Is Corporate Cash Hoarding a Lack of Corporate Social Responsibility

Corporate social responsibility is not a high priority for U.S. organizations. There is a viable alternative to raising taxes on the wealthy and on corporations available to the American economy. This alternative 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 that success. Currently, American organizations are stockpiling cash while the American economy is experiencing joblessness and loss of disposable income. I can't say I know what they are doing with all that cash. I can say it sits on the balance sheet as a current liquid asset yielded insignificant returns. And I wonder-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 cash in a shrinking economy. The average American household's disposable income has shrunk, so consumer spend certainly isn't a major factor. Digging deeper, I realized that many of these American corporations are offshoring jobs and reaching for increased automation in 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 implications, so I decided to do a little analysis on an American organization I was familiar with. Using the annual 10-K reports filed 2007 through 2011 for this U.S. organization, I found that the organization increased net earnings by 36.5% across the five-year period. 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 this five-year period, has offshored a large 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 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?

The impact of the payroll shift for this one organization on the U.S. economy equates to a 32% loss of federal revenue (individual states of residence lose taxes also). For example, the shift of $803 million dollars in wages and salaries to offshore locations denies the federal government $200 million in individual federal payroll tax, $50 million in social security tax, and $12 million in Medicare tax.

While the economy is composed of many factors, think about changing just this one factor in the U.S. If American corporations could loose their death grip on cash and exercise their American corporate social responsibility, these organizations could infuse the U.S. economy with the jobs that exist offshore. And, as a side note, the organization analyzed in the above example showed a loss in the basic earnings per share of 17.9% during the five-year period.

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Easing the Burden of AP with Electronic Invoice Presentment and Payment

So why aren't more U.S. banks offering electronic invoice presentment and payment solutions? After searching with Google and Ask, I found only one U.S. bank that offers this service, while at least ten European banks had this in place. Electronic invoice presentment and payment (EIPP) is really so simple. The process takes the guess work out of invoicing customers, receiving customer payments, and, for the buyer, makes accounts payable processing so much easier.

It is a matter of accepting the software constraints, selling employees on using the process (many employees are afraid of being replaced), and onboarding buyers. However, the buyers are the ones who benefit the most. The acceptance of the electronic invoices from suppliers carries the ability to send buyers files that can be imported directly into the buyer's software. The import carries all the documents needed to prepare the accounts payable invoice for payment-the original purchase order, the proof of delivery, and any buyer required document. This process automatically matches product price and quantity and rejects discrepancies. The invoices that match are entered directly, so employees only deal with the rogues.

Even though banks may not offer the service directly there are several third-party vendors who offer this, and buyers need to take this seriously. When I look at this from the AP managers view, I want it.

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 large organizations undertake these with some regularity.
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 be profit wise in, say, five years. Lets say you want your profit level to be at $5 million, or $500K. Either way set the target.
What you are going to do is make a plan. But, instead of setting a one-year plan and going through an exercise of sticking to that plan, you are going to set a plan 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 nickel and diming your financial expenses set the main levels of production and inventory expense, sales and marketing expense, and administration.

Have patience and wait under the end of the first quarter. How did you do? Where did you fall short? Is there a product that needs to be marketed more? Or costs too much to be 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, and add another. Second now is the first quarter, third is now the second, etc.

After you do this for a few quarters, you'll get the hang of it. And you will be able to see where your business is going, and decide where you want it to go.

Easy Business is Hard Work

The holidays are coming. In the joy of the season, and the rush for gifts, don't forget....take a few moments every weekend to start sorting your tax receipts. Get your medical bills together, if there are any behind, pay them now. It can save you later. Don't forget your charities, especially at this time of year. Donations help those in need, and are still deductable.

Need help or just some more information? Leave a comment, or give me a call. I am listed in the business section in Google Real Accounting and Bookkeeping Solutions

Payroll Liabilities

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?

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

Maybe you are using your accounting software for payroll. Do you know how to set up the payroll module to perform the correct calculations?

Simple explanation of payroll calculations.

Independent Contractors How to calculate taxes

If you have your own small business and offer services, you could be an independent contractor. Before the end of 2009, calculate what your personal income tax will be. If you have not made tax deposits, it's a good idea to make personal federal tax deposits before December 31st to avoid any penalties.

Calculate the tax due on contract work

Get Your Business Out of Debt

If your business profit is on the downward path, review the key elements of your financial information. Review your Accounts Receivable for slow pays. Look over your vendor month end statements for invoices you already paid, or duplicate bills.

Review your selling, and administrative costs. Look at the details. You'd be surprised how much you can save with a simple analysis of your business expenses.

For information and a detailed guide, How to Get Your Small Business Out of Debt provides a detailed step by step program to get your business out of debt.