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Non Profit with failed accounting department engages GMA

 

Case study 3


Non profit company with 250 employees services included adult day care, children school, residential care; workshops, work training, etc.    Engaged Mr. John (Giancarlo) Meazzo, M.A GMA’s President.   Controller resigned, accounting performed by staff of 5.  General ledger and financial statements were maintained in Excel without the use of accounting software.  An accountant responsible for the accounting was ill and accounting fell behind considerably.   Considering the complex Excel spreadsheets used as a general ledger, no one else could perform the GL accounting functions nor prepare financial statements.  Mr. Meazzo was engaged to review systems, develop a Gantt chart where he made a list of over 30 problem areas.  He installed new ACCPAC accounting software; developed departmental and company-wide financial statements, developed a budgeting system.  Presented financial statements using fund accounting; trained accounting personnel; developed accounting policy and procedures; installed internal controls, and key performance indicator reporting system;  trained department heads and executives on use, interpretation of financial statements budget preparation and variance reporting; presented financial statement to finance committee and board of directors.  Other changes, upgrades and financial management functions were performed.  At the end of the engagement, the CPA, president of the finance committee remarked: “I am flabbergasted on how you accomplish and complete your assignment at half of the cost and time”.  At GMA we take pride in providing the best, timely and professional service to satisfy all our client’s needs. 

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Non Profit months behind in financial statements engages Mr. Meazzo

 

Case study 2.

A non-profit company provider of services (under $2 million in yearly revenues) to the developmentally disabled children and adults lost their CFO.  Engaged Mr. John (Giancarlo) Meazzo, M.A GMA’s President.   Company services included adult day care, children school, residential care; work training, etc.   In six months from the CFO’s departure, the accounting department went into disarray.   The typical billing functions stopped.  All department heads took on the billing responsibility and opened a bank account for each of the departments.  The revenue began recording on a cash basis of accounting vs. accrual basis.  No journal entries and balance sheet schedules, i.e. prepaid and accrued expense accounts, were prepared nor maintained.  Internal controls where not adhered to.  Budget was never prepared (required by funding agencies). Financial statements were not prepared for over eight months.  Accounts payable did not have proper internal control procedures.  Board of directors upset and concerned of potential liability.   Mr. Meazzo as the CFO took control of the company finances and within 3 months centralized the accounting department;  installed a new accounting system and set up “fund accounting” following FASB 116 and 117 standards.  Developed division income statements and company wide; brought all transactions and accounting up to date.  Issued long awaited current financial statements using the newly installed accounting software.  Began a key performance indicator (KPI) system as well as a new budgeting system.   Instructed all departments to develop company wide policies and procedures if missing.   Instrumental in obtaining total government funding of residential homes.  Mr. Meazzo was applauded at the finance committee and board of director’s meetings. 

 

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CPA firm replaced by GMA

 

Case study 1. 

 

A grocery store with $24 million of yearly revenue engaged Mr. John (Giancarlo) Meazzo, M.A GMA’s President, for his services as a “turn around” interim CFO.  In this six months engagement Mr. Meazzo replaced a medium size CPA firm that had provided accounting services for over eight years.   The CPA firm failed in providing timely financial statements; the accounting practices did not follow standard accepted ones;  e.g. sub-ledgers nor reconciled to general ledger; significant balance sheet items not recorded, journal entries system lacked structure, etc.  In his customary initial client finance system review, he developed a list of over 25 problems with the accounting and financial systems.   Within 6 months the accounting was brought in-house; developed key policies and procedures; installed equipment inventory system; reconciled equity section that was not supported by sub-ledger (membership based company); set up all the schedules necessary to maintain account analysis, sub-ledger to ledger reconciliations; trained staff.   At the conclusion of the engagement, all systems including internal controls have been optimized and perfected, financial statements current; reduced CPA fees by 80%.     

 

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What are C Level Executives

What are the C Level Executives?

 

The highest-level executives are usually called “C-level” referring to the 3-letter initials starting with “C” and ending with “O”  with changes in the middle to specify area of responsibility  e.g. “Chief __________ Officer”

 

The traditional officers are:

 

Chief Executive Officer (CEO),

Chief Operations Officer (COO),

Chief Financial Officer (CFO).

 

In banking, insurance, and other financial services companies the C levels are: Chief Administrative Officer and Chief Risk Officer positions.

 

Technology companies (including telecom and semi-conductor) (now IT sector companies also) tend to have:

Chief Technology Officer (CTO),

Also companies with a strong Information Technology (IT) presence have a Chief Information Officer (CIO).

 

In creative/design companies (such as film studios, a comics company or a web design company), there is sometimes a Chief Creative Officer (CCO),

 

Approximately 60% of the Fortune 500 companies have a Chief Diversity Officer (CDO).   Be careful on how C level titles are used as it may imply and create liability for the officer of a company.

 

GMA offers seasoned C level consultants to assist and support enterprise executives to navigate in the current challenging environment.

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Why 50% of businesses fail the first year and 95% the first 5 years

The U.S. Small Business Administration has seen lots of small businesses come and, unfortunately, go.   According to the SBA, over 50% of small businesses fail in the first year and 95% fail within the first five years. Why? What goes wrong?
In his book Small Business Management, Michael Ames gives the following reasons for small business failure:

1. Lack of experience
2. Insufficient capital (money)
3. Poor location
4. Poor inventory management
5. Over-investment in fixed assets
6. Poor credit arrangements
7. Personal use of business funds
8. Unexpected growth
9. Competition
10. Low sales

“These figures aren’t meant to scare you, but to prepare you for the rocky path ahead. It’s true that there are many reasons not to start your own business. But for the right person, the advantages of business ownership far outweigh the risks. You will be your own boss. Hard work and long hours directly benefit you, rather than increasing profits for someone else. Earning and growth potential are far greater. A new venture is as exciting as it is risky. Running a business provides endless challenge and opportunities for learning.”

Having the support such as a contract team of professionals, such as seasoned “C” level (e.g. CFO, CEO, COO) consultants in the field of finance, marketing and sales professional, legal and tax adviser is key to pass the 5 year hurdle!  GMA is here to assist your company in developing and executing strategic plans and management;  Develop safeguards and plan for permanent reductions in sales volumes if needed and much more.   Be proactive!

 

To obtain a quote or is you would like one of our executives to contact you, please call 1-310-228-7721 or send us an email with your needs by clicking this link

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Outsourcing Options & Solutions for Small Businesses

 

 

 

Small business are at a distinct disadvantage as compared to larger companies. Mr. John (Giancarlo) Meazzo, M.A. has provided assistance to many small businesses that had horrendous experiences, from the melt down of the accounting department; to falling months behind in accounting tasks; reducing costs as business volume dropped substantially, etc.  He developed a free self rating questionnaire to businesses where he can quickly respond with suggestions.

Mr. Meazzo found that the access to high end experienced and capable professionals, keeping up with new technology, understanding company needs become monumental tasks for the owner.  The typical small business operator may be excellent in his business technology such manufacturing or providing professional services.  The business owner may not be experienced in sales and marketing or in accounting and financial management.

Competition is fierce and economy has slowed and not stable. There is a need to be proactive in making business changes and decisions to navigate through these difficult times. Having the best assistance (part or totally outsourced) is key to success!

 

Some Problems Incurred by Small Business Owners

 

Owner of the company:

 

1.  Is investing most of his time in sales and marketing and does not have much time or experience in managing the accounting department. Is not certain if the bookkeeper or accountant is performing at a high or required level of effectiveness and productivity.
2.  Does not know if the current financial staff has the required experience to perform duties beyond the core responsibilities.  Are they able to assist executive in creating new opportunities; foresee upcoming financial problems and assist in strategic planning?
3.  Concerned about lack of internal controls.  Not quite sure of all safeguards are in place to protect the company from theft.   Are there safeguards in place to eliminate opportunities for theft? (see article of why companies fail first year: http://www.gma3000.com/Fail.htm )
4.  Has various tasks for an accountant to perform, but knows that accountant is not qualified or experienced in financial management (typically performed by controller and CFO).  A good part of the work of the highly paid accountant is performed performing clerical (equivalent low pay) tasks.  How to resolve the over/under employment and/or over/under qualification problem?   Is executive qualified to know if he needs an accounting supervisor, accounting manager, controller or CFO?
5.  No support from accountant in planning and providing “think tank” advice and services.  Accounting manager has little or no education in accounting and financial management and cannot really train or manage the accounting staff.
6.  Does not understand the accounting software well and does not know how to use the data well for managing the enterprise.  What key reports should executive receive daily, weekly or monthly?
7.  Operates day to day without a strategic plan or budget.
8.  Is not certain of the break even point for the business.
9.  Does not know the types of management reports he should receive from the accounting staff  so that he can understand the ergonomics of his business, causes and effects of changes in business volume.  Does not understand how to develop and compile key performance indicators (KPI), the basis for budgeting and planning.
10.  When there is a turnover in accounting staff, has to invest time in training new temp or replacement.  Takes much time from his other important tasks.  Accounting falls behind and causes a lot of stress.
11.  Too busy and not experienced is setting a business strategic plan with goals and objectives.  Let operations run without a plan.
12.  Not certain how to flex the staff and costs depending upon the volume of business.
13.  Doesn’t have a cost reduction plan in place in the event of reductions on volume of business.

 

 

Additional example of operational problems.

 

Service Company: 10 employees, $10 million in revenues, $90,000 budget for Controller. Need to hire experienced controller to handle accounting department and take on the financial management needs of the company. Current accounting manager/controller left or about to leave company. Needs: (example, actual needs will vary for each company) Identify and fix problems (or develop new accounting system for start-up) with accounting/finance department.

 

Typical areas needing attention: Accounting system to support financial statement preparation by product lines; revenue/expense centers and divisions or area of responsibility; consolidated income statement with inter-company eliminations; internal controls; a capital and operational budgeting system; prepare break even analysis; internal audit and controls system; product finance dept. policies and procedures; evaluate business performance against industry bench marks or standards; ensure profit margins (product line and department) are reported, evaluated and managed; manage the revenue cycle insuring proper rate setting (product and service pricing) that “days in AR” are adequate; there are no “lost revenues” due to inadequate systems; eliminating payroll error factors; insuring adherence to payroll labor laws; reduce costs without effecting client satisfaction and quality of services; train managers in financial management concepts; develop key performance indicators (KPI) reporting system; ensure staff works at 100% of productivity; evaluate mergers and acquisitions opportunities; develop data mining solutions for business management; ensure adequate insurance coverage; develop corporate governance policies; succession planning; assistance in strategic planning (power of collaborative thinking)

 

Solution: A senior financial manager is needed to plan, manage and implement systems to satisfy the needs (partially listed above) of a typical company. When planning to hire a full time financial officer or accountant, you may want to consider outsourcing that position as many companies now do. To satisfy the above needs of a company, GMA, for example, would provide its client a high level CFO (35 or more years of multi-industry experience) for 10% of the time, a Controller for 30% and an Accounting Manager for 60%.

 

In some cases there may be a mix of CFO and Accounting Manager or accountant! This may total 1 full time equivalent (FTE) and most likely, at the same cost of one existing or planned FTE. This is just an example and needs would vary based upon the size and needs of the business. CEOs should evaluate their current staff and determine if the staff can provide their company with the support and financial management they need (not the other way around). It does not necessarily mean to change the finance staff. Rather, it means understanding their abilities and obtaining assistance through companies such as GMA, for whatever the company lacks in expertise.

 

Having one full time professional to perform all duties may not be the best strategy!. Likewise, someone who does not have the finance experience may undermine the viability of any business. The typical full time professional will either be under or over qualified and/or under or over employed. Many times an employed financial manager may not want to seek the assistance of a consultant. The reason is obvious. The financial manager may be concerned of how their superior (CEO) may perceive the option of the request of a consultant.

 

Relying on a senior accountant or a controller who does not have strong experience could be the downfall of a company. GMA as contract CFOs have first hand experience in these matters! If your financial manager leaves your employment, is the other staff able to continue with operating the finance department? We have seen companies fail as they grew too quickly without planning for such growth. Also, without the right supervision and internal controls, companies lost funds and became insolvent as a result of employee dishonesty.

 

Many of GMA’s engagements were due to a turnover in accounting staff, controllers and CFOs as well as a total collapse of the accounting and finance department. We saw firsthand what serious problems an unqualified financial manager can cause. By having this important position outsourced as in Choice 2 below, will allow continuity of services for when you experience a possible turnover, while providing the right mix of financial support and expertise.
Below is a one staff professional vs. GMA’s three tiered professional team. Which would you prefer to have?

 

CHOICE 1

CONTROLLER. 7 YEARS OF EXPERIENCE, SALARY $95,000

CHOICE 2

CFO, 35 YEARS OF EXPERIENCE, 10% OF TIME (FTE)

CONTROLLER 16 YEARS OF EXPERIENCE, 20% OF TIM

ACCOUNTANT 6 YEARS, 70% OF THE TIME

TOTAL SALARY $95,000

On Choice 1, the Controller may be skilled in supervising the accounting department and preparing financial statements. The Controller most likely will not have the know how (due to lack of experience) in developing strategic plans and determining their financial effects to the company; analyzing financial ratios and their trends; calculating the break-even point; analyzing and preparing for the effects to the company of changes in the economy (e.g. inflation – recession etc); planning and implementing operational corrective actions; analyzing the budget to actual variances; bench mark comparisons; managing the revenue cycle and more.

 

Word of caution: companies sometimes believe that by hiring a CPA, the problems will be solved.  Acronyms are just that, abbreviations, and a CPA or MBA behind someone’s name does not mean that the job can be done. Accountants that graduate usually choose the CPA route to perform independent audits and tax services.  Conversely, an accountant may decide to stay in the area of corporate financial management where a certification of public accounting would not be needed.  There are many great CPAs and many great financial managers that are not CPAs.  Bottom line, experience is the most important factor not acronyms!

 

We believe that having experienced operations financial managers (CPA, MBA or not) is KEY to a successful enterprise. These financial managers will work with CPA, typically for the latter to for perform audits and tax returns. Asking for our assistance is very simple by clicking here.

 

Mr. John Meazzo, M.A. Principal of GMA may be contacted directly by calling 310-228-7721.

 

A video on one of our business solutions

 

 

 

GMA GROUP 1 SERVICES

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Consolidation of Subsidiaries in Accounting Software

Mr. John (Giancarlo) Meazzo, M.A. President of GMA noticed that at times clients are uncertain on how to set up consolidated companies in their accounting software.  Company consolidation lets you combine the charts of accounts (and general ledgers) of a number of existing companies to create a new consolidated chart of accounts. The new consolidated company created in this way will let you see consolidated financial statements for a number of subsidiary companies (different entities) operating under an umbrella organization.  Naturally a chart of account can be set up in a single company with various department (same legal entity e.g.one balance sheet).   It is important (and at times clients do not know) that different general ledgers be maintained for each of the subsidiaries.  GMA used various software such as Peachtree, MAS90, ACCPAT, BIP, Software International, and others.

 

For example, say your company is a food service organization that incorporates a restaurant, a food distribution service, and a catering service. You could combine the charts of accounts of these three sub-companies to create a new consolidated chart of accounts for the entire organization.

Consolidated companies you create act exactly like any other company in your general ledger. You can add to their charts of accounts, maintain customers, vendors, and employees, and report on company just as you would in any other company.

The result would be a company that contains the charts of accounts of the three subsidiary companies. Now you’d be able to track general ledger information, budget, and create financial statements and general ledger reports for all the subsidiary companies within your new consolidated company. This would greatly simplify and streamline your financial duties for the three subsidiary companies.  GMA is the guru in setting up accounting systems and converting from one software to another.

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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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