The following is an interview with Sandra Simmons, Founder and President of Money Management Solutions Inc. on the state of  business money management in the United States.

The current economic crisis should serve as a harsh money management lesson to all of us. Every economy, whether large or small, be it a large corporation or the household income, will always be at risk to the degree that it relies upon credit for its survival. It is not that credit is inherently evil or bad; rather, credit and living beyond one’s means is a tempting financial seductress which will always threaten to wreck our financial ships upon hidden fiscal shoals.

The problem with credit is risk. Whenever you take out a loan, use a line of credit, or even use a credit card, you are taking a financial risk to some degree. That risk is that you will have enough money at a future date and time to pay back that financial obligation in full and in a timely manner. There is nothing particularly wrong with using credit as long as there is virtually no risk involved in paying the money back.

There is a lot wrong with living way beyond one’s means and spending virtually every dime one makes to pay off creditors. This can be risky in the extreme, because with just one slip, the whole house of cards can tumble down very quickly.

“I am not against the use of credit,” says money management expert Sandra Simmons. “What I am against, however, is the overuse of credit to create a lifestyle or a business situation which is basically false. Living in a condition based on credit and debt is very, very risky. Done on a national scale, you can see what has now happened.”

Simmons, who is President of Money Management Solutions, Inc. (www.MoneyMgmtSolutions.com), a business-to-business consulting and money management products and services company, located in the Tampa, Florida area, has been warning for years now that the economy was dangerously overextended. Even at the virtual height of Wall Street, Simmons could see the writing on the wall and the danger that was lurking just beneath the surface of the credit markets.

“An economy on a national scale is really just the sum of its parts,” says Simmons. “I could see that individuals and businesses were over extended and relying too much on credit. Because credit was easy to get, people took advantage of it and were living beyond their ability to pay. When an entire national (or world) economy is built upon such a shaky and risky foundation, it makes it vulnerable.”

Simmons’ approach to wealth and financial success is rather old fashioned: You work for it. She says that the best and safest way to be financially successful is to practice good money management: pay your bills, set aside savings and reserves, and avoid using credit.

“Now I know none of you reading this article fall into this category, BUT I call people who are overly tempted to live beyond their means and use credit “Gratification Groupies”. I say this because they fall victim to the credit trap of having to have it now, and worrying about how to pay for it later,” Simmons says in reference to our instant gratification oriented society. “Instant gratification, however, is not the road to wealth and financial freedom. Oftentimes, it is a path that leads to heartbreak and financial failure.”
What is interesting is that it is not so much how much money is made; it is what you do with it that determines wealth and economic condition.

“I have clients who have made millions who were in dire financial straits, and who, despite all of the money they were making were always behind and never had enough to meet their financial obligations,” says Simmons. “And I’ve also had to fix businesses that had millions in sales, but weren’t profitable. In either case, the real problems had to do with the handling of their cash flow and money management. Solving those problems put them on a firm financial footing.”

Simmons’ money management strategies are fairly straightforward. The difficulty is not in understanding them so much as having the fiscal discipline to implement them.

Some of her principles are as follows:

Money Management Principle 1 – Use CASH Not Credit

“Each time you buy something using lines of credit or credit cards because you don’t have the money to pay for it, you are promising your future income to the credit card company,” says Simmons with emphasis. “Those future earnings will undoubtedly be needed to pay your regular household or business operating expenses. That’s when you end up in the pay-for-life program known as the credit trap.”

The only exception is buying property that increases in value, such as usable business assets, or investing in commercial buildings that put more income in your pocket and more profit on your bottom line. Using your money to make more money is smart money management.

Money Management Principle 2 - Don’t Spend More Than You Earn

The most direct route to financial disaster is spending more than you make. You can keep a good quality of life for your business while reducing optional spending. This can be accomplished by acts such as buying used equipment rather than new, or negotiating better buying margins for your raw resources and supplies. Don’t buy something because you only want it, but don’t really need it. It’s just a plain good money management practice.

Money Management Principle 3 - Money Must Be MADE Before It Gets Spent

“If there is some future large purchase you need to make, begin by setting aside small amounts of cash into cash reserves for that purchase and keep that up until you can pay for it with cash,” Simmons says in reference to the safest way to make larger purchases without using credit or going into debt.

On a company level, if you will need to purchase or upgrade equipment for your office, then figure out what the costs will be and work out how much money you have to set aside every week to have the full amount in the month you will need to make that purchase. Plus look for and negotiate to get the best deal possible.

“I know this takes a lot of discipline,” says Simmons, “but it keeps you out of the credit trap. And I would argue that in the end it is more satisfying because once owned, you don’t have to worry about how you are going to pay for it because it is already paid for. It may not be instant gratification, but it is definitely a sense of accomplishment.”

Money Management Principle 4 - Put Away Some Cash for Emergencies and Future Operating Expenses

“You will sleep much better at night with the financial security of knowing you have money stashed away in reserves for emergencies like unexpected repairs to a vehicle or an office machine, increases in employee benefits expenses, or experiencing a big drop in income,” Simmons says. “When you have a cash cushion you can get your hands on immediately, then magically, you don’t even worry about money, and your focus returns to living life and enjoying it, and earning money suddenly gets easier.”

In reality, the primary thing you have to be afraid of should there be another Great Depression or an economic downturn is not having enough (or any) cash reserves tucked away that you could immediately get your hands on.

Out of every bit of income that comes in the door, immediately set aside 10% and stash it in an interest bearing savings account that you have designated for your cash cushion.

The above steps, done on a national scale, would create an enormously stable foundation on which to build a true economy that is rock solid.

“I want business owners to know that there is something that they can do about their economic circumstances and that they do not have to wait and see what further actions the government is going to take in order to try and fix the economy,” says Simmons in conclusion.

“Whether you’re a large company, small business, or an individual, stop relying on credit, pay off your debts, and start setting aside money and get on the road to economic prosperity. I guarantee that it can be done, and my own clients are not worried about the economy because they have applied sound money management principles in preparation for the kind of economic circumstances we now find ourselves in.”
“Their weekly use of our Money Management Solutions software program to plan how to allocate their cash flow in their own best interests, and their implementation of the points in our Business Profits Checklist, among other strategies has put them on a firm economic footing.”

Sandra Simmons, President and founder of Money Management Solutions, is slated to give a seminar for business owners on how to build wealth and increase profits despite the current U.S. Economic crisis.

Simmons, who lectures and does financial consulting throughout the United States, is a strong believer in the ability to succeed financially, even in a tough economic environment, if you have the right money management tools.

“People really can escape the economic trap and build wealth despite what they hear about the economy,” says Ms. Simmons. “I’ve spent years giving people the tools that they need to be financially successful. Anyone attending the seminar will be excited to know that with a few simple steps, they can greatly improve their financial circumstances and get on to the road to financial freedom.”

Those business owners attending the seminar will learn the secrets of avoiding credit traps, how to quickly get out of debt, and how to increase profits and income. They will also learn what the so-called financial experts and mass media aren’t telling them about economy and finances.

The event will be held at the Hilton Clearwater Beach Resort Hotel on Saturday, December 13th, in Clearwater, Florida.

Those interested in attending are recommended to make reservations early as seating is limited.

For more information, please call 727.448.1011 or email seminar@MoneyMgmtSolutions.com .

I recently received an email from a visitor to my Money Management Solutions website who wants to learn how to pay off her mortgage quickly without having to attend expensive seminars or buy expensive software to do this trick.

I realized that this was a question a lot of people might have, especially during this current economic crisis. I decided to share my answer here for that reason.

Brenda asked Sandra Simmons:

Is there some sort of “mortgage accelerator” program where your mortgage gets paid off in a fraction of the usual 30 years time? I want to learn how I can do this myself for my mortgages. — Brenda B.

Answer:

Brenda: You can do this yourself by making extra principal payments each month.

Example if your mortgage payment is $2,000:

 If, when you make the payment for 8/1, you include an extra payment for the principal due 9/1 of $302 then you don’t ever have to pay the interest of $1,698 that was due 9/1.

Your next payment due, which you will pay on 9/1, is actually the 10/1 payment.

Then on 9/1, when you make the 10/1 payment, if you also pay the principal payment from the 11/1 payment, then you save that interest. If you do this you will cut your mortgage payoff time in half.

Write on your payment coupon “Extra Principal Payment $302” so there is no question of where you are directing the funds, and keep a copy of the coupon and the check for your records.

If you want to accelerate it even faster, say cut it by 2/3rds, if on 8/1 you make the payment and include the principal amounts for the payments due 9/1 and 10/1, then you don’t pay the interest on the 9/1/and 10/1 payments.

Then on 9/1 when you make the next payment you would pay the payment for 11/1.

Ask your mortgage lender for an amortization statement of your loan so you can actually see the correct principal and interest amounts broken down for each payment. They may not want to give you one so you can’t do this as they lose interest income, but you have a right to have it. Even if you have to pay them for it, it is worth it. Typically they charge $25 – $75 for an amortization statement.

Sandra Simmons is the President of Money Management Solutions, Inc. She specializes in helping business owners and individuals manage their money to achieve financial freedom. Claim your FREE Debt Reduction Solutions Guide.

Can You Help Me Turn Around My Construction Company?

Service professionals like construction companies can find themselves in the financially tough position of running a lot of projects, but still barely making it financially. Without proper money management strategies and control of their financial planning and cash flow, a general contractor can actually find themselves in financial difficulty with declining profitability and increasing debt.

The following money management strategies illustrate what construction companies and general contractors can do to improve their financial condition and put their business back on the road to wealth and prosperity.

In May 2007, a construction company called me for help. Despite the mortgage loan debacle, the construction industry continued to be strong in Louisiana after Katrina. However, this company was behind on all of their projects, had no operating capital and had accumulated a lot of debt trying to keep the business afloat. They need a FAST turn around in order to survive.

The challenge was to raise income to keep projects moving ahead, placate materials suppliers and subcontract labor, cut runaway expenses, close sales on new projects and deliver the jobs profitably, while reducing a six-figure debt liability as fast as possible.

Money Management Strategy # 1 – Raising Income & Profitability

Behind the 8-ball, the company’s biggest challenge was to raise income to fund projects to keep them moving forward. Recent project draws from funding banks had been used to keep earlier projects going when money got tight and delivery of projects was coming to a standstill. The income statistic had crashed and personal savings had been drained to try to stay afloat. The debt load had grown to 6 figures.

The Money Management Solutions software program was implemented immediately, and a special “Income Planning Drill” was done with the client to determine what the major problems were. As part of the drill, an evaluation of profitability was done on projects that were running in negative profits. An analysis revealed that the company’s construction crew was making costly mistakes that had to be corrected at the company’s expense. To make matters worse, having to correct poorly installed doors and windows often ruined the materials. Replacing costly materials was an extra drain on the company’s bank account.

Many of the highly skilled construction workers had left the state when Katrina hit, never to return, or to return to locations further from the coastal areas. Less qualified workers were hired both to save money and because they were available for work. In the long run this cost the company more because job mistakes had to be corrected at no additional charge to the client.

The worst effect of this was the owner of the construction company was spending all his time doing quality control checks and correcting and re-working jobs, so he had little to no time to work up bids on new contracts. No bids meant no new projects.

The existing construction crew employees were replaced with half the number of new highly skilled crew who could get it right the first time. One of these had experience as a job foreman, and he was given that hat. Despite the increase in the hourly pay for the higher skills, the work was done correctly and faster than before on existing jobs. This freed the owner up to work up bids and close contracts.

In addition a new company policy was implemented, and bids for new jobs were confined to commercial projects which generate more income than residential jobs.

Money Management Strategy # 2 – Slashing Expenses

With jobs being done right the first time the cost of materials dropped dramatically, but cash was still very tight and materials suppliers who were owed a lot of money were complaining loudly. Money was so tight that one of the weekly financial planning actions was to look for things we could sell quickly to raise cash to buy materials. Now, a construction guy would rather die than part with any of his tools or his truck; but here’s what happened.

The owner walked his property and found a riding lawn tractor he could sell. The cash went to pay a supplier. That wasn’t enough for me, so I asked about vehicles. It wasn’t easy, but the sale of the second pickup truck the owner rarely drove was agreed upon and that cash was used to pay suppliers as well. I asked the owner to walk his property and see what else he could find. Sitting in a shed were some very expensive doors and windows he had forgotten about from a project done long before. They happened to be from one of the suppliers who was making threats. The doors and widows were washed clean of accumulated dust, loaded onto a truck and delivered to the supplier for a healthy credit on the bill owed. That was a real win for all of us!

The company had not had good luck with hiring competent bookkeepers, so a good replacement was found and trained on the Money Management Solutions software system. She was easily able to input the information into the MMS software program to prepare for my weekly planning meeting with the owner. The accounting chart of accounts was cleaned up and simplified, and the correct entry and reconciliation of credit card statements was implemented.

Just by having the accounting cleaned up and entries corrected allowed the owner to view a correct Profit & Loss statement and review past job profitability. Each line item was reviewed and red-flag items were investigated. The spending faucet was turned off in some areas and turned down in others so available income could be used to maximum advantage to buy time and move current projects forward while income and profitability was being strengthened.

Money Management Strategy # 3 – Turning the Ship Around

With projects moving forward the owner was freed up to spend his time working up bids and closing new contracts. One area that was a drain on profitability then came to light. Past bids were hurriedly prepared due to lack of time, suppliers were not called for current prices, old pricing was used to make up the bids and the increased prices of materials were missed. Consequently jobs were bid with little profit built in.

A new policy was implemented to get current materials and labor quotes before writing a project bid with clauses to cover unforeseen materials increases. With the owner getting price quotes good for 30 days from suppliers and writing bids that were profitable, the cost of materials was adequately covered and that drain on profitability was stopped cold. The bids on the more lucrative commercial jobs that were closed opened the income faucet and the ship started to turn around.

Money Management Strategy # 4 – Putting the Owner Back in Financial Control

Using the money management software, funds were allocated to job materials and labor on a weekly basis which kept projects moving. Funds were also allocated to past due bills while keeping up with current operating expenses. That kept suppliers happy. A set aside account for cash reserves was funded weekly to cover unexpected emergencies.

The company owner had plenty of time to work up bids and close projects. He landed several big contracts and sold a spec house he had been building which enabled him to pay off a large chunk of debt. Faithfully following the money management system, the weekly financial planning meeting included income planning for closing new projects out on bid, promoting for new projects, and allocation of funds to keep digging out of debt, keep current projects moving, and paying current operating expenses. Here is what the client had to say about the Money Management system:

Less than 3 months ago the likelihood of paying off a huge debt without borrowing money seemed impossible, much less figuring out how to continue running our business without any money, except what we were making week to week. Our stats [production statistics] were down, the quality of our work was poor, jobs were not profitable, acquiring new contracts was at a stand still and we were BLOCKED.

Using Money Management Solutions, with help from Sandra Simmons, we did our financial planning faithfully. It brought us understanding of what caused our financial difficulties in the first place, peace of mind through a very stressful period, and the ability to get through each week with a plan of action that allowed us to systematically work ourselves into a better condition in just a short three months. Now the contracts are flowing in, we have qualified personnel, great profitable work, haven’t had to borrow a penny to pay off debts and now have a very simple and workable technology to flourish and prosper, which we are.

Using the Money Management software in this construction company, the weekly allocation of income included percentages to pay for job costs, reduce debt, pay regular expenses on time, promote the company and even set-aside funds for a long-term retirement savings plan,” she says. “The increase in income from cost cutting measures, promotional activities and weekly income planning was immediate and profitability was on the rise.

The success of the plan was driven by owner’s decision to fully embrace the money management program and keep the discipline in. Once that decision was made, the rest was easy. As part of the plan, statistical graphs are being charted weekly and the decrease in debt and increase in cash reserves are proof that the weekly planning continues to work. Keeping the action in to keep a tight control on job costs, raise income and pay off debt is handled in less than an hour each week using the money management software, and the company owner spends the rest of the week with his attention on writing bids and closing projects.

He isn’t worried about the money any more and he’s having fun doing what he loves to do, constructing new, beautiful buildings. He actually beat my 8 month estimate of how long it would take to turn the company around by a couple of months. That is a testament to the power of the money management software program when it is kept in and used as intended.

If you would like a consultation regarding your construction company or general contracting company, contact Sandra Simmons at 727-448-1011 or email her at info@moneymgmtsolutions.com .