Virtual Bookkeeping Services

Intuit, makers of Quicken, QuickBooks and TurboTax, will shut down its free Quicken Online personal  finance site in six to nine months and put all its chips in with newly-bought Mint.com.

The company closed on its $170 million acquisition of Mint yesterday. That made Mint founder and CEO Aaron Patzer the new vice president and general manager of Intuit's Personal Finance Group, heading up Mint.com, Quicken Online and Quicken desktop products.

His first decision? Quicken Online must die.

"Over the next 6 to 9 months," he said to TechCrunch, "we will end-of-life Quicken Online and their customer's data will be migrated over to Mint."

That's a startling reversal for a company that bashed Mint before acquiring it. It's also a shock that a new Web 2.0 upstart so definitively trumped an established brand with far more customers.

But like the acquisition, the move is smart. Quicken and Mint couldn't coexist for too long because they serve the same purpose. Quicken has about 1.5 million users, but only 100,000 are active each month. In comparison, Mint's got 1.7 million users, and 700,000 are active each month.

So Quicken's throwing in the towel on its brand extension and going with the more engaging site.

The question remains how the company will manage two brands that are distinct from each other. Mint has a very glossy, light feel; Quicken's very red-and-gray, with style to match.

But it makes sense - Mint took off thanks to adoption by young professionals who weren't scared of putting financial data into the cloud. Quicken Online only bulked up after seeing Mint fly past it.

So what should users expect? Like Quicken Online, Intuit can cross-promote Mint from its Quicken desktop products and TurboTax software. But some customers still want their finances on their desktops, so Mint may explore how to store data locally for that group.

But leveraging the personal finance software with Intuit's tax software is where the move really shines: TurboTax may eventually suggest tax deductions to you based on what you've entered in Mint (401k, stocks, etc.).

Expect to see more moves on the mobile front, too. Mint's popular iPhone app will continue development, and perhaps we'll see desktop apps and mobile apps on other platforms. With Intuit's backing, there's also much more hope for international scaling, including Canada, which has been left out of Mint, much to Canadians' disappointment.

November 5th, 2009
Posted by Andrew Nusca @ 8:03 am http://blogs.zdnet.com/BTL/?p=26936

Lenders have a number of ratios and formulas they use to evaluate credit applications, to set ongoing debt covenants, and to review renewals.
 
I find two of them are most critical.  They are intertwined, and if you can meet them, the rest of the covenants and ratios tend to take care of themselves.
 
First ratio:  Debt to Earnings.  More specifically this formula would be total debt divided by earnings before interest taxes, depreciation and amortization (EBITDA). 
 
There are refinements to it.  For example, if the company routinely carries high cash balances, they can be used to offset the debt in the formula.  But, that's not usually an adjustment made for small and mid size companies, because cash balances are usually pretty thin.
 
Most mid market companies are either subchapter S or LLC companies under the tax code.  So, the company does not pay taxes.  But, the bankers will want some acknowledgment of the distributions necessary to the owners to pay their personal share of the taxes.
 
And, the earnings number in the denominator needs to be reduced for capital expenses (CAPX).  An easy assumption is that depreciation will equal CAPX, so no adjustment for either in the formula.  But, if CAPX is much different than historical depreciation, it needs to be recognized.
 
There are a few other tweaks that can be made to the ratio:  annual minimum property tax payments, rents, lease commitments, and some others, but the big ones are the debt, the projected earnings and depreciation.
 
What's the target?  One senior commercial lender recently told me his bank's range for this ratio was 3.0  to  3.5.  Meaning:  the ratio of debt to earnings should be no higher than 3.0 to one, but must not be higher than 3.5 to one.
 
Second ratio:  Fixed Charge Coverage.  This is EBITDA (same number as in the first ratio, so you can see how interrelated they are) divided by next year's fixed charges.  The fixed charges are interest, principal reductions on installment loans, and maturities.
 
Again, some adjustments to the fixed charges may be needed, like CAPX, minimum repairs above routine maintenance, taxes, leases, and so forth.  Each client is a bit different, depending on their business model.
 
Maturities in the next year can really cause this ratio to fall, especially lines of credit, so some adjustment is typically made to recognize that the routine lines of credit for receivables and inventory are rolled over. 
 
What's the target?  Same banker said 1.0 to 1.5.   So, the bank would like to see the ratio above 1.5, but it must be above 1.0.  As you can imagine, losses ruin both of these formulas.
 
An example:  Total debt $1,000,000.  EBITDA of $350,000.  Fixed charges (interest and principal maturities) of $180,000.  The debt ratio is thus 2.85 ($1 million divided by $350,000) and the fixed charge coverage is 1.94 ($350,000 divided by $180,000).  Targets met.  But, if you move the base numbers just a bit, you can see how quickly the ratios change and blow the targets.
 
From time to time, depending on credit conditions, banks move these targets around.  But, the interplay continues because interest and principal payments in the fixed charge ratio are driven by the debt balances, and both the debt ratio and the coverage ratio include earnings in the base.  To improve these ratios, earnings need to be higher, debt levels lower (typically meaning higher equity in the business) and interest rates lower.
 
They are two good ratios for any business to monitor.

Written by Randal Suttles CPA B2B CFO®