VIEWSLETTER Jan-Mar 2013
IN THIS ISSUE
Read it online @ www.primefactor.co.in
¬ Balance(d) Sheet ¬ Whom to listen? ¬ Beyond a point ¬ Mentor - A worthy option ¬ Accounting ¬ The law that has the widest jaw
a viewsletter from
... every quarter
PRIME FACTOR transforming businesses
2 BALANCE(d) SHEET
VIEWSLETTER Jan-Mar 2013
The character of a business is its accounts. The financial statements and directors report is the window through which the world understands a business. It is no wonder that successful businesses all over the world attach such importance to the preparation, presentation and statement of facts. How many enterprises can boast of stating the facts and truth of their finances in their Balance Sheet despite knowing their importance? Could a change in name from BALANCE SHEET to FACT SHEET change the attitude and serve as a reminder about the importance of financial documents? Business owners often declare that they are not experts in the preparation of the financial statements and thus rely on their Chartered Accountants and finance professionals. Yet, no businessman can testify that he does not know how much he owns and how much he owes, which is precisely what a balance sheet is all about!.
INSIGHT BENEFITS of Financial Statements The theme for the quarter is aptly chosen to highlight how the financial year ending March 2013 ends for most businesses only in September 2013.
“The truth is bitter”, goes the famous proverb. Although this holds in other situations, in financial statements, truth is made sweet so it would be liked by others. If you previously thought otherwise, let this financial year end be a bold starting point to clean up the statements and make it a part of your business philosophy to state only what is correct.
It is a every year ordeal promised to be corrected from the next year.
If it is too much at once to make these changes, make most of it this year and consciously remind yourself to make it absolutely clean from the next year.
May be the present system of accounting just to tally and not for management of business could be a prime reason for this.
Not to blame any professional or supporting staff, if the business owners learn about these statements and encourage correct representation of the facts and figures, it could well be the giant step towards transforming their business.
It is high time the business owners realise the waste of time and opportunity by delay in this simple and important yearly ritual and complete it well before April instead of stretching it to September.
Is it the laziness of the business owners or the preoccupation of the auditors? Both blame each other.
Benefits of early completion: ª Banks support proposals that are accompanied by audited statements. ª Investors like the commitment of the business owners to their financial statements if prepared well in time. ª Planning for the current year is better if these statements are well within April. ª More are the benefits if year ends of businesses is ended well before May begins.
THE MENTOR CORNER
WHOM TO LISTEN? Economists are rarely right. They are either over optimistic or over pessimistic. Growth rate, recession, slow down are terms often used by analysts and non-businessmen. When you hear all this, listen to yourself. You care about what is happening to your customers. You keep improving your products and services. Take every negative feeling as a heater to your desire and charge yourself to know about your products better and serve the customer more. Be yourself in these matters. India can never face a recession. There are enough people and more than required money to keep the economy growing. Better give your deaf ears to any negative news. Listen to your inner voice and heed to your gut feeling. Listen to those who can motivate you and give you confidence. There are opportunities so long as you have something to fulfill human needs. Look at the events and circumstances that affect your business and understand the direct effect of every such event. If you are perplexed, talk to somebody like PRIME FACTOR. You may gain clarity and guidance and a good dose of confidence based more on reality than on mere guess work and statistics.
INSIGHT Money or Mind Money others have for you, if you have your mind to give to them. Business needs money all the time. Business needs customers all the time. Alongside the above, the business needs your mind in it all the time. What you can give is your mind, make or take money and serve your customers who actually deal with you rather than your product or service. Money can be seen, customers can be shown. But, what about your mind? How do you show your mind and how your mind will be seen by others? Your mind is shown by how you manage your business and your team, handle your customers, honour your vendors, legal compliance, accounting and records maintenance and how you manage your existing bankers and investors. All things that mean business, matters in business. Those well organized are easily recognized and those not, are very easily ignored.
4 BEYOND A POINT Everything has a limit in our physical life. In an imaginary world, one has the liberty of limitless thinking. These few lines throw some light on how far one can go in one's physical realm vis-a-vis the mental realm and reach that point, beyond which one has to alter one's current position in one's material pursuit. Let's take the case of an entrepreneur who has a business struggling its way into the third year. It is often advised to be persistent and there are umpteen consultants and motivational gurus who propagate this. Entrepreneurs often wonder where to stop since they are the real burn-bearers if the heat of the situation does not cool down. But, nobody tells when to stop. Sooner or later, everything that looked bright in the beginning becomes pitch dark. It is most likely that the capital invested would have been lost or the business would have reached a point where it requires more capital, people, market reach and also the innovation to push it into the next orbit. We are all aware that time is the essential capital in all endeavours and any loss of it is fatal to the business. Now what does the entrepreneur do? In most cases, the entrepreneur would go in for more loans at any rate of interest to sustain the business hoping for support from somewhere (which rarely comes) apart from consulting as many people, but rarely finding the right solution. This is the melting point of business.
VIEWSLETTER Jan-Mar 2013
The day we seek advice off the shelf rather than the self, is the starting point of all trouble. Of course, one can share positive ideas and opportunities with several persons to get a clearer understanding, but if it is for the relief from stress situations, the signal is clear - the entrepreneur should look beyond conventional wisdom and take a drastic view even if it may cost him his business. From here on, the theory of persistence does not generally work. The entrepreneur should shake himself off to associate and offload a certain share of the business (also some trouble if taken) and bring in a broad based investment basket and managerial talent. Additionally, ways and means must be explored to associate with similar businesses in whatever form with a better focus on growth and sustenance.
PLANNING Do you file your annual returns well in advance or rush up at the last minute? Do you postpone till the last day or your auditors drag till that day? Both in effect mean the same and bother you all the way. As with many last minute chores, job satisfaction is a big sacrifice and as you would appreciate, complications arise only from compromises. Now, are you ready to put such experience to history and plan from today for the coming years not to be in such a situation? Plan to file your returns promptly and follow up to ensure that this annual ritual is done with ease and comfort. Please remember, â€œPlans work well if the planner works with itâ€?.
VIEWSLETTER Jan-Mar 2013
MENTOR-A worthy option
NEED for a Mentor:
Mentoring is a relationship between two people in which one of them offers advice and guidance to help the other to develop in a particular area.
There is a definite need for a mentor and in today's context it would be worthwhile signing a contract with a professional if such a person is identified.
This has been for centuries in art, music, sports etc., History has shown how traditionally even kings have sat at the feet of a master, their mentor, to learn from him.
Typically as owners of the business or CEO of an organization, one has to take many decisions that may require a second opinion or a word of caution/ concurrence and it is very common that for want of such opinion, decisions are delayed or even postponed and even wrong decisions taken. In spite of all these if things go wrong, we can blame it on luck and in my opinion it is least unlikely.
Even the best sports stars invariably have a trainer, an individual who looks after not only their physical fitness but also their mental preparedness for what they want to do. They guide them on certain movements which they may overlook without their knowledge or by over confidence. In India, most of the Small and medium enterprises look for their very close circle of friends, auditors and business associates to advise and do not look for a professional counsel who would be faithful and committed to the advise.
Businessmen have failed due to lack of right advise at the right time, simply because they did not ask anybody with a professional background or experience relevant to the particular problem. Many a times a general logical approach would not give the right solution and a mentor committed professionally would make sure his advise is good in his self interest at least.
Not that the advise of the above mentioned individuals are less valid, but the response from the taker could be more forthright and can expect extra commitment in the whole process if a rank outsider is authorized.
Of late, it is realised and appreciated that business is changing rapidly and many a times information is not obtained in time, of the developments in the business environment like competition, alternate technology/ products etc., Mentoring (by an outsider) can be seen as one way of helping managers to view the wider context of change in which their businesses were operating and the mentor could be expected to be well informed to advise on matters, which may be ignored in the normal course. It is not enough to go to conferences and seminars (which had previously been the main channel for development and learning). Managers need to chew the cud with someone they could respect and trust. These individuals did not have to be brilliant managers themselves, any more than tennis star's coach needs to be a brilliant tennis player. But they did have to have reached a certain level of knowledge and skill in order to have a proper appreciation of the technical and psychological issues facing the person for whom they were acting as mentor. Many businessmen and CEOs accept that it is lonely at the top. Proprietors and senior executives are, by force, cut off and restricted in which they can talk to
VIEWSLETTER Jan-Mar 2013
MENTOR - A worthy option... contd
The following could help identify a good advisor:
and in what they can say to other people within the same organisation. A mentor from outside can set problems in a wider context and chat about them in a disinterested, non-confrontational way.
A professional qualified to express opinion on the subject in focus and who does not immediately suggest solutions to a problem could be a choice.
A professional mentor within a short period would be able to understand the needs, emotions, skill sets, set backs and advise. A mentor should be very objective, non-emotional, very well informed and above all be honest in expressing. He should be able to put across the ideas and solutions in a positive manner even if a suggestion is likely to be rejected. A mentor should have no ego except to the extent of retaining his integrity and confidence. Though all these qualities sound very idealistic and theoretical, in today's environment it is not difficult to find, if one has patience, willingness and also the mind to pay for the right person. HOW TO SELECT A MENTOR A mentor need not be the advisor in all the issues and one can have more than one depending on the situation and the problem on hand. Mentoring does not just happen. The liking developed to a particular person's approach to problems solving in other cases, which may be shared, by friends and associates identifies a suitable mentor.
The professional who shares his experience in similar circumstances of the problem with suitable references could be a choice. A professional who shows involvement in identifying solutions to the situations and which can be felt instantly could prove to be a choice i.e. a person who puts his mind and heart to the situation since the relationship apart from being professional also binds both the parties to common emotions. Apart from all the above, the best mentor could be at home. Most of the married men would admit after a failure that their wives had warned them of the chance of failure beforehand, which they had failed to recognize. This could be more by intuition or earlier experience of the wife and it is best proved when personalities are involved especially in a partnership decision or a joint investment decision. Recognize their practical wisdom and adopt them suitably and they could be better-unpaid mentors. As any association takes time to develop and mature, give reasonable time and opportunity to the relationship whatever existing or formed. Patience with a particular professional could prove worthy in the long run. Of course, the choice of parallel consulting is still available if done with the knowledge of the existing associate and any changeover could be made without much heartburn if properly planned. A good mentor could help businesses remain in good health and make life easier and enjoyable.
Disclaimer The views expressed here are purely the opinion of ours. Readers are advised to take suitable professional guidance before adopting or implementing them in their business or personal life.
VIEWSLETTER Jan-Mar 2013
OUT OF MESS One is in a mess because he has missed many things that needed his attention and action. The result of inaction creates the mess and sooner or later, one reaches a stage where he finds no way out of the mess and also there is no clue from where to start the cleaning up. The financial mess is one of the most common among people.
Business actions depend on the accounting data and records of the business that are unfortunately given the least importance in many small and medium sized organisations. No wonder they remain in constant stress and pain, being unable to solve them early and easily. In most cases, the lack of day-to-day and proper accounting system cause such predicaments. Why slack about? What is the simplest way out? A 'taken for granted' attitude could be one reason. Lack of accounting knowledge could be another. Dependence on accountants (a difficult resource as always) may be yet another reason. The lack of accountants need not be an excuse anymore with accounting software applications in the market on the cloud platform that do not require accounting skills. It only calls for shedding of old and bad habits and developing new and better habits. What does one miss with mere routine accounting? © Lack of timely information - the key to decisions. © Lack of clear understanding - the key to correction. © Lack of correct control - the key to efficiency.
What can one gain from accounting beyond the routine? Clarity, Control and Consistency in thought and action relevant to business.
Credit card overdue, personal loans, business loans, overheads over the head, expenses in excess of income etc. are the most common. It is easy to advise on the steps but it will not be a solution to many. But a few common threads of advise would be a good food for thought and they are as follows: « Forget the quantity and get into the quality of the mess. « Prioritize your solution process. « Try not to solve all at a time. That is unrealistic. « Also do not expect to clear the mess in a short period though it may happen much earlier than you expected. « Discuss the problem with people whom you think could help.
8 THE CAUTION CORNER
VIEWSLETTER Jan-Mar 2013
The society always respects more of those who are openly acknowledged as within law than those above the law. Reform yourself to be 100% compliant. That would transform your business RADIANT.
THE LAWâ€Śthat has the widest JAW Laws are complicated. Yet they need to be complied with. Practicality and severity are no excuses for non-compliance. Not only must one comply with the laws, one must also make sure that you deal only with those who follow the laws and rules as much as expected. With the internet and portal managed legal compliance increasingly becoming a matter of administration, it leaves little room for complacency and it is best to be 100% compliant with the applicable laws. Keep in mind that everyone would preach to the other, the values of compliance that he cares little for. Hypocrites preach and sycophants praise. Do not fall prey. Make sure you remain law abiding to the fullest extent. Chances are that you may not know the laws that you are violating or not following in its letter and spirit. Yet, a focus on this discipline should help you comply with most of the laws over a period and could be a face saver in any eventuality of being caught for some negligence. It would not be an exaggeration, if you conduct a periodical audit of your compliance to make sure you are safe and protected legally to enjoy doing your business free of tension, anxiety and worry. With time the administration is becoming smarter and stricter making compliance cheaper to defy. It is not just a matter of tax compliance, but of all the laws that businesses have to deal with.
In Your Interest
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IN THIS ISSUE ¬Balance(d) Sheet ¬Whom to listen? ¬Beyond a point ¬Mentor - A worthy option ¬Accounting ¬The law that has the widest jaw