When Employees Are Stealing Time Theft In A Service Environment

When Employees Are Stealing Time Theft In A Service Environment

Theft – Introduction A quick perusal of statistics coming out of this recession has been the rise in employee theft. From petty cash misappropriations to stock shrinkage, employee time theft is on the rise. A study published by the Chubb Group of Insurance Cos. found that executives at 60 percent of the companies surveyed expect employees may steal money or equipment from the company. Executives at 34 percent expect their employees will steal from their clients. A study released by the Association of Certified Fraud Examiners, estimates that the typical company loses 6 percent of its annual revenue to fraud, which can include theft of company property, corruption schemes and accounting trickery. For many companies, the 6% can make the difference between profit and loss. There are a number of tactics to prevent theft – restrict access to inventory, establish and maintain proper controls over cash, etc. But as the economy moves to a service economy, how do you prevent theft by service workers, where there is little tangible evidence of their “production”? In a service environment, what is often stolen is the most important asset – time! Time Theft – 1st Tactic: The Internet Time can be stolen in a number of ways. First and foremost – the internet. Time spent surfing, shopping, or just checking up on their Facebook can steal enormous amounts of billable time. One engineering company terminated an employee who was devoting over half his time to World of Warcraft play! The best way to prevent time theft is to eliminate the temptation. Restrict access to the internet whenever possible through the use of...
Financial Ratio Analysis For Dummies

Financial Ratio Analysis For Dummies

Ratio analysis.  Sounds like a fascinating topic.  Something I really need to spend my time on.  Right…. Most business owners react the same way.  And no wonder.  Ratio analysis can be dry as dust, impenetrable, complex and confusing.  But it’s also a really good way to perform an “Executive Physical” on your company.  If you don’t want to read about all the ratios, you can see what 6 top B2B CFOs told Inc. Magazine about ratios, or you can call me now for a free ratio analysis of your company – no strings attached, and a look at some simple ways to track this information.  Make the call.  Your banker will thank you… Inc. Magazine article on ratios for business, featuring six B2B CFOs on a variety of industry types: Inc Article   And for those who like to do it themselves, here are the top ratios you should be looking at: Financial Ratio Analysis – Net Profit Margin Net Pretax Profit ÷ Revenue The bottom line — the amount you have left after every other expense is taken out.  Varies with industry and over time, but should be at least 5%. Otherwise, you might just want to open a pass book savings account. Financial Ratio Analysis – Gross Profit Margin Gross Profit ÷ Revenue Gross profit is your revenue minus what it costs to make your product.  Maximize this because you’ve got to make enough to cover the overhead – or you might as well close the doors.  You cannot make it up on the volume! Financial Ratio Analysis – EBITDA Margin EBITDA ÷ Revenue Many companies use...
Break Even Analysis and Cash Flow Analysis is Critical

Break Even Analysis and Cash Flow Analysis is Critical

Break Even Analysis and Cash Flow Analysis is Critical – Today’s Economy In this tough economy, it is important for the business owner to review two critical analytical tools to ensure the success of his/her firm. Break Even Analysis and Cash Flow Analysis is Critical – Break Even Analysis Let’s take a look at how increases and decreases in sales and expenses affect your bottom line. It is very helpful to breakdown expenses into “fixed” and “variable” categories to better understand how each expense category is affected by an increase/decrease in sales. Fixed expenses are those that remain level/constant regardless of the sales level. Variable expenses are those that will go up or down in relation to a change in sales. Some expenses have both fixed and variable aspects to them. Examples of “fixed” expenses are rent (not tied to a percentage of sales), telephone, depreciation, most utilities and administrative salaries. Examples of “variable” expenses are sales commissions (tied solely to a percentage of sales), cost of goods sold, shipping expenses and supplies. Examples of expenses that have both fixed and variable aspects to them include rent (which may have a fixed portion and a portion based on a percentage of sales, license/franchise fees, sales commissions (commissions paid once sales reach a certain level) and insurance (premium based on sales). Sales $1,000,000 Variable Expenses $750,000 75% of sales Profit left over to offset fixed expense $250,000 Fixed Expenses $200,000 Profit $50,000 Break-even point of company is $800,000 in sales: Sales $800,000 Less: Variable Exp ($800,000 x .75) $600,000 Profit left over to offset fixed expense $200,000 Fixed Expenses $200,000...
Business Investment Analysis – Are You Making Wise Choices?

Business Investment Analysis – Are You Making Wise Choices?

Business Investment Analysis – Preface It is a sales axiom that people buy things based on emotion and seek out facts to justify their decision. I wish I could say that the axiom were true ONLY for personal decisions, but my experience has shown that it is frequently true in the business realm as well. Perhaps we accountants are guilty of scaring off the novice with our intimidating terminology such as “time value of money” and “discounted cash flow” or acronyms such as NPV and IRR%. The purpose of this Part 1 article is to present a simple approach to evaluating investment decisions. Part 2 will present an example. The ultimate goal of the investment analysis process is to organize everything that is known about the potential investment. You are simply comparing the costs you will incur (initial investment and costs of operation) against the benefits (revenue opportunities) that are reasonably assured to be available to you. Keep it simple and don’t over analyze the investment decision. As the saying goes, eat the elephant one bite at a time. I suggest that your break the analysis into bite size parts. The following categories can serve as an example: Business Investment Analysis – The Opportunity When someone is contemplating purchase of a piece of equipment, building or purchasing a building or other investment they are doing so because of an expectation that such a purchase will enhance the profitability of their business. A clearly defined opportunity with accurate estimates of revenues and costs is essential to making a wise business decision. Business Investment Analysis – Investment The purchase price for a piece...
The 3 Pillars Of Financial Management

The 3 Pillars Of Financial Management

3 Pillars of Financial Management – Introduction Well managed companies employ many tools to optimize financial performance, some of which can be very sophisticated. However, most of these fall within the basic “blocking and tackling” of financial management. Invariably, entities that under perform or experience fraud or some other impropriety will have failed in at least 2 of these categories. And the price of failure can be harsh. Many companies when they experience a negative event – a fraud perpetrated by an employee or a significant misstatement of their financial statements may be forced into bankruptcy or may be forced to merge or restructure against their wishes. So reflect on your business operations and determine if you are lacking in these areas. If so, take quick, calculated action to supplement the areas of internal control, financial reporting and financial monitoring. The 3 pillars are: First Pillar of Financial Management: Accurate, detailed financial statements produced in a timely fashion Management should see to it that financial statements and management reports are produced in a relatively timely fashion. If your accounting staff cannot produce meaningful reports in a timely fashion or if the information is inconsistent or contains many errors, you could have a serious problem. If erroneous data has to be furnished to outside stakeholders like bankers, auditors or joint venture partners, you may lose credibility or may incur financial losses directly attributable to the loss of confidence of your stakeholders – such as the closure of a debt facility. You should ask yourself these questions: Is the financial data contained with reports consistent? Does it dovetail with what you...