- JLR & Associates Newsletter Issue #4, June 2005
- JLR & Associates Newsletter Issue #5, September 2005
- JLR & Associates Newsletter Issue #6, January 2006
- JLR & Associates Newsletter Issue #7, April 2006
- JLR & Associates Newsletter Issue #8, July 2006
- JLR & Associates Newsletter Issue #9, October 2006
JLR & Associates Newsletter Issue #4, June 2005
Inventory Management
Stale Inventory and ceased production lines = Reduced Cash Flow The closer your eye on inventory, the better your cash flow. A few guidelines:
- The most important set of metrics is to understand the inventory levels inherent in your industry…read the peaks and valleys and where the inventory levels are in relation to these.
- Avoid a one Supplier Fits All relationship – Look for at least two supplier sources to provide your inventory. You don’t want your business to stop suddenly because your only supplier is no longer doing business with their overseas market due to government authorities issues or political strife.
- Always make sure you have what your system shows. If an adjustment is required to bring the inventory levels back to actual, then you must determine what caused that adjustment. For example, one of our clients runs a machine shop that builds components for use in the geotechnical markets. He uses a bill of material module that effectively ties the costs of components to a finished good price. Initially, a large adjustment had to be made to bring his inventory levels in line with the physical inventory count. But after that, we had established tight enough controls that ensured no further adjustments were necessary. Until one month end, we found an adjustment was required. After examining the transactions within the Bill of Material module, we found a particular component was setup with incorrect cost allocations. Article written by Janice L. Ramirez
Human Resources
Payroll Outsource: To a Company’s Advantage?
More than one-half of the average finance department’s resources are devoted to processing functions. It is to a company’s advantage to automate as much as possible. With the added Sarbox compliance issues, along with the regular financial reporting requirements, streamlining control processes wherever necessary is important. Outsourcing traditional finance department functions such as payment processing allows you and your people to concentrate on compliance issues and risk mitigation.
Private Company Financial Reporting Issues
AICPA Private Company Financial Reporting Task Force Issues Report A task force comprising representatives of key constituents of private company financial reporting released its final report on February 28 recommending that generally accepting accounting principles (GAAP) for private companies be developed based on concepts and accounting that are appropriate for their distinctly different needs.
The task force based its recommendations in large part on research conducted with over 3,700 lenders, investors, sureties, business owners, financial managers, and public accounting practitioners. The AICPA will work with the FASB and the Financial Accounting Foundation on the next steps to address these recommendations in order to meet the needs of all constituents of private company financial reporting.
Gary Cademartori, a current member of the Business and Industry Executive Committee, served on the Task Force, and an article by Gary about the thorough process that the Task Force engaged in to complete its work will be featured in the Business & Industry supplement to the April CPA Letter which was available in early April.
The report, information on the research conducted, and additional information about the task force are available at PCFRTF Report contained in the following link:
http://www.aicpa.org/members/div/acctstd/pvtco_fincl_reprt/index.htm
Article featured provided by Business Ind. News, March 22, 2005 Issue#78
Economy
Employees Less Optimistic Than Management About the Economy A survey by Hudson Highland Group found that the confidence of 9,000 U.S. workers surveyed in February fell to its lowest level in 12 months.
Fears of job loss rose to the highest level in more than a year: 21 percent of respondents were concerned about losing heir own job, compared with 19 percent in January. Further, the number of workers who said they expected their companies to lay off staff in the coming months rose to 18 percent in February from 16 percent a month earlier.
Articles featured above were provided by Business Ind News, March 22, 2005 Issue#78
In the News…
Search Begins for Inc. 500 Fastest Growing Private Companies Inc. Magazine has begun its search for the fastest growing private companies for their Inc. 500 list. Privately-held companies, based in the US, with four full years of operating history are invited to apply. Companies must provide their revenue for 2001, 2002, 2003 and 2004 to qualify for consideration. They can do that via the online application reached via Inc.com’s front page at www.inc.com.
Article featured by Business Ind. News, May 2, 2005 Issue#80
JLR & Associates Newsletter Issue #5, September 2005
Financial Reporting
An ‘accounting change’ can increase profits – but are they bona fide profits?
Overstating earnings would seem to be a self-defeating strategy in the long run. An example of this is employing an ‘accounting change’ to increase profits.
Assume that for reporting purposes, a corporation’s fixed asset capitalization policy employs an asset life of 5 years. By amending the life to 7 years, the corporation can lower its depreciation expense. This represents an accounting change; the cost of replacing expended equipment through wear and tear does not decline. Nor does the corporation’s tax deduction or cash flow. Bona fide profits have not increased, however, if you are computing earnings per share, this accounting change does cause earnings per share to rise and should be disclosed. Further, the accounting change should be removed from bonus calculations if executive compensation is tied to earnings per share. If you are a public company, this is a compliance issue that one has to contend with under the rules of Financial Accounting Standards Board (FASB) so as to not give the appearance of smoothing earnings.
The flip side of this scenario is when the time comes to replace the equipment. The corporation will now be faced with the unattractive option of recognizing a loss for the amount which will have to be written off on the remaining undepreciated balance on assets that are obsolete and carry little value in the resale market. And if the corporation chooses to hold off on necessary purchases of up-to-date equipment, it will lose competitive ground.
Janice Ramirez is a partner with JLR & Associates and is the Chief Financial Officer for a nationally recognized non-profit based in Atlanta. She has significant experience in business transactions from her role at JLR where she assists businesses with financial management and reporting issues, financial staffing, compliance, risk assessment and strategy.
JLR & Associates Newsletter Issue #6, January 2006
End of Year…A few financial management checklist points to consider if you are on a calendar year schedule and gearing up for an end of year audit or review by an independent firm:
Auto Mileage
The Internal Revenue Service (IRS) issued the optional standard mileage rate to be used with the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning January 1, 2006, the standard mileage rates for the use of a car, van, pickup or panel truck will be:
The new rate for business miles, while higher than the 40.5 cent per mile rate used for three-quarters of 2005, is lower than the 48.5 cent per mile rate used in the aftermath of Hurricane Katrina when fuel prices exceeded $3 a gallon.
.
Have you considered developing a Risk Assessment Manual for your organization? Risk is an element of competing in a market economy. Organizations must be able to evaluate many types of risk including environmental, political, social, technological, economic, and financial. Identifying, measuring and managing organizational risks for improved performance published by the AICPA, includes a guideline which provides a Risk Management Payoff Model that includes a selection of performance measures to properly identify, measure, manage and report risks.
JLR & Associates Newsletter Issue #7, April 2006
When Client Staff Needs Audit Fieldwork Help
No one said conducting an audit was easy. No one said conducting an audit was easy. When the client's staff isn't familiar with the process or able to assist auditors in collecting appropriate evidence supporting the opinions contained in financial statements, conducting an effective and accurate audit becomes a significant challenge.
SAS No. 60, Communication of Internal Control Related Matters Noted in an Audit, states that "the independent auditor may draft an entity's financial statements, in whole or in part, based on information obtained from management during the performance of the audit." This assumes, of course that management, or their support staff, has the necessary information, in a usable form, or knows how to get it. The failure, or the inability, to produce such information as audit evidence constitutes a material weakness, which can impact financial statements and raise questions about the client firm's compliance with regulatory and legal requirements. And the preparation of a draft of financial statements by an auditor does not eliminate that material weakness as the auditor is neither part of, nor responsible for, a client's internal controls.
The information that is considered audit evidence varies by stage, type and purpose of the audit. It can include balance sheets, account statements, industry data, procedure documents, lists of board members, and more. In most circumstances, information provided by client management is testimonial or documentary in nature. In all cases, client provided information must be independently verifiable by the audit team and preferably traced back to the original source materials used in their creation.
Information provided by the client or gathered by the auditor should be evaluated for:
· Sufficiency and persuasiveness
· Quality
· Usefulness
· RelevancyFurther, SAS No. 103 amends paragraphs .01 and .05 of AU section 530, Dating of the Independent Auditor's Report, Codification (AICPA, Professional Standards, vol. 1) and requires that the auditor's report not be dated earlier than the date on which sufficient appropriate audit evidence supporting the opinions on the financial statements is obtained by the auditor.
It should be noted, that the failure to gather sufficient audit evidence is a common problem in the Securities and Exchanges Commission's (SEC's) fraud-related cases. If the financial statements made by the auditor are based on insufficient evidence, the probability that the auditor will unknowingly issue material misstatements by failing to issue appropriate opinions is increased. This puts both the auditor and the client at risk of financial loss, investigation by regulatory agencies and even criminal investigation or prosecution.
No one said conducting an audit was easy. Having high quality, accurate audit evidence in sufficient amount to confirm or disconfirm the opinions in financial statements is a great advantage that not only makes the auditing process easier, but reduces the risks to all parties involved.
Article by Janice Ramirez
JLR & Associates Newsletter Issue #8, July 2006
JLR & Associates Newsletter
Issue #8
July 2006
Greetings!
Do you have financial projects but lack the time or staff to complete the job expeditiously? Have you considered using a contract financial professional to handle your financial projects or oversight matters.
JLR specializes in the following areas:
- Part-time CFO Function
- Controllership Function
- Treasury Function
- Business Process Re-engineering
- Information Systems
- Regulatory & Compliance Audit Relations
- Risk Management
"Our approach to outsourcing services makes it possible for companies who lack the resources to hire permanent high level financial personnel in order to utilize specific expertise either part-time or on a project basis..."
SMB Growth Expectations Spell Consulting Opportunity for CPAs
AccountingWEB.com - Jun-26-2006 - In good news for CPAs providing consulting services to small and midsized businesses (SMBs), that market sector is bullish about its near term prospects but is failing to tap into key areas that could further spur growth, according to a nationwide survey of SMBs conducted by accounting and consulting services giant RSM McGladrey.
In the survey of more than 1,000 top executives at SMBs in manufacturing or distribution, 58 percent said they believe their companies are “thriving and growing”, and only 4 percent said that business is “declining.” But these companies are also missing out on key growth and revenue enhancing opportunities in tax planning and several other areas in which many CPAs offer specialized consulting, such as staffing services, going global, and accessing grants and other incentives from government agencies.
“The strength of small and midsized companies is their ability to innovate, but many of these organizations are overlooking important ways to ensure their businesses continue to thrive in the future,” says Tom Murphy, executive vice president of RSM McGladrey’s manufacturing and wholesale distribution practice.
Tax planning is one of the areas where SMBs most sorely need help, according to the survey. Among distribution companies, just 9 percent use research and development (R&D) tax credits, 6 percent use the domestic manufacturers’ deduction (DMD), and 9 percent use international tax incentives. Among manufacturers, 61 percent use R&D credits, 36 percent use international incentives, 64 percent use the DMD, and just 65 percent use state and local tax credits.
RSM further found that the manufacturing and distribution SMBs “are not enthusiastically responding to globalization,” and many view the global economy "as more of a challenge than an opportunity.” Half of the survey participants expect no revenue growth in this area, and only 25 percent said that globalization has helped them lower costs, while more than 40 percent said it has forced them to lower selling prices.
Among other things, the SMBs are missing out on is exporting or supplying to the major multi-national companies, according to Murphy. Also, only 10 percent or less of manufacturers and distributors surveyed make use of the many state and federal small business assistance programs available to them.
Despite projecting strong growth, many in both sectors lack sophistication in recruiting staff. The survey found that 43 percent of the SMBs surveyed “seek their main source of skilled labor in the general marketplace rather than mining technical, community and vocational schools for employees.” The SMBs’ generally rosy predictions for future growth belie the fact that “many organizations are missing key opportunities to grow and prosper,” RSM concluded. Similar SMB studies also show a general bullishness, but, unlike the RSM report, did not detect the market’s underlying inefficiencies.
We are a professional service firm who specialize in financial management and governance issues specific to small and mid size companies.
Our CFO services provides custom solutions to increase profits, reduce overhead costs, increase system and process efficiencies, and reduce employee theft. Our Controller services can assist your Accounting Office with expediting the financial close, ensuring proper account reconciliation or inventory process reporting, personnel oversight issues, governance procedures, documentation and revenue recognition methods. Call us today for a free consultation.Click on our website links below to read on...
email: janice.ramirez@jlrassociatesinc.com
phone: (404) 2022699
web: http://www.jlrassociatesinc.com
JLR & Associates Newsletter Issue #9, October 2006
JLR & Associates Newsletter
Issue #8
July 2006
Greetings!
Do you have financial projects but lack the time or staff to complete the job expeditiously? Have you considered using a contract financial professional to handle your financial projects or oversight matters.
JLR specializes in the following areas:
- Part-time CFO Function
- Controllership Function
- Treasury Function
- Business Process Re-engineering
- Information Systems
- Regulatory & Compliance Audit Relations
- Risk Management
"Our approach to outsourcing services makes it possible for companies who lack the resources to hire permanent high level financial personnel in order to utilize specific expertise either part-time or on a project basis..."AccountingWEB.com - Sept 25 -2006 - The second annual Employment Dynamics and Growth Expectation (EDGE) Report released last month by RHI and Careerbuilder.com shows hiring managers and employees with very different perceptions of the job market. Recruiting is more challenging today than one year ago, hiring managers say, with 81 percent reporting difficulty in finding qualified candidates, up from 55 percent last year.
Hiring managers said the primary cause of problems finding qualified workers was a shortage (52 percent), followed by inability to offer competitive compensation (21 percent). The EDGE report also found that more than 80 percent of hiring managers anticipate that it will be equally or more challenging to locate qualified candidates 12 months from now.
We are a professional service firm who specialize in financial management and governance issues specific to small and mid size companies.
Our CFO services provides custom solutions to increase profits, reduce overhead costs, increase system and process efficiencies, and reduce employee theft. Our Controller services can assist your Accounting Office with expediting the financial close, ensuring proper account reconciliation or inventory process reporting, personnel oversight issues, governance procedures, documentation and revenue recognition methods. Call us today for a free consultation.Click on our website links below to read on...
email: janice.ramirez@jlrassociatesinc.com
phone: (404) 2022699
web: http://www.jlrassociatesinc.com
