure it goes in one place.  Misplaced bills can be the cause of unwanted late fees and can damage your credit rating.  Whether it’s a drawer, a box, or a file, be consistent.  Size is also important.  If you get a lot of mail, use an area that won’t get filled up too quickly.
2.  Pay Your Bills on Schedule
Bill paying can be simplified if it’s done at scheduled times during the month.  Depending on how many bills you receive, you can establish set times each month when none of your bills will be late.  If you’re paying bills as you receive them, chances are you’re spending too much time in front of the check book.  Although bills may state “Payable Upon Receipt”, there’s always a grace period.  Call the creditor to find out when they need to receive payment before the bill is considered late.
3.  Read Your Credit Card Statements
Most people take advantage of low interest credit card offers but never read their statements when paying the bill.  Credit cards are notorious for using low interest as bait for new customers then switching to higher rates after a few months.  Make a habit of looking at your statement carefully to see what interest rate you are paying each month and if any transaction fees have been applied.  If the rate increases or a transaction fee appears on your statement, a simple call to the credit card company can oftentimes be beneficial in resolving the matter.  If not, try to switch your money to a more favourable rate.
4.  Take Advantage of Automatic Payments
Most banks offer a way to automatically deduct money from your account to pay creditors.  In addition, the creditors usually offer a lower interest rate when you sign up for this payment option because they get their money faster and on-time.  Consider it as one fewer check to write, envelope to lick and stamp to buy.  Just make sure you record the deduction when the automatic payment is scheduled or you run the risk of bouncing other checks.
5.  Computerize Your Check book
Using a software program is a handy way to organize your finances.  Whether it’s Quicken(r), Microsoft Money(r) or another package, these easy-to-use programs make bill paying and bank reconciliation a cinch.  Computer checks can be ordered almost anywhere and fit right into most printers.  Once the checks are printed, all of the information is automatically recorded in your electronic check book.  Furthermore, many banks have direct downloads into these software packages so when money is deposited or withdrawn, the transaction is entered immediately onto your computer.  And, when it comes time to do taxes, it couldn’t be easier.
6.  Get Overdraft Protection
Most banks have a service where, if you run the risk of bouncing a check, the money will come from another source.  For a nominal fee, the bank will link your checking account to either a savings, money market, or credit card so the embarrassment of bouncing a check will be avoided.  Call or visit your bank to learn about this convenient feature.
7.  Cancel Unused Accounts
Whether it’s a credit card or bank account, write a letter requesting that the account is formally closed.  Not only will this improve your credit score, it is a useful way to avoid money from being scattered all over the place.  Don’t let department stores and credit card companies lure you into opening new accounts by offering favourable interest rates and purchase discounts.  It’s easy for credit to get out of hand by taking advantage of every credit offer that comes your way.
8.  Consolidate Your Accounts
If you have several credit card accounts with outstanding balances, try to consolidate them into one.  Be careful and check the balance transfer interest rates and one-time fees.  Also, make a list of all your open Money Markets, Savings, CDs, IRAs, Mutual Funds, and other accounts to see if any consolidation can be done.  Keeping your money in fewer places eliminates all of the guesswork involved and reduces errors.
9.  Establish Automatic Savings
Create a link from your checking account into a savings account that will not be touched.  This can usually be done through the banks and automatic amounts will be transferred over each month.  Most people will not put money into a savings account on a regular basis.  They may wait until a large tax refund check arrives or some other event to actually deposit money into savings, retirement or other accounts.  If you establish an automatic savings deposit every month, your accounts will begin accumulating money faster than you think.
10.  Clean up Your Files
Make sure your paid bills are organized in a filing cabinet.  Keep individual files for paid bills.  Go through your files at the end of each year and throw out bills and receipts no longer needed for auditing purposes.  Contact your local IRS office to see how long records need to be kept for audits.  Usually federal tax return audits can be done three years back but cancelled checks may need to be kept for seven.  Consult the Internet for auditing and records-keeping procedures for your state or region. (c) 2005
Dear Reader, this article may be freely distributed as long as the signature file and active link are included. Michael G. Peterson is the Vice President of American Credit Foundation, an IRS 501 (c)(3) non-profit consumer credit counselling organization that has assisted thousands of individuals and families with their financial situations through seminars, education, counselling services, and, debt management plans. For more information, and free consumer resources visit