Let's Talk Energy

I attended The Natural Step breakfast meeting this morning.  The topic was Peak Oil and John Kaufmann, Senior Policy Analyst with the Oregon Dept. of Energy gave an amazing presentation.

If you are not aware of Peak Oil, then I highly, highly recommend you get yourself educated about the science and the implications.  I believe we may have already peaked, or that the peak is imminent.  He said the consensus is that we reach Peak in 2-5 years if we haven’t already.  Here are some resources for more information:  www.hubbertpeak.com, www.peakoilportal.com, www.theoildrum.com.

One of the key things I’ll share is that this crisis is urgent and that we ought to be using the precious liquid gas resources we do have to bootstrap our way to the next system.  It takes lots of fossil fuel to build electric trains, retrofit and build buildings for zero energy use, and put in the grid and generators that will provide clean and renewable energy in the future.  We have really squandered the last 25-30 years and we cannot afford to squander the next.

Every type of non-renewable energy source will peak and decline this century: Petroleum, natural gas, coal, uranium.  We currently get 4 percent of our energy from renewable sources (wind, hydro, solar, geothermal, bio, etc.) and almost none of that fuels our transportation.  96% of our energy supplies will peak or be exhausted this century.  Ninety-six percent!

I’ve never really thought about how much energy we use or what life might be like without it. I recently heard a couple of examples that put our energy use in context.

How much energy does it take to run a single 100 watt light bulb?  Have you ever been on one of those bikes hooked up to a light bulb?  It takes a very physically fit person biking at nearly full speed to power a single light bulb.  Multiply that by all the lights and electrical devices in your home and you probably have the equivalent of at least 50 human slaves working for you in the form of energy.

How much energy is in a gallon of gas? Try this, fill your tank with a gallon of gas and drive until you run out.  How much energy was in that gallon?  Try pushing the car home to find out.  Similarly, fill a chainsaw with a gallon and cut wood until you run out.  Now repeat using an axe or saw.  You’ll find that a gallon of gas can do the work of more than 100 men.  I had someone tell me today that 3 tablespoons of gasoline will do the equivalent work of one person working an 8 hour day.

 

“True” Commitment

I’ve been writing about the A.T. Kearney report that discussed their findings that the market rewarded “companies who show a ‘true’ commitment to sustainability.”  What is a ‘true’ commitment to sustainability and what does that look like?

To me, using sustainability as a strategic driver means you make that focus primary.  Making money and being financially sound are also important but if they become the primary focus or raison d’etre, I believe you’ll make short-term decisions and when the two conflict, you’ll likely make the wrong choice.

Another sign of “true” commitment is leadership and a continuous drive for improvement.  I toured Rejuvination's manufacturing facility this week and learned that they sit down each year and evaluate all areas of their business to ensure they are using the current best practices.  Is there a better chemical, process or material they should be using, if so, they change.  

One thing I’m beginning to use as a criteria between a deep and real commitment to sustainability and a lesser, questionable commitment is the greenhouse gas (GHG) inventory.

No GHG inventory and no plans to do one = Questionable commitment.  Are they just greenwashing?

Taking action to minimize your waste stream is important. The largest and arguably most dangerous waste streams are your unseen and unmeasured carbon emissions. 

Dr. James Hansen, the NASA scientist and climate expert, recently wrote that “our planet really is in peril” as a result of our carbon emissions.

Will 2009 be the year you do your GHG inventory, or are you prepared to be accused of greenwashing and lose your brand and market position?

Greenwashing

Yesterday I wrote about the A.T. Kearney report that discussed their findings that the market rewarded “companies who show a ‘true’ commitment to sustainability.”  What is a ‘true’ commitment to sustainability and what does that look like?

Let me start with a true story about a ‘fake’ commitment. 

I was recently introduced to an executive for a ‘green’ online website.   I was excited to meet her based on her business card and initial ‘image’.  I visited their website before our meeting and could immediately smell a fake.

Visiting their website I could instantly tell they didn’t get it.  While it was an aesthetically pleasing site with the appearance of some good branding, it was clear they didn’t get sustainability and I predicted failure.

•  They were promoting consumerism
•  Their online articles were fluff
•  There was no information about who they were, where they were located or an easy way to contact them
•  There was nothing about their story
• Nothing about their commitments or goals to social justice or sustainability
•  There was nothing there to make me care

I met with the executive and shared my thoughts in a polite manner.  I sent her a mini report after our meeting and here is part of her email response:   

“I Know, I know, we aren't transparent and all the other stuff you mentioned...but in this economy it is all about making money.”

I stand by my prediction.

While a company like this may temporarily grow, it won't be sustained as savvy consumers really figure out the motivations, and how sustainable is that?  A failing company takes lots of people down with it including vendors, employees and investors.

More to come tomorrow.

Green Winners and Real Sustainability

A recent report by the consulting firm A.T. Kearney found that “companies who show a ‘true’ commitment to sustainability appear to outperform their peers in the financial markets.”

Two key takeaways for me were the advantages derived from long-term thinking and that this premium value is only created by a “true” commitment to sustainability. 

Long-term thinking was 5+ years for public companies.  I guess that is an improvement for business leaders who have been primarily focused on quarter to quarter results.  But is this really the appropriate time horizon for sustainability?  No way!

I caution people about the use of the term sustainability.  It is a goal to strive for, but I believe true sustainability needs to be determined over the course of at least a few generations, if not centuries or millennia, and it is therefore misleading to say ______ IS sustainable.

Canada and many other countries actually have standards related to environmental claims.  Here is the standard for Canada:

The concepts involved in sustainability are highly complex and still under study. At this time there are no definitive methods for measuring sustainability or confirming its accomplishment. Therefore, no claim of achieving sustainability shall be made.
CAN/CSA-ISO 14021, Clause 5.5

According to Arie de Geus in his book the The Living Company, the average lifespan of Fortune 500 companies he studied was 40-50 years.  From birth to demise, whether the end comes in the form of failure, merger, being acquired or broken into pieces, the average was under 50 years.  It is well known that start-ups have an even higher mortality rate.  One study of Japanese and European firms, regardless of size, indicated an average life of just 12.5 years.   How sustainable are those numbers?

The book went on to highlight the attributes of companies who have been around for over 300 years.  There are actually companies operating today who have been around for over 700 years! Now that is starting to look sustainable.

In studying these long-lasting companies, four common traits emerged as important factors: 

1.       They were sensitive to their environment

2.       They were cohesive, with a strong sense of identity

3.       They were tolerant

4.       They were conservative with their financing

That last one seem particularly important right now.

Tomorrow I’ll comment about the report’s findings on the commitment to “true” sustainability.

Time to ACT

Dr. James Hansen, head of the NASA Goddard Institute for Space Studies and one of the leading experts on climate change wrote a Sunday op-ed for The Observer.

The picture is not pretty - "our planet really is peril" he writes.

Are we going to heed his warning?

"Our global climate is nearing tipping points.  Changes are beginning to appear, and there is a potential for explosive changes with effects that would be irreversible - if we do not rapidly slow fossil fuel emissions over the next few decades."

"If we do not change course soon, we will hand our children a situation that is out of their control, as amplifying feedbacks drive the dynamics of the global system."

I hope you have an emotional reaction to this information.  I did.  I woke this morning thinking what more can I do?

While there are a number of individual actions I can and will take, I still believe the greatest leverage point occurs at the system/paradigm level.  We must change our economic system to a sustainable system and we need to do it fairly quickly.

Dr. Hanson calls the trains carrying coal to power plants "death trains."  "Coal-fired power plants are factories of death" he writes.  Every product you buy or sell should make you think about the embedded carbon. 

How might we get off the "death train?"

A Hopi Elder Speaks

"You have been telling the people that this is the Eleventh Hour, now you must go back and tell the people that this is the Hour.  And there are things to be considered . . .

Where are you living?
What are you doing?
 What are your relationships?
Are you in right relation?
Where is your water?
Know your garden.
It is time to speak your Truth.
Create your community.
Be good to each other.
And do not look outside yourself for the leader."

Then he clasped his hands together, smiled, and said, "This could be a good time!"

    "There is a river flowing now very fast.  It is so great and swift that there are those who will be afraid.  They will try to hold on to the shore.   They will feel they are torn apart and will suffer greatly. 

    "Know the river has its destination.  The elders say we must let go of the shore, push off into the middle of the river, keep our eyes open, and our heads above water.   And I say, see who is in there with you and celebrate.  At this time in history, we are to take nothing personally, Least of all ourselves.  For the moment that we do,  our spiritual growth and journey comes to a halt. 

    "The time for the lone wolf is over.  Gather yourselves!  Banish the word struggle from you attitude and your vocabulary.  All that we do now must be done in a sacred manner and in celebration. 

    "We are the ones we've been waiting for."

-- attributed to an unnamed Hopi elder

Hopi Nation

Oraibi, Arizona

Economic bubbles

The cornerstone of the CPA profession is independence, integrity and objectivity.  I wish I could tell you that our financial system was going to be okay and that President Obama and our elected and appointed leaders in Washington were going to save the day.  Unfortunately, I'm highly skeptical and I have obligations to my friends, clients, family and readers to share my concerns.  Your future depends on understanding these matters.

Economic bubbles exists when asset price inflation rises beyond what income can sustain.  The ride up a bubble is exhilarating as everyone thinks they've found a fountain of gold and the ride down is devastating, as the economic system collapses and the artificially inflated values people assigned to certain assets retreat to their actual value.

One of the most famous bubbles was the Dutch tulip mania that peaked in 1637.  On the run up, people actually believed a single bulb was worth more than a house.  

We've actually experienced two bubbles in the past ten years (dot.com and housing).  These were partially fueled by cheap credit (corporate, governmental, private).

Ludwig Von Mises (1881-1973), an influential Austrian Economist wrote:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion.

The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

If this is true, current government actions to expand credit (print a $Trillion and get banks lending again) will ultimately lead to the collapse of the US currency.  A collapse occurs when people no longer have confidence in a fiat currency. Historically, thousands of currencies have collapsed.  Given time, is it possible that they all will? 

It would be unfair to freak you out without providing a solution.  The first step is to get educated and then to take action.  Two items I'm imploring you to read/watch are 

1. Chris Martenson's Crash Course.  The first sentence on the home page reads, "Ready to learn everything you need to know about the economy in the shortest amount of time?"  
2. David Korten's Agenda for a New Economy: From Phantom Wealth to Real Wealth

I'm on Chapter 17 of the 20-Chapter Crash Course, and I'm in Section 2 of Korten's book.  

Real solutions? - Perhaps

I'm an idea guy.  That is one of my core strengths so I always find myself looking around for ideas that can help solve the world's problems and create a place that works for all.

I have two things to share this morning.  First, is a link to Chris Martenson's Crash Course.  The first sentence on the home page reads, "Ready to learn everything you need to know about the economy in the shortest amount of time?"  

This is an entertaining and highly informative 20 chapter video course offered in very digestible 5-10 minute segments.  I'm on Chapter 14 so I don't know how it concludes but I recommend you check it out.  I was hooked after watching the first 10 minutes.

The second item is a link to Common Good Bank.  Their goal is to create a new type of institution for a sustainable economy and to provide the "social agenda with a bank", rather than a bank with a social agenda.  You can visit their site to get more information but on the surface it looks like a good idea and I've signed up as a supporter.

I will remind readers that where you bank matters.  Not all banks are created equal.  A scholar (forgot his name) gave a lecture while I was at BGI and asserted that the most powerful leverage point for a consumer to bring about sustainable change was the decision of where to bank.  

I can't recall the entire list but I do recall where you buy your gas was #2 (Exxon Mobile = BAD) and that where you get your food was somewhere in the top 5.

Do you still keep your money in global corporate banks?  Aren't they part of the problem?

Don't Fix Wall Street, Replace It

That is David Korten's message and you can read his short essay over at Yes! magazine.  (That's a picture of the Wall Street bull as seen from the backside in case you are wondering.)

I've also been reading Dr. Riane Eisler's (The Chalice and The Blade, The Real Wealth of Nations, et al) recommendations about investing in a new "Caring Economy."  According to her,

"we should create and subsidize more jobs in childcare, education, healthcare, eldercare, and other “caring industries” through the Job-Creation and Economic Recovery and Reconstruction Plan. This will quickly stimulate our economy, help families, radically reduce poverty and violence, reward women’s economic contributions, save billions in crime and prisons -- and is an essential investment in the “high quality human capital” needed for our post-industrial economy." 

You can read Riane's Roadmap here.

I read The Real Wealth of Nations a few summers ago and highly recommend it.  In case you aren't familiar with Dr. Eisler, here is a little bit about her background and credentials from her website.  

"Her newest book, The Real Wealth of Nations: Creating a Caring Economics – hailed by Archbishop Desmond Tutu as “a template for the better world we have been so urgently seeking,” by Peter Senge as “desperately needed,” by Gloria Steinem as “revolutionary,” and by Jane Goodall as “a call for action” – proposes a new approach to economics that gives visibility and value to the most essential human work: the work of caring for people and planet.

Dr. Eisler is the only woman among 20 great thinkers including Hegel, Adam Smith, Marx, and Toynbee selected for inclusion in Macrohistory and Macrohistorians in recognition of the lasting importance of her work as a cultural historian and evolutionary theorist. She has received many honors, including honorary Ph.D. degrees, and is included in the award-winning book Great Peacemakers, as one of 20 leaders for world peace, along with Mahatma Gandhi, Mother Teresa, and Martin Luther King."

TriLibrium and our GHG Reporting

Yesterday I mentioned that a TriLibrium stakeholder requested information about our GHG claims.  Here is our response.

TriLibrium will use the GHG Protocol developed by World Resources Institute.  We will include both direct and indirect emissions in our footprint and will report on the scope of our boundaries at that time.  We intend to include all employee travel.  We will probably exclude customer travel.  We will probably exclude embedded carbon in purchased items due to the cost/benefit of gathering that data.  We intend to offset 150 percent of our measured GHG footprint and believe this buffer is more than sufficient.

Our company began operations October 1, 2008.  Our current office uses 100% renewable electricity purchased from Pacific Power and we pay additional money with each bill for Salmon Habitat Restoration.  We recycle 100 percent of materials that can reasonably be recycled in Portland including glass, metal, cardboard, plastic, and paper.  We buy in bulk and reduce, reuse and recycle where we can.  We currently put out just one small garbage can per month of solid waste.

Since inception, we have logged all employee travel whether by car, bike, train or bus.  Based on our experience, this is likely to be 80 percent or more of our GHG footprint. 

We will include natural gas consumption in our footprint inventory and will offset that accordingly.  We have not selected our offset provider.  I have personally used The Climate Trust to offset my personal GHG footprint.

We intend to do an annual CSR report complete with a GHG inventory sometime this summer and then each subsequent summer.  We will select an offset provider at that time based on best practices.  Colleagues at the Bainbridge Graduate Institute developed COPEM (Carbon Offset Provider Evaluation Matrix) which we will use to guide our selection.

As noted above, we will not include customer travel in our GHG footprint.  We have excluded it from our inventory because it is hard for us to capture this data and believe it is primarily our customer’s responsibility and not ours.  We are aware of this issue however and provide our customers with ways to reduce their travel when engaging with us through the use of secure, electronic data sharing portals, mail, fax and other means. 

What are you doing about climate change?

Every single business needs to be taking action.  

The first step is to conduct a greenhouse gas (GHG) inventory.  Have you done that yet? 

The subsequent steps are to reduce emissions and then offset the remaining ones.  By conducting a GHG inventory, you will discover ways to make positive changes.  This is an iterative process so progress can be measured and reported.  

It is the transparency of the process and the reporting that helps provide credibility.  If you aren't transparent you will lose credibility and might be accused of greenwashing.  How sustainable is that? How long do you think that type of firm will survive in this market?

Stakeholders are far more sophisticated these days and are asking legitimate questions.  On Friday last week I sent an email announcement formally introducing TriLibrium and our website.  One of the receipients noted our GHG offsetting claims and asked the following questions:

Upon review of your website you mention that you will be "offsetting" your GHG emissions.  I have a  few questions/comments:  How are you determining your GHG Emissions?  What Scope are you defining and what are your boundaries?   As a matter of transparency, it might be advisable to define how you are calculating your GHG Emissions.  Also, it may be advisable to indicate how you are offsetting your GHG Emissions.  What company you intend on buying offsets from, etc.

I'll share my answers with you tomorrow.

What Matters

As I said in my last blog post, we measure and therefore focus on the wrong things. If you manage performance using the wrong metrics, you will get the wrong results.

I would suggest that all of our current economic indicators are highly suspect guides to a sustainable economy since the source and justification for the metrics comes from the Wall Street economy. Even the employment numbers are suspect because they lack any qualitative values.

The New Economics Foundation has created the Happy Planet Index which measures our well-being divided by our ecological footprint.  Well-being is measured as the product of Life Satisfaction x Life Expectancy.

Life expectancy is an indicator for our overall health.  By putting our ecological footprint as the denominator, we can drive the index up by improving life with a smaller footprint.

As you'll notice, this index has little to do with financial indicators and who cares - in the end we don't really care about money, just the things money provides.  And as they say, money doesn't buy happiness.

Here are some examples of nonfinancial indicators we might want to measure:

• Voter participation rates
  
• Divorce rates
• School attendance and graduation rates
• Open park space
• Community service
• Percentage of home ownership
• Percentage of locally owned businesses
• Number of clean streams and rivers
• Youth involvement
• Suicide rates
• Percentage of organic food
• Incarceration rates
• Obesity rates
• Etc., etc., etc.

These factors impact the quality of our lives.  It is time we stop worrying about the Phantom Wealth numbers generated by Wall Street and Washington, and start focusing on the numbers that help us get where we want to go.

What We Measure Matters

The most important number to the powers that be is the GDP. The GDP is how Wall Street and the government measure the health of our economy but this number is seriously flawed for two important reasons.

First, it measures negative events as positive additions to GDP - Car accidents, divorces, and oil spills all add to the GDP.

Second, it fails to include or account for positive activities if money doesn't change hands - taking your neighbor to the doctor doesn't count while hiring a stranger to drive a cab does. Which do you think makes a better society?

As an accountant, I'm keenly aware that what we measure matters. In my MBA program, I really appreciated the work of Mark Anielski, an Adjunct Professor at the Bainbridge Graduate Institute and the author of The Economics of Happiness. Mark has developed a "Genuine Wealth Indicator" that can help any community measure its wealth across a number of indicators in order to measure those things we actually want.

We need new measurement tools if we are going to achieve sustainability. It is high time we stopped using GDP as a tool to measure our economic progress.

$3 Trillion, get ready to be ripped off

I woke up to a liberal talk radio host interviewing a conservative FOX business guy and their prediction and conclusion was that next week, the government should and would set up a new federal bank, capitalized with $3 TRILLION to buy up all the bad loans in the system. What the hell?

Even before the latest crisis, it is a Wall Street myth that the old economy worked. Sure, it made some people fabulously rich and it did supply many needed goods and services, but even more glaring is the fact that it failed on so many levels (Think of unmet NEEDS and environmental and social havoc). Spending trillions of dollars to restore the economic system to its previous condition is a reckless waste of time and resources.

Have you gotten your copy of David Korten's new book Agenda for a New Economy: From Phantom Wealth to Real Wealth? Here is a link if you need one.

I'll leave you with two good links today.  First, is a real nice review of David's book so you can get a taste of what is covered.

Second is an excellent article by Prof. John McMurtry from Global Research on the current problems and the choices we face. Near the end he concludes:

The most instructive moments in America’s history have been forgotten - for example, the 1776 American Revolution itself which Benjamin Franklin said was most of all to wrest back control over the issuing of money from the private Bank of England; Abraham Lincoln’s issue of “greenbacks” to go over the head of the New York bankers’ demand of 17% compound interest to fund the war for the Union; and FDR’s historic New Deal which guaranteed minimum economic security and put people back to work in rebuilding the real economy. Yet not even the Depression has demanded the economic reset now required to resolve the coinciding energy, environmental, employment and financial crises confronting America and the world.

Agenda for a New Economy

Let us be honest.   We don’t need to fix the old economy – We need to create a new economy.

David Korten’s new book, Agenda for a New Economy: From Phantom Wealth to Real Wealth, has been in bookstores less than 10 days and I implore you to get this book and read it immediately.  We have a unique opportunity to change this system and create a sustainable, life-affirming economy.  We must rid ourselves of the Wall Street menace. 

Last night I attended the first of a 4-session workshop to explore David’s new book.  There were at least 30 people in attendance which seems huge given the fact the book was launched January 23^rd, 2009!

We started by watching David give a presentation at Trinity Wall Street, a church in the heart of America’s financial district on the 23rd, which coincided with the launch of his book.  If you do nothing else this week, watch this presentation.  You can fast forward to 6:15 to see the introduction of the presentation, followed by a short video bio.  He concludes at 59:30.  There is a Q&A that follows.

I’ll be writing more about this in the future but let us take this opportunity to get to the root cause of our problem.  It is time to treat the system, not the symptoms.  The system solution is to fix the system so the problems go away.  Isn’t that what we learned in business school?

What about a 32-hour, 4 day work week?

There is a simple, comprehensive system solution you won’t hear about. (I wonder why that is? Could it be that the powers that be are heavily invested and benefit immensely from THIS system?)

This one simple action would:

• Increases the number of jobs. 
• Provide more time off for this overworked, over stressed nation.
• Provide more family time for parents and children.
• Decrease overall commuting which both reduces our dependence on foreign oil and greenhouse gas emissions. 
• Should decrease rampant consumerism as overall incomes decrease.

The late Donella Meadows wrote a famous paper about Leverage Points and places to intervene in a system. Changing the rules of the system is a fairly significant leverage point. This is one rule change that would benefit working class Americans.

Truth and honesty

We are all part of a system that is devouring the world. We know this to be true yet we deny it.

I saw an interesting quote the other day regarding truth:

There is the truth of authority and there is the authority of truth.

Which one do we believe when they conflict? Unfortunately, I think most of us follow the truth of authority.

While we know continued economic growth is a problem and that our consumer based take-make-waste culture cannot be sustained (authority of truth), we all listen to authorities (Governments, President Obama, mainstream economists, bankers, media moguls, corporations, etc.) who tell us otherwise and offer us more of the same solutions. Do we really believe we can grow our way to peace, prosperity and sustainability?

Morpheus, in the movie The Matrix, offers Neo a choice between a red pill and a blue pill. The red pill will allow Neo to see the truth while the blue pill will allow him to continue his life in ignorant bliss (Ignorant of his own slavery). When given the choice, do you live on in ignorance (and potential bliss) or do you lead what Aristotle called 'the examined life'...

If we keep doing what we are doing inside the same system, we will continue to get the same results. This is the truth. Are we being honest with ourselves?

It is easy being Green

My neighborhood Trader Joe's provides every customer who brings in a reusable bag with an entry ticket to a weekly drawing for $25 gift certificates. A few weeks back they counted up the number of entry tickets and it totaled 14,634 in one week!!! That is amazing.

I've been reusing and refusing bags for over 30 years now and I estimate my own savings would be enough to fill a small swimming pool with bags. Just think how much unnecessary packaging could be saved if we all just brought our own bags?

Without knowing the cost of bags I would still estimate Trader Joe's saves at least $1,000 per week when you add in the full cost of ordering, storing and handling new bags compared to when customers bring their own.

My coop makes a contribution to community groups and lets customers vote by placing a bean in a bucket. Both approaches appeal to me a lot better than the old standby of giving the consumer $.05/bag off their total.

It aint easy being Green

I'm trying to locate 9" x 12" and/or 10" x 13" envelopes. I would like to find the highest post-consumer recycled content as possible. I searched and searched and after an hour of searching the best thing I could find were 40% PCW in a natural brown. Where is the market for recycled office supplies and why aren't there more?

My effort to find security envelopes with any recycled content came up empty. Please let me know if you have a source for such items.

It shouldn't be this hard being green. Where are the entrepreneurs to supply this market? Where are the responsible manufacturers? I realize this market is driven by economies of scale which makes it difficult for recycled products to compete with virgin when so many people purchase strictly on price.

Form 1099-Misc due February 2

This is a reminder that 1099s, with a few exceptions, need to be mailed by Monday, February 2nd. Fines for late filing start at $15 per return (if filed within 30 days of the due date) and go up to $50 per return if filed after August 1 or not at all.

Businesses (and non-profits) need to send them to any individual or partnership if you paid them more than $600 during 2008. Professional fees to attorneys, doctors and other professionals are included. Payments to corporations are included only if they are for medical, legal or fishing activities.

You also need to send one if you paid someone more than $10 in royalties.

You can read the more detailed general instructions here or the more abbreviated 1099-Misc instruction here.

Finally, you should have a policy to require your non-corporate vendors to complete a Form W-9 prior to disbursing any payments to them. This will insure you have the required information you need at year end to properly prepare your 1099s. Don't wait until January to start gathering this data.

Dr. King and servant leadership

I attended the 24th annual "Keep Alive The Dream" tribute to Dr. King today hosted by the World Arts Foundation. This is the first time I've attended after listening to the simulcast on KBOO for years. What an inspiring event.

I attended because my friend Sharif Abdullah was getting a Lifetime Achievement Award for his work on peace and dialog. Sharif is an inspiration to me because of his commitment to creating a world that works for all. I too am committed to that goal.

This is a historic day. Barrack Obama and Dr. King both highlighted the importance of service to others if we are going to be great.

Dr. King said "Every man must decide whether he will walk in the light of creative altruism or the darkness of destructive selfishness. This is the judgment. Life's most persistent and urgent question is, What are you doing for others?"

So what are you doing for others?

Transparency and tough decisions

The Bainbridge Graduate Institute recently found it had to cut $1 million from its budget due to declining foundation support in these tough economic times. Rather than approach this problem from a top-down secretive approach, the leadership chose another path. You can hear the short news report here.

What isn't mentioned in the story is how they shared the problem with our entire community (students, faculty, staff, donors, vendors and more). This open process brought forth a ton of great ideas and allowed us to change the budget almost overnight.

Because it was transparent, the buy in and acceptance was unbelievable. We all were saddened by the decisions to cut staff but the open process made it palatable. A closed and secretive process would have created nothing but dissent, distrust and disharmony. Instead we are moving forward leaner and using our creativity to adjust to a new reality.

Perhaps the biggest problem was that the process generated so many good ideas that one could almost become paralyzed with too many options. This was not the case however as we sorted the ideas into a variety of pools opting for the low hanging fruit first before working our way up the tree.

Data security over the internet

Our firm just set up a 128-bit SSL encrypted extranet to store and transmit data. We have a personal and legal commitment to ensure that our clients' data is secure and protected.

I'm sharing this with you because it was just this past summer that I learned that sensitive information in emails, and even attachments to emails, can be stolen as the email passes through the internet. As I understand it, programmers in foreign countries write programs that search email for this data and can extract it when found.

Accordingly, you should never, never include your social security number, bank account info, credit card numbers, passwords, etc. in the body of an email or in an attachment, unless that data is encrypted. When we exchange this type of data with our clients, like a PDF of their tax return, we send them a encrypted link so they can upload and/or download securely.

US tax system not perceived as fair according to report

Yesterday I provided some information from The Tax Institute at H&R Block’s annual survey of taxpayers. The study found that most Americans weren’t very knowledgeable about the tax laws that impact their pocketbook and should inform their financial decisions.

What I didn’t report, and what I found more interesting, was the finding that a whopping 92 percent of those taxpayers surveyed could not describe the U.S. tax system as "very fair." While “very fair” may be a high threshold, it shows me there is a lot of room for improvement since the best tax systems are perceived as fair.

To me, the fairest system is a progressive system with increasing marginal tax rates. Increasing marginal tax rates means that tax rates increase as income increases, but only at the margin. For example, if marginal rates increased every $50,000, then the first $50,000 everyone earns would be taxed the same regardless of total income, while those who made between $50,001 and $100,000 would pay slightly more on that income than on their first $50,000. In this example, the marginal rate would go up until it reaches the maximum rate.

The theory behind this is based on the utility of money. The less money you earn, the more valuable and vital each dollar is to you, while the more you earn decreases the utility of the subsequent dollar. A $1,000 to me and a $1,000 to Bill Gates are two very different amounts.

I’ll continue with this discussion the next time I blog.

Would you pass the tax quiz?

An annual survey conducted by The Tax Institute at H&R Block finds a majority of taxpayers can’t answer even the most basic tax questions correctly according to their press release. Accordingly to Amy McAnarney, Executive Director of the institute, “Americans are failing Taxes 101.” The annual survey asks 1,000 people tax related questions.

Some of the findings:

70 percent said they were not aware of recent legislative changes that could affect their return despite the fact that changes could affect parents, first-time home buyers, long-time homeowners, military personnel, retirees, taxpayers impacted by Alternative Minimum Tax and more.

Nearly 60 percent didn’t know whether a deduction or tax credit trimmed more off the bottom line. (The correct answer is a tax credit.)

78 percent didn’t know what tax bracket they were in. (Knowing your marginal tax rate, including state and local taxes, can be very important when making financial decisions).

You can click through to their press release if you want more of their findings.

I think my key take away is that most Americans need help. Yes, you can do it yourself but are you really prepared to sort through and understand all the complexities?

It is my belief that having a CPA prepare your taxes and assist you with planning is a bit like using a slugger in baseball - They may not get a hit every time but occasionally, they hit it out of the park and that's why you pay them.

TriLibrium website is up

We've been super busy here at TriLibrium and I've had a hard time finding time to blog. I'm sure I'm not the first to find out how challenging it is to sit down and write something interesting and useful on a regular basis.

You may be interested to know that my firm's website (www.TriLibrium.com) is up and running. I invite you to visit and give me feedback.

Also, please let me know if you'd like to see me write about something specific and I'll attempt to address it.

Happy New Years!

We've had an intense winter over the past few weeks here in the Pacific Northwest and I apologize for not writing more often. However, one of my New Year's resolution is to blog more.

Here is to wishing you much success and happiness in 2009.

How do you source your copy paper?

Yesterday I had to print some handouts for the course I taught on Sustainability for CPAs. Our office is primarily paperless so buying copy paper isn't something we do very often but I purchased three reams for us to have on hand.

And here is the cool part. The paper we purchased was FSC-certified made from 100% post-consumer waste. It was manufactured using Green-e 100% Certified Renewable Energy (from biomass), and processed chlorine free. This paper is made without cutting down any trees or creating any additional green house gases.

And guess what? The manufacturer is Gray's Harbor Paper manufactured right here in the northwest (Hoquiam, WA). This is a locally owned company that closes the recycling loop by taking our local paper waste and turning it back into paper. I think everyone in the northwest should be buying their paper. Here is a great story about the company and their impact on the community.

Too much of the paper we recycle in the northwest is shipped across the ocean to China where it recycled using dirty coal-fired plants like the one pictured above then shipped back to us at enormous environmental costs. Harbor 100 should be the paper of choice for any northwest firm interested in sustainable economies.

More Than Money

I was at BGI this weekend where I help teach accounting and finance. Mark Albion, the former Harvard Business School professor, best selling author, and founder of Net Impact was there. I had met Mark before and found his book True to Yourself — Leading a Values-Based Business, and personal life story, inspiring as I ventured out into the real world with my MBA.

Mark's new book is called More Than Money: Questions Every MBA Needs to Answer and he was again talking about the importance of a creating a life of meaning. As an MBA, I have a lucky lottery ticket and the question is, what should I do with my lucky ticket? The cultural expectation is to cash it in for money and status, but is that really fulfilling? To me the answer is no.

Mark told the story of how he used his MBA skills to help a small scale fisherman. You can see that story here in a 3-minute video I hope will prompt some discussion and thought about sustainability, business and life.

Bullish on Sustainable Business

Our accounting firm is in the process of adding staff which means we are growing. As a new firm, it would be hard to get any smaller but still, I remain bullish on the market sectors and business organizations committed to sustainability.

Why in the face of continued negative economic forecasts am I hopeful? Because I know that humans have and will always have an economy and that the green economy is the economy of the future and will continue to grow accordingly.

While the old economy is changing, the leading green edge is vibrant. For example, here is a recent report showing LEED building starts are up five fold. Here is another story about a research report showing that 2009 will be a good year for green IT. I also suspect part of Barack Obama's economic plan will include a huge capital infusion towards building the green economy of tomorrow.

I meet every day with business owners and entrepreneurs. All of them are concerned about the economy while simultaneously excited about the future. Our job, as business leaders, is to remain hopeful and to build the types of triple-bottom line organizations we will need in the emerging economy.

Sustainable Networking

I have been a member of a couple networking groups and have visited numerous different ones over the years. These networking groups can be an important marketing and sales element of a business plan for small to medium size organizations. These groups usually allow just one representative from each industry who then provide leads to each other.

One problem with most of these groups is the dearth of like-minded green businesses, since this is not a criterion for membership. Fortunately, that is starting to change and I’m hoping this post will encourage others to start green business networks in their communities.

First, a little background. I helped start a “green” networking group here in Portland back in 2002. I was selling B2B in the progressive community and saw a real need for values based businesses to connect efficiently and economically. Informally, with folks from the ReDirect Guide and others, we started our own green networking group to make it easier for like minded folks to connect.

Our group was informal, with minimal dues (we asked everyone to throw in a few bucks each meeting) and met every other week at a locally-owned progressive restaurant. Everyone present got a chance to give a 30-60 second introduction and promo for their business before we’d feature a 10-minute in depth talk by one of our members. This group successfully served its function of helping all of us obtain more business.

That group has since dissolved but I recently joined a similar group here in Portland called Bridges, a green business networking group. Bridges is a bit more formal and structured but the key here is that the group uses sustainability as the primary screening tool for every member. Besides myself, Bridges has a green financial planner, physician, acupuncturist, builder, insurance broker, mortgage broker, real estate agent, graphic designer, marketing consultant, life coach, computer tech, geologist, and a real estate appraiser. This group is vibrant and growing.

It is really easy to start a networking group and I would encourage green business leaders to get one started in their area. Feel free to contact me if you need any help and/or post ideas and suggestions here to help others get started.

Business networking groups are a great way to learn, share and grow as a community. There should be green business networking groups across the country.

Health, Happiness and Sustainable Business

BGI Founder and President Emeritus Gifford Pinchot will be giving an address at the Green Festival in San Francisco next week entitled "Health, Happiness and Sustainable Business: The Happo/Dammo Ratio." I bring this up because Gifford's Happo/Dammo ratio is onto an important aspect of sustainability. Here is what Gif has to say:

The purpose of the economy is to support our health, well being and happiness. Unless we find ways to produce substantially more happiness with far less stuff and damage, our civilization is doomed. But this is a happy task, a joint project of sustainability experts, entrepreneurs, consumers, citizens, corporate innovators, academics, legislators and policy wonks. Given that most happiness comes from relationships and most of our consumption uses stuff symbolically rather than for its intrinsic value, it won’t be hard to make 1,000 fold improvements in the ratio of happiness to stuff. These innovations will often be very popular, cost-effective and profitable. In this direction lies hope and true prosperity.

Our current economy is driven by a take, make, waste consumption cycle and as long as we stay in this paradigm the future looks bleak. However, as Gifford correctly points out, we have an incredible opportunity to expand our economy by figuring out how to increase happiness while decreasing stuff. We have an unlimited and endless supply to provide comfort, joy, laughs, smiles and support. These have no environmental or social costs.

The cycle of giving support/getting support/giving support is an endless human cycle that has been around as long as humans have walked the earth. It was the basis for tribal economies. Maybe we can learn something valuable from an economic system that has been around for 100,000 years.

My bank is making loans

Last week I mentioned that I was applying for a bank loan (The Green CPA: Local Banks Still Making Loans) and that I would report back on my results.

I stopped by my bank this morning and found out my new business was approved for a VISA card as well as a $10,000 3 to 5-year fixed rate loan to acquire equipment. The loan fee was 1% with a 10 percent rate. This feels a bit steep but there you have it.

I'm sure I could have gotten approved for more but I'm not likely to use this loan since I have access to cheaper sources of money. The point of the story remains the same - local banks with whom you have a relationship are making loans, even in this uncertain market.

BGI Pride

Kevin Maas, a Bainbridge Graduate Institute colleague, and his brother Daryl, are the founders of Farm Power Northwest. Tomorrow they break ground for an anaerobic digester (shit composter) up in the Skagit Valley. The digester creates energy from manure by burning the methane and thus preventing the release of this dangerous greenhouse gas. It also reduces runoff and odor usually associated with dairy farming “waste.” This particular digester will handle the waste from two farms.

Some of the dignitaries on hand for the groundbreaking include Congressman Rick Larsen and representatives from the US Department of Agriculture to present a $500,000 federal grant; state senator Mary Margaret Haugen and "First Husband" Mike Gregoire will present a $500,000 state grant (joined by representatives of Skagit County and the Washington Department of Community, Trade, and Economic Development). Shorebank Pacific is their lender.

Kevin developed his business plan while attending BGI and I just wanted to give he and Daryl a huge thumbs up for their continued success and for the achievement of this important milestone.

Tax breaks for the green community

The latest tax bill has some nice benefits for the sustainability community to help us green our economy. For instance, starting in 2009, employers can give bicycle commuters a tax free fringe benefit of up to $20 per month to cover the cost of pedaling to work including repairs, storage, accessories and even the cost of a bike. Employers and employees should act now to put this in place starting January 1st.

Also, the credit for residential energy saving improvements will return in 2009. The 10% tax credit has been expanded to include biomass fuel stoves as well. You may want to delay the installation of skylights, windows, outside doors and high-efficiency furnaces, water heaters and central a/c units until next year in order to claim the credit. This credit will be on the books through 2017 so you can use it in 2010 and beyond if you don’t get your project done next year.

One of the challenges for the alternative energy market is financing, and tax policies can make or break projects. Trying to determine long-term cash flows with unpredictable tax policies makes the challenge even harder so it is good news that many existing energy tax breaks have been extended:

• Coal and wind energy credits as well as the biodiesel credit have been extended through 2009.
• Energy credits for biomass and landfills lapse after 2010, as will a new credit for energy from waves and tides.
• The 30% solar energy and fuel cell credits however get a long-term extension through 2016. 
• The residential solar credit also lasts through 2016, and the $2,000 cap is repealed. 
• The law that allows commercial realty to expense energy saving improvements will run through 2013.

Credit Crunch tips

The professionals at Grant Thornton have released an excellent report providing guidance on how to survive the credit crunch.

The 36-page guide was a quick read and offered 10 practical steps to survival. It also gave a nice overview of the causes of the current crisis.

While most of the tips are simply good business practices, they become super important during a downturn.

A few of the important reminders:

1. Cash is King!!!
2. Get closer to your bank
3. Evaluate your customers and suppliers

The guide goes into additional detail. I recommend it for anyone with CFO responsibilities.

Local Banks Still Making Loans

I attended a Sustainable Business Network of Portland luncheon this week and the speakers were Dave Williams from Shorebank Pacific and Margo McCoy from Albina Community Bank. While they both talked about the causes and ramifications of the banking crisis (Insert macroeconomic lecture here), they also made it clear that their banks and many other banks had money to loan.

What has changed is some of the lending ratios (50-70% of equity rather than 90%) and collateral valuations. Due to declining asset values, firms that at one time borrowed 80% of an asset's value may actually be upside down due to market declines.

While there are problems with the banking industry and many banks have temporarily stopped loaning to each other, banks make money by making good loans and companies seeking funds shouldn’t give up. Having a solid banking relationship is important for every business both in good times and in bad.

I’m actually filling out a bank loan application today to buy some computer equipment for my new firm. I am hoping for a response early next week. I’ll keep you posted.

Sustainable money

Did you know that 45% of all bills in circulation are $1 bills and their average lifespan is 21 months? (wwww.http://www.moneyfactory.gov/document.cfm/18/2041). I believe these bills are made from a combination of linen, cotton and paper but I couldn't locate this exact information.

Compare that to the Life Cycle of $1 coins that the US Mint are now promoting (http://www.usmint.gov/mint_programs/$1coin/index.cfm). The average life of a coin is closer to 20 years and they are completely recyclable into new coins at the end of their life. This is a good example of closed loop manufacturing system. Not only is this good for the environment, but it is also good for the Treasury which hopes to save millions annually due to the durability and cost advantages of coins.

Like most ecological choices, the best option usually saves money and ecological resources when measured over time. I just picked up my first $25 roll of the coins and plan to begin using them as often as I can.

A trillion here, a trillion there

While Congress debates the $700 billion Wall Street bailout, I've heard nothing in the press reminding us that this is coming on the heals of a $300 billion housing bill signed by the President back on July 30th. That is a staggering $1 trillion spent on this fiasco. Add to that the nearly $1 trillion we've spent in Iraq and it is no wonder our standard of living is declining.

I currently oppose the bailout for the following reasons:

1. It is being rushed through with little discussion, debate or analysis of alternatives. This is the Bush/Paulson plan.

2. It contains no reforms and simply gives the money to the same players who created the crisis.

3. It provides not a single dime to homeowners or want to be homeowners. What would $700 billion do for the economy if we targeted this money towards the housing needs of citizens?

4. I don't trust President Bush or his administration. I hate to say it but I'm also skeptical of both McCain and Obama here as well. Both are being advised by Wall Street insiders who will benefit from this bailout.

5. The negotiations have been secretive.

I've just been reading the latest news and the House is going to debate this massive bailout for a total of 3 hours before they vote.

I would love to see our country invest $700 billion in a green economy. That type of investment would go a long ways toward creating a post-carbon economy. Instead, I'm worried that we are doing nothing but temporarily propping up a decaying system.

CPE class on sustainability for CPAs

I am proud to announce that I'll be teaching a Continuing Professional Education (CPE) class for CPAs entitled "Sustainability: What it means for the profession, you and your clients."

The class is scheduled in Vancouver, Washington on December 10th from 1-5pm. It will qualify for 4 hours of CPE credit.

This may be the first CPE class for CPAs to focus on sustainability and what it means for the profession and their clients. I'm currently working on the outline but here are some of the points I intend to cover:

** Get up to speed on sustainability and what it means for business
** Understand the business case for sustainability
** Get an Introduction to triple-bottom line accounting
** Discover the opportunities and risks in this rapidly emerging paradigm
** Discover resources to help your clients
** Look at evolving metrics
** Look at changing reporting requirements and initiatives

Why I don't trust corporate media

Last night CBS Evening news did a story that purported to compare the impact of Obama’s and McCain’s tax plans on three separate Ohio families.

If I recall, all three families had three children. The story discussed some of the details of each candidate’s plan (special credits, deductions, rate changes, etc.), then used an Ohio CPA to crunch the actual numbers of these three families.

The first family had an income of $32,000, the second family had an income of $64,000 and the third family had an income of $213,000.

The CPA determined that the first family would see no change in their taxes under McCain’s plan but would get a refund of $2,200 under Obama’s. The second family would save $225 under McCain’s plan and $500 under Obama’s.

Unfortunately, we never found out how the plan would impact the third family. Instead, rather than provide a specific answer as they did with the first two people, the story focused in on Obama’s plan to raise the top two marginal rates from 33% to 36% and from 35% to 39.6%, respectively. Due to deductions and exemptions, these top rates would only apply to people with income of $225,000 or more. It should also be noted that these are marginal rates and not effective tax rates, meaning the higher rate only applies to the income earned above the $225,000 threshold. All the income below that threshold would be taxed just as it is now.

Rather than give us the actual numbers, the CBS Evening News story pointed out that the third family was nearing the line where the new marginal rates on Obama would kick in. “If this business owner were to make more next year, they could find themselves in the 33% bracket which under Obama will become the 36% brackets” said the reporter. They then cut to the taxpayer who says he’d be hurt if his taxes went up 8% (from 28% to 36%).

This is dishonest and deceitful reporting for a couple reasons. First, why didn’t they compare apples to apples and just tell us how the plans would effect the three families? Additionally, as I pointed out above, the rate increase Obama support is at the margin, so the third family’s taxes wouldn’t be going up by 8% even if they got that $12,000 bump in income.

I believe CBS Evening News has enough resources to get this story right and that this was a blatant attempt to distort the information and change the impression on viewers. There can be no other explanation other than media bias.

I’m not a member of the Democratic Party or an Obama partisan, but I believe we need accurate and truthful information to make good decisions. I was particularly interested in this story so I could learn something relevant to my profession, unfortunately, CBS let me and the rest of America down.

Domestic Partner Tax Filing in Oregon

The Oregon Dept. of Revenue (ODR) is preparing forms and special instructions to accommodate domestic partners in 2008 due to the new law finally recognizing these relationships.

Two new “statuses” have been added: Registered domestic partner filing jointly and Registered domestic partner filing separately. For ODR tax purposes, if domestic partners register in an Oregon county, they will be able to file as registered domestic partners. If the domestic partners are registered outside of Oregon, they will need to register in an Oregon county.

Because the federal government does not recognize domestic partners, it gets a little convoluted going from federal Form 1040 to the state return.

The partners will need to file their single federal returns and then prepare another federal return “As-if” a combined federal return were allowed for domestic partners. This “As-if” return will drive the amounts on the state return except for one major difference. The federal tax subtraction shown on the Oregon return will be the amount of the actual federal tax liabilities, less any economic stimulus rebates received.

While this solution isn't perfect, it should help many couples save money by filing together.

Wouldn't it be nice if the federal government would move into the 21st century and allow consenting adults to marry and/or partner up in anyway they so choose?

Systems

Back in May I wrote about accounting systems (What Accounting System Should I Choose?) where I talked about accounting systems for startups.

I can't stress enough about the value and importance of getting the right software and creating appropriate systems.

Yesterday I was at a new client's office helping them set up some industry specific software to interface with QuickBooks. They called me because of my QuickBooks expertise and to see if I could help them with the integration. I went to help despite no previous knowledge of this specific third party application.

Prior to me setting up their new system, they spent hours, upon hours writing up invoices, POs, and work orders to run their business. Now they can do these same tasks in minutes and have better records and a far more professional appearance to their customer using their new software.

The business owner was also spending at least a day/month reconciling his VISA/MC deposits, while being completely frustrated at the process. I also got him set up with QuickBooks merchant services so these tasks can be automated in the future. This change will probably cost him an additional $25/month but he will free up an entire day and eliminate a major source of frustration. A poorly designed system had him pulling his hair out.

The industry software he acquired (Mitchell 1) costs about $250/month but it allows him to go from being an amateur to working like a professional overnight. I'll bet this software has an off the chart ROI for him as he goes forward. It was clear that his business was severely hamstrung trying to operate on QuickBooks as he fought to make his system function. Now he has an elegant system that works for him and will give him the information he needs to run his business.

While these additional costs are significant to a startup, a good business must invest money to make money and his investment in the proper systems should pay huge dividends.

Residential Energy Tax Credits Set to Expire

Hurry!! At the end of 2008, without Congressional action, the only remaining federal residential energy tax incentives available for homeowners will expire. You must act soon if you want to take advantage of the following tax credits:

FUEL CELL POWER PLANT – A credit of 30 percent, to a maximum of $500 per ½ kilowatts of electricity generated by electrochemical means from a qualified fuel cell plant installed in the taxpayer’s primary home located in the United States.

SOLAR ELECTRIC AND/OR SOLAR WATER HEATING SYSTEMS - The credit is 30 percent of the cost, with a maximum cap of $2000, for the installation of a qualified system in the taxpayer’s primary or secondary home located in the United States.

These credits are nonrefundable and can only be used to offset your income tax in the current year. Any unused credit can be carried forward to future years. No credit is allowed for expenditures related to hot tubs or swimming pools. You may lose part or all of the credit if you are taxed by the alternative minimum tax.

The House passed H.R. 5351 (Renewable Energy and Energy Conservation Tax Act of 2008) back in February 2008, which would have extended these credits as well as others to 2009 and beyond. Unfortunately, the bill is stuck in the Senate and faces a threatened veto so it looks unlikely to pass this year. The cost of the extended credits would have been funded by reducing subsidies to the oil and gas industry. Hmmm, I wonder if that has anything to do with the hangup?

What inspires you?

I love this question.

What have you been doing?
What is working well?
Give me a highlight of your day?
What do you want?
Tell me a story when the team was at its best.

These and countless other questions are the foundation of Appreciative Inquiry (AI).

We studied AI at the Bainbridge Graduate Institute but that was just a little taste. Last week I attended a 5-day morning seminar learning more about the practice.

AI is an approach to facilitate change. The theory is that by changing the questions we ask we change the world by discovering what is and by bringing the "best" of the past consciously into the future.

Change the questions.....Change the world.

People and organizations move in the direction of what is studied. Study problems and you get problems. Study success and you get success. Problem solving tends to narrow the thought repertoire while AI expands it by engaging enthusiasm, dreaming and creativity. Problem solving tends to be backward looking while AI is about projecting forward. Both approaches have the same goal --> moving a person or organization from the current situation to a preferred situation. The difference is in approach, and I would add effectiveness.

You can learn more about AI by visiting the AI Commons.

Ask some positive questions today and see how people respond. AI offers great promise in our efforts to change the world.

The high cost of not following the rules

A client of mine is out of business. They were struggling for the past two years operating in the construction industry and the economic downturn hit them hard. While the economy played a part, the truth is they were poorly managed.

I won't go into all the details but they didn't take advice from me or their other advisers and failed to deal with the details and realities of their situation. They acted as if little were wrong despite the fact they weren't paying their payroll taxes (This is a ominous warning sign). People responsible for payroll decisions can be held personally responsible for the payroll trust fund taxes.

While I was working with her to settle past tax problems, I recommended that she obey the first rule of holes (When you are in a hole, stop digging) and that she should seriously consider closing shop if she couldn't meet her payroll tax obligations.

I subsequently met with the owner and a team of mentors and advisers about a year ago to help them understand some of the accounting and business issues they faced. All the advisers agreed with my advice and that closing would at least stop the bleeding.

Needless to say she pushed on and continued to rack up debt. She closed the business last month and now owes over $100,000 in trust fund taxes. The IRS will lien her home.

The ultimate kicker however is that she also failed to renew her corporate license, let it lapse and is now personally liable for many debts that would otherwise have stayed inside the corporate entity.

I feel bad that she has all these problems but leading a business requires attention to detail and making sure you follow the rules.