IRS non-collectable status? Good news! Not really.

I talk to many people who have achieved non-collectible status with the IRS collection process and they celebrate, seemingly enjoying a victory. I guess it s a victory of sorts, a least they will not be bothering you with collection and or liquidation procedures for a while, but what does it really mean?

It means you have a life time to deal with this issue as it may be dormant but it did not go away.

It may feel as though you have won, no more threatening letters, phone calls or collection efforts, but has it really ‘gone away’.

A resounding NO!

It has been put into the computer as noncollectable and thus taken out of the active files.

BUT IT IS STILL THERE WAITING FOR YOU TO DO SOMETHING TO AWAKEN THE SLEEPING GIANT.

Any publicly recorded event, any attempt to get a loan, sell a home, buy or register a car,  will awaken the giant who will then appear in all its glory and power and resume the collection process.

So, if you plan on living under a rock for the rest of your life, noncollectable status is fine, fine, for a street person. If you have any intention of doing anything productive with your life, this issue must be dealt with and concluded for once and for all, as noncollectable status is a long term death wish not salvation.

A much better approach is an Offer to Compromise, especially following  noncollectable status as the service has already determined  you have no assets or capability to pay, what an opportunity to wipe out the debt all together, for ever.

So celebrate for one evening and then get to work the next day  filing your application for an Offer in Compromise. That is a plan that works.

You say the SBA does not have a mortgage or lien on your house so ‘its safe!’ Not so!

If only it was that easy. Unfortunately they are smarter then that and have laid a trap for you that many fall into unbeknown to themselves. The personal guaranties is a path to everything you and your wife own.

Keep in mind that almost every SBA loan we see and certainly many non SBA guaranteed normal secured bank loans require  spousal guarantees on the notes.

This may appear harmless in the beginning when all is well, but in the end when default is looking and you review your exposure, please count your home as ‘in jeopardy’. It too will be additional collateral to the loan, as follows:

At some point in the default process, the bank will seek and get a lien on your home. That is as good as a mortgage as it attaches the note to the collateral home. They get there by following the two guarantees provided from the principal borrower and his/her spouse.

Thus when push comes to shove, your home is in jeopardy and becomes a target for either liquidation or simply pressuring the borrower into compliance on some level more then one would provide if the home was not at risk. That is the reality…One way or another the SBA will get to your home and every other asset you own.

The answer of course is to workout the debt and settle it for affordable losses, and not risk losing the house altogether. This is discussed elsewhere in this blog, however the important point to understand is that once the spouse signs the guaranty, everything the family owns is then collateral for the note and can be liquidated upon default, liqidated by foreclosure and auction

Lets have a party!…and improve your business.

Everyone loves a party, an opportunity to meet new people, and have fun! Yes, true, but  what can this possibly have to do with your business?

It’s called marketing and the concept goes like this:

Business relationships are exactly that, relationships. Relationship building is critical to business success. Thus whatever we can do as business owners to improve, develop, nurture, support, relationship building with our client base, is a good thing to do and aught to be considered in your marketing action plans.

Second point: Your best source of new business is from existing clients, whether it be referrals or repeat business, there is always much to be gained by getting more involved with your client base.

It may be a golf tournament you promote, a midnight party at your office, food, entertainment, drinks,   Saturday bar-b-que  drop in, food, greeting and enjoying getting to know your clients better.  Low budget, high return.

Its simple: Saying thank you to your client base for the business support they bring you. Showing them  respect by offering to entertain them, whether they come or not. Spending time with your clients, a huge demonstration of respect. Even giving your clients an opportunity to say, ‘Hey your services were great, I want to thank you…or, I was thinking of you when I got your invitation and wanted to drop by to ask you to give me a call, and enjoy your hospitality, or maybe it is an opportunity for a client to bring a friend along who may be interested in your services, OR BEST OF ALL, A CLIENT WHO JUST COMES TO HAVE SOME FUN IN YOUR ENVIRONMENT.

In this day and age of gloom and despair, declining revenues and financial disaster, a party announces that you are in a positive frame of mind and this is very attractive in a down turned economic environment. As people need to remember to relax in times of stress. Be the leader show them the way. This also demonstrates you are on a positive up beat trend and people will be motivated to come and join your energy.

All this because you bothered to have a party, an event of some sort, where business is the second objective and meeting and greeting the first.

Your competition cannot beat this, as relationship building is key to trusting and trust is the basis for doing business. Trust is a competitive advantage that gives you a major edge.

Obviously you are doing his to create more business, but the fact that you are doing it and the fact that your client base participates means many good things will evolve out of this simple act of graciousness. …having a party, a bar-b-que, a social event of some sort to bring your client base to you for a large dose of respect, care, consideration, attention,  fun and yes appreciation.

What a great idea. It can be promoted as an anniversary, a simple client appreciation event, it can be a charitable event, whatever excuse you can invent. If done well and done with total consideration for your guests, it will have huge impact.

Promote it well, and be personal with all who come, thanking them and engaging them  in the idle social chatter that we all are very good at, have good food and drink, and demonstrate respect.Most of all have fun…have a fun environment and everyone who comes by or even hears of it will feel better about themselves and your relationship with them and good things will flow from this effort.

Yes its called marketing….try it, it works

Going for the business home run!

I see it more often then one would imagine…small business owners attempting to turn their fate around by going for the homerun, hitting it out of the park! Then it’s easy street. This plan almost never works. Yet despite the odds, too many small business owners believe in the one big order to save the business theory…and they waste their precious time chasing windmills.

Yes there are many examples of such events occurring. It does happen. When it does there is cause for celebration, assuming you can deliver and the price is good enough to allow a profitable exchange, but to make this an obsession to the exclusion of doing repeatable, profitable day to day business, building slowly but surely is a huge mistake.

Seldom can we hit the homerun to win the game. It happens when you least expect it, it happens when you are just trying to hit the ball, it happens when everything you are doing is being done well. Thus making the homerun the plan is a plan that is unsustainable and unlikely to carry your business were you need to go. Do business correctly, efficiently and consistently and you may be surprised with an occasional homer.

It’s ego controlling your decision making,  unwilling to build one brick at a time, waning the glory if immediate satisfaction,  rather then taking pride in building something solid and successful over time. The tried and true method, the best method. In these times maybe the only method.

Worse yet is the man who seeks out only long shots constantly swinging for the fences believing one will go out of the park…If only it worked that way. The truth is if your plan is to hit homeruns, your plan will fail, if your plan is to do business effectively then occasionally you may get an extra base hit…

Don’t ever stop dreaming. Keep looking for opportunity, but stop making your plan based on the home run theory, it is not the way to win games. be appreciative when one goes out of the park, but this cannot be the plan.

Who ever said 2%10 net/30 is a requirement? What are your invoice terms?

Cash flow can be as important as gross revenue, especially in this recession when revenues are down and expenses are high. Having the cash available to use  is critical for survival rather then waiting endlessly for it to show up…its in the mail,  they say…we all know that one, seems like it takes weeks for the mail to arrive these days even months.

So who created this requirement? Whom ever it was, it seems to be the way of the business world and I say enough!

We are not banks. We do not make loans, let alone unsecured, non-guaranteed loans. We need our cash when we ship. I ask again. Why do we all believe we must extend terms? Some say if we do not we will lose the business. I say Good! Maybe that business is business we do not want to have in the first place.

We must invest in the raw materials, pay our overhead, pay our payroll, ship our goods and then wait for 30, 45, 60, 90 days for payment?

Think about how much smoother our business operation would be if we received the payment in  5-7 days, or 10 days, respecting the client enough to allow them to see the product or service, determine if it is delivered as ordered, write the check if it is acceptable and mail it to us… 5-10 days at the most. That works.

And what is this 2% 10 net 30 all about. Now we are discounting to get paid in ten days as if the customer should be rewarded for doing what he should be doing anyway?  Paying the bill. I definitely do not get this at all.

How about penalizing late payment after ten days. I repeat we are not banks, we should not be lending our customers money or allowing them to use our goods and services before they pay for them.

Some say that our competitors provide such terms so our customers will go elsewhere if we require tougher payment terms. I say let them go, they are not the customers you want. The times they are a changing, and we cannot afford to accept long payment terms, rather not ship at all. Revenues are down, expenses are up and we must squeeze every dollar we can out of out of our cash flow to survive and grow again. Its time to evaluate our terms and conditions.

You must be providing goods and services that are unique, valuable and demand loyalty to your  business and  so you deserve the terms you demand, and if you have not accomplished this then it is you who are not doing the job effectively enough to warrant such payment terms, then change your ways. Do a better job, provide more and better service, and enjoy better customers, faster payment.

My bet is, that if you get paid in 5 you will be able to deliver faster, better, and with greater quality and will be so valuable to your customers they will want to pay you a soon as you require. That is the answer.

Another approach, although not as valuable, is to mark up your invoice and allow a deeper discount for immediate payment, but make them pay for the borrowing. More then the 2% everyone wants to give away. I say mark it up an additional  10% for net thirty and then discount it the ten%  for payment in 5 days…So now  if they want the terms they are borrowing the money and paying for it, reasonably enough to warrant the extra 30 days time. But if over thirty another 5 %.

You get it, if they want to use you as a bank then charge them for borrowing. If they want to buy in the due course of business then they should pay upon delivery or shortly thereafter.

Announce this and you will see how good a job you are doing. If your customers head for your competitors then you must review your policies and procedures,  you are not fulfilling your mission adequately, if they remain our customers you just increased your cash flow tremendously. Congratulations, job well done. Enjoy your business rewards.Find out and do what is appropriate.Survive this recession.