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October 17, 2014

Choosing the right bank for your small business

 

One of the most important aspects of owning a small business is finding a reliable bank for all of your financial needs. From complex lines of credit to separate business checking accounts, knowing what to look for is a crucial step for all of your future endeavors.

When making a decision, there are many factors that you need to consider. Establishing a strong relationship with your financial institution should be one of your primary goals.

Keep in mind that not all banks are cut from the same cloth. Here are some guidelines that can help you to find the perfect bank for all of your small business requisites.

What Specialized Services Do You Need?

Do an assessment of what specialized services you might need either now or in the future. Do you need a loan or help with investing? How much cash flow will your business be dealing with on a daily basis? Many banks offer incentive programs to fledgling businesses, like when you maintain a set amount of funds in your account. Also, a financial adviser should be available, who can assist you with investments and cash flow management.

Compare Features

When you do decide what exactly you need in a bank, do some comparison shopping. Call and ask them for specific information, including interest rates, fee structures, and what other additional services they possibly offer. Having open access to your funds is a plus, and should be on the top of your list of priorities. As a potential customer, you have the right to ask as many questions as you need to ensure that their particular bank is a right fit for you.

Smaller Banks Can Be A Great Choice

In the small business world, research has shown that you may be more likely to receive a loan from a smaller bank than from one of its larger competitors. When banks can’t provide financing or sufficient financing, that’s when Financial Engineering Counselors, Ltd. is of greatest assistance in helping to secure alternative financing for adequate working capital to both meet current requirements and provide the leverage to bid on more and larger contracts.

Community banking, on the plus side, may offer the extra added benefit of forming long term relationships with the bankers and lending officers, because there seems to be less moving around to different areas within the bank. They may be more prone to assist you when it comes to reaching your business goals and aspirations. Smaller banks often have more personal human interaction and are generally more flexible.

Choosing the right bank doesn’t have to be overwhelming. Think of it as a partnership that can offer both of you stability in a shaky post credit crisis economy. In many ways, you are actually hiring a small banking institution as part of your business team.

If you have any questions about what small business banking can do for you, please contact us.

 

 

October 10, 2014

4 DCAA Myths Busted

 

You’ve won that government contract. You’ve pre-planned and are ready to enter the government contractor’s world. With so much misinformation out there, understanding the DCAA compliance rules and regulations you must follow can be mind-boggling. Let’s examine and dismantle a few myths to guide you in getting your accounting system ready.

Myth #1: DCAA automatically audits contractor accounting systems on request. They will not audit you until a government agency asks them to. This usually occurs after the contractor wins the bid, and the contracting agency has called and requested it to be done. The only time a contractor can request the DCAA to step in is if they have previously failed an audit. Furthermore, due to the massive backlog the DCAA has, the probability of a contractor being audited at any time without any specific reason has increased.

Myth #2: DCAA recruits the best and brightest in the accounting field. While this is most often the case, according to GAO, the DCAA management cut its auditing costs by not paying their auditors well, not providing adequate training, and putting them on jobs beyond their capabilities and expertise. In fact, most auditors hired by the DCAA make a fraction of what accountants outside of the government make, yet many still rise above this condition and provide excellent work for their country.

Myth #3: You have no choice but to accept DCAA’s findings. While you should hope the DCAA finds nothing, most of the time, their findings are correct. However, there are rare instances when they are wrong. When this happens, there are several levels of appeal open to the contractor. These include:

  • a well written management response that the DCAA is required to publish with their audit
  • appeal to the DCMA to investigate and draw their own conclusions
  • submit a formal appeal to the OIG, appeal board, or even CID

Myth #4: You can purchase DCAA-approved accounting systems in a box. The DCAA does not, in fact, endorse any accounting software program. Two contractors can use the same software and one will pass its audit and one won’t. This is because the DCAA approves all accounting systems regardless of its brand based on a set of evaluation criteria, which follows the standards required by the Federal Acquisitions Regulations. Accounting systems themselves are more than just the software anyway. Even with a software system like Quickbooks, it’s all about what the system addresses. To ensure your system passes the DCAA audit, it needs to be able to segregate the costs according to projects, contracts, or jobs and have labor distribution ability within it. Most available accounting software programs out there have the ability to do this.

Last year, the DCAA upgraded their pre-award checklist, making it more important than ever for small businesses to have an accounting system that is operational and their policies in effect prior to the DCAA audit.

With just a little preparation, there is nothing to fear from a DCAA audit. Need help ensuring your accounting system meets the requirements of the DCAA? Contact us today!

 

September 26, 2014

Start Your Own Bank!

Have you ever wanted to start your own bank? Why not, right? It must be great to use other people’s money to invest with, and be insured (for free) by the FDIC. Is it risky? Well, a recent news article states that current statistics reveal that only “one in 1,000” banks fail every three years. Those are pretty good odds, all things considered.

Here is what you should consider when starting a new bank:

  • Is there a need for a bank in the area you’re planning on starting your new bank? Often times, there are locations which no bank is conveniently close to. People would rather drive to a local bank than drive 20-30 minutes away to do their weekly or daily banking activities – especially local businesses who run to the bank more often than everyday consumers.
  • The actual capital. Well before your customers secure their money with you, you’ll need a starting capital of “$12 to 20 million.” Don’t worry! It doesn’t have to all come from you! You can organize your bank to have a board of directors whose members will pool their funds together. You can ask local law firms, physician practices, etc.
  • Digitize it. The majority of consumers decide to utilize banking service, not to secure their funds, but for the convenience they provide. Some businesses don’t take cash – only checks, and many people use credit and debit cards for the convenience as well. So, logically, if you make your customers’ banking services available online and mobile-accessible, your bank will be much more attractive than the next local bank.

Financial Engineering Counselors, Ltd. can help you in your business startup endeavors. We have over 30+ years experience in counseling government contractors and financial institutions. Contact us today to learn more about our finance services.

New Requirements For Government Contractors Regarding Human Trafficking

The Federal Government expects to release new Federal Acquisition Regulation (FAR) amendments before the end of this year.  The intention of these regulations is to strengthen existing prohibitions against human trafficking and may levy new obligations on government contractors to evaluate their exposure.

According to an article in lexology.com, the new requirements prohibit the following:

  • Denying an employee access to his or her identification.
  • Documents using false or misleading recruitment practices.
  • Forcing employees to pay recruitment fees.
  • Failing to provide employees return travel arrangements upon the end of their engagement.
  • Housing employees in conditions that violate the health and safety standards of the host country.
  • Failing to provide employees employment contracts when they are required.

For out-of-country contracts over $500,000, there are additional requirements, according to mondaq.com.

  • Develop a compliance plan for out of country work meeting a set of requisite standards.
  • Submit proof of plan implementation.
  • Post compliance plan details at location where the contract is performed.

The new rules include an employee bill of rights which covers rights to on-time wage payment, lunch and break rules, ability of employees to terminate employment at will, and address grievances without fear of reprisal, according to law360.com.

The due diligence required may impose delays and additional costs. Also, government contractors may be subject to greater liability due to the higher risk of trafficking in some countries. Prime contractors will need to monitor and ensure subcontractors and agents associated with these contracts are not involved in human trafficking. Defense contractor exposure is greater in conflict areas where large numbers of non-professional workers are used.

If you need help sorting out how these rules will affect your organization, contact us. We are a resource for government contractors and we will be happy to assist you.

September 12, 2014

New concerns about sequestration arise for government contractors

With the recent release of the OMB Sequestration Preview Report to the President and Congress for Fiscal Year 2015, sequestration fears have returned for Government Contractors and Government Small Business.

Sequestration is a package of automatic spending cuts ordered by the 2011 Budget Control Act (BCA) intended to resolve the debt-ceiling crisis. The law involves the introduction of several complex mechanisms, such as creation of the Congressional Joint Select Committee on Deficit Reduction options for a balanced budget amendment and automatic budget sequestration. Sequesters affect non-mandatory budget items.  Funding for these optional items passes through congressional appropriation bills and the Office of Management and Budget (OMB) determines whether the appropriations exceed the relevant cap for that year. In the past year, Congress voted to roll back some of the automatic cuts.

Sequesters effect both defense and non-defense discretionary programs evenly, effecting Small Business and Govenment Contracting. On the non-defense side, automatic spending cuts effect Medicare, public service programs, and agency IT spending. While the Highway Trust Fund is not subject to cuts, the HFT has had solvency problems during the last half a dozen years.

IFY 2015, the law requires the sequestration of almost $18 billion in defense and non-defense direct spending.  Specifically, OMB calculates that the sequestration of non-exempt direct spending will require reductions of 2 percent of non-exempt Medicare spending, 7.3 percent to other non-exempt non-defense mandatory programs, and 9.5 percent to non-exempt defense mandatory programs.  Given the new discretionary spending caps set under the BCA, no discretionary reduction is required for 2015 as it was in 2014.

According to a recent article in DefenseNews.com, Air Force four-star Gen. John Hyten and Sen. Jess Sessions, R-Ala., are seriously concerned about sequesters for coming budgets which affect command.

We understand the government contractor business and the Finance issues effecting.  If you would like to know more about how we can help you, contact us.

 

September 5, 2014

Financial Solutions and Financial Consulting

Startups and Established Business can both benefit

The following statement made by the U.S. Small Business Administration, (SBA), explains in a nutshell, the importance of knowing what your financial solutions are,

 “While it is poor management that is cited most frequently as the reason businesses fail, it is inadequate, or ill-timed financing that is a close second. Whether you’re starting a business of expanding one having sufficient ready capital is essential. However, it is not enough to, simply, have sufficient financing, as it is to have the knowledge and planning required for managing it well. These qualities ensure that entrepreneurs avoid common mistakes like securing the wrong type of financing, miscalculating the needed amount, or underestimating the cost of borrowing the money.”

This proves the importance of having an open conversation with a Financial Consulting firm. Because your business is so important it behooves you as an owner, CEO, or  Money Manager to ensure that there is a means for immediate refinancing available for future projects and or possible expansion. In the case of the birth of a new business, a consultant can help with setting strategies on IPO’s, creating shareholder value, economic forecasting, and business valuation, albeit these same things apply to an established business entity as well.

The Goals Are To Enhance the Accounting Operation and Capital Movement

As it stands, the landscape of financial lending has become somewhat resistant to providing venture capital due to the economic turmoil that has erupted over the past few years. Because of this, it is wise to partner with someone who has a working network comprised of professional service firms, finance companies, and banks that focus on creating long-standing relationships. At the same time, the right group of consultants can help educate and prepare your business for generating the correct financial reporting mechanisms that will ensure a better practice scenario within the structure of the company, which improves the ability to obtain working capital.

Further, if your business is a government contractor you can enhance your business by utilizing the expertise of financial consulting firms that focus on, and that are knowledgeable of, government contracts and capital management. As the world economy changes businesses must change and become cognizant of the financial landscape that changes with it. Through improved financial reporting and a network built on supplying capital specific to government contractors. The team at Financial Engineering Counselors, Ltd is the one that can give your business what it needs. For further information on what we can provide for your business please contact us.

August 29, 2014

Updates on Executive Compensation and Government Contracts

In 2009, the Federal Reserve and Treasury Department joined to impose limits on executive pay in public companies and government regulated institutions. It was a move by then Chairman Ben Bernanke to prevent banks from “rewarding employees for actions that could endanger the firms’ long-term financial health.” This motivated organizations to develop new compensation methods not covered by the cap in a move to avoid compensation rules that are commonplace in most of Europe.

According the Capital Edge Consulting Winter, 2014 newsletter, “The National Defense Authorization Act (NDAA) and the Bipartisan Budget Act of 2013 (BBA) were both recently signed into law…include significant and conflicting changes to the ceiling amount.  Both pieces of legislation eliminate Title 41 Section 1127, removing the authority to set Government contractor compensation ceilings…Each Act also establishes applicability date as …’compensation costs incurred on contracts…entered into on or after…180 days after the date of enactment…’ Each act also provides that the ceiling will be will be adjusted annually using the Bureau of Labor Statistics Economic Cost Index for total compensation for private industry, by occupational and industry group. However, the NDAA sets the 2014 base year cap at $625,000; and the BBA sets the base year cap at $487,000.  We have received information through our contacts that the $487,000 cap will be enforced.”

In a recent newsletter, FedGovContracts.com explains, “This limit applies to all contractor employees on contracts with the Department of Defense (DOD), the National Aeronautics and Space Administration (NASA), and the Coast Guard. For all other federal agencies, this limit applies to ‘the five most highly compensated employees in management positions at each home office and each segment of the contractor.’ While the statute places a cap on the amount that the government will reimburse the contractor, it does not limit the amount of compensation that the contractor actually pays its employees. Contractors can provide compensation to their employees that exceed the compensation benchmark amount.”

Fears from some are that these rules will undermine employee morale and prevent contractors’ abilities to hire the best talent.

If you have concerns or questions about Executive Compensation, contact us here at Financial Engineering Counselors, Ltd.

August 22, 2014

Small Businesses and Government Contracts

Small businesses often have difficulties getting started and earning revenue. Many owners are highly ambitious and wish to establish governmental contracts immediately. However, if the small business is unknown, the government is less likely to accept the proposal. Despite this knowledge, the relationship between small businesses and government contracts is interactive.

Before the Proposal

Thus, it is important to be aware of the areas that are regulated by the government. For instance, the government has established policies relating to executive compensation, advertising, employment and labor, the environment, safety and health, and privacy. With a working knowledge of these areas, it is more likely that the proposal will be accepted. Furthermore, it is essential that the subcontractor be fully qualified to undertake the project.

During the Proposal

Now that research has been done regarding governmental regulations and within the contract needs itself, it is time to create the proposal. New small businesses may wish to engage in subcontracting in order to become initiated within the world of government contracting. With successful subcontracting, it is more likely that larger government contract proposals will be accepted.

After the Proposal

It is time to play the waiting game. Your part is done. Now it is time for the government to do its part, which involves evaluating all bids and selecting the most qualified contractor. However, by completing effective research, it is more likely that your bid will be accepted.

To increase your chances of a winning bid, contact us today to discuss how we can help you.

August 15, 2014

What is a credit default swap?

During the 2008 crisis, investment banks were underwriting credit default swaps. Credit default swaps are a type of credit derivative that have become a very powerful force in the world market. According to Investopdia, at the height of the financial crisis the market for credit default swaps  was valued at $24.8 trillion.

 Investopedia defines a credit default swap as, “A swap designed to transfer the credit exposure of fixed income products between parties.” In other words these securities allow the transfer of default risk from one party to another. In layman’s terms they transfer default risk from one party to another. While swaps can mitigate risk, they can also consolidate risk.  The investopedia article goes on to state,  “the risk of default is transferred from the holder of the fixed income security to the seller of the swap” In other words the risk of default on a mortgage, for example, is transferred from the holder of a mortgage to the seller of a swap. While credit default swaps are well known for being written on mortgages, they can also be written on bonds and corporate debt. The function however remains the same: to transfer credit risk. In this way a credit default swap is similar to insurance. The buyer of the credit default swap transfers the risk of default from him/herself to the buyer of the swap. In the case of default to seller of the swap must deliver the value of the principal plus the value of any interest payments.

These financial instruments can be written on many different types of debt securities.  They can be written on bonds, mortgages, corporate debt and mortgage backed securities.

Please visit our website, or contact contact us.

August 8, 2014

Alternative Financing to Help Sustain Growth

Working with lenders comes with restrictions. Many traditional lenders are unwavering and unable to accommodate the personal and business needs necessary to sustain growth. Consider alternative financing opportunities when weighing your lending options. Here are a few areas worth exploring.

Payroll Finance: Payroll Financing is an option that does not take out a loan or put a small business in debt. Instead, this avenue allows business owners to borrow against future income from a projected project. It works by selling approved invoices to a lending company at a discounted rate. As a result, business owners can proceed with a scheduled payroll without accumulating debt.

Asset Based Lending: Asset based lending options is a loan taken out that is secured by the value of an asset. However, if not paid in full, the asset is taken by the lender. Like with many mortgages, lenders will front money with an asset as collateral. It is important to note, in many instances, asset lending loans are usually accompanied with lower interest rates.

Purchase Order Financing: In many businesses, money is needed upfront to fill a purchase. However, there are times when the funding for the project is not available. Purchase Order Financing allows you to take a loan on the supplies needed to complete an order, and in turn, the lender seeks out payment directly from the client.

Equipment Financing: Equipment matters to the function of a business as well as to its branding. Before using your working capital or tapping into your business line credit, consider Equipment Financing as an avenue to gain necessary workforce equipment without running into debt. Many equipment financing and leasing options are built with structure and can be worked into your companies budget taking into consideration business, accounting tax specifications.

SBA Loans: SBA loans are backed and guaranteed by the Small Business Administration. Small businesses are eligible, which is offered through private-sector lenders with reasonable terms.

“Crowd-Sourcing”: Crowd-Sourcing eliminates the services traditionally obtained through suppliers and employees. Instead, in many cases, solicitations from a larger group of individuals is used to raise funds or to perform company-wide functions.

Small business owners carry a unique set of challenges when it comes to lending options. The traditional financing avenues granted to many corporations are void in the private-sector workforce. Consider alternative financing options to help prevent debt and heighten growth.

For more information on financing options or about the services provided by Financial Engineering Counselors Ltd., please contact us.

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