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Bottom line basics

Posted on March 2, 2016 by admin

Talking about money makes many of us uncomfortable. Sometimes we’re even conflicted about wanting to make money.

Money, after all, is one of the few things left in modern life we don’t discuss openly with even our closest friends or family members. In a business context, this discomfort with money often extends to a reluctance to deal with budgets, bookkeeping, and accounting. Most of us are intimidated by numbers. More often, we just find it unpleasant to think about bills and expenses, cash flow and profit margins, and most especially, debt.

Well, if you’re in business, you’re going to have to discuss money. And you’re going to have to be able to do so without it seeming like a report card of your character. If a customer’s bill is overdue, it’s not impolite to tell them. When meeting with a prospective client, you’re not being rude when you let them know how much you charge. When hiring a consultant, it’s reasonable to ask not only their hourly fee, but how much the whole project will cost. And to set limits.

The bottom line of business, after all, is the bottom line. Of course, some of us just feel lost when we hear people using financial terms; it seems like a foreign language. So, to make talking about money – and finances and accounting – easier, here’s a handy list of some commonly-used terms.

“Red ink” or “in the red”
On accounting ledgers, negative numbers used to be written in red ink. So the expressions “red ink” or “in the red” refer to showing a loss.

“In the black”
Positive numbers, on the other hand, were written in black ink. So if your accounts finish “in the black,” you’ve come out with a profit.

The “bottom line”
At the top of your financial statements, you list your income. You then deduct your expenses. The number you’re left with on the last line of your profit-and-loss statement is how much money you’ve made — or lost. That’s your company’s “bottom line.”

Overhead, or fixed expenses, or your “nut”
These terms refer to each month’s expenses, even if you don’t make a sale. Fixed expenses include rent, utilities, insurance, and administrative salaries. Your “nut” is the total amount of these fixed expenses.

Variable expenses
Costs that change depending on how many sales you make. In other words, if you run a sporting goods store, your rent is fixed every month, but your marketing expenses change depending on how many advertisements you decide to run.

Cost of goods sold (COGS)
This refers to what it costs you to purchase the inventory you sell or to purchase the raw materials to manufacture your products.

Revenue
Total amount of money received from sales.

Income
The amount of money received from any source. You can, for example, have money coming in to your business from loans or investments.

Profit
Money you have left after deducting your expenses. There’s gross profit or net profit.

Gross Profit
The amount of money you receive after deducting the cost of goods sold and sales commissions but before deducting general and administrative expenses.

Net Profit
The amount of money you receive after deducting the cost of goods sold, sales costs, and general and administrative expenses.

Net Loss
The amount of money you’re in the red if, after deducting all expenses from all revenue, you’ve lost money instead of having made money.

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Avoiding mortgage default

Posted on August 26, 2020 by admin

As individuals struggle with cash flow through the coronavirus, the Australian Bankers Association records that repayments on almost 500,000 mortgages have been deferred for six months. While repayments can be delayed, they cannot be avoided altogether.

Lenders can send you a default notice the day your repayment is overdue. However, they could also wait until your repayment is overdue by 90 or more days. When you receive a default notice, you are given 30 days to repay the amounts you have missed in addition to the regular repayment on your loan. Individuals who are struggling with their home loan repayments can avoid mortgage default by considering the following.

Contact your lender
Lenders are generally willing to work with you through financial hardship. Don’t be afraid to contact your lender to discuss your situation and find out what options are available for you. Lenders are often willing to negotiate short-term variations to repayment schedules that both parties can agree to. However, make sure that you do not agree to unrealistic repayment conditions that cannot be met.

Many Australian banks are offering a six-month deferral on mortgage repayments (including interest) for customers who are experiencing financial hardship as a result of COVID-19. If this is you, contact your bank to see if this is an option.

Apply for a hardship variation
Mortgage holders may be able to change the terms of their loan or temporarily pause or reduce their repayments under a hardship variation. A hardship variation can still be requested after you receive a mortgage default. To apply for one, contact your lender’s “hardship officer” and tell them that you wish to change your loan repayments due to financial hardship. This will usually require you to explain why you are struggling to make payments and to estimate how long your financial problems will continue to determine how much you can afford to repay.

After submitting a hardship variation request, your lender must contact you within 21 days with the outcome of your request. They may ask you for more details regarding your request; in this case, they must contact you again within 21 days from when you provide the additional information.

Consider selling your home
Selling your home is a tough decision, but in some cases this may be the better option if your circumstances are unlikely to improve. If you get to the point where your lender takes possession of your home and sells it, it’s likely that you won’t make as much as if you sold it yourself. When you sell your house on your own terms, chances are you will get a better price and avoid having to pay the legal fees passed on by your lender. Inform your lender if you decide to sell your home; they may ask for proof, such as a copy of the contract with your real estate agent or property advertisements.

Renting out your home until you can afford to make repayments again may also be an option if you are able to live somewhere else during this period.

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