Category: data analysis

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Efficiency and Value with Cloud Accounting

For some accounting professionals, the problem is finding a way to provide services that are valuable to the client, and doing it in a way that makes it profitable for the provider.  Outsourced and online accounting models are the answer, employing innovative tools in the practice and with clients: tools and resources necessary to get more informed and run the business better.

accountingCloud

With online accounting solutions the firm is able to increase profitability with the range of services offered, often adding clients and work without hiring more personnel.  Online solutions allow professionals and their clients to work from anywhere at any time, providing both with the freedom to focus on core business capabilities (and lifestyle).

Reducing the requirement for sophisticated on-premises technology may mean providing everyone with the ease of use and security of server-based computing models, which is among the benefits of a cloud IT approach.  Centralizing and managing applications, protecting valuable data resources, and streamlining business processes are among the benefits to be achieved with an outsourced, managed application hosting solution.  Businesses who outsource their IT management often realize an increased capacity to do business simply by leveraging the cloud to make the current working models more efficient and effective.

Leveraging mobility and real time access is also about increasing the overall range of opportunity to deliver value.  Contractors, employees and clients all find improvements in getting the information they need when it matters, and the firm finds a greater agility in meeting client demands and expanding service offerings.

Cloud computing and online accounting solutions have proven the viability of anytime, anywhere working models, and professional accounting practices of all sizes and orientations are realizing the benefits of working closer with their clients by applying them to the engagement.

Cloud accounting is really about improving the profitability of the accounting practice while delivering higher levels of service to the client.  The movement of information from one place to another; translating data from one form to another – these are the processes representing the cost and inefficiency in the practice, and are specific areas where a collaborative, online approach may introduce new service efficiency and value.

jmbunnyfeet

Make Sense?

J

It is worth noting that “cloud accounting” and online accounting models do not necessarily require the use of a SaaS solution.  QuickBooks Online, Xero, Freshbooks – these are new small business offerings that exist purely on the web.  QuickBooks desktop editions can be “cloudy”, too, when they’re hosted by an authorized QuickBooks hosting provider.  The point is not necessarily to use web software, but to approach IT management and systems from an outsourced perspective, allowing for centralized management and administration and delivering secure remote and mobile access.  The systems should facilitate the working model, not force it.

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The Productivity Paradox: Accounting for Returns on IT Investments

The Productivity Paradox: Accounting for Returns on IT Investments

There has always been somewhat of a struggle between the IT department and “management”, much of the difficulty existing with the need to demonstrate clear returns on investments for IT purchases.  Unfortunately, expenditures in information technology are often the result of short-term views of long-standing problems, applying “solutions” that do not fully address the requirement or which do not deliver the productivity or performance gains expected, particularly in a dynamic and rapidly changing business environment. The assumption is that a wise investment in information technology will result with improved profitability and performance.  Demonstrating this on paper is not always easily accomplished.

There is a great deal of research on the subject of accounting for returns on IT investments.  Some of this research describes “The Productivity Paradox”, referring to early studies on the “relationship between information technology and productivity, and finding an absence of a positive relationship between spending on IT and productivity or profitability”. [1]  Previous to the emergence of cloud computing and widely available remote and mobile technologies (and now possibly even more with the prevalence of available options), businesses invest heavily in IT infrastructure and applications which deliver nominal benefit to the business when measured against the cost of acquisition and implementation.  Heavy IT investments are made with little or no measurable benefit to profitability, even if operational performance improvements are created.  In many cases, the difficulty in “proving” benefit from information technology investments rests with the lack of information relating to impacts in non-operational areas, such as with investors, auditors or analysts.

The early research has become a foundation for making the argument that accounting professionals should be more directly involved in determining the value and impacts of IT investments – due largely to the fact that accounting professionals are generally familiar with the variety of formulas and approaches which become relevant in measuring the effects of IT purchases.  Information technology spending will result in short-term impacts, but will impress on the business over the longer view as well. With a foundation in accounting principles, valuation and analysis, and accompanied by IT knowledge and experience, management accounting benefits from an improved ability to recognize the relevance and value in IT implementations even where no direct profit improvement is visible.

Can difference in firm performance be explained by differences in IT investments?
Can differences in firm performance be explained by differences in IT investments?

Emerging technology models are having huge impacts in business capability as well as risk, and this new paradigm requires that accounting professionals apply their skills to understanding more fully the influences from and results of IT spending in the enterprise.

Having a basis for studying valuation and recognizing the good and bad of focusing on various key measurements (return on assets vs equity vs sales vs investment…) is essential in developing a “formula” for predicting impacts of and potential returns from IT spending, and solving the puzzle that is the productivity paradox.

jmbunnyfeetMake Sense?

J

[1] Journal of Information Systems Vol. 16; “Returns on Investments in Information Technology: a Research Synthesis”

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Security and Users: Change is the Only Constant

Security and Users: Change is the Only Constant

Managing user accounts and access to business IT assets is challenging, particularly as cloud and social computing models introduce new wrinkles in security and identity management. Information has become “mobile” along with the users accessing it, yet management of user behavior is even more complicated that trying to manage a digital resource.

If you look at the history of security breaches, you’ll find that many of them started with a user making a mistake – like losing a laptop or clicking on a phishing email, downloading bad software, or forgetting to report an employee termination to the IT dept – something which inadvertently created a vulnerability that could be exploited.  It’s tough to stop breaches because there are so many possible ways for them to happen.

If most security breaches start with a user mistake, then IT departments have their hands full because users aren’t static, unchanging objects to monitor and manage.  Users change, sometimes a lot.  It is this constant change which undermines the ability for some IT departments to meet the demand to adequately secure company information systems and data. Now is the time to take control of user security and identity management, creating automation and controls to protect business assets in a constantly evolving environment.

It is not simply employee turnover that challenges security management.  Certainly, IT departments have been dealing with user account creation and termination for a long time.  And sure, users have sometimes been promoted and demoted, resulting in the requirement for IT to increase or perhaps decrease access to information and applications.  These are normal and expected activities for a business IT department.  Unfortunately, IT often doesn’t hear about the user’s change in status.  An account isn’t disabled, access isn’t restricted, and the system is left vulnerable.

Just to pile on, think about what happens when a user is more than just a single system user.  It may be manageable when where a single identity and set of credentials governs their access to applications and information.  But the proliferation of web-based services and SaaS solutions has made it commonplace for users to have multiple applications and services available to them, each with their own approaches to identity management.

For even a small business IT department, the security of all of these access points and applications must be managed and monitored – no small task when the department may not even be aware that the solution is in use.  It is not unusual for file sharing, data sync, or other applications to be implemented in businesses without the knowledge or participation of the IT department.  Actually, many services attract users due to their simplicity and ease of use, leveraging the fact that they can be deployed without the “assistance” of IT.

Users are becoming increasingly mobile, accessing information and applications from public and private locations while using any number of possible mobile devices.  Vulnerabilities which may exist in public networks and the increased potential for device loss or theft are high on the list of concerns of IT departments managing remote and mobile user access.  Mobility is driving many changes in how information technology and access to systems is provided to users, and it is changing user demands for what they should be able to easily accomplish while being mobile.

Businesses need to recognize that their continued existence may rely on keeping their information systems and assets safe and secure.  Disaster recovery and business continuity applies not only to loss of physical systems, but also to losses of various forms due to data breach. The disaster recovery and continuity plan (you have one, right?) should not only address situations after they happen; planning by definition is proactive.  It is not enough to have a plan to recover from loss or failure; the business must actively engage in activities which will prevent loss and reduce vulnerability. 

Part of this plan necessarily centers on managing users and user identities, ensuring that the company knows about all access or user accounts involved and employs strict processes and guidelines for making sure they are constantly up to date and have the authority to do what they’re trying to do.  In short, the plan must also be a plan for change, providing change management processes to guide the business as the evolution of information technology and the dynamics of user interaction continue to change.

jmbunnyfeetMake Sense?

J

read more about IT Security and Engaging users to reduce vulnerability

read more about Mobility and the Cloud, Managing BYOD and securing company resources

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Degrees of Success: Improving Productivity and Performance through Process Automation

Degrees of Success: Improving Productivity and Performance through Process Automation

Few businesses use just one solution to get all their work done.  In most cases, the business must at least communicate, produce information and account for financial activities – and each of these functions has a software product or service associated with delivering the required capability.  While every business uses technology at some level, some businesses have more success than others in developing streamlined and efficient processes guiding the various tasks and activities performed throughout the day.  Sometimes the problem stems from a lack of understanding of the importance of process automation, and sometimes it’s the software.

integrated

The success (or lack thereof) in streamlining a business process is often enabled by the tools supporting it, yet the truth of software and systems is that not everything  is easily integrated and not all business workflows actually “flow” smoothly.  In many cases it is left to the human user to connect the processes and keep the work flowing, creating the opportunity for missed deadlines, duplicated or erroneous data, and a greater dependency on individual worker knowledge than is good for the business.

The better alternative may be the adoption of workflow and automation tools to assist with bridging and scheduling of repetitive tasks, building the knowledgebase of process and task flow supporting business sustainability efforts and easing the burdens of training new employees.  Process automation helps to improve productivity, it’s just that simple.

If the time is taken to really consider the variety and numbers of repetitive tasks employees perform throughout the day, the cost in time, lost productivity and data errors or omissions would likely add up to far more than initially expected.  People tend to adapt to using the tools they are provided, and will find ways to get things done (whether it’s the most effective way or not).   The end does not always justify the means, and many businesses ultimately find that it is here – where individual worker initiative and unguided action are most prevalent – that the operation fails to accomplish stated goals.

In order to create a sustainable operation with consistently high levels of production and performance, the business must establish a complete framework for process automation and support.  Where existing application and software functionality is not able to meet the requirement, the business should implement specialized tools to bridge the gap and embed the process knowledge in the system.

Scheduled reporting, customer and product data synchronization, import/export routines, data maintenance routines – these are among the tasks and processes which represent the regularly-performed work that may be sucking the user productivity and performance out of the business.  It’s a matter of degrees of success, and productivity improvements introduced through comprehensive process and task automation can make the difference between a little success and a lot.

Make Sense?

J

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4 Rules of Thumb for Fiscally Fit Business

4 Rules of Thumb for Fiscally Fit Business

4-rules-of-thumbMost folks who start a new business go in to it with a rather naïve belief that a good idea, product, service and/or group of people can be successful just because their idea, product, service or people are good.  Unfortunately, that isn’t’t the reality of starting up and running a business.  Regardless of how great and innovative the idea is, the business only works if it is sustainable and profitable.  Otherwise, it was just a great idea.  For many entrepreneurs, developing an understanding of the financial underpinnings of running a company isn’t the most exciting of ideas.  The compulsion is to outsource the responsibility to someone else like an accountant or financial advisor. While I completely and utterly agree that every business owner should work closely with their accounting professional and financial advisor, I also know that those very same business owners will get more value from their advisors if they have a common language to speak (business finance) and are working toward a common goal.  The goal is fiscal fitness – the creation of a sustainable and profitable business. Just as physical fitness supports a healthy body, fiscal fitness supports a healthy business.

The successful business operating in this economy adheres closely to 4 main beliefs, rules of thumb perhaps, relating to fiscal management and fitness and which are generally communicated in detail using the language of business finance.

Rule 1. Plan before you start.  Then plan some more.  Starting a business isn’t like going to college; you’re supposed to know what you’re going to do BEFORE you start up rather than paying to explore the options.  It is also very important to recognize that the plan may require some adjustments as you go along (“No plan survives contact with the enemy”), taking care to not equate focus with intractability.  This plan should also include the “exit strategy”, which is really a plan for what the owner wants to ultimately get out of the effort.  It could be a plan to sell out for gobs of money, to leave a legacy for the children, or maybe just to have an awesome quality of life and do what they love at the same time.  Knowing what it will take to get in, get it done, and get out the way you want is all part of the plan.

Rule 2. Keep a close eye on the numbers.  No, not all of them, but the really important ones.  Some of these numbers have to do with the relationships between price, volume and cost.  This is the stuff a business owner needs to know like the back of their hand – hairs and all.  Not every business will focus on the same key numbers (mostly, but there are certainly variations), but every business owner should know what to look for.  And they should be looking very frequently so things don’t get out of whack before corrections can be made.

Rule 3. Manage the cash, manage the growth, and know how one impacts the other. Cash flow and growth are priorities number 1 and 1 in business but they aren’t the same thing.  Consider that reducing prices (and profits) to get more sales may work as long as the volume of sales supports the effort and generates the cash.  Without the extra sales revenue to rely on, reducing profits could result in devastation (maybe sticking with the prices the way they are and not pushing for fast growth is a better idea).

Rule 4.  If you must borrow, be informed and do it smartly.  There are a lot of different options for borrowing money for the business, just as there are a lot of different reasons to do it.  There is a great deal of research available which describes the benefits of borrowers being educated in basic financial literacy, with better financial decision-making being among those benefits.  Looking for financing is kind of like choosing between the apple and the candy bar: one may promote the fitness you’re looking for while the other does not (but it looks sweet!).  It’s nice to have the foundation to support knowing which one you should choose.

Building and maintaining a fit business requires an understanding of how the business works – how and why it makes and spends money, what makes it profitable and what it takes to create and support growth.  While outside advisors may be available to help, the best performance is achieved when the business owner masters the essential skills required to run and grow a fiscally fit and sustainable business.

Joanie Mann Bunny Feet

Make Sense?

J

Measure, Manage and Succeed.  It’s all about knowing how to speak the language of finance

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4 Rules of Thumb Regarding Workers Compensation Insurance for Employers

In two previous “4 Rules of Thumb” articles, I discussed a few things that businesses can do to create the best possible environment for engaging new customers and providing quality service (4 Rules of Thumb for Business Success) and provided additional tidbits for service businesses – things the company can do to make sure that the work is done completely and correctly the first time, which is what leads to happy and loyal customers (4 Rules for Building Service Customer Loyalty).

This article is focused a bit more internally to the business, discussing a few of the risks and considerations surrounding those dreaded tax burden issues: Unemployment Insurance, Worker Classification and Workers Compensation Insurance. 

Unemployment insurance is one of those items that most businesses pay attention to, because rates are impacted based on unemployment claims made and paid. The cost of unemployment insurance is usually calculated just like workers’ compensation, using standardized arithmetic formulas based on the profile and past record of the company.

Workers Compensation insurance is sort of the “elephant in the room” of compliance – it’s a big problem that is frequently the last item of consideration in business compliance and reporting. It is also an item that frequently goes without scrutiny at the state level, so little attention is generally given it by accounting and human resource professionals.

Workers Comp is one of those payroll reports where you select from a broad list of categories relating (hopefully fairly closely) to the work your people do, you calculate the cost, and you pay the fees.

Ideally you’re classifying workers properly in terms of their being employees versus independent contractors – this being the big focus of most workers comp audits and where many advisors say to pay attention. If you use a company to perform some of the work of your business, also pay close attention to the concept of joint-employer status (see article on joint employer status).

An equally big issue – the issue that impacts the business owner perhaps more than the employee – is classifying worker activities too broadly, potentially costing the business hundreds (if not thousands) of dollars in annual workers comp premiums. Improper classification of worker activities can lead not just to increased premium costs, but heavy penalties in the event of a claim finding the worker was not properly covered.

Most workers compensation policies issue blanket risk classifications, yet how these classifications are used in different industries is where the secrets of cost savings exist.  In the moving and storage industry, for example, the risk is in the warehouse. If a clerk or administrative worker enters the warehouse, that employee is now actually working under a different classification. However, if the worker often checks warehouse inventory or sells items from the warehouse as part of their sales job, they may operate under yet another classification.

There is a balance required when seeking to reduce premiums while keeping the company compliant.  Many companies consider caution to be more affordable than keeping highly detailed activity and work classification records, finding that reporting workers in higher cost work categories is more cost effective than paying for the labor intensive effort of capturing, analyzing and reporting in more detail. That is, until a worker is injured and the risk wasn’t disclosed through accurate workers compensation reporting.

When it comes to workers compensation insurance for the business, give these 4 compliance rules of thumb some strong consideration.

Rule 1: Get informed and get help.

It’s OK for a business owner to not be the expert in all facets of compliance and reporting – – you have accountants and tax advisers that can gain this knowledge from their annual CPE (continuing professional education). The potential costs of mis-handling workers compensation and other aspects of having employees are too great to risk being uninformed and unprepared.

Rule 2: Call an employee an employee

Classifying workers will turn out better for all parties in the long run even if it seems like the more expensive way to go. Misclassification of employee workers as contractors hurts everyone, eventually. There is a big problem with businesses misclassifying workers as contractors rather than as employees, sometimes to avoid paying taxes and benefits, but sometimes not just for that reason. When classified as contractors, workers are generally not covered by the various protections and do not get the benefits that employees do.

Some business owners who are unsure of the state administrative rules may pay workers compensation premiums for workers that are truly independent contractors. Other businesses may require workers to have a workers compensation account as a condition of employment. Either way it is being done improperly and one party or the other ends up bearing unnecessary cost and/or risk.

The unfortunate result is that employers are bearing larger than necessary burdens of supporting injured workers and the unemployed.

Deliberate mis-classification can save dishonest contractors upwards of 30 percent in payroll and other taxes, but for workers, taxpayers and honest employers, the practice amounts to millions in lost wages and revenue. – See more at:

http://www.ibew.org/articles/13ElectricalWorker/EW1305/Misclassification.0513.html#sthash.7u1vtjW

Rule 3: Details Details Details.

Worker classification done properly can save businesses a lot of money simply by being more accurate. Yes, there may be tradeoffs in terms of labor to perform the calculations and reporting, but it can prove to be well worth the effort.

Particularly in businesses where workers may perform multiple duties or work in a variety of locations and conditions, there is value in delving into the details of time, location and work performed to make sure the business is adequately covering itself. Filling out the report by simply selecting the broad category that “seems most likely” is not the best way to go. There are details in the rules, and the smart business takes advantage rather than being surprised by them.

A home installation satellite company did not keep sufficient records for their most hazardous business classification: tower work. During the audit, all their hours were assessed in this one classification that was six times the reported amount. – See more at:http://cath235lni.wordpress.com/

Rule 4: If there is a worker injury claim, pay attention and deal with it right away.

While it seems somewhat like getting car insurance after the wreck, there may be some risk mitigation that can occur if the issue is dealt with directly and in a timely manner – possibly avoiding a claims nightmare.

The last item is more of a suggestion than a rule, which is to be fair and truthful. Treating employees well is part of growing a successful team that will propel the business towards success.

Surprisingly enough, the benefits to the business may not only be a more productive and happier workforce, but lower risk exposure and lower workers comp premiums due to more detailed use of classifications in reporting.Tell employees and independent contractors what workers’ comp does for them – it’s essentially a medical and lost wage policy to protect them and those close to them.

Explaining to employees that keeping the boss informed about what is happening in the plant or in the field is simply part of helping ensure their proper protection.

Joanie Mann Bunny FeetMake Sense?

J

Many thanks to my friend Ted Carlson, Certified Fraud Examiner (retired), a veteran of the Department of Labor and Industries (L&I) in Washington State – responsible for Tax Discovery and Fraud Prevention field Audits.