Strategic Planning for Business

In businesses, strategic planning is an important step in implementing and maintaining a successful business. The question is ‘What is strategic planning’? Strategic planning is an organizational activity that sets priorities, focuses energies, strengthens operations, and ensures employees and other stakeholders are working towards a common goal. When a company develops a strategic plan, they can use it to lead them into the future while establishing fundamental practices and principals the drive the company forward.

The strategic plan is a document used to communicate the goals of the organization and the actions needed to achieve the goals. It also includes all the other critical elements of development of the plan. When developing a strategic plan companies should look at where they would like to see their company go and how they want to get there. It is impossible to get everyone on board without having a map to see where they are going. The strategic plan provided that map.

The steps to formulating a good strategic plan is:

  1. Analysis: Have an understanding of the current internal and external environments for the company.
  2. Strategy Formulation: Formulate the high-level strategies and basic organization level strategies.
  3. Strategy Execution: Implementation of the high-level strategies that are translated into operational plans and action items.
  4. Evaluation and Sustainment: Ongoing refinement and evaluation of the strategies implemented through performance, culture, communications, data reporting, and other management reports.

When developing a strategic plan companies need to have input from all level of the organization. It important to have everyone on board with the changes and understand the implementation of the strategies. This is an ongoing process that is always needing refined and updated.


Succession Planning: Making a Smooth Transition

Creating a successful succession plan is critical to a smooth, effortless transition of control in a company. Many times this process takes years to complete, and in the end the transition may not be a smooth as you had thought it would be. Here are some practical ideas on how you can help impact your company’s succession planning efforts.

    1. Thinks of the planning as a process to develop a new leader. Planning does not develop someone that can follow in your foot steps and run the business the way it should be ran. It is important to focus on what you need from someone that is taking over your place in the company. What traits do you want them to have? What does their leadership look like? Can they do the same job you do and take the company into the future? The planning part needs to be in the checklist, forms, charts, meetings, and due dates that formulate the expectations of a new leader. Don’t fall into the planning trap and never get around to the actual execution of the plan.
    2. Measure outcomes, not process. This is putting emphasis on the important. You need to have clear cut goals and defined rewards for meeting the goals. Leadership development is not the end game because you can develop thousands of leader and not find the right person to fit the top job. Make it a priority to establish and measure goals. Tracking the progress will help the planning process and set you on to your next steps in the process. Track data during the process so when the time comes again to venture through this process you have formulated answers to question that may arise.
    3. Remember to keep it simple. It is not rocket science. Having increasing complex assessments and criteria as part of the succession plan is impractical and unreasonable. These test should be built into the leadership training program as opposed to creating hoops to jump through. This is just the precursor to the actual development, so save the additional hoops for when they pass the initial criteria.
    4. Keep things realistic. Just because they look good on paper does not mean that they will be able to perform up to expectations. It is important to pick someone based on performance and not unrealistic development expectations. Don’t jerk people around and communicate the needs and wants of the company clearly and without basis to find the perfect person to complete the succession plan.

The Liability of Assuming Responsibility

In many different professions, when you are hired you are handed a job description. For accountants and a few other independent contractors, the clients define the job description. This can create an unexpected liability for the independent contractors. For some responsibilities, the line can be fuzzy, which in turn causes an expectation gap. When this happens, the independent contractor could be liable for not covering this gap, even if it was never communicated.

There are ways to minimize the pitfalls associated with independent contractors. The following are a few steps to follow:

  1. Define the Duties: When writing the engagement letter, clearly define the duties and scope of the services rendered, and be sure to include any limitations on services.
  2. Perform Only Duties Listed: Performing only the duties agreed upon in the engagement letter is critical. If more duties are performed, get an additional letter or addendum to the agreement to define those new duties and limitations on the duties.
  3. Documentation: It is important to keep everything in writing. Any oral conversations should also be communicated through written communication. The communication should note the client’s responsibility for taking the action and the recommendations made. Be sure to date the communications to keep the records clear.
  4. Avoid Overstatements and Titles: When communicating with clients, creating marketing materials, or creating engagement letters, it is important to be clear. Do not imply that certain services will be included if they will not be covered. Clear communication is key. Also do not take on extra titles such as, interim, outsources CFO, or controller. Such titles give an importance that usually is not there.
  5. Request an Overseer: Have the company delegate an overseer, preferably at the executive level that has the time and expertise to oversee the services provided by the independent contractor.
  6. Assuming Responsibilities: Do not assume responsibilities that are not in the agreement letter or contract. Stay firm on responsibilities that are outlined and request a new agreement if more services are needed.
  7. Board Meeting Attendance: If it is mandatory to attend board meetings, try to be first on the agenda, and exit after you are done. Have it noted in the minutes of what you discussed and then the time that you exited. This will keep you from being drawn into responsibilities that are not in your contract.

A Guide to Rollovers as Business Startups

Since the economic downturn, more than 10,000 new businesses were started with rollovers as business startups (ROBS). They have been able to use their retirement funds without triggering early distribution penalties, to establish their new business venture. How is this possible? Are there any cautions to look out for? The following outline the basic process of ROBS, and warns about some of the pitfalls associated with using the process to establish a new business.

This complicated process is under extreme scrutiny from the IRS. The following are the five basic steps to ROBS transactions:

  • The first step is for the entrepreneur to establish a new corporation, usually a C corporation.
  • Once the new corporations is established, the corporation adopts a prototype 401(k) that permits the plan participants to direct their investments into a selection of investments options, including employer stock. This plan usually allow the employee to roll over from an existing account or execute a direct transfer from an existing retirement account in to the plan and use it to buy the employer’s capital stock. There are no employees at this time, and the corporation does not have any assets, business operations, or even capital received to create shareholder equity.
  • When the entrepreneur becomes the corporation’s only employee, they elect to participate in the newly formed 401(k). They then direct the rollover or transfer of funds from the original retirement account to the new 401(K) account.
  • Once the funds have been transfer or rolled over, the entrepreneur direct to purchase newly issued corporate stock. This stock usually represents the amount of assets the entrepreneur wishes to invest in the new business.
  • The final step is to direct the corporation uses the funds from the sale of the stock to purchase a franchise, existing business, or begin a new business venture.

There are several pitfalls to watch out for when attempting this transaction. The IRS take each ROBS on a case-by-case basis to ensure that the arrangements are not being abused.


Preventing Job Burn Out

Many people have been in a job that could have been their ideal position, but after some time, the job began to feel mundane and a burden. It all starts at the beginning. The starting of a new job can bring mixed emotions, anticipation for what is ahead, fear about fitting in, and even excitement to begin something new. Employers should make it their priority to welcome the new staff members to the team. The more welcome the new employee is to the company, the more they will invest into their work. The following are tips on what employers can do to help prevent employee burn out.

  • Make the employee feel welcome. Remember to make a good first impression. Bad impressions are extremely hard to overcome. Throw a welcoming party for the new employees. Celebrate having them on your team.
  • Spend one-on-one time together. You have hired this person because you saw an asset to your team, so spend time with them to help them understand what an asset they are to the team. Have them spend time with other leaders so everyone get to know each other. Foster a relationship with the new hire.
  • Introduce them to formal and informal culture of the company. This allow the new employee to see both sides of the business. They will meet new friends and learn the expected behaviors for each situation they are thrown into. Consider CEO meetings, lunch-and-learns, or the buddy system until they are comfortable on their own.
  • Carefully chose a buddy or mentor. Assign someone to answer questions, show them the ins and outs of the workplace, and guide through their first few days. Choose the person wisely, making sure they are patient and willing to help the new hire.
  • Make resources available. It is important to provide special resources to the new employees, such as company specific acronym dictionaries, process diagrams, phone lists, community information for those who relocated, etc. If your company provided community forums, auto-enroll them into the ones that will help them the most.
  • Give feedback and guidance on job performance. Give new hires a clear view of what their first 90 days will look like, so they do not spend them wondering and with regrets. Give feedback as needed to guide them to the results you want.

It is important to create a friendly environment for works. If you take care of your workers, they will take care of your company.


The Rising Mobility Demand for Companies

Over the past decade, the increase demand for companies in the overseas markets has increased by 25%. With the demand, companies are finding an increased number of mobile employees. The mobile employees frequently make trips overseas to complete short-term assignments, project-based assignments, and assignment that require no relocation. The mobility of employees is set to increase over the next eight year to around 50% of large company’s workforce.

This can provide serious problems for companies. There is a need for a specialized workforce according to a survey by PwC of 900 company’s chief executives. The chief executives are looking to recent college graduates and mobility specialists to fill the needs within the company.

To respond to the shortages, changing business needs and employee preferences, many companies are making the effort to retain the best workers and develop a well-rounded employee that can meet the demands of the changing business environment. Since companies are targeting younger workers to develop, they are becoming more accommodating to family needs and responsibilities. They are also considering the preferences and needs of the different generations and cultures and shaping assignments to fit the different requirements.

As workers emerge in different markets, especially China, companies are starting to see a preference towards domestic multinationals instead of Western multinationals, so companies will recruit within the international market.

They are also improvement that are being implemented to help keep track of oversea employees and assignments. Many companies are adopting a standard global remuneration system for all oversea assignments. To deal with the increasingly diverse and mobile workforce, companies’ human resources and global mobility functions are becoming strategic tools instead of providing services for the workforce.

With the ever-changing demands in the business world, companies will have to adapt in response to demands including employee preference, long-distance commuting, and virtual mobility. The greater the flexibility from companies the better global mobility will work for both employee and employer.


Improving Audit Quality: The Debate

There has been a lot of discussion recently about ways to improve audit quality. Two proposals made by the PCAOB that would, in their opinion, improve audit independence and accountability. The two proposals have also received a lot of attention both bad and good. The PCAOB wants to require mandatory audit firm rotations and a signature from the lead engagement partner. While these proposals may seem like a good idea in theory, will it really work in practice?

The ideology behind each proposal is the same; both are discouraging forming social relationships that would interfere with auditor independence and create more transparency with in the audit field. Auditors should question procedures, financial statements, etc. and if they feel like they are too reliant on the client for social or economic status then it may erode their objectivity and skepticism. If the auditor’s objectivity and skepticism are decreased then their overall independence is compromised.

Many of the critics of these proposals feel that it the mandatory rotation will have increased costs and decreased quality. Many companies feel that new auditors will have to spend extra time playing catch up and the efficiencies and specific knowledge about the business will be lost in the change. The supporters of the proposal come from people who feel like the relationship has become too cozy and comfortable. This can then lead to unintended lapses in objectivity. There are always two sides to the coin.

While the mandatory audit firm rotation has garnered the most attention, another proposal of requiring a signature from the lead engagement partner has also come under scrutiny. The proposal is to increase accountability, when what is really does is increase identifiability. When a person is identified on a report, one of two things will happen. They will be very cautious to avoid disapproval, or they will become the scape goat if something goes wrong.

Neither one are perfect and will work the same way every time, but by examining the procedures and mixing in a little of both they may be a way of creating a better solution.


Tax Incentives for Companies from Local and State Government

Many local and state governments are trying to entice companies to invest their time, money and business resources in them. To accomplish this goal, local and state governments are offering tax incentives for business. By taking advantage of these incentives, companies can maximize their return on investment and help fund many capital improvement projects. Corporations need to keep in mind three simple steps when planning for capital improvement projects.

Gather Relevant Data

In many corporations, especially large companies, the board or CEOs will plan for capital improvements for the company. While these sounds like a good plan, there is a problem with this way of planning because corporations could evaluate projects based on tax incentives available. Planning should take place with the knowledge of what tax incentives government entities are providing.

Redefine Projects

Many times, the ways companies define capital improvement projects and the way the government entities define “projects” are two different things. Companies need to change their definition to fit the government’s definition so they qualify for the tax incentives. This will maximize the amount of incentives the company qualifies for and will supplement the money spent on capital improvements. Keep track of the requirements for the tax incentives. If the tax incentive requires a three-year window to complete the project, submit a timeline to track the progress. Follow the rules and regulation to the letter.

Let the Race Begin

It is important to realize that there are going to be other companies competing for the tax incentives. Competition is good, but keep your eyes on the prize. Contact the government entity early in the process and keep them updated. Have several different presentations, even if they do not all come into existence. The process can be compared to an auction, and the person with the “last-best” bid will with the prize of the tax incentive. During this negation time, keep a tight control on internal and external communications. Do not let a loose tongue be the downfall of any new project. Discretions is best.


AICPA Framework for Small Business

On June 10, the American Institute of CPAs announced the new framework to help small businesses with their financial reporting. The new framework is to provide a new accounting option for small- and medium-size entities. While these new accounting option are not required as US Generally Accepted Accounting Principles (GAAP) they will help to streamline relevant financial information for statements for privately held, owner-managed businesses..

The purpose of the new framework for small- and medium-size business is to help prepare financial statements clearly and concisely. The report shows the business’s profitability, cash available, assets to cover expenses and concise disclosures. The framework provides a report that makes it easy for lenders, insurers and other people that use the financial statement.

With a blend of traditional accounting and accrual income tax methods, the framework uses historical cost, target disclosure requirements, options to presenting the information, and reduces book-to-tax differences. This new framework expands options for CPAs and other companies for providing consistent, cost-beneficial financial statements.

The framework was developed by a group of CPA professionals that are experts in understanding the needs of private company financial statements. There has also been public and professional scrutiny to improve the new framework for any users.

Almost half (46%) of the 200 CPA firms surveyed are familiar with the new framework and half of them expect their client to use the new framework. There are a few critics to the new framework, but the opinion remains that the framework will help provide less complexity for the daily business.


How to Select an Auditor for Your Employee Benefits Plan

Businesses with over 100 participants in an employee benefits plan must have an audit on an annual basis. This audit must be filed, in fact, with the annual return. Many companies turn to simple services that provide nothing more than a basic look over the plan and provide the necessary files. Yet, before you choose anyone for the job, and potentially miss costly mistakes being made, it is critically important to focus on hiring a third party professional specializing in this type of audit.

Why Does It Matter?

Sometimes, it may seem that the least expensive option is the best option, but your business is likely suffering because of what you do not know. It is critical to have a professional with ample experience step in and to ensure that the necessary funds will be available to pay for all promised benefits to employees, including retirement and health needs. This is a legal responsibility, but it is also more than that.

An accurate plan is one that helps you to achieve your goals. Your employees are happy and that leads to good productivity. It also means you spend less money paying fines or trying to fund programs you cannot.

Who Should You Choose?

When selecting an auditor for your employee benefits plan, there are several key things to look for in these professionals. First, the auditor you use must be a licensed or certified public accountant. Aside from this, there are other things you will want to look for including:

  • The overall experience level of the auditor
  • The amount of time he or she has to dedicate to the job
  • The types of services offered specifically, you may wish to continue with the auditor for other needs as well
  • The cost of the service and how it is determined
  • The organization and timeliness of the individual

Take the time to get to know the auditor you select carefully. Not just anyone will meet the stringent requirements of the government and also ensure that you have an accurate, unbiased representation of what is happening with your employee benefits plan. The right professionals, like those at Crowley & Halloran, can help you to get this legal matter taken care of and ensure that your benefits plan is working in the best possible way it can for the benefit of both you and your employees.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.