CPA Blog

Listen and Trust the Power of Collaborative Management

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Published: Monday, 13 March 2017 05:52

Written by Phillip Strickler, CPA.CITP

Many business owners are accustomed to running the whole show. But as your company grows, you’ll likely be better off sharing responsibility for major decisions. Whether you’ve recruited experienced managers or developed “home grown” talent, you can empower these employees by taking a more collaborative approach to management.

Not employees — team members

Successful collaboration starts with a new mindset. Stop thinking of your managers as employees and instead regard them as team members working toward the same common goals. To promote collaboration and make the best use of your human resources, clearly communicate your strategic objectives. For example, if you’ve prioritized expanding into new territories, make sure your managers aren’t still focusing on extracting new business from current sales areas.

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Don’t make hunches — crunch the numbers

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Published: Monday, 06 March 2017 08:40

Written by Phillip Strickler, CPA.CITP

Don’t make hunches — crunch the numbers

Some business owners make major decisions by relying on gut instinct. But investments made on a “hunch” often fall short of management’s expectations.

In the broadest sense, you’re really trying to answer a simple question: If my company buys a given asset, will the asset’s benefits be greater than its cost? The good news is that there are ways — using financial metrics — to obtain an answer.

Accounting payback

Perhaps the most common and basic way to evaluate investment decisions is with a calculation called “accounting payback.” For example, a piece of equipment that costs $100,000 and generates an additional gross margin of $25,000 per year has an accounting payback period of four years ($100,000 divided by $25,000).

But this oversimplified metric ignores a key ingredient in the decision-making process: the time value of money. And accounting payback can be harder to calculate when cash flows vary over time.

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Tangible property safe harbors help maximize deductions

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Published: Monday, 06 March 2017 08:24

Written by Juan Andrade, CPA

If last year your business made repairs to tangible property, such as buildings, machinery, equipment or vehicles, you may be eligible for a valuable deduction on your 2016 income tax return. But you must make sure they were truly “repairs,” and not actually “improvements.”

Why? Costs incurred to improve tangible property must be depreciated over a period of years. But costs incurred on incidental repairs and maintenance can be expensed and immediately deducted.

What’s an “improvement”?

In general, a cost that results in an improvement to a building structure or any of its building systems (for example, the plumbing or electrical system) or to other tangible property must be capitalized. An improvement occurs if there was a betterment, restoration or adaptation of the unit of property.

Under the “betterment test,” you generally must capitalize amounts paid for work that is reasonably expected to materially increase the productivity, efficiency, strength, quality or output of a unit of property or that is a material addition to a unit of property.

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Streamline your inventory management to boost cash flow

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Published: Monday, 27 February 2017 10:30

Written by Phillip Strickler, CPA.CITP

Inefficient inventory management is one of the biggest cash drains on many businesses, depriving them of valuable working capital. Excess inventory is literally cash wasting away in your warehouse or on your shelves. So every company needs to do everything it can to minimize its inventory investment.

Manufacturing tips

If you’re a manufacturer, one of the best ways to do this is by implementing just-in-time (JIT) inventory management. It involves having raw materials delivered just as they’re needed, rather than weeks in advance.

Automation plays a big role in JIT. Back-office inventory and ordering software, combined with bar-code scanners and other software tools, is widely available today and can give even smaller companies a leg up on the competition. Bear in mind, however, that JIT systems require greater collaboration with your customers, suppliers and employees. And they’ll likely bring substantial upfront equipment costs.

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