How to Hire the Best Person

The current job market is highly competitive, leaving businesses with a mountain of applications to sift through. How do you decide whom to hire when the qualifications are so similar? Your eyes begin to blur, and the task of interviewing is daunting.

If you have not begun the process, follow the advice below when preparing questions for the interviewee. Adding questions to the job advertisement can sometimes help eliminate some of the applications you will receive. 

If you have applicants in process, these are some ideas to narrow the field.

Look at the applicant's job history. Job seekers with a history of frequent job changes are a high risk. Most applicants will submit the past 10 years. How long have they been at any one job? Everyone can have a "bad luck" job, but there should be one or two jobs that lasted more than 5 years.

Do yourself a favor and don't allow age bias to discount an applicant. A seasoned professional brings a high level of skills, problem-solving ability, and wisdom to the position.

Prepare a list of the most desired qualifications for the open position. Use a highlighter to find the resumes that contain most of the qualifications. Finding one person with all the traits may be difficult. Ask yourself which traits are truly important and which traits will most benefit the business. Some advice: skills can be learned; integrity and commitment cannot. This is important to productivity and directly affects workplace culture.

Once you have a set of applicants with the skills and traits you desire:

Read the cover letters of the chosen applicants again. Is it well written? Does it highlight and add value to the position you are trying to fill? If not, set those applicants aside.

Again, review the applicant's resume for experience. How deep is the experience? Can the person "hit the ground running", or will they need to grow with the position? Since you are a busy professional and your organization needs immediate direction, put aside those resumes with a less proven track record.

Review the salary history, if you have requested this. Compare these with the budgeted salary for the position. Ask yourself whether you are willing to pay more for a seasoned professional. Based on the value the candidate offers, will this offset the cost to your business?

Ignore enclosed letters of recommendation. These are easily obtained. Always perform your own verbal verification or email verification of the potential applicant's experience.

Now that you have the second set of applicants with the skills and traits you are looking for:

Prepare a list of questions that directly relate to the position. Conduct a phone screening interview or include the questions in the job post. Structure your questions directly around the job qualifications. 

A benefit of including questions in the job application posting is that it can help you eliminate, at the start, applications that don't answer the questions or provide unsatisfactory information. 

For example:

In analyzing the Income Statement, what issues have you come across that affected the organization?

An acceptable response: I found that the month's revenues did not match my expectations given the inventory levels. I investigated and found that several sales had not been recorded.

Instead of: Well, I have never done an actual Income Statement analysis, but I am willing to learn.

Avoid using personality tests as a determinant to hire an applicant.

This is a current trend, but it does not measure the applicant's actual ability. While the tests do measure conscientiousness and emotional stability, applicants can readily adjust their responses based on the employer's job description and by researching the company's culture. Overall, the tests do a disservice to the employer by eliminating unique problem solvers and diverse backgrounds. These kinds of tests are currently under Federal scrutiny. "The Equal Employment Opportunity Commission (EEOC) actively penalizes companies whose tests create a discriminatory "disparate impact"." Cowen Partners "Ethics of Personality Tests in Hiring"

As a business professional, I know that it costs money to hire and train a new person. It takes time to build trust. Look for applicants who bring value and experience to the position. A seasoned person brings more than technical knowledge to the workplace. They bring wisdom. There are decisions and actions in daily business that more experienced workers have already plowed through. They have already learned to overcome business obstacles. They have dealt with all levels of employees and all types of personalities. They are actually more productive because they have already gone through the learning curve. They have a basis for their decisions, and they have already experienced the outcome.

Accounting in Everyday Life

Whether you are managing a business or a home, accounting is an integral part of everyday life.

You look at your salary, pay the bills, and decide where else to spend your money. You also check your pantry and take inventory of canned goods and other items before grocery shopping.

  

Two accounting statements, the balance sheet and the income statement, are valuable to understand and practice for business and personal use. These statements can help you understand where your money is going and how best to use what you have.

The Balance Sheet is a statement of your assets and liabilities. Your home is an asset because it is worth something, and the amount you owe on it is a liability. After subtracting the cost of mortgage payments, the equity portion is what you have left in the home's value. The equity portion is also called your net worth.

In the simplest terms, income statements represent the inflows and outflows. The incoming are your paychecks, customer payments, or dividend and interest income. The outgoing is what it costs you to maintain your home or business: gas, electricity, groceries, and supplies used to make the product you sell or the service you provide. When the incoming is less than the outgoing, you are "in the red." This means you are not making a profit and have a negative net worth.

The balance sheet and the income statement are dependent on each other. On the balance sheet, there is a liability called Accounts Payable. These are bills you have to pay. When you record accounts payable, you also record an expense. Accounts Receivable is the money others owe you. When you record accounts receivable, you record Income.

Credits and debits are best understood by examining the Balance Sheet and the Income Statement. On the balance sheet, assets are debits and liabilities are credits. Equity and net worth are also credits.

On the Income Statement, Income is credited (and the asset increases to Cash or Accounts Receivable), and expenses are debited (Cash is reduced and Accounts Payable are reduced). When you record your paycheck, you debit your checking account and an asset, and credit your Income. When you pay your bills, you credit your checking account and accounts payable and debit your expenses. When you balance your checkbook and have cash left over at the end of the month, this is your net worth.

Because you have cash left, the credit from the money coming in and the debit from the cash going out result in a credit balance. This credit balance is recorded in the Balance Sheet's Equity portion and reduces the liabilities portion. Hopefully, your assets equal liabilities, and you are "in balance."

Clear as mud?

Think of it as an X. At the top of the X, on the right and left sides, are the Assets (on the right) and the Liabilities/Net Worth (on the left). At the bottom of the X, to the left of the Asset line, is the income credit to Assets. At the bottom of the X, horizontally to the right of the Liability/Net Worth are expenses (decrease to Accounts payable) and Equity (cash).

Assets increase cash and Accounts Receivable. Liabilities increase Accounts Payable, and Equity (the net Income left over after all bills are paid) increases. Income minus Expenses is Net Income. A positive net income is a credit balance that is reported on the balance sheet. The Assets minus the Liabilities equal Net Equity or Net Worth.

Can't you hire someone to do this? Of course, but you need to know how much cash you have at the end of the day. When you apply for a loan, the bank looks at your net worth in this way. That is why they ask about how much you owe on your home, what investments you have, and what you owe. It helps, especially in today's economy, to understand what you do and do not have and how to manage the cash coming in to pay your expenses while leaving some left over.

10 ways to make Home Based Bookkeeping Easier

Debits and credits are fundamental accounting terms-debits increase assets or expenses; credits increase liabilities or income. Or debits on the right, credits on the left. What does this mean to your business? You have cash coming in, and cash going out. You need to focus on sales, customer contacts, and products and services. You know that accounting is part of the business, but, frankly, it's a pain, and you don't want to deal with it.

You want to design your product, not spend your time doing bookkeeping

Here are 10 things you can do to simplify your accounting and avoid common mistakes that can lead to confusion or errors in your financial records.

1. Keep track of your cash coming in. Using tools like summary reports or spreadsheets can help you feel more confident and in control of your business finances, making it easier to manage your cash flow effectively.

2. Make your expense tracking easier. Opening a separate business checking account and a credit card helps you feel more organized and better able to manage your business finances effectively, reducing stress and giving you peace of mind.

3. When you open a business checking account, do it where you do your personal banking. This separation can give you peace of mind, making tax time less stressful and helping you feel more secure about your record-keeping. Check your sales sites and make sure your sales are credited to your business bank account.

4. Keep track of what you purchase to make your product. This is your cost of goods sold and will help you mark up your items to ensure you make a profit.

5. Use a spreadsheet to track your expenses. Creating a single 'My Business' file with tabs for sales, costs, and expenses can help you feel more empowered and organized in managing your finances.

6. Don't let your filing stack up. Dedicate 10 minutes daily to filing customer invoices and receipts in labeled folders like 'Jan Sales' or 'Jan Expenses.' This routine keeps your records organized and reduces stress during tax season.

7.  Order your supplies online and have them delivered to your home. The delivery will include a packing slip, making it easier to separate the items into Office and Cost of Goods. It also saves your valuable time.

9. Use a spreadsheet to keep track of your customers. Keep all their information in one place, including phone numbers, addresses, and email addresses. Also track when you last called them, worked for them, etc. You can also use this to track the hours you worked for them.

10. Consider purchasing accounting software. I recommend QuickBooks Desktop or Online, but choosing the right one depends on your business size and needs.  After the initial setup, this makes your life much simpler. You can track cash from customers, inventory items and costs, office expenses, jobs you are working on, customer information, people you pay, and how many hours you work per day for each customer.

If you choose a QuickBooks version, there are legitimate, licensed third-party retailers that sell different versions of QuickBooks desktop. These versions usually come with a lifetime license. This will help you bypass the annual subscription costs of Intuit. However, QuickBooks Online is only available from Intuit.

Payroll Liabilities Effect on Taxes and Net Income

Payroll is perplexing. It would seem straightforward enough, but if you offer health, dental, or retirement benefits to your employees, the calculations become more complicated. And how can you be sure you are doing it correctly?

You could outsource your payroll. You should still perform a verification calculation to make sure your service is correct. As an employer, it is your liability.

You may be using your accounting software for payroll. To verify the payroll, it's essential to know what does and does not affect net income. The accounting software used will include the federal and state tax tables. While federal taxes are applied equally, states differ in how they apply withholding taxes.

Payroll accounting software should contain the federal tax tables for the current year and the state tax tables for each year. Benefits may be offered pre-tax or after-tax. Pre-tax reduces the employee's gross income by the benefit amount before calculating the federal tax. 

However, not all pre-tax benefits reduce the FICA (Social Security and Medicare) withholdings:

Pre-tax benefits that reduce FICA

• Employee share of health insurance premiums
• Employee contributions to a Health Savings Account (HSA)
• Contributions to the Flexible Spending Accounts (FSAs) that can include healthcare FSAs and Dependent Care FSAs 
• Commuter benefits: Pre-tax deductions for transit passes and qualified parking also lower your FICA liability. 

Pre-tax benefits that do not reduce FICA

• Traditional 401(k) and 403(b) contributions
• Adoption assistance
• Group-term life insurance: This is a pre-tax benefit; however, if the coverage exceeds $50,000, this will be subject to FICA tax

FICA tax is contributed in two parts: one by the employee and an equal share by the employer. 

When calculating the validity of the payroll:

Gross Income less Federal Tax less Employee FICA (calculated using the pre-tax and after-tax contributions) plus Employer FICA (using the same pre-tax and after-tax contributions) less the state tax withheld.

States differ in their assessments of withholding tax and in the pre-tax and after-tax benefit calculations. For example, the state of Missouri follows federal withholding guidelines, while some states, such as Florida, Texas, and Wyoming, have no withholding tax. The state of California has its own policies on pre-tax and after-tax benefits. 

 

Roll in the Dough with Rolling Forecasts

I am working on rolling forecasts, a good way to replace your annual budget process and position your business for future growth. Rolling forecasts are not new. Rolling forecasts have been in use for some time, and successful organizations regularly undertake these exercises.

As a small or mid-size business, rolling forecasts can give you real power to control your financial future. The concept is simple and involves setting targets for where you want to achieve your profit, say, within five years. Your profit level could be $5 million or $ 500,000. Either way, set the target.

Next, make a plan. However, instead of setting a one-year plan and going through the exercise of sticking to it, you will employ a strategy that involves real-time business operations. The plan will be set up by quarters, so you will be setting up the first five quarters, or the next 15 months.

Now, instead of drilling down into your financial expenses, set the primary levels of production and inventory expenses, sales and marketing expenses, and administrative costs.

Have patience and wait until the end of the first quarter. How did you do? Where did you fall short? Is there a product that needs more marketing? Or are the costs too high to make the product profitable? Are you paying too much?

After the first quarter is complete, decide how you will achieve your sales and profit again for the next 15 months. Redo the second through fifth quarter of your original rolling forecast, adding a 'new' fifth quarter. In the process of the rolling forecast, the second becomes the first, and the remaining "roll forward".

After you do this for a few quarters, you will see where your business is headed and decide where you want it to go.

Corporations offshore manufactuing-Are the Tariffs changing Corporate behavior

Corporate social responsibility is not a high priority for U.S. organizations. A viable alternative to raising taxes on the wealthy and corporations is available to the American economy.

However, there is an alternative that can restore funds to the federal and state governments and decrease the U.S. unemployment rates. It may take courage, but exercising this alternative can result in a win-win situation for the American economy. And it is as simple as fulfilling corporate social responsibility.

Harvard's corporate social responsibility initiative defines corporate social responsibility as encompassing "not only what companies do with their profits, but also how they make them. It goes beyond philanthropy and compliance and addresses how companies manage their economic, social, and environmental impacts, as well as their relationships in all key spheres of influence: the workplace, the marketplace, the supply chain, the community, and the public policy realm."

Fulfilling corporate social responsibility helps keep capitalism in check. Harvard's initiative places economic success, in part, on the organizations that benefit from it. Currently, American organizations are stockpiling cash, while the American economy is experiencing joblessness and a decline in disposable income. I don't know what they're doing with all that cash. It sits on the balance sheet as a current liquid asset, yielding insignificant returns. Are these stockpiles a shirking of American corporate social responsibility? The echo from the depths of the economy might say yes.

Seeing all that unproductive cash, I wondered how organizations were obtaining so much money in a shrinking economy. The average American household's disposable income has decreased, making consumer spending an unlikely significant factor. Digging deeper, I realized that many of these American corporations are offshoring jobs and increasing automation in their processes. According to the U.S. Department of Labor, "Cost-cutting by U.S. industries in almost every sector of the economy will continue to change the workforce. To reduce labor costs, some jobs are being sent offshore while others are being replaced by technology or are being filled with lower-cost workers."

This has real implications for the U.S. economy. As an accountant, I wanted to see the impacts, so I decided to do a little analysis on an American organization I was familiar with. Using the annual 10-K reports filed from 2007 through 2011 for this U.S. organization, I found that the organization increased its net earnings by 36.5% over the five years. During this same period, the organization experienced only a 10% increase in cost of goods, and a 25% increase in G&A This same organization, during these five years, has offshored a significant portion of its back office finance and product production, equating to a shift in payroll dollars of approximately $803 million.

Could this organization be remiss in managing its economic, social, and environmental impacts, as well as its relationships in all key spheres of influence: the workplace, the marketplace, the supply chain, the community, and the public policy realm?

The payroll shift for this one organization in the U.S. economy amounts to a 32% loss of federal revenue (individual states of residence also lose tax revenue). For example, shifting $803 million in wages and salaries offshore results in a loss of $200 million in individual federal payroll tax, $50 million in Social Security tax, and $12 million in Medicare tax to the federal government.

While the economy is composed of many factors, consider changing just this one factor in the U.S. If American corporations loosened their grip on cash and exercised their corporate social responsibility, these organizations could infuse the U.S. economy with the jobs that currently exist offshore. Additionally, as a side note, the organization analyzed in the above example experienced a 17.9% decline in basic earnings per share over the five years.

Benefits of Unit Cost Analysis

I worked for Monsanto in the Agricultural Division as a young accounting assistant. I was transferred from corporate to agricultural, entering a whole new world. At that time, the agricultural division was the most profitable part of the organization. What made it a new world for me was that there were no computers within this accounting department.

My first responsibility was to compose the domestic gross profit statement. I asked where to find the computer so I could begin setting up the spreadsheet. My boss laughed and handed me a columnar pad with thirteen columns and a calculator.

Each month, I used a 20-pound report for each product and transferred the respective product's gross sales, freight, quantity sold, and cost-related expenses onto my paper. I calculated the sales and cost units by product, compiled all the information, and generated a gross profit statement. During this process, I needed to explain why any sales or cost unit deviated from the budget by $.005.

I realized I was the computer. In this accounting environment, the belief was that computers are good, but people are more intelligent. A spreadsheet can't tell you why. To know why, you must understand the nature and components of unit cost.

A unit cost reflects the costs incurred to produce, store, and sell one unit of a particular product. Unit costs include:

· Fixed costs - depreciation, monthly rents, organizational cost allocations, and any cost incurred, whether or not production occurs; and
· Variable costs - labor, materials, electricity, any cost that increases or decreases depending on the output produced.

Total cost/total output equals unit cost. Total cost and total output are typically derived from a budget or forecast and can change on an annual, quarterly, or monthly basis. The static unit cost is a "best guess" based on past results, used to analyze the variance between the static unit cost and the actual unit cost. This variance analysis creates awareness of input costs, planned output, and planned productivity.

Input costs refer to the products and services used to produce output. Examples of variances are:
· Increase/decrease in the cost of material,
· Increase/decrease in freight in,
· Loss of vendor discounts,
· Missed vendor discounts.

Planned output is the estimated number of units. Examples of variances are:
· Material shortages,
· decrease in available labor,
· Equipment breakdown,
· Raw materials spillage,
· production for a customer who later canceled the order,
· Over-production based on incorrect scheduling,
· Overtime required due to unscheduled production,
· Overtime required due to a labor shortage,
· Increase/decrease in labor benefits,
· Increase in hourly wage.

Planned productivity refers to the number of units produced by current employees. Examples of variances are:
· Acquisition of new machinery that is less labor-intensive,
· Improvements in the production process.

A change in fixed costs can also contribute to the variance. For example,
· Change in fixed cost allocations,
· Increase/decrease in support staff costs,
· Change in monthly depreciation or rents.

Unit cost variance analysis can reveal these changes. Sometimes, poor communication results in an over- or understated standard cost unit. These variances also alert management to changes that can be addressed quickly before the end of the next monthly cycle, such as negotiating discounts with vendors or identifying new suppliers to provide materials at a lower cost. A monthly cost variance analysis completed within the short closing cycle can increase profit and efficiency.