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“C” Level Knowledge and Articles

Documentation and Support of Donations

Proper documentation to support donations to Non Profits (NP) is important in the event of an audit.   This is what Mr. John (Giancarlo) Meazzo, President of GMA3000.COM, shared with his clients at a recent conference GMA held in Los Angeles.   He suggested that it is a good practice to send thank you letters to all donors vThis allows the NP to hand write a few words to make the letter more personalized.   He stated that a small client today may be a larger client tomorrow.  A thank you letter with some information on how important the donation is, no matter how small it is, may go a long way.  Mr. Meazzo is a top expert in Non Profit accounting and financial management.   GMA provided interim, turn around and outsource CFO and accounting services to NPs in various industries.  Here is a summary of what donors should know when making donations.

Receipts for Donations:

Donors must keep records reflecting the amount of cash and noncash contributions made during the year. The types of records that must be kept depend on the amount of the contributions and whether they are cash or property.

If the donation is over $75 is partly a contribution and partly a payment for goods or services, a qualified organization must give the donor a written statement.  Donors can deduct only the amount of your contribution that is more than the value of the benefit they receive.  Donor should keep the written statement for their records.

For a cash contribution, the type of records you are required to keep depends on whether the contribution is:

Contributions fall into 2 categories – less than $250 – more than $250

Each payment is a separate contribution.  Therefore in figuring whether your contribution is $250 or more, do not combine contributions.

For each cash contribution under $250, you must keep one of the following:

A cancelled check or a legible and readable account statement that contains the amount of the contribution, the date it posted on the statement (bank or charge card)   and to whom paid.

For each contribution over $250, you must keep a receipt, letter or other written document from the qualified organization that contains the A. date of the contribution B. the name of the organization, C. amount contributed.

If you have not got some records of documentation to support your charitable contributions, then you aren’t allowed to take them: “You are not allowed to deduct your charitable contributions because you did not satisfy the acknowledgment and record keeping requirements.”

For additional information go the the IRS website:

http://www.irs.gov/pub/irs-pdf/p526.pdf

Donations of Property

If you contribute property with a fair market value that is more than your basis in it, you may have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction.  Your basis in property is generally what you paid for it. If you need more information about basis, get Publication 551. Different rules apply to figuring your deduction, depending on whether the property is:

Ordinary income property,

Property is ordinary income property if its sale at fair market value on the date it was contributed would have resulted in ordinary income or in short-term capital gain.

Capital gain property.

Amount of deduction – general rule. When figuring your deduction for a gift of capital gain property, you generally can use the fair market value of the gift.  In some situation you must reduce the fair market value by the amount that would have been long-term capital gain if you had sold the property for its fair market value. See the IRS publication 526 for more information.

This information is general to let reader understand that there are IRS codes for these matters.  You should consult your accountant, attorney or financial adviser before you donate money or other assets.

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Importance of Data Mining

Generally, data mining (sometimes called data or knowledge discovery) is the process of analyzing data from different perspectives and summarizing it into useful information that can be used to increase revenue, cut costs, financial modeling and much more.

Mr. John (Giancarlo) Meazzo, President of GMA3000.COM, the guru of budgeting and financial management has made data mining a priority for clients in various industries.  Data mining is the principle of sorting through large amounts of data and picking out relevant information. It is usually used by business intelligence organizations, and financial analysts. Now, applications are used in more industries, including not for profits. There may be other names for such database information management such as Universal Relationship Management.

Data mining is now also used to capture all aspects of organizational transactions. Implementing such a database system, would require charting the flows of data (products, staffing, tasks, etc.); the capturing to the minutest detail of data (best) is planned. The data is entered using systems such as data entry screens or by exporting the data from programs such as Excel, financial and operational software (accounting sytems); data is warehoused and is now available for the preparation of various operational, managerial and executive reports.

Data mining software is one of a number of analytical tools for analyzing data. It allows users to analyze data from many different dimensions or angles, categorize it, and summarize the relationships so identified. Technically, data mining is the process of finding correlations and/or patterns among dozens of fields in large relational databases. It may also include capturing transactional data (what departments generate in goods and services) to merge into the accounting systems. This combined data will give a company a formidable powerhouse of managerial tools to evaluate performance and to plan future performance. GMA has the experience to plan and implement a data management system to perform data mining processes. Call us we can explain how you can benefit from “Data Mining”!!

Website databases are now an important component of organizational data that is merged and managed with other organization internal data. Data mining involves four major classes of task like Clustering, Classification, Regression, & Association rule. Planning the merging of web and internal based data is must in today’s demanding and competitive business environment. Database storage management technology is adequate for many application linked to data mining.

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Surviving a Recession or Reduction in Business Sales

Is your bottom line getting smaller? Are you concerned about the future of your business?  Mr. John (Giancarlo) Meazzo, President of GMA3000.COM, the guru of budgeting and financial management and planning has assisted companies in strategizing ways to increase revenues and decrease costs.  Without experience the typical business owner or leader will not be ready for the financial economic impact.  Learn what the best businesses are doing to survive the recession. Not every manager is educated or trained to take measures to maintain the financial viability of the business. In bad times be proactive rather than reactive in using profit improvement and advanced cost reduction methods.  Business should be ready with a defined plan on ways to reduce costs in the event in permanent reductions in business sales.   The plan should comprise the cost reduction in phases or priorities. The reductions may be cutback in management salaries; voluntary unpaid leave of absence; find savings opportunities, such as buying vs. leasing (e.g. PR time clocks; postage stamp machine, etc.); reviewing telephone services and contract services;

You should always look ahead, understand the economy and change the course of   operations and possibly your mission, if necessary for financial survival. Here are the main opportunities: Maximize your cash flow quickly; Reduce your costs rapidly; Coach your team on how to control costs; Make your staff part of the solution.

At times it is hard for management to determine how to cut costs and what to cut. An independent consultant without any attachments to people or operations can suggest obvious ways to reduce costs. In theory when a company is having financial problems, it reduces operating costs and increase marketing and sales costs. Bringing additional revenues may be one of the best ways to maintain fiscal stability. Just consider some of the cost and saving statistics of specialist in the cost reduction management industry:

• Up to 20% of profits may be spent on excessive supplier charges

• A high percentages of NNN commercial leases include overcharges by their landlords

• Approximately 70 % of businesses pay more than they should for basic utility services

• Nearly 9 out of 10 telecommunications audits result in lower rates and/or reduced costs

Managers always look at reduction of everyday business costs as part of their responsibilities.  Many operational costs such as salaries, rent, typically occupy the mind of most managers and financial officers. But the amount paid for healthcare, energy, and telecommunications is often not looked at by administration. The reason? Most companies simply don’t have the knowhow and internal resources to undertake an in-depth audit of their operating costs.

GMA’s consultants know where cost reductions can bring more dollars to the bottom line. These cost reduction experts generally start with a comprehensive audit – usually at no cost to the client – with the goal of reducing costs without impacting the quality of a company’s service or operation. Consultants can potentially help a business to eliminate waste and save thousands of dollars yearly.

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Why Outsourcing Business Services

Many cannot afford a qualified professional mostly due to the high cost and scarcity of top notch experienced accounting and financial management consultants. Mr. John (Giancarlo) Meazzo, President of GMA3000.COM, is the guru of outsourced accounting and financial management. GMA assisted companies with $1 million to $3 billion in revenues and has provided much needed “turn around” support and outsource services.

We can share a secret, for many companies a part time qualified (seasoned) contract CFO may the best alternative to a full time non-qualified CFO.  See an example of the smart alternative to a staff CFO. The contracted CFO should have at least 30 years experience as a CFO and should have worked in at least 5 companies.  We found that CFOs that had only a couple of positions, lack the diversity of experience that is usually needed for such an important position.   In some companies a CFO performs clerical work just to keep them busy.  Many invest a great portion of their time in performing work that can be easily performed by accountants.  The CFO should develop systems and delegate the responsibility for their use to their subordinates.   This will allow the CFO to concentrate on key issues and to assist the corporate executives in planning and financial management. The right experienced CFO will set the foundation for success and growth.   Many companies have closed as a result of inexperienced professionals.   Most non finance executives or board of directors do not know the difference between an accounting manager, controller or CFO.   As a result they fail when hiring this very important position.   Also there are many companies that have highly qualified bookkeepers with a title of CFO.   This can be disastrous.     The CFO should not under-employee himself.  The core of his time should be to insure all operations to financial systems are working well.  The CFO should understand and implement controls, budgets, 5 year plans, direct the financial aspects of the business operation and much more.

The Today’s companies are finding that outsourcing accounting is smart business.

A Gartner Group report indicates that “market perception has shifted from outsourcing as a way for companies to meet short term financial objectives to a technique for strong companies to improve competitive advantage”.   In addition, a recent Chief Executive Magazine/Andersen Consulting survey stated that half of the CEO’s surveyed said they used business process outsourcing (BPO) strategically, but more than 90% said they expected to have strategic outsourcing or strategic sourcing relationships by the end of this year. In short, strategic select task outsourcing is emerging as a cost effective tool for “unbundling” the corporation. Outsourcing can effectively create alliances and partnerships with the professionals in various fields of expertise. The market for outsourcing is estimated to be several billion dollars by the year 2011, according to an Accenture survey.

GMA has provided its clients with “boutique” accounting and financial management outsource services.   At the initial part of our engagement we review all systems to determine weak areas and areas that need immediate attention.   Internal controls are essential to eliminate any potential for theft by employees.   We also invest time to train supervisors, department heads and management.  We educate them in how to make use of financial reports as a tool to operate their departments.  We support the dissemination of financial data and train staff in budgeting, planning and communication.   Engaging companies such as GMA to perform reviews in accounting and financial systems may be one of the best investments a company can make.

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Operational Indicator Reports (OIR) or Key Performance Indicators (KPI)

Operating Indicator Reports (OIR) also know as Key Performance Indicators (KPI) is to companies as EKGs, blood test and other medical tests are to humans.  Dashboard is another term used for OIR and KPI.  Mr. John (Giancarlo) Meazzo, President of GMA3000.COM, is the guru of budgeting and financial management. He developed various budgeting and KPI systems for companies with $1 million to $3 billion in revenues.    The premise for KPI reporting is to have each department of the entity report statistics, e.g. what they generate as output, labor productivity and others. Statistics would include personnel turnover ratios, departmental productivity ratios (productive hours/volume of output), financial ratios (these may be reported as part of the financial reports [i.e. income statements, balance sheet, etc.]).

KPI data or statistics are the heartbeat of any organization. Business activity volumes, productive hours and other statistics are captured and reported in the KPI. The statistics reported in the KPI can be used to understand the effects of changes in business sales strategies, management turnover, the way business is transacted, changes in policies, turnover in staff, productivity changes as a result of new policies, new management or supervisors, etc. The fluctuation in the statistics and correlation between them can help in pinpointing problem areas, e.g. productivity, turnover, and others. Example: If in a department, the total production output increases with the same amount of staff (productive hours); it may be due to changes in operation, new equipment, a new manager that is better in managing the human resources, etc. It could also denote that the staff had not previously been working at full capacity or productivity.   The question is what is the optimum staff productivity? What amount of output can staff produce?  When does the employer add new staff or reduce staff, at what level of activity?  Capturing historical statistical data is the key to answer some of these important management questions.  This information should be used to determine staff productivity levels and use this for budgeting purposes (determining staff needs based on projected sales volume).  Statistics can assist management in identifying changes in productivity, trends, business volumes of transactions, and they will facilitate pinpointing sources or effects of such changes.

Statistics should not be shown as static numbers, rather as rollover numbers showing monthly beginning balances, additions and decreases (by segments) and ending balances. Example – staffing reporting: for an entity with 300 employees, the report would show monthly, the beginning number of employees, the employees that left the company, reported by reasons of departure (voluntary and involuntary, etc.) and the number of hires and number of vacancies to be filled.  Example: a large percentage increase in involuntary departures in a particular department may be caused by the hiring of an inexperienced manager lacking supervisory skills.  You can compare your employee turnover ratios to the industry standards, departmentally or by period (month to month, year to year).   Governments around the world use statistics for understanding the changes in their economies.   Economists use them to make economic predictions.

The statistics in the KPI also become the basis and the first step in the preparation of operating budgets. Statistics drive the development of the revenue budget which in turn is used to prepare the expense budget.  This is typical but could differ upon industry e.g. grant based non profits. Financial models using this data are easy to develop and to change based upon various factors. With statistics, the correlation between primary units of service (UOS) to the secondary UOS can be calculated and makes the budgeting process a much easier task. Example:  hospital in patient days (primary UOS) will affect the ancillary (secondary) UOS such as radiology, lab and physical therapy.   If there is a correlation, once you budget the primary UOS, it would be an easy task to project secondary UOS.  GMA has over 120 combined years in development of KPIs, operating budgets and financial modeling. They implemented various KPI reporting systems. Mr. Meazzo personally developed and implemented fixed and flexible budgeting systems, break even models and provided ‘turn around’ consulting services to for profit and nonprofit companies.

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Reasons for a Merger

There are many reasons to consider or plan a merger. We know that many mergers are made between large and small companies. The mergers we hear about the most are those of public companies. The reasons for a public company’s merger may differ significantly from the merger of a small to medium size non public company. Mr. John (Giancarlo) Meazzo, President of GMA, is the guru of budgeting and financial management has provided some of the reasons for a merger:

Small businesses that are owned and managed by one person, typically a professional such as a physical therapist, a bakery, a CPA firm or consulting company or a manufacturing plant, may not survive upon the incapacitation of the operator owner. That means that once the person becomes incapacitated, the business could dissolve unless there is a plan of succession. If business closes, the family of the owner will not receive any value from the estate, unless the business is sold.

Increasing profits mainly as a result of reduction in expenses i.e. “economies of scale” Consider two cosmetic laboratories. They would both have similar manufacturing facilities, duplicate marketing and sales staff, laboratory personnel, same equipment (maintenance contracts), shipping and delivery.

They may only operate with one shift (8/24 or 1 of 3 possible shifts). Consider the merging of the two companies. The elimination of possibly 20% to 30% of staff, manufacturing with 3 shifts, lower supply costs (larger quantity purchases), etc. A financial model combining the two entities, using the various realizable assumptions can give the decision makers the insight as to the feasibility of the merger.

Diversification and Growth, A company that plans to enter new markets or new products can do so much more efficiently and at less costly through a merger (instead of taking the time and resources to open their own company).

Eliminate Competition. Companies may strategize to eliminate present and future competitors and gain a larger market share for its products.

Political and Legal changes sometimes force the businesses to merge. Banks show these type of mergers when governments and Central Bank of the country made the new laws about minimum branches in a particular country. It has been seen that small Banks merge to fulfill that legality.

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