Welcome to the IT Manager’s 2009 Budget Toolkit.   This toolkit is designed to provide you with the basic tools you will need to plan and manage your organization’s IT Budget for the upcoming year.

You’ll want to begin by browsing the Financial Terms Primer document.  Even if you’ve never had any formal training in Finance or Accounting, this easy-to-read guide should quickly bring you up to speed on important financial concepts and terms you’ll need to know before starting the budgeting process.

Next, you’ll want to take a moment to read our 10 Tips for Your 2009 IT Budget. This document will briefly discuss trends and economic factors that will shape the upcoming year and provide you with a perspective that will help you shape your budget and ultimately impress your company’s senior management team.

Finally, you’ll be ready to jump right in and use the templates in this kit to prepare your budget.  You can pick and choose the templates and tools that best suit your needs, including the Budget Template, the Salary Planning tool, and the Hardware Amortization Schedule.  Each document provides user-friendly instructions, the blank template, and an example template filled out with sample data.

The Financial Framework for IT Manager’s Toolkit This toolkit is designed to provide you with the basic tools you will need to plan and manage key IT initiatives for your organization.

This document provides you with the basic background info you’ll want to collect about your organization.  This critical background info will allow you

1)     to provide your team with appropriate financial information, and

2)     to help maximize the return of your company’s IT investments

Remember that in order to be fully effective in managing your IT department, you must be able to understand and communicate in financial terms.  As the IT leader, your job is to translate the technical initiatives you deem necessary into financial models that enable everyone to understand their impact.

Finding out the nature of your organization

You can define companies into two basic styles:

1)     Capital-intensive or

2)     Expense-driven

Capital is a financial term that refers to large investments required either to produce or to provide an organization’s goods and/or services.  A capital-intensive company is one that makes several large investments over the course of a year to run its business.     Typically, in a capital-intensive business, financial managers are receptive and encouraging of capital purchases and tend to be aggressive in capitalizing assets and effort.  Some typical capital-intensive industries are manufacturing and airlines.   Companies in theses industries routinely make large capital investments.

Expense-driven organizations tend to avoid capital expenditures whenever possible.    Their approach is to limit spending and to delay or to avoid capital expenditures.  Most small- to medium-size businesses in the U.S. are expense-driven in nature.

Now, think about whether your organization is capital-intensive or expense-driven.  Once you understand how your organization views capital, you will be better able to present relevant financial information for your project.  You’ll soon find discover that an organization can fund projects using different methods.  Understanding how your company views capital will undoubtedly help you select the most appropriate source of funding and how to present your project to management.

Cash flow

Another important financial term is cash flow—the inflow and outflow of cash required to operate your organization.  It’s critical that you understand the cash flow nature of your organization and your finance department’s view of borrowing money from a bank or other lender.

For instance, a company that has a positive cash flow may want to self fund many items and not rely on loans to finance projects and initiatives.   Others who struggle with positive cash flow may prefer to use financing or leasing whenever possible to fund projects.   The easiest way to understand which type company you are is by talking to the people in your accounting or finance department.   Ask them what they prefer and why.  Also, ask them to help you understand what they look at when evaluating different initiatives.  (You might be surprised how much they will enjoy telling you!)  Most importantly, you’ll be much better prepared to work with your finance department on mutual solutions to your organization’s IT challenges when the time comes.

Financial Metrics

Like all departments, your finance department likely has key financial metrics it monitors and reports on each week or month.   The better you understand the key metrics your finance department monitors, the better you will  know how projects you’re proposing will impact those metrics.   (Some companies don’t track quantifiable metrics, but most do—especially if they want to remain in business!)

Opportunity Costs

Finally, you should understand how your company views opportunity costs.  Opportunity cost looks at what you are giving up to accomplish a specific initiative.  For example, you may have two developers writing software for a particular initiative.   A company that does not view opportunity costs would view their efforts as costing zero because the developers are already on staff and therefore do not garner any incremental costs for working on the project.

However, other companies would consider the full cost of the developers and apply those costs to the initiative since they could be work on something else but for the project at hand.  You might be surprised to learn that many companies do not think in terms of opportunity cost—at least not consistently from month-to-month and year-to-year.  You might need to have several discussions with your finance manager in order to understand their approach to opportunity cost and to prepare your justification documents for IT projects

Over the past several years homeowners are facing the reality that their mortgage really is their biggest debt. With home values shooting up, homeowners have tapped into this equity to facilitate a more appealing lifestyle, ignoring what this will do to their financial position in the long run. Now with lenders closing shop left and right, mortgage originators dropping like flies and “creative” loan programs beginning to rear their ugly heads, there will be more demand to find solutions to foreclosures.

One of the programs that are beginning to surface is the concept of the Money Merge Account. The concept behind this plan is not new, and involves paying extra money to principal to cancel interest. Many homeowners do this now to a certain extent. With the bi-weekly payment plan a homeowner pay’s two ½ payments each month. With this they can expect to pay one extra mortgage payment per year.

In order to build equity more rapidly, you must have a lender that will immediately apply each 1/2 monthly payment upon receipt. If the lender waits until the second payment has been received before crediting the loan, you won’t see the benefits. When worked properly, this is a decent plan and is effective in reducing your amortization schedule. One of the downsides of this is that there is no built-in plan to come up with the extra money.

Another method to paying off mortgage and other debt is the debt roll-down. The idea here is to set aside a certain amount for debt repayment and continue to maintain the total monthly amount you pay in debt reduction even after the first debt is paid off. You would then target each debt you have in the order of highest interest rate. This is effective, requires a lot of discipline but does not employ the concept of interest arbitrage, or interest cancellation.

The Money Merge Account is neither a bi-weekly or debt roll down. With the Money Merge Account, the homeowner would set up a specific type of HELOC (Home Equity Line Of Credit) that would be open-ended. In this case the interest would be charged on the average daily balance rather than month-end principal balance and would act as a primary checking account allowing monies to be deposited and withdrawn using checks, debit or transfers. Rather than using a standard checking or savings account where your money sits, waiting to be spent and doing nothing for you; you would use the functionality of the HELOC to compress the principal balance in which the interest is calculated (on an average daily balance).

Taking into consideration the structure and interest rates of the HELOC and the first mortgage, your income and expenses; the Money Merge Account software would prompt you periodically to make extra payments to your first mortgage. This prompt would be a specific dollar amount, to the penny and applied on a specific date as to maximize interest cancellation. Once the payment is made, the balance owed on the HELOC would go up, you would then deposit your paycheck back into the HELOC driving the average daily balance and interest charges back down canceling interest until it’s time to pay expenses again.

By using this method, you are using a portion of your discretionary income which includes the offset interest from the HELOC. The extra payments to your first mortgage would not necessarily be applied every month; it would depend on your particular cash flow situation. With this method, the average homeowner will pay off their home in as little to ½ to 1/3 the time.

So with the cooling real estate market and ever increasing demand for solutions to mortgage debt, many ideas will emerge, as necessity is truly the mother of invention. Whereas the concept of interest cancellation is not new, the systematic approach of the Money Merge Account software definitely is and worth a second look as a viable option.

I hope you have found this article informative and interesting. Feel free to contact me if you have questions.

-Greg Campbell

Read more on PR Newswire via Yahoo! Finance

I, at one time, had a software program that all you did was enter your debts and interest rate, etc. and as they were paid off added that amount to the next debt payment and so on.

The next time you’re in an office where personal computers are used, look on the desks. Chances are pretty good that you will see a mechanical tape adding machine sitting next to many of the computers. That makes no sense to me whatsoever. Why are such antiquated pieces of equipment, that do little more than simple arithmetic, sitting next to very powerful, perhaps very expensive computing devices?

In my opinion, the advantages of a full featured adding machine program should convince most people that mechanical adding machines are expensive dinosaurs that have long outlived their usefulness for personal computer users. To illustrate, here are a few of the advantages a person realizes from using a well written electronic tapes (etapes) program instead of a mechanical adding machine.

* An etape is editable. With a mechanical machine, an error on a printed tape often means re-running the entire tape. Etape entries can be changed, inserted and removed.

* Etapes can be saved to disc and reopened. There is no need to commit an electronic tape to paper unless needed. And etapes on disc can be shared with anyone in the world who has an email address.

* Etapes saved to disc are encrypted to prevent “back door” viewing and changes.

* Electronic tapes that must be stored to satisfy statutory requirements can be saved on media, such as CDs, that will ensure the integrity of the stored etapes almost indefinitely. In additon, multiple backup copies of stored etapes can easily be created. With backup copies stored off-site, the expense of fireproof storage can be avoided. (While the life expectancy for data stored on CD’s is not yet known, I imagine an electronic tape saved on a CD may last longer than a tape printed on paper.)

* Editable notes can be added to each entry and subtotal on an etape. Each etape can also have a caption. Etapes saved on disc can be searched based on file names, captions and/or etape notes.

* Entire etapes and single etape values can be copied and then pasted into any other program that supports the clipboard. This means an electronic adding machine program works with just about all office and finance software.

* With a Master/Derived Value feature, a person can re-use multi-sectioned etapes for often performed calculations. To re-do a calculation, the re-usable etape is opened from disc and key values are changed. Linked subtotals cascade to following etape sections automatically so that all sections of the etape are correctly recalculated.

* An optional subtotal column on an etape displays the current running subtotal throughout the entire etape.

* An unlimited number of memories can be created in a well written adding machine program. Switching between memories at any time is a matter of a few mouse clicks.

* Adding sales tax calculations to an etape can be done by pressing one button.

* A Biz Wizard feature simplifies the calculations of annuities, loans and depreciation. The results of these types of calculations, including entire loan amortization schedules, can be placed on an etape with one mouse click.

With these, and several other advantages of electronic adding machine etapes, why have mechanical tape adding machines managed to avoid the same fate of paper and pencil spreadsheets? In my opinion, habit is a large factor. People have been using adding machines for a long time; long before the advent of personal computers. Whenever an arithmetic calculation needs to be done, muscle memory kicks in subconsciously. The arm extends past the keyboard and the fingers begin to punch very familiar buttons.

I imagine there is also a certain amount of addiction to the whir and clickity-clackity sounds of a paper tape being printed. When I asked one person why she still used a mechanical paper tape machine she said, “I like the sound it makes.” There is also the intimidation many people still feel with personal computers. A mechanical adding machine, compared to software, may feel like a pair of well broken in loafers.

Be it habit, addiction or a comfort factor, mechanical adding machines have managed to survive technological advances despite the fact that they deprive people of valuable functionality and incur unnecessary costs. A well written electronic adding machine, which can sound just like a mechanical machine, pays for itself quickly with reduced office supply expenses and fewer purchases of replacement equipment. It is no longer necessary to buy cases of adding machine tape or boxes of ribbon cartridges. And, since software doesn’t wear out, the expense of replacing worn out and broken adding machines is eliminated. Not buying paper tape and ribbons in cardboard packaging also means less pressure on our forests. And not throwing out broken machines and exhausted print cartridges means fewer non-degradable plastics going into our landfills.

Using etapes, in my opinion, is a win-win-win situation for personal computer users, the bottom line and the environment.

Where to turn and what to do can be confusing, especially if you’re responsible for your organization’s communications or IT department, but don’t really know anything about a digital sign. While there are many good companies in business to help you achieve your goals, you can make the endeavor easier and far more successful if you avoid the problems many before you have encountered when rolling out and maintaining their digital signage networks.

Having worked with hundreds of customers on their digital signage needs, we’ve seen a lot of difficulties that could easily have been avoided -along with the associated delays and added expense- with a little knowledge up front. As the saying goes, forewarned is forearmed. So, keep these Top 10 Digital Signage Pitfalls in mind as you plan your new digital signage network to make the experience smooth and rewarding.

No. 1: Lack of a clear purpose

Someone in your organization, has read digital signage can make marketing messaging more effective. It can reach potential customers at the point of purchase, promote desired behavior, target different demographic groups associated with different times of the day, and do so many wonderful things.

But what exactly does your organization need to accomplish with digital signage? That’s the seminal question. Without clearly defining the purpose of a digital signage network, it is impossible to find success in any phase of its deployment or use.

Taking the time up front to define the expectations for the system and write them out on paper for the approval of key management will provide direction and focus effort on attainable goals. Struggling to fulfill a nebulous purpose for the digital signage network will rack up unnecessary expense and leave everyone connected with the project frustrated.

No. 2: Taking on digital signage as an IT project

“Digital signage network,” the very words sound IT oriented. While there’s a lot of IT technology involved with digital signage, taking on a digital signage network as an IT project is dangerous.

While highly skilled, the typical IT manager does not have the background nor the experience needed to roll out a successful digital signage network. There’s a powerful temptation on the part of IT managers to look at digital signage playback as if it were a Microsoft PowerPoint presentation. It isn’t.

PowerPoint does an excellent job at making business presentations, but how many TV stations rely on PowerPoint to create and playback the programs, commercials, news and promotions you see nightly? Exactly zero. With respect to playing back video, graphics, text and animation, layering multiple visual elements and building and maintaining a playout schedule, a digital signage network is much more like a TV station than a boardroom with a projector and a PowerPoint presentation. Keep that in mind if an IT manager volunteers to take on your organization’s digital signage project.

No. 3: Lack of content

Congratulations. You have a digital signage network. What are you going to display? Having a digital signage network without content is like having a newspaper without print. There’s just a whole lot of nothing and overwhelming sense of emptiness.

Communicating in some form must be part of the reason behind the decision to add a digital signage network. However, there is no communication without content. Fortunately, many organizations have existing resources to draw upon that can be repurposed as digital signage content. Logos, commercials, promotional video, print advertising, plans and drawings can all be reused in whole or part to communicate a message on a digital signage network.

Additionally, RSS Internet feeds are a tremendous resource for updating a digital signage network with fresh “newsy” content, weather and sports scores that can give an audience a reason to take a second or third look.

Regardless of where it comes from, content is critical to the success of a digital signage network. Knowing where it will come from is as important as actually having the digital signage network in place.

No. 4: No one assigned to manage the project

While it’s not like designing the International Space Station, putting a digital signage network in place can be a complex undertaking. For that reason, it’s essential that any business or organization taking on a digital signage network assign someone to manage the project. Having an individual identified to own the project will minimize the impact of the unforeseen problems that inevitably creep into any complex undertaking.

Just as bad as having no one assigned to manage the project is its closely related cousin: management by committee. Offering up conflicting directions from multiple individuals will leave your system integrator bewildered and your project incomplete.

No. 5: No one to update content

While RSS feeds and subscriptions to news wire services are two sources of fresh information for a digital signage network, where will updated content conveying your company’s specific messages and current offerings come from?

A digital signage network that attracts attention has an insatiable appetite for fresh content. Thus, it’s essential that an organization taking on a digital signage network assign a qualified, competent person to the task of creating that content. Without someone in charge of the network’s content, the text, graphics and video being displayed will soon grow tired. Stale content will have the opposite of the desired result for a digital sign. It actually will drive viewers away and impart a sense of “been there, done that” that will be difficult to reverse.

No. 6: Taking the cheap way out

There’s nothing wrong with being budget conscious about a digital signage installation; however, selecting products, including displays, controllers and software, and services like content creation solely on their price tag can result in a system that in the long wrong will cost an organization dearly.

Systems designed solely on the price of the component miss the point. Digital signage networks are about communicating information –perhaps a marketing message, maps and directions or instructions- to their intended audience. Spending money on an inexpensive system just because it’s cheap could cost a business or organization far more than the money saved in lost opportunities.

No. 7: Not knowing the locations of the signs

Knowing where your organization wants to locate the flat panel monitors in its digital signage network is important for a few reasons. First, locating the digital signage content players needed depends on where the sign or signs it’s controlling are located. The length of cable runs between player and sign must be taken into account. Clearly defining the location of the signs will allow you to minimize construction/renovation expense and avoid paying for “do overs.”

Second, understanding exactly where the signs will be positioned will make it easier to understand what will be needed to mount the flat panels in use. Are wall studs available where a sign will be located? Or, will a freestanding structure be required? What’s the condition of the wall studs? Is electrical power available? What’s the status of ambient light sources? Will a window or skylight need to be shaded to reduce glare?

Third, not knowing where the signs need to located may be a symptom of a bigger problem, namely not having a clear idea about the purpose of the digital signage installation.

No. 8: Installers without general contractor capability

Installing digital signage can be messy. Drywall and plaster may need to be cut. New electrical plugs with isolated grounds may need to be installed. Beyond those obvious construction challenges, less apparent structural modifications may be required. Those can vary from relocating HVAC ducts to re-enforcing walls.

For that reason, choosing a digital signage installer without the skill and experience to serve as a general contractor for the project can be a big mistake. Depending on the specific installation, it’s not unreasonable to assume carpenters, electricians, plumbers and even heating and cooling contractors might need to be involved to make necessary structural modifications. Having an installer who can serve as a general contractor to bring those diverse resources together and manage them properly can save lots of time and expense.

No. 9: Failing to allot adequate time to learn the system

Far too often, the people responsible for new digital signage installations at businesses or organizations are so excited about their systems that they can’t wait to show them off to upper management. After all, a significant sum of money went in to making the digital signage network a reality. So showing it off as soon as possible only seems natural.

However, creating content for a digital signage system, scheduling it and making changes to playback along the way require some skill. It takes time to be properly trained to use a digital signage network. Failing to allocate sufficient time to learn how to use the system not only could be embarrassing in front of management, but disastrous to your communications efforts with the general public, if they’re your first audience.

No. 10: Failing to keep future expansion in mind at the time of initial design

Designing yourself into a box when first contemplating a digital signage network can be costly. Without casting an eye towards future needs, it’s possible that portions of the network might need replacement before they’ve been amortized to accommodate expansion.

Without exception, experience shows that businesses and organizations that fund the addition of digital signage networks express interest in expanding their systems after they’re installed.

There you have it, the Top 10 Digital Signage Pitfalls. Take these lessons to heart as you proceed with your digital signage rollout, and you’re much more likely to have a successful experience. More importantly, your company or institution will avoid costly mistakes that will delay the installation and prevent your communications from having their desired effect.

Consider the following facts from the Small Business Administration:

1) According to the Small Business Administration, sales increase between 15 and 150% when and electronic message center is installed.

2) Electronic message centers allow an unlimited number of message changes and variable controls, all easily completed with a computer. The result is lower labor cost and elimination of the physical liabilities often associated with copy changes on traditional reader boards.

3) Electronic Message centers communicate variable messages as people pass by, allowing greater flexibility in communicating to the public.

4) With their automated dimming and focusing systems, electronic message centers can respond to the visibility needs of the public, increasing safety and conspicuity day and night.

5) The flexibility offered by electronic message centers means your business can advertise specials while also displaying public service information or other items of public interest.

6) Electronic message centers can quickly “brand” your business site in the local community.

7) Electronic message centers are an investment in your business and provide the best and most cost-effective forms of paid advertising. The only form of advertising that may be more powerful is word of mouth (although it can be neither purchased nor controlled).

The effectiveness of an electronic message center is not limited by space or surface area constraints as with a reader-board.

9) Electronic message centers act as your “salesman on the street,” attracting new customers to your business location.

10) Electronic message centers allow you to market your products and services to your immediate trade area and prevent wasteful advertising expenses.

11) The business owner can change the message as needed to provide information to specific retail customers, and can be used for political, social or community events.

12) Software is available that enables a business owner to display sophisticated logos or images on the EMC precisely as planned.

An Answer to the Challenge of Changing Demographics

The public – your existing and potential customers – is on the move, both literally and figuratively, and sometimes catching their attention is like hitting a moving target. Consider that approximately 18.6% of Americans move every year. Whether they move a short or long distance, they usually change their basic trade area. Add to that the fact that 15-35% of the traffic on a given street is “just passing through” (vacation travelers and such), and you can see the great potential for single stops by those unfamiliar with the area. An electronic or variable message center offers a unique way to capture the attention of these passers-by. An EMC allows you to communicate more effectively with the typical person passing by at a particular time day by changing the message and graphic of your sign to match the profile on the street. The local airport in Monmouth, NJ offers a clever example of this flexibility. The airport used its display to advertise price specials at peak hours to those traveling by on the freeway on the way to and from work. During shopping hours or after-school traffic, the airport changed its display to offer community service messages. This kind of flexibility increases the readership of a message unit, as it can correspond to the traffic profile by the day of the week, the time of day, or the season. With the right software, virtually any message can be created and displayed. The demand by businesses for these electronic or variable message centers is increasing because these signs improve the economic viability of difficult commercial sites with limited space. Municipalities that wish to prevent urban sprawl or deterioration of urban land are passing enabling acts that require optimization of urban space, and thus are more willing to look at EMCs as a signage option for businesses.

Frequently Asked Questions about EMCs

We have a sign; why does my business need a message center?

Consider for a moment the speed at which traffic passes by the average business. A motorist has only a few seconds to see and comprehend any given sign. For example, on a street with traffic passing at 45 miles per hour, a car that is 500 feet in front of a given sign will have only 7.6 seconds to read the sign before it passes, under normal driving conditions. A business’ sign must be conspicuous if it is to catch the attention of passing motorists within the limited amount of time available. Motorists often spot electronic message centers quickly because the copy changes, the letters are illuminated, and the signs have traditionally been used as public service devices. Additionally, electronic message centers may have greater visibility from further distances, especially in poor lighting conditions , giving the motorist additional time to read the message displayed while safely maneuvering his or her vehicle. Message Centers act as a consolidating type of advertising. In other words, they offer businesses a way of posting a variety of information in one place rather than relying on numerous signs and banners displayed in windows, for example. This can be a real advantage for a business located in a district with strict rules about temporary signs. Most importantly, the electronic message center almost always increases a business’ share of revenue . This is a result of the “branding” of the site through the use of specific logos, reinforcement of other advertising messages, allowing for public service notices, generating exact impulse stops, and helping to change customers’ buying habits once they have stopped.

Is an electronic message center a cost-effective advertising medium?

Yes. Businesses often select their advertising medium, and messages, based upon the cost per thousand exposures of their message to the public. ON this basis, no other form of advertising comes close to matching the efficiency and cost-effectiveness, dollar for dollar, of an electronic message display. Compare the figures below:

· Newspaper advertising – the cost on average is about $7.39 for 1000 exposures within a 10- mile radius of the business location.

· Television advertising – The cost on average is approximately $6.26 per 1000 exposures.

· Radio advertising – The cost is about $5.47 per 1000 exposures.

· New LED electronic message center display – The cost is less than $0.15 per 1000 exposures. How? Assume, for example, that you spend $30,000.00 on this type of system, and that its useful life is about ten years. The amortized daily cost of the message center would equal about $2.74. Add to this the daily cost of electricity for this new LED unit (approximately $0.20), thus giving your business a daily message center expense total of $8.82. With a daily traffic count of 20,000 vehicles passing your business, you would have a cost of less than $0.45 per thousand exposures (counting drivers only)!

Best of all, with an electronic message center, a business does not have to worry about missing its target audience, becoming “yesterday’s news,” or facing expensive production costs for changing its message , as happens frequently with the other forms of advertising mentioned.

With an electronic variable message display:

· The business owns the form of advertising

· The advertising works for the business 24 hours a day, 365 days a year

· The sign acts as the “salesman on the street” attracting customers into the business

· The advertising speaks directly to the potential customers as they drive past the business location, and the EMC makes the business a landmark in its community. Finally, many message center manufacturers provide leasing programs, which include service and maintenance, thereby providing another option for covering the cost of usage.

Please contact the Small Business Administration for more information.

Before you decide that these incredible devices are beyond your scope of understanding or ability to operate, consider the fact that, with a rudimentary understanding of personal computers, within a couple of hours of “hands on” experience you will have a firm grasp of what it takes to run your new electronic message center. If you have the ability to use Microsoft software, electronic message centers will provide little challenge.

A common misunderstanding is that there must be constant communication between your computer and the electronic message center. In reality, this communication is only necessary when the user changes the message schedule, and it takes about 5 seconds for the transmission.

Electronic message centers range from small simple “time and temperature” displays to full color boards with the ability to show movie clips. You may choose between Mono(single color/text only), Gray Scale(single color with varying number of shades that allows basic graphic display), and Full Color, which offers beautiful realistic renderings of just about anything you can visualize!

One of the most exciting parts of owning an electronic message center is the ability to target your advertisements specifically to the potential customer passing in front of your location, by time, date, Holiday, or any other variable you choose… and if you use your imagination, and devise very tempting ads, that customer will come in your door immediately while your ad is still on his mind. Instant gratification!

One of the most frustrating advertising issues is coordinating ad dates with delivery of product. As a business owner, how many times have you spent thousands of dollars to run advertising on a new and exciting product, only to have the supplier “drop the ball”, and not deliver the goods on time? It’s happened to all of us… With your new electronic message center, until you push the “send” button your message doesn’t change.

How about the other side of the coin… A vendor calls and has acquired one of your best selling items at a tremendous savings and wants to get them out of his inventory very quickly. It’s a cash deal, so you want to turn your investment within a short period of time. Your ability to rapidly set up and get ads running on “standard” media is very limited, and could add weeks to the amount of time needed to sell the product. With your new electronic message center, you can target tens of thousands of passersby per day immediately! This provides a real advantage for you, when your competitors don’t own an electronic message center.

Time and temperature and public service messages will draw viewers to your electronic message center. Adding “non-sales” oriented public service messages to your schedule will cause those who use your street as a regular route to become accustomed to turning to look at your sign to get the latest updates, which is exactly what you are trying to accomplish.

Bottom line? You can own an electronic message center for less than the yearly cost of a full page Yellow Pages ad. The cost of a yearlong full coverage television or radio advertising campaign could dwarf the investment made in an electronic message center that will last for years, requires very little maintenance, and runs on standard 110 volt AC current.

The question is no longer “can we afford an electronic message center”… It’s “can we afford NOT to invest in an EMC!”

http://www.advantagewebsitedesigns.com

 By David Roberts

 I have to apologize as there are some lines here that would cause an entirely separate article, and yet are not used by 90% of the companies using Quickbooks as their accounting software. I am sorry that these definitions are so brief but should you need clarification please don’t hesitate to email me.

 •I. K-1 Tax Lines

 The K-1 tax form is a little bit like a mutt form on the tax return. Mainly it concerns the division of profits and expenses in a partnership, trust or corporation so if your company is not a partnership or corporation these particular tax lines won’t apply to you. Some people receive a K-1 because they are part of a group of people who own a trust or portfolio that generates income through the year. That income is split up into the designated percentages amongst those in that group. One example of this would be the trust left to a group of siblings that generates income through the year, the eldest receiving 60% and the one or more siblings receiving an equal share of the remaining portion. Each sibling would receive a 1065B which would then be used to fill in the K-1 form.

Schedule K

•1. Rentals Income – Used when a partnership or corporation earns income from rental property.

•2. Rentals Expenses – Self explanatory but make sure you can break down what your actual expenses are versus what you think you are spending. Ads, Management fees, mileage to go collect rent or inspect problems with the home, all play a part in reducing your income and tax liability.

•3. Portfolio – Interest – CD’s – when a CD is part of an investment it earns a special place on the K1 form apart from interest from the US Treasury which is the next category.

•4. Portfolio – Interest – U.S. Treasury (bonds) etc. Many of these bonds are non-taxable income and many of these non-taxable bonds pay decent interest rates.

•5. Portfolio – Dividends – What would normally be on a 1099 DIV form in the case of a partnership, corporation or trust that owns stock will go on the K1.

•6. Portfolio – Royalties – Income received from copyrights, patents, oil, gas or mineral properties. Check your portfolio to see if your mutual funds are being invested in these type of companies.

•7. Other Income – the all-purpose IRS junk category. Other. If you can’t fit it into one of the other categories, put it here.

Deductions -

•1. Charitable – yes, partnerships, corporations and trusts can donate to worthy causes and receive the same benefits of writing off these donations to offset income and to foster goodwill in their communities.

•2. Other – If you can’t fit a deduction anywhere else, put it here.

Investment Interest

•1. Foreign Tax – Some mutual funds invest globally and thus you end up paying some foreign taxes. Sometimes these foreign taxes are deductible, that is a completely different article I haven’t written as of yet.

•2. Reduction in Available Taxes – another category put on your 1099DIV at the end of the year. Most companies will not use this category, I have been doing this for 9 years and have yet to service a client that uses this category.

•II. Balance Sheet Tax Lines

While a lot of the lines that have been covered can easily go into this income or that expense category, the balance sheet covers the accounts that would be considered assets, liabilities or equity.

•1. Cash – this would be your bank accounts, your cash on hand or petty cash accounts. It would include any account that is immediately available as liquid assets.

•2. Accounts Receivable – If you accept payment on credit terms, all amounts that you are waiting to be paid would be classified as A/R. There are companies out there now who will pay cash for your receivables, which in cases of extreme cash flow restrictions would be an option. The percentage you get however will be significantly reduced and isn’t an option for a lot of smaller business owners.

•3. Allowance for Bad Debts – This is the method I discussed earlier about figuring in advance that .5 – 2% of your A/R will never pay and being able to claim that as such against your A/R.

•4. US Government Obligations – Rare to be used, but if you have back taxes or debts owed to the government on a payment plan or regular payments, use this box.

•5. Tax Exempt Sec. – If the company owns any bonds or tax exempt securities, these are assets that pay out based on the ‘loan’ made to the payor.

•6. Other Current Assets – These are assets that can be easily and quickly converted to cash within a year’s time, CD’s, Bonds, etc.

•7. Loans to Shareholders – Just as it is feasible for a shareholder in a corporation to loan money to the company, it is also feasible for the shareholder(s) to borrow money from the company. Keep in mind that this kind of loan is strictly regulated and is one of the reasons that the Enron executives were more closely scrutinized and prosecuted, because the loans were below market value for excessive amounts that could never have been repaid.

•8. Mortgage Real Estate Loans – If your business involves the collection of loan amounts for real estate purchases, this would be the account to put those payments into.

•9. Other Investments – Are there any other investing activities that your company participates in that generates income either directly or through depreciation or amortization of assets?

•10. Buildings – Your building will be included on the balance sheet as being a positive addition to your assets and their value, the loan for the purchase of the buildings however will be on the liability side. There should be a separate fixed asset account showing the original cost of the building.

•11. Accumulated Depreciation – the yearly amount deducted from the VALUE (not the COST) of the building, vehicle, etc. Accumulated means all the previous year’s accumulated deductions for this asset. This amount if added correctly will appear on the chart of accounts as a negative figure.

•12. Land – Land does not depreciate, however the cost of the land is an asset and should be included in the accounting.

•13. Accumulated Amortization -

•14. Other Assets – Assets that cannot be put into any of these categories. Intangible assets, like goodwill, etc.

Balance Sheet Liabilities

•1. Accounts Payable – These are the accounts you owe that are on credit. This is for products, services or merchandise you purchased on credit.

•2. Short Term Mortgages Payable – In a time of extreme cash flow need, sometimes a business owner will take out a short term mortgage with collateral. Short term means it should be paid within 12 months.

•3. Other Current Liabilities – All liabilities that will be paid off within 12 months.

•4. Loans from Shareholders – When the company is strapped for cash and the owners/shareholders are not the money is put here so that when it is taken out it is done so as a repayment on the loan from the shareholders, with interest, and is not taxable, apart from the interest gained personally to the shareholder.

•5. Long Term Mortgages/Notes – Mortgages on property, notes payable to companies or individuals that don’t expect payment within a years’ time.

•6. Other Liabilities – All liabilities not fitting in other categories go here.

•7. Capital Stock – The number of shares authorized for issuance by a company’s charter, including both common and preferred stock. Generally the value assigned to each share is $1 but that is up to the individual business owner.

•8. Paid In Capital – capital received from investors for stock, also called contributed capital.

•9. Treasury Stock – stock reacquired by a corporation to be retired or resold to the public. Not to be considered when calculating an earnings per share ratio, dividends or for voting purposes.

Numbers 7,8 and 9 are usually meant for companies with the intent to sell their stock or go public. For these categories I would suggest getting guidance from a CPA before attempting to undergo that process yourself.

M-1

The M-1 is a form used for corporations with income or assets over $250,000. It is a comparison to the beginning years balance sheet to the end of year’s balance sheet. The use of Quickbooks makes this preparation easier as the information flows easily from the Quickbooks file to many different types of tax preparation software. (Lacerte, ProSeries, etc) The cost of these tax preparation software is usually prohibitive for a company that doesn’t specialize in tax preparation, so seek out a preparer that uses one of these two systems.

1. Net Income Per Books – the income minus expenses on books flows through to here.

2. Depreciation Per Books – ditto.

3. Expenses on Books not on Return – consult a tax professional before putting any of your accounts into this category!

4. Income on Books not on Return – again, consult a tax professional before using either of these categories.

8825A-E

If your corporation or partnership owns one or more rental real estate properties, the income and expenses are assigned to one of these accounts. The A, B, C etc are for separate rental properties so you can keep track of up to 5 different properties.

Gross Rents – how much rental income did you receive for this property. Advertising – how much did it cost you to advertise this property as being for rent? Auto and Travel – how many times did you travel to the property for maintenance, collection of rent, etc. Cleaning and Maintenance – tenants can sometimes make a mess, how much did the carpet cleaning, painting, etc cost you? Commissions – did you hire someone to help you rent the place? Pay them and deduct it here. Insurance – this would be for property and casualty insurance on the property in case you get sued or someone hurts themselves while living on or exploring your property. Legal and Professional Fees – did you have an attorney draw up the rental paperwork? Interest Expense – generally reported on the 1098 of the property. Repairs – outside of regular cleaning, was anything damaged that needed repairs? Taxes – Real estate taxes, county taxes, etc Utilities – Are you paying utilities to keep up appearances while you are trying to rent the property? Are you paying utilities for the tenant? Wages – do you have someone on staff who is your “property manager”? Split up their wages amongst the properties for accurate bookkeeping! (but pay them with one check. Misc. Expenses – pest control, security, etc would all go here.

Hopefully this article has helped you further your Quickbooks education on tax lines. Remember the old adage, “Garbage in, Garbage Out!” Put in correctly, your reports will be more accurate, and decidedly more helpful to you and your accountant.

The idea is to estimate the cash flows and rates of return a rental property may produce for future years by projecting its income, operating expenses, and loan payment out for maybe ten years based upon some assumptions.

The concept is straightforward. Increase the income and operating expenses annually by some estimated percentage rate to arrive at a net operating income (income less expenses), then deduct the mortgage balance owed for that particular year to compute the property’s cash flow and subsequent rates of return. The proforma income statement (or proforma) is generally the report used to project these revenues, and in this article, we’ll discuss some simple basics to give you the idea. Please feel free to visit my website if you would like to see a sample proforma.

How to Create a Proforma You can choose one of two methods. You can use a spreadsheet or you can invest in a real estate investment software solution that provides the forms and will create a proforma income statement for you.

In any case, the important thing is to start the proforma with numbers that accurately reflect the property’s current financial position, i.e., income, operating expenses, and loan payment. This will represent year one.

Next, make an estimate as to how much you think income and expenses will increase annually (use separate percentage rates for each if you wish) and multiply your starting numbers by these rates to calculate for year two, year two’s numbers again for year three, and so on out as many years as you deem necessary (ten years is typical). Be sure to include the loan repayment for each of those years.

Finally, for each year, subtract the operating expenses from the income to determine the rental property’s net operating income then subtract the loan payment to arrive at the cash flow (or more specifically, cash flow before taxes).

For a more elaborate income statement that shows cash flow after taxes, sale proceeds, cap rate, return on equity and so on, you will need to include tax information such as depreciation, mortgage interest, amortized loan points and the investor’s marginal tax rate, a projected selling price for each of the years, and a round of additional computations for the rates of return.

Start with year one and then add each of the figures to the following years. You can inflate a sales price in exactly the same manner you did for income and expenses or select another way to project a sales price such as with a cap rate, gross rent multiplier, or set dollar amount. The depreciation rate depends on whether the rental property is residential (a home rental or apartments), or non-residential (commercial use). The loan will also have to be amortized so you can determine the amount of interest paid during each year.

You can find information regarding the depreciation schedules online if you’re planning to construct your own proforma, otherwise a good real estate investment software solution will have it built in to the program and you will just have to fill in the forms.

Whether you choose to use real estate investment software or a spreadsheet, here’s what you want to keep in mind about your statement.

1) You are essentially looking to analyze the cash flow and other performance measures resulting from changes to such variables as income, operating expenses, and property value over some number of future years.

2) Because it consists of projected estimates, don’t rely solely upon a proforma income statement to make your investment decision.

3) Also, because it is speculative, you might not want to construct your proforma out further then ten years.

4) Always use income and operating expenses that are realistic to begin with and then use a reasonable percentage rate to inflate them annually. The same would be true with the projected selling price of the property.

To get a better idea about creating revenue projections for rental properties, you can see a completed sample proforma on my website. Here’s to your real estate investing success.