Xpenditure/QBO integration review

Recently I was chatting with one of my friends who owns a paper/label recycling business and who also holds a REALTOR license on the side. As most business owners do, we started sharing the ways we deal with admin and tax compliance.  Maybe someone has a magic bullet?  Nope. He was telling me about the leakage he has with his personal cash expenses (dining & entertainment in particular) that could be applied as expenses to his personal return related to his real estate commission income.

Like most commission income earners, he was missing out on capturing cash expenses such as when entertaining three clients for dinner and the bill for $800 comes, everyone pitches cash and one person puts it on their card. The person who covers the bill on their card and pockets the cash usually takes the paper bill and claims the expense. But if you pitch $200 cash and can’t take home the paper bill, how can you capture this expense if CRA/IRS asks for backup? I told him about a app that another friend uses for his property maintenance business called Xpenditure.

Xpenditure is a pretty cool app that helps capture cash expenses. In the case of the $200 cash expense for a shared cost of dinner, my friend could open the Xpenditure app on his phone, take a picture of the receipt, and Xpenditure will capture the details of the bill and upload the data to an Xpenditure expense report. The expenses captured on Xpenditure can then be exported to other accounting programs such as Freshbooks or Quickbooks.

I use QBO, so I went thru a trial of Xpenditure to see if I could integrate it with QBO. The process of setting up Xpenditure to integrate with QBO was pretty cumbersome and took several days (probably 10 hours total) and several times going back and forth with Xpenditure’s help-desk. One of the annoying things about Xpenditure is since its a small company itself, it has a small support staff. There is no 1-800 number clients can call for immediate assistance. Instead, Xpenditure clients have to deal with an online chat system and the response time from Xpenditure isn’t instantaneous. The result is once a query/question is sent to Xpenditure, it usually means that I’d have to follow up in a few hours or the next day for a response. This made it take longer to overcome integration issues.

When signing up for Xpenditure, make sure to use the same credentials and e-mail sign in as your QBO account. In order to integrate Xpenditure and QBO, they will need the same credentials. Once you have created an account with Xpenditure and downloaded the app to your phone, you will need to connect Xpenditure with QBO by going to the Advanced Settings of the Company Settings Tab. Scroll down to the bottom of the page to view  a list of supported software and choose the link button for QBO. Type in your credentials to make the link. You can then sync the two accounts which will upload your QBO accounts to Xpenditure.

You can use your cash on hand account in QBO to receive your expenses, or choose any other custom account to link to particular expense items. You have to go to the Personal Settings tab and create a payment method in order to link any particular expense. Call the category Cash Payment or something easy to understand. Once a payment method is created, capture an expense by taking a picture of a cash payment, the details will be captured to Xpenditure. Make sure to classify the captured expenses to the Cash Payment category that you setup in the Personal Settings tab. Also make sure to link this payment method to the account you want the expenses to flow into on QBO. When you are ready to export expenses to QBO, create an accounting report from the reports tab located in the expense main menu.

If everything was setup correctly, you should see the expense show up in the correct category in QBO under the expenses list. From that point on-wards, as long as you categorize your expenses correctly, the data should flow into QBO without any manual data input, this saves time and hopefully lots of money since you can claim more of your cash expenses.

I’d say Xpenditure is probably really useful for commission income earners as a way to capture more expenses, but like most accounting methods, it requires staff/users to use the process and stick with the system.  If they don’t report expenses, no amount of software is going to help.

“Fixing” McDonalds

A lot is being said in the business press about “fixing McDonalds”. I’m not sure that McDonalds is broken, but there are certainly lot’s of room for improvement. McDonalds share price has certainly stalled, its basically at the same level since 2011, although its still near all time highs.

Menu Items

There are too many menu items at McDonalds. This makes it harder for team members to prepare items; so consistency and quality suffer as a result. While focusing on rationalizing the menu, McDonalds should consider the items that add complexity to the system, which items have the best margins, and canalization. McCafe items have a high margin and are relatively easy to prepare, but a special sandwich with its own bun might be cannibalizing other menu items while also adding complexity to the system. Making it harder for team members to deliver consistently.

Better Food

Just as Coca-Cola shouldn’t change the formula for Coke Classic, McDonalds should never change the way a Big Mac tastes. But there are things that McDonalds can improve about some of its iconic menu items without changing the way they taste and feel. What about the beef? McDonalds could improve the quality of its beef without sacrificing taste by eliminating such things as beef raised with hormones.

Invest in People

McDonalds faces pressure from labour unions to increase the pay of its front line team members. McDonalds should confront this challenge head on by investing more in its own people. McDonalds should focus more resources on recruiting, training, and retaining its front line team members. McDonalds should take a holistic approach to its human capital by providing team members with a more valuable working experience. This could mean more sponsorship and support for team members who are making charitable impacts in their community. McDonalds should provide more resources to team members that will help them with personal development. Better trained, more motivated team members will ultimately deliver a better experience to guests.

Real Estate Investment Trust

It’s estimated that McDonalds could unlock at least $20 billion from spinning off its real estate holdings. McDonalds owns 45 percents of the land and 70 percent of the buildings its restaurants sit on. These properties would make a great foundation for the creation of a public REIT. This strategy seems like a no-brainer. REIT shares could be given to shareholders in a tax free way, and the REIT could grow by acquiring other retail REITs or individual properties as a way to diversify its portfolio and single tenant risk. The REIT could also be structured so that McDonalds continued to control the REIT either by a voting structure of by McDonalds remaining as the largest shareholder.  Spinning off a REIT doesn’t mean the sponsor has to loose control.


McDonalds could kick start earnings by re-franchising corporate owned stores. About 10 percent of McDonalds stores are corporately owned and 90 percent are franchised. A re-franchising strategy will bring fresh capital and energy into the McDonalds system. Although I loathe Burger King, re-franchising worked well for them.

Store Formats

At an earlier stage of its evolution, McDonalds thrived on standardization. Each McDonalds had the exact same format, each store looked the same. But as the number of stores grew, and McDonalds expanded into all geographic areas, its stores became more customized. A McDonalds in Manhattan has a different real estate footprint compared to a McDonalds in Buffalo. What about more McCafe’s with limited menus?  Just as every McDonalds doesn’t need a PlayPlace, McDonalds should explore satellite store formats as well as large scale destination formats such as a giant McDonalds on the Las Vegas strip, or a McDonalds resort with a McDonalds museum experience? If you think a McDonalds resort sounds crazy, check out the Bass Pro Shops Memphis Pyramid or Big Cedar Lodge.

S&P Suspended from Free Speech

I’m shocked and disappointed to learn that S&P has been suspended from providing ratings in the commercial mortgage market for a period of time.

The latest fines and restrictions against S&P are part of a long series of moves by governments around the world to curb the ability of markets to function freely with open information. Governments benefit from restrictions because they gain more control of market outcomes. Customers and investors should decide whether S&P’s opinions are credible, there is no need for governments to step in.

At the heart of S&P’s business is their credible opinion. Their credibility is based on the trust investors and other market participants have in them. If S&P provides lousy ratings not grounded in honest research and objective opinions, then less people will be willing to pay S&P for their ratings.  Its up their customers to determine the fate of S&P.

Is Gambling a Good Investment?

Is gambling a good financial investment? Probably not. Most players should view their gambling losses as entertainment expenses. Most recreational gamblers should be prepared to “lose what they came with”. They should ensure that their gambling bankroll does not exceed a reasonable entertainment expense. For most gamblers, their gambling expenditures should compare to a night at the movies or a beer with friends. Anything more is wasteful.

If a gambler knows how to gain an edge on the casino, how much should these “advantage players” devote to their gambling bankroll? Probably a small amount of their net worth. If your net worth is more than $1 million, and you can gain an edge on certain casino games, it might be fun to devote some hobby time to gambling. The casino games you can beat in the long run might include blackjack (by card counting), video poker, sports betting, and hold’em poker. If you’re a millionaire who is confident in their edge over the casino, and you can verify your edge using some statistical method, how should you determine your gambling bankroll?

Millionaire advantage players have the opportunity to develop large gambling bankrolls. But should they? I have a small gambling bankroll, but since I’m wealthy, my gambling bankroll might seem like a large dollar amount to most recreational gamblers. I’m comfortable with a gambling bankroll that represents about 1% of my net worth. Since most of my day is spent managing my business, and gambling isn’t my only hobby, I don’t spend much time gambling (although I do spend a lot of time studying gambling). Most of the time, my gambling bankroll is sitting in a few accounts collecting interest. I use these accounts as collateral to trade derivatives (a form of gambling) and to hold investments in casino companies. I figure that between gambling trips, I might as well grow my gambling bankroll by investing it wisely. Sometimes when my gambling winnings become so large that my gambling bankroll is an out sized portion of my net worth; I spend some of my gambling bankroll on food and lodging during my vacations in order to draw down big wins.

By viewing your gambling bankroll as part of your asset allocation, it helps frame the decision surrounding how much of your net worth should be devoted to gambling. Unless your goal is to become a full time gambler, a wise investor should keep their gambling bankroll as a small portion of their net worth. Most assets should still be devoted to productive investments such as stocks, bonds, and real estate.

In the long-run, advantage gamblers might come out ahead. But in the short run, their gambling generates many frictional costs. These costs include time spent practising, planning, scouting, and executing their gambling strategies. I view my own casino gambling as I view my derivatives trading. Both activities provide a rate of return that is uncorrelated to the rest of my investment portfolio. Gambling and derivatives are zero sum activities that carry transaction costs. These transaction costs make gambling and derivatives trading economically negative in the long run. But advantage gambling and derivatives trading are fun; and they may provide an opportunity to expand the efficient frontier.

Automating Financial Advice

With the growth of new information technology, and the additional comfort users have with life online, the financial services industry has come up with new ways to deliver financial advice.  At the extreme, there are a few new services available that attempt to automate the personal financial planning and investing process.  I’m excited about these new services, but at this time, I don’t believe we can totally automate our financial lives.

New services are emerging that attempt to automate the investing process.  Examples of these are Betterment Investing in the US and BMO InvestDirect in Canada.  In the case of BMO InvestDirect, users go thru an information gathering process and then BMO’s investment specialists will recommend portfolios guided by a standard model. So the InvestDirect service is quasi automated as it combines advice from a licensed rep with the benefits of automating certain aspects of the portfolio construction and monitoring process.

There is a lot of new research being done in the area of behavioural economics.  Much of the research is uncovering new psychological aspects of our financial choices.  Researchers are confirming what many practitioners already know: there is a difference between how we should invest and how we actually do invest.  The psychological aspects of financial planning are critically important to providing good financial advice. Practitioners also know that “good” advice is not always the most efficient or rational advice.  Many times, the advice that “good” financial planners give is based on non-economic criteria.  These non-economic criteria often include making clients feel “peace of mind”. This peace of mind enables clients to spend less time and energy on their financial lives and more time and energy on other aspects of their lives that matter more to them.  This is the key to providing good financial advice.  Good financial advice is personalized, but also holistic.

Automating the process of financial planning is appealing, but automation does not take into consideration personal psychological traits that are uncovered by a deep personal relationship and an information gathering process that at least in some part needs to be conducted face to face.

Unfortunately, many financial planners are really just selling financial products.  And so the face to face meetings are more likely part of a psychological sales strategy.  For clients of these advisors, online services that attempt to automate the financial planning process will be a great benefit.

Downtown Summerlin only successful with increased residential density

Downtown Summerlin is positive for the surrounding community and Las Vegas generally. The new shopping and office district will provide more shopping and restaurant options for residents.  But in the long run, to avoid cannibalizing nearby retailers, downtown Summerlin must add more residential density nearby.  This means developing adjacent vacant land into multi residential midrises and other higher density mixed use properties.  The Howard Hughes Corporation understands this.  They are increasing density for their other major MPCs in the Woodlands and in Hawaii. The key question for Summerlin watchers is how quickly can Howard Hughes Corporation add this density?  The longer it takes, the greater the risk of Downtown Summerlin being a drain on the company instead of a cashflow producer.


TWC Commentary (Clublink)

I live and grew up in Southern Ontario, and the first stock I ever owned was Clublink back when Bruce Simmons was at the helm. I still play many Clublink courses on a regular basis, but I’m not a Clublink member. Below is an off the cuff analysis of what Clublink is part of today. It’s now under the umbrella of TWC which is listed on the TSX and controlled by Morguard’s Rai Sahi.

TWC is essentially two separate operating businesses: golf course operations and rail/port facilities. Its a strange combination, and I wonder whether this is beneficial to shareholders or whether the main driver is Rai Sahi’s ambition? Either way, Sahi is a successful leader and he’ll likely create value for shareholders regardless (and still make some money for himself, since he owns almost 70% of the equity and votes).

Clublink owns and operates 45 golf clubs in three distinct regions (Ontario, Quebec, and Florida). I was at dinner at National Pines, a Clublink course in Barrie Ontario, and our table was commenting on various Clublink courses. One person at our table actually worked in IT for Clublink and mentioned that National Pines was actually just leased and operated by Clublink, and he confirmed that this was also the case for Bond Head. This was confirmed after I examined the AIF for 2013.

Clublink also formerly had an operating agreement with Delta resorts to operate the hotel properties, but this agreement has been mutually terminated, and Clublink will now operate its resort properties internally.

Clublink shared the distribution of its segmented revenue by type, here are the details:

Annual Dues 39.96%
Corporate Events & Daily Fees 22.46%
Food & Beverage 28.80%
Room & Other Merchandise 8.78%

Also, based on the information disclosed in their AIF, Clublink is achieving an operating margin of about 30% from its golf courses. Labour represents about half of the operating expenses. Long term borrowings represent about 55% of property, plant, and equipment. Would it be possible for Clublink to create a REIT to leaseback the golf properties back to Clublink?

Clublink has some mortgages against its properties ranging in rate from 6.2% to 8.3% and the mortgages are laddered from maturities 3 to 15 years.

Deep into note 13 to the most recent quarterly financial statements, there are details of related party transactions. Strategically, TWC has an open revolving credit agreement open to Morguard Corporation for $30,000,000 at TWC’s borrowing rate plus 10 bps. More importantly, TWC make a similar facility availably to Paros (a holding company owned by Sahi) for $5,000,000 at prime plus 1% and the same terms are provided by Paros to TWC. Sahi is a very strategic operator. There are also officer loans outstanding of about $1.2 million bearing interest at 3% (a pretty favourable rate).