Accounting
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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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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Revenue Cycle Management (RCM) – Key Component of Financial Stability
The revenue cycle management (RCM) is a key financial management component of any industry. This term is widely used and very complex in the hospital industry but the concepts apply to small businesses as well as to large ones. Mr. John (Giancarlo) Meazzo, M.A. President of GMA3000.COM is the guru in this areas when he was a controller and CFO of California hospitals and responsible for the RCM. The more complex a revenue system is, the more it needs attention from the executive management e.g. Chief Financial Officer (CFO) and the need of highly skilled accounts receivable (AR) managers. Unfortunately, the critical process is often left only to the AR manager and often overlooked and misunderstood by executives.
Managing revenues and ensuring collections is critical for the livelihood of any entity. But that is not all! There are pre-revenue tasks of the RCM that are key to the RCM cycle. Executives often lack the background to identify problems and take corrective action. But before reacting, they need to insure that the framework of an excellent revenue management system is in place. A revenue system includes a prerequisite.
Understanding your cost structure and knowing the fixed and variable cost components
of each product or service that is sold. Before selling anything, from a nail to an airplane, understanding the direct and indirect costs of producing the goods is essential to fiscal livelihood.
The RCM segments (samples)
- Pre-production segment
- Purchasing products (used to manufacture or resell) at most reasonable prices but highest quality
- Ensuring viability of supplier
- Production segment
- Have an excellent cost accounting system
- Understand how to capture and report costs
- Selling segment
- Have the best Marketing and Sales manager. If you cannot afford the best, have a “guru” who provide consulting services. Have a realizable marketing and sales strategy
- Have sale and return policies
- Develop from yearly to daily sales goals
- Billing segment
- Have a great charge master (fee / product price schedule). Consider bundled and unbundled pricing
- Ensure policies and procedures are in place, have checks and balances. Provide management with sales reports with comparison to projections (budgets)
- Have a statistical reporting system in place (along with Dollar/Euro) to report data to the Key Performance Indicator (KPI) reporting system. This will be the basis of your revenue budgeting system!
- Develop and disseminate reports for managers, sales force and other stakeholders.
- Collection segment
- Review accounts receivable aging reports (shows balances by client in 30 day increments) at least monthly. This should be performed by the CFO and the Director/Manager of billing and collection (or with the consultant)
- Have good policies and procedures in place
- For non or late payments, have a system in place from contacting the client to having an agreement with a collection agency
- Reporting segment
- Ensure to develop “rolling” or “ roll forward” reports. Analyze the significant changes in activity. Take corrective action if sales levels fall below quotas.
- Statistical segment
- Understand well all the Units of Service (UOS) and Relative Value Units (RVUs) and reporting the data. Analysis of trends, significant changes in sales volumes (in total and by client, or segment) is essential. A system of analyzing changes in activity needs to be in place. Charts or roll forward reports will assist you in pinpointing problem areas that need corrective actions.
A business cycle manager may not have the expertise and education of optimizing and controlling this important function. They may know the basic concepts but lack the analytical tools to identify problems and improvements. Executives may not know which indicators (ratios) to establish for good revenue cycle management and review. Days in accounts receivable, a typical gauge of how AR is managed, is one of many key indicator! AR managers are usually too busy in dealing with the “issue of the day” and do not focus on the long-term management of accounts receivable. Are the executives the “watch dog” of the AR manager? Most likely not. A consultant a few hours a week or month may be a wise choice. The consultant will objectively analyze the data and report to the executives. Let’s not forget that an AR manager may not be willing to share data with his superiors, if it makes him look bad.
All industries have revenue cycles. The process of providing the service, generating revenue and collecting revenue is a basic business function. In the health care industry it is complex, cumbersome and costly. In developing an optimum AR reporting system it is essential to develop an RCM model with various target performance indicators (ratios) to be analyzed, compared and reported. Actual vs. target indicators reporting is a must in ensuring the effectiveness of a revenue RCM program.
RCM also includes billing for cost based payers. Therefore good accounting systems have to be in place to ensure payments from payers such as Medicare, Schools, grantors, state funders such as DHS and regional centers are maximized. Ensuring an overhead allocation system that accurately charges cost based payers is essential, along with choosing the most advantageous statistics. Understand the difference between a single or double step down overhead allocation method. Both will give different results and will have an effect on reimbursement. Companies should have a cost accounting system to determine the cost of goods or services sold. This can assist in determining the most profitable services. Does the hospital administrator or the CFO know what each of the DRGs (Diagnostic Related Groups) costs are and which are most profitable? Most probably not! Mr. John (Giancarlo) Meazzo, M.A. President of GMA3000.COM developed a cost accounting system for hospital while he was the Director of Financial Analysis for a hospital chain. The system was effectively used to calculate routine and ancillary variable costs for each of the DRGs. Cost data will allow intelligent and educated negotiations when contracting with payers or clients (e.g .hospital contracts). Collections, write offs and adjustments also need to be managed!
A revenue cycle is the process businesses use to describe the financial progression of their accounts receivables from the very beginning, when they first acquire product, if they’re product based, until they get paid, if they get paid in full.
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