Business and Money Tips

(This is covered in lecture 22 of our course Financial Intelligence) The time value of money -- the idea that money received in the present is more valuable than the same sum in the future because of its potential to be invested and earn interest -- is one of the founding principles of Western finance. Let's say you lent your friend $2000. Would you rather he repaid you today, or tomorrow? The logical choice would be today, because you'll be able to use your money, and potential gains that come with it, sooner. What Is the Time Value of Money? Money is worth more more in the present than in the future because there's an  opportunity cost  to waiting for it. In addition to your loss of use if you don't get your hands on it right away, there's also  inflation  gradually eroding its value and purchasing power. If you're going to part with your money for any period of time, you probably expect a larger sum returned to you than you started ...

Financial Engineering Top 20 + 5 Ways to Cut Cost without Cutting Pay or Chopping Heads: (detailed video at here ) 1. Issue Shares instead of Borrow   (If borrow, get an interest-free loan from shareholders and directors, convert the loan to preference shares. Issue derivatives) 2. Rent premise/asset with an option to buy (ask for lower rental plus lower price) 3. Re-look at your Balance Sheet – are they really assets? (Assets must have cash inflow and will increase in value) 4. Move operations or HQ to places with lower or zero taxes eg the Cayman Islands 5. Profit Sharing instead of Bonus for staff 6.  Use OPM other than creditors 7. Hedge your purchase cost 8. Use online more 9. Split your company into many to take advantage of zero or lower tax 10. Change accounting policy to be more in-line with industry (e.g. lengthen depreciation years, capitalize IP, amortize R & D) 11. Sale and lease-back premise/asset (rental is ...

(Watch our short video at here ) Having looked at financial intelligence for an individual, today we look at financial intelligence for businesses. I will tell you to throw away your financial statements as they are not useful! Traditional financial statements will show you the profit and loss statement as follows: Sales Less cost of sales = Gross Profit Less expenses = Net Profit The question I want to throw to you is: is this your real profit?  How do you make decisions based on this information? We know that businessmen do not rely on the above financial statements to make decisions because they lack an important information.  They do not give you information on your costs. There are two types of costs: fixed and variable. Fixed costs do not vary with operations level, like your rental or staff salaries, they are the same regardless of your sales.  Variable costs vary with your operations level, like your selling costs and cost of purchase.  ...

(Watch short video at here ) As a Chartered Accountant by training, I want to talk about Financial Intelligence today.  This is because everyone wants to be rich, but few have financial intelligence, the key ingredient for richness. Intelligence is the ability to make sense out of information, strategize, think and act appropriately. Most people have no intelligence, for they simply follow the crowd and react more than respond. For example, when times are hard, most people will cut costs, and they end up with lesser sales and less cash flow instead. There are 2 indicators to show if you are financially intelligent: When you are empowered by numbers and take advantage of financial leverage, like make use of other people's money When you can act without money as the objective There are two key elements in financial wealth: value and cash flow. These two are interlinked, for when you have more value, you will have more cash flow.  The rich can turn value into cas...

Find out how to receive and pay people in Singapore using FREE PayNow mobile app at here We all know that to be financially wealthy, we need to have cash flow and increase in the value of the things we possess. For example, if you are living in your house that brings you rental income (from one of the rooms) and your house’s value is much higher than what you paid for it, you are considered financially wealthy. But to have cash flow, you need to spend less than what you earn and get passive income (i.e. income earned when you are not working, like dividends from shares). Other than spending less than you earn, why not save money on your spendings?  When you save money on your spendings, you are indirectly earning money on your spendings. This may sound impossible, but there are 7 ways you can do that: 1.  Use Your Phone and Save with Apps  There are many apps for your phone, where you save simply by shopping and scanning your receipts. Apps like  Saivia...

Basic Financial Intelligence : Know the difference between price and value. Save cost, not save value.  In business, there are 5 costs that you absolutely cannot save, for they are not costs but value:  Training : for if your people are not trained, they will do things the wrong way and this will cost you more than the training cost.  By far the biggest training cost is not the training fee you pay to external trainers like us, but on-the-job training .  Like your staff make a mistake and your company has to compensate the customer for this, this must be a large training cost!  But if your staff is trained to do the right thing, you would have avoided this large cost Marketing and Sales : even the world's largest consumer product company Apple has to incur hundreds of millions dollars on sales and marketing, what makes you think your company can save this cost?  Your sales would definitely drop if you cut you this marketing and sales cost.  The la...

Most people have high IQ, but low FQ - Financial Intelligence.  Just look at the many people who prefer freebies to discounts (like buy 5 get 1 free is more popular than 25% discount) and you'll know what I am talking about. By the way, I think I am qualified to talk about this subject because I am a Chartered Accountant by training, and have a  Second-class Honours Degree in Accountancy  from National University of Singapore in 1988, in addition to a MBA from Scotland in 2000.  There are 3 simple ways that you too can be financially intelligent today: Know that Cash Flow is better than Profits, and Profits are better than Wages .  Cash Flow is money coming in and out whereas Profits are just what you make in a period.   Profits can be boosted by one-off event s (like a big business deal) but Cash Flow is difficult to be manipulated because it is over a period of time (like 4 years).  Of course profits are always better than wages because you nee...