Lighten the Employee Evaluation Load
Apr 29, 2014
Managers and employees often dread annual assessments. But the process doesn’t have to be so difficult for everyone involved. Here are some options that might help give your organization’s entire staff a break and make the chore easier and more beneficial.
If evaluations are done near the anniversary of the date each person was hired, it can be a never-ending process. As a result, managers sometimes take shortcuts and overlook strengths, weaknesses and accomplishments that are critical to an employee’s future.
There’s another approach that might work better for your company. Instead of scrambling to prepare evaluations for the anniversary of each employee’s hire date, consider evaluating all your employees at the same time every year.
The advantages:
- The appraisal process becomes an annual, high-priority project instead of a task that’s squeezed into a long list of duties. You can schedule research and preparation time for managers, just as you do with other important projects throughout the year.
- You can manage the company budget better because pay raises that accompany appraisals occur at the same time.
- With sufficient time to assess all subordinates at once, managers might be more likely to consider an entire year’s performance and less likely to be swayed by recent events.
- Managers can give equal consideration to all staff members instead of concentrating on problem performers or standouts, who often receive an undue share of attention.
Evaluating employees at one time is certainly labor intensive. And you have to tailor appraisals for those who join the firm just before the evaluation period.
But in the end, you might wind up with better appraisals, a more satisfied workforce and better cash management.
Keep in mind: Employee evaluations should also measure the performance of your company. Suppose a large percentage of your employees are getting high scores in their evaluations. Presumably, your bottom line should be increasing. If not, it might be time to take a second look at your management philosophy, not to mention your performance appraisal methods.
Staff performance is the key to productivity and profits. Analyze employee evaluations and compare the analysis against your bottom line. This alerts you to trends, weaknesses and blind spots in your organization. It’s a good way to ensure that the staff and the company are moving in the same direction — up.
Categories: Uncategorized
Setting a Selling Price
Apr 29, 2014
There are huge differences in the way businesses or industries set their selling prices. From my point of view, they break down into two general categories. First, an industry where there is selling price competition and industry selling prices are primarily driven by the market. Hence, you are driven by what the market will bear and there is not much you can do to influence your selling price. In these cases, the market presumes a level of service and quality that is built-in to the sales process.
This type of industry could be comparable to a commodity where in there is little difference from supplier to the next as far as the quality of the product and the level of service required to deliver the product to the customer. Industries such as steel and lumber or perhaps grain might be examples of products that are difficult to differentiate from other products in the same industry. The market is price driven and competitors are quick to note changes in market prices and adjust their prices almost instantaneously. I have worked in industries like this where in times of rapidly rising prices, selling price quotes are only good for a few days and in some case only a few hours because the market was moving so quickly.
In cases like this the costing process for determining selling price is really aimed at determining profitability for “a-go/no-go” decision. Once the minimum floor of profitability that will be accepted by the business is set, all future potential sales are measured to that standard with “a-go/no-go” decision process.
The second category is an industry where the company setting the selling price has more discretion based on its own targeted goals and is less influenced by the industry. This would be true in industries that have few competitors or unique niche products that can demand premium pricing. Some companies can find themselves in such a selling price setting market by delivering extraordinary service or quality in an industry that might otherwise be controlled by market prices.
In either case, businesses in this industry then can use product costing information that is prepared accurately and timely to have set selling prices. Competitors, if there are any, are always a factor in this process but if your company happens to be in an industry that allows you to have more discretion over how you set your prices then your costing information can help drive company profitability. This is a unique situation that requires accurate and timely cost information that is updated periodically to be able to maximize company profitability in a unique marketplace.
Whether the costing information developed to be used in the selling price setting process is also integrated into the control of the operations is dependent on management’s desires and is not mandatory as part of the overall costing process. However, those companies that are most successful in setting and using costing information to set selling prices do find useful purposes for applying that same cost information to the operations as processes change, cost change or activity levels are forced up or down.
Categories: Cost Accounting
Enter the World of Web Design Cautiously
Apr 24, 2014
Enter the World of Web Design Cautiously
Web developers can come up with great designs that help attract business and make your site more user-friendly. But be careful who you hire or you could wind up wasting money and hurting your image.
You want your Web site to lure new customers and provide interesting information to your existing clientele. But be careful when retaining a firm to develop or update your site. There are a lot of fly-by-night operators in the Web development business.
With no licensing requirements, anyone can set up shop — and the consequences can be devastating. For example, one company paid $75,000 to a firm to design a complex site to take orders from customers. The developer “farmed out” the job to an overseas third party. The company never got the site it needed and lost a bundle in the process.
To prevent problems cropping up down the road, here are three safeguards to take before entering into any agreement:
Safeguard 1. The development firm should provide references and examples of its prior work in your field of interest. Of course, the references should confirm that the developer completed the projects satisfactorily. It’s critical that the firm be what it appears, and not merely a jobber who sends work out to third party contractors.
Safeguard 2. When searching for a Web development firm, your company may submit a Request for Proposal (RFP) to a few firms to get bids. Make sure the bidders know that your RFP is a copyrighted document that may not be shared with others so that information about your firm doesn’t wind up in the hands of competitors.
Safeguard 3. Consult with an attorney about how to retain your intellectual property rights.
Safeguard 4. Include all of the following in a written contract:
- A means for network administration hosting and backup. If your site is hosted on the developer’s server, you must have full control over the domain name.
- The developer will provide a copy of the source code and all updates.
- The exact scope of the work; specifications, deadlines and penalties for non-delivery.
An acceptance period during which you can confirm that the work is satisfactory. Problems might crop up long after the check has cleared.
Categories: Uncategorized
Ever Considered a Cost Segregation Study?
Apr 24, 2014
Do you own your practice building? If yes, ever consider a Cost segregation study?
Cost Segregation is a strategic tax savings tool that allows companies and individuals who have constructed, purchased, expanded or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions and deferring income taxes. In general, it is easy to identify furniture, fixtures and equipment that are depreciated over 5 or 7 years for tax purposes. However, a Cost Segregation study goes way beyond that by analyzing construction costs that are usually depreciated over 27 ½ or 39 years. The main goal of a Cost Segregation study is to determine all construction-related costs that can be depreciated over 5, 7 and 15 years. For example, 20% to 50% of the total electrical costs in most buildings can qualify as personal property (depreciated over 5 or 7 years). Reducing tax lives results in accelerated depreciation deductions, reduced tax liability, and increased cash flow. Any structure used for business or as rental property can benefit from a Cost Segregation study.
There are several benefits to a Cost Segregation study. One, it generates an immediate increase in cash flow through accelerated depreciation deductions. Two, it reduces income taxes and creates an opportunity to claim “catch up” depreciation on assets previously misclassified.
The ideal time for a Cost Segregation study can vary depending on a client’s tax situation. At William Vaughan Company, our team of experts work together with clients to recommend the best tax planning solution to fit their needs.
Categories: Healthcare & Dentistry
ABC – A Budget Communication
Apr 24, 2014
I know. . I know. . do not say the “B” word right now. You finally got everything into place, running smoothly and do not want to think about a budget again until November! I’m sorry, but I recently read an article about better communication called, “How to better connect – and communicate – planning, forecasting and budgeting.”
The article’s title focused on communication, but really it is not until the last paragraph that it seemed to really touch on communicating. I think as accountants we try to communicate, but we are just not that great. I do agree, however, that budgeting itself has to evolve as times change. It needs to be a dynamic tool that can be updated as needed and can be used to compare to actual results. A static document can easily become outdated and ignored.
I am surprised and not surprised that spreadsheets still rule. Excel is so widely used and I think it is an excellent tool but there can be critical errors that ruin the forecast. I am surprised because there are many software companies that have developed programs specifically for budgeting. I am not sure if people are apprehensive to try the new software or if the developers do not do a good job promoting it.
Once the budget is established, its falls back to communication. If people know what their budget is and what the expectations are, they will be more likely to try to meet their goal. If they are unaware or do not understand the consequences, then why will they try? As accountants we often think a lot of what we do is common knowledge. We need to recognize we do not understand everything the sales team, or the developers do and vice-versa. We must TELL them!
It is also very important to be balanced between optimism and some skepticism. Be careful to say the sky is falling if it isn’t, but also make others aware when things need to change to be able to continue. You would be surprised how often the manufacturing team can change things up to save money if they are given specific parameters to maintain. If you tell them we need to cut costs they may say no. But if you effectively communicate and say we need to cut costs by 2% you would be amazed at what they can do.
Categories: Cost Accounting