1st Quarter is Coming to a Close, Now What?

Mar 31, 2014

If you live in or around the Ohio area, like I do, you are probably thankful that 1st quarter is ending and maybe that means the snow and cold weather will finally be gone! It is supposed to be 62 and sunny today, but in a few days back to the 40s and 50s! Oh well, you can’t have everything and at least with April on the way we can get out of these winter blues! And truthfully I’ll take the 40s and 50s over what we had! Perhaps more importantly, with the close of first quarter I am also hopeful that everyone is comparing their budget to actual.

written-budgetFirst of all, I hope a budget was established in late fall of 2013 for the 2014 year. If you did not, consider creating a budget for the remainder of the year now. As I am sure many of you have heard me say, if you do not know what something should be, it’s easy to believe it is correct. It’s like taking an exam that you didn’t study for: all the answers may seem to be the right answers.

If you did a budget, I hope you have been taking the time to compare your estimates to what actually did happen? A budget is only useful tool if it’s used! Not spending the time to reconcile it to actual completely negates the time spent creating it.

The best use of a budget is comparing the actual results to the anticipated results and then answering the question why. Why were things better/worse/different than expected. Is the cost of material higher, but scrap lower. Or, is cost of material lower and scrap higher, for example. Just looking if the numbers are more or less than what you expected and not asking why, again is not a good use of time.

Looking at the budget at the end of the quarter is a necessity, but even more frequently could be very useful. Reconciling every month is a good practice and sometimes every week, every day, every hour is necessary. You need to know what you are looking for and the correct time frame to look at it. Comparing the monthly utility charges every hour would not make sense, but reconciling material usage every hour may.

Categories: Cost Accounting

Direct Labor – Is It Fixed or Variable?

Mar 28, 2014

For many of my clients, this question is almost laughable. They have considered direct labor a variable cost for so long to think of it in any other terms would be outside the realm of reality. But in today’s ever increasing mechanized manufacturing environment, the question of whether or not labor should be accounted for as fixed or variable is being asked more often.

laborI was having lunch with the CFO of one of my clients recently and he was struggling with this very issue in his organization. His question, however, was the reverse of what you might think. His manufacturing environment was highly machine controlled and for years his entire manufacturing team had considered direct labor as fixed overhead and part of the machine cost. The problem that he was facing was the entrenched thought process in considering labor a fixed cost, and therefore, not available for modification as volumes changed. Above this, his primary concern was that short-term fluctuations in volume should be met with short-term fluctuations in cost where possible. The CFOs goal of course was to have good management. Rather than considering labor fixed, he recognized that some portion of his crew was talented and experienced in their operations and was not readily replaced by other inexperienced, untrained individuals. However, a portion of the fixed labor crew truly was relatively untrained and could more easily be replaced if necessary after a downturn in volume.

The real challenge was to convince his management team that such fluctuation in crew size makes sense in an environment where virtually all of the costs are related to machinery and all production was in a machine controlled environment.

His thought process did call to mind other components of his operation, which could be available for modification in times of decreased volumes. As volumes fall off, a good cost manager will attempt to match the lower volumes with decreased costs where possible.

In many cases, truly fixed costs are unavailable to be modified by temporary changes in volume. However, it’s worthwhile thinking through the process of those costs that might be available and assuring that changes in volume are met with changes in expenses.

Years ago one of my largest manufacturing clients experienced substantial reductions in volume as their industry protracted in the early stages of the recession. However in this case, the cost manager was able to significantly reduce manufacturing costs and in fact used the volume variance calculation to help guide cost cutting initiatives by providing a guide post about how many dollars in cost need to be removed. At the end of that year, there was a very large negative volume variance which was almost completely offset by a very large positive spending variance.

The ability to manage a cost in spite of their nature in times of fluctuating volumes is one of the hallmarks of a good cost manager.

Categories: Cost Accounting

Tax Return Identity Theft – What Should You Do?

Mar 26, 2014

tax_identity_theftRecent reports of identity theft related to tax filings have been reported by local dentists. We would like to take a moment to remind you that the IRS uses your Social Security Number (SSN) to make sure your filing is accurate and complete, and that you get any refund you are due. An unexpected notice or letter from the IRS could alert you that someone else is using your SSN. However, the IRS does NOT contact taxpayers by sending an email, text or social media message that asks for personal or financial information. If you get an email that claims to be from the IRS, do not reply or click on any links. Instead, forward it to phishing@irs.gov.

If someone uses your SSN to file for a tax refund before you do, the IRS might think you already filed and got your refund. When you file your return later, IRS records will show the first filing and refund, and you’ll get a notice or letter from the IRS saying more than one return was filed for you.

If you think someone has used your SSN for a tax refund or the IRS sends you a notice or letter indicating a problem —contact the IRS Identity protection unit immediately, 1-800-908-4490. Specialists will work with you to get your tax return filed, get you any refund you are due, and protect your IRS account from identity thieves in the future. Make sure you take the following steps to minimize the effectss

  1. Complete IRS Form 14039, Identity Theft Affidavit, and attach it to a paper-filed tax return to the IRS with a letter of explanation.  You will also need to include with the Form 14039 the following:
    • A clear and legible photocopy of your identification – a passport, driver’s license, social security card, or other US Federal/State government issued identification.
    • Telephone # to best reach you (home, work, cell) and a best time to call
  2. Contact the Federal Trade Commission to report the identity theft atwww.consumer.gov/idtheft, or call the hotline at 877-438-4338.
  3. Contact the Social Security Administration at 1-800-772-1213.
  4. Contact each of the three major credit bureaus:
  5. Notify your personal financial institutions/banks.
  6. Consider filing a police report, but without a lot of information, the local police often won’t file a report.

Once the IRS receives the Identity Theft Affidavit they will begin their investigation.  Please be aware there are significant processing delays with this unit.  You must allow 204 days (6-8 months) for their investigation.  There are over 1 million cases, so it is a long process!  If no information has been provided after 204 days, then we suggest calling the specialized unit at 1-800-908-4490.

Categories: Uncategorized

Tax Return Identity Theft – What Should You Do?

Mar 26, 2014

tax_identity_theftRecent reports of identity theft related to tax filings have been reported by local dentists. We would like to take a moment to remind you that the IRS uses your Social Security Number (SSN) to make sure your filing is accurate and complete, and that you get any refund you are due. An unexpected notice or letter from the IRS could alert you that someone else is using your SSN. However, the IRS does NOT contact taxpayers by sending an email, text or social media message that asks for personal or financial information. If you get an email that claims to be from the IRS, do not reply or click on any links. Instead, forward it to phishing@irs.gov.

If someone uses your SSN to file for a tax refund before you do, the IRS might think you already filed and got your refund. When you file your return later, IRS records will show the first filing and refund, and you’ll get a notice or letter from the IRS saying more than one return was filed for you.

If you think someone has used your SSN for a tax refund or the IRS sends you a notice or letter indicating a problem —contact the IRS Identity protection unit immediately, 1-800-908-4490. Specialists will work with you to get your tax return filed, get you any refund you are due, and protect your IRS account from identity thieves in the future. Make sure you take the following steps to minimize the effectss

  1. Complete IRS Form 14039, Identity Theft Affidavit, and attach it to a paper-filed tax returnto the IRS with a letter of explanation.  You will also need to include with the Form 14039 the following:
    • A clear and legible photocopy of your identification – a passport, driver’s license, social security card, or other US Federal/State government issued identification.
    • Telephone # to best reach you (home, work, cell) and a best time to call
  2. Contact the Federal Trade Commission to report the identity theft at www.consumer.gov/idtheft, or call the hotline at 877-438-4338.
  3. Contact the Social Security Administration at 1-800-772-1213.
  4. Contact each of the three major credit bureaus:
  5. Notify your personal financial institutions/banks.
  6. Consider filing a police report, but without a lot of information, the local police often won’t file a report.

Once the IRS receives the Identity Theft Affidavit they will begin their investigation.  Please be aware there are significant processing delays with this unit.  You must allow 204 days (6-8 months) for their investigation.  There are over 1 million cases, so it is a long process!  If no information has been provided after 204 days, then we suggest calling the specialized unit at 1-800-908-4490.

Categories: Healthcare & Dentistry

Ohio Bureau of Workers’ Compensation Agency Revamps Safety Intervention Grant Program

Mar 25, 2014

If you are an employer in Ohio and have not had an opportunity to review the BWC’s Safety Intervention Grant program, time is of the essence to do so.

safetyThe items available for the Safety Grant have changed – they now include items that would assist medical offices of all kinds in patient moving and patient care, as well as automatic transplanters for agriculture environments, and industrial applications like powered dolly equipment for stairs, wheeled carts, walk-behind loaders, and power equipment designed to turn valves.

The grant is a 3-to-1 matching grant, up to a maximum of $40,000 per eligibility cycle. To be eligible, you must be current on your BWC premiums, demonstrate a need for a safety intervention, and have active BWC coverage with four past payroll reports for private employers.

To get started, review the link on BWC’s website. Gather your information and schedule a visit by a BWC safety consultant before you complete the application – then you won’t be spinning your wheels. You will have to submit quarterly reports back to the BWC, but that is not unusual in the grant process.

Best practices, case studies and success stories are available at the BWC site as well.

For more information contact Sharon Trabbic, COO, at William Vaughan Company at 419-891-1040, and stay tuned on significant changes coming to the Ohio’s Workers’ Compensation program in 2015. William Vaughan Company will be hosting a free, informational seminar in the fall of 2014 to review the changes. As soon as a date is confirmed, we will send all our clients registration information.

By: Sharon Trabbic, COO

Categories: Uncategorized

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