Working Wednesday: Cyprus and It's Lessons For Us

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I have been watching the bank situation in Cyprus recently and then the European Union for quite some time. I believe our world is quite small when it comes to finances. I suppose my readers have also seen where Brazil, Russia, India, China, and South Africa have formed an institution (BRICS) similar to the World Bank and will be its competitor.

Back to Cyprus, which is an island where those with Greek heritage and the Turks have argued about ownership for years. Turkish troops occupy 40% of the northern part of this little piece of land in the Mediterranean Sea. Now the government has another crisis on its hands-going bankrupt.

The two news articles at the end of this blog gives details to the problem, but essentially this has been coming for a long time. As soon as the Greece banks fell, Cyprus knew they would be next since their banks held major deposits in that country too. Russian backed banks have a presence on the island and they are having problems also.

Bailout or Bail-in? The European Union has bailed out banks in Ireland, Portugal, Spain, and Greece.
What they are planning for Cyprus--have personal accounts bailout the banks. In other words, a "bail- in". I couldn't quite understand if this will go through, but people cannot get all of their money out at one time. They are limited to a daily quota. The regular "Joe on the street" is bailing his own bank out by not being able to access his funds. So far, people are not rushing their banks and getting only what they need. Perhaps the seriousness of the situation has sunk in since the Orthodox Church has announced they will loose about $130 million from their deposits. But they are ready to stand with the people as the people loose too.

Lessons Learned
1. Have an emergency fund on hand. And make it cash, in small enough bills to transact anywhere. I know this may be hard depending upon where your business is located, so make arrangements, find a location you can travel to, etc. where you can access cash that is not in a bank. Banks fail. Take precautions. In fact, think of several emergency scenarios (weather, etc.) and plan ahead.

2. How dependent are you on credit card transactions? How many transactions can you make with the cash you have on hand? Likewise, would you insist on cash from customers if banks fail like in Cyprus? If not when? Start working with some of your more solid suppliers and customers with basic discussions. Perhaps an emergency 7-14 day plan can be put into action due to the forethought of yourself and them. 

3. Diversify your funds. Think of opening several accounts in different financial institutions. Check out what each offers, what and how they lend to small business, and to you as a person. Don't keep all your funds in one place.

4. Ask yourself how many steps back can I take? Write it down. How close are you to shutting your doors? Get help now if you need to and/or ask questions to steady your business foundation. Take the time to seek for ways to improve your business now. I know this is hard because there is always something that needs your attention. I know there is always critical mass when you are a small business owner. That is why I talk about the "panoramic view" so often. Being too close deflects what you need to see. Step away every once in awhile and give the other side of the brain something to think about. Planning is just as important as action. It is a partnership, a relationship that has to have balance. If done right, it is one you can always count on.

http://www.mcclatchydc.com/2013/03/26/186997/in-cyprus-financial-crisis-even.html

http://www.businessweek.com/news/2013-03-27/cypriot-banks-to-open-for-first-time-in-2-weeks-with-cash-curbs#p2

Alone in The Car: Almost Time to Pay Our Federal Taxes. Oh, Yea.

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April is almost here. Where I live the snow won't go away. Lucky for us, the white stuff does melt quickly this time of year, but we really don't want any more. April is also the time to pay taxes. Oh, joy.

Once again Congress is thinking about how to pay for all the programs the federal government funds.
I think it has been interesting how different agencies, etc. have decided to cut 2% during the sequester period we are now in. No more White House tours? Really? That was the best you all could do? There were other examples to catch the public's attention, but you understand Federal decision makers didn't take the cuts seriously. Guess I don't have to either.

Well, each chamber of our Legislative Branch has passed a budget. Wow, after 4 years way to go! Of course the federal fiscal year ends September 30th. The question is, "Can the Senate and the House be able to form a conference committee, make compromises, send it back to the House and Senate for a vote to approve the revision budget before September 30th?"  Good luck with that, because then they will have to start all over again for next year's budget.  Oh, by the way, the Senate version wants to raise taxes for the top wage earners (I wonder where they will move to?)

In keeping with my last blog about the Middle Class (Middle Class and Their Discretionary Money )
here is a website about low wage earners, http://www.deseretnews.com/article/865576307/Minimum-wage-workers-cant-afford-their-rent.html This news article describes how tough it is for low wage earners to pay basics such as rent. What does this have to do with taxes?

I believe if everyone pitched in and paid taxes, better programs could assist those who really need help. Americans are known for their charity and are willing to give to the truly poor and needy. But I am not sure if we have all the best programs right now. Government has gotten so big, the right hand doesn't know what the left hand is doing. Sequester could have set a model for eliminating, even a little bit, the programs that don't work. But what do the people inside the Beltway do instead? Make a mockery of it while those like the poor continue to suffer.

How do we get everyone to pay their fair share? A Federal sales tax. I know, I wasn't for this either awhile back. But that was before illegal immigration was such a problem, before drug dealers were stealing farmers' fertilizers, and before my grandchildren will have to fund their great-grandparents' Social Security checks. Everyone contributes by eliminating income tax and beginning a sales tax.

Right now many illegals don't file income taxes, but they make purchases daily. Drug dealers create profits all the time. Do they pay taxes on their businesses or personally? No, but they would with a sales tax. High, middle, and low income members of our society would be treated exactly the same. Isn't that what all the controversy is about anyway? I purpose 10 percent. It is easy to understand, partners better with our consumer based economy, and doesn't have exceptions for certain lobbying groups. Government: you live within your means just like everyone else. You don't get a "bye" just because you are government. Ten percent is your budget, period.

Other solutions:
1. Federal agencies are required to cut their programs. Just like when you are organizing your home:
keep if you are using it, trash what is broken, donate to charity what you no longer use. In this case, coordinate/turn over to non-profits parts of programs that were working, but not enough to justify funding anymore with citizens' money. Ultimately this means more funding available to efficient and successful Federal programs.

2. Get the Federal Hand out of every cookie jar. I know, the Federal Government feels their view from the top can make a contribution. Wrong. We simply don't have the extra cash for this. If you think of how many people "touch" income taxes going all the way up to the Feds and then all the way down again to fund programs in a city/town, it is just not worth it. Keep Federal programs that make sense at the Federal level. The states should do the same. This again would release more funds to reduce the debt or give to successful programs.

3. Inform the public. I bring this up because I believe some of the "low information public" will start to pay attention again if they are part of the equation. Once cash in their wallet is less than before by paying a federal sales tax, they will want to find out why, discuss with others, and evaluate what is going on. What will happen when the poor pay taxes? Hopefully become more informed, better their circumstances, and vote for people who will engage with those across the aisle. The ones that really have dire situations? Well, we Americans will gladly support them. We all know friends, family, and those we care about who need a helping hand.

Middle Class and Their Discretionary Money

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Have you ever heard of the Bell Curve? Basically, it is a symmetrical graph with low ends on either side and high in the middle. Much like looking at a cross section of a bell. For our discussion today, I am going to assume the Middle Class sustains the economy. Yes, the wealthy do their share. I just think that because the Middle Class has more people, they influence the consumer-based economy more.

That is why I found the article on the zerohedge website interesting. Please see:
http://www.zerohedge.com/news/2013-03-02/guest-post-16-signs-middle-class-running-out-money

Now I am aware this blog could be long if I wrote about all 16 signs individually and quite frankly I don't want to. So I have picked a few themes to comment on and please bear in mind I have done so because they relate best to the Panoramic View. The numbers correspond to the list in the article.

2. / 6. / 7. / 8. / 9.  These all discuss retail chains such as J.C. Penney, Best Buy, Walmart, etc. They are all struggling. The next time you go into a large retail establishment, look at their shelves. Are they stocked as well as they were even a year ago? The article also mentions transportation. If no one is buying, no trucks are rolling, and no products are moving through the manufacturing and distribution process. Cash flow has become a problem because the consumer is not buying.

4. Subway Restaurants have seen a dip in sales. Really? To me, you can't beat a 12 inch sandwich for $5.00. I get 2 meals out of that. The founder believes it is the taxes that is hurting their business, but people will eventually come back. Now granted, their subways are a good deal. But people are cutting back on all restaurant eating from their budget. Necessities and nothing else. Subway falls into the "nothing else" category. I am not sure former customers will return.

1. / 10. A quarter of Americans have more credit card debt than savings in the bank. I was surprised at this one. After the 2008 fiasco, people learned they must trim down their debt. And they did. They paid off credit cards, use cash more, and stay within their household budgets. Likewise, Small Businesses knew they had to create profits differently too. Many deleted costs where they could, diversified their products and services, and paid close attention to where they could establish new contacts. But maybe number 10, College Debt, has driven people to use credit cards because a portion of their salary is dedicated (or vice versa) to paying this debt. Maybe this is a much larger problem, not only for the amount of debt but also for the length of pay-off time. Maybe we should be more concerned about this from a panoramic view and its implications to our economy as a whole.

Whether you are part of the Middle Class, your products and services are used by the Middle Class, or you recognize the importance of this topic, you need to understand how our economy is influenced by the purchasing power of the Middle Class. Don't be fooled by the stock market. It is more important to watch the retail quarterly earning reports. It is vital to continue to watch this in the upcoming months and next few years. Prepare yourself and your business for any trends you see coming. The domino effect of the Middle Class purchasing power, or lack thereof, will affect your company. Plan now for that eventuality.

Working Wednesday: Small Business Continues To Lead, Even Without Headlines

I keep looking for major media outlets to give the "large" small business sector credit where credit is due. Something flashy for once. An in-depth look at all the positives small businesses make to Community, USA. They are everywhere, keeping economies going and people employed.

The U.S. Small Business Administration states that:
99.7% of employers are small businesses
50% of the GNP (Gross National Product) comes from small businesses
75% of new jobs come from small businesses

Take for instance a new survey that has interesting facts about small business.
See: http://smallbiztrends.com/2013/02/positive-aspects-of-small-businesses.html?utm_source=rss&utm_medium=rss&utm_campaign=positive-aspects-of-small-businesses&goback=.gde_91651_member_214819775

In this survey:
88% of adults said they view small businesses favorably.
80% of adults said they would view a company negatively if a company sent jobs overseas.
I would think small businesses invest in the town where they "grow up" and stay for a long time.

These statistics show once again:
1. Customers want to have strong, trusting relationships. Continue to go out of your way to answer their questions. Practice reading people's behavior so you know when to invest in a little expenditure for a big pay-off later.
2. You have many resources when you are ready to hire. Check out your customers for potential employees, suggestions from current employees, and those you know through outside contacts, besides those that apply. Also let those you trust know you are hiring. Perhaps they will have ideas.
3. Being honest and hard working will pay off in many ways. It keeps customers coming back. The best want to work for the best and will apply for jobs with you. And small business owners are entrepreneurs. Hopefully you want your employees to be team players and introduce new ideas.  All of these ideas, and more, create a successful attitude and environment able to weather the storm and soar through blue-sky days.