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

 

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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.

Keep Your Nonprofit Board Motivated and Engaged

The Challenge of Board Engagement

Just about every nonprofit understands the need for a motivated and engaged board of directors. So why doesn’t every nonprofit have one? Because it’s challenging to develop—and maintain—a healthy board.

The good news is that you can take a number of concrete steps to motivate both new and existing members of your board of directors, including these:

  • Engage board members in the mission: Involve members in as many programs and activities as possible, so they can better understand and value the organization’s mission.
  • Set high expectations: People rise to the level of expectations set for them, so set high expectations for new board members. Otherwise, you risk losing their attention.
  • Set specific goals: By setting yearly financial goals, and revisiting them regularly, you can keep members on track.
  • Use the latest technology: Provide board members with easy-to-read reports, marketing material, and other information to help them stay engaged and informed.
  • Provide the right direction: Make sure the executive director manages the board but doesn’t lead it. If the ED is too directive, the board will not fully develop.
  • Interview board members: Once a month, check in with each member. Are they pleased with their role? Have their needs or interests changed? Give them an opportunity to express themselves.

 

Conduct impactful board meetings

Another critical tool for building a better board is conducting impactful board meetings. Meetings set the tone for members, so plan them well, run them on time, and give members a chance to feel heard and valued.

To help board members appreciate the organization’s impact and mission, consider bringing in clients or program participants to speak or perform at meetings. You might also designate a subcommittee or person to monitor the dynamics of the group during meetings to identify issues and tensions, such as who is talking too much, who needs to talk more, and how to involve everyone.

 

The Challenge of Board Engagement

Don’t overlook the small things

When it comes to building a successful board, details matter. Along with all the steps mentioned above, pay attention to other seemingly small things that can make a real difference:

  • Collect personal information about board members (birthdays, anniversaries, etc.) and acknowledge them as part of building a trusting relationship.
  • Provide training on fundraising and other important board roles. Even members with skills and experience in a particular area can benefit from further training.
  • Create fun contests or other incentives to encourage board members to hit their fundraising and other goals.
  • Be creative to help board members succeed. If, for instance, they’re not comfortable asking for donations, send them out with an experienced staff member.

 

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For more than four decades, Insero & Co. has served nonprofits of all sizes. Our experienced experts provide outsource accounting services, audit services, employee benefit plan audits, and other services to help organizations achieve their missions.

Board Orientations Set Boards Up for Success

Build a Better Board with a Better Board Orientation

Every job needs a job description, and every new member of a nonprofit’s board of directors needs a board orientation. The reasons are similar: In both cases, you want the new member of your team to know exactly what is expected of them, so they can be successful right out of the gate.

 

Key information in a board orientation

Make sure that, at a minimum, your board orientation provides new members with:

  • A written description of the position
  • A review of organizational operations (mission, bylaws, organizational chart, recent Form 990s, etc.)
  • A summary of board goals, with a review of recent meeting minutes
  • Fundraising obligations
  • Attendance expectations and when and for how long the board meets

 

Motivate and inform

The board orientation provides an opportunity to do more than simply inform members of their roles and responsibilities. It also provides a chance to let new board members know how important they are to the organization’s success.

When members know that their skills and experience are valued, and they know exactly what’s expected of them, they’ll feel more confident when talking to friends, family, and potential donors. They’ll also be more likely to value their position and feel empowered to use their skills and experience to help the organization meet its goals.

 

Build a Better Board with a Better Board Orientation

Build a better board

Another advantage of conducting a thorough board orientation is that it can help the entire board of directors run more smoothly. If a new member comes on board who does not understand the organization’s mission or is confused or surprised by member responsibilities, the disruption can disrupt operations for both the board and the executive team.

In contrast, the arrival of a new member who understands the organization’s mission knows exactly what is expected of them, and feels empowered to tackle new challenges can breathe new life into the board and the organization.

 

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Insero & Co. has served nonprofits of all sizes for more than 40 years. Our experts provide outsource accounting services, audit services, employee benefit plan audits, and other services to help organizations be more productive and efficient.

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?

 

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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 Implement a Board Assessment

Successful nonprofits tend to have healthy, energized boards of directors. Board members don’t just show up—they actively participate in meetings, fundraise, provide thoughtful oversight, and much more.

The challenge for many nonprofits is to build and then maintain a strong and engaged board. One way to do this is by performing a periodic board assessment, which can accomplish a number of important goals:

  • Illustrate (and reiterate) the board’s importance to the organization
  • Define roles and prevent duplication of effort among board members
  • Provide opportunities for self-reflection regarding strengths, weaknesses, etc.
  • Create a baseline for future efforts
  • Help begin essential conversations (about term limits, recruitment, etc.)
  • Provide a format for expressing concerns and raising or revisiting concerns

energized boards of directors meeting discussing a board assessment

How to build a board assessment

If you think your nonprofit would benefit from a board assessment, begin by asking these two fundamental questions, which will drive the framework for your assessment:

  • Why does this nonprofit exist?
  • How can our board help advance our mission?

There is no single template for board assessments. Depending on your needs, you can tailor the format, questions, grading scales, and more. For example, you might want to ask each board member to rate the board on a scale from 1-5 on topics such as performance on core responsibilities, understanding the mission, and succession planning.

Typically, you’ll want to describe each item you ask about, such as what exactly the board’s core responsibilities are. That ensures that every board member is responding based on the same understanding, and it helps to educate board members who may not have a full understanding of every topic.

Another best practice is to leave room for comments, which can add depth and insight to the results. Remember that your goal is not only to gather information from board members but also to encourage them to reflect on their individual and collective performance, which can lead to new ideas and insights, as well as a greater feeling of belonging.

When you collect and compare all of the board assessments, you can identify challenges, strengths, and opportunities, which can be relayed to board members. Using that information, you can then start to outline the topics of conversation in your timeline for governance agendas.

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Insero & Co. has worked with nonprofits for more than 40 years. Our experienced experts are available to help you with outsource accounting services, audit services, employee benefit plan audits, and other services designed to free you to focus on mission-critical work.

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.