What is Management’s Attitude About Internal Control and Why Does It Matter?

 

By Bob Swetz
Controller Consultant | Tier One Services, LLC
As external auditors, accountants, and bookkeepers who are concerned about our clients, we need to be aware of management’s attitude towards internal controls.
So, what does that even mean, “Management’s Attitude?”
Let’s look at an analogy that many of us can relate to. Suppose a friend suggests that you should be more physically fit. He provides you with a detailed and customized workout routine that you are to perform 5 days a week. It’s a great plan and if followed will help you reach the goal of being fit.
Notice how I said, “the goal” and not “your goal.” You see, the problem is you aren’t too concerned about being physically fit, it’s just not something you care about right now and certainly not a priority for you. Given this set of circumstances, the chances of you doing the workout at all, let alone 5 days a week are slim, therefore the probability of you attaining the goal of physical fitness is also minute.
Why does management’s attitude about internal control matter?
Management’s attitude about internal control matters for a few reasons:
1.      Management’s attitude will most likely trickle down to the staff
2.      If management doesn’t care, the staff probably won’t care either
3.      Even if the staff does care, a poor attitude at the management level will tend to override the good controls that are in place (more on this is a future article)
4.      The best plan will fail if it is not properly implemented and monitored
Management having a poor attitude about internal controls doesn’t necessarily mean that management does not have integrity. It could be that they have too much on their plate to focus on internal control. As trusted business advisors, we may be able to fill a gap that management didn’t even know existed. It’s something to think about as we perform our day to day duties for our clients.
If you have questions or want to dig deeper, feel free to schedule a 15-minute troubleshooting session with me at http://bit.ly/Scheduling_Troubleshooting or connect with me on Facebook at https://www.facebook.com/bobswetzonline.

Should Your Organization Have an Accounting Policies & Procedures Manual?

 

By Bob Swetz
Controller Consultant | Tier One Services, LLC
Yes, and thank you for reading.
Well, I suppose you know where I stand on this, but let me expand a bit. This topic can be broken into 2 groups, both with the same outcome but perhaps for different reasons.
You have a small organization with a 1-person accounting department
This group might be leaning towards a NO answer, but that couldn’t be farther from the truth. A small organization with a 1-person accounting department should have a manual that documents their policies and procedures for continuity if nothing else. When all of the processing steps are in this one person’s head, what happens if they leave suddenly, get sick or are off for an extended period of time? I’ll tell you what happens if there is no documentation, mass chaos. On the other hand, if the policies and procedures are in a written document, the owner, manager or director can pick up right where the other person left off. There may be a bit of a learning curve, but at least there is a good starting point.
You have a large organization with a multi-person accounting department
This group is probably leaning towards a YES answer, but why? The general perception is that a larger organization is a bit more rigid in terms of their policies and procedures and would most likely have them in a written document. This document is critical for such an organization for several reasons. To name a few…
1.      There is a tendency to move staff from one position to another
2.      There can sometimes be high turnover
3.      With many hands in the cookie jar it is important to know who is doing what
The accounting policies & procedures document will help ensure a smooth transition from one position to another, a smooth intake for new employees and protection for staff when errors or irregularities occur.
Once you get on board with the need for such a document you will also realize the importance of keeping the manual updated on a regular basis, at least once or twice a year.
If you have questions or want to dig deeper, feel free to schedule a 15-minute troubleshooting session with me at http://bit.ly/Scheduling_Troubleshooting or connect with me on Facebook at https://www.facebook.com/bobswetzonline.

How can we make life easier for our accounting team while asking more of them?

It’s about automating and streamlining – and takes people, processes, and technology.

Let’s take a look!

Technology

  • Set up bank feeds
  • Record processes using a tool like Screencast-O-Matic and post the screencasts to a place that the team can access. This helps to get the most value from your top-level finance people instead of having them spend their time on more repetitive financial tasks
  • Record task checklists in a workflow tool like Asana, Monday, or Wrike. Start with recurring tasks and include decision-making trees.
  • Implement tools to automate tasks which don’t require human judgment, and to batch/streamline tasks which do. For example: memorized transactions, recurring transactions, transaction templates, Batch Enter, Find & Recode.
  • Don’t use spreadsheets or other separate stand-alone files if the main technology that you have can do the trick. Learn more about what it’s capable of. Unnecessary separate systems will cause wasted time. If a separate spreadsheet is necessary, design it to be an easily-updatable template.

PROCESSES:

  • Encourage electronic transactions and not use paper checks
  • Have vendors e-mail their invoices to a Bill.com address or Hubdoc address. Hubdoc will employ OCR and handle some of the data entry for you
  • Use a simple, standardized Chart of Accounts. Make sure it’s meaningful to the organization but don’t let it explode with details which don’t contribute to a decision-making process.

PEOPLE:

  • Control the quality of the information stream, so make sure that only well-trained, process-oriented people are sending information to the Accounting team.
  • Authorize new apps and processes such as the ones listed above. If the invoicing process can be streamlined by using TSheets for example, authorize a training and work with service providers to get the team trained on it.
  • Make sure everyone is on board for streamlining and if someone is resistant, decide whether you are going to provide coaching or engage in a different course of action. Someone resistant to process will kill a company.

The Fee for a Business Plan for a Startup

The price for a business plan depends on a few things:

  • whether the plan will be used to raise investment capital (higher) or to make decisions while creating the company (lower)
  • how large and how quickly the founder plans to grow the business (larger & faster = higher fee)
  • how experienced the founder is in creating & launching successful businesses (greater certainty for the client can be parlayed into a greater fee for you if you’re really good at this, adding value & not just documenting…but greater certainty for the client can also result in a downward price pressure if he is just looking for someone to document his thoughts that he’s already confident about and not looking to be influenced)
  • relates to the above point – whether this is designed to be a project documenting what’s in the founder’s head (lower) or a process in which the business design is in fact generated based on powerful, illuminating questions with a suite of the options presented (higher). This latter choice is a process in which language is treated as a generative act, not a descriptive act.
  • what the startup will be left with when the engagement is complete – something genuinely reference-able, usable, inspiring? Or a 100-page book that’s going to get stuck on a bookshelf?

Is it worth it to track inventory quantities, not just dollars?

 

How much money do you stand ready to make & keep from this data?
Uses of quantity-specific inventory information include:
* prevention & detection of theft and loss
* guard against being overcharged by the supplier
* highest ROI on giving of samples
* shaping of messaging & promotion strategy to focus on highest-margin products, not just highest or lowest sale price
* cash flow management from clarity on reorder points so disbursements aren’t accelerated, or on the other end of the spectrum, she isn’t left without product when a customer needs it
* prevention of losses when she has too much of a non-selling or slow-moving product and has to let it go at a fire sale
* once her business is large enough such that she has to file on the accrual basis, you can help her to make sure she’s not paying too much in income taxes (or too little and then pay extra for it later with money and time)
* assist in setting sales targets & plans for achieving those targets
Track.
Profit.
Repeat.

Accepting a Payment Plan from a Donor or Customer

 

If you accept a payment plan in any situation for any reason, bear in mind that risk is something you can play with and not just be subject to.
A payment plan introduces risk into the equation, because it’s replacing a certainty with an uncertainty.
So if you do ever accept a payment plan, propose terms that then reduce your organization’s uncertainty and/or compensate for the additional uncertainty.
Examples:
* AutoPay only
* Weekly payments, not monthly payments
* Pull from their bank account instead of the credit card account – lower fees for your organization – and only pull from the cc account if the bank account pull bounces, and of course if so then include that fee to get reimbursed plus a surcharge to cover the cc fees (check your state’s laws on this).
* Charge a financing fee
In my experience, a lot of organizations suffer for lack of training about how to identify and counter financial risks. My life certainly suffered for it. I did what I knew…and when I knew better, I did better.

Figuring Out the Real Value of a Compliance Project

How do you measure the value of a compliance service that you received…or provided?
A story recently came my way in which a business owner received professional services required to help his business be in compliance with federal and state laws.
Specialty knowledge was required to accurately complete the right forms.
He engaged the services of an expert who got the job done…but didn’t want to pay the invoice in full because it just didn’t seem worth the price tag.
As a buyer, have you ever felt like that?
As a service provider, has that ever happened to you?
Let’s hone in on why the business owner did not perceive value for the service. In this case, it was because there just weren’t that many documents produced.
I can’t blame the business owner for using what he knows – and a quantitative metric, at that – in order to assess value.
However, this needs to be a lesson for all of us, those who engage the services of others and those who provide services.
Notice what metric you’re using to assess value. And use the right metric.
“Number of pages produced” is an inaccurate and unhelpful metric.
Ask yourself:
* What isn’t possible without said documents
* Comparable pricing with other service providers for the same level of speed, accuracy, and other factors in the relationship
* Opportunity cost of his time if he were to do this himself
* Length of time that it takes anyone to be able to build the expertise to handle this
* Making sure the RIGHT documents get prepared
* The fallout from the documents being prepared incorrectly or late
The Emancipation Proclamation is only 5 pages long.
The Declaration of Independence is only 1 page long.
But “number of pages” is what he knows to use as a measurement of value in the face of nothing better.
Service providers: Teach your clients how to measure value, and you’ll empower them for life. And thereby get them present to the amazing value they have access to by working with you.
Business leaders: Beware of illusion of value that comes when you measure something that is NOT correlated with actual value. Get clear with yourself and with your service provider about the real indicators of value before your engagement begins, and you’ll both be delighted and better off after your project is complete.

Giving a Workshop? How to Short Yourself in One Easy Step

 

Pricing your workshop by using your materials cost as a point of comparison is an approach that is likely to leave money on the table and keep yet another entrepreneur playing small-time by default, all for lack of design.
Long ago, I made the mistake of using my costs as a determining factor for my price point. I practically gave away my product because my materials cost was tiny…but my expertise was exceptional.
Consider the following:
Charge what the market will bear.
See what other people in the area have charged for similar workshops. If it’s more than you were contemplating, yippee! Charge market rates if your audience is the same and your value proposition is the same.
Be aware of who you’re attracting to your workshop and what’s in it for them so you can decide who you want to attract and put together language accordingly.
When you attract people to your workshop who stand to make a financial gain (make or save money) by coming to your workshop, this can drive up the price.
When you attract people to your workshop who stand to save time by coming, then if the opportunity cost of their time is worth anything, this can drive up the price.
Your opportunity here is to decide who your audience is and then tailor your workshop message to help them realize the real value that’s on offer.
Take into account the relationship of risk to price.
The lower the risk for the attendee, the higher the price can be. There are many ways to lower risk, such as guarantees. If you want a list, I can start a list.
Take into account the social value of the event and the relationship to price.
Price something at $10 and you’ll attract people who are willing to pay $10. Nothing wrong with that. But you’ll have to generate a lot more volume to cover your house nut, much less create a real profit. If you’re a volume-generating machine and you want to make the results of a $10 workshop available to many people, go for it.
However, don’t believe that this is your only option.
Price the same thing at $5,000 (and have the value proposition aligned with that) and you’ll attract people who want to be in the same room as other people who can pay $5,000 for a workshop.
My point is that you can design how this goes and not assume that it has to be a certain way.

The Pointillism Maserati

 

Every action that we take either enriches us or impoverishes us.

When we have perfect clarity about which is which, we’ll have the keys to the vault.

Expenses

I was driving through downtown Naples on a beautiful October Saturday. You have probably heard – and rightly so – what a beautiful city Naples is, and certainly there is a lot of wealth here, in the city itself and on lovely Marco Island.

On U.S. 41, the main north-south road connecting the main cities in the area, there are plenty of luxury car dealerships. I don’t mean the Honda Acura. I mean Maserati, Aston Martin, Tesla.

That’s fine.

But these are, for most people, expenses. Most people will not leverage a vehicle into a (spoiler alert!) ROI.

In the heart of downtown Naples is the difference between spending 6 figures to enrich your life or spending 6 figures to impoverish it. Just where U.S. 41 turns to the southeast is a cluster of establishments that spells out that difference in 2 words:

art galleries.

Art appreciates in value. Most vehicles do not. In a given transaction, one type of disbursement is an expense whereas one is an investment.

But while the dealerships are all up and down U.S. 41, you have to go to one special place for those art galleries.

What are the questions you’re asking yourself right now?

 

Is It Profitable to Blog?

One of the many online marketing options available for businesses is blogging. A blog can act as a company’s daily newspaper, letting customers and followers know the latest news about what’s happening. It can also be a wonderful revenue-generator.

As long as the content of your blog is relevant to your readers, you can post on a wide variety of topics. You might want to let clients know about an upcoming sale, a new employee, or a tip related to a product or service of yours.

Some businesses make a separate revenue stream out of blogging. The most profitable blog today is the Huffington Post. Revenue from blogging can be earned in many ways:

  • By selling ad space to people who want to get their products in front of people who read your blog
  • From sponsors
  • By holding events your readers attend
  • From commissions from the sale of products on your site
  • By creating products and services such as membership sites which allow paid access to your resources

Making money from blogging through one of these revenue streams takes work. Not only do you have to find or create content, you’ll need to attract readers too.

You can also simply use your blog to generate a following for your products and services. The right content can improve customer service, educate customers on your products which leads to better client retention, or inform them of the benefits of your products during your sales cycle.

If you’re not a writer, there are plenty of freelance writers available that you can hire to create your blog posts.  You can also curate articles, meaning you can find existing articles and ask the author if you can re-publish theirs.

Creating a blog is easy with software like WordPress or apps like Blogger.com WordPress.com, and Wix.com, and all of these solutions are free.

Think about how a blog can impact your business for the better.