Use Data to Make Better Business Decisions

3 Ways to Use Data for Better Business Decision-Making

Businesses today have access to more data than ever before, which you can use to measure metrics, track trends, and gain insight into just about every aspect of your customers, products, and services.

Although gut instincts still come into play some of the time, the availability of so much data—and advanced software to calculate key performance indicators (KPIs) and issue real-time reports—makes it imperative for businesses to use data to inform their key decisions.

Following are three ways you can use data to make better, faster business decisions.

 

1. Use data to optimize pricing

One of the basic questions for businesses is whether they have priced their products or services too low or too high. Just because items are selling doesn’t mean the business is profitable, or that a different price might not lead to better sales and margins.

To optimize pricing, you first need up-to-date data on all costs related to each product or service. An item that is selling fast, generating a high level of revenue, may also be expensive to produce, resulting in low profits. Raising the price to reflect those higher costs might be necessary—and any price change can be closely monitored to see how it affects sales.

 

2. Manage your margins

Total revenue is not a true indicator of business success. What matters more are profit margins, including both contribution and gross profit margins.

Contribution margins are revenue minus variable costs. Gross profit margins are revenue minus the costs of goods sold. By following both, you can better understand what your profits are and where your break-even point is for every product and service you sell. Using those metrics, you can then look for opportunities to increase your margins—which could mean scaling back low-margin products, promoting the sale of high-margin goods, or other steps.

 

3. Evaluate your revenue stream

To properly evaluate your revenue stream, it is important to run individualized profit and loss statements on every client. Gut instinct might suggest that your oldest, biggest, or most renowned client is your best client. But when you run the numbers, you might be surprised by what you find.

By running individual reports, you can identify low-margin clients that are damaging your cash flow or limiting your growth. Spend too much time on serving those clients, and you might lose others. Then too, there might be an opportunity cost if you fail to reach new, higher-margin clients because you’re working so hard to maintain low-margin clients.

 

Use Data for Better Business Decision-Making

 

Get the insights you need

Insero & Co. is one of the premier public accounting firms in Western, Central, Upstate, and the Southern Tier of New York. Contact us to learn about our outsource accounting services, audit services, employee benefit plan audits, and how we can help your business use data and the latest accounting software to make more informed decisions.

Ideas to Help Control Health Insurance Costs

Ideas to Help Control Health Insurance Costs

As health care costs continue to rise, businesses are facing some tough decisions to stay profitable while maintaining this important employee benefit. With insurance renewal season right around the corner, now is the time to evaluate your plan. Consider these cost-cutting ideas:

  1. Review your current plan and shop around. The first step to shoring up your health care benefits is to review your current insurance plan. What do you like about it? Where do you have issues? Engaging your employees and asking for their opinions can provide you some insight, as well. Having a full understanding of your plan allows you to effectively compare the costs of other insurance providers. In many cases you can save costs and add benefits simply by changing insurance companies or coverage options.
  2. Move to a high-deductible health insurance plan. The upfront savings realized by high-deductible health plans (HDHP) make them an enticing option for employers and employees alike. The monthly premiums for HDHPs are lower compared to traditional plans, but the employee has to pay more out of pocket for their health expenses because of the higher deductible. To offset the extra cost to employees, you can offer a health savings account (HSA) to pair with the HDHP. With this approach employees can pay for medical expenses with pre-tax dollars. You, as the employer, can help offset the cost of the higher deductible by making tax-free contributions to your employees’ HSAs.
  3. Consider self-funded options. If properly executed, self-funded insurance plans can save your business money and improve cash flow. The basic concept is that you (the employer) pay the medical claims directly, instead of paying premiums to an insurance provider. Switching to a self-funded plan involves hiring a third party administrator to process the claims, creating a reserve fund to pay the claims, and purchasing stop-loss insurance to protect your company from catastrophic events. All in, a self-funded plan can cut your health benefit costs by up to 10 percent, according to Hub International.
  4. Encourage alternatives to traditional doctor visits. When setting premiums, health insurance companies factor in the cost of covering the claims made by your employees. One way to help control these costs is to educate your employees on the alternatives to traditional clinics and emergency room visits. For example, there are now alternatives such as nursing lines, online doctor consultations and remote monitoring apps that can cut your costs and save your employees some money. With a lower claim history, your future insurance premiums may not be as impacted by skyrocketing health insurance costs.
  5. Promote employee wellness initiatives. Another way to lower medical expenses is to promote the health of your employees. Wellness programs can be as simple as offering flu shots, onsite cancer screenings or organizing a company 5k run. The options are endless, but choosing the correct approach is key to your program’s success. According to a study by Knowable Magazine, an effective program starts at the top. Before rolling out a wellness initiative, present your plan to your company’s leadership team to get them on board.

The proper approach to cutting health care costs is different for every company, so take the time to research your options to ensure the correct fit for your business.

Control Health Insurance Costs

As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions, please contact us directly.

How to Successfully Implement Change

3 Tips to Implement Change Successfully

You know what’s hard for organizations? Change. You know what’s worse? Standing still. Whether you need to implement a new corporate process or a new technology, it is critical to not only get the solution and strategy right but also to implement it in a manner that wins over skeptics and ensures long-term success.

Here are three tips for implementing change successfully.

3 Tips to Implement Change Successfully

Tip #1: Recognize that a great idea is only the beginning

Let’s say you know—quantitatively, unequivocally—that your organization needs to automate its accounting system. It’s an absolute no-brainer. If you think your work is done, that all you have to do now is implement your wonderful automated solution, you’re making a mistake.

 

Anytime you’re going to change something at your organization, recognize that there will be hesitancy and resistance. There always is when it comes to dealing with change. So you have to be prepared to tackle several issues that are not about the product but about the culture:

  • Win over management, so you have their support
  • Engage and educate employees
  • Identify opportunities for collaboration across affected divisions
  • Make sure it’s clear who is in charge and accountable

 

Tip #2: Make it a two-way conversation

Employees are less likely to get onboard with a new technology or other solution—again, regardless of how great it is—if they’re simply told after the fact what it is and why it’s good for them.

 

Avoid employee resistance by engaging, as many of them as possible in the full process, from strategy development through implementation. Often, they’ll have valuable, on-the-ground insights into what’s working and what’s not—and they’ll feel more empowered, valued, and engaged.

 

When you announce a forthcoming change to employees, make sure that you explain not only what it is but also why, how, and when it’s being implemented. If you’re not ready to answer all those questions, you’re not ready to announce the change.

 

Tip #3: Review and refine your change processes

After implementing a new process or tool, it’s important to evaluate how well it worked—not the solution itself but the change process. Ask questions such as:

  • Did management adequately support the change?
  • Was there employee resistance? How could it have been better avoided?
  • Was the implementation plan followed? If not, why not?
  • Did the change process move fast enough? Are greater efficiencies possible?

 

About us

Insero & Co. is one of the premier public accounting firms in Western, Central, Upstate, and the Southern Tier of New York. Contact us about our outsource accounting services, audit services, employee benefit plan audits, and how we can help your organization be more productive and efficient.

Bad Debts Cause More Trouble than You Think

How to effectively use your bad debt allowance

When your business extends credit to customers who don’t settle accounts, their debt becomes bad debt. For businesses using the accrual basis method of accounting, establishing the correct bad debt allowance (also called an allowance for doubtful accounts) can bring the asset section of the balance sheet into focus.

 

The basics

The bad debt allowance (balance sheet) and related bad debt expense (income statement) accounts were established to help level out the impact of an uncollected invoice on any one particular financial month. By booking a reasonable estimate of bad debt expense each month, the roller coaster ride of writing off an account in any one month no longer materially impacts a business’ income statement. Instead, you build up a bad debt reserve on your company’s balance sheet to account for the actual recognition of writing off uncollectible sales on the balance sheet.

 

Here’s an example: Assume your accounts receivable totals $500,000. After careful consideration, you determine that only $440,000 is likely collectible this year. By creating a monthly bad debt expense of $5,000 on your income statement, the bad debt allowance on your balance sheet will build up to $60,000 over a year. Then when a write off is required, the reduction is in the allowance account NOT on your income statement. By doing this, you’ll gain a more accurate picture of the company’s monthly financial health, unaffected by one or two large bad debts.

 

Many businesses use a percentage of prior credit sales to calculate bad debt allowance. If your company’s credit sales totaled $100,000 last quarter and bad debts over the same period amount to 2 percent of sales revenue, you could establish an allowance of $2,000. As an alternative, you might assign risk factors based on individual clients, especially if the firm relies on a few large customers.

 

man writing debt

Managing your bad debt allowance

Regardless of the method chosen to calculate bad debt allowance, monitoring it should be a priority. Use these guidelines to help you manage your allowance:

  • Understand the tax implications. Only debts that are considered completely worthless and uncollectible can be taken as an expense on your business tax return — the allowance approach described here is not allowed. Some additional analysis and adjustments to the bad debt on your books will be required when it comes to filing your tax return.
  • Diligently track your allowance. Watch for rising and falling allowance levels, as they will help determine your course of action.
    • Allowance is climbing. A bad debt reserve that’s routinely increasing might highlight the need to adjust policies for extending credit or collecting payment. It means your estimate for bad debts is much higher than actual uncollectible debts. Perhaps you are not being aggressive enough in identifying actual bad debts. Lack of attention here could negatively impact your net asset condition and cause unneeded attention from your bank.
    • Allowance is falling. A declining allowance may indicate you are writing off more uncollectible accounts than you estimated. You need to understand the underlying cause. Perhaps a major customer went out of business or your account receivable group is not pursuing collection aggressively enough.
    • Allowance is holding steady. The initial indication here is that your estimate of bad debts might be appropriate. However, you should still conduct periodic reviews of your accounts receivable aging report to ensure your expectations of credit management are being met. Adjustments should be made as the collectability of specific receivables becomes clearer.

Understanding the bad debt allowance and how it works in conjunction with bad debt expense can really help you manage your financial condition and quickly see if your accounts that pay on credit are being managed to your expectation. Contact us if you have questions.

 

As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions, please contact us directly.

Why Automate Accounting Processes

5 Reasons to Automate Your Accounting Processes

Many businesses begin using manual accounting processes and continue to do so as they grow, often because of the appeal of maintaining the status quo. The problem is that at some point those manual processes can slow organizations down, hindering growth and innovation.

 

If you’ve been on the fence about transitioning to automated accounting processes, it might help to consider the following benefits of automating your accounting processes with Sage Intacct or other cloud ERP solutions.

 

  1. Save time
    Are your month-end closes taking up most of the month? Have you missed payment deadlines? Manual data entry is tedious and time-consuming, with employees spending hours on mind-numbing manual tasks instead of focusing on strategic tasks that add real value to the business.
  2. Be accurate and consistent
    Even highly skilled employees will occasionally make mistakes. Automation alleviates common data entry errors and ensures that every action is performed identically, so your customers, clients, and internal departments receive a consistently high level of service.
  3. Reduce costs
    Manual tasks almost always take longer than automated tasks, which means they demand more employee hours every week, month, and year. Automation reduces those work hours and helps prevent errors that can lead to unexpected additional costs.
  4. Increase visibility
    Using manual accounting methods, it can be extremely difficult to monitor, update, reconcile, and report on every internal process across the organization. When you automate billing, collections, sales, and other processes, you can automatically record and report on key metrics, in real time, so the information you need is always at hand.
  5. Reduce risk
    Automated processes can help you reduce the risk that you are out of compliance with the latest regulations or vulnerable to data breaches and other security concerns. Automated, cloud-based accounting solutions are automatically updated to adhere to the latest guidelines, and top providers follow strict security guidelines to protect your business and its data.

Automate Your Accounting Processes

Where to start?

If you’re convinced of the benefits of automating your accounting functions but overwhelmed by the challenge, remember that you can start slowly. For instance, you could automate your accounts payable workflows or audit documentation first, and move gradually to a completely automated solution.

 

Insero & Co. can help you weigh the benefits of automating your accounting processes and help you make the transition to best-in-class software. Contact us to talk about the relationship-based services we provide and how we can help you improve your processes to be more efficient and productive.

Considering Employee Raises? Review These Ideas

Considering Employee Raises? Review These Ideas

Deciding how to administer employee raises can perplex even the most seasoned managers. How often should raises be given? Should they be given across the board to all workers? If staff turnover is increasing, can you turn back the tide by granting raises to the most productive workers? There’s a lot to consider.

As you create or update your plan for giving out employee raises, here are some ideas to consider:

  • Pros and cons of merit raises. You may think that giving everyone the same raise (either percentage or dollar amount) seems impartial and will produce harmony. But there’s a downside. Your top performers — workers who sell more widgets, meet customer demand more often, and maintain a great work ethic in the face of additional responsibility — often leave if they’re recognized the same as employees who show up late, have a bad attitude, or perform poorly. To solve this, consider establishing specific goals along with tiered raises for employees who meet or exceed published goals whenever possible.

 

  • Always with budget in mind. Raises mean higher labor costs, expenses that a company’s cash flow must support month after month, year after year. As you create your annual operating budget, incorporate expected labor cost increases. In addition to planning for standard cost-of-living adjustments (COLAs) and performance based wage increases, set aside funds for bonuses, commissions and “spot awards” (lump sum payouts for superior performance). You may also set guidelines for rewarding staff members whom identify operational improvements or generate goodwill in the community.

  • Reward existing staff first. When companies grow, they often face the prospect of hiring additional staff. If you’re in that enviable position, remember to review your current employees. A business that’s gaining customers and market share may load additional responsibility on existing workers. Plus, your more experienced employees may be asked to train new staff or work longer shifts. This current compensation review is especially important if the job market requires hiring new employees at or above the rates of your current, seasoned staff.

 

  • Communicate expectations regularly. Clearly state and routinely emphasize performance goals. Consider separating personal performance discussions with salary action. That way if revenues are down and you’re faced with the tough choice of freezing salaries, there is less chance an individual’s performance will be solely linked to pay. Then you can creatively use incentives and spot awards to reward behavior and ideas that help your business turn the corner.

 

A highly structured system for granting raises may allow your company to stay within budget, but if your best workers become dissatisfied and leave, labor costs can skyrocket. A well-managed payroll system that rewards great performers on a regular basis and is understood by all employees can be an effective tool to retain workers and help keep morale high.

 

As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions, please contact us directly.

How to Find the Right Cloud ERP Software

The Basics of Cloud ERP Software

Just about every organization is already in the cloud or considering moving there. If you’re trying to decide whether to transition to cloud-based ERP software, you first need to understand some basic terminology. Then you can ask smart questions and identify the right solution to fit your business needs.

Multi-tenant vs. single-tenant

ERP software is built with multi-tenant or single-tenant architecture. Most organizations will benefit most from multi-tenant Software as a Service (SaaS) applications like Sage Intacct that were written exclusively for the cloud. With multi-tenant applications, the cloud provider shares infrastructure and applications across multiple customers and takes care of upgrades, security, and more. That means every user runs on the same software version, with updates and upgrades automatically applied across the business.

Single-tenant software versions—also called hosted or managed services—give a business dedicated access to the infrastructure and applications. Single-tenant solutions are typically more expensive than multi-tenant arrangements, and you have to manage the deployment much as you would for a private cloud.

APIs

Application programming interfaces (APIs) allow for communication between different applications. APIs are critical with ERP software because they allow you to integrate your ERP system with other cloud applications. Every ERP software solution will have APIs, but you’ll want to be sure they’re well-documented and have existing integrations with other popular cloud software products that you use, such as ADP and Salesforce.

Device agnostic

If a cloud application is device-agnostic, you can access it from any device, from desktops to smartphones, using any web browser. Make sure that any ERP software you purchase is device-agnostic, so you can add new devices without concern about accessibility.

SOC 2 compliance

All cloud-based ERP software providers will no doubt promise that your data will be secure, but how can you be sure? First, ask to be certain that their data center has been audited. Then ask if they are SSAE 16 SOC 1 or SOC 2 compliant (SOC 2 is strongest). If they say they are compliant, request a copy of their SOC 1 or 2 report, which they should freely supply.

Learn More

Insero & Co. can help you understand all the key features of different cloud-based ERP software solutions, and help you decide whether now is the right time for you to make the move to the cloud.

7 Common Small Business Accounting Mistakes

7 Common Small Business Accounting Mistakes

Keeping your company books in order can be tough. It’s hard to find the time to give it the proper attention. When you finally do, understanding the complicated, ever-changing accounting rules can be a challenge. Consider these common accounting mistakes to ensure they do not happen to your business:

  1. Mixing in personal expenses. Having non-business costs included in your financials will harm your business in three ways. First, your financial statements will not accurately portray your business performance. Second, personal expenses are a drag on your available cash. Third, the IRS is quick to deny legitimate business expenses as tax deductions if it perceives that personal expenses are comingled. Common sources of non-business expenses to watch for are credit card charges and expense reimbursements.
  2. Not keeping your books current. Think bookkeeping is frustrating? Try waiting a month or two to enter your transactions. Falling behind has a compounding effect on the time needed to get back on track. Complex entries get even more complicated as your ability to quickly recall transaction details diminishes over time. All the while, your business continues to run and set you back even more. Set a goal to have all transactions entered by the end of every week.
  3. Entering capital assets as expenses. Because capital assets provide long-term value, they are entered on the balance sheet and depreciated over multiple years. Mis­classifying a capital asset as an expense will torpedo your net income for that period. To avoid this, review large purchases and comb expense accounts likely to be hiding capital assets during your month-end review. Remember, while you depreciate these capital assets over many years on your books, special tax treatment allows certain capital assets to be fully deducted on your taxes.
  4. Not performing monthly bank reconciliations. When you receive your monthly bank statements, ensure they are reconciled to your books within a week or two. Bank reconciliations almost always identify errors. Delaying bank reconciliations will add unneeded complexity and decrease your chances of correcting an error.
  5. Mishandling of sales tax. Many businesses book sales tax they receive as revenue. This is not the proper treatment. Sales tax you receive should be entered as a liability until you remit it to the proper tax authority, ultimately avoiding your income statement altogether. Conversely, sales tax you pay on purchases should be booked as an expense.
  6. Lacking proper documentation. Most business owners know that you need to save invoices and receipts for sales and purchases, but what about documentation for adjustments and journal entries? Proving these are just as important. Contracts, time sheets and shipping documents are some examples of substantiation required to support your entries.
  7. Devoting too much of your time. Most entrepreneurs start their business for reasons other than spending hours working on the books. Don’t get bogged down worrying about the inner-workings of accounting rules and tax laws. Partnering with an expert to handle your bookkeeping needs can free you up to use your expertise where it’s needed the most — running and growing your business.

Contact us today to discuss your business bookkeeping needs or to schedule an appointment.

calculator to keep company books in order

As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions, please contact us directly.

Weekly Cash Flow Forecasts

Why Weekly Cash Flow Forecasts Are Worth Your Time

Do you really need to create weekly cash flow forecasts when you already create monthly profit and loss statements (P&Ls)? Actually, yes!

P&Ls are not a true indicator of an organization’s inflow and outflow of cash. For instance, they don’t show the cash used to make payments on loans—only the interest you’ve paid on the loan. Also, they don’t tell you whether you’ve received cash for the revenue billed or whether checks have been written for the expenses recorded. 

analytical charts


Benefits of Weekly Cash Flow Forecasts

The many benefits of weekly cash flow forecasts include that they:

  • Provide an early warning of both positive and negative cash situations
  • Offer insight into when funds are expected to come in and be paid out
  • Can be used to plan cash movements to maximize investments and ward off cash shortfalls
  • Are useful for evaluating liquidity
  • Help predict line of credit needs
  • Can help you maximize purchase discounts and avoid late fees
  • Can assist with the timing of inventory purchases
  • Help gauge the impact of grant funding and billing delays

A Real-world Example

Imagine that your organization experiences a four-week delay billing due to an employee being out on medical leave, resulting in a shortage of cash and a need to draw on a line of credit. The P&L would show the total revenue billed but not when it was billed or when funds were expected. 

With a weekly cash flow forecast, you would not only see the impact on cash but also be able to time the line of credit draw. 

Challenges of Creating Weekly Forecasts

If they’re so helpful, why do some organizations choose not to create weekly cash flow statements? Mainly because it can be difficult to pull together timely, accurate forecasts on a weekly basis. The statements need to be simple enough to be read quickly and, as forecasts, they’ll undoubtedly include constantly changing data. 

Weekly forecasts are nonetheless worth creating for organizations that are willing to devote themselves to three key areas:

  • Critical thinking: Some data will be subjective and hard to find, so you need to be able to dig into difficult questions, make judgments, and have conversations with the right people to get answers.
  • Data collection: To get meaningful data, you need reliable financial systems and people who can provide up-to-date reports and information.
  • Smart models: You’ll need to decide whether to rely on a canned model for your statement or build your own model in Excel.

Need a Helping Hand?

Developing a helpful weekly cash flow forecast requires human interaction, good data, a hint of intuition, and experience. Insero & Co. can help you weigh the benefits of forecasts and, if it’s the right step for your organization, help you get started.

Benefits of Going Paperless

Why and How to Go Paperless

Some people still use flip phones, and some businesses and nonprofits still use paper. If you’re among the holdouts still hanging on to the old-school comfort of printed handouts and boxes full of documents, it’s time to take a deep breath and embrace a paperless world—a world that will be better for your organization.

Time to go paperless: a man is surrounded by paper in a glass office

Why Go Paperless?

There is an overwhelming list of benefits to going paperless—it really is a smart move for just about every type of organization imaginable. The benefits include:

  • Cost savings: Imagine not having to buy paper, copier ink and toner, envelopes, and file storage solutions!
  • Time savings: No more manually filing and searching through reams of paper documents—a few mouse clicks is all it takes for employees to find whatever they want.
  • Space savings: Paperless offices have less clutter on desks and fewer storage needs. Now your organization can grow without requiring more space.
  • Environmental benefits: One office does make a difference, given that it takes one small tree to produce about 10,000 pieces of paper. By going paperless, you can do your part to leave more trees in the ground, where they benefit people and the environment.
  • Better access: Need to read a document while on the road or at home? If it’s stored digitally, you can always access what you need.
  • Stronger security: More than a decade ago, it made sense to question the security of cloud storage, but now the cloud is far more secure than your office, where theft and natural disasters are a continuing threat.

 

How to Go Paperless

Probably you already recognize the benefits of going paperless, but how do you get unstuck and actually make the change? Start by making a plan that covers these and other concerns:

  • How will you convert physical files to digital files? It’s going to take some time, but it’s a one-time process. Decide what you need to scan, who will scan it, and when and how they’ll dispose of the paper documents once they’re done.
  • How will you convince employees to change their behavior? Employees might resist a top-down announcement, so you might want to involve them in the process, including listening to their ideas for making the transition successfully.
  • What will your new processes be? Decide how current paper-based processes will change. You might need new business software to help.
  • Where should we start? You might want to start going paperless by tackling “low-hanging fruit.” Can you shift to electronic billing statements, for instance? Achieve success in one area, and use that to build momentum leading to other changes.

 

Need a Helping Hand?

Insero & Co. provides audit, tax, outsourced accounting, and business advisory services to help you through every business transition. Contact us to talk about how we might be able to help you improve efficiency through the use of cloud-based software and other solutions.