Accounting Errors Can Be Devastating

Posted on by TJ Van Voorhees

The Sarbanes-Oxley Act created a new regulatory authority called the Public Company Accounting Oversight Board (PCAOB) in 2002.  It replaced the American Institute of Certified Public Accountants (AICPA) rules about auditing businesses.  The law was the most comprehensive change in financial reporting since the Great Depression over eighty-five years ago.  Please see the article titled “The Financial Impact of the Sarbanes-Oxley Act on Small vs. Large US Public Companies” by the Economics Department at the Haas School of Business at U. C. Berkeley for more information on the Sarbanes-Oxley Act.

One of the biggest lessons learned from this legislation is the cost of accounting mistakes can be unforgiving to a business.  One of the most insidious accounting errors made by most companies is under pricing their products and services.

Many businesses try to break into new markets by under-cutting their competition.  In the short run, they can gain new customers.  However, the marginal cost of each new customer acquired, is exorbitant over the long run.  It also brings into question the quality of your products and services by those customers.  Quoting prices below your required profit requirements is not a sustainable strategy.  Price is only a consideration in the absence of value.

Another critical accounting error is building budgets based on last year’s performance.  Future success cannot be forecast based on prior performance.  New strategic assumptions must be created that are in alignment with management’s current goals to be relevant.  An accurate budget will list all anticipated expenses as well as take into consideration changes in everyday business realities such as seasonal changes in sales.

The most expensive mistakes involve accounting for mergers and acquisitions.  The Pacific Crest Group case study titled “Bay Area Business with Bookkeeping Challenges” required that a new accounting system be installed with a totally revised chart of accounts for an accounting client.  All the bookkeeping transactions from 2006 to 2008 had to be re-entered into the accounting system.  This entire process was done in less than four weeks and saved the client thousands of dollars in potential reporting penalties.

The Pacific Crest Group (PCG) provides professional services that keep your business focused on your critical objectives.  We create custom made financial and Human Resource (HR) systems based on creative strategies that are always delivered with exemplary customer service. A PCG professional is happy to meet with you to discuss solutions for your unique requirements designed specifically to maximize all of your business opportunities.

 

 

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5 Reasons to Manage Your Business Credit

Posted on by TJ Van Voorhees

Pacific Crest Group (PCG) fully supports businesses in building their credit to fuel business growth. Establishing and maintaining business credit helps companies increase profits by financing growth and controlling costs. Below are five good reasons to take control of your business credit.

#1 – SEPARATION OF PERSONAL AND BUSINESS CREDIT
When owners and/or officers of a company use their own credit (i.e. – guarantee loans or credit cards), they risk the chance of being personally liable. If the business defaults, personal assets are at risk.

#2 – BORROWING POWER AND OPTIONS
Personal guarantees only go so far. If a business owner has a normal credit profile (i.e. – a mortgage or two, car payment(s), and a few credit cards), there is a ceiling to how much can be borrowed. Increased credibility in established business credit reduces risks for lenders and/or vendors resulting in more options at better terms and anywhere from 10 to 100 times the borrowing power.

#3 – ACCOUNTS AND TERMS WITH SUPPLIERS
Being able to purchase goods and services from suppliers on account with favorable terms is essential to effective cash flow management. Your business needs good credit in its own name to qualify for accounts and the most favorable terms.

#4 – INSURANCE PREMIUMS
Insurance is necessary for the security of your business. The cost of insurance is affected by many factors, including your business credit. Without good credit, the cost of insurance is higher, and you may be forced to seek coverage from less reputable providers.

#5 – EXIT STRATEGY EXECUTION
Established credit in the name of the business increases overall value, which results in a higher sale price. It can also ease the extrication of the business owner by not having personal credit tied to loans or vender relationships.
The best time to create credibility in a business is before it is needed. Not being prepared can cost the company, and its owners, money.

The Pacific Crest Group (PCG) provides professional services that keep your business focused on your critical objectives. We create custom made financial and Human Resource (HR) systems based on creative strategies that are always delivered with exemplary customer service. A PCG professional is happy to meet with you to discuss solutions for your unique requirements designed specifically to maximize all of your business opportunities.

Erik Lacy
Founder, Credit & Business Funding Specialist
Apollo Credit & Finance Solutions

Office: (707) 327-2769
Mobile: (707) 889-4100
Fax: (707) 260-6002

Erik@ApolloCFS.com
www.ApolloCFS.com

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Employee Benefits Drive Employee Retention

Posted on by TJ Van Voorhees

The percentage of employees with a retirement plan from their employer has been dropping sharply according to the Employee Benefit Research Institute (EBRI). An article in the Harvard Business Review on “Managing People,” stated forty percent of employees are planning to look for a better job within the next six months. About seventy percent say they are already looking around for better benefits. The retention of top notch talent is getting more and more difficult in the current economic climate because the demand for quality employees greatly exceeds the supply available.

There is a solution to the apparent paradox of employers cutting back on offering employee benefit packages in the face of an ever growing number of employees who are looking to jump ship for a better offer. The answer lies in the fact that there has been a massive paradigm shift in the benefits arena over the last several years.

Employers have moved away from a strictly paternalistic model that focuses on “looking after your employees” to an approach where the purpose of offering benefits is to assist the business improve its financial performance.

The theory is that increased financial health is in the best interest of everyone in the company. This mission aligns your employees’ performance with your company’s overall long-term goals. It serves as an incentive for your employees to stay with your organization as it continues to grow.

The debate is centered around two different management assumptions. One assumption is that employee benefit reductions increase profitability. The other assumption is that the employee and employer relationship is to be cultivated and nurtured. No matter what side of the debate you find yourself, the key is that all employee benefit plans must be fair and equally available to all employees according to the American Institute of Certified Public Accountants (AICPA) “Employee Benefit Plans Industry Developments – Audit Risk Alert.

Pacific Crest Group (PCG) is a huge advocate for fair and equal treatment of employees as evidenced by its case study titled “Standardized Leave Policy Eliminates Favoritism and Lawsuits.” It is important that your employee benefit program establishes a positive culture that builds strong relationships with your employees. It must encourage your employees to make a long-term commitment to the profitability of your business for all.

PCG firmly believes that companies should be careful to hire people who are the most qualified for the job. Once you have them, you want to keep them for as long as possible. Employee benefits must focus on your employees’ emotional needs not just their financial requirements in order for them to stay with your firm over the long haul. It is imperative that you give them plenty of reasons to remain loyal to your organization.

Pacific Crest Group (PCG) provides professional services that keep your business focused on your critical objectives. We create custom made financial and Human Resource (HR) systems based on creative strategies that are always delivered with exemplary customer service. A PCG professional is happy to meet with you to discuss solutions for your unique requirements designed specifically to maximize all of your business opportunities.

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Accelerating Cash Flow Makes Your Company More Competitive

Posted on by TJ Van Voorhees

Chief Financial Officers (CFOs) must master more than cash flow and revenue models. They must be strategic partners in the business. According to IBM’s Global CFO Study, there is a growing gap between the importance of core finance responsibilities and broader strategic questions that affect a company’s long-term success. The importance of integrating information has more than doubled while the priority of risk management has risen a startling ninety-three percent. Nearly half the CFOs say their organizations are not effective in the areas of strategy, information integration and risk and opportunity management.

One of the most important ways a Chief Financial Officer can make their company more competitive is by accelerating their cash flows according to the book “The Strategic CFO – Creating Value in a Dynamic Market Environment” published by the Wharton School of Business at the University of Pennsylvania. The following five strategies is just a sampling of the ones used by most Chief Financial Officers today.

Prepare a cash budget and weekly cash forecast to track actual cash against projected cash in and out. These tools will enable you to better control where your cash is going and help you prioritize future cash expenditures.

Centralize purchasing for your firm within major profit and loss centers. This reduces administrative costs. Standardized purchasing policies and procedures promote efficiency by preventing duplication of efforts. When negotiating with your vendors, agree on the price of the goods and services first then negotiate as favorable payment terms as you can get.

Prevent costly supply disruptions which can bring sales and cash flow to a full stop. Use multiple suppliers for critical items whenever possible. Know your suppliers’ financial status so you can alleviate potential disruptions due to financial stress before they happen.

Turn slow moving inventory into cash by discounting it to move quickly or by returning it to the vendor. Record any damaged inventory right away. This can save cash if the damaged merchandise was not sold because it can be written off as a loss for income tax purposes.

The link between your invoicing and cash flow is paramount. Streamlining your accounting system to make sure you can measure the profit on each item sold and each service rendered is critical. This makes it easier to measure your return on investment (ROI) and makes your customers happier as well because you are more efficient in your accounting operations. See the Pacific Crest Group (PCG) case study titled “Accounting Challenge for Local Professional Services Company” for more ideas on successful cash flow management strategies.

Pacific Crest Group (PCG) provides professional services that keep your business focused on your critical objectives. We create custom made financial and Human Resource (HR) systems based on creative strategies that are always delivered with exemplary customer service. A PCG professional is happy to meet with you to discuss solutions for your unique requirements to maximize all of your business opportunities.

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2014 Has Been Declared the Year of the Internet Security Breach

Posted on by TJ Van Voorhees

The biggest lesson learned by businesses in 2014 is that Internet security needs to be their top priority regardless of the organization’s size. Many business owners think their company is too small to be a target for cyber thieves. The fact is small to medium size businesses (businesses not on the Fortune 1,000) are easy prey for attacks because they lack even the most basic security defense strategy.

Financial loss as a result of an Internet security breach is only part of the story. The most devastating loss is the damage done to the organization’s brand. Loss of trust from their customers can put the company out of business over night. No one wants to do business with a company that cannot protect their private information.
An astonishing eighty percent of all bot (automated applications that scan Websites) visits on the Internet are to small and medium sized businesses with less than one-thousand visitors per day. Smaller to medium size Websites can be hacked automatically with no human participation whatsoever. This is why they are prime targets for malicious attacks. They are easy money.

In an article published by the U. S. News & World Report called “The Science of Cyber Security,” Shankar Sastry, Dean of the College of Engineering at the University of California at Berkeley, said “We want…to be the start of this science base, upon which an inherent defense system can be built that will operate almost like the (human) body’s in the event of an attack.” In other words, an Internet attack defense system so advanced that is in essence self-healing just like the human body.

The top three things you can do to protect your business from a cyber attack is as follows:
Install and keep your anti-malware and anti-virus protection software up to date on all your computers including mobile devices. Run protection software after every software install to make sure your devices have not been compromised.

Encrypt your data so it is compliant with the Payment Card Industry’s Data Security Standard (PCI-DSS) and Cloud Security Certification SSAE16. Encrypted data protects your sensitive client information by adding an additional level of complexity in the event your data is stolen. Most hackers will not spend much time trying to crack your encryption because there is so much unprotected information available to them.

Keep your employees educated on your Internet attack defense guidelines. They should receive updates on security risks and prevention measures regularly via email, video trainings or brief update meetings.

Benefits to the business owner of having a solid Internet attack defense strategy are numerous. The most salient example is increased employee productivity as outlined in the Pacific Crest Group case study titled “Adopting an Open IT Strategy Increases Office Productivity”.

Pacific Crest Group (PCG) provides professional services that keep your business focused on your critical objectives. We create custom made financial and Human Resource (HR) systems based on creative strategies that are always delivered with exemplary customer service. A PCG professional is happy to meet with you to discuss solutions for your unique requirements to maximize all of your business opportunities.

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Hire the Right Person for the Right Job Every Time

Posted on by TJ Van Voorhees

The success of your company depends on your employees. Each person you hire either raises the probability of you meeting your goals or lowers it. The best way to guarantee the growth of your company is to have a solid hiring system in place. Your system needs to be as well planned as launching a new product, service or developing the long-term strategic plan for your company.

The three most crucial pieces of your hiring process are knowing the skills required for the job, testing for these skills and involving the right people in your hiring process to make the best decision possible.

Know the Skills Required for the Job

What are the top four skills a person must have to succeed in this position? Describe the education, experience, knowledge, beliefs, attitudes and behaviors a candidate must exhibit to not only excel but thrive in the job. Talk to people who have been excellent in this position in the past. Interview the people they came in contact with such as their supervisors, customers, vendors and peers to find out why they were successful. What did they do or not do that set them apart from everyone else?

Skills Testing

Test the people you are about to hire to make sure they have all the skills needed for the position. The tests can be written, role playing or “hands-on” projects. If the job requires selling, take them on a sales call and watch them do the selling. If writing is required, have them do some writing projects for you. The tests do not have to be complex. They just need to be designed to prove to you without a doubt that the person you hire has the necessary skills and attitudes required to be outstanding in the position over the long-term. The “Recruiting and Hiring” (http://jobsearch.about.com/od/recruiting) Website has some great ideas on creative tests to measure a person’s aptitudes in certain skills.

Involve the Right People

Make sure candidates have an opportunity to talk with the people they will be interacting with on a consistent basis as much as possible. This will give you several different perspectives of the candidate. How they relate with those people can be a great indicator of future performance.

Taking your time in the hiring process is critical to making the right decision the first time. Rushing your decision can be a recipe for disaster as evidenced by the Pacific Crest Group case study “You Never Want to Rush the Hiring Process.”

Pacific Crest Group (PCG) provides professional services that keep your business focused on your critical objectives. We create custom made financial and Human Resource (HR) systems based on creative strategies that are always delivered with exemplary customer service. A PCG professional is happy to meet with you to discuss solutions for your unique requirements to maximize all of your business opportunities.

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Why Is Concentrating On Your Core Business So Important?

Posted on by Franka Winchester

Current studies show most businesses fall short of their growth objectives by a wide margin. Failure rates are as high as eighty percent. Why is attaining your expansion goals so difficult?

No matter what growth strategy you choose, your company’s infrastructure must be able to support its successful execution. Devising the strategy and implementing it are two very different things. The solution lies in focusing on your company’s core business.

Your core business is defined as the products, services, customers, distribution channels and geographic areas that yield the largest return on your investment (ROI). It is mission critical that systems be put in place to measure the overall performance of each segment of your core business. Peter Drucker, the world renowned business consultant, said “you cannot grow what you cannot measure.”

The best place to start the assessment of your core business performance is with the following five questions:

Who are our core customers?

What is our firm’s main competitive advantage and how can it be strengthened?

What are the most attractive growth opportunities given our core business? What performance measurements should we use?

In what direction are key performance indicators going and why?

The answers to the above questions must include input from your employees, customers, senior management and external stakeholders such as vendors and strategic partners. Be sure to include both loyal and not- so-loyal customers in your research. For more information on performance management techniques, see the article in the Harvard Business Review titled “Reinventing Performance Management

The probability of fulfilling your growth objectives is significantly increased when your organization has a clear and well defined growth strategy combined with a strong execution infrastructure. One without the other can be devastating as illustrated in the Pacific Crest Group (PCG) case study “Creating a Strategy That Smoothes the Path for Growth.

Pacific Crest Group provides professional services that keep your business focused on your critical objectives. We create custom made financial and HR systems based on creative strategies that are always delivered with exemplary customer service. A PCG professional is happy to meet with you to discuss solutions for your unique requirements to maximize all of your business opportunities.

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How to Write a Clear Job Description

Posted on by TJ Van Voorhees

A common misconception in Human Resource policies is that job descriptions are for lower level jobs and mission statements are for higher level positions. Higher level jobs include “C Level” positions such as Chief Executive Officer (CEO), Chief Operations Officer (COO), Chief Financial Officer (CFO) and Chief Technology Officer (CTO). This perception can be very costly to employers when employees question what they are responsible for and what they are not responsible for in their positions.

All employees in your company need to understand what is expected of them and how their success will be measured from the first day of their employment. A job description fulfills this requirement like no other employment tool. It guides the hiring, ongoing evaluation and potential termination of each employee no matter what position they occupy.

There are seven main components of a job description as follows:

The “Purpose Statement” is normally two to four sentences that describe why the job is important to the success of the company.
An “Environment and Culture” section describes the physical attributes of the job location (office, outside job site or phone center) and the personality (culture) of the job and the people that work there.

Your “Function” portion is usually the most detailed. It describes what duties need to be performed and when. It should be as clear as possible about the tasks that the employee must perform each day. Will the position include interactions with the public, your customers or internal personnel? What are the priorities of the activities to be performed?

A “Requirements” area must detail what education, technical skills and prior experience is required for the job and why those requirements are important.

“Responsible Parties” section provides details on who the employee reports to in the organization and when. It should provide the employee with an organization chart when necessary and how the employee’s activities impact the company in the big picture.

A “Performance Measurement” portion must be as specific as possible. Define what is most important for the employee and the organization. Describe the type of activities and requirements that will enhance the future success of the business. Provide details on when evaluations will take place, who will give them and if any advance preparation is required.

The “Compensation and Benefits” area can include either a specific compensation amount or a range if the position is based on reaching certain performance levels or seniority. If your company uses salary grades, be clear about what needs to be done to reach each level. Are any employee benefits offered such as bonuses, retirement packages, vacation time, cars or special recognition? What needs to be done to receive the benefits and when are they available?

A clearly written job description can literally save thousands of dollars in potential litigation costs. A succinct example of this is presented in the Pacific Crest Group (PCG) case study “Why You Need Well-defined Job Descriptions.”

A job description is not difficult to write. Some type of job description is infinitely better than no job description at all. For a more in depth discussion of job descriptions, please go to “Reference for Business.”

Pacific Crest Group provides professional services that keep your business focused on your critical objectives. They create custom made systems based on creative strategies that are always delivered with exemplary customer service. A PCG professional is happy to meet with you to discuss solutions for your unique requirements to maximize all of your business opportunities.

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Increasing Medical Practice Profits

Posted on by TJ Van Voorhees

Medical costs have skyrocketed over the last several years. Since 1960, healthcare spending in the United States increased as follows according to HealthCare Facts (http://www.justfacts.com/healthcare.asp):

  • from a yearly average of $147 per person to $8,085 (55 fold increase).
  • from 5.2% of the nation’s gross domestic product (GDP) to 17.68% (3.4 fold increase).

Pacific Crest Group (PCG) continues to work with many medical professionals to help them increase their profits despite spiraling costs using the following three main strategies:

The first strategy is called Data Mining. This strategy involves analyzing the medical diagnoses in your practice. Patients are categorized based on their needs. They can be grouped as “New Patients,” “Established Patients,” “Acute Patients” and “Preventative Care Patients.” Each patient sector requires different procedures. Making sure required procedures are communicated to the patient well in advance increases patient satisfaction and profits.

The second strategy is known as “Schedule Management.” Every unfilled appointment results in a loss of income. Patients with chronic conditions such as high blood pressure, diabetes and heart disease are scheduled for multiple visits over a defined period of time right away. This reduces administrative costs because future visits are scheduled in a single visit and revenue from patient visits are planned for in advance. Patient visits can be scheduled using “Fixed Interval” or “Seasonal” scheduling. Train your office staff to schedule appointments proactively for preventative care purposes. There is a big difference between saying “call us if you are not feeling better” and “see you in five days.”
The third strategy involves ”Prescription Refill Procedures.” Policies are drafted to maximize efficiency and therefore profits. For example, filling prescriptions when patients are in the office or hospital is always more profitable than over the phone because of the additional administrative time, follow-up and provider review required for over –the-phone refills.

The strategies above are designed to increase productivity, patient care and patient satisfaction resulting in optimizing profits due to improved operating efficiencies. A great example of this is when PCG helped an Oncology clinic significantly increase its profits by establishing an in-house pharmacy (See “Helping a Bay Area Oncology Clinic Recover its Profits). [http://www.pcg-services.com/helping-bay-area-oncology-clinic-recover-profits] Additional revenue has also been received from health care providers for exceeding their “quality indicator” requirements.

Pacific Crest Group provides professional services that keep your business focused on your critical objectives. They create custom made systems based on creative strategies that are always delivered with exemplary customer service. A PCG professional is happy to meet with you to discuss solutions for your unique requirements to maximize all of your business opportunities.

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Build Your Business Using Financial Key Performance Indicators

Posted on by TJ Van Voorhees

One of the best ways to grow your business and monitor your company’s financial health is to use financial Key Performance Indicators (KPI). Pacific Crest Group (PCG) has written extensively on the benefits of KPI management strategies.

Stockholders, investors, customers and competitors can use financial data to measure the performance and sustainability of your business model. You want to make sure that critical financial key performance indicators are working for you rather than against you. The Advanced Performance Institute has a wealth of information available on the use of KPIs.

Your company’s current ratio is a great example of a very useful financial key performance indicator. The current ratio is your current assets (for example cash and accounts receivable) divided by your current liabilities (such as accounts payable due in thirty days or less). It measures the ability of your organization to pay its current debts within a defined time period (normally one year or less).

For example, if your company has $22,500 in cash and $15,000 in accounts payable due in thirty days, your current ratio would be 1.5:1 ($22,500 in cash divided by $15,000 in accounts payable). A high current ratio indicates solvency and sustainability. A current ratio of between 1.5:1 and 3:1is considered healthy.

A current ratio of less than one indicates that your company would not be able to meet its current financial obligations within the next thirty days. This could be because of a cash flow problem due to the business funding growth by accumulating debt.

If your current ratio is more than three to one, it could indicate your company is holding excess cash instead of investing it back into the business. This will significantly slow down the growth of your organization.

The current ratio KPI provides owners, investors and financial professionals a great deal of information about the efficiency of your company’s operating cycle. It answers the crucial question: “Is your business able to generate a constant revenue stream with consistency over a specific period of time? “
Blue Frog Quadruples Profits by Tracking Key Performance Indicators” is an excellent example of how PCG used a “Revenue-to-Staffing” KPI strategy to give one of its clients the tools the company needed to properly manage their cash flow to successfully fuel their business growth.

Pacific Crest Group provides professional services that keep your business focused on your critical objectives. They create custom made systems based on creative strategies that are always delivered with exemplary customer service. A PCG professional is happy to meet with you to discuss solutions for your unique requirements to maximize all of your business opportunities.

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