Helpful Tips

Are you interested in publishing your organizational manuals electronically, but not quite ready for publishing directly on the internet? Tired of distributing update pages for manuals only to find that employees don't file them timely? If so, you're ready for digital publication. It's simpler and easier that you think.

Many organizations start by restricting electronic publication to their local or wide area network, with a goal toward Internet publication. This discussion will start you down that path using your existing documents. This approach helps avoid backtracking should you eventually choose Internet publication. If your manuals are already in a word processing format, you're three quarters of the way there. Here's how to start.

1) Find the electronic versions of the files that make up the document you want to publish. If you can't find the computer files, you can always scan the document and edit it.

2) Create a table of contents page (if you don't have one) for the document.

3) Use a word processing program to insert electronic bookmarks into the text of your document. For example, in Microsoft Word, highlight a chapter or section heading, then select the menu command Insert | Bookmark. Type in a name for your bookmark, like the chapter or section heading.

4) Add hyperlinks to your table of contents. With Microsoft Word, highlight the text for the link, then select the menu command Insert | Hyperlink. In the top dialog box, type (or browse to) the file that you want to link to, if the file is different from the one you're using. In the bottom dialog box, browse to the bookmark name in the file you want the link to. Click OK.

5) Save the document.

6) Test the hyperlinks to make sure they are working properly.

7) Tell employees where the document table of contents is located. Have them create a shortcut on their computer to that file.

8) As a safeguard, it's probably helpful to maintain one hardcopy master manual for your reference in case a computer file ever becomes corrupted.

These steps show you one way to create electronic publications. The skill inventory of your personnel may permit you to use other methods. Once you create a hyper-linked document, it's easy to convert that document into a web page. Most word processing programs include such a conversion feature. Whatever method you choose, at the end of the day all that really matters is that your employees have easy access to the information they need.

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Should you pay invoices early to take advantage of discounts? How frequently should you pay? These questions apply to many organizations--especially smaller ones without systematic accounts payable operations. Here are a few items to consider when timing of your accounts payable.

1. Determine the amount of discount available to you.

2. Compare the value of paying early with the amount of any interest you might incur by drawing additional amounts on your line of credit.

3. Schedule invoice payments to take advantage of discounts.

Example: You have an opportunity for a 2% discount on a $20,000 invoice if you pay within 10 days and suppose this is 20 days earlier that you would normally pay. Your discount would be $400. If you paid this invoice on your normal schedule (20 days latter), your effective interest savings (assuming a 9% rate) would be $20,000 x 9% x 20/365 = $98. Therefore, under this scenario, you save $302 ($400 less $98) by paying early.

How to record discounts. Normally, discounts are recorded in the general ledger as offsets to the type of expense incurred. For example, discounts on purchases of inventory are usually reflected as reductions in cost of sales. Discount on general expenses are often recorded in a discount account within the general expense category.

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The Zeta score, or "Z" score as it's commonly referred to, can be a good indicator of a business' overall strength. Historically, it has been used as a predictor of business failure. Of course, as with any tool, this too takes a lot of judgment. To compute the score for your business, calculate each of the four ratios on the left, then multiply each ratio by the factor on the right. Finally, add the four results together for a composite score.

A total score greater than 2.6 means the business is generally secure, less than 1.1 may indicate poor long-term survival prospects. A score between 2.6 and 1.1 requires judgment.  Trends over time may be more important than a score at any single point in time. A few variations exist for this formula, but the one above is a common one for general business.

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If you ever wondered what you're looking at in a statement of cash flows, here is a short primer. The statement is divided into three sections: operating activities, investing activities and financing activities. Operating activities generally consist of amounts that result from an organization's normal operations of delivering goods or services for sale. Typical line items in this category include net income, changes in current assets and liabilities, and non-cash operating transactions, such as depreciation. If cash flow from operations is positive, you can usually conclude that the organization derived more cash from its normal operations that it spent.

The investing activities section of the statement, normally consists of lending and collecting money on loans to others, acquiring or selling available-for-sale or held-to-maturity investments, and purchasing or selling long-term assets, such as property and equipment. Negative cash flow from investing activities can indicate that an organization is expanding or replacing significant long-term fixed assets.

The financing section of the statement of cash flows normally consists of transactions with an organization's owners or borrowing (such as the issuance of stock) and repaying amounts borrowed from others (such as on lines of credit or long-term debt.) Positive cash flow from financing activities usually indicates that the organization borrowed more funds than it repaid during the year. This condition can accompany an organization's conscientious expansion of fixed assets. It can also mean that an organization is having to borrow funds to compensate for negative cash flows from operations.

The net of the cash flows from all three sections should equal the net change in cash for the period.

If an organization has significant non-cash financing or investing transactions, the statement of cash flows will present those transactions as well, but in a separate section. An example is the acquisition of property through a capital lease. While any down payment on the lease would appear in the investing section, the remaining asset cost subject to the capital lease would appear in the separate non-cash section. Payments on the capital lease would flow through the financing section.

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Eligible IRA contributions made by the filing due date for an individual's tax return (not including extensions) may be deducted on 2003 tax returns. This year's 1040 filing due date is April 15, 2004.

A traditional IRA contribution may be deductible, partly deductible or nondeductible, depending on the applicable limit. The limit is the lesser of $3,000 ($3,500 for those age 50 and over) or 100% of the individual's compensation. The limit applies to traditional IRAs and Roth IRAs. If you make a nondeductible traditional IRA contribution (i.e., the contribution is not deductible, but the earnings on the contribution are deferred), then you should file Form 8606 with your return. If you have excess contributions, early distributions or a failure to make required distributions, then you should file Form 5329 with your Form 1040. The latter three are conditions subject to computation of excise tax.

Educational IRAs, like Roth IRAs, are no deductible, but their earnings are accumulated tax-free. Educational IRAs have a calendar basis contribution deadline. The contribution limit for an educational IRA is $500 per beneficiary, subject to the phase-out rules for higher-income taxpayers.

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Can't find that tax form you need? Have the form, but need the instructions? Don't know where turn? Of course we'll be glad to help, but you can also download formsdownload forms through the IRS website. This page also includes the 2003 individual tax extension Form 4868 Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. While filing this extension form does not extend payment of any tax that is expected to be owed, it can provide you with additional time to gather information necessary to complete you tax return.

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When preparing your organization's annual budget, include a capital expenditure component for technology. Annual expenditures for smaller, less-disruptive projects over time are more economical than large expenditures for massive hardware and software projects every few years. Here are some ideas to consider:

1. If you use desktop computers, estimate their average effective useful lives for your organization. Use this number to target your desktop hardware replacement budget. For example, if the average useful life is 3 years, then plan to replace 1/3 of your desktops each year.
    

2. Do the same for software upgrades. What's different about software upgrades is that you will probably want to upgrade specific applications at the same time in order to promote personnel performance efficiency and consistency. If you use many types of packages, upgrade some each year.
    

3. Plan for new applications, such as workflow technology, document imaging, or e-business. Inventory your current hardware and software technology and determine how the new applications will interface with your existing configurations. Factor these expenditures into your annual budget as well.

While this all sounds straightforward, it can be tricky. Advancements in technology can always lead to second-guessing, but an organized approach to budgeting upgrades can reduce the strain and help your technology solutions blend with your strategic plan and other annual organizational objectives.

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Whether considering expansion or just curious, break-even analysis is a tried and true performance benchmark. The overall objective of the analysis is to calculate the number of units that must be sold in order to break even in term of costs. Here are the basics:

1. Determine the target per unit selling price.

2. Identify fixed costs which are those expenses which are expected to remain constant over a relevant range of operations. Be sure to consider fixed costs that are part of your costs of sales as well as those included in general and administrative expenses.

3. Determine per unit variable product costs

4. Identify and estimate discretionary general and administrative expenses.

5. Calculate the number of units required to be sold in order to break even. The following formula can be used:

This analysis is not limited to sales of goods. It can also be used for sales of services where per unit costs can be determined. By using your algebra, you can change the formula to solve for other unknowns.

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The budget information against which you compare actual operating results can have a big impact on any corrective action you might need to take.  Managers use a number of budgetary tools to monitor progress and analyze variances against expectations. Some are simple to implement, but may not give a true picture of results. Others give a more accurate view of operational results, but are a bit more time-consuming to implement. Your needs will determine which is best for you. Here are some of the approaches that managers use.

1. Annual budget approach. This method compares year-to-date actual activity to the total annual budget. The budgeted amounts used for comparison do not change during the year. This method relies on management's experience to identify unusual variances.
    

2. Constant month approach. This approach assumes that revenue is earned and expenses are incurred at a constant rate throughout the year. The annual budget is divided by 12 to derive a monthly budget. Year-to-date revenue and expenses are then compared to the computed year-to-date budget. This model works best when revenue and expenses are expected to remain relatively constant from month to month.
    

3. Variable month approach. This method works best when activity for the year can be projected with fair accuracy, but monthly activity varies because of the seasonal nature of operations. With this budgeting method, an organization projects a monthly budget based on expected monthly activity. Year-to-date actual activity is then compared to the corresponding cumulative monthly budgets. This budgeting method provides a more accurate comparison, but is more time-consuming to prepare.
    

4. Flexible budget. This method starts with a base budget for the year. The twist with this approach is that cumulative year-to-date budget amounts are based on updates to expected annual activity rather than static projections developed during the initial budgeting process. This method requires more fine-tuning during the year, but may provide the best measure of activity relative to a given level of operations. This method depend more heavily on the identification of fixed and variable costs.

The budget method best for you depends on your objectives and the reliability of the underlying accounting information used in developing your base budget.

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If your business needs to request an extension to file its corporate tax return, remember that any expected tax due with your extended return must be paid with the extension request. If you file quarterly estimate payments, also remember that your first corporate estimate payment will be due April 15, even if your extended corporate return has not been filed. Corporate tax extensions are filed using IRS Form 7004. If your organization does not have a calendar year end, our tax deadline pages for businesses and other organizations can show you what your deadline will be.

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If you have considered the merits of e-business for your own organization, there are certain fundamentals that are prerequisites for success. Our e-business assessment page goes into more detail, but here are some of the fundamentals to consider first.

• Don't make rash decisions, but start a methodical evaluation now.

• Assess your current product/service fulfillment processes. Are they adequate to effectively and efficiently service the demand in an online world?

• Evaluate your staffing and knowledge requirements. Determine what skills your key employees will need to acquire in order to manage the online business segment and which should be augmented with outside sources. 

• Review your security and privacy policies and procedures. Our article on trust and electronic commerce summarizes key points for this area which is one of the most important considerations from your customers' point of view.

• Consider the demographics of your online customers. Think big. This is not all that different for what you do already, but the Internet provides a gateway to the rest of the world. 

• Assess your tactics for driving potential customers to your e-business web site. These methods often include use of traditional media.

• Assess hardware and e-business software needs. Many packages available today make expansion into e-business easier than ever.

These are only a few of the important considerations. We can help you organize your evaluation process. Just let us know. Our e-business assessment is a practical way to start.

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Remember to take a moment out of your day to say "thank you" to an employee or co-worker in appreciation for the work they do. Many personnel studies have shown that genuine appreciation for an employee's work is one of the most highly valued aspects of employment.

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Every client may have some cash collection challenges from time to time. Here is a quick refresher of some of the common tried-and-true methods for accelerating your cash flow from slow paying customers.

• Review your aged accounts receivable monthly and flag delinquent customers.

• Place personal telephone calls to customers.

• Ask customers to commit to a specific dates and amounts of payments.

• Initiate quick follow-up if customers do not honor their payment commitments.

• Ask customers to make payments with credit cards.

• Offer early payment discounts.

• Deposit collections to your financial institution timely or consider the cost effectiveness of a lockbox.

• Set up an electronic funds transfer system with your customers.

If you have other methods that work for you and are willing to share your ideas with others, please let us know. We'll add it to our list.

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Although the new year is young, it's time to re-read your 2004 strategic plan. The goals you developed last year should be guiding your actions this year. Pay particular attention to the performance measures that you established. These are your report card scores for the year to date. If results don't match up well to these measures, consider corrective action, taking into account your organization's business cycle. If you have not already incorporated leading or trailing indicators pertinent to your business, now is a good time to consider developing these measures so that you have them in time for this year's strategic planning session.

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One of your first lines of defense in any computer system are your policies regarding passwords. While policies vary greatly among organizations, here are few policies that some organizations use. The list is not necessarily complete, but may provide a basis for evaluating your current policies.

• Passwords should be changed at regular intervals or when personnel with computer access leave employment. 

• Passwords should not be given to or shared with others.

• Required password lengths should be sufficiently long to make the passwords harder to guess. Many organizations require a minimum of six characters. Many others require a minimum of eight.

• Passwords that contain alpha and numerical character are preferable to those that contain only alpha or numerical characters.

• Passwords should not be the same as the user ID.

• Passwords should not include any of the users' names.

• Passwords should be significantly different from ones previously used. 

• Users should be informed not to use passwords that can be easily guessed or obtained. For example, passwords should not contain information such as birthdays, anniversary dates, names of children, pet names, license plate numbers, social security numbers, telephone numbers, or street address, etc.

• Passwords for newly activated users must be changed upon first use.

• The organization's password policy should be distributed to each new employee.

As you assemble your information to prepare your 2004 tax returns, make notes about your expectations for income, deductions, employment, filing status and other matters might affect your 2005 return. Discuss these matters with your tax professional in conjunction with the preparation of your 2004 return. There may be certain planning considerations that are important to talk about now. At the very least, you can incorporate your expectations into decisions about payroll withholdings or estimated tax payments.

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Strong internal control benefits your organization more than you think. More than just forms and policy manuals, the internal control process is objective-driven, but people-focused. It gives you reasonable assurance of meeting your organization's objectives in three categories:

1. Effectiveness and efficiency of your operations. Addressing basic business objectives, this category encompasses performance and profitability goals and safeguarding of resources.

2. Reliability of financial reporting. This category relates generally to how financial information is reported to external users of that information.

3. Compliance with applicable laws and regulations. This internal control component addresses an organization's compliance with a host of federal, state and local requirements, including employment law, income tax regulations, workplace safety requirements, environmental regulations, and many others.

If you have not assessed your internal control lately, we recommend that you talk with us about the options that you have available.

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Financial statements can provide you with a wealth of information to monitor and manage your business. You just have to know what to look for. If your financial statements don't provide the information you need, then perhaps the financial statements should be restructured. For example, financial statements can be prepared on a cash or tax basis or certain expenses can be summarized differently. Comparative information can be added. Additional schedules or graphs can also be a big help. If you would like to get more out of your financial statements, give one of our accountants or auditors a call.