One of the largest contributors to an economic crisis such as the one that we are now witnessing is fear from the general public, and fear in the media. In most cases this is fear of the unknown. Our minds have been transformed by the recent good years, and we often can’t remember what slower economic times are like. To make things more difficult, even the experts seem to be confused. Every expert seems to have a different opinion of long and how severe this will be. As a result we lose the trust we had in the sound financial advice that we’ve received in the past. Fear begets more fear, selling leads to more selling, and sound judgment is temporarily set aside. If it is true that every event must have both a winner and a loser then who is the winner in this scenario? It is the investor, who realizes that fear has driven the economy further down than logic would suggest, and purchases good assets at bargain prices.

I would like to now suggest three reasons that we do not need to fear the economic crisis. In fact, when you begin to calm your mind you will find that you will be better able to weather this storm.

1)      The Media Loves Fear: The media loves big stories. That is how the sell their advertising. The larger the story the more excited they get. You can bet that they don’t mind this crisis because more people than ever are tuning in to watch the CNN Money, or logging on to Yahoo Finance or just watching the local news. If this is true then is it not also true that they may be blowing things out of proportion?

2)      Sound Finances and Budgeting Will Keep You Safe: The people affected most significantly here are those with higher fixed expenses than they can afford. This could be an investor who purchased a property to flip, but have not yet been able to sell, or someone who decided to move, and purchased their new home but have not been able to sell their old one. If this is you, and you are struggling to pay your loans each month, you need to seriously consider your options, maybe you can rent one property, or maybe it’s time for that price reduction. If you have a budget, and your fixed expenses are in line you have nothing to fear.

3)      Our Banking System is No.1 in the World: There have been many reports out recently that have suggested that while we in Canada are not immune to the this crisis our financial system is in fact in the best shape to get through this crisis. One of the reasons is because our lending practices in Canada have been much more stringent than in the US and other countries.

Please feel free to contact us regarding any questions that you may have.  If you would like assistance in creating a budget or reviewing your personal or business finances we are able to assist.  If we are not able to help we have a list of contacts that can.  We would also love to hear from you regarding your own goals, plans and achievements.  You can contact us by email at accounting@birchent.org or by phone at 778-786-1440.

Birch Accounting was pleased to be invited to Until Your Heart’s Content, a conference put on by the Shelley’s Angels Society, Sunday October 5th.  As their accounting provider we were offered a table at their trade show and we met a wonderful group of people.   During the trade show we offered a draw for $100 in accounting services and the winner was Lisa B. of Coquitlam BC. Many thanks to the Society for offering this opportunity for the community to learn and grow, we appreciate the opportunity to support you. Matthew & Amanda Birch

To sum it all up in one word, unimaginable.  The financial events of this week have been nothing less than a roller coaster.  I would like to say that I’ve never seen a week like this in the North American stock market in my life, but that would be a tremendous understatement.

Lets summarize, on Monday the American Insurance Group (AIG), one of the worlds largest financial institutions was in such risk of bankruptcy that the US Federal Reserve offered 85 Billion dollars for an 80% stake in ownership.  To put this into perspective, a US bail out like this has not happened since “The Great Depression.”  On the same day, Merrill Lynch was rescued from Bankruptcy with a buyout from the Bank of America, and Lehman Bros another very large American financial institution that is more than 160 years old was rescued with a 50 Billion dollar bailout.  And this doesn’t include other financial institutions in dire straits such as Washington Mutual (the largest Savings & Loan in the US), Morgan Stanley, or Wachovia.  With all of this news the TSX was down nearly 600 points, and its US counterpart, the DOW Jones was also down nearly 300 points.  It wasn’t until the US Federal Reserve along with the Bank of Canada, and many other Western governments pledged up to another 247 Billion dollars to ad liquidity to the North American markets that the stocks recovered with the TSX up 848.42 points, and the Dow Jones up 368.75 points.

Then on Saturday Sept 20 the US Fed continued its work to try and prevent an all out collapse of the market by announcing an additional 700 Billion dollars in relief.  To put all of this in perspective, Forbes.com says that Warren Buffet, the worlds most famous investor and wealthiest man is worth 62 Billion dollars. The amount of aid offered this week to the North American markets is greater than 17 times his wealth.

So what does this mean to you and me?  Well the first response by the banks to all of this is to tighten up credit.  This means that we will need to save a larger down payment to purchase the house we want.  This is likely to bring down housing prices because there will be fewer buyers able to purchase homes, and that starts with the pricier, and more unique homes.  Next, those of us with less than 20% equity will have difficulty trying to borrow more money for things like a new car, or home renovations.

In response, now is the time to pay down consumer debts like credit cards, and unsecured loans.  Now is the time to put together a personal budget and look for ways to reduce spending, and only if you have a large amount of available cash, now is the time to look for bargain investments.

Which of these statements best describes you when it comes to budgeting:

a) I keep a very detailed and balanced budget that I review every month.

b) I have prepared a budget but I rarely look at it.

c) It sounds like a good idea, but I just don’t know where to begin.

Most of us would say statement c) best describes how we feel about budgeting.  In fact depending on which study you read the percentage of people that actually follow a budget ranges between 1-5%.  I would like to recommend a few ideas that might help us get started, and alleviate any fears that we may have with keeping a budget.

First let me start by making this statement: “A budget is the most significant and simplistic tool to creating wealth.” Let me explain.  In its most simple terms a budget is nothing more than a rule of measure.  To know if we are on track financially we need something to measure our current financial status against.  Stated another way, if we were to embark on a journey across the country would we not first plan our trip?  This is the significance of a budget.  To meet our financial goals we need a plan of how to get there.  I would like to offer four suggestions to assist you with your plan.

1) Start to Track Spending

The first place to start is by tracking your monthly spending for the next two to three months.  This allows us to average out monthly spending, and isolate or eliminate one time purchases.  Expenses should be categorized into fixed or variable.  Fixed expenses include those that are recurring and cannot be easily altered such as mortgage or rent, car payments, utilities, and anything to which you have a formal contract.  Variable expenses can be more easily manipulated.  Examples include groceries, fuel, clothing, gifts and donations, and all of our miscellaneous spending.

2) Create a Realistic Ideal

I know, I know, a realistic ideal.  Is that not the definition of an oxymoron?  The goal however is to recognize that for a budget to work it must be realistic.  This means that we cannot just expect to cover a budgetary shortfall by increasing our income 25%, and it often takes time and sometimes money to alter our fixed expenses.  It also means that we need to create an ideal, or a goal that will challenge us.  The result is that we want to first list our current income, subtract our current fixed expenses, and then subtract our variable spending.  Once this is done we either have a surplus to which we should invest or a shortfall meaning that we need to alter our variable spending to eliminate this shortfall. 

3) Wiggle Room

Some people call it “mad money,” I simply call it Wiggle Room.  What I mean is that we need to ensure that we build room for error into our budget.  What we are trying to do is eliminate the #1 excuse budgets fail, which is because we get discouraged.  If the budget is too tight and we fail the chances that we continue are greatly reduced.

4) Review Monthly

The final step is simple.  We need review our actual spending compared with our budget once a month with an accountant or family member we trust.  This will ensure that we follow the plan we have created.

I recognize that for some of us this comes easier than for others, but I believe that when we consider these simple steps, and recognize the significance that a budget will play in our lives the process becomes easier.

In fact I would like to put forth this challenge to all of us: First, create a list of 5 financial goals that we would like to achieve in the next 12 to 24 months.  Be specific.  Second, follow the steps I’ve outlined above to create and maintain a budget that will help you achieve those goals.  Third, show your goals and budget to an accountant or family member you trust, solidifying your plan, and allowing them to encourage you.

Please feel free to contact me regarding any questions that you may have, or if you would like assistance in creating a budget.  I would also love to hear from you regarding your own goals, plans and achievements.  You can contact me by email at accounting@birchent.org or by phone at 778-786-1440.

 ___________________________________________________________________________________________________________

Matthew Birch has ten years of accounting experience with dozens of companies varying in size from 1 to over 100 employees.  He has worked with organizations in many different industries ranging from service to wholesale and retail sales and from construction to manufacturing.  Serving the accounting needs of Vancouver and the Fraser Valley Matthew owns and operates Birch Accounting & Tax Services from his home in Clayton Heights Surrey.  To contact Matthew regarding any of the services offered by Birch Accounting & Tax Services please call 778-786-1440 or email accounting@birchent.org.

The last five years have been fabulous! Isn’t that true? Anyone who has owned a home during this time has recognized an increase in value, which in many cases has been double our original purchase price. Additionally many people have taken advantage of increased equity, and relatively low financing rates to pick up an investment property, or quick flip a pre-construction condo or townhome. I know that I’ve been a part of some of these activities, and it’s been very profitable. Hasn’t it?

Wait just a minute though. Maybe it hasn’t been all that profitable. Yes the there were a few years when you just could not lose.  There were too many people wanting to get in on the action. They had been renting all their lives and now realized that they could afford to purchase their first property. Or maybe it was because family sizes are getting smaller and hence there are more people wanting to purchase smaller properties. Or maybe it’s all those foreign dollars coming here to purchase a property in Vancouver because of the Olympics. What about the investment component? How many people just decided that it was time to try out their first investment, a pre-construction flip, or a rental?

It seems, we all learn, that what goes up must also come down. Okay maybe it’s not a down market. That’s what is happening south of the border, not here. They are the ones that overspent and were offered ridiculous mortgages - to people that could never afford them.  But then again, what if it happens here as well? Would it not be better to be prepared for such an event, than to react after it has happened? And if that doesn’t happen here would we not sleep better knowing that we had a plan anyways?

If during these years we have taken out equity for consumer spending, or purchased additional properties that are now on the market but not selling, then maybe we have to admit that for the first time in recent memory the good years are over. Now is the time to put together a budget and watch our spending. Now is the time to take a reduction in the selling price of the property that we are trying to sell so that we can get rid of those extra monthly mortgage payments, even if it means settling for a loss.  The upside?  Have you ever heard the phrase “In a down market cash is king”?  Well it is true. Cash will keep you afloat if you cannot get more credit. Cash will allow you to expand your business when others are contracting. And cash will allow you to find bargain investments when everyone else is being forced to sell.

In the coming weeks I will expand on some of the topics that I’ve touched on here starting with a budget. We all know that keeping a budget is an ideal way to manage our finances; the difficulty is that for most of us we just don’t know where to start.

Thanks for reading,

Matthew Birch, CMA

Birch Accounting & Tax Services

778-786-1440

matthew@birchent.org

www.birchaccounting.com

Accounting — Your Management Controls

Would you ever drive your car blindfolded? Obviously, not!

Nonetheless, every day millions of business owners drive their businesses without knowing their financial locations: where they have been, where they are, and where they are going. That sure sounds blindfolded to us.

As your profit and growth expert, our primary role is to ensure that you have the historical data that will tell you where you have been and where you currently are. With that information we can provide a professional consultation that will help you determine where you want to go while creating an action plan that will help you get there.

With this 360 degree view of your business, you can plan effectively and then track your progress against your goals. It will also help you anticipate obstacles so that, when encountered, you can easily maneuver around them rather than allowing them to slow you down.

With our help you can’t go wrong.

You want an accounting system that gives you peace of mind and more profits with less work. We’re guessing that you also want to reduce taxes, improve cash flow, and manage your business more profitably.

That’s what we do best! Work with us and choose which of the following systems you would prefer:

1. Receive training to use a system exclusively designed for your business, OR
2. Have us completely manage the custom-designed system at an affordable cost

What Can We Do for Your Business

Wholesale / Retail / Service
Have complete control systems for Accounts Receivable, Accounts Payable, and Inventory.

Automotive / Furniture
Properly account for Contracts in Transit, Bank Reserve Accounts, and Flooring of products for resale (inventory financing). Maintain control of income and expenses.

Manufacturing
Control Raw Materials, Direct Labor, Work in Progress, and Finished Goods. Keep expenses categorized into Manufacturing and General Overhead areas.

Construction
Easily track profits or losses on each job in progress. Control cash flow based on percentages of completion. Minimize losses from under-billings created through change orders.

Professional
Control expenses and income for year-end savings. Take advantage of conversion from cash-to-accrual accounting. Manage Accounts Receivable and improve Collections.

Food / Cafe / Beauty
Utilize a combination of Cash and Accrual statements. Have a low-cost, low-maintenance accounting system.

Enjoy an accounting system designed specifically for your business that shows where you stand at all times. Simplify the books that maintain it all:

• Cash Receipts
• Deposits
• Charge Accounts
• Credit Purchases
• Cash Purchases
• Bank Reconciliation
• Depreciation
• Adjusting Entries
• Inventory Control
• Reconciliations
• Income Statements
• Balance Sheets
• Individual Accounts Receivable Records
• Individual Accounts Payable Records
• Payroll Journal
• Individual Payroll Records
• Property, Plant and Equipment Records

Incredible Benefits You Will Enjoy

Your accounting system will be tailored to your business. You can do it, I can do it, or we can do it together.

Your bookkeeping/accounting costs will be substantially reduced.

Your personnel will be free to produce more profits for you.

We can help you acquire funding for your business through financing, investors, and other means.

You will receive properly-designed financial statements that will allow you to manage your business efficiently and help you to better plan for the future.

Choose from hand-posted or computerized programs specifically tailored to meet your accounting needs.

Streamline the accounting task, and free up your valuable time. [Consider this: the average small business owner spends over 10 hours personally, each month, accounting for the business. If your average billing rate is $50 per hour, you may be spending more than $500 per month of your time.]

How Would You Describe Your Business?

• Steady and stable
• Growing fast
• Hanging in there
• Brand new

If your business is steady and stable, or growing fast, then congratulations! But IT IS POSSIBLE for your business to improve, and generate more profits!

If you’re just hanging in there, you can turn things around . . . FAST!

If your business is brand new, don’t make the expensive mistakes that can be the difference between success and failure!

No matter which of these groups describes your business, you can benefit from these small business services that can save you both time and money!

Accounting is a core business function. Without accounting, a business is sure to fail. With accounting, a business might survive. With accounting managed by a Profit Center Expert, a business is certain to succeed.

You’re probably already familiar with the bleak forecast for new small businesses. While failure rates have decreased considerably in the last few years, recent studies from the Small Business Administration (SBA) indicate that one third of new employer establishments fail within the first two years, and 56% fail within four years.

Poor financial management is often cited as the reason for most small business failures. Often the business owner or a member of the business team manages this crucial function because they want to maintain complete control of their business, they’re afraid that outsourcing the accounting would be too expensive, or a combination of the two. What they don’t realize is that outsourcing is a useful management tool that can save a business both time and money while preventing potential failure. And when you outsource to the right accountant, it can be the difference between base survival and profitable success.

The Benefits

There are countless benefits you enjoy when outsourcing your accounting. Here are just a few:

Save Yourself Time. You’re in business because you’re good at what you do. Your expertise involves the product and/or service you offer. And we’re guessing your expertise is not accounting. So if you, or anyone on your team, spend time managing your business’s finances, that’s time that could be better spent building your business.

In order to be competitive you must constantly be looking for ways to improve and expand your products and/or services, better market your business, and stay ahead of your competition. When you and your team focus time and attention on the accounting, that’s time not spent on these crucial tasks. When you outsource the accounting to a trusted professional, you can use that time to make your business the best it can be.

Save Yourself Money. We all know time is money. The average small business owner spends over 10 hours personally, each month, accounting for the business. If your average billing rate is $50 per hour, you may be spending more than five hundred dollars’ worth of your time! Chances are you can pay for a good accountant and then some with all that money.

Gain Access to Valuable Accounting Expertise, Equipment, and Technology. Reputable accountants have the expertise to not only save you money, but to make your business more profitable. In addition to that, they have access to equipment and technology that most small businesses can’t afford. They will use their resources to your advantage, and save you the time and headache of doing it yourself.

Gain Access to Profit-Building Information. A truly valuable accountant is also a Profit Center Expert. They analyze financial data in order to assist you in making profitable decisions for your business. A Profit Center Expert can inform you which products and/or services to expand, which to eliminate, whether your marketing attempts are successful, where you’re loosing money, and where to cut back in order to save and redirect funds in order to become more profitable.

Call us for a free, no-obligation consultation. We can customize a package of services that is competitively priced and designed to save you time, energy, and headache. We offer the following services:

Accounts Payable

• Input vendor invoices to payable system
• Classify invoices to the proper G/L account
• Request and maintain vendor information
• Maintain vendor master files
• Respond to vendor inquiries about payment status
• Retrieve copies of payments as necessary
• Prepare and file required tax forms
• Process requests for stop payments when necessary
• Cut checks to vendors based on due dates or client instruction
• Reconcile vendor statements to accounts payable ledger
• Reporting to organization on detailed aged payables and cash requirements

Accounts Receivable

• Billings prepared as needed and mailed out (all billings provided to Client for approval prior to mailing)
• Record and account for revenue
• Input receivable transactions into the accounting system
• Prepare and deliver periodic statements
• Issue client-approved credit memos and refund checks
• Maintain subsidiary receivables ledger
• Process client-approved adjustments
• Apply cash received to customer accounts and resolve “short pays”
• Light phone collections as needed by client
• Client to prepare deposit slips and make bank deposits

Cash management

• Process daily sales and deposit reports
• Verify daily deposits and report variances
• Reconcile and verify credit card deposits
• Reconcile monthly bank statements

Journal entry and general ledger

Account reconciliations

Payroll

• Time cards, after approval, will be scanned and uploaded prior to payday
• Complete payroll and client prints, signs and distributes paychecks
• Prepare employee earnings statements complete with current pay period and year-to-date wages, taxes, and adjustments
• Prepare department summaries of month-to-date payroll data in addition to customized reports specific to Client
• Prepares timely and accurate notifications of tax liabilities and deposits
• Completes Year end T4’s
• Respond to requests for employee verifications
• Process and submit garnishment payments
• Respond to employee payroll inquiries
• Prepare, file, and pay all payroll taxes
• Reconcile health insurance payments and make payroll deductions when required
• Prepare necessary HR reports such as turnover
• Allocate payroll expenses for multi-store employees
• Prepare and process payroll accruals when necessary

Monthly Closing

Fixed assets accounting & depreciation

Monthly financial analysis and reports

Yearly Business Assessments

Don’t wait another day to partner with a Profit Center Expert (PCE) and make your business more successful. Do what you love to do more; let your PCE take care of the rest. Call now for a free, no-obligation consultation.

Our company provides a balance of good old personal interest, while meeting a broad variety of business accounting needs at a very affordable price.

We want you to feel like you are our only client. If you have a priority, it becomes our priority, and we will quickly get you the answers you need to run your business profitably. Regardless of company size, our clients should expect our utmost attention.

But still, by working with us, you have the resources of a full-service accounting provider. We have the resources to fulfill virtually any of your accounting needs, or aid in connecting you with professionals who can.

There’s one distinguishing difference between tax planning, and tax preparation. It’s December 31st. In order to beneficial, any planning has to occur before the end of the year; preparation can only take place after the beginning of the year. Although we can’t promise to eliminate taxes, we can help you with both the planning and the preparation in order to minimize them.

Tax planning is an important step in reducing taxes. Together, throughout the year, we will discuss various tax strategies that could potentially save you thousands of dollars. This will enable you to make any needed adjustments before the end of the year so that you have some control over how much you pay in taxes.

Then, at the end of the year, with your help, we will see that your taxes are professionally prepared in a timely fashion to avoid any late fees. In order to offer you such service we have on staff Professional Tax Preparers that will assess your tax liability.