June 21, 2018

Business Planning

While many business owners think of planning simply as a process you need to go through to get funding, there are many types of planning that may be useful to a small business to help it operate efficiently and effectively.  

The Planning Process looks at what planning encompasses in greater depth.  It is a “big picture” look at the planning process.  There are a wide variety of specialized types of planning best know as the generic business plan.

My personal preference is to write your business plan in a format that describes each part of the business operation.  This clarifies for you how you plan to handle each aspect of your business and shows a nice overall picture of your business.  A good business plan will include:
  • Financial Management Plan
  • Legal Plan
  • Management Plan (Human Resources and Strategic Planning)
  • Marketing Plan
  • Office Design Plan
  • Production Plan
Together, they give the total picture of your business and keeps you aware of the relationship of the various plans so you can adjust the other areas of the business as you make changes.  Write something for each section, put them in a notebook and at the end of each month, look to see how you are doing.  Pencil in any changes you have made over the month.  Then, once a year you just have to revise all the pages based on the penciled notes in each month.


If you know of anyone who could benefit from this information, please forward directly.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406

 

Fixed/Variable Rate Scenario

Just a month ago, you could find variable-rate mortgages at prime – 0.80%.  Consumers thought they were here to stay but the tables turned very quickly.

Economic troubles and lender profit motives have shrunken variable discounts beyond expectations.  Lenders are now commonly quoting prime rate (3%) with little discounting.  Meanwhile, five-year fixed rates are as low as 3.29%.  That is an unusually low less than 50 basis point premium to a variable.  A spread that tight doesn’t come around often and it makes you rethink all of the research suggesting variables are the way to go.  BMO Capital Markets Senor Economist Benjamin Reitzes states  “going forward, borrowers won’t see the same advantage to variable rates as they have in the past 25 years.”

If you look at data from 1970-1995, the average difference (spread) between 5-year fixed and variable rates was 126 basis points.  Today, the average difference is roughly less than 50 basis points.  If you theoretically backtested with the same spreads as today, you would find that fixed rates outperform considerably more often.  This isn’t meant to imply that fixed rates now have an insurmountable edge.  If the Bank of Canada drops rates unexpectedly, a variable could easily beat all other terms over the next 5 years.  That said, if the Bank of Canada’s next rate move is up (which economists say is the highest probability outcome), the boring old 5-year fixed rate could certainly outperform.  Today’s five-year fixed rates are surprisingly competitive thanks to lenders getting stingy on variable-rate discounts.

In an article posted in the Financial Post with the caption “Canadians With Floating Rate Mortgages Face Trouble,” a Bank of America Merrill Lynch report paints a worrying picture of Canadians with exposure to interest rate hikes.  “One must question however just how much longer interest rates will stay at this rock bottom level,” says the report.

CEO Boris Bozic of Merix Financial recently stated” We’re going to be in an environment very shortly where we’ll be prime-plus on variable-rate mortgages.”  “This is the new normal for the foreseeable future.  The days of prime-.60% or better are behind us.”  “Increased regulation is raising mortgage capital costs and that added cost is being placed on consumers.”

In an article posted in The Globe and Mail “Is It Time To Lock Into a Fixed-rate Mortgage?”  It is one of the most agonizing decisions homeowners make:  Do you go fixed or variable rate?  With a fixed-rate mortgage, homeowners lock in their mortgage rate for a specific period of time, the most popular being five years.  People with a fixed-rate mortgage often pay a small premium for the security of knowing that their payments will stay the same.  And since rates can arguably only rise from their current lows, locking in seems like a good call.  It’s a small price to pay for knowing that you won’t get skewered by rising rates.

Moshe Milevsky, a finance professor at York University says that because interest rates are so low, the amount people will save from choosing variable over fixed will be lower in the future.  He believes a person’s circumstances should dictate which mortgage they choose.  “For people who are making their first purchase with a large amount of debt, small down payment and big risk, I would say not to take on more risk by gambling on floating rates.  On the other hand, people who are renewing with a substantial amount of equity and a strong personal balance sheet and other assets to fall back on in the event of a crisis, can go floating rate.”  He also suggests checking out a hybrid mortgage, which is partially fixed and partially floating “By diversifying your mortgage debt you can reduce some of the worry.”

When the difference (spread) between fixed and variable rates gets tight, variables lose some advantage.  When the spread is less than one percentage point and we’re near the bottom of an economic cycle, fixed mortgages often have a higher probability of outperforming.  Today’s spread between a five-year fixed and a variable is an astonishingly low half a percentage point.  

I would love to hear your thoughts and opinions, what do you think?

www.canadianmortgagetrends.com
business.financialpost.com/2011/10/27
globeandmail/business/article

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406

How To Qualify For The Home Office Deduction

The technological revolution has given rise to the personal computer, the internet, email, file sharing and video conferencing.  Put all these together and you have the makings of a home office.  Not only is this arrangement much more convenient for workers, it also allows many of them to take the tax deduction for the use of their homes as well.

However, not all employees are able to write off their home-office expenses.  This list will give you 4 tests that you must pass before you can deduct your home-office expenses.  

  1. Is the space used only for business?  Is the workspace used exclusively and regularly for business?  Both of these criteria must be met before any deduction can be taken.  If the space is only used a few times per year, it will not be considered a home office.
  2. Who says you have to work from home?  Is the space solely for your convenience or for your employer?  If your employer has provided a place for you to do business at its own location, then you cannot simply set up a home office.  Your employer has to mandate that you must work from home before your expenses become deductible.
  3. Do all of your businesses comply?  Filers who have more than one home-based business must be careful when claiming the home-office deduction.  It’s an all-or-nothing proposition: the home office expenses incurred for each separate line of business must meet the criteria on a standalone basis, if one fails then all others fail as well.
  4. Do deductions exceed income?  You must make sure that the total deductible expenses don’t exceed the income derived from the business.  However, the expense over and above the income can be carried forward to a future year and deducted when business income exceeds expenses.
If you want to avoid a very unpleasant audit, you must understand the home-office deduction rules.

www.investopedia.com/articles/home-office-deduction

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406

Operating a Small Business

There are a wide variety of ways to put together the operations of your business so that it functions effectively and efficiently.  The model that works best for you will be related to your objectives, what your product or service is and your personal operational style.  However, there are a number of functions that every business needs to address simply as part of doing business.  Here are some topics that you need to know about to keep your business running with minimal effort.

  1. Financial Management – The Bookkeeping and Accounting systems, Record keeping, taxes, collecting money, insurance, budgeting and managing risk.  These are all part of keeping your business financially solvent.
  2. Legal Management – You don’t need to have a lawyer in house but you definitely need to make certain that all the operations of your business are legal ie business licences, legal forms, alliance agreements, copyrights, trademarks, patents, contracts with suppliers and employment law.
  3. Management of the Business as a Whole – Someone needs to be in charge of keeping the business functioning on a day-to-day basis and planning for its future.  Whomever oversees the business objectives needs to look at the traditional realms of management and know what those functions really involve:  Planning, organizing, staffing, directing and controlling
  4. Marketing – Marketing involves getting the message out to customers about your product or service, the 4 “P’s” Product/price/promotion/place (distribution).  Each of these areas involves a lot of coordination and planning to arrive at the best advertising, public relations and sales package to best present your product or service to the customer
  5. Office Management – You have to have a place to operate your business and the proper equipment to accomplish its tasks.  Putting together the right space, furniture and equipment to make your business operate efficiently is something that needs careful consideration
  6. Production – Whatever your business, you are producing something that you hope to sell.  That means you need to have a production process in place that will help you make certain that you have a quality product when you need it and produced the way you planned it.  Lackadaisical production is costly.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406

How To Read Your Credit Report

How To Read Your Credit Report

When you receive a copy of your Credit Report, there will be many categories you will have to interpret.  What do they represent?  How do they impact you and your score?  What do they mean?


PUBLIC RECORDS OR OTHER INFORMATION

  1. Reports outstanding and paid:  Collections, Judgements, Bankruptcy 
  2. Reports the lending institution that holds collateral on ie a car (mortgages are not reported)
ACCOUNT RATINGS
  1. RPTD – the last time the account was updated/rated
  2. OPND – date the account was originally opened
  3. H/C – High Credit – the highest balance that was ever recorded
  4. TRMS – terms, monthly payment
  5. BAL – current outstanding balance
  6. P/D – amount past due
  7. RT – R1 reflects the account is current, R2 is 1 month arrears, R3 is 2 months arrears, R5 is more that 120 days past due, R7 means Credit Counselling, R8 means repossession, R9 the account has been written off or in collection
  8. 30/60/90 – the number of times this account has been late 30/60/90 days
  9. MR – months reviewed
  10. DLA – date the account was last active
If you need any help understanding your Credit Report, please call me anytime

 

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

 

To contact Colleen, please fill out the form on our site or call 416-459-2406