CPA Blog

Keep an eye on KPIs as your company rolls along

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Published: Monday, 16 November 2015 09:21

Written by Phillip Strickler, CPA.CITP

Like race car drivers, business owners need to monitor gauges on their dashboards to keep an eye out for serious operational failures before a total breakdown occurs. These gauges are commonly referred to as key performance indicators (KPIs).

There are two broad categories of KPIs: financial and nonfinancial. Financial KPIs often take the form of ratios, such as:

• Debt to Equity: Total Debt / Shareholder’s Equity,
• Current Ratio: Current Assets / Current Liabilities, and
• Days Sales Outstanding: Number of Days × Accounts Receivable / Credit Sales.

Nonfinancial KPIs may include measurable metrics in the areas of customer service, sales and marketing. For example, if a company’s goal is to improve its response time to customer complaints, its KPI might be to initially respond to complaints within 24 hours, and to eventually resolve at least 80% of complaints to the customer’s satisfaction.

KPIs differ from one company to the next based on industry, company type (B2B or B2C, for example) and, most important, strategic objectives. Your KPIs will stem mainly from your mission statement and your short-, medium- and long-term goals.

How to fix a shaky succession plan

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Published: Friday, 13 November 2015 14:05

Written by Phillip Strickler, CPA.CITP

Compare progress to plan. Don’t rely on vague notions of why your succession plan isn’t working. Identify the specific gaps in its execution. Also consider how your impaired plan is affecting your company’s bottom line, productivity and morale.

Be a communicator. Inform key parties about the problems, such as your successor, members of your board of directors or advisory board, managers, family and key nonfamily employees, shareholders and investors, and professional advisors such as your attorney and accountant.

Hit the pause button, if necessary. Don’t be afraid to retain control of the business a little longer while your next-in-line resolves his or her shortcomings or while other problems are resolved. Alternatively, you might name an interim CEO.

Revisit your successor choice. In extreme cases, a business owner may simply need to find a new leader-to-be. Remember, no one can afford to continue investing in someone who can’t successfully drive the company forward.

We’d be happy to review your succession plan and provide insights into its strengths and potential weaknesses.

Ongoing Responsibility for Retirement Plans

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Published: Wednesday, 11 November 2015 10:21

Written by Phillip Strickler, CPA.CITP

Another May 2015 Supreme Court decision may affect business owners. In Tibble v. Edison International (No. 13-550), the Court unanimously held that there is no statute of limitation on fiduciary responsibility for 401(k) plans.

            In this case, employees of a utility company filed suit, alleging that the company had added some relatively high-fee mutual funds to the 401(k) plan’s menu of investment choices. In 1999, the plan added three funds that were sold to ordinary investors; another three similar funds were added in 2002. According to the complaint from plan participants and beneficiaries, versions of the same funds, with lower fees, were available to institutional investors, yet these versions were not in the Edison 401(k) plan. Thus, the plaintiffs said they paid higher fees than necessary, reducing investment returns.

            In the Supreme Court, the case revolved around the funds added in 1999. The company said that such disputes related to employer-sponsored retirement plans have a six-year statute of limitation based on when the funds were selected for the plan. As the action was begun in 2007, the employees’ complaint regarding the funds added 8 years earlier was untimely. A district court and the Ninth Circuit generally agreed with this argument.

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Past Losses Offer Winning Opportunities

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Published: Wednesday, 04 November 2015 16:11

Written by Phillip Strickler, CPA.CITP

For nearly two decades, investors have been riding a stock market roller coaster. The late 1990s tech stock boom turned into a bust in the early years of this century, as the Dow Jones Total Stock Market Index fell by nearly 45%. After a real estate-led recovery pushed stocks to new highs, a real estate collapse dropped that index more than 50% from 2007 to 2008. Since then, the index has nearly tripled; as of this writing, U.S. stocks are near record levels.

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