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Business Companion
A Publication of Beneby & Company, Chartered Accountants
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March 2009
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In This Issue
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Quick Links
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Welcome
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The Swiss Government, in an effort to ease rising international financial pressure from the G20 countries, who are blaming offshore financial jurisdictions for being contributors to the global financial meltdown, has decided to release the names of its banking customers to foreign governments, providing they show solid proof that their clients have illegally evaded paying taxes on their earnings.
The American Government has been very aggressive in taking legal action against UBS, a major Swiss bank, who had to eventually disclose the names of many of their American clients, who were evading paying taxes. UBS had to pay substantial fines for these infractions. The American system of taxation is based upon income earned by individuals or businesses worldwide.
During the recent American election campaign, now President Barack Obama vowed to crackdown on offshore financial jurisdictions, which he believed was aiding and abetting the loss of taxable income in the tune of trillions of dollars.
The Europeans have now taken the world's financial crisis, as well as the opening provided by UBS's problems, as an opportunity to further tighten the screws on offshore financial jurisdictions, including Switzerland.
Offshore financial centres got their start as places where citizens of other countries moved their money to avoid the high taxes in their countries; hence the original name of tax havens. Today the mature jurisdictions describe themselves as safe havens.
The Caribbean region dominates the offshore financial centres, with over fifteen countries active in this market. They are Antigua and Barbuda, Aruba, The Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Dominica, Grenada, Jamaica, Netherlands Antilles, St. Lucia, St. Vincent and the Grenadines, St. Kitts and Nevis, Turks and Caicos Islands and the US Virgin Islands.
Europe follows with a close second of thirteen offshore financial centres. They are Andorra, Cyprus, Gibraltar, Guernsey, Ireland, Isle of Man, Jersey, Liechtenstein, Luxembourg, Malta, Monaco, San Marino and Switzerland.
The rest of the world accounts for sixteen offshore financial centres. They are Lebanon, Jordon, Bahrain, Liberia, Maldives, Sechelles, Mauritius, Macao & Hong Kong, China, Singapore, Marshall Islands, Nauru, Samoa, Vanuatu, Niue and the Cook Islands.
Offshore jurisdictions have for the most part been the legitimate bankers for the world's high net worth earners, who had the means and wherewithal to move money around the global financial system with little hassle. The problem with this is, that in the past these jurisdictions operated like kissing cousins, where they would receive funds without concern that it may have been used for tax evasion or other improper purpose. The usual response was that we are not the world's tax collectors and are not responsible for its citizens seeking safe havens for their money.
South American countries that have instable governments and very high inflation rates and significant devaluations of their currencies, truly saw offshore jurisdictions as safe haven to protect their wealth. Moving funds offshore was made based upon preserving wealth as opposed to, say the Americans and Europeans, who due to high tax rates in their home countries sought offshore jurisdictions to shield against taxes.
What is often overlooked when examining offshore jurisdictions is that they made it easier for world trade as they were able to create vehicles that made it easy to do business across international borders? OECD governments' see trillions of dollars being held in their banks by these offshore jurisdictions and have erroneously concluded that they are loss tax revenues. All offshore banks maintain correspondent banking relations with major banks in the home country of the trading currency. To get to the point, US dollars are all held with the New York banks, the same as Sterling or Euros are held by major British or European banks?
In the past decade or so, offshore jurisdictions were pressured by OECD countries to tighten their standards and regulations. Many of them such as the Bahamas have gone over and beyond the minimum standards, including concluding a Tax Information Exchange Agreement with the Americans. Refusal to have similar agreements with other countries in particular the other OECD countries, is causing further pressure to be placed for more offshore financial exchanges.
The death of offshore financial centre have been anticipated and forecasted by many, for decades, but these centres have evolved, adapted and prospered. It certainly seems now, that the crows and vultures and forming again, to put the death nail into this industry, under the guise of global financial reforms. As Switzerland recognized, with the revelation of the type of activities UBS was involved in, to encourage clients to circumvent American law, that it had lost substantial credibility claiming banking secrecy status, when it was obvious that it's oversight of its banking industry was certainly not so robust .
Those offshore financial centres that refuse to open up and make it easier for legitimate inquiries from foreign governments, the new creators of the new world economic order, will soon find it difficult to continue to do business. What could stop these big players from restricting or prohibiting offshore centres from dealing with their banks? This would certainly restrict the movement of funds in the global financial system. The whereas and how to, of this death ceremony, we will find out in a month or so, coming out of the G20 meeting in London.
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The Global financial crisis has consumed at least one business victim with Bahamian-Caribbean connection. The pending liquidation of CLICO Bahamas Limited, has caused wide spread panic and anxiety among the Bahamian public and seemed to caught our insurance regulators off guard. CLICO within a few short years had become a dominant player in the Bahamian insurance market.
Immediately after CLICO's announcement, rumors began to fly that one of our clearing banks, First Caribbean International Bank Limited, was about to take similar actions. These rumors were quickly quieted once the bank's top executive flew into town and held a wide ranging press conference about the bank's financial health. First Caribbean is a publicly traded company.
Based upon management's reports, First Caribbean is operating profitably overall and it appears that The Bahamas division is the most profitable arm of the group. The bank has shown consistent asset growth and continues to expand its business both in The Bahamas and the region.
The takeover of Bahamas Supermarkets Limited (operators of City Market Food Stores), by a Barbadian group, in an auction bid from the bankruptcy of Winn Dixie Food stores of the United States was controversial itself, in that Bahamian bidders did not meet the bid amount.
This transaction was a mess from the start, in that the product lines that Bahamians had become accustomed were dropped and many substituted generic brands were added. Their accounting and financial reporting systems were in a mess and they were late with their filing as a public company. Bahamian investors have been receiving less of a dividend that they have been accustomed to under the prior management. There was a general perception that they were undercapitalized and did not have the resources to fuel their growth and ability to maintain reliable lines of credit with suppliers
This attempt at regionalism and Caribbean cross- border investments is a fledgling industry and is perhaps too early to judge. So far the investment has come from outside in, whereas Bahamians for the most part have been reluctant to invest in the region, partly due to our exchange control regime. These few examples should be learning opportunities for both Bahamian and Caribbean investors to pool their resources and management talents to ensure that future enterprises are properly capitalized and are carefully managed.
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In the midst of this global economic crisis, it is so easy to focus solely on cutting cost and expenses. Unfortunately, during this exercise, some businesses will make the mistake in letting some of their best people go. Some of these people may end up with your competition.
The cost of training a new employee and integrating them into the systems and methodology of your business should always be considered when the time is upon you to dislocate staff. When this crisis is over you still need to have the best and most productive employees, to be competitive in your business.
Of equal importance is the cost and efforts to have a continuing drive to hire new employees. During this crisis you will have the opportunity to hire both experienced workers, as well as better educated, though inexperienced workers. While you may use this period to get rid of under performing or "dead wood" employees, this must be complemented with bringing on new talent. At present, there are many university or technical school graduates in the employment market from which healthy companies can select. Their future contributions to your business may be tremendous.
If your business is financially strong during this crisis, you must be forward thinking during this time as well. Both you and your management team are growing older each day and will leave the company sooner or later. You need to always have a corporate succession plan in place. While it is better and cheaper to grow management talent in-house rather than hire from outside, you should consider whether the pool of talented workers in the country will be large enough for you to select capable people in the future. If you stop the recruitment process during the financial crisis, you may find that the employee structure of your business may be distorted. No one knows when this financial crisis will end; you could lose your momentum if you stop hiring capable and qualified employees. Some of your future leaders will be recruited away from your business by your competitors.
Those of you, who keep your eyes on the prize for the future of your business, will continue the recruitment drive as opposed to placing it on the back burner. It cannot be overlooked that you may have to restructure your business during this period to survive. To survive in the future you need to have good and capable employees. Although there may be some significant hurdles to overcome during this financial crisis, the active employee structure must always be retained in your business.
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Memorized Transactions
When you have similar transactions that occur in the same amounts; for example, rent, every month, you can set these transactions up as memorized transactions.
In the setup menu on the tool bar, select Memorized Transactions from the drop down menu. Here you can create the journal entries for your transactions.
This process can save you valuable time having to post these entries. Once these transactions set up, they are posted automatically each month.
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Tips for a Potential Business Borrower
Most bankers that we speak to, always suggest that potential business borrowers should really be in communications with them before they need a new loan or overdraft facility.
We suggest that even though you may have good relations with your bank, you should have relations with other bankers as well. In this slow global environment, a little competition for your business would be just the medicine the economist ordered. You should visit a number of financial institutions and get a feel for who can assist you, if required.
Once you have secured financing you should ensure that you comply with the terms of the financing arrangements. Stay in constant communication with your banker.
As a former banker, I can tell you that banks get very concerned when they do not receive the business financial statements on time, usually within three to four months after the year end. Make sure to keep your banker informed about good and bad news affecting your business. Bankers do not like surprises. This is also not a good way to build trust and confidence. Bankers' see a lot of clients in your type of business and have a very good idea what is happening in your industry. You will get a lot of points with your banker if you demonstrate that you understand the risks of your business in this economy.
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The Bahamas Government has announced a temporary scheme to assist unemployed workers. The scheme is for $20 million dollars, funded through the National Insurance Board, to cover a period of three months.
Bank of the Bahamas donated $250,000 to the College of The Bahamas in its efforts to find a solution to National Literacy.
There are glimmers of hope that the global recession may be bottoming out. Major Banks in the United States, Europe and Asia have reported profits for the first quarter of 2009. These include Citibank and Barclays Bank, plc.
China is flexing its mussels in calling for a global currency to replace the dominant dollar. This proposal was made by China's Central Bank governor, in response to unease about China's vast holdings of U.S. Government bonds. China is bringing pressure to overhaul the global financial system dominated by the dollar and western governments. Both the United States and the European Union rejected the idea.
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Beneby & Company, Chartered Accountants
Telephone: 242-341-5475 or 242-341-5476
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Business Companion
A Publication of Beneby & Company, Chartered Accountants
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February 2009
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In This Issue
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Quick Links
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Welcome
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With the global recession having a drastic affect on businesses, companies that before now routinely had their financial statements audited are now questioning whether then should continue this practice.
Audited financial statements provide the highest degree of assurance that a company's financial statements are fairly presented, free from material errors and misstatements, comply with International Financial Reporting Standards and require an independent examination of the business financial systems and records. Audits are generally required for publicly traded companies, government corporations, companies who business is regulated by statute and those businesses that have sizeable borrowings.
Reviewed financial statements on the other hand are generally accepted by end users, but provide less assurance than an audit, as no independent examination is required. However, these financial statements are very important as users of these statements are assured that the financial statements are free from material errors and misstatements and comply with International Financial Reporting Standards. Most lending institutions accept these financial statements to facilitate reasonable overdraft or borrowing requirements.
The difference in price between an audit and a review could be significant. The main reason for this is that the professional requirements are very stringent for audits and the obligations placed on auditors are very great. In the post ENRON environment, the nature and scope of an audit has completely changed. The new audit approach requires the auditor assessing and evaluating the business risks and planning the audit around those risks.
Greater client involvement is required as the Company is responsible for complying with International Financial Reporting Standards and preparing financial statements and related notes, independent of the auditor.
Auditors are being audited as well, for compliance with International Standards on Auditing by their profession and or international affiliated firm, through annual "Quality Assurance" or "Peer Reviews," for which they have to pay. This along with "Professional Indemnity Insurance" and the cost of employing fully qualified personnel makes audits very expensive.
So unless there is a requirement to be audited, why pay this unnecessary expense when there are cheaper alternatives available to you. Talk with you financial institution to see what is required.
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We have been getting more frequent calls from businesses that are experiencing financial troubles due to a slow down in the economy. They would like to know what can be done to assist them.
The first step that is required is for you to perform a critical and strategic review of your operations, finances and debt load. If you are unable to perform this by yourself, seek professional assistance from an experienced and qualified independent chartered accountant. This will allow you to make any adjustments that are required.
Secondly, if the first step does not solve the problem, you may have to sell of some assets to assist with cash flow requirements or pay-off debts. This may require you having to downsize your business, close some locations and reduce operating costs.
Thirdly, if this still does not solve the problem then you may need the services of an Insolvency Practitioner who can assist you in deciding whether the business should be placed into receivership or fully liquidated (visit our web site to learn more about this process at "www.accountantsbahamas.com" or click the link for "Our Insolvency & Corporate Recovery Services" under Quick Links on the top left side of this newsletter).
Fourthly, you have to decide whether you are willing to give up control over the business by employing an insolvency practitioner. If you decide that you would like to try to rescue the business, then the "Receivership" option should be sought.
Fifth, if you conclude that the business cannot be rescued then a formal liquidation of the company should be sought to pay-off your creditors.
Taking no action is not an option. Creditors want to be paid and will pursue the business until they are paid. This could lead to expensive lawsuits which would further drain the resources of the business. An orderly resolution to the business financial crisis would be the best course of action. This will help you to minimize sleepless nights and personal headaches. An experienced Insolvency Practitioner can shoulder your burden and remove you from the stress of dealing with creditors and litigation.
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During the month of February, we conducted an online survey of readers of Business Companion to learn the affect the recession was having on their businesses. We received responses from the retail/wholesale, service and financial services sectors.
All respondents recorded a decrease in revenues during the past twelve months. Twenty percent (20%) saw decreases in the range of 1% to 10%. Another twenty percent (20%) saw decreases from 11% to 20%. Forty percent (40%) of respondents recorded decreases in revenues between 21% and 30%; while the remaining 20% saw decreases as high as between 41% to 50%.
Sixty percent (60%) of respondents had to layoff between 1 and 5 employees during the past twelve months.
Only twenty (20%) of respondents had difficulty obtaining new credit from their bankers. However the feeling was mixed when asked if their bankers were willing to assist them in these difficult times.
Despite these responses, the majority of respondents had either a very good or good impression of the future prospects for their businesses.
As to what strategies they are employing to cope with these difficult times the following comments were received: · Business owners are more hands-on and involved in their day to day running of their businesses; · Some had to reduce their prices to keep customers; · Avoiding and minimizing wasteful spending was a priority for most respondents; · Purchasing items with a high sales turnover and minimizing their inventory; · Utilizing supplier 30 day credit facilities; and · Improving work quality and reliability.
We are grateful for those of you that took the timeout of your busy schedules to assist us in completing the survey. We trust that you would find these results of assistance in managing your business in these difficult economic times and look forward to your continued participation in future surveys.
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If you have more than one bank account, remember to go to the setup menu on the tool bar and designate which bank account you want to be used as the default account.
You can move between bank account as you wish. However, the bank account that you wish to use should be designated as the default account. This will ensure that transactions are posted to the correct bank account.
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I am behind on my loan payments. Will my lender begin foreclosure proceedings against my real estate?
Answer:
When you finance a commercial building or equipment with a loan, your real estate becomes collateral for the loan. If you do not repay the loan as agreed, your lender has the right to take your property and sell it to satisfy the debt, also known as foreclosure.
Whether or not your lender will begin foreclosure proceedings depends on exactly how far behind you are on your loan payments. If you are only a month or two behind on payments, your lender will not likely begin foreclosure proceedings. Typically, a lender will not file for foreclosure unless the lender is absolutely certain that the borrower is defaulting on the loan. This could take up to six months.
If you are experiencing financial difficulties, it is better to sit with your banker to determine the best course of action. This could be through consolidating of loans, refinancing or even extending the terms of the loan to make the monthly payments more affordable.
If you are in a situation that will impact your ability to make timely payments (e.g., you or your spouse has become disabled), you should seek advice on how to deal with your creditors rather than wait until you are at risk of losing your real estate.
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President Barack Obama, signed the US$786 billion economic recovery package into law on Tuesday February 17, 2009. The package consisted of about one third in tax relief and the remainder for infrastructure, aid to states, education, health care, transportation, energy, communications and the like.
Japan is facing a financial melt down, with the consecutive third quarter declined by 3.3%.
China is facing massive layoffs in construction and manufacturing due to declined export sales from its main clients the United States of America and Europe.
President Barack Obama has imposed a salary cap and restrictions on CEO and executive compensation on banks and financial institutions receiving extraordinary financial assistance from the Government.
At a recent meeting of European Finance Ministers, they once again focused on pressuring offshore financial jurisdictions who they see as a part cause of the global financial instability. A report of measures to pursued will be issued in April 2009.
CLICO Bahamas Limited, a part of the large Caribbean Insurance group has filed for bankruptcy. This came in light of the fact that their parent company in Trinidad was experiencing financial difficulties as their main banker had to be bailed out by the Trinidadian Government.
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Beneby & Company, Chartered Accountants
Telephone: 242-341-5475 or 242-341-5476
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Business Companion
A Publication of Beneby & Company, Chartered Accountants
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January 2009
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In This Issue
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Quick Links
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May God Help Us Through This Global Financial Crisis!
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We would like to apologise for the absence of Business Companion for the past few months, due to illness of our Editor-in-Chief. He is now doing well, having recently celebrated his 55th birthday in October.
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Proponents of globalization are all amazed at how fast the troubles of the United States economy have affected almost every nation on earth.
The financial crisis that Asia and Mexico had a few years back was a drop in the bucket compared with the financial crisis now experienced by the United States. It took Asian countries in particular Japan more than ten years to recover due to slow government interaction.
From London to Europe, to Japan, Australia, Russia, China and the Icelandic countries, stock markets tumbled and Central Banks had to step in to avoid the total collapse of the global financial system. Major Banks and investments houses began to collapse as credit dried up from the international financial system.
The Government of the United States has provided for an infusion of US$700 billion dollars to prop up its terminally ailing financial system and allow easing of credit. To avoid a run on deposits at banks they increased the Federal Deposit insurance on customer deposits from US$100,000 to US$250,000. In addition, they offered guarantees for commercial paper and inter-bank lending, to further stimulate confidence in the banking system.
This move alone seemed to further increase citizens' fears as losses piled up from trading on the stock markets, there has been wide spread panic and fear as the volume of trading and selling of investment holdings were at an all time high. Customers chose liquidity and moved their money to safer environments.
In Germany and France, their Governments had to immediately guarantee 100% of banking customers’ deposits. In both London and Europe governments had to step in and either sell-off deposits to other profitable banks or temporarily step in and take over these failing banks as equity stakeholders.
Foreign governments such as Britain, China, Japan and other have pumped more than US$500 billion individually into their bank systems to save them from collapsing.
Despite global decrease in interest rates and falling currencies, the international credit markets are still frozen as banks do not trust each other anymore and stopped lending to each other. Consumer confidence is at an all time low.
At first glance, when the American economy was reeling from the slumping housing market, as a result of the sub-prime mortgage problems, no one in their wildest imagination could predict the affect this would have on the global economy.
Bear Stearns fell, then Lehman Brothers, Fannie Mae & Freddie Mac, the government backed mortgage guarantee institutions had to be bailed out, and soon after AIG Financial Group, the largest insurance company in the world, became the biggest bailout in United States history.
It soon became clear that Wall Street was front and centre in creating this global financial mess, along with a decade long dropping of interest rates by the U.S. Federal Reserve (Central Bank), which saw a large infusion of foreign capital into the American economy, most of which was invested in the housing market.
As a result of the deregulation of the financial markets and loosened regulations in this industry, Wall Street bought up a lot of these mortgages by creating many financial and derivate instruments to support these mortgage backed securities that were sold-off to investors in smaller tranches, world wide. Banks abandoned their traditional debt to equity ratios and was giving away money like dirt without regard to the risk being assumed.
All was well when the fat cats on Wall Street were making money and their CEO and executives were taking home insane salaries and bonuses. The bubble burst when the housing market took a deep slide with record foreclosures. The market was not able to recover their investments and the losses began to mount in many Wall Street institutions and flowed rapidly down to Main Street America and the world.
The old phrase “when American sneezes the world catches a cold” could not be truer.
Just before the lose of 2008 world governments convened a meeting in Washington D.C. of the G-7, G-20 and the International Monetary Fund (IMF) to seek a global solution to this financial crisis.
Stocks on the New York and American stock exchanges rebounded shy of 900 points, the biggest recovery in the stock markets in seventy years. Also, following the British example, President Bush has announced the US$350 billion of the US$700 bailout would be used to buy equity stakes (preferred shares) in failing banks on a voluntary and temporary basis (not exceeding five years), to allow quicker liquidity into the financial markets.
G-7 and G-20 finance ministers agreed to pump trillions of dollars more into their banking systems as well.
For this financial crisis to be resolved, the geniuses of globalization have to now go back to the drawing board and come up with a new world financial order, that is fair and just. The international monetary system established in the early 1900s looks very much like a ghost of the past. Free market economics or capitalism as we once knew it looks very much in need of a life makeover.
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We are the last to be profits of doom. We believe that in every bad some good will come out of it.
The last five months of 2008 saw the virtual collapse of the most successful and largest economy on earth. The United States and its citizens lost trillions of dollars of wealth during this period. While the jury is still out, it is believed to be caused by the relaxing of lending standards, deregulation of banks and financial services companies, coupled with an incessant greed where publicly traded companies were more interested in growing their profits and balance sheets and to provide a steady stream of dividends to demanding shareholders.
This created a circle of financial and derivative instruments and a booming hedge fund industry that took on excessive risks.
Major banking institutions such as J.P. Morgan Chase, Citibank, and Bank of America on this side of the Atlantic were brought to their knees. British and European banks such as Northern Rock, Royal Bank of Scotland, Barclays Bank and Lloyds Bank TSB had to be saved by the British government or large Arabian investors (as is the case with Barclays).
Despite these efforts, money worldwide remains tight, with banks putting the brakes on lending, despite pleas from world governments. This has further the rise in corporate bankruptcies and increasing unemployment as companies began downsizing.
Fortunately, Bahamian commercial banks were not caught up in the feeding frenzies of their global compatriots. Credit in the Bahamas remains tight and only customers with the very best credit ratings are able to access this source of funding. Many businesses that relied heavily on bank funding are being faced with hard choices as well.
The point that we would like to stress is that in a declining economic environment there are things that every business should now give more focused attention. Cash is king and preserving cash equals business survival. This is not the time to make unnecessary capital expenditures or take on new borrowings if it can be avoided.
Maximizing the use of inventory by avoiding excesses can save precious cash resources. Accounts receivables must be more tightly controlled and credit limits reassessed to improve collections.
The temptation in a slow economy is to begin to cut expenses and reduce business controls. The favourite expenses to cut are staff costs and benefits. It is better to review personnel decisions from a pragmatic point of view and be flexible in offering staff reduced hours or pay for a defined period of time rather than outright firings. Why is this good strategy? When the economy improves it will be more expensive to recruit and train employees to fit in with the demands of the business that you have become accustomed to.
We have seen from other recessionary circles that medium and smaller businesses cut out essential services such as bookkeeping and accounting, when this is the time more than ever that they need a good financial reporting system to assist them in making proper and wise decisions. The problem is if you abandon financial reporting, in the short run, you will soon be faced with being denied credit or not being able to obtain your Business License. In difficult times banks are more demanding on knowing your business financial health.
Realistic budgets for the short and medium term should be prepared and compared monthly with your actual financial performance. This will help you know if your strategic goals are being met.
The best thing that you should be doing now is to get closer with your customers. Where possible offer incentives, promotions or affordable and flexible payment terms and the like. If you look after your customers in good time they will not abandon you in bad times.
Managing a business in a slow economy can be very challenging. But this is no time for panic or fear. This is the time for all hands to be on deck. This is the time to be the captain of your business and take control of your business. In every situation there are opportunities, especially for those who are not guided by fear.
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With so many Bahamians losing their jobs in the hospitality industry as a direct result of the global financial crisis and weak travel demand; the questions to be asked now were the ideas of unemployment insurance and the National Medical Scheme such bad ideas?
As large numbers of people become unemployed, the Government's social assistance program, which clearly is inadequate would be put under greater stress.
Special interest groups lobbied very heavily against instituting both unemployment insurance and the National Medical Scheme and it would appear that our governments have backed down in the faced of this pressure. Has the public good been served though? With a drop in disposable income the unemployed is subject to great financial stress. Families and communmities become dislocated and an a further deterioration in the society and increases in crime becomes more evident. The rash of brake-ins, arm robberies, of which we were not spared, between October and December is a telling sign of the times we live.
While it is commendable for the efforts made to assist hotel workers by a joint fund established by the industry and the hotel union, it is clear that in times of a deep recession these short-term relief efforts are not adequate.
Perhaps now is not the best time to introduce either scheme, but the public debate should begin so that when times become better we can establish something to benefit distressed workers and their families.
We believe that an unemployment feature could easily be added to the present National Insurance program by increasing the contribution ceiling while keeping the rates as is. Benefits should be established as a certain percentage of a contributor’s wages or salary up to when they find new employment or for one year.
The cycle of life has shown that there are no free lunches. Somebody eventual pays the bill. If in good times we do not plan for the future, we will reap the whirlwind in bad times.
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Client Bookkeeping Solutions Updates
User of the Client Bookkeeping Solutions programs that are not yet using the NetClient version should ensure that their programs are current.
Go to the red plug-in sign on your tool bar on in the drop down menu for File and click the update prompt to receive downloads. Make sure that you are connected to the Internet.
Users of the Client Bookkeeping Solution NetClient version have to do nothing as your programs are automatically updated.
Client Bookkeeping Solutions software updates are made three or four times during the year, to take into account new technology changes or to correct problems users experienced.
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Use Technology to Order Office Supplies
A company should use available technology to order office supplies in order to reduce costs. Technology can lower labor costs and improve productivity in the purchase of office supplies and can be used in the following ways:
· Use Facsimile Machines to Transmit Orders to Vendors. Faxing a copy of your order to the vendor eliminates errors from misinterpreted verbal orders and is an easy and effective cost control to implement.
· Use Online Purchasing. With online purchasing, a computer with Internet access is used to place orders on the vendor's website. The order is then entered directly into the vendor's computer system. With an attached printer, a printed copy of the order can be produced. This method speeds the order process and reduces errors since the vendor does not have to rekey the order.
· Electronic Data Interchange (EDI). EDI provides the most labor cost savings of all. With EDI a company's computer transmits the order directly to the vendor's computer system. The advantage of this type of technology is that end users enter orders on the company's computer system via their own purchase order system, eliminating the need for a hard copy since the data is always accessible electronically. A company can impose computer-monitored ordering restrictions, such as blocking orders for office furniture or high-dollar items. The order is transmitted quickly to the vendor since large amounts of data can be transmitted in seconds. Vendors can use EDI to transmit usage reports or invoices directly to the buying company's computer, thus eliminating the cost of processing stacks of paperwork. Also, the company can transmit payment back to the vendor's bank via EDI. EDI cuts paperwork costs, reduces inventory levels and carrying costs, reduces order lead times, increases business volume without increasing staff, eliminates rekeying, reduces errors, and provides better service to the customer.
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President Barack Obama, the first African-American president along with his Democratic colleagues is seeking to to bolster the sluggish United Sates economy by pushing an economic recovery package of US$850 billion dollars.
The Bahamas was down graded and criticized by Standard and Poors, the international credit rating agency, for blunders made by the Government in stopping, reviewing and canceling project in progress by the former government.
Tourism remains sluggish even though there was a spike during the holiday times. This despite the unusually cold winter experienced in North America and Europe.
MICROSOFT the software giant recently terminated 5,000 employees.
Chrysler got a shot in the arm from FIAT Motors who bought 30% of its shares.
Citicorp, lost US$8.29 billion from operations in 2008.
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Beneby & Company, Chartered Accountants
Telephone: 242-341-5475 or 242-341-5476
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Business Companion
A Publication of Beneby & Company, Chartered Accountants
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May 2008
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In This Issue
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Quick Links
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Welcome!
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Last month there has been rioting in Haiti, Africa and other countries due to the shortage of vital food items such as rice and grain related products, coupled with sharp increases in food prices. The weakening US dollar and the high increases in the price of oil have had a negative impact on the global economy.
Two main causes of this are the demand for commodities, such as rice, wheat and soy beans, has increased world wide to support the affluence of China and other emerging economies and closer at home in the United States of America, about a year or so ago, the Bush Administration has provided incentives for US farmers to grow more corn to make ethanol as an alternative fuel source. The US was pressuring other agricultural producing countries to do the same. This has affected the land available for producing vital grain products. Hence more demand than the available supply, causing sharp increases in prices.
CEO, Jeffrey Beneby, remembered clearly on some of his visits to Europe and Asia last year and even to Cuba, that leaders of these countries were warning of world hunger as a result of the reducing supply of agricultural lands that were previously used to grow, rice, wheat, soy beans, corn and other grain products. They all claimed that it would take an inordinate amount of maze products to make even a litre or gallon of fuel. Their fears were well founded. World ethanol production is a drop in the bucket compared with world demand for oil.
In the US, large food chains such as Cosco and Sam's Club recently had to limit customers in the quantity of rice they could buy to avoid the hoarding syndrome, as news quickly spread that rice in the US was becoming scarce.
It is reported that in many African and sub-Saharan countries that people have resorted to eating dirt as they cannot source enough grain crops to meet their dietary needs. Some rice producing countries have stopped exporting this product to ensure a reliable and adequate supply of what is now a “precious grain crop”, is available for local consumption.
Thailand, the world’s largest producer and exporter of rice are in talks with other Asian neighbouring rice producing countries to form a “rice cartel”, similar to that of OPEC to control the production, supply and pricing of rice.
The United Nations is suggesting a different formula, where they would be the body to store excess grain production, which can be evenly distributed when there is a market shortage.
The competing interest of the world largest economies is again at work to preserve the way of life of the combustion engine over the basic dietary needs of the world’s poorest citizens. The products that we take for granted, such as rice and bread may well soon be out of our reach, if more equitable solutions are not reached to preserve the world’s food supply versus the competing interest of demand for oil.
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Remember all of the hype and political rhetoric about abolishing exchange control. With a weakened U.S. dollar and volatility in major currencies world wide, what if our Bahamian dollar was floating in the international arena as well?
The main reasons that our economy has not been more drastically affected by changes in world currencies and the economic downturn in the U.S., is that it is tied to the U.S. dollar. The American market is where most of our imports and tourist come from. There is no advantage or disadvantage to us from the lower international standing of the dollar, where our trading is mostly in US$ dollars.
It is now cheaper for Europeans and Asian tourist to come here as their currencies buy more value in US dollars.
Bahamian businesses that purchase products from the United Kingdom, Europe or China would of course be affected. It takes approximately US$1.55 to purchase items base on the euro and approximately US$2.00 to purchase items in pound sterling. While Chinese products are quoted in US$'s, it is based to the trading strength of the Yen.
The liberalization of the exchange control regime in recent years has been a good thing for consumers and businesses. There is less red tape in obtaining US$’s and to make foreign purchases. There are still however, limits and controls on amounts to be invested overseas.
Have you wondered why Bahamian real estate for the most part never lose value and in fact in the face of upheaval in international economies, our real estate continues to trade high. In the current environment due to the minimum exposure of our commercial banks with investments and mortgage instruments with foreign banks and a stable B$ dollar is perhaps why this financial miracle occurs.
We are of the view that any further moves to drastically change our exchange control regime at this time, needs to be carefully thought out. Any moves away from the US$ as a bench mark for the B$ could cause undue volatility in the market place and possibly result in any comparative advantages that we now enjoy, being lost.
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The changing economic situation in the world provides an opportunity to review the impact on our country should things turn for the worst.
Right after 9/11, when the United States closed its ports to the world, we were in a panic as our food stock is estimated to be no more than three months supply. We would imagine that our fuel supply may be even less than that.
What if the increase tensions between the US and Venezuela, one of our principal suppliers of petroleum products, result in military actions between those countries? This could certainly affect our fuel supply. Prolonged shortage of vital food supplies from the US could have a drastic effect on our economy and could affect both our way of life and standard of living.
Prolonged shortage of vital food supplies from the US could have a drastic effect on our economy and could affect both our way of life and standard of living.
Perhaps now is the time to review our national food and petroleum needs and create plans to buffer against such unlikely occurrences. We are aware that these are drastic measures and tactics used by countries feeling vulnerable to threats of military attacks or themselves at war. However, it is our view that it is better to be safe than sorry.
Who would pay for this is a big question? It could be a government only funded project. It could be a private sector funded project; or it could be a jointly funded project by the government and private sector. Whatever food or fuel plans that are agreed to could be phased in over a period of years, until the desired goals are achieved.
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Printing Options
When you need to print, remember that you have a wide variety of options to choose from. You can print transactions or accounts at the current date; a specific date; a date range; in detail or summary.
This is useful, especially if you are investigating a matter or following up on a supplier or customer query. You can print a single account, customer or supplier details, for whatever period that you are investigating.
The print preview option allows you to print on-screen before you physically print, which allows you to print only what you want.
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Use Occupancy Sensors to Reduce Lighting Costs
Before installing occupancy sensors, the Company should consider the following factors:
· Time Delay. Time delay is the length of time, usually in minutes, a sensor will keep the power turned on or off once the motion has stopped.
· Sensitivity. Sensitivity levels determine the amount of motion necessary to activate the sensor.
· Type. Types of sensors include photocell, infrared, ultrasonic, and pressure.
· Adjustment. Factory setting and functions vary from model to model. Some have fixed settings while others allow adjustments. Adjustable sensors are more expensive, but provide greater flexibility.
· Mounting Location. Sensors are mounted on the ceiling, on the wall, or in the light switch. The location should be accessible, have a clear view of the area to be scanned, and face the area's occupants. If occupants are facing away from the sensor their bodies may hide their motions.
· Override. Occupants' work patterns may fluctuate; therefore, the ability to override the sensors is important.
Sensors in restrooms turn on the lights when a person enters and turns them off after they have left. Stockrooms and warehouses need a small amount of light when unoccupied, but when someone enters the aisle or door a sensor can turn on all the lights. The light level returns to normal when the person leaves the premises.
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Leon Williams, former President and CEO of BTC, has been terminated from that corporation. Legal actions is being threathened.
U.S. economy maintains a second consecutive quarter slow growth of less than 1%, while unemployment is unchanged at 5%.
Bah Mar is seeking new equity partners and has engaged the services of a major Wall Street firm to assist.
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Beneby & Company, Chartered Accountants
Telephone: 242-341-5475 or 242-341-5476
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Forward email
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Beneby & Company, Chartered Accountants | P. O. Box N-7958 | Marshall Road | Southern Shores | Nassau | Bahamas |
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Business Companion
A Publication of Beneby & Company, Chartered Accountants
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April 2008
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In This Issue
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Quick Links
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Welcome!
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In recent weeks, we have learnt that Harrah's Entertainment, operators of world re-known Caesars Palace Hotel and Casino has decided to pull out of the Bah Mar hotel development project on Cable Beach.
Of equal importance, the major shareholder of the Albany Project in South Ocean, Joe Lewis, has lost between half a billion to a billion dollars of investment with the collapse of Bear Sterns, a leading Wall Street Merchant bank. While the developers have announced that Phase I of the project has started with the funding in place, it is not yet apparent if the development as a whole will meet its full potential in the short-term.
What is obvious to any independent observer is that The Bahamas Government failed to move speedily in approving major investment projects in a timely basis. The Government of Prime Minister Hubert Ingraham made a policy decision to revisit all contracts negotiated by the former Perry Christie's PLP government during their last year in office. This had the effect of further delaying these projects, at a time when the U.S. economy started to go into a slump and the mortgage crisis in the U.S. was at its worst. Both investment equity capital and debt financing was affected in the changing U.S. economy, which now made some of these projects less attractive for investments.
What was even more alarming was the fact that these heads of agreements were brought to Parliament in what is called an act of transparency. We believe that this was a mistake. These agreements should go no further than the Cabinet. Disclosing confidential details of investment agreements is not only an act of bad faith, but also exposes investors to competitive disadvantages as their competitors are armed with how they are organized and financed.
We noted on concerns in our June 2007 issue of Business Companion in the shift in government policy to reverse and revisit the decisions made by the former government. This has introduced a new investment risk category “political risk”, which sends the wrong message to the foreign investor. A change of government could affect how their business is structured.
We believe that there should be a clear national land use policy. Areas of the country should be designated for water resources, bird, fish and animal sanctuaries, marinas and harbours, hotels, condominiums, townhouses, apartments, time-share, highways and road systems, towns and cities, industrial sights, free trade zones etc.
Areas should be designated where foreign investment is permitted and a clear path to receiving concessions should be known. Where crown land will be required, there should be certainty about the procedures for acquiring such land. Perhaps investors should be required to prove that they have 40-50% of the projected investment capital before their projects are approved and concessions granted.
It is unrealistic to think that a foreign investor will be bringing in vaults of money to complete their dream projects. They in many instances will need to seek local or foreign financing to supplement their equity in order to complete their project. This may require them using land both private and public, to assist with their funding requirements. Where crown land is being acquired, investors should be required to provide a minimum percentage of their shares to Bahamian investors, equivalent to the fair market value of the land.
Atlantis came about through creative financing from both private investors as well as seeking investment capital from the U.S. Stock markets. Once they have gotten well on their way they were able to buyout these shareholders and take the company private again. The main factor was that they had the beautiful land of Paradise Island to factor into their fund raising efforts. What we now have is a major development that employs a significant number of Bahamians and is a main driver in our economy.
The time is now for us to stop wasting our precious resources every time we change governments by reinventing the wheel. We should expect and demand that our political leaders put the country first before their political parties. We must stop this continuous circle of bad decisions and petty politics. Where there is no vision, the people perish.
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It seems that just after we have survived one set of hard fought negotiations and settling down to normalcy, we are faced with some new challenges.
First, it was the attack on our financial services industry by the OECD (Organization of Economic Cooperation and Development) and FATF (Financial Action Task Force). Secondly, it was CSME (Caribbean Single Market and Economy) and now the EPA (The Economic Partnership Agreement) sponsored by the European Union.
It begs the question, why are we confronted with so many choices and competing interest in the world? What is the relevance of the World Trade Organization?
The Bahamas has been flirting with becoming a member of the WTO for many years, and, in fact, have Observer Status with that body. When will the courtship end and the marriage (our membership) be consumed? Or are we so insular in our approach that we seek to continue to have our cake and eat it to. We want the protection and benefits, but not the cost of being a full member.
It is time that we have a national consensus on our place in the world. It is obvious that the days of isolation is over and our very survival could depend on how we manoeuvre through these global treacherous waters.
While the recent discussion was raging here at home about signing on to the EPA, I was visiting neighbouring Cuba where the representatives from the EPA were there negotiating their participation. I found the Cuban position to be clear and refreshing. Yes they discussed all of the other side issues including human rights and other non-trade issues. More importantly, was the fact that their agreement with the EPA was firm on complying with the terms of the WTO, respect for Cuba's sovereign integrity and no extraterritorial and one sided agreements.
We believe too, that The Bahamas’ position regarding any international trade agreement must first be in our interest. We must have an agreed set of national and international principles to which any agreement must include. Any trade agreements must be both free and fair and protect the sovereign integrity of our country.
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Daily we are confronted with the news that our neighbour and the world's largest economy, the United States of America, is slipping into recession.
What then is a recession? Economist have long established that a general slowdown in the national economy for a sustained two or more quarters is considered a recession. Recessions occurs very frequently in most free market economies. Recessions occur in a national economic circle anywhere from every eight to ten year and generally last anywhere from six to eighteen months.
The problem with recession is that it has a negative impact on businesses, employment and consumer confidence, where consumers tend to be more conservative in their spending. Consumers tend to buy basic necessities over unnecessary luxury items. This helps to cause a recession economy to go into a further slowdown.
Banks also are stricter in their lending practices, which restricts the level of liquidity in the market place. Tighter credit means that there is less money in circulation needed to fuel the productive sectors of the economy. Borrowers with the very best credit will be more successful in obtaining loans during this period.
This year is similar to the economic slow down that we experienced in 1992, where there was a general slowdown in the economy coupled with higher oil prices. In recent days oil prices were as high as $111 per barrel and most of us are paying $5 per gallon for this precious resource. This will have the inflationary effect of increasing all goods and services consumed in our economy, which is dependent on imports.
A recent survey of U.S. consumers indicated that they will cut back as much as 70% on travel and entertainment this year. This could have a drastic impact on our economy, which is heavily dependent on the North American tourist market.
Not to fear though, as we went to press, we were encouraged by steps taken by the U. S. Federal Government to increase funding to banks and government backed mortgage institutions; the rescue of Bear Sterns Cos, with government support allowing J.P. Morgan Chase & Co. to acquire it at $10 per share and the rebounding of investor confidence in the U.S. stock markets. The U. S. Congress is also presently dealing with legislation that seeks to provide assistance to consumers hit hard by the sub-prime mortgage crisis.
Tighten your belts, the ride will be bumpy, but with progressive government and private investor involvement in the U.S. and here at home, we should be back on smooth terrain hopefully within a year or so.
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Payroll Reports include: NIB Contribution Report by employee and employer, Payroll Checks, Check Register, Employee Check Report, Cash Requirement and Deposit Report, Earnings Report, Employee Deduction Report, Department Summary Report, Wage Report, Payroll Journal and Payroll Journal Entry Reports and more.
You no longer need to have a full time employee dedicated to the payroll function. Once your payroll is initially set up, thereafter,You only have to provide us with the current pay period employee hours, changes in pay rates, employees hired or no longer active and we do the rest.
Visit our website at accountantsbahamas.com and go to tab "online payroll" and navigate to our live Sample Payroll Client and review completed checks and all of the payroll reports. Under the Document Presentation section on the left side of the screen, under "Payroll Sample Client", just click on the "+" sign and for the accounting tab. Finally, click on the "+" sign again and all of the reports will be available.
Give us a call and enjoy the benefits of no hassle payroll. Try it Free of charge for a 60 days trial period. If you are not satisfied there is no obligation. Offer ends April 30, 2008.
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Our front line software is the Client Bookkeeping Solutions , which gives clients full on demand access to processing, reviewing and printing their transactions as required, in a safe and secured environment. This software, with the exception of inventory, is easily tailored to meet the needs of most businesses operating in The Bahamas. Clients can print checks, invoices,
Once the monthly transactions have been processed and backed up, they are seamless sent to us electronically, for review, directly from client's computers. We review these transactions for accuracy and for compliance with accounting standards. Our integrated accounting software, automatically prepares a variety of financial statements, graphs and ratios, which we use to advise you about the financial health of your business.
Financial statements reports can be printed for a single period or in comparison with prior year. The income statement is available in a variety of formats, such as: current period with dollar amounts only; current period with dollar amounts and %; current period and year to date dollar amounts; current period this year and comparative prior period dollar amounts; current period year-to date and prior year to-date dollar; current period this year compared with the same period for the prior year; year to year comparisons; rolling 12 months comparisons; 48 months trend, five year comparison and an accountants' analysis. So depending on your need for information about your business, it can be obtained from our financial statement reports.
For clients requiring audits, our software is further integrated with our Engagement Solutions software, where the information processed by our accounting software, is easily transferred and automatically creates the required audit schedules and analytical reviews that assist in the audit planning and field work. This feature alone helps to reduce your audit costs.
So if you are tired of QuickBooks or other bundled software or other inadequate bookkeeping systems, join our growing list of clients, who stopped dreaming about having good accounting records, but have started living again. Let us know if you can benefit from our accounting services. You can visit our website at "accountantsbahamas.com" under the folder "online accounting", where you can review our live sample client. Try it Free of charge for a 60 days trial period. If you are not satisfied there is no obligation. Offer ends April 30, 2008.
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If you are plagued with constant "pop-ups" on your computer, relief is in sight.
In your Windows Explorer tool bar, go to the "tools" tab at the top of the screen and go to the options for pop-ups and select the options that you require.
Depending on what version of Windows Explorer you have, you can decide how high to set this filter. However, do not set this too high as you may block out some normal communications and some files from people you want to receive communications from. Some pages may not be displayed because of the pop-up blocker.
If you are still having problems you may wish to add those unwanted addresses to your pop-up blocker selection as well.
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Increase Productivity to Reduce Janitorial Costs
Increases in productivity typically result in lower costs. A company's in-house janitorial personnel can increase productivity by applying one or more of the following recommendations:
· Assign Tasks. Employee- assigned tasks provide a company with the opportunity to evaluate individual performance. If the company's cleaning is not being done timely, it usually considers hiring more workers, but that might not be the correct solution to the problem. Tasks should be assigned to each employee and standards set for the completion of those tasks. Those employees not meeting standards should be replaced with others that are more productive. This reduces the need for the company to hire more people to compensate for inefficient workers.
· Work Teams. Work teams are a group of workers doing a certain task or working within a certain area. For example, a work team of three people doing janitorial work is assigned to clean a specific zone in a building. Each team member is assigned a task within that zone. For example, one person vacuums, another dusts, and the third empties wastebaskets. Generally, the cleaning is completed quicker and more efficiently than if each person on the team performs all the tasks.
· Supplement Staff. The effort to clean a building often fluctuates with business volume or seasons. Higher volume usually results in more trash or dirtier environments, and seasons have an impact on the condition of most floors. Supplementing the cleaning staff with temporary help can improve productivity during these times. Outsourcing your janitoral services could relieve you from the stress and cost of managing a new set of employees.
· Quality Products. Inferior cleaning products usually require extra labor to accomplish a task. For example, if the cleaning product is too diluted, it takes more of the product or increased rubbing to achieve the desired result. A quality product can reduce the time required to perform a task with the same result. Some quality products are more expensive, so the company will need to determine the cost/benefit on a case-by-case basis.
· Equipment Carts. Janitorial carts should have all necessary cleaning supplies on them. Properly equipped carts can reduce labor time because the employee has what he needs with him. Otherwise, he will keep going back to the supply closet instead of cleaning.
· Trap Dirt. Dirt should be trapped at the entry door instead of having to clean it from inside the building. This will not only reduce the cost of cleaning the flooring, but will probably prolong its useful life.
· Clean Spots Quickly. Cleaning spots and spills quickly can reduce stains to the flooring. If stains are reduced, or eliminated, it can delay the need for replacing the flooring.
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Prime Minister Hubert Ingraham, along with Barbados' Prime Minister David Thompson and Belize's Prime Minister Said Musa, recently represented Caricom leaders as they paid a visit to the U. S. President George Bush. They discussed trade among other issues.
Abaco Markets, operators of Solomon's Super Centre, Cost Right stores and Domino Pizza, reported that they have finally began to show a profit after many years of losses.
William Wong, former President of The Bahamas Chamber of Commerce was recently elected as President of The Bahamas Real Estate Association (BREA).
The Government has recently announced that it 's housing program will not begin before the end of 2008.
The Government has also said that it is seeking approximately $400 million in loans from the Inter-American Development Bank (IDB) to complete the New Providence Road Improvement Program and to facilitate upgrades to the Lynden Pindling International Airport.
Bahamians visiting China can now breathe a sigh of relief. Delta Airlines began operating direct flights from Atlanta to Shanghai, China effective March 30, 2008.
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Beneby & Company, Chartered Accountants
Telephone: 242-341-5475 or 242-341-5476
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Forward email
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Beneby & Company, Chartered Accountants | P. O. Box N-7958 | Marshall Road | Southern Shores | Nassau | Bahamas |
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Business Companion
A Publication of Beneby & Company, Chartered Accountants
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March 2008
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In This Issue
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Quick Links
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Welcome!
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For most of us, when business is down, we have the instincts to immediately panic and begin cutting cost and firing staff. This is for sure the wrong strategy at worst.
A down turn in the national economy is not necessarily bad for business. There are a few things that you can do to insulate your business from national and international economic woes.
Firstly, this is a time to get closer to your customers and to ensure them that you will be there to support them in this sluggish economy. Let them know that you are there to assist if they need your help, with extending credit and other flexible payment terms.
Secondly, the need to establish sensible short term budgets of six to twelve months is critical. Your budget estimates should be closely monitored by comparing them with your monthly actual financial statements, to see if, when and how any adjustments need to be made.
Thirdly, this is the time to sure up your marketing and promotional efforts. In a slow economy, consumers become very price sensitive and are seeking further bargains to stretch their hard earn dollars. This is a time for more advertising, not less.
Fourthly, now is a good time to look at your financing requirements. It is better to seek short term overdraft or loan facilities early, rather than when you are at a crisis point. It let’s your bankers know that you are managing your business wisely and are seeking to avoid potential future problems that may occur.
Fifthly, if your business is flush with cash, this is the time to seek out new acquisitions, by buying up weaker competitors who may be experiencing financial troubles.
Finally, your long serving employees deserve a break. This is a good time to reassess how best to utilise your employees to maximize their productivity. Some job functions may have to change. This is better than having to terminate employees. Good employees are very hard to find and the cost of training new employees is very expensive and time consuming.
Be of good courage; managing in a sluggish economy could be challenging, but it could also be rewarding as well. How well you adapt will determine your long-term success.
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The United States mortgage crisis is causing a significant drain on the American economy, which last quarter grew by less than 1% (.6%). This combined with rising unemployment, which is now 5%, is making it difficult for consumers to meet their financial commitments. Under normal circumstances, economists have recognized unemployment at 5% as full employment.
Subprime mortgages are non-traditional loans that allow borrowers with less than perfect credit or limited down payment funds, who would not otherwise qualify for a traditional mortgage, to purchase a home. Of all U.S. homeowners, 5.1 percent have subprime, adjustable-rate mortgages.
Why is this such a big deal? The average home in the U. S. is valued at $375,000 and the median American salary is $671 per week. Depending on the state and population centres, homes are sold to average middle income earners in the range of $500,000 to $1,000,000. During the 1980's, state and federal regulations on this segment of the market have been relaxed in order to make home ownership a reality for more of the population, especially low income earners.
To under stand this problem we quote from an article in Fortune Magazine of January 31, 2008 by Jon Birger, Senior writer on "How Congress Helped Create the Subprime Mess."
“Two key pieces of legislation that are at the root of the current mortgage crisis: the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) and the Alternative Mortgage Transactions Parity Act of 1982 (AMTPA).
The former abolished state usury caps that had limited the interest rates banks could charge on primary mortgages - and, in the process, gave banks more incentive to make home loans to folks with less-than-perfect credit.
Though DIDMCA did eventually open the door to some predatory lending in low-income communities, McCoy thinks that, on balance, the 1980 legislation was valuable in the way it deregulated the mortgage market and made home loans more available. It is AMTPA, the 1982 law that McCoy sees as most problematic.
Prior to the passage of AMTPA, banks were barred from making anything but the conventional fixed-rate, amortizing mortgages. AMPTA lifted those restrictions, giving birth to all the new and exotic mortgages that have so many borrowers in hot water today. For instance:
- Adjustable-rate mortgages, in which the interest rate becomes floating after a number of years.
- Balloon-payment mortgages, which have an outsized payment when the loan comes due.
- Interest-only mortgages, which require only repayment of interest (not principal too) during the first few years of the loan, only to hit borrowers with crushing monthly-payment resets once the new monthly payment kicks in.
- And worst of all, the option-ARM, which allows borrowers to underpay by as much as they want during the first few years. The awful upshot is the unpaid monthly interest gets tacked onto the size of the loan. So your $300,000 mortgage can turn into a $350,000 loan in a hurry, destroying any equity you have in your home.”
This provided opportunities for banks, mortgage brokers and Wall Street investment companies to devise creative financing options to entice home buyers. Wall Street made it easier by creating mortgage backed bonds that had many “derivative” features attached to them. For example home owners putting as low as $10,000 down and paying the closing cost of the homes could obtain a large mortgage that they really could not afford, at rates below the national prime rate, with escalating variable rate clauses. Thus the term sub-prime mortgages.
CNN recently carried a story of a lady who earned $38,000 per year, who paid $10,000 down and $48,000 in closing costs, who is now two months behind in her mortgage payments. Her mortgage was based upon a derivate backed system where the interest rate was variable. Her current monthly payment is $7,000, more than twice her earnings.
The problem with flexible or variable rate mortgages is while it makes it easier for borrowers to obtain a home which they can meet their initial monthly payments, they are never sure when their interest rates will increase. Increases in interest rates, result in increases in monthly payments. Most consumers are not so sophisticated to purchase derivate instruments to hedge against such interest rate increases and are stuck with higher mortgage payments. This is the main reason why there are now significant foreclosures.
A factor that is little publicised is also the high cost of homeowners insurance and real property taxes in most states. Most of the U. S. eastern sea board states have seen insurance premiums increase by as much as 200-300% percent in the past year due to the hurricane threat. Some persons that we know in Florida are just simply walking away from their mortgages.
If we look deeper, Americans are drowning in credit card debts and other easy consumer creative financing of personal properties, such as car, furniture and appliances. With a good credit rating most things could be obtained with no money down and in many cases no payments for the first year or two.
Recently, the U. S. Congress passed new laws making it difficult for their citizens to apply for personal bankruptcy to ward off creditors as a result of strong lobbying by the financial services and investments sectors. Before the law was changed consumers finding it difficult to meet their mortgage obligations, could stop paying their mortgages, apply for personal bankruptcy and the mortgagor could not foreclose on their personal residences.
These truths about the American economy, while painful are full with lessons that we Bahamians should learn from. Easy credit is very expensive in the long run. The desire to own a home is a very noble thing. However, persons should not commit to a home that they cannot reasonably afford and that there is uncertainty in their monthly payments.
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The Firm recently conducted an online Industry Computer & Technology Survey of readers of Business Companion. We have received a 17.3% response rate or 72 respondents, who operate in the financial services, services and real estate business. We did not receive any responses from the retail/wholesale, construction, tourism and other sectors of the Bahamian business community.
We are pleased to share these results with you:
· 40% of respondents had revenues between $100,000 and $1,000,000. A further 40% of respondents had revenues between $2 and $3 million and the remaining 20% of respondents had revenues between $4 and $5 million. · 33% of respondents employed between 1- 5 employees. Each of the remaining groups employing between 6-10 employees, 11-20 employees, other (independent sales persons) and the largest group employing more than 50 employees, had a represented total of 16% each, respectively. · 40% of respondents use one computer, while 60% were using multiple computers, on a network. · 100% of respondents use Microsoft's Windows Operating System. · 60% of respondents' hired and in-house accountant or bookkeeper, while the remaining 40% relied on outside accounting services.
· 25% of respondents use industry specific software. 37% use Quick Books or an off the shelf software. 25% use the software provided by their outside accountants; and the remaining 12% use Peach Tree software. · 80% of respondents relied on the services of a computer consultant or their independent accountant in selecting computers and software, while the remaining 20% did not. · 83% of respondents use MS Internet Explorer as their internet browser, with 16% using Fire Fox. · 35% of respondents use their computers for browsing the internet and sending emails. 28% of respondents use their computers to create letters, make spread sheet calculations, graphics and marketing materials. 21% of respondents use their computers to make online banking payments and to transfer money. 7% of respondents use their computers for data encryption and the other 7% of respondents use their computers for downloading computer software, music and videos. · 100% of respondents use their computers to pay credit card bills and to pay for products and services online.
· 40% of respondents use McAfee for their internet security, while it was split evenly by 20% of respondents in favour of Microsoft and Fire Fox. The remaining 20% use other network security software or Eset and Counter Spy to protect their internet.
· 80% of respondents use one form or other of Microsoft Office for emails, scheduling, marketing, maintaining contacts and for Word, Excel, Power Point, Access, and Publisher, among others.
· 80% back up their computer data at different frequency.
· It was an even split of 45%, respectively in the usage of desktops versus laptop computers. 9% use remote terminals.
· 37% of respondents use their computers for accessing and downloading files from one computer to another. 25% of respondents use their computers to access their independent accountants or service bureau software. 25% of respondents use their computers for remote meetings, conferences and internet communications. The remaining 12% of respondents use their computers for remote processing while away from the office.
· 60% of respondents prepare their payroll manually, while 40% use computer payroll software.
· 40% of respondents pay their employees by check. 20% send a list to their bank to credit their employees account at the same bank. 20% of respondents have a direct debit from their account to their employees account at the same bank. 20% use Direct Deposit, which transfers employees’ payroll to their individual banks.
· Respondents worry about their computer environment. 33% are concerned about losing computer data, while the remainder is evenly split worrying about BEC’s reliability, junk mail filtering and their computers crashing.
· Most respondents use some system to protect their computers. 50% use surge protectors. 30% use uninterrupted power supplies and the remainder also use generators to ensure clean power to their computers.
· 54% of respondents have an electronic file management system or use their computer network to store their files and data. 36% of respondents file documents manually.
· 100% of respondents bought a new computer within the last twelve months. 40% of those, bought computers with the Windows Vista operating system, while 60% opted for Windows XP Professional.
We would like to thank all of those who took the time to complete our survey. We look forward to your continued support in the future. We invite those of you who did not participate, to do so in the future. Information learnt about the Bahamian business market place would be shared so that we could all keep pace with the changing international business environment.
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Payroll Reports include: NIB Contribution Report by employee and employer, Payroll Checks, Check Register, Employee Check Report, Cash Requirement and Deposit Report, Earnings Report, Employee Deduction Reports, Department Summary Report, Wage Report, Payroll Journal and Payroll Journal Entry Reports and more.
You no longer need to have a full time employee dedicated to the payroll function. Once your payroll is initially set up, thereafter,You only have to provide us with the current pay period employee hours, changes in pay rates, employees hired or no longer active and we do the rest.
Visit our website at accountantsbahamas.com and go to tab "online payroll" and navigate to our live Sample Payroll Client and review completed checks and all of the payroll reports. Under the Document Presentation section on the left side of the screen, under "Payroll Sample Client", just click on the "+" where the drop down screen goes to "accounting". Finally click on the + sign again an all of the roports are available.
Give us a call and enjoy the benefits of no hassle payroll. Try it Free of charge for a 60 days trial period. If you are not satisfied there is no obligation.
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Our front line software is the Client Bookkeeping Solutions, which gives clients full on demand access to processing, reviewing and printing their transactions as required, in a safe and secured environment. This software, with the exception of inventory, is easily tailored to meet the needs of most businesses operating in The Bahamas. Clients can print checks, invoices,
Once the monthly transactions have been processed and backed up, they are seamless sent to us electronically, for review, directly from client's computers. We review these transactions for accuracy and for compliance with accounting standards. Our integrated accounting software, automatically prepares a variety of financial statements, graphs and ratios, which we use to advise you about the financial health of your business.
Financial statements reports can be printed for a single period or in comparison with prior year. The income statement is available in a variety of formats, such as: current period with dollar amounts only; current period with dollar amounts and %; current period and year to date dollar amounts; current period this year and comparative prior period dollar amounts; current period year-to date and prior year to-date dollar; rolling 12 months comparisons; 48 months trend, five year comparison and an accountants’ analysis. So depending on your need for information about your business, it can be obtained from our financial statement reports.
For clients requiring audits, our software is further integrated with our Engagement Solutions software, where the information processed by our accounting software, is easily transferred and automatically creates the required audit schedules and analytical reviews that assist in the audit planning and field work. This feature alone helps to reduce your audit costs.
So if you are tired of QuickBooks or other bundled software or other inadequate bookkeeping systems, join our growing list of clients, who stopped dreaming about having good accounting records, but have started living again. Let us know if you can benefit from our accounting services. You can visit our website at “accountantsbahamas.com” under the folder “online accounting”, where you can review our live sample client. Try it Free of charge for a 60 days trial period. If you are not satisfied there is no obligation.
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It is not sufficient to protect your computers using surge protectors only. The unreliability of the national electric supply causes much problems with computers, especially causing hard drives to crash.
We recommend that you supplement these surge protectors with a "smart uninterupted power supply". This is preferred over a regular uninterupted power supply, because it operates on battery power while the electricity is on. It continues to do so when the power goes off, which gives you time to back up data and close files without your data being corrupted. This prevents damage due to sudden electricity outgages and brown outs in electricity suppy.
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Reallocate Funding Among Employee Benefits
Employees rate health insurance as their most valued fringe benefit. When pressed, they are often willing to accept other lowered benefits (even reduced retirement benefits) to fund adequate medical insurance. Therefore, we suggest companies consider polling employees about benefit priorities and reallocate funding accordingly if amounts of funding for employee benefits are severely limited.
Choose the Attending Doctor (If Allowed) In Your Company's Group Medical Plan
One study showed that medical costs dropped 29% when the worker was treated by the employer's physician. We suggest considering a policy requiring the use of a physician (or group of physicians) selected by the company. In selecting the physician or group of physicians, a company should visit with peers and its insurer to identify the local physicians with good reputations for effectively and efficiently treating workers' compensation injuries. After visiting with the physician to determine the treatment and rehabilitation philosophy, a company could consider offering to send all its workers' compensation cases to the physician in exchange for a discount either for volume or for direct payment of claims.
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During the first week of February, the American economy's service sector has had a negative growth for the first time in five years. This sector now represents 80% of all jobs in the American economy.
Further larger chains stores such as Wal Mart and mall outlets reported a slower than normal sales growth in January, for quite sometime; indicating that consumers are become cautious in their buying pattern, choosing to buy only necessities.
According to the RBC Cash Index in the United States of America, confidence dropped to a mark of 48.5 in early February, from 56.3 last month. The new reading was the worst since the index began in 2002 and surpassed the previous low reached in January.
The RBC consumer confidence index was based on the responses from 1,006 adults surveyed during the first week of February about their attitudes on personal finance and the economy. Results of the survey had a margin of sampling error of plus or minus 3 percentage points. The overall confidence index is benchmarked to a reading of 100 in January 2002, when Ipsos started the survey.
The Prime Minister at a recent Press Conference confirmed his Government's support of National Health Insurance. The immediate focus is to upgrade the existing medical facilities, including Princess Margaret Hospital, before phasing in over a period of time, vaious aspects of NHI.
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Beneby & Company, Chartered Accountants
Telephone: 242-341-5475 or 242-341-5476
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Forward email
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Beneby & Company, Chartered Accountants | P. O. Box N-7958 | Marshall Road | Southern Shores | Nassau | Bahamas |
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Business Companion
A Publication of Beneby & Company, Chartered Accountants
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February 2008
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In This Issue
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Quick Links
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Welcome!
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Dear Readers, we conducted a survey of readers of Business Companion during January 2008, around the same time that the January newsletter was sent to you.
We were very pleased and encouraged by the responses that we received. We would have preferred receiving a higher response rate. What was evident from the responses was that readers were satisfied with the content, format and frequency of the newsletter. They wanted more articles on industry trends in The Bahamas and elsewhere.
Beginning this February, and periodically thereafter, we would be sending you our email surveys, for your responses to various business topics affecting your industry. These results would be published in Business Companion for your benefit. This will allow you to see best practices used by others in your industry. We will not disclose any details about your Company. All information learnt about your business would be kept confidential.
We encourage your participation and support, beginning with the February Computer and Technology Industry Survey. If you wish to share a success story about your business or industry, we would be happy to publish it.
Finally, we would be adding two new sections to Business Companion: "News & Industry Trends" and "Tips and Tid Bits From The Consultant."
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The much touted Microsoft Vista operating system was finally rolled out during 2007. The Vista platform comes in three versions: Business, Enterprise and Ultimate. According to Microsoft, Vista is supposed to be the cure-all for the problems with Internet hacking and computer attacks and intrusions. Within months of its launch, the Vista network was hacked, which Microsoft claims is now fixed?
Microsoft was so confident that consumers would overwhelmingly change to Vista, that it had initially set a December 2007 deadline for users to convert. They did not anticipate the rebellion from the Business Community, who was reluctant to change; especially for those who were comfortable with its' Window's XP Professional and its Windows 2000 and 2003 network servers. The main problem is that most software used by the business community have not yet been upgraded to operate in the Vista environment. Of the new computers bought last year by the business community, they continue to buy computers with the XP operating system by a margin of 2 to 1 over Vista.
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