Meredyth McKenzie

Sunday, 26 July 2009 20:00

Fifth Third Bank makes banking easy

Depositing checks can sometimes be a hassle — if you accept a lot of them, you’re running to the bank each day. But it can also be a hassle if you don’t accept a lot, as you may wait several days or even weeks to deposit them all at once, slowing down your cash flow.

The solution is remote deposit, which allows you to deposit checks into your bank account directly from your office.

“It has all the convenience of being able to make a deposit whenever you want, right from your desk,” says Susan A. Goins, assistant vice president, Treasury Management Officer in the Business Banking Department at Fifth Third Bank. “It also offers centralized reporting for companies with multiple locations.”

Smart Business spoke with Goins about how to set up remote deposit and how it can improve your cash flow.

How does the remote deposit service work?

Electronic Deposit Manager allows clients to enhance their receivables management process by making deposits electronically to a bank account from anywhere they do business. Clients simply connect a compact scanner to their local PC and access the remote deposit software through the Internet to scan checks.

Basic scanners are able to process roughly 50 checks per minute, while larger volume units can process up to 100 checks per minute. Once all items are scanned, the client transmits the balanced deposit files, and the check transactions are now an electronic deposit that will be sent for posting.

So instead of traveling to the banking center and waiting at the teller line, deposited checks are sent electronically as images. The original checks need to be securely stored for a short time and later properly destroyed. The check writers will see these electronically deposited items on their account statements in the same way they see all of their other cleared checks.

What are the benefits of remote deposit?

Remote deposit saves time and money by creating efficiencies and improving a company’s overall cash flow. Efficiencies are gained as remote deposit allows employees to spend more time in the office and less time traveling to the bank and standing in line to make check deposits. The scanner also creates a virtual endorsement on the back of the check, so time is saved by no longer having to stamp the back of each check with ‘For Deposit Only.’

Additionally, remote deposit helps mitigate risk and fraud by not having employees traveling with negotiable instruments and by removing paper checks from the marketplace. Remote deposit also provides better reporting for business units and the software creates check image files, thus eliminating additional photocopy efforts.

There is also a cash flow improvement benefit opportunity. As remote deposit creates check images for clearing, the exchange of checks between banks is expedited. Also, as some businesses with low volume tend to hold deposits for a week or so before they deposit items, having checks sitting in desk drawers negatively impacts their cash flow. Remote deposit simplifies the ability to get those items on deposit more quickly.

Additionally, for companies that don’t have many actual cash/currency handling requirements, remote deposit can help consolidate banking relationships as bricks-and-mortar bank facilities no longer need to be in the area of a company or subsidiary.

How has remote deposit advanced over the years?

When remote deposit systems first rolled out, they were a bit cumbersome. The product software was installed on a user’s computer, and it sometimes conflicted with accounting packages and other software programs. The original versions often required standalone PCs, and although the speed and accuracy were good, improvement was needed.

In today’s new versions, most are Internet-based, so the product and software can be accessed from multiple computers and the conflicting software issues have been eliminated. Additionally, the speed and accuracy of the scanners and software continually gets better and better.

How can a business set up remote deposit?

Through conversations and interaction with a bank’s treasury management representative, the right scanner equipment can be matched up with your business requirements. After a short implementation process on the bank side, the scanner is shipped to the client.

Upon receipt and unpacking of the scanner, along with a quick download of the drivers from the Internet, the client is ready to make electronic deposits.

Many banks will have implementation help desks or technical trainers available to provide training and assistance.

What other things do you need to be aware of when using remote deposit?

The storage and retention of the checks that have been scanned is very important, as the remote deposit user is responsible for sensitive client information in the form of the negotiable instruments.

The need exists to ensure security procedures are in place to safeguard these documents. The recommendation is to keep the original paper checks in tamper-evident bags by date of deposit under lock and key.

Susan A. Goins, assistant vice president, is a Treasury Management Officer in the Business Banking Department at Fifth Third Bank. Reach her at (513) 326-4333 or

Sunday, 26 July 2009 20:00

Taking responsibility

Over the past decade, there has been a radical change in the face of entrepreneurship.

While typical entrepreneurs are focused on profit, many of today’s entrepreneurs have become focused on the triple bottom line — profit, people and planet. That has created a new class of social entrepreneurs who are focused not only on how they are doing financially but on what they are doing socially and ecologically to help the community and the planet.

“Companies have a responsibility to effect change on the ecological and social issues in the world,” says Dennis Barsema, a social entrepreneur who is a director for, and has been involved with the formation of, two Illinois-based nonprofits, an instructor in the Northern Illinois University Department of Management and a member of Opportunidad Microfinanzas, the board of Opportunity International, Mexico. “Every business, large or small, has the ability to make a difference.”

Smart Business spoke with Barsema about why social entrepreneurship is important to business, how it is affecting Wall Street and how business leaders can get involved.

What are the characteristics of social entrepreneurs?

Successful social entrepreneurs are great networkers. They also have the ability to see a vision and a need, and to map out a path to address the need. In addition, successful social entrepreneurs have the ability to assess their own strengths and weaknesses, and they hire to those weaknesses.

They are also great salespeople. Often, they have to sell their idea to the people or community that they are trying to help and then sell their idea to potential donors. And finally, they are risk-takers. Social entrepreneurs are not afraid to take risks because, often, their goal is driven not by money but by the desire to serve a need or cause, and many live pretty simple lives.

Why is social entrepreneurship important to business?

Employees want to be a part of companies that are socially responsible. It’s also important for retention and recruitment, as many of today’s college graduates want to work for socially responsible companies. They don’t want to read in the paper that their company got fined for dumping toxic waste in the river.

If you’re going to be a socially responsible company, you need to be looking at all three parts of the bottom line — people, profit and planet — and not just two of the three. You can’t be doing good things to help the community and planet and not make a profit.

Many social entrepreneurs have a hard time with the profit part because they’re so focused on people and planet, but profit is important. You won’t be around long if you don’t make any money.

Conversely, many businesses are also starting to be judged by consumers on their social and ecological scorecards as well as on their profit. For example, Starbucks includes information on its displays regarding its social responsibility to the planet and what it is doing about it, such as using reusable plastic and recycled materials.

How is this trend impacting Wall Street?

The Global Reporting Initiative started in the 1990s but picked up steam in 2006. It’s being done in cooperation with the United Nations to start judging companies on three primary criteria — economic, environment and social performance.

The GRI is a voluntary report, but there are more than 1,000 companies in 60 countries doing it in some form, including Coca-Cola, Pepsi, Cisco, Office Depot and Starbucks. Some are doing it annually, some less frequently, but they’re still thinking about it and reporting on it.

The eventual hope is that companies on Wall Street will be measured on their GRI, as well as on their profits and losses. Eventually, we may find companies being valued by shareholders on their environmental and social performance. There are some people already doing this, but we’re not there yet.

How can business leaders become more focused on social entrepreneurship?

Find a cause that breaks your heart and do something about it. It’s being aware of the needs in your community and what your product is doing to the world. You need to be aware of your product life cycle and its effects on the environment. Is your product responsible to the planet and environment? Or is it polluting the environment?

You need to become more involved in your community. You’re responsible to give something back if you’ve been fortunate enough to be successful. You may not see the change for 20 or 30 years, but you can make a huge difference, even if it’s just in your own community.

What is the future of social entrepreneurship?

Hopefully, there will be a day when an entrepreneur is a social entrepreneur, and the two are the same thing. If you’re going to be an entrepreneur, you should be focused on the triple bottom line, not just on profit. Some of the biggest challenges social entrepreneurs face are access to capital (funding) and access to great people. More venture funds are beginning to focus on social enterprises, but there is a need for more.

There are a lot of initiatives like the GRI happening to bring awareness to a business owner’s responsibility to the world. It’s not going away; it’s gotten too much momentum for it just to be a fad. It’s going to become a part of the fabric of the business world.

I’m not sure how fast it will get there, but it is going to happen one day. There’s too much of a need in our world for that not to happen.

Dennis Barsema is a social entrepreneur, an instructor in the Northern Illinois University Department of Management and a member of Opportunidad Microfinanzas, the board of Opportunity International, Mexico. Reach him at (815) 753-6191 or

Sunday, 26 July 2009 20:00

Financial value

The securities market is one of the many areas of the economy affected by the recession. While companies continue to place equity and debt securities, the issuing landscape has evolved. A greater focus on information and due diligence and tougher regulations has changed the intermediation phase of security issuance.

“There used to be a trend to issue securities almost overnight, which meant little due diligence on the part of investment bankers and investors,” says Dr. Gabriel Ramírez, a professor of finance at Kennesaw State University Coles College of Business. “Those practices won’t continue to exist after the recession.”

Smart Business spoke with Ramírez about how securities has changed, how corporations and investors have to approach securities differently, what vehicles have become more prevalent, the state of international securities and what to anticipate in the near future.

How have the current economic conditions changed securities? Have any new markets opened or old markets closed?

Securities themselves have not changed. What has changed is the process to issue them. Traditionally, there has been a major reliance on investment banking firms. Most recently and up until 2007, there was a strong movement toward speed of issuance. It was common to see ‘overnight (bought) deals’ that were auctioned as opposed to using the traditional book-building process. There were also ‘accelerated book-built deals,’ which went through book-building, but were faster than traditional book-built deals. And perhaps more importantly there was the 144A market, which allowed companies to issue securities quickly. Because of the financial crisis, speed of issuance has changed, along with the process of issuing securities.

In terms of markets, the collateralized securities markets have practically shut down, particularly the 144A market. According to a recent Standard & Poor’s report, the total level of collateralized issuance is one-tenth of what it used to be. Results from my current research in this area reveal that issuance of collateralized securities in the 144A market is almost at negligent levels. The other markets have experienced significant drops in issuance levels. In recessions, it is expected to see such drops in public equity issuance. Due to the financial crisis, debt issuance is also down to about 50 percent of its regular levels, despite the prevailing low level of interest rates. In particular, bank loans are significantly down, as is widely known. Private equity should be the area with some relatively significant activity.

How do corporations and investors approach securities now, and what new conditions are being considered?

Previously, there was an overreliance on third-party mechanisms for monitoring and processing information. In the case of collateralized instruments, regulators and investors were relying on ratings by credit agencies. Such overreliance was prevalent across other areas but with an emphasis on investment bankers. As a result of the current financial situation, individuals will have to do more diligence, processing and monitoring on their own, and corporations will need to seek full-service intermediaries and provide greater disclosure of information. For example, investors will be doing a lot more of the risk assessment and evaluation previously inferred from third parties and ratings. The landscape for issuing securities, at least for the next few years, will be more regulated with more oversight, particularly in the collateralized market.

What vehicles have become more prevalent?

Convertible debt tends to be more prevalent in situations like this, particularly for private and small public firms. In periods of uncertainty, where the equity valuation of firms is difficult, convertible debt tends to be used more frequently. Most private investors or venture capitals tend to use convertible debt as a way to invest in small, private firms, and those are the firms that were shut down from access to capital in the current financial crisis.

What about international securities? Has anything changed there, and how does that affect the U.S.?

International securities issued in the U.S. market are mostly done in the 144A market, which up until 2006 was strong. Firms issuing securities in the 144A market tend to be riskier and more information problematic than firms issuing in the New York Stock Exchange or NASDAQ. There is less information disclosure in the 144A market. That is why the 144A market has suffered a lot more in the current economy and why international issuance has drastically reduced in the 144A.

Where do you see securities heading in the future?

Collateralized securities will be revived and will continue to play an important role in the markets. The collateralized market does provide a significant benefit to many corporations, and financial institutions, in particular, will be able to maintain the capital requirement levels by collateralizing loans. But how it’s done will be different and we should see a change toward what prevailed prior to the recent market boom. Currently we’re seeing a significant supply of equity, mostly coming from financial institutions that need to shore up their capital, but most nonfinancial corporations find it difficult to issue equity at the moment because of the recession. I believe that there will continue to be financial innovation with a strong focus on better capturing financial risk. One thing that this crisis has shown is the need for better risk assessment, particularly in complex financial securities.

Dr. Gabriel Ramírez is a professor of finance at Kennesaw State University Coles College of Business. Reach him at (404) 378-8222 or

Thursday, 25 June 2009 20:00

Recovery mission

In this economy, companies are conscious of cutting costs in every possible area. Many, however, may be throwing away money and not even know it.

Duplicate payments, unused vendor credits and revenue leakage are just a few of the areas where companies lose money, but lost revenue and excess costs can ultimately be recovered if you know how to do it.

“The amount recovered will vary, depending on the controls,” says Jan Beckmann, ACL certified trainer, manager of risk services and data analysis practice leader at Brown Smith Wallace LLC. “If you don’t identify and correct areas of vulnerability, you’re putting all that work in and not getting the money you should. But if you engage a specialist to recover costs and prevent future problems, you’re going to identify overall improvements for your company.”

Smart Business spoke with Beckmann about the areas in which companies typically find recoverable costs, how to identify and quantify errors, how to prevent them from happening again and what to look for in a good service provider.

What is the likelihood that a company has recoverable costs?

The probability that a company has recoverable money depends on the control environment and systems in place. Companies that have gone through layoffs and restructuring during this economic downturn have a higher probability that controls are not as tight as they used to be, or were not tight to begin with, making them more likely to have recoverable costs.

The control environment is the deciding factor, not industry or company size. A company with a tight control environment and fully integrated systems, or a single system, is less likely to identify a high dollar amount of recoverable costs.

What are some typical areas where businesses see recoverable costs?

It depends on your industry and individual risk factors, but some typical areas are duplicate payments, missed vendor discounts, unused vendor credits, invalid charges on construction projects, duplicate employee reimbursements, inappropriate corporate credit card transactions and invalid employee benefits.

You should focus on the areas where there’s the greatest chance of recovery. First, do an assessment of all the areas where you think there may be recoverable costs. The identified areas most likely will have disparate systems or the weakest controls.

How does revenue leakage factor in?

Usually, you find some large-dollar recoverable costs by completing an assessment, but preventing future revenue losses is equally important. Revenue leakage sometimes gets missed because leakage is often not evaluated in the same way as cost.

You may find a few duplicate payments that were issued, but if you can find a revenue stream that did not have strong controls around it, your dollar amount is going to be higher, and you’ll have a much greater long-term benefit.

Often, when you’re looking for revenue leakage, you’re only looking at the main revenue stream, not all streams. Frequently, the main revenue stream is reasonably controlled, but there is leakage in one of the smaller streams.

For example, someone may have given out an excessive amount of free trials or samples to the same company because there are not good monitoring controls around the trial program.

How do you identify and quantify errors, and then prevent them from happening in the future?

You need to look at 100 percent of the data. Sampling is not a reasonable approach to cost recovery because you will not be able to find all of your dollars. One tool used for fraud detection and prevention is data analysis software, such as ACL, which allows you to pull all of the data together and identify the errors within it. Using that information, you can then quantify dollar amounts and pinpoint how much you should receive back from the vendor or customer.

The next step is to identify the root of the problem. Improving controls in your system can prevent future errors, but a lot of companies don’t choose to go that route because it can be expensive and time-consuming. Another possibility is to implement a continuous monitoring system, which is usually less costly and time-consuming.

Data analysis software can be programmed as a continuous monitoring system to perform highly specialized tests as required based on the cost recovery items identified for your company.

What should you look for in a service provider to help with cost recovery?

Look for a provider who will partner with you so that you’re not just recovering costs, but rather clamping down to ensure more money is not lost in the future. You need a provider who has both business knowledge and data analysis expertise.

It is essential to understand the source of the problem to prevent future losses; otherwise, you’ll wind up doing cost recovery every couple of years. By partnering with a trusted provider, you can implement lasting change.

A partner will have a continued presence working with you, helping you to determine what system controls need to be changed and what continuous monitoring systems you can implement.

Jan Beckmann is an ACL certified trainer, manager of risk services and data analysis practice leader at Brown Smith Wallace LLC. Reach her at (314) 983-1254 or

Thursday, 25 June 2009 20:00

M&A acumen

This new economy presents unfamiliar challenges for companies looking to sell, and unique opportunities for those looking to buy. While funds are limited for acquisitions, buyers realize that now may be the best time to separate “the wheat from the chaff.”

“There are still people out there with money looking for the right acquisition,” says Bruce E. Dizenfeld, senior attorney at Theodora Oringher Miller & Richman PC. “Quality acquisitions are likely to be good companies with bad balance sheets available at a discount, or companies that differentiate themselves with a quality business and a solid balance sheet that may now be able to command a premium price. The key for sellers is to understand what opportunities may exist, how the seller may be perceived and, if possible, to tailor the business ‘story’ to project the right image.”

Smart Business spoke with Dizenfeld about the merger and acquisition opportunities in the new economy, and how an attorney can help a company prepare for the transaction process to increase value and decrease costs.

Where are the merger and acquisition opportunities in this environment?

For sellers with a strong core business, good market presence and a strong balance sheet, there are still buyers out there. Buyers are now competing for those businesses, there are fewer such target companies available, and the result is premium prices.

From a buyer’s standpoint, it is also a good market to find companies with either (1) good management or (2) good products or services that are unable to exploit their commercial advantage for lack of funding. This is a good time for buyers to pick up competitors and complimentary niche businesses at a lower price to position the buyer for the future.

How can an attorney help a company to identify and build value in preparation for a transaction, or control the costs of a transaction once a transaction opportunity is presented?

Counsel familiar with your business can help you anticipate what assets, rights or problems may exist to either discount or enhance your company’s purchase price or better terms. Your legal counsel can help you prepare for this event. Engaging counsel after a transaction is proposed, simply to handle the documentation process, is short-sighted. The biggest expense of a transaction is often (1) the conduct of due diligence, (2) preparation of the seller’s schedule of assets, and (3) correcting asset document deficiencies and overcoming transfer restrictions. Anticipating and identifying these problems in advance may eliminate problems later that might come at a significant expense.

How important is a strong relationship with an attorney prior to entering into a life-changing sale of your business?

Preparation makes the sale process work to your advantage. Take the time to get an attorney with your vision embedded in the company. These services can often be obtained at a fraction of the cost of ‘task-oriented’ legal services. Attorneys in the new economy are hungry to establish relationships that may generate task-based services. Your ‘embedded’ counsel should be like having a family member as an attorney, someone you can call at any time for general legal advice. The embedded counsel is basically filling the role of a general counsel, but without being on payroll.

Larger companies may also benefit from the new economy, where a general counsel may need specialty counsel from time to time (e.g. litigation, employment, regulatory, securities, or geographically strategic counsel, etc.). Getting specialty counsel embedded in the culture of the business, available for casual inquiries and prepared to respond to required tasks, will make the task-oriented jobs flow more smoothly and generally at a lower cost due to a reduced learning curve and better understanding of the general counsel’s and company’s expectations.

Where do you see the merger and acquisition market in this new economy?

In general, I think we are all having to take a closer look at our core values and how we can deliver value — determining what is ‘spin’ and what is substance. First, realize that for the most part we are all in this together. Second, those who have the financing are still concerned about conserving those resources. We anticipate, however, that there will be consolidation within certain markets and competition for proven companies. We also anticipate a wave of more savvy entrepreneurs, and displaced executives with knowledge, industry experience and some personal funds, and colleagues with funds to invest. We expect these new entrepreneurs to identify and launch niche businesses or to acquire small companies with good products or know-how, but lacking management and/or funds. Those are not necessarily companies that will be selling right away, but are new growth businesses that will be launched during these challenging times as a matter of necessity, and which may become the business gems of the future.

For most of us, however, we are all exploring this new economy together. Anything is possible. Be prepared.

Bruce E. Dizenfeld is a senior attorney at Theodora Oringher Miller & Richman PC. Reach him at or
(714) 549-6165.

Thursday, 25 June 2009 20:00

Making a change

Earlier this year, several alterations were made to retirement plans in the U.S., making it more complicated to administer 403(b) retirement plans.

New guidelines for the 403(b) plan, which is comparable to the 401(k) plan but used by university, government, church and nonprofit employees, require more employer involvement in plan documentation and operation.

“Overall the rules are changing to make the 403(b) plans comparable to the 401(k) plans, and the differences between the two are being minimized,” says Michael Kozlowski, CPA, director of assurance and business advisory services with GBQ Partners LLC.

Smart Business spoke with Kozlowski about the changes made to the 403(b) plans, the benefits of these changes, problems that can arise from these new rules, and how these changes affect businesses and individuals.

What are the new 403(b) rules?

With a 401(k) plan, the plan sponsor uses a third-party administrator and investment adviser to help select various investment options, such as mutual funds, that participants can choose from. These investment options are usually held with one investment company who will administer the plan. The new regulations will encourage 403(b) plans to move toward this type of plan administration. The plan sponsor will be required to enter into written information sharing agreements as specified in the plan document. Exchanges by a participant will only be permitted if approved by the employer’s plan.

In the past, 403(b) plans didn’t necessarily require a written plan document, but all 401(k) plans have these documents, which have to be submitted to the Internal Revenue Service for approval. If your 403(b) is subject to ERISA, a written plan is now required and must be adopted by December 31, 2009. The plan must be in operational compliance by January 1, 2009. If there was an operational deficiency in 2009, that also has to be corrected or else there can be severe consequences. The plan may be disregarded and all participant accounts may become taxable. You need to make sure these plans have written documents and the compliance is followed.

What are the benefits of these changes?

The plan sponsor should now know where all the plan participants’ investments are located. Before, participants could potentially invest in whatever they wanted and the plan wouldn’t necessarily know where all the assets were. The plan could’ve had someone terminate and transfer out of an investment fund to a separate fund and the administrator may not have known that the funds were still plan assets. Now, the plan sponsor will be able to monitor the plan, follow the rules, and make the plan more universal.

What are some problems that may arise because of these changes?

There are new rules if the plan allows for loans or hardship distributions. Before, the plan sponsor had nothing to do with these distributions, that was handled between the participant and contract provider. Now, the employer will have to decide whether to permit these distributions, and if the plan allows, the employer has to determine if the employee is permitted to take the distribution. The employer will need to be more involved in the administration of the plan in order to make sure the rules are being followed.

Also, 403(b) plans will be subject to the same IRS Form 5500 filing requirements as 401(k) plans. If you have more than 100 participants, you will have to file the complete form. The complete form will require an independent audit report of the plan, which can be expensive. If you have fewer than 100 participants, you only need to file a short form and an audit report will not be required.

A plan participant is defined as anybody who’s eligible to participate in the plan, whether they’re participating or not. Anybody with an account balance is considered a participant, as well, including people who have left your company and haven’t taken their distributions out of the plan.

How do these changes affect businesses?

The employer is going to be responsible for more administration, documentation and oversight of the entire process. There’s also going to be more disclosure, so if your 403(b) allows for employee contributions, you will have to make sure all employees are notified of this on an annual basis.

Everybody who is a common-law employee will be eligible to make a contribution. Only permissively excluded individuals (employees eligible under other deferral plans, student employees or employees who ordinarily work less than a certain number of hours per week) may be excluded from the plan. You also need to perform discrimination testing if you make any sort of matching contribution or engage in profit sharing.

There’s also been a change regarding the timing of remitting employee contributions to the plan. Before, these contributions didn’t necessarily need to go into the plan right away. But now, if your 403(b) plan is subject to ERISA, contributions must be made to the plan as soon as administratively possible, but no later than the 15th business day of the month following the withholding. The Department of Labor will look at how quickly the employer is able to remit these funds to the plan. So let’s say an employee gets paid on the 15th and then gets paid on the 31st and the employee has elective deferrals taken out on both payrolls. If the employer combined those deferrals and contributed both of those into the plan by the fourth of the following month the above rule appears to have been met. But, the Department of Labor will have an issue with that, since they look at how quickly the contributions can be made. If you can get the payment for the paycheck on the 31st by the fourth of the next month, you should be able to do that for the 15th, as well.

You have to make sure you’re getting these payments in on time or you may face penalties and may have to make up lost earnings to your participants.

Inventory systems can make or break your business, and effective controls help provide visibility as to what you have, what you need, what you don’t need and costs.

But bad procedures can lead to numerous problems, including a lack of knowledge, missed production, lost customers and money wasted on carrying inventory that is not necessary.

“Inventory can be the lifeblood of a company,” says William R. Harrod, vice president, team lead, Special Assets Group with Fifth Third Bank. “It’s important to have clean systems with solid procedures and controls so you know what you have, what you need, how much it costs and how much you can make on it.”

Smart Business spoke with Harrod about how to develop effective inventory controls and how your bank can help you in the inventory control process.

How do you put effective inventory controls in place?

Let’s say you buy some widgets and use those to combine with other widgets to make a new widget to sell. It’s important to understand how many widgets you need, how many you have, how you are going to put them together and how they’re selling.

Inventories are usually tracked via perpetual systems that keep tabs on all the raw materials coming in, work in process, finished goods being produced and then removed when shipped to the customer. The perpetual system will track the location, quantity and cost, among other things. The perpetual systems today are very sophisticated and incorporate bar codes, optical scanners and the like.

Then you consider cost. This can be done various ways, including average cost, actual cost, weighted average cost and standard cost. You have to factor in the value increase as the raw material morphs into the finished product and other costs such as machines used, lights, energy and personnel.

How do you maintain effective inventory controls?

You need to work with your CPA to put together an appropriate tracking plan/system, which will vary based on the industry and the type of inventory you have. You then develop a plan policy and procedures around the system.

Some companies have automated procedures, placing a company-specific bar code on the inventory that is read optically, which takes out the human error. The key is to have a detailed plan, policy and procedures to make sure everything happens correctly every single time. Once something gets out of whack, it can mess up your production schedules, ordering schedules and financial statements.

You then need to develop an audit and review process, typically done periodically to review all procedures to make sure they’re being adhered to. An effective method is cycle counts, where you select a sample of inventory each month to test and make sure the quantity and cost are right. If you find a problem, you can expand the tests, isolate the problem and resolve it now before the system gets too out of whack.

Some companies that don’t have a lot of inventory will do full physicals and count every single piece of inventory each month. The whole process is designed to make sure systems are being adhered to and yielding the correct results. Any piece of inventory that you buy but don’t need or sell is costing you money. You want to buy only what you need in order to meet your customers’ needs.

If you see a problem during the audit, do you need to fix your procedures?

Absolutely. A lot of times during cycle counts, you will find that someone is being careless within the process, so you need to establish new protocol so that doesn’t happen again.

For example, let’s say you have 15 baseball bats but only find 10. You find out the missing bats were shipped, but no invoice was issued, meaning the customer wasn’t billed and it was never taken off the inventory. You need to go back and revise the plan so that doesn’t happen again.

What role do banks play in the inventory control process?

Banks lend on assets and will routinely send out field examiners to review systems, accounting, receivables and inventory to monitor and understand the performance of the working capital assets. From an inventory perspective, banks want to understand the composition of inventory such as raw materials, work in process and finished goods. In addition, a bank will want to understand how the company’s products are produced and tracked.

They want to understand the tracking system, costing process and how these are accounted for. They will review inventory turnovers and look to understand the company’s slower-moving and/or obsolete inventory. They will perform test counts and costs tests (similar to cycle counts).

These periodic reviews can help companies identify areas that need to be improved and also help to uncover ways for the company to improve the performance of its inventory.

It’s important to have solid systems and procedures in place. Companies that do a good job can yield more availability on inventory and may generate more borrowing capacity.

All loans are subject to credit review and approval.

Thursday, 25 June 2009 20:00

The changing face of sales

Your sales team is one of the most important parts of your company, as its members are the face of your organization and the first people most of your customers will interact with.

To form relationships with potential clients to close the deal, you need to develop the right team with the right education, knowledge and characteristics. To do that, sales education programs are growing in popularity and have become an important part of training people in a changing sales environment.

“Sales education focuses on business-to-business sales because it lends itself well to relationship building,” says Dan C. Weilbaker, Ph.D., McKesson Pharmaceutical Group professor of sales in the department of marketing and editor of Journal of Selling and Major Account Management at Northern Illinois University. “That relationship and trust between the customer and salesperson is important.”

Smart Business spoke with Weilbaker about how technology has changed sales education and how to align your business strategies with a new kind of customer.

What does sales education focus on?

There is a major focus on the importance of asking relevant questions and then listening actively to the customers’ responses. A lot of people may think that salespeople are good talkers, but it’s the contrary. The good salespeople are the ones who listen well. It doesn’t mean that you don’t have to know your product and be able to talk about it, but it’s also important to listen to the customer.

How has sales education changed with the advancement of technology?

At first, sales was more transactional. A customer would come in, and the salesperson would tell him or her about the product. The customer would ask questions like, ‘How much is it going to cost me? How long is it going to take to get to me? Are there any special deals?’ If the customer liked the product, he or she would buy it, but if not, he or she didn’t.

As time went on, customers became more professional and were even trained in product purchasing. The Internet allowed buyers to get as much information as the salesperson had. But buyers needed help in creating solutions to their problems, so transactional selling morphed into solution selling. The salesperson asks good questions, listens to the customers, identifies their problems and then provides them with the best solution. Characteristics of the sales consultant then started evolving to accommodate this change.

What does the future of sales education look like?

It’s moving toward consultative selling. Buyers are now college-trained individuals who are not only looking for solutions but are also looking for the salesperson to be a business consultant and to look at the purchase from an enterprise level. What impact does purchasing this product or solution have on our entire operation?

They’re taking a macro view of the impact of each individual purchase, and the cost of ownership versus the cost of product is beginning to form in their minds. I could buy a more expensive product, but it would save the corporation money because it would make cuts in areas that the cheapest product did not.

How can businesses align their strategies with this new customer base?

It takes different kinds of salespeople who have to embrace a different way of selling. The number of people needed for transactional selling is declining, and a lot of that is being replaced with technology.

Instead of hiring salespeople, some companies have tried to script or codify routine sales practices using technology to reduce costs. Salespeople need to ramp up their skills to either be a solution or consultative seller, or they’re going to be out of a job.

You have to determine where you fit in the mix. Are your buyers still transactional? If they are, you can start changing some of your sales into direct mail, Internet and other scripted forms. But if your customers are more interested in solutions, you need to develop your sales team with that different mindset.

What characteristics do sales consultants need to be successful in today’s market?

There are several:

  • The ability to listen and hear what the customer is saying.
  • The ability to ask good questions that lead to real issues instead of the fluffy questions salespeople sometimes focus on. And asking good, solid, probing questions to find out the real problem, not just the surface symptoms.
  • Creativity and good problem-solving skills.
  • A good work ethic — this is the least teachable skill.
  • Being able to take rejection. This is the major reason for high turnovers with salespeople.
  • Knowledge of your products and offerings, as well as the competition’s products and offerings.
  • An understanding of the client’s business.
  • Adaptability to any situation. You can’t just go into a sale with a script, you have to react to the customer’s current needs and have a good knowledge base so you can shift gears in an instant.
  • Being open to coaching and training.
  • Most of these skills are learnable, but sometimes a salesperson might come in with one skill that’s already more developed than others.
Tuesday, 26 May 2009 20:00

Cost and compliance

During this recession, business owners are concerned with decreasing cash flows. As a result, many are scrutinizing their retirement plans to ensure that they’re spending wisely.

This is an opportunity for plan sponsors to revisit their retirement plan to see if it still meets the original goals and whether any specific goals should change.

“There’s a fiscal focus and an educational component of keeping people aware of their finances to make sure they have proper asset allocation and investment diversity,” says Patrick Shelton, managing member of BSW Benefit Plans Plus LLC, an affiliate of Brown Smith Wallace LLC. “You want to make sure your plan is working well and you’re getting the best value for your money.”

Smart Business spoke with Shelton and Robert Higgins, a Benefit Plans Plus LLC senior consultant, about how to design your retirement plan for maximum benefits and how to make sure your plan is in compliance.

How can you design your retirement plan to get the maximum value?

Review your retirement plan from a total cost standpoint. Work with your advisers to determine not only plan investment and administrative fees, but also employer and employee contributions and any soft-dollar costs for running the plan through human resources.

Total after-tax costs should be the benchmark. For example, if the business is privately held, owners may defer their income through the plan and deduct employer contributions made on their behalf, as well as plan expenses, significantly reducing their taxes. Be sure your plan accomplishes its basic purpose in a tax-efficient manner.

How can companies make sure their plans are in compliance?

Benefit Plans Plus LLC has designed a Fiduciary Health Check to help clients ensure their plans are properly administered. The first step in this analysis is to identify all plan fiduciaries. At least one plan fiduciary is named in the plan document, but other individuals are deemed ‘functional fiduciaries’ due to their plan duties. These unnamed parties are often unaware of their fiduciary status and responsibilities.

Step two is to compare plan procedures with plan document requirements to verify that the plan sponsor properly manages the plan, provides quality materials, satisfies compliance testing requirements and submits timely tax filings.

You should also review communications to make sure employees receive the proper notification. Lastly, review insurance for proper plan coverage through a required fidelity bond and supplemental fiduciary liability insurance, if necessary. This type of analysis ensures that the plan is spending dollars wisely and continues to provide a plan that helps employees prepare for retirement. It also minimizes risks to participants and the plan sponsor.

How is compliance testing different from a fiduciary check?

Government-mandated compliance testing is much more specific. Failing your annual compliance testing is an indicator of design flaw. There are ways to avoid such failures, for example, through enhancing matching contributions or promoting employee participation in the plan.

A compliance review may uncover other errors requiring a technical correction. Without frequent review, plan sponsors are often unaware that they’re doing something incorrectly or not filing the proper reports. The government provides several self-correcting programs that permit plan sponsors to go back and fix operational errors. Because of the complexity of the rules involved in these situations, a sponsor should seek assistance from experienced professionals.

What is a third-party administrator, and how can using one help with your benefits plan?

A TPA is a local, smaller business that provides a closer level of service. Instead of having to call an 800 number, you have direct contact with a local person who can physically meet with you.

TPAs tend to be specialists and can often provide insight into complex retirement plan regulations. You can outsource some financial functions to TPAs, who can also troubleshoot if you have questions or issues. Using TPAs leads to better-run plans. Within any given marketplace, there can be a large number of TPAs but only a handful with a quality reputation.

You need to find a firm that not only has technical expertise, but is also professional and communicates well. Ask a trusted business adviser, like your accountant or attorney, for a referral. TPAs can also be found online at sites such as, or

How can employees maximize the benefits of their employer’s plan?

Employees must educate themselves about their plan. It’s your money; use the plan and investment information provided and ask plenty of questions. Use resources such as financial items on a provider’s Web site, newsletters, media articles and peers.

There’s a misconception that people can’t afford to participate in a retirement plan. Contributing only a little bit each pay period helps. This is a long-term investment but, if you persist, the dollars will grow. At a minimum, participate up to the level that your employer provides a match. If you can get free money, you get an automatic return. It’s a good investment to make.

Focus on the long term, and make sure you have proper asset allocation and incorporate your 401(k) into your overall financial planning. Be sure the plan best serves your needs relative to growth and retirement.

Patrick Shelton is managing member of BSW Benefit Plans Plus LLC, an affiliate of Brown Smith Wallace LLC. Reach him at (314) 983-1212 or Robert higgins is a senior consultant at BSW Benefit Plans Plus LLC. Reach him at (314) 983-1358 or

Tuesday, 26 May 2009 20:00

Evaluating quality care

As an employer, you want your health plan to provide the best care possible for your employees. Working together with your health plan and its physicians can help you do that, as can services such as quality health programs, physician report cards and physician incentive programs that emphasize patient care.

“If a quality program is in place, the health plan is trying to reduce barriers to good care for members and trying to increase the incentives for the different variables that go into that patient getting good care,” says Dr. Bruce Niebylski, associate vice president of medical affairs with Priority Health.

Smart Business spoke with Niebylski about how using physician rankings and report cards can help ensure that patients are receiving proper care, how physician incentive programs work and how they can benefit you as an employer.

How did quality health programs get their start?

Quality health programs were initiated by employer groups years ago when they realized certain diseases were costing them a lot of money and were keeping employees away from work for long periods of time.

Employers realized they were spending a lot of money on health care for people with diabetes, heart failure and asthma.

Employers then went to health plans to see how plans could provide those patients with disease management. The programs help the sickest people navigate their condition through information and care. And if they begin to take better care of themselves, it will cost employers less in health care.

It’s a lot like AAA sending driving and safety tips to members.

How can employers use physician rankings and report cards to make sure their employees are getting the best care?

The physician ranking system and report cards are pretty much the same thing. The ranking system started about eight years ago when employers wanted to make sure their employees were seeing the best doctors.

A list of questions was generated about what makes a good doctor, and it has evolved from there. The original report cards gave stars to doctors who had board certification and no stars to those who didn’t.

The ranking system is typically an annual thing, because there are seasonal differences in what doctors do, and there are delays in collecting data. The ranking system is then updated once a year.

There have been a lot of questions over the years about physician report cards, and they’re still evolving as we’re learning what the best measures are that reflect a physician’s behavior. Because every doctor’s patients are different, in terms of their age, gender and life habits, all their demographics are different.

I may be doing an incredible job with my patients who are 70-year-old smokers with heart failure, but I may not have as high of a ranking as somebody caring for healthy 25-year-old joggers.

How do these ranking programs benefit employers and patients?

Physician report cards do change behaviors. Physicians, no matter where they rank, are always trying to improve their patient care. For example, if someone with asthma uses a steroid inhaler for care, he or she will prevent problems of the disease.

Health plans started measuring a doctor’s asthma population in the report card to see what percentage of patients used steroid inhalers. When it first started, about 50 percent of the patients were on steroid inhalers. But now, it’s up more than 90 percent, because doctors know it’s included in the report card.

Asthmatics are now receiving the right treatment and medication, and doctors are also persistent to get them to continue treatment. Some health plans have even gone as far as to reduce co-pays for steroid inhalers so it’s easier for patients to get.

It’s a concentrated effort to take responsibility for improving patients’ awareness and care of their disease or condition. For example, a patient may be motivated to take care of his or her asthma, but if the doctor is not available, he or she becomes unmotivated.

If the cost of the medication is too expensive for the patient, he or she may be motivated but unable to get treatment because of the price. Disease management programs try to reduce the barriers to people getting good care.

Health plans try to make sure medication is affordable, physicians are motivated, and many times members receive incentives when they achieve certain quality measures.

What is the incentive for physicians to participate in quality health programs?

It typically varies between health plans — some use a lot of incentives, some use a few, and some don’t use any at all. Many incentive programs are based on quality measures — things like asthmatics getting their steroid inhalers, diabetics getting their disease under control, women getting their mammograms and pap smears, and children getting their immunizations.

If a physician has a high percentage of members getting these preventive services, plans will give them incentives or extra money for achieving that rate. For example, if a physician has a 90 percent rate of children receiving immunizations, he or she will receive an additional $175 for each child in the plan.

Dr. bruce niebylski is the associate vice president of medical affairs at Priority Health. Reach him at (248) 324-2763 or