Busy, busy, busy. It's the time of year where it seems everyone is on vacation and yet there is more to do this week than in the past two months combined.
You've probably heard and read of Aesop's fable The Tortoise and the Hare. I'm reminded of this fable this week as I help a client with their purchase of a business. It seemed everything was handled very methodically up to the week before closing and then, as usual, the amount of smaller items put off suddenly become front and center. If you've ever been through a closing (either purchasing a new home, selling or purchasing a business, obtaining a large loan under a time constraint), then you understand. It's also similar to preparing for trip. You carefully plan and then a week or so prior, it's time to get into high gear and take care of those million little things. What I've noticed though, is the difference between the Tortoise and the Hare during these transactions and events.
A few years ago one of my clients, an entertainment company, was involved in a royalty dispute. This typically happens a few years after the agreement is structured. The royalty payments begin to decrease (movie revenues down, book moved off the best-seller list, etc.) and the receiver of the royalty questions the calculation. Or, the company paying the royalty begins to incur higher expenses concerning the product and re-reviews the royalty agreement. My client prevailed because they had their documentation in order and were quickly able to provide the support requested by the mediator. The other party had failed to track the royalty payments they had received, depositing them into various accounts over the years, never reconciling or tracking. They were under the impression they had been grossly underpaid and yet what my client's records showed was that they had been paid consistently and for far more than they thought.
My client's Mint (their money system) was the Tortoise. They tracked every payment, kept it correctly categorized, attached a PDF image to each transaction, tracked exactly when the checks were cashed and matched the cancelled check to the transaction. Sounds like a lot of work, it wasn't. This client spends an hour a week on their bookkeeping. Everything is so automated for them and we continue to fine-tune their system. This has saved them incalculable amounts of money in lawyer and accounting fees, potential overpayments in royalties, and they sail easily through various audits. The artist who's agent was suing my client was unable to dispute the amounts paid. Their only option was to wait until the last minute to respond or create another demand for additional information. They were the Hare. Do nothing then scramble at the end, hope to overwhelm with requests and win in that manner. That doesn't work when you are up against someone with a well-managed Mint.
I've helped on both sides of these disagreements. What these come down to is who has ability to provide proof for the numbers disputed. The companies and individuals that have kept their records consistently and are able to easily locate documentation or provide reports quickly inevitably succeed.
This is what a Mint does. It provides an easy way to quickly access data, create reports, and store back-up documentation electronically to each transaction. Lawyers can't manipulate the data, and arbitrators, mediators, and judges are grateful for the order. So many times I see people put off their Mints/money systems until they have more money. Typically what happens when they do have more money is they put off a money system/Mint because they feel like they don't need one anymore. When it becomes a race (usually when the IRS or lawyers come calling), it's best to be the Tortoise. Mediators, arbitrators, and judges will always lean to the side that can support their actions with numbers and back-up.