Strategic Planning Blog Posts
December 28, 2016
Plan Now For The New Revenue Recognition Standard
The changes required by the new revenue recognition model are quickly looming – but most companies have not started their preparations. Given the new processes your organization may need to implement, the time to begin planning is now.
Plan for New 2017 Tax Return Deadlines
For the 2017 filing season, Congress agreed to change tax return filing and extension deadlines for partnerships, corporate entities, and information return forms. Don’t forget to update your calendar!
Plan Cybersecurity Protection
The average cost of a data breach in 2016 was $7.01 million. While you may not be able to prevent breaches entirely, you may be able to mitigate cybersecurity risks by involving all of your company’s departments.
Consider Strategic Outsourcing
A virtual CFO or controller can assist with financial processes and budgeting, thereby helping you more efficiently run your business. This benefit is just one of many that your company can reap from outsourcing your accounting functions.
Plan for the Unexpected
One-quarter of all small companies hit by a major storm permanently close. Be proactive against unexpected natural occurrences by disaster-proofing your business.
A code of ethics, document retention policy, and whistleblower policy are three governance policies that all companies should put in writing. Some of these policy details may vary depending on the needs of your organization.
Maintain Financial Separation Between Company and Owner
For business owners, keeping personal and company finances separate offers many benefits – including simpler tax preparation and a streamlined IRS audit process. We can advise you regarding 10 “seeds” to plant for financial autonomy.
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October 28, 2016
We wanted to share with you this great infographic on business performance in Ohio from 2015.
August 29, 2016
Encouraging Effective Management Accounting
Most discussions about managerial costing turn into comparisons of different costing methods & approaches. Previous costing solutions historically skipped the fundamental work for assessing their effectiveness against a set of concepts. Actually, it isn’t uncommon for the results from competing methods to point to contradictory decision alternatives. In the past experts have gone back and forth trying to push their preferred method without a principled basis to ground their approaches. This can be dangerous for achieving accuracy to support decision making.
A good example is the use of simple activity-based costing. This method fails to consider the nature of costs. ABC lacks capacity information as well. The confusion is based on whether capacity resides in resources, activities, or both. Activities don’t have capacity of their own, activities merely consume resources.
The profession must embrace a managerial costing principles based approach to cost modeling. This, of course, doesn’t mean that we are promoting a one size fits all approach to cost modeling or that every organization should perform cost modeling in the same manner. What it does mean is that managerial costing professionals can now assess how closely aligned their cost models are to the principles outlined in the Framework. If we collectively embrace these principles of managerial costing, then ultimately we must believe that principles are good for the profession and should be integrated into our practices.
If we agree that establishing principles will encourage the revitalization of our industry, then we must dive deeper into understanding the principles themselves.
Causality is the basis for all inferences in the scientific method. It is appropriate and essential, to apply causality to managerial costing, and as a principle it is the basis for discerning truth in cost modeling and its decision support information.
This isn’t to say that management accounting is a science, but decision science, which managers apply in their optimization efforts, is dependent on cause-and-effect insights. The Framework defines the principle of analogy as “the use of causal insights to infer past or future causes or effects.” Thus analogy “applies when insights are used and inferences are made about known cause and effect relationships.”
Given that these principles are self-evident, cost models that are consistent with causality and analogy would naturally provide information that aids managers’ decision making needs. Most current methods don’t consistently follow causality. As a result, they don’t produce efficient & reliable cost modeling solutions nor the clear, causal insights that decision makers need to perform their most important work.
As an example, the CPA exam still teaches students to allocate all overhead costs from manufacturing support into one main manufacturing cost pool. This means that fixed overhead can no longer be analyzed in a meaningful way. Fixed and variable costs aren’t separated. These issues plague management accounting. These problems are even worse when we consider that textbooks defer to GAAP principles rather than principles needed for internal decision support when teaching traditional standard costing. They teach some adjustments from GAAP for management analysis but don’t teach any principles for internal decision support.
The 2012 survey indicated that the availability of investment funding in relevant cost modeling technology wasn’t a significant financial constraint for most companies, but companies were reluctant to invest in new cost modeling methods. We believe these survey results may reflect increasing levels of regulation that have created commensurate amounts of uncertainty, effectively stalling investment.
This may indicate a lack of proposals to justify improving cost information or the possibility that accounting and finance professionals lack the knowledge to provide an effective cost information solution. One approach already exists: resource consumption accounting, that has the ability to encourage the healthy promotion of management accounting’s role. This principles-based managerial costing approach completely conforms to the Framework but is now sparsely employed in practice. The 2012 survey reveals the gap between managerial costing’s problems and the practices needed to effectively achieve improved results.
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May 20, 2014
Jim Bonvissuto, President of Business Improvement Group, Inc., discusses joining with COSE (http://www.cose.org/), or the Council of Smaller Enterprises, to mentor entrepreneurs interested in purchasing, starting, or operating a business.