It used to be that large corporations were the only
businesses involved in activity-based costing. Not so
today. Service industries such as banks, hospitals, insurance
companies, and real estate agencies have all
had success with ABC. But since its inception, activity-
based costing has seemed to have been more successful
when implemented by larger companies rather
than by smaller ones.
Friday, November 20, 2009
POTENTIAL PITFALLS OF ACTIVITY BASED COSTING
Companies that implement activity-based costing
run the risk of spending too much time, effort, and
even money on gathering and going over the data that
is collected. Too many details can prove frustrating
for managers involved in ABC. On the other hand, a
lack of detail can lead to insufficient data. Another
obvious factor that tends to contribute to the downfall
of activity-based costing is the simple failure to act on
the results that the data provide. This generally happens
in businesses that were reluctant to try ABC in
the first place.
run the risk of spending too much time, effort, and
even money on gathering and going over the data that
is collected. Too many details can prove frustrating
for managers involved in ABC. On the other hand, a
lack of detail can lead to insufficient data. Another
obvious factor that tends to contribute to the downfall
of activity-based costing is the simple failure to act on
the results that the data provide. This generally happens
in businesses that were reluctant to try ABC in
the first place.
HOW ACTIVITY-BASED COSTING WORKS
Activity-based costing programs require proper
planning and a commitment from upper management.
If possible, it is best to do a trial study or test run on a
department whose profit-making performance is not
living up to expectations. These types of situations
have a greater chance of succeeding and showing
those in charge that ABC is a viable way for the
company to save money. If no cost-saving measures
are determined in this pilot study, either the activity based
costing system has been improperly implemented,
or it may not be right for the company.
ACTIVITY-BASED COSTING
Activity-based costing (ABC) is an accounting
method that allows businesses to gather data about
their operating costs. Costs are assigned to specific
activities—such as planning, engineering, or manufacturing—
and then the activities are associated with
different products or services. In this way, the ABC
method enables a business to decide which products,
services, and resources are increasing their profitability,
and which are contributing to losses.
method that allows businesses to gather data about
their operating costs. Costs are assigned to specific
activities—such as planning, engineering, or manufacturing—
and then the activities are associated with
different products or services. In this way, the ABC
method enables a business to decide which products,
services, and resources are increasing their profitability,
and which are contributing to losses.
ACCOUNTS RECEIVABLE FINANCING
Accounts receivable financing provides cash
funding on the strength of a company’s outstanding
invoices. Instead of buying accounts, lenders use
invoices as collateral for the loan. Besides benefiting a
business in debt, accounts receivable financiers can
assume greater risks than traditional lenders, and will
also lend to new and vibrant businesses that demonstrate
real potential. An accounts receivable lender
will also handle other aspects of the account, including
collections and deposits, freeing the company to
focus on other areas of productivity.
funding on the strength of a company’s outstanding
invoices. Instead of buying accounts, lenders use
invoices as collateral for the loan. Besides benefiting a
business in debt, accounts receivable financiers can
assume greater risks than traditional lenders, and will
also lend to new and vibrant businesses that demonstrate
real potential. An accounts receivable lender
will also handle other aspects of the account, including
collections and deposits, freeing the company to
focus on other areas of productivity.
Accounts payable
Accounts receivable describes the amount of
cash, goods, or services owed to a business by a client
or customer. The manner in which the collection of
outstanding bills are handled, especially in a small
business, can be a pivotal factor in determining a
company’s profitability. Getting the sale is the first
step of the cash flow process, but all the sales in the
world are of little use if monetary compensation is not
forthcoming. Moreover, when a business has trouble
collecting what it is owed, it also often has trouble
paying off the bills (accounts payable) it owes to
others.
cash, goods, or services owed to a business by a client
or customer. The manner in which the collection of
outstanding bills are handled, especially in a small
business, can be a pivotal factor in determining a
company’s profitability. Getting the sale is the first
step of the cash flow process, but all the sales in the
world are of little use if monetary compensation is not
forthcoming. Moreover, when a business has trouble
collecting what it is owed, it also often has trouble
paying off the bills (accounts payable) it owes to
others.
PRIORITIZING AND MONITORING
This is especially true for fledgling business owners
who are often stretched pretty tightly financially.
Entrepreneurs who find themselves struggling to meet
their accounts payable obligations have a couple of
different options of varying levels of attractiveness.
One option is to ‘‘rest’’ bills for a short period in order
to satisfy short-term cash flow problems. This basically
amounts to waiting to pay off debts until the
business’s financial situation has improved. There are
obvious perils associated with such a stance: delays
can strain relations with vendors and other institutions
that are owed money, and over-reliance on future
good business fortunes can easily launch entrepreneurs
down the slippery slope into bankruptcy. Another
option that is perhaps more palatable is to make
partial payments to vendors and other creditors.
who are often stretched pretty tightly financially.
Entrepreneurs who find themselves struggling to meet
their accounts payable obligations have a couple of
different options of varying levels of attractiveness.
One option is to ‘‘rest’’ bills for a short period in order
to satisfy short-term cash flow problems. This basically
amounts to waiting to pay off debts until the
business’s financial situation has improved. There are
obvious perils associated with such a stance: delays
can strain relations with vendors and other institutions
that are owed money, and over-reliance on future
good business fortunes can easily launch entrepreneurs
down the slippery slope into bankruptcy. Another
option that is perhaps more palatable is to make
partial payments to vendors and other creditors.
ACCOUNTS PAYABLE
Accounts payable is the term used to describe the
amounts owed by a company to its creditors. It is,
along with accounts receivable, a major component of
a business’s cash flow. Aside from materials and
supplies from outside vendors, accounts payable
might include such expenses as taxes, insurance, rent
(or mortgage) payments, utilities, and loan payments
and interest.
amounts owed by a company to its creditors. It is,
along with accounts receivable, a major component of
a business’s cash flow. Aside from materials and
supplies from outside vendors, accounts payable
might include such expenses as taxes, insurance, rent
(or mortgage) payments, utilities, and loan payments
and interest.
CHANGING ACCOUNTING METHODS
In some cases, businesses find it desirable to
change from one accounting method to another.
Changing accounting methods requires formal approval
of the IRS, but new guidelines adopted in 1997
make the procedure much easier for businesses. A
company wanting to make a change must file Form
3115 in duplicate and pay a fee. A copy should be
attached to the taxpayer’s income tax return and the
other copy must be sent to the IRS Commissioners.
Any company that is not currently under examination
by the IRS is permitted to file for approval to
make a change.
change from one accounting method to another.
Changing accounting methods requires formal approval
of the IRS, but new guidelines adopted in 1997
make the procedure much easier for businesses. A
company wanting to make a change must file Form
3115 in duplicate and pay a fee. A copy should be
attached to the taxpayer’s income tax return and the
other copy must be sent to the IRS Commissioners.
Any company that is not currently under examination
by the IRS is permitted to file for approval to
make a change.
CASH VS. ACCRUAL BASIS
Accounting records prepared using the cash basis
recognize income and expenses according to real-time
cash flow. Income is recorded upon receipt of funds,
rather than based upon when it is actually earned, and
expenses are recorded as they are paid, rather than as
they are actually incurred. Under this accounting
method, therefore, it is possible to defer taxable income
by delaying billing so that payment is not received
in the current year. Likewise, it is possible to
recognize income and expenses according to real-time
cash flow. Income is recorded upon receipt of funds,
rather than based upon when it is actually earned, and
expenses are recorded as they are paid, rather than as
they are actually incurred. Under this accounting
method, therefore, it is possible to defer taxable income
by delaying billing so that payment is not received
in the current year. Likewise, it is possible to
ACCOUNTING METHODS
Accounting methods refer to the basic rules and
guidelines under which businesses keep their financial
records and prepare their financial reports. There are
two main accounting methods used for record-keeping:
the cash basis and the accrual basis. Small business
owners must decide which method to use depending
on the legal form of the business,
guidelines under which businesses keep their financial
records and prepare their financial reports. There are
two main accounting methods used for record-keeping:
the cash basis and the accrual basis. Small business
owners must decide which method to use depending
on the legal form of the business,
CHOOSING AN ACCOUNTANT
While some small businesses are able to manage
their accounting needs without benefit of in-house
accounting personnel or a professional accounting
outfit, the majority choose to enlist the help of accounting
professionals. There are many factors for the
small business owner to consider when seeking an
accountant, including personality, services rendered,
reputation in the business community, and expense.
The nature of the business in question is also a
consideration in choosing an accountant. Owners of
small businesses who do not anticipate expanding rapidly
have little need of a national accounting firm, but
business ventures that require investors or call for a
public stock offering can benefit from association
with an established accounting firm. Many owners of
growing companies select an accountant by interviewing
several prospective accounting firms and requesting
proposals which will, ideally, detail the
firm’s public offering experience within the industry,
describe the accountants who will be handling the
account, and estimate fees for auditing and other proposed
services.
their accounting needs without benefit of in-house
accounting personnel or a professional accounting
outfit, the majority choose to enlist the help of accounting
professionals. There are many factors for the
small business owner to consider when seeking an
accountant, including personality, services rendered,
reputation in the business community, and expense.
The nature of the business in question is also a
consideration in choosing an accountant. Owners of
small businesses who do not anticipate expanding rapidly
have little need of a national accounting firm, but
business ventures that require investors or call for a
public stock offering can benefit from association
with an established accounting firm. Many owners of
growing companies select an accountant by interviewing
several prospective accounting firms and requesting
proposals which will, ideally, detail the
firm’s public offering experience within the industry,
describe the accountants who will be handling the
account, and estimate fees for auditing and other proposed
services.
ACCOUNTING AND THE SMALL BUSINESS OWNER
‘‘A good accountant is the most important outside
advisor the small business owner has,’’ according
to the Entrepreneur Magazine Small Business Advisor.
‘‘The services of a lawyer and consultant are vital
during specific periods in the development of a small
business or in times of trouble, but it is the accountant
who, on a continuing basis, has the greatest impact on
the ultimate success or failure of a small business.’’
advisor the small business owner has,’’ according
to the Entrepreneur Magazine Small Business Advisor.
‘‘The services of a lawyer and consultant are vital
during specific periods in the development of a small
business or in times of trouble, but it is the accountant
who, on a continuing basis, has the greatest impact on
the ultimate success or failure of a small business.’’
ACCOUNTING PROFESSION
There are two primary kinds of accountants: private
accountants, who are employed by a business
enterprise to perform accounting services exclusively
for that business, and public accountants, who function
as independent experts and perform accounting
services for a wide variety of clients. Some public
accountants operate their own businesses, while
others are employed by accounting firms to attend to
the accounting needs of the firm’s clients.
A certified public accountant (CPA) is an accountant
who has
accountants, who are employed by a business
enterprise to perform accounting services exclusively
for that business, and public accountants, who function
as independent experts and perform accounting
services for a wide variety of clients. Some public
accountants operate their own businesses, while
others are employed by accounting firms to attend to
the accounting needs of the firm’s clients.
A certified public accountant (CPA) is an accountant
who has
FINANCIAL STATEMENTS
Financial statements are the most comprehensive
way of communicating financial information about a
business enterprise, and a wide array of users—from
investors and creditors to budget directors—use the
data it contains to guide their actions and business
decisions. Financial statements generally include the
following information:
● Balance sheet (or statement of financial position)—
summarizes the financial position
of an accounting entity at a particular point
in time as represented by its economic resources
(assets), economic obligations (liabilities),
and equity.
● Income statement—summarizes the results
of operations for a given period of time.
way of communicating financial information about a
business enterprise, and a wide array of users—from
investors and creditors to budget directors—use the
data it contains to guide their actions and business
decisions. Financial statements generally include the
following information:
● Balance sheet (or statement of financial position)—
summarizes the financial position
of an accounting entity at a particular point
in time as represented by its economic resources
(assets), economic obligations (liabilities),
and equity.
● Income statement—summarizes the results
of operations for a given period of time.
ACCOUNTING SYSTEM
An accounting system is a management information
system that is responsible for the collection and
processing of data useful to decision-makers in planning
and controlling the activities of a business organization.
The data processing cycle of an accounting
system encompasses the total structure of five activities
associated with tracking financial information:
system that is responsible for the collection and
processing of data useful to decision-makers in planning
and controlling the activities of a business organization.
The data processing cycle of an accounting
system encompasses the total structure of five activities
associated with tracking financial information:
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
Generally accepted accounting principles
(GAAP) are the guidelines, rules, and procedures used
in recording and reporting accounting information in
audited financial statements. Various organizations
have influenced the development of modern-day accounting
principles. Among these are the American
Institute of Certified Public Accountants (AICPA),
the Financial Accounting Standards Board (FASB),
and the Securities and Exchange Commission (SEC).
The first two are private sector organizations; the SEC
is a federal government agency.
(GAAP) are the guidelines, rules, and procedures used
in recording and reporting accounting information in
audited financial statements. Various organizations
have influenced the development of modern-day accounting
principles. Among these are the American
Institute of Certified Public Accountants (AICPA),
the Financial Accounting Standards Board (FASB),
and the Securities and Exchange Commission (SEC).
The first two are private sector organizations; the SEC
is a federal government agency.
Saturday, November 14, 2009
ORGANIZATIONAL CHARACTERISTICS THAT ENCOURAGE INTRAPRENEURSHIP
ORGANIZATIONAL CHARACTERISTICS
The single most important factor in establishingan ‘‘intrapreneur-friendly’’ organization is making
sure that your employees are placed in an innovative
working environment. Rigid and conservative organizational
structures often have a stifling effect on intrapreneurial
efforts. Conservative firms are capable
of operating at a high level of efficiency and profitability,
but they generally do not provide an environment
that is conducive to intrapreneurial activity (and
organizations that do not encourage creativity and
leadership often alienate talented employees). But as
Erik Rule and Donald Irwin stated in Journal of Business
Strategy, companies that establish a culture of
innovation through: 1) formation of intrapreneurial
teams and task forces; 2) recruitment of new staff with
new ideas; 3) application of strategic plans that focus
on achieving innovation; and 4) establishment of internal
research and development programs are likely
to see tangible results.
ACCOUNTING, business,financial
ACCOUNTING
Accounting has been defined as ‘‘the language ofbusiness’’ because it is the basic tool for recording,
reporting, and evaluating economic events and transactions
that affect business enterprises. Accounting
processes document all aspects of a business’s financial
performance, from payroll costs, capital expenditures, and other obligations to sales revenue and owners’equity.
An understanding of the financial data
contained in accounting documents, then, is regarded
as essential to reaching an accurate picture of a business’s
true financial well-being.
ACCELERATED COST RECOVERY SYSTEM
ACCELERATED COST RECOVERY
SYSTEM
The Accelerated Cost Recovery System (ACRS)
is a method of depreciating property for tax purposes
that allows individuals and businesses to write off
capitalized assets in an accelerated manner. Adopted
by the U.S. Congress in 1981 as part of the Economic
Recovery Tax Act, ACRS assigns assets to one of
eight recovery classes—ranging from 3 to 19 years—
depending on their useful lives. These recovery
classes are used as the basis for depreciation of the
assets.
ESTABLISHING A SYSTEM FOR TRACKING ABSENCES
ESTABLISHING A SYSTEM FOR
TRACKING ABSENCES
Absenteeism policies are useless if the businessdoes not also implement and maintain an effective
system for tracking employee attendance. Some companies
are able to track absenteeism through existing
payroll systems, but for those who do not have this
option, they need to make certain that they put together
a system that can: 1) keep an accurate count of
individual employee absences; 2) tabulate company
wide absenteeism totals; 3) calculate the financial impact
that these absences have on the business; 4)
detect periods when absences are particularly high;
and 5) differentiate between various types of absences.
ABSENTEEISM POLICIES
ABSENTEEISM POLICIES
Most employees are conscientious workers with
good attendance records (or even if they are forced to
miss significant amounts of work, the reasons are
legitimate). But as Markowich noted, ‘‘every company
has a small number of abusers—about 3 percent
of the workforce—who exploit the system by taking
more than their allotted sick time or more days than
they actually need. And when they begin calling in
sick on too many Monday or Friday mornings, who
picks up the slack and handles the extra work? More
important, who responds to customer requests?’’
To address absenteeism, then, many small businesses
that employ workers have established one of
two absenteeism policies. The first of these is a traditional
absenteeism policy that distinguishes between
excused and unexcused absences.
DEVELOPING AN ABSENCE POLICY
DEVELOPING AN ABSENCE POLICY
Many small business owners do not establishabsenteeism policies for their companies. Some owners
have only a few employees, and do not feel that it
is worth the trouble. Others operate businesses in
which ‘‘sick pay’’ is not provided to employees.
Workers in such firms thus have a significant incentive
to show up for work; if they do not, their paycheck
suffers. And others simply feel that absenteeism
is not a significant problem, so they see no need to
institute new policies or make any changes to the few
existing rules that might already be in place.
But many small business consultants counsel entrepreneurs
and business owners to consider establishing
formal written policies that mesh with state and
federal laws. Written policies can give employers
added legal protection from employees who have
been fired or disciplined for excessive absenteeism,
provided that those policies explicitly state the allowable
number of absences, the consequences of excessive
absenteeism, and other relevant aspects of the
policy.
ABSENTEEISM
ABSENTEEISM
Absenteeism is the term generally used to refer tounscheduled employee absences from the workplace.
Many causes of absenteeism are legitimate—personal
illness or family issues, for example—but absenteeism
also can often be traced to other factors such as a
poor work environment or workers who are not committed
to their jobs. If such absences become excessive,
they can have a seriously adverse impact on a
business’s operations and, ultimately, its profitability.
A Newsletter Publisher's central Task: packaging value text area
A Newsletter Publisher's central Task: packaging value text area
The main task of a newsletter publisher is to select and package quality content of direct, practical relevance to its specific readership audience.
This might sound quick and easy, but it is not.
Publishing a quality newsletter is more than just cutting and pasting quality content into your newsletter. A quality newsletter is more than just the sum of its parts. The more the different sections in a newsletter support each other, the more benefits subscribers can get from it.
A quality newsletter makes sense out of the Internet chaos. A good newsletter editor understands the Internet big picture and is able to pick out relevant information which is packaged into one newsletter issue in a way that makes sense for its readers.
A poor quality newsletter is easily produced in less than 15 minutes of cutting and pasting quality content text. One issue of a good quality newsletter takes one day to produce - it might also select from the same content pool as the poor quality newsletter - but it takes more time in selecting the right combination of available free content for each issue.
The main task of a newsletter publisher is to select and package quality content of direct, practical relevance to its specific readership audience.
This might sound quick and easy, but it is not.
Publishing a quality newsletter is more than just cutting and pasting quality content into your newsletter. A quality newsletter is more than just the sum of its parts. The more the different sections in a newsletter support each other, the more benefits subscribers can get from it.
A quality newsletter makes sense out of the Internet chaos. A good newsletter editor understands the Internet big picture and is able to pick out relevant information which is packaged into one newsletter issue in a way that makes sense for its readers.
A poor quality newsletter is easily produced in less than 15 minutes of cutting and pasting quality content text. One issue of a good quality newsletter takes one day to produce - it might also select from the same content pool as the poor quality newsletter - but it takes more time in selecting the right combination of available free content for each issue.
Subscribe to:
Posts (Atom)