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Incurring expenses is usually the focus of many business owners. Generally because it’s the easiest and most visible thing to look at. However, there are other considerations for controlling costs. The first one is to look at how you manage the flow of money overall. By this I mean your budgets.

I want to reiterate that if you spend the time upfront defining your budgets, then it’s a lot easier to manage the costs that are incurred down the track. It also allows you to then delegate the management of this process to the bookkeeper or financial controller.

1) TOP TIP: IMPLEMENT A SYSTEM THAT YOU ONLY PAY ON PURCHASE ORDERS

One of the most effective ways to control costs is once you have your budget defined, is to then implement a system where you ONLY pay invoices on purchase orders. This will stop employees ordering willy nilly in its tracks. Because as soon as you issue the edict to staff, you make sure that the accounts people ONLY pay where a purchase order is quoted.

For staff to spend money, this means that they have to request a purchase order from the accounts person. They would then check the budget to make sure that the amount is allocated, and that the person ordering the goods is authorized to make the order. If the answer is yes to both of these, then the accounts person would issue a purchase order which the person ordering the goods when then quote.

So when the invoice is received by the accounts person, they would then check that the goods have been delivered and that there is no outstanding issues to resolve. They would then prepare a cheque or online transaction for payment.

If there is no purchase order assigned, then they would refer it back to the supplier and/or the staff member who ordered the goods to resolve. I suggest being tough here – if its not assigned, then you don’t pay. It’s then up to the employee to settle the account – well essentially you probably would, but when there’s a perceived consequence, it usually puts the fear of god into them! They usually don’t spend your money again after that scare!

2) VALUE FOR MONEY

One of the areas that most business owners are usually fairly comfortable with is controlling costs. But let’s just go over the basics again. As a business owner, you should set a key performance indicator for your financial controller to be responsible for value for money. This means continually looking for different and innovative ways to control costs as a way of impacting your business’ profitability. A dollar saved as a cost, goes directly to bottom line profitability. Some businesses find that by implementing tight cost controls and questioning the need for all spending has achieved the same profitability improvement that would otherwise have had to come from a substantial increase in sales.

Now I’m about to briefly go through a checklist that is available in the ‘Essential Financial Management Templates’ workbook which you can purchase from our website.

3) SHOP AROUND FOR DEALS

The first rule of thumb is to shop around. No matter who I’m dealing with, whether it’s a good friend or colleague that’s providing the service, I always compare it against two other quotes. Now, I usually don’t go straight for the cheapest option, but it does allow me to then go back to the original person and have an open and honest discussion about reducing the original cost. I always think about a comment one NASA astronaut once made when being asked about his feelings about being in space on a new space shuttle for the first time. His reply was, “how would you feel if you were about to fly in craft millions of mils into space, where your shuttle safety is completely reliant on our governments policy of sourcing the cheapest part possible.” Point well taken. It’s not always about going for the cheapest option, but it is about ensuring that you’re getting value for money.

4) COMPARE ACTUAL COSTS TO YOUR BUDGETED COSTS

Another point is to always review costs on an ongoing basis. I would suggest monthly – lets not wait until the end of the year or when we’re in strife, we should always be focused on ensuring that we’re getting value for money at all times. When you are going through your reports with your financial controller, use this as a time to look over your costs and compare them to your budgets.

5) THINK OUTSIDE THE BOX TO CONSIDER OTHER OPTIONS

Also be sure that you’re aware of what’s happening in the market place. Is there a new player who can provide competitive prices, or is there an online option available to you. Perhaps even a global possibility for you to explore. I’ll give you the example of a website. I had a friend who rung me to ask my opinion about a quote she had received on building a website. The quote was for $10,000. I referred her to a website called elance.com that has a global online bidding community. She placed a project brief for someone to build her a website and ended up getting one built for $1400. She was delighted with the quality and the end result – the only thing she did say was that she had to spend more time communicating with them (as they were overseas) but she was happy to do that to save herself $8,600!

6) CONTINUALLY REVIEW YOUR STANDARD PROVIDERS FOR THE BEST PRICES

Are there areas in your expense items that are being deregulated or additional players coming into the market. For example, electricity or gas providers, telephone providers, etc. You may be able to save money by consolidating accounts on your mobile phone bills. There are also telco providers that actually provide a free assessment service to see where they can save costs for you – use them!

7) REVIEW ELECTRICITY COSTS WITH AN ENERGY AUDIT

And while we’re on electricity costs, have you conducted an energy audit in your business to ensure that you’re not needlessly wasting money? For example, some energy reduction strategies could include turning off lights in offices that are not being used, or turning off the air condi8tioning system, photocopiers, printers and computers at the end of the day. Is there the potential to use electricity in “off peak” periods. Put timers on plant and equipment and put signs around your business reminding people to turnoff the lights and to save energy.

REIGN IN THE STATIONERY BILLS!

One of the biggest expense items in a business can be stationery. A lot of business owners won’t pay a $10 delivery charge to their business, but they will send an office person to pick up the stationery, at $25-30 an hour, plus allow them to purchase “whatever they need”. Have you ever tried not to buy an impulse item at a stationery store? It’s impossible – take it from someone who knows! Look also at the purchases that are being made in small quantities – can money be saved by purchasing in bulk – especially in printing. Make sure that one person only has the responsibility of purchasing stationery and ordering printing so that its not open slather of everyone in the business and they can also make sure that the items are actually required.

9) ESTABLISH A TRAVEL POLICY

Do you have a travel policy in your business? If so, it should clearly outline the class of air travel, grade of hotel accommodation and what expenses can be incurred and reimbursed. There are numerous accommodation site available now days that allow last minute bookings at a greatly reduced cost – have a look at wotif.com to see what I mean. Using this site means that you can actually book staff into 5 star accommodation at 3 star prices.

10) CHECK BANK CHARGES & FEES

Also consider bank interest, fees and charges – these should be checked regularly as banks often make mistakes in charging fees and interest. You should also maintain a record to interest rates and margins quoted by banks and shop around for the best interest rates.

11) REVIEW VEHICLE ALLOWANCES

Vehicle allowances are also another area of costs that can rack up pretty quickly when employees cotton to the fact that they can receive a nice little earner using the ATO vehicle allowance figures. If you have people using their vehicles a lot, you may want to consider whether you purchase or hire a pool car. Often the amount of money that you can spend paying vehicle allowances can actually pay off a company car – therefore building your assets at the same time. Another way to hand this is to offer to pay for all petrol costs instead. So everything an employee fills up, they just need to hand you the receipt and they’ll be reimbursed in full. This still adds up cheaper than paying a vehicle allowance – and is easier to budget for in your profit and loss projections.

Another way to further streamline this process can be to have fuel cards that link into a single account that you pay each month.

12) ESTABLISH BOUNDARIES FOR EMPLOYEE EXPENSE REIMBURSEMENTS

Always establish the boundaries for expense reimbursements in your business. Incorporate this into your induction program in your business so that everyone is extremely clear of the expectations. This is particularly relevant if you have a business development person who wants to have an “entertaining” budget. I usually empower people in this regard by providing them with a profitability target on sales made – which incorporates things like their entertainment budget. But more often, I’ll act6ually sit with them and run through ways to provide potential clients with value, without expenses “wining and dining” experiences. In fact, in my IT days, where everyone apart from me had a corporate credit card for “smoozing”. I was more effective with my sales because I would take people for a coffee.

13) MAKE SURE THE INVOICES YOU PAY ARE CORRECT

Advertising is another area where businesses can incur lots of charges. I’ve covered off on advertising in another CD in the Jump Start Your Business Series, but one thing I want to mention here is taking care with “bogus” invoices for advertising and checking that all invoices are actually for valid advertising. Now if you have a purchase order system or a centralized purchasing process, then you won’t get caught out on this one. But a few years back there was a scam where people were receiving invoices for “advertising” and then pressuring the accounts payable staff to pay them. A nice little earner made from the lack of internal systems in 99% of companies.

14) BEWARE OF OVERCHARGING!

I want to finish by talking about overcharging and the need to always check invoices against contracts or agreements. This includes rental agreements, any supplier invoices, etc. If in doubt, don’t be shy of asking the supplier to provide more details or query any inconsistencies. Errors are easily made and usually suppliers are extremely apologetic should a discrepancy be discovered.

15) ENSURE THAT YOUR PETTY CASH HAS A MONTHLY LIMIT

Despite your best planning, there will be cases when you need to have access to some petty cash – that is small amounts of cash for purchases that are fairly minor and random.

Make sure that the initial petty cash amount is realistic – if it keeps exceeding the amount each month, you need to establish where the cash is being spent and then put alternative strategies in place. However, I would strongly recommend setting a monthly limit that staff are aware of – for instance set a monthly amount of $150. Once it’s exceeded, it’s exceeded.

Taking time to reassess your costs will have a direct impact on your bottom line. However, be careful that you don’t focus more on cost minimization than opportunity creation. It’s easy to cut costs, but downright difficult to create more income. So be sure that your attention is focused in the right direction.

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What is a Personal Debt Obligation?

A personal debt obligation is an amount of money legally owed to a lender that arises from a loan agreement. It involves a continuing obligation to make payments until the debt is paid off in full. A lender has the right to sue in order to collect any unpaid outstanding debt. A debt obligation can be secured or unsecured. A secured debt obligation involves the placement of a lien against the debtors property, so a lender can force the sale of the property to pay off the debt. An unsecured debt obligation has no security against the debtors property which means a lender can only sue a debtor personally to recover any monies due.

What is Debt Forgiveness?

Debt forgiveness is the partial or total forgiveness of a debt. It means you no longer owe the debt to the lender or any other party. The lender gives up its rights to collect the debt and instead “writes it off” their books. Once a lender agrees to forgive a debt, the lender will report the forgiveness to the IRS by filing a 1099 form.

What is a Deficiency Debt?

Deficiency debt also known as debt deficiency arises when collateral that is used to secure a loan cannot satisfy the total amount due on the loan. It happens most often with debt involving real estate. However, it can occur in other types of collateralized loans such as car, business, and equipment loans. When a loan goes unpaid, the lender has the right to auction off the property to pay off the debt. If the lender collects less than what is owed at the sale, the shortage is called debt deficiency.

What are the consequences of a Personal Debt Obligation?

You will continue to owe the original amount that was borrowed plus any additional interest, late fees, collections fees, penalties, and/or attorney fees that may come due. If the debt obligation remains unpaid, then the lender can go to court, sue for a money judgment, get a money judgment, and use any legally available collection tactic. Most often, after a money judgment is awarded, a lender will attempt to put a lien on a bank account or garnish wages or put a lien on the debtors real estate. A lender can put a lien on business equipment. A debt obligation that turns into a money judgment can last for many years. In New York, a money judgment last for 20 years.

What are the consequences of Debt Forgiveness or Debt Deficiency?

Whether it is debt forgiveness or debt deficiency, the consequences are essentially the same. A lender has two general options regarding any unpaid debt. 1. The lender can forgive the debt. 2. The lender can get a court ordered money judgment to chase the borrower for the money or sell the debt to a third party.

If a lender agrees to forgive the debt, the lender will, in all likelihood, file a 1099 form for the forgiven amount. You should also remember to check your state taxing authority, since your state may consider debt forgiveness as taxable income. If the debt is secured by property, it may be possible to negotiate an exchange of the property for the full debt balance. In this case, the lender would not have a reason to file a 1099 form.

If the lender refuses to forgive the unpaid portion of a debt, then the lender will try to collect on the remaining balance. The lender can hire an attorney to sue for the remaining debt or sell the debt to a third-party. If successful, a lender will get a money judgment. There are various methods a lender can use to enforce collection of a money judgment. They can request your financial records to see if you have a job; to determine if you possess cash in the bank; or to locate your property. If the lender can find anything you own or earn, it will be seized or attached. The lender has the right to collect a fixed percentage of your wages also known as wage garnishment. By the way, the lender does not need you permission to garnish your wages. The lender simply contacts the payroll department and demands that a portion of your salary go to the lender.

When there is a debt deficiency from the sale of a property, the lender can forgive the difference or try to collect the difference. A deficiency debt becomes a new personal debt obligation unless a lender forgives the deficiency. Sometimes, a lender will demand a property owner sign another loan agreement for a deficiency debt. The IRS and some states offer tax relief to homeowners who have their debt deficiency forgiven. There is more information provided ahead about tax relief in this FAQ.

In our day and age, debt collection is big business. Technology makes it easier to find anyone and to find everything an individual earns or owns. There are third party companies purchasing personal debt obligations and/or deficiency debt from lenders. These third party companies may pay 10 to 20 cents on the dollar for the debt. Once the third party company owns your remaining debt, under most circumstances the third party has the same collection rights as the original lender.

Why does a lender issue an IRS 1099 form after Debt Forgiveness?

Debt forgiveness is considered taxable income by the IRS and by certain state and municipal taxing authorities. The IRS requires a lender to report the forgiven debt on form 1099-C, Cancellation of Debt. Individuals are required to report any forgiven debt on Form 1040. For example, lets say Mr. Jones originally borrowed $250,000 from the lender. The lender decides to forgive $150,000. Basically telling the debtor he or she does not have to pay $150,000. The IRS believes that since you did not have to pay back the entire loan, then you ended up keeping the money, therefore it is income.

What if I own a property with a value less than the mortgage balance, can the difference be forgiven through a short sale or a foreclosure auction? Can the difference become a deficiency debt? Will the IRS let me exclude forgiven debt and not look at it as income?

The general answer is yes to all of the questions. If a lender agrees to a short sale, the uncollected difference can be forgiven or it can become a personal debt obligation. If the lender forgives the difference then the amount forgiven can be considered taxable income. If the lender refuses to forgive the difference, then it becomes a personal debt obligation. This means a lender or a third party (who buys the debt obligation from the lender) has the right to legally pursue you by getting a court ordered money judgment.

If your home ends up selling at a foreclosure auction for less than what is owed, the uncollected balance is called a deficiency debt. A deficiency from a foreclosure action can be forgiven or can become a personal debt obligation. Various states have anti-deficiency statutes. These statutes prevent a lender from collecting on a deficiency. Also, the federal government enacted the Mortgage Debt Relief Act of 2007. The Mortgage Debt Relief Act of 2007 allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for the relief. The act applies to all applicable debt forgiven between 2007 and 201. It applies up to $2 million for joint filing and $1 million if filing separately. Make sure you read the act and get a qualified tax professional to analyze your specific situation.

The IRS has additional exceptions to the “debt forgiveness is income” rule. The most common situations when cancellation of debt income is not taxable involve qualified principal residence indebtedness, bankruptcy, insolvency, certain farm debts, non-recourse loans and other exceptions established by the IRS. You need to speak with a qualified accountant or other professional, so you understand your tax obligations.

What are Anti-Deficiency Laws?

Simply put, an anti-deficiency law prevents a lender from collecting on a deficiency debt or places limits on how much a lender can collect on a deficiency debt. A homeowner will not be held responsible for any deficiency if the property is occupied by homeowner. Basically, the property must be the homeowners primary residence. The lender can only recover the property and any proceeds from a foreclosure auction sale.

Anti-deficiency laws do not prevent a lender from reporting the deficiency to the IRS. Since the lender is generally prevented from collecting the loss on a sale, the lender can report the loss to the IRS as forgiven debt.

You can contact your states attorney general or banking department to learn about any deficiency laws. You can contact a qualified attorney. There are certain states that limit a lender to only one lawsuit to collect a mortgage loan debt. So make sure you get a professional opinion about your state laws.

What happens If I settle a Credit Card or Business Loan for less than what is owed?

If negotiated properly a credit card company or lender may agree to settle a business loan or credit card debt. Normally, the unpaid balance should be forgiven. This brings up an important principle. In order to get debt forgiveness, it must be in writing!!. Keep this in mind. Just because the lender verbally tells you the debt is forgiven does not mean it is forgiven unless it is in writing. There are instances when a debtor is told the debt is forgiven only to get aggressive collection calls sometime in the future.

How can I determine What Is Best for Me?

Ask yourself “What am I trying to achieve, what are my goals?” Your answer should focus on what puts you in the best financial position in the short and long term. The focus should be on reducing your debt obligation with limited long term negative financial impact. If debt is forgiven, then you may have a tax bill. If the debt becomes a money judgment, then wages can be garnished or certain assets can be seized. You will need a qualified team of professional advisers to assist you or you need to do a fair amount of research. Your advisers can include an accountant, attorney, and/or a consultant.

Each persons circumstance is unique. It requires spending time listening, gathering detailed financial information, reviewing all necessary documents and discussing various strategies.

Now you know so take control.

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A new article on June 3, 2009 from MSN Money writer Michael Brush indicates that there is a third wave of foreclosures still to come from prime borrowers (i.e. those previously “safe-borrowers” with sound credit and fixed-rate mortgages) as a result of job losses thanks to the worsening economy (”Coming: A 3rd Wave of Foreclosures”).

The article states that “In the first quarter, the percentage of these borrowers who were behind on their mortgages or in foreclosure had doubled from a year earlier, to nearly 6%” and goes on to say that “Credit Suisseanalyst Rod Dubitsky predicted last week that 8.1 million mortgages, or 16% of all mortgages, will go into foreclosure over the next four years. A weak economy, continued declines in home prices and rising delinquencies among prime borrowers all but ensure that foreclosures “will march steadily higher,” he says.” Not such great news for the economy, but good news indeed for entrepreneurs interested in starting a foreclosure cleanup business to clean and repair foreclosed homes for the banks.

To put this in perspective, this means that there will be over 2 million foreclosures a year and more than $2,025,000,000 up for grabs in money that will be spent on cleaning up these foreclosed properties (since the average bill is $1000+ to clean up one of these properties).

Let’s take a look at how you can position yourself to capitalize on this coming foreclosure movement

Set Up Your Company Properly

If you want to be hired for cleanup or preservation work, you’ll need to operate your business as a professional company. The good news is that you can set up a business quickly and inexpensively, and usually on your own. Many people decide to set up an LLC (Limited Liability Company) because of how quickly and easily it can be done but you’ll want to check with your accountant or other business professional to select the type of business entity that’s right for your personal situation.

If you do decide to start an LLC, you can usually find all of the documents you need online from your state’s government website. Usually the branch you’re looking for will be called the “Industrial Commission” or “Corporation Commission” or similar. Try typing in “start a business + ______ (your state)”. Anything ending in “.gov” is usually a good place to start as it indicates a government site.

Once your business is set up, you’ll need an Employer Identification Number (EIN), which is like a SSN for your business. You can register for one online: type in “IRS” & “EIN” into a search engine to find the online registration link.

As soon as you have your EIN (which you can usually get immediately online), you can open up a business bank account for your company. This step is very, very important. In the excitement of things, many people get caught up in the day-to-day dealings of running a business and use their personal accounts to pay for business expenses. Not only does this present an accounting nightmare at the end of the year, but it could present problems for you with the IRS if you don’t keep your personal and business finances separate.

Once you legally set up your business, you may be required to register your business with your county or city in order to get a business license to operate. You can start by calling City Hall or the Office of the County Clerk to inquire as to whether or not you need a city/county/state business license and if so, how to get one.

So to recap:

1. Legally set up your business

2. Get your EIN # and set up a business bank account

3. Apply for a business license

4. If you want to do preservation work, determine whether or not you need a contractors’ license

Get Insurance

You absolutely must have a Commercial Liability Insurance policy and Workers’ Compensation Insurance in order to run your business. Not only is insurance essential for protecting yourself from liability and protecting those that work for you in the event of a work-related injury, but many asset management companies will not do business with you if you do not meet their minimum insurance requirements.

Insurance will likely be one of your largest start-up costs, however, most insurance companies allow you to pay the premium on a monthly (rather than yearly) basis, which definitely makes this expense more affordable.

General Liability Insurance policies can cover the following: bodily injury, property damage, contractual liability, personal and advertising injury, professional liability (also known as Errors & Omissions (E&O) insurance, this coverage protects you and your business from litigation caused by charges of professional neglect or failure to perform your professional duties), hired auto and non-auto liability and umbrella liability.

You’ll want to speak directly with your insurance agent to get a better idea of the extent of the coverage provided by their particular policy and one that is best suited for your individual needs

Workers’ Compensation Insurance is required in most states when you have W2 employees, and some states also require your insurance to cover your 1099 contractors also. Workers’ Compensation (”Workers’ Comp”) covers your employees’ medical and disability expenses related to work-related illness and on-the-job injuries.

In the states where you are not required to cover your 1099 contractors you would need them to provide proof that they carry their own Workers’ Compensation insurance. Although tempting to shift the financial burden of maintaining a policy onto your 1099 contractors, in all reality, you are probably better off to take on the cost of all staff Workers’ Compensation (all W2 employees and 1099 contractors). The reason is that it’s difficult to find only independent contractors that have their own policy. In addition, this industry has such high turnover that if you put this restriction on your independent contractors, you’ll waste valuable time and lost revenues trying to find replacements in a hurry.

Here’s a great tip: sometimes you can get “pay-as-you-go” insurance where your workers’ compensation insurance premiums are based on your actual payroll, rather than an estimated amount. This is great for companies that are just starting out or have a fluctuating workload. Type in “pay as you go workers comp” into a search engine for results in your area.

As a second tip, we’ve used Farmers Insurance for years and have always had excellent customer service and great rates. Just Google “Farmers Insurance” for an agent in your area.

Foreclosure Cleanup v.s. Property Preservation Services

As the name suggests as a Foreclosure Cleanup Company, you’ll be cleaning out all of the junk in the house (also called a “trashout or a “junk out”), as well as cleaning the interior of the home. You may also be required to remove vehicles on the property. Usually foreclosure cleanup companies are also responsible for doing a basic landscape cleanup which includes hauling out any junk from the front/back yards, cutting the grass and trimming trees/bushes.

Cleaning up the property is the extent of services offered by a Foreclosure Cleanup Company, whereas a Property Preservation Company is also involved in the “securing” of the property and the “preserving” of the property.

Here are some of the services that a preservation company may offer (note that a Property Preservation Company will generally also offer cleanup services):

Securing the Property

o Initial vacant property inspection

o Lock changes

o Boarding of windows and doors

o Temporary roof repair

o Securing swimming pools

Preserving the Property

o Exterior Debris removal

o Abandoned vehicle removal (cars, boats, etc.)

o Interior Debris removal (junk-out)

o Hazardous waste removal

o Interior cleaning services including carpet cleaning

o Window washing/graffiti removal

o Window replacement

o Pool services (draining, acid washing, maintaining, etc.)

o Pest control services

o Yard maintenance/landscaping

o Snow removal

o Winterization

o Gutter cleaning

o Pressure washing

o Carpet removal & replacement

o Tile/Floor repairs

o Painting

o Sheetrock/drywall repairs

o Carpentry repairs

o Plumbing fixtures repairs & replacements

o Fire & mold remediation

o Fence repair

Here are a few things to consider when determining the extent of the services you want to offer:

A Contractors’ License is generally not required for Foreclosure Cleanup Company but is likely required for preservation companies doing work over a certain dollar value (usually $500 – $1000+). Sometimes this license can be obtained by attending a course and successfully passing a test whereas other states require previous, verifiable industry experience.

The insurance premiums tend to be higher on companies that offer preservation services as they are considered to be a “general contractor”. However, the revenue potential is much higher as preservation services tend to run from a few thousand dollars upwards instead of $800 – $1500 for each cleanout.

Usually what people do is start out initially offering just the foreclosure cleanup services and then when things pick up, they’ll add preservation items to the list of services they offer. This let’s them get their foot in the door without having to spend a whole lot of money upfront when setting up their company.

Source the Right Equipment & Tools

The great thing about starting a foreclosure cleanup company is that the initial expenses are quite low as much of the equipment and tools needed for cleaning foreclosures can likely be found in your own garage:

o Cleaning chemicals (i.e. all purpose cleaner, disinfectant, toilet bowl cleaner, window cleaner)

o Cleaning supplies (broom, mop, scrub pads)

o Vacuum cleaner

o Garbage bags and shovels

o Work gloves and disposable plastic gloves

o Lawn mowers & lawn tools

o Wheelbarrow

For the smaller items you don’t have on hand, check your local dollar store. Their prices can’t be beat and they usually have the same chemicals and cleaning supplies as the other retailers. Once you start doing some volume, consider shopping for your supplies at Sam’s Club or Costco to keep your expenses low.

You can also find used equipment in great shape (such as vacuums) by going around to your local Saturday morning garage/yard sales. If you have a “Re-Use” center or a Salvation Army, you may consider checking there also as they often have vacuums and other small equipment or yard tools for sale.

For hauling junk, you’ll need some sort of trailer and a vehicle large enough to pull it. If you don’t have a truck and a trailer, you can always borrow a friend’s truck and rent a trailer from U-Haul or just go ahead and rent a moving truck from U-Haul. (Remember though, that you’ll be charged a daily rate plus a per-mile rate when you rent a moving truck whereas if you use your own truck and just rent the pull-trailer, you’ll only incur the daily rental rate for the trailer.)

Sometimes you’ll be required to clean a property that doesn’t have electricity or water. In the event that there’s no electricity, you’ll need a generator to operate the vacuum cleaners and other electrical equipment. These can be rented at Lowe’s or Home Depot and is a much better alternative to purchasing one outright unless you’re going to use it on a regular basis (a new one will run you about $500+).

To save on expenses, it’s best to rent equipment in the beginning.

Once you get up and going, it may be worth looking into purchasing equipment of your own. Check the online classifieds ads (such as Craigslist, Kijiji and Backpage) for used trailers, generators, etc. You should also check with U-Haul as they have been selling some of their excess trucks as of late.

Stay Safe on the Job

As a business owner, you’re responsible for keeping your staff safe while working on the job. Working safely is paramount to the health of your staff and the reputation of your business (and also keeps your insurance premiums low). It’s imperative that you review safety issues prior to allowing anyone to work on the job – you must provide both classroom and on-the-job safety training to all new hires.

Now, it doesn’t have to be anything fancy; you can spend 20 – 30 minutes reviewing safety policies, safe working practices and answering any questions and then you’ll be done! Make sure you have people sign in and out of the meeting and that you document that a safety meeting took place.

It’s also very important that you become familiar with OSHA and Safety Standards as well as the health & safety hazards associated with this industry so that you can keep your staff safe, avoid accidents and costly fines. You can find the OSHA Pocket Guide to Construction Safety (it’s a short and an easy read) at the main website (OSHA DOT gov) by searching for the report name.

Another way to protect your staff and your business is to make sure that you check references before you hire someone. Insist that they list non-related references (i.e. not mother, sister or best friend) and instead list references of previous employers or someone they know in a professional capacity. We also do drug testing and background checks – it might sound paranoid to some, but the safety of our staff, our customers’ property and our company’s reputation is far too important to risk not spending $20 on a background check or drug test.

Price Your Services Right

In this industry, the lowest price always wins the bid (unless, of course, the lowest bidder has a terrible track record of not completing work and is utterly irresponsible and unprofessional, in which case the company has just committed “reputation-suicide” and will never be hired again). Lenders don’t want to spend any more than they have to on these properties so you want to make sure you price your services comparable with the going market rates (but at the same time, priced so that you still make a great profit and don’t leave any money on the table).

For cleaning out foreclosures, most banks expect to spend anywhere from $500 – $1500 for a cleanout (trashout, interior clean and initial landscape cleanup), but it could be a bit more or a bit less, depending on your area. It’s important to know that most lenders have prescribed “price caps” for the maximum amounts that they’ll pay for services.

If you’re also providing preservation services, a great site that we’ve used before to determine our prices for doing repairs is www.CostEstimator.com for getting the market rates for construction costs – you can get a free 30 day trial (no need to enter credit card – it really is free!). There are over 3,000 cost items adjusted for over 210 local, geographic regions to create your bid and you can add as many others as needed. If you want to sign up after the trial, it’s only $15/month.

Market Your Services

It’s true – “nothing happens until somebody sells something”… and you’ll need to get out there and sell, sell, sell your business. Once you’ve done a few jobs, you’ll find that word of mouth advertising and referrals will provide a large pool of new jobs for you, but in the meantime, you do need to do everything possible to let customers know you exist.

A large portion of work will come from the relationships that you build with Real Estate Agents (”Realtors”) who list bank-owned homes (often referred to as REO listings). They are often given the task of bidding out the cleaning and repairs of new listings by the asset management company so you’ll want to make sure the agents in your area know your company handles this type of work.

A great way to find out which Realtors in your area list REOs is to go online to the major bank’s REO websites and “data mine” the contact information for the listing agents (name, email, phone numbers). It can be painstaking work, but definitely worth it.

Here’s an example of a bank REO sites to get you started collecting Realtor information

WELLS FARGO (Properties managed by Premier Asset Services): pasreo.com/pasreo/images/pas_logo.jpg

NOTE: In order to access agent information, select the state and click search. Then, individually select each listing and click on “Print Property Report CVS”. Each listing and corresponding information (such as agent name, phone # and email) will be created in an Excel spreadsheet. You can access the page

Remember to follow up with a phone call a few days later. Don’t be shy about asking the Realtor if he/she has any jobs for you to bid, either – most of them are very accommodating and willing to give a new company the opportunity to provide estimates.

The other way jobs are bid out is through large Asset Management Companies (also referred to as Marketing & Management Companies, REO Field Service Companies and Property Management Companies). Essentially, the lender says, “ok – I have thousands of properties to get rid of. Here, national ABC Asset Management Company: clean, fix and sell these properties for us”. And the national Asset Management Company will then subcontract out the work to local foreclosure cleanup and property preservation companies. In order to work for these companies, you usually need to sign up your company as a potential vendor. Many times this can be done online.

There are both positives and negatives associated with working for the larger companies. On the positive side, you will probably be given a few projects to work on at a time so you will be kept relatively busy. On the negative side, they usually want you to offer ‘wholesale pricing’ and don’t pay until 30 – 60 days after you invoice them for the work. Working for one of these companies, however, will give you the experience you need to go after more work.

Other possible customers include wholesale property investors (groups of investors that purchase foreclosed homes at the auctions and then sell them to smaller investors at a wholesale price), investors, landlords, property management companies, Realtors and so on.

You should also consider attending your local networking events such as the Chamber of Commerce meetings and any local investor meetings in order to hand out your card and network with potential customers. The more you get out there, the better chance you’ll have of securing some great, long-term customers!

This is definitely an exciting industry and a very profitable one for those of you who don’t mind getting your hands a bit dirty! Good luck!

Vicarious Liability

I can still remember seven years ago when I applied for an American Express card online. It took more than one month for me to get approved. Nowadays it’s a lot different. With instant approval, you usually receive notice via email of your acceptance within seconds of completing an online card application. If you have a good to excellent credit record you can even get an easy approval credit card with guaranteed 10,000 limit or an easy instant approval student card, but what happens if have a bad credit score? Are you doomed to pay all your purchases in cash? Certainly not so don’t despair.

The first alternative for people with bad credit score is to get a “secure card.” There are some major card issuers which requires applicants to make a deposit or what we call “secure cards.” If you have a bad paying history, the most logical thing to do is save a little money to be used later on to “pre pay” a card. A secure card is a no credit card because the amount you can charge against the card is determined by the amount of your deposit. If you deposit, for example, $5,000, then you can charge up to $5,000 only. Hence, there is no actual “credit” being extended. Typically, these cards are marketed as no credit credit cards because of the fast, easy instant card approval.

The second alternative is to search for a “bad credit credit plastic” and find an easy approval unsecured credit, but they should try to resolve their bad credit issues and prevent further damage to their credit score.

While there are plenty of bad credit credit plastic choices available, they can do more harm than good if not used wisely. This is one way for a consumer to repair his damaged reputation by making up to date payments on his bad card and eventually upgrading to the real credit card in the future. And also a bad card charges a higher interest rate because of the increased risk to the issuer.

The third option is to apply for a debit card. Debit cards are cards that can be used depending on how much money the user transfers to the specific card. Consequently, the risk of running up credit card debt is nil. There are also no finance charges to contend with, only minimal fees for application, start-up and ATM card.

Credit cards for bad credit score were designed to rebuild credit that had been damaged. For those with no credit or poor credit there are secured credit cards, bad credit credit cards and debit cards but there are also unsecured cards that can be used for this purpose. These cards generally come with low credit lines (around $300) and additional fees. This kind of card will not allow you to on shopping sprees but it will certainly help you restore your damaged credit history. If you’re disciplined and pay all your bills on time you can ask for a credit increase after a while with an end goal of upgrading to an easy approval credit card with guaranteed 10,000 limit. Isn’t that wonderful? But in the meantime let’s concern ourselves with finding easy approval credit card applications with bad credit score.

Distance Education Learning

Do you want to know 50 great profit building ideas that you can put to immediate use in your business to increase profits and reduce costs?

If yes, read all these ideas that have been implemented by clients and have benefited them giving their businesses dramatic boost in profitability. Most ideas can be put to action immediately. Each idea has the potential to give you many %points increase in net profits.

Research shows profits increase by 4%-56% and costs reduce by 18%-37% within 2 years using the simple 5 step process called the Profit Maps Model. Usually a 5% reduction in cost is adequate to turnaround most loss making businesses.

Businesses can calculate the value of the savings by these 2 simple formulas

If the business made a loss

Total Costs and Expenses = sales + absolute value of net loss +/- income tax = say X

Minimum Savings you will make in 2 years = 5% of X (which was calculated above)

If the business made a profit

Total Costs and Expenses = sales + net profit +/- income tax = say Y

Minimum Savings you will make in 2 years = 5% of Y (which was calculated above)

So how much can you save? Improve your profits by?

Revenue

This category typically contains inflows of resources into the business generated through operations.

Needless to say the profit building process can be used to generate marketing and sales ideas. The following ideas were generated with the objective of increasing revenue with little or no impact on the cost structure.

Revenue Increasing Ideas

1. If your company has facilities located over a multi-geographical area you may be able to rent antenna space to cellular phone companies. Typically these companies will pay for the use of rooftops as a place to erect their antennas. Another option is for billboards as advertising if you occupy a central location with a high visibility building. This enhances your revenue without any additional cost you. The point here is to explore alternative uses for your facilities. Remember they are assets that can be used 24 hours a day, seven days a week. There are numerous opportunities available for increased revenue if you look for them. Training room and function room facilities can be rented out in the evening or weekends. How about spare land or excess slots you own for public car parking?

2. Determine whether your business can market commission and non-commissioned products as add-on sales. Look for opportunities to sell products to your existing customer base at no additional cost. Examples are catalogue sales to airline passengers and the sale of miscellaneous products to credit card customers. You may have the opportunity to do something similar. Your customers have more value than you realise.

3. Is there any additional value in your customer database? Perhaps your business could generate additional revenue by selling the data. Alternatively consider starting a telemarketing department to market another line of products or services. Depending on your business and the nature of your customer base you may have something great here.

4. Explore the advantages of an effective e-strategy including e-commerce, e-business, e- people and e-technology. There is no question that the new opportunities available through the Internet offer new and innovative ways to increase profits and reduce costs. Consult with an expert in this area including a cross-section of your employees and magic will happen.

5. Segment your customers into heavy user and light user categories and determine the difference between these two groups. What needs to be done to generate another sale from both categories? All customers are critical. What can you learn about the different types of customers to determine whether more selling occasions possible? Make the most of these customers; you already have them.

6. Develop retention strategies as well as growth strategies. In today’s markets, it is as important to hold on to your existing customer base as it to grow your business. It took you a certain amount of resources to attract your customers: you may want to explore ways to retain a high percentage. What is your cost to acquire a customer? What is your cost to retain a customer? Do your employees know?

7. Continue to look for augmented products and/or services that would add value without adding expense.

8. Explore opportunities to licence or franchise your business products or services for additional market share or penetration

9. Explore merger and acquisition scenarios where efficiencies would be gained for all businesses concerned.

10. Develop a relationship with a long-distance carrier whereby your company will distribute phone cards to your customer base in return for a fee or residual commission.

Salaries

This category typically contains charges associated with

· Management Pay

· Non-management Pay

· Hourly Wages

· Training Labour

· Overtime Pay

· All Other Pay, Wages and Salary items

Cost Saving Ideas

11. Establish a 45 to 60 hour per week work environment among the managers. Cost structures among your competitors are basically similar to your cost structure so you will obtain an advantage because your managers are working more hours. This assumes that your managers are productive. Managers who have responsibility for a workforce of hourly employees are usually at the facility, a retail outlet, restaurant or office at least this amount of time. Sometimes business volume is extremely low at early or closing hours. During the slow hours managers can save substantially by scheduling fewer employees and filling it themselves. In addition to the Labour savings, managers will become more knowledgeable about operations and will find ways to improve customer service, training and operations. I have put this procedure in place in several places. At the beginning there will always be resistance, but once managers get beyond the initial hump things will run smoothly. I also find that certain incentive programmes work well here. Get the manager’s incentives based on Labour dollar saved and they come to understand the process.

12. Effectively manage your salary administration programs. Many companies pay lip service to this principle but failed to obtain true levels of success in salary administration and management. To start, make sure you have a salary range for every position in the company. Salaries should be structured so that the midpoint is 100, the minimum is 80% and the maximum is 120%. The basic philosophy is that the candidate should be hired into a position between the minimum and the midpoint on the basis of his or her level of experience. The employees are then moved higher in the range on the basis of performance. This philosophy is based on the premise that mid-point is the amount the position is worth to the company. Employees can obtain an additional 20% through stellar performance. Few employees should be paid over the 120% range. Each job is worth a specific amount to the organisation. If a new hire needs training to become efficient in a particular job, that employee is working at a level below the worth of the position and therefore should be paid at the minimum salary range. When the employee’s performance rises at successful completion of training and can perform 100% of the job duties move the employee quickly toward the midpoint of the salary range.

13. Insist that a salary survey be done every year to ensure that you have achieved the desired community position relative to your competition. In this case the competition is those companies that would recruit your employees. You need to make sure that if you survey 10 competitors; you have a salary range higher than 75% of these companies for your key positions and higher than 50% of these companies for lower-level positions. Implementing this strategy will help you reduce turnover and will also ensure that you are not overpaying for positions.

14. Make sure your salary administration program allows for regular salary review. Typically, this is done once a year for salaried employees and every six months for hourly employees. The review should include a performance appraisal form and the employee’s performance levels should correspond with established pay increases. In other words, establish the pay for your performance review system.

15. Establish a bell curve of salary increases. Let’s say that approximately 8% of your employees are superior performers, 12% are above average, 60% are average, 12% are fair, and 8% are poor. Create a salary increase guideline that mirrors this curve, with the better performing employees receiving higher increases. For example superior employees are given 6% to 7%, above average employees 4% to 5%, average employees 3%, fair employees 2%, and poor employees 0%. This allows the organisation to check and reward performance whilst still meeting its salary increase budget. Obviously, your goal is to continue to train and develop your workforce. Occasionally, low performing employees have to be replaced with those most suited to the position. The Bell curve is just a process to ensure that star performers are recognised and rewarded for their work.

16. Establish the salary increase guideline budget and stick to it. Plan salary increases for the coming year by using the Bell curve mentioned in the above idea. Department managers should budget salary increases for employees assuming that the next year’s performance will be at the same level as this year’s. Please be aware that some performance ratings will change. There will always be exceptions. This process will help ensure that your organisation will remain within the new salary increase budget.

17. The salary increase guideline budget should be preapproved. When a different rating is submitted during the year, treat it as an exception and make sure to justify it because performances can change- it may go up or down. A strict salary administration program will ensure that budgets are achieved.

18. Establish a training rate for all appropriate positions. This is crucial when your organisation experiences higher levels of turnover during the first and second months of employment. The training rate is lower than the standard pay rate and is applicable only during the training period. Employees are given a raise once the training has been completed satisfactorily. Determine whether the training rate could be established for other positions in the organisation.

19. Where the training rate is not appropriate, establish a probationary rate for the standard 90 day period. This rate is lower than the standard pay rate and is applicable only during the first 90 days of employment. If performance is satisfactory, the employee will receive a raise to the standard pay rate. Determine whether a probationary rate could be established for all positions in the organisation.

20. Develop a labour-management system whereby a computer predicts daily or hourly volume and the amount of labour needs on the basis of seasonality. Most businesses have a trend cycle that can be measured with 15 minute increments. First, you must find a way to get past the notion that your business cannot be tracked this way. There is a pattern to your business. Discovering your business pattern is the first step toward determining how to manage your Labour cost. Management will give you many reasons why the business cannot be tracked. Once you work through all their concerns, you and your team can identify those trend items, aspects of your customer behaviour that, in fact, can be tracked and schedule Labour accordingly.

21. Determine whether your new hires would qualify for the targeted job tax credit program whereby a percentage of training dollars is refunded by the government.

22. Determine whether your organisation would qualify for tax benefits for providing employee childcare services.

23. If your employees handle cash transactions, install software driven cash reconciliation process to save time at shift changes and at closing. This will also reduce cash shortages. This type of procedure also saves time in the cash out process.

24. Constantly look for software modifications that can reduce labour. Seconds saved could also mean dollars earned. Using technology is a natural approach to the whole effort of productivity improvement. If your business has not recently explored this area, effective tools that currently exist may surprise you.

25. Have an industrial engineer evaluate your business in terms of time and motion studies to determine whether additional efficiencies can be achieved in areas where high throughput is important. This approach can still work today. Some managers run their businesses the same way they did 10 or 20 years ago. Time and motion studies can have an impact on cost savings, productivity, customer service, and employee morale.

26. Establish a self-regulating team with the specific responsibility of improving productivity and reducing costs in a particular department or area of the organisation.

27. Develop an incentive to reduce absenteeism. This incentive should be linked to productivity improvement goals and to the availability of the workforce. It should be based on reducing absenteeism from previous period. The incentives could be a vacation bonus based on a 1% reduction in absenteeism

28. Develop a variable pay program whereby management salaries are reduced 5% to 10% across the board and these dollars are set aside into a bonus pool. When there is goal achievement, managers have the potential to earn even higher levels of compensation. However, these dollars will be at risk if managers do not achieve profit objectives. The potential to earn even higher levels of compensation will help sell this item.

29. Controlling your staff turnover is another way to reduce operating costs. Implementing strategies throughout the entire human resources cycle to ensure that all systems, procedures, policies, and practices are tight preventing employees from falling through the cracks. I refer to this as the human resources closed loop. If you think about it you will see that there is a cycle to the human resources process. It starts with recruitment, interviewing, selection and placement and continues to orientation, training, salary administration, performance appraisal, development, promotion, and finally termination. Then the cycle begins again. Make sure that all of the areas mentioned are employee friendly and are designed to retain employees. Identify any areas where improvements would reduce the number of employees leaving.

30. In order to determine where are to place additional controls, measure your labour costs in terms of cost per unit, cost per test, cost per guest check, etc. Breaking your labour costs down to the lowest unit will help you better identify cost saving ideas. It will also make it easier to affect and control.

Other Personnel Costs

This category would typically contains charges associated with

· Applied Payroll Burden

· Superannuation Employers Portion

· Vacation

· Paid Holidays

· Sick Leave

· Bonuses

· Short/Long term disability

· Group medical

Cost Saving Ideas

31. Make sure your company has a program that offers all full-time employees the opportunity to receive a higher salary in lieu of accepting certain benefits (such as medical, dental and life-insurance). Today many employees are being carried on a spouse’s plan. Why not let these employees choose a higher salary instead of benefits? As long as salary increases less than the cost of benefits, the company will save money and employees will increase their income.

32. Evaluate the cost of your superannuation administration. There are competitive programs that can reduce administrative costs. A simple evaluation of three different companies will determine whether you have an opportunity to realise savings. Even if you do not want to change the current superannuation administration you may still be able to negotiate better terms by showing your evaluation.

33. Reduce workers compensation insurance by aggressively reducing accidents. Evaluate your workers compensation actual to determine your claims history. Most companies set an actual rate and never re-evaluate them even though their experiences change. Depending on your business you may be surprised at the potential savings here.

34. Using the Internet conduct benefit surveys to comply your cost with those of similar organisations.

35. Challenge third-party providers to reduce administration costs by using the Profit Maps Model and passing those savings along to you.

36. Continue to monitor workers compensation costs and develop action plans to reduce them.

37. Develop a back to work programme that puts injured employees in alternative positions. There are times when injured employees want to remain active in the organisation and appropriate positions are available.

38. Negotiate settlements when long-term workers compensation situations dictate.

39. Eliminate alcohol at all company sponsored activities. This approach can prevent accidents, cut beverage costs at functions and reduce risks.

Communications

This category typically contains charges associated with

· Long-Distance Telephone

· Cellular Phone

· Pagers

· Data lines

· Fax lines

Cost Saving Ideas

40. Authorise a telecommunications consultant to analyse all your communication costs in terms of rates charged, equipment used, and programmes offered, promotions available, usage, cellular phone options, long-distance carrier performance and pricing, fax and security line combinations, past bills, and so on. Structure the contract so that the consultant bills on the basis of percentage of cost saved or refunds received. In this way, there will be no cost to you if the consultant is not successful in improving your bottom line. Review all areas of communication to ferret out these pockets of expense that often go unnoticed. Pagers and cell phones are usually ordered and distributed without the benefit of an organised plan. There are real and meaningful discounts if you shop around.

41. Continue to renegotiate rates and terms with the vendors who provide services. Set up an ongoing procedure for constantly renegotiating rates and terms.

42. Monitor and control your communications cost on the basis of the cost per unit test (guests check, or that like) in order to determine locations for exerting any additional control.

Utilities

In this category typically charges associated are

· Gas and Electricity Usage

· Water

Cost Saving Ideas

43. Authorise a utility consultant to analyse your utility costs. Such consultants would know how to deal effectively with the local public service companies in order to discover advantages or missed opportunities associated with gas and electric services. They should be fully authorised to check existing equipment and records. They should be experienced in developing an index and analyses and creating demand graphs to spot situations where you may have been overcharged. They would also represent your issues to the public utility commission.

44. Pay your consultant on the basis of a percentage of the savings associated with his or her action steps. The typical rate is 25% to 30% of the demonstrated savings and refunds over a specific period of time. There should be no charge if savings are not demonstrated.

45. Take energy conservation action steps including setting thermostats at 72°F. Automatic controls should be put in place to control temperature during off hours.

46. Turn off lights in conference rooms, restrooms and officers when they are not in use.

47. Turn off all lights not related to security at the close of business.

Professional fees

This category typically includes charges associated with professional services such as

· Legal and Human Resources Related Fees

· Proposals (domestic and international)

· Fees for Technical Services

· Other professional fees

Cost saving ideas

48. Talk about fees. If your lawyer does not bring up the subject of fees, you should. Do not be shy. In business, lawyers are free to set their own fees. The best time to discuss is at the beginning of a new legal matter.

49. Try to settle cases rather than litigate.

50. Have lawyers design standard forms you can use in routine transactions.

Conclusion

Refinancing Services