Despite advancing technology, businesses continue to fall victim to fraud.
But that doesn’t mean you have to just sit around waiting for an attack on your company. Instead, be proactive by taking steps to make your accounts less vulnerable to fraudulent activity.
“The more protective services and security parameters used, the harder it becomes for criminals,” says Matt Zeck, vice president and commercial sales manager for the corporate treasury management team in Fifth Third Bank’s Cincinnati, Northern Kentucky and Dayton markets. “Much like the burglar who will move past a house with an alarm system, deadbolts and guard dog, the potential fraudsters will find another business to hit if you have taken preventive steps against fraud.”
Smart Business spoke with Zeck about how to protect your business from becoming a victim of fraud.
What are the types of check fraud, and why is it difficult to thwart?
The most common types of check fraud are counterfeit checks, in which checks are reproduced via a scanner, software and printer; forged signatures, in which legitimate checks are cashed with bogus signatures; stolen check stock, in which counterfeit checks are created with technology; and altered checks, in which valid checks are chemically altered with a new payee or amount.
Despite the decline of paper check usage, there are still billions of them being passed within the financial markets, and each check provides all the information a criminal needs to commit fraud.
Each check reveals the account number, where the account is held, the range of check numbers being written, the company address and often the logo, and a copy of the authorized signer’s
With a minor investment in technology, a criminal can purchase all the supplies needed to perpetrate fraud against a business and/or personal checking account. More than 500 million checks are fraudulently passed each year, and payroll accounts are the most susceptible to check fraud because of the widespread distribution of checks.
How can you prevent check fraud?
Diligent and daily reconciliation of items, either paper or electronic, is a great defense to make sure money isn’t being fraudulently removed from accounts. Banks also provide a number of security and defense services to protect business accounts, such as Check Positive Pay, ACH blocks, filters and Positive Pay.
You can also require identification and utilize check protection services when accepting checks as payment. Some services will scan the financial networks for the basic parameters of the checking account, such as if the account is open and in good standing.
Others will actually verify account balances and/or put holds on the funds, and some will even guarantee the check funds, much like a credit card transaction. Each service involves a different level of risk.
What other steps can you take to prevent fraud from occurring in your business?
Put in place a mindset of vigilance and maintain the attributes needed to protect and defend your accounts.
These include high-quality internal controls over the use and distribution of checks, use of check stock with security features, reconciliation of account activity daily, use of bank protection services, and use of alternative financial services like ACH to reduce paper check usage.
A good majority of fraud is committed in-house, so you need to create a separation of duties for employees. No employee should be given complete control over an entire accounting process.
Separate the duties of the person running the payroll and the person who receives and distributes the payroll reports and checks. The use of online check stubs can also help you spot incorrect payments quickly.
Are businesses and banks held liable when they are the victims of check fraud?
In the past, financial institutions were fully responsible for fraud losses reported within a specified time frame. Check fraud has become a highly complex matter involving legal issues, but current Uniform Commercial Code revisions outline specific check fraud responsibilities for corporations and banks.
There is also case law now that shows companies can be held liable for fraud.
Besides check fraud, how else are businesses vulnerable?
Six billion phishing e-mails are sent each month, and about 50 percent of people respond to these attacks. Phishing is a scam where criminals send spam e-mails and direct Internet users to Web sites that look like legitimate e-commerce sites but that are controlled by thieves.
Unsuspecting users are asked to provide sensitive personal information, such as passwords, Social Security numbers, and bank account or credit card numbers, often under the guise of updating account information.
Criminals then use this information for fraudulent purposes.
Never access a site by clicking on a link from an e-mail, and legitimate businesses will never ask you to confirm sensitive information from a Web site.
matt zeck is vice president and commercial sales manager for the corporate treasury management team at Fifth Third Bank’s Cincinnati, Northern Kentucky and Dayton markets. Reach him at (513) 534-0344 or email@example.com.
The recession has many people leery about investing in a down market, but doing so via your 401(k) plan will pay off once the economy starts to turn.
“There’s a concern that people tend to shy away from contributing during down periods,” says Robert K. Thompson, first vice president and institutional trust services manager at MB Financial Bank. “When the markets are doing well, that’s when people tend to contribute because it’s positive and there’s more optimism. But the best time to buy is when the investment price is at its lowest. The beauty of a 401(k) is that you don’t have to make the decision of when to buy — it just happens on a regular basis through payroll deductions.”
Smart Business spoke with Thompson about how to maximize your 401(k) in this economy and how to become more active in your plan.
How can employers keep their employees involved in their 401(k) plans in this economy?
It’s not possible to overcommunicate the value of 401(k) plans or overeducate your participants.
You’re trying to retain the best employees, and having a 401(k) is a huge benefit because it continues to be the strongest retirement savings tool.
It’s important to continue to tell your employees why the 401(k) is valuable and why they need to contribute to it. Here’s why: When individuals purchase into these mutual funds through their 401(k), they keep contributing the same dollar amount, even as the market prices go down.
Take someone who contributes $100 per paycheck: If the prices are lower, that’s buying significantly more units or shares in each of those mutual funds. But as the prices go up over time, they end up with a higher price on more underlying shares and units. The growth is going to be significant.
What information should employers provide to employees about their plan?
Most plans provide educational materials to participants, from the very basic to the complex.
There’s never the assumption that everyone’s an investment expert, so the materials help educate participants from square one about their investments.
If you have a group of participants who have only put money into checking or savings accounts or certificates of deposit, this may be the only other place where they’re managing their money. As the plan sponsor, you have to assume that they’re not experts about investments, so you have to provide information that is understandable for them. A 401(k) provider can provide that education.
What can an employer do to convince employees of the value of participating?
Employees have to work through their own financial budget and know what they can afford to put away from paycheck to paycheck. The time value of money is the driver. You can put away relatively smaller dollar amounts the younger you are that will then accumulate to a substantial amount later on in life.
For example, if you started putting away a small amount of money when you were 25 years old, by the time you turn 65, you’ll be further ahead than someone who started saving when he or she was 35 years old. You’re going to have to put away more money as you get older to make up that difference. So start early.
That’s one of the reasons some of the rules have been changing as far as the amount of money that can be contributed to retirement plans.
For years, IRAs were limited to $2,000 per year. But if you do the math, it would have been extremely difficult, even at the highest rates that you could earn, for someone to be ready for retirement only saving at that amount.
Now, retirement plan contributions are indexed, so every year, you see a slight increase in allowable contributions. There are also catch-up provisions once you hit 50 years of age to help you reach your goal. When you run out of time, you can’t put in enough money to make up for the years that you didn’t invest.
Employees need to take responsibility and accountability for their own future. It’s like when you’re job hunting; you don’t expect somebody else to do that for you. Employees need to educate themselves and understand the value of these programs provided by their employer.
Benefits such as match provisions and profit sharing offer exceptional value to employees that you’re not going to find in any other type of retirement plan. There’s also the tax savings from 401(k) plans; for every dollar you put in, you enjoy a substantial tax benefit through reducing your overall taxable income.
robert k. Thompson is first vice president and institutional trust services manager at MB Financial Bank. Reach him at (847) 653-2390 or firstname.lastname@example.org
Despite all the dire circumstances brought about by the economic recession, there is a bright side. With their attention focused on the here and now, many competitors have taken their eyes off the future; innovation is the key to jumping ahead of those competitors. It’s a time of opportunity to encourage your employees to come up with new ideas and intellectual property to re-energize the business and stimulate the economy. While some might want to hide and ride out the recession, now is the time to think ahead and innovate.
“The heart of innovation is with entrepreneurs; they’re amazing people,” says Rick Walker, an attorney with Baker, Donelson, Bearman, Caldwell & Berkowitz PC. “They have a risk-taking mentality and are willing to think outside the box. There’s a certain spirit that lives in them and that comes to the surface in troubled times like these.”
Smart Business spoke with Walker about how to develop an innovation strategy, how to encourage innovation among employees, common problems you can run into and how to be proactive.
What is an innovation strategy and how can you develop one?
It depends upon the company, because one size does not fit all. An innovation strategy is broader and, in addition to the expected outline of the company’s commitment, can cover such things as funding — how much money the company is willing to invest in the project and the speed at which it wants to invest. It can also focus on harvesting intellectual property the company already has to generate licensing or royalty income. Sometimes there’s a lot of money sitting on a shelf that a company can harvest.
You also have to look at research and development and commercialization. You can come up with great ideas, but what’s the next step? Once you have it, are you going to devote the company’s money and time to commercializing it?
How can you encourage innovation among employees?
? Use brainstorming methods with an experienced facilitator. Start with an assessment of what you’ve done in the past and where you are in terms of innovation. One technique is to give employees a notepad and have them spend five minutes coming up with as many ideas as they can. Place the ideas in categories, display them on a wall, and determine which ideas are good and will actually work.
? Give employees permission to innovate — a time, place, environment, break from other duties, etc. You need them to be free of their day-to-day activities for a short period of time.
? Place them in a more relaxed environment, maybe even somewhere off-site, where they will be allowed to innovate, think outside the box and work with a facilitator on techniques.
? Don’t react negatively to any ideas brought up, and maybe even ask for ideas anonymously. Every idea and thought counts, so don’t penalize someone, because it may lead to the next best idea. It should be a free flow of information. The first idea may not be good, but it may be enough to get someone thinking of a great idea the third or fourth time.
? Recognize and reward employees for their innovations. There should at least be acknowledgement, and then beyond that, whatever you believe is proper for compensation. For some, it’s simply recognition, such as in a company newsletter, but some companies have inventor awards.
What are some common pitfalls in the innovation process?
Part of this is accentuated in an economic slump, because people don’t want to spend the money on patents. If you put off protecting patentable ideas, you can lose significant rights if you don’t file. It’s best to keep your idea totally confidential until you talk to an attorney and get those ideas protected in some way.
Don’t wait on these things, and move quickly because once things go public, your options are limited. It’s like toothpaste — it can’t be put back in a tube once it comes out. Clocks are running and competitors see what you’re doing. In some way, they may respect your work, but they also may use it as a brainstorm for themselves to spin off other ideas. If you’ve got a great idea, be there in the market first and protect it. Also be aware that your competitors may imitate you. This may or may not be flattering and may even be legally actionable.
How can you be proactive with innovation?
? Develop an IP strategy, similar to a business plan, and get your board of directors to buy in to it. This should be specific about your traditional forms of protection, such as patents, trademarks, copyrights and trade secrets.
? Perform an audit of what you have and what you need.
? Keep good records (both electronic and paper, where appropriate), including invention disclosures, trademark use, copyright development, etc.
? Use employee agreements to protect your confidential information. Have your employees agree to assign their inventions to the company. Also, respect the confidential information of others. You don’t want your employees disclosing things that they should not.
? Be smart with noncompete and nonsolicitation agreements so that you’re protecting the company’s confidential
Rick Walker is an attorney with Baker, Donelson, Bearman, Caldwell & Berkowitz PC. Reach him at email@example.com or (404) 223-2209.
The implementation of the Sarbanes-Oxley Act of 2002 has had a significant impact on financial reporting for public companies. Enacted by Congress in response to high profile business failures (think Enron and WorldCom), SOX holds public company executives personally responsible for financial statements and they may be criminally liable for misrepresentations or omissions.
The cost of compliance for public companies, in terms of dollars and time, can be staggering.
Privately held companies and charitable organizations are generally exempt from complying with SOX provisions. But SOX has an impact, either directly or indirectly, on every organization, including their real estate activities.
“Being SOX ready can be a competitive advantage, as public companies may look more favorably on doing business with you,” says Peter J. Licastro, senior manager of brokerage and leasing for Grant Street Associates Inc.
Smart Business spoke with Licastro about how SOX affects commercial real estate, why nonpublic companies should be concerned about SOX and best practices to adopt that can help you save money and improve your business.
How does SOX affect commercial real estate?
Real estate is often one of your most significant assets and/or expenses. Because of its significance and the fact that many business operations are becoming decentralized, either nationally or globally, real estate can present a variety of risk factors, including:
n Substantial differences in the book value versus market value of owned properties
n The existence of structured lease or ‘off-balance sheet’ transactions, such as synthetic leases
n Commitments and risks embedded in, or associated with, leases. This could include substantial rent bumps, critical notification dates for lease renewal or termination rights, leased space that is not occupied and may be subject to accelerated loss recognition of tenant improvements, as well as the liability for the remaining lease payments.
n Property with known or latent environmental issues
Why should nonpublic companies be concerned about SOX?
SOX is rooted in disclosure, transparency, risk identification and internal controls. The ripple effect of SOX can range from standards for the physical security of data centers to the accounting treatment of surplus property or sublease space.
For public companies, compliance with Section 404 Management Assessment of Internal Controls is an organizational mandate as they must certify that adequate internal controls govern their operations. If the activities of a service provider are critical to the information system of the company in the creation of financial statements or disclosures, then validation of the service provider’s internal controls may be necessary. Depending on the circumstances, this may be accomplished by obtaining a Service Auditors’ Report from the service provider, performed under an auditing standard known as SAS 70.
Public companies are asking their nonpublic providers of outsourced services, such as facility management and accounting, lease administration and project management, to implement controls similar to those required of the public company. This can raise a number of issues though, such as whether or not your vendor is contractually required to provide SAS 70 type assurance.
What best practices can private businesses or nonprofit organizations adopt for leased or owned real estate?
Private organizations are in a unique and enviable position with regard to SOX, because they can cherry-pick provisions that have the greatest benefit at minimum cost. While outsourcing services and automating processes can help improve effectiveness and reduce costs, best practices can also include basic initiatives, such as promoting a company-wide focus on better documentation of real estate activities and decisions.
If you are decentralized, consider centralizing higher risk decisions, such as purchasing or leasing property and construction or renovation projects in a more standardized environment.
Develop and maintain a complete listing of all properties, owned or leased, service contracts and vendors. Utilize checklists for property acquisitions and dispositions, bidding out and managing construction or renovation projects.
Create a lease administration system by carefully abstracting leases for critical dates, terms and financial commitments. Depending on the volume, a database can be used to generate reports of lease expirations, and dashboard metrics such as rent expense as a percentage of business unit revenue.
How can you start implementing these best practices?
Getting started is easy. First, make sure you have fully executed leases on file, including all exhibits and amendments, not just the faxed signature page. Are there leases with onerous automatic renewal provisions lurking or with critical notification deadlines in order to preserve lease renewal or termination rights? Surprises are a bad thing when it comes to SOX and real estate.
Peter J. Licastro is senior manager of brokerage and leasing at Grant Street Associates Inc. Licastro advises tenants and landlords, owner/users and investors. Reach him at (412) 391-2635 or firstname.lastname@example.org. Grant Street Associates Inc. is a full-service commercial real estate firm and a member of the Cushman & Wakefield Alliance.
And in these tough economic times, you want to make sure every penny is spent wisely. By using such tools as global consolidation of data and actionable reporting, you can manage your business more wisely, control expenses and even make some budget cuts to help your bottom line.
“Travel is usually your second- to third-largest expense in business,” says Todd Stoneman, vice president of information technology at Professional Travel Inc. “In these economic times, companies want to be able to move and change their business. Trimming budgets and growing smartly can help you control and change that.”
Smart Business spoke with Stoneman about how to effectively use global consolidation of data, how to create actionable reporting in a real-time environment, and how these tools can help you cut your travel budget and save money.
What is global consolidation of data?
It’s a collection of data from all parts of the world. Companies look at their overall spend and business model for the world, put it all together, and then create reports based on this accumulation.
You look at the vendors you’re using, such as hotel, air or car. You also look at how much money you’re spending and where you’re flying to. You can also look at your different departments and get an idea of where they’re traveling to, what the money is being spent on and if it’s on budget. It’s just an easier way of controlling money and employees.
Are more companies doing this now that global business is becoming more common?
It’s coming more into its own now. It’s something a lot of companies looked at a number of years back, but there were so many obstacles and pitfalls in it, such as culture and regional differences. It still has its quirks, but now travel management companies are able to work across the globe pretty well and get the necessary data to give companies some meaningful picture of their business.
Why is it useful to use a travel management company for this process instead of doing it on your own?
Your turn around time will be shorter. Travel management companies can report weekly, actually even daily, on this information. If you do it internally, a lot of times the data isn’t collected until long after the money is spent, so you don’t have an opportunity to change habits until after the fact. Companies also don’t have the resources and relationships to collect this data like travel management companies do. It can also be expensive to do it yourself.
How do you create actionable reporting?
Actionable reporting is being able to react to situations or spending patterns before the money is actually spent and then change habits before it continues. With actionable reporting, you can tell the employee why it’s important to change and what he or she needs to do to avoid that. It’s empowering you to change your business.
More importantly, companies can look at trimming money out of their travel budgets. You can look at things such as changing your business class booking from a 10-hour window to a 12-hour window to save money. You can also look at moving travelers from hotels such as the Marriotts, Sheratons and Hyatts to the Hamptons and Courtyards.
If a traveler finishes early, he or she could change his or her flight and head home sooner. The traveler may see it and say, ‘It’s only $200,’ but the company might say, ‘That’s $1 million a year; we need to change this behavior.’
You can drill down to the point where you know exactly who’s doing this and who to go to make these changes happen, and that’s where it becomes an actionable item. You can either have the department head handle it or target the offenders directly. Travel management companies can also send e-mails directly to travelers notifying them of the change. It’s more effective than if companies send out a blanket statement themselves that says: ‘Please do this.’
What steps could a business take to begin using these tools?
First, you’ve got to look at your footprint globally and your different locations. The travel management company then finds partners in those markets to complete contracts with. Management companies also work with your accounting department or chief financial officer to understand how they want it structured when the data comes back, because things can change between here and North America.
Todd Stoneman is vice president of information technology at Professional Travel Inc. Reach him at email@example.com or (440) 734-8800 x4050.
When David B. O’Maley joined Ohio National Financial Services Inc. 15 years ago, the company was viewed as a regional enterprise in an industry that hadn’t seen a lot of growth.
“The challenge became one of achieving a reasonable enough scale and financial dimension to be considered an enterprise that could survive for the long term,” says the chairman, president and CEO. “The forces that were at play caused us to think differently about where the company needed to be in order to remain a viable independent enterprise over the longer term.”
And that wasn’t easy for a company that was already more than 80 years old at that point. Now, as the insurance and financial services company celebrates its 100th anniversary, O’Maley says it is better positioned for the future, including the economic challenges the industry has faced in recent years.
“The challenge for us was how to reassess the company and recraft it so that it could achieve growth sufficient enough to let all of those things happen,” he says.
The solution was a new vision that would help keep the company focused and invite feedback from its 850 employees.
Set a vision
O’Maley’s first step was to develop a vision that positioned the company for future growth and that the management team could accept and embrace.
“If you don’t have a sense of where you want to go, you’re liable to end up somewhere else,” he says. “We started with setting forth and trying to articulate a vision (that) was clear and understandable and upon which we could build some strategies that were growth-focused.”
He had an off-site meeting with a group of senior managers to talk about the company’s current position, its strengths and weaknesses, and the environment it was operating in.
O’Maley says you have to be open during that process and be willing to admit that you’re not great at everything.
“You do a hard self-examination and lay it out through a matrix process, talking about characteristics and self-evaluate,” he says. “There are some things we do well, and some we’re not good at. You do a strength, weaknesses, opportunities and threats analysis and separate those into tiers.”
While O’Maley says the SWOT process can be tedious, you come out of it with a vision that is clear, actionable and consistent.
“Our vision acknowledges that we can’t do everything,” he says. “The SWOT helped us examine what we do well and how we can do it better while reminding us of the areas where we have room for improvement.”
Once the vision was developed, O’Maley set out to communicate it to employees, which he says was a labor-intensive process. He tried to keep a sense of transparency when communicating the vision, from starting the process by including senior management down to giving employees opportunity for input.
“You have to have lots of sessions where you give people an opportunity to talk about the business and the company, marketplace and share back and forth so there is a real understanding communicated,” he says.
He discussed the vision in officer meetings and used an outside consultant to meet with all employees in small group sessions to give them an opportunity to be participants in the process.
“This gave everyone a chance to be involved, express themselves and gain an understanding through the communication process,” O’Maley says. “It took a lot of time and effort, but it paid off well.”
The vision statement has been revised twice since the original one was written in 1994 to accommodate changes at the company. When a new vision was developed in 2005, O’Maley had a special meeting where the primary focus was how Ohio National could build a culture of value and performance into its second century of business.
“The relationship with our associates is so important that it’s part of the vision; we want to make it clear,” he says. “The vision says, ‘Build strong business relationships with our sales, home office and distribution associates, recognizing that our mutual success is inseparable, and promote an environment which encourages excellence in performance and results.’”
O’Maley says the vision development process at Ohio National was successful because it was specific to the company. You need to find a process that will work best for your company and employees.
“Those processes were both organized and deliberate, and while there are definitely some object lessons that others could take from our model, each organization is so different,” he says. “There is no one, single strategy that works for everyone. Each organization has to develop its own unique positioning. There’s no cookie-cutter approach that will work.”
One of the keys to growth is staying focused on the vision you create and what you do best as a company.
“We need to stay committed to our strategy and not try to be all things to all people, and take our strengths and exploit them effectively,” he says. “It’s better that we tell you we’re unable to address your need than take on something that we can’t handle and isn’t in our scope of the business. We’re very good in businesses we’re in and successful in staying out of the businesses that are not consistent with our strengths.
“There are companies that are successful and have built tremendous brand recognition but blew it by venturing off into some exotic area that’s not within their framework.”
Use your vision to stay focused. It involves continually questioning yourself before you take any action. Ask yourself if the action is consistent with your vision, strategy and value system and if it’s going to move you forward or will eventually move you further away from the strategy.
O’Maley says there are times when you will be tempted to step outside the box and try something new. There have been several times when he has been approached to develop a product for a client, but in the end, it wouldn’t have been consistent with Ohio National’s core strategy.
“If we don’t do it well, we won’t be serving anybody well,” he says.
Mistakes can be made if you try to step outside what you do best and venture down a different road.
“You can’t do everything,” O’Maley says. “What you want to do is do what you know how to do best and do it well. That is part and parcel of focusing on your strategy.”
Having a good vision in place to start with makes it easier to stay focused in the long run.
“When you have a clear, simply stated vision in place, it enables you to stay focused and execute day after day, week after week and year after year,” he says.
Connect with employees
When it comes to growth, O’Maley isn’t shy to seek out employee feedback and advice and use it in developing new ideas.
Early on he developed the “Hey David” card. He invited any employee to write him with ideas, concerns or complaints that he or she may have.
“My commitment was that if you wrote me and signed your name, I would get back to you, and I answered every one,” O’Maley says.
He says people were hesitant at first to open up to him. He talked about the card every chance he got, but even with all the discussions, people were still leery about sharing.
w people will try it out, and there are a couple of things you have to do,” he says. “You have to reply back. You have to respect their concerns that they might have — that they might be going over their supervisor’s head, they might be raising an issue that management doesn’t want to hear about, and they need to feel comfortable that there’s no negative backlash that comes their way as a result of opening up and sharing.”
Most of O’Maley’s follow-up was on the phone or through written communication, but occasionally he went out and met with the employee in person. Later on, as e-mail started to become more popular, he started following up with e-mails. It doesn’t matter which way you follow up though; it’s just important that you do it.
“Opening the discussion is a big pro for communication, but if you don’t close the circle and follow back up with associates, you undo all the good,” O’Maley says. “You have to be frank and timely. By doing so and being straightforward, we’ve been able to execute on associate ideas and have delivered with programs.”
If O’Maley receives a question that he is unable to answer, he copies a member of the management team on the response to the associate and lets them know that this person would be better able to help him or her with the concern.
As more people started sharing and realizing that O’Maley was paying attention to them, more and more employees were willing to come forward with comments or ideas. This helped build trust between management and employees.
One example of where an employee suggestion made a difference was in Ohio National’s on-site café. Employees receive a 10 percent discount if they use their ID badge debit card. When the price of gas went up over the summer, O’Maley decided to increase the employee discount from 10 to 30 percent. If employees went out to eat lunch, they would be spending more on the meal and gas than if they decided to eat in the cafeteria because of the higher discount.
“It was well received,” he says. “It showed that management was thinking about them as much as management was thinking about the business.”
You need to remain open in order to build that trust and always deliver on your promises.
“Don’t promise things until you’re pretty confident you can deliver them,” O’Maley says. “If you treat people that way, it will come back. Then it just takes time. Trust is not something you get in a week or with a speech or a single event, it just takes time.”
O’Maley has certainly accomplished what he set out to do 15 years ago. The company has been in the 11 to 14 percent range for growth in metrics such as assets, revenue, earnings, capital and equity during that time period. It recently posted 2008 total GAAP revenue of $1.24 billion, an increase of 5.5 percent from 2007.
He says to keep the business focused and on course, it’s important to view your role as more of a teacher instead of a dictator.
“Together we can accomplish the things we set out to do,” O’Maley says. “I see myself as not just the leader who helps set the vision but also as a teacher who guides and directs our associates and stakeholders through the process.”
How to reach: Ohio National Financial Services Inc., (513) 794-6100 or www.ohionational.com
The rising number of unemployedAmericans due to the recession isresulting in more individuals beingeligible for Consolidated Omnibus BudgetReconciliation Act (COBRA) insurance.
COBRA allows those who leave employment to continue to receive health coverage for generally up to 18 months or untilthey become entitled to other coverage.COBRA participants are required to paythe premium cost that the employer wasproviding for them during their employment, which usually is higher than whatthey were paying when employed.
“The problem is, you are without a joband income — maybe you are receivingunemployment — and now you’re beingasked to pay a substantial premium just tokeep health insurance for yourself andyour family,” says Dale R. Vlasek, memberof the business department and chair ofthe employee benefits practice for McDonald Hopkins LLC.
Smart Business spoke with Vlasek andAdrienne Stemen, an associate in the business department at McDonald HopkinsLLC, about how the American Recoveryand Reinvestment Act is affecting COBRAand how you can prepare for thesechanges.
How has the American Recovery andReinvestment Act affected COBRA?
It will help people who were laid offbetween Sept. 1, 2008, and Dec. 31, 2009,by subsidizing the premium payments theindividual makes for COBRA. The subsidyis up to 65 percent, so the employee willonly pay 35 percent. Before, they mayhave paid up to 102 percent of the premium. The subsidy will last up to ninemonths, and it’s only available for thosemaking less than $145,000 a year for anindividual or $290,000 as a couple.
Previously, when a person left employment, they had 60 days to sign up forCOBRA. The Act makes COBRA availableto anyone laid off from September 2008going forward, so you may have people inthat period who elected not to getCOBRA, as well as those who startedCOBRA but stopped paying because thepremiums were too high. The Act states that those people get a second chance toelect COBRA with the subsidy. TheCOBRA period is still measured from thedate it would have started had the personelected it when their employment ended.
How can someone find out if he or she is eligible for COBRA?
Employers must notify all formeremployees, not just the ones who mightbe eligible. This is only for involuntary terminations, so people who resigned voluntarily are not eligible. The notice informing former employees that they might beeligible is due to be sent by mid-April.
How do you determine if an employee wasinvoluntarily terminated?
The act doesn’t define involuntary termination. The intent of the act is for the layoffs that have occurred or will be occurring during the recession. There are some‘gray’ areas concerning whether a formeremployee qualifies as an involuntary termination, such as a person who has negotiated his or her termination and as part ofa severance arrangement agreed to quit sohis or her record looks better.
How can you prepare for these changes?
You need to identify former employeeswho were let go, because they must benotified. Work with your payroll providersto figure out what kind of records you needto keep. Technically, the government isproviding the subsidy but they are not writing the first checks. Instead, the employeepays 35 percent of the premiums, theemployer pays the remainder of the premium, and then the government reimbursesthe employer through a payroll tax credit.
What are some problems with thesechanges?
Employees who were terminated andelected COBRA from September throughJanuary might think they will receive acheck for those premium payments, butthey will not. It is important to point outthat the subsidy is only applied for COBRApremiums for March 2009 and later.
The former employee is only eligible forthe subsidy for nine months or until he orshe becomes eligible for another healthplan or Medicare. Simply being eligibledoesn’t mean you are actually covered, itjust means it is available. People could losethe subsidy legally, and if they are not entitled to the subsidy because they haveobtained other coverage, or their income istoo high, they may pay a penalty when theyfile their tax returns. The penalty is 110 percent of the subsidy received while eligiblefor other coverage and 100 percent of theamount if they find out at tax time that theymade too much money to participate.
What are the benefits of these changes?
More affordable health care is the bestbenefit of this change in COBRA. In somesituations, given the level of subsidy thatmay be provided, individuals might payless for health care after losing their jobsthan they did while they were working.
DALE R. VLASEK is a member of the business department and chair of the employee benefits practice at McDonald Hopkins LLC.Reach him at (216) 348-5452 or firstname.lastname@example.org. ADRIENNE STEMEN is an associate in the business department atMcDonald Hopkins LLC. Reach her at (216) 348-5760 or email@example.com.
Finding a good bank to partner within this market can be tough. Youneed to find one that is the right fitand can support you with the necessarytools to be successful. Current economic conditions have forced banks to reexamine their credit practices.
“Business owners need to be more prudent in choosing their banks,” saysStephen Ball, first vice president andhead of business banking at MBFinancial Bank. “If you choose a bankthat is undergoing financial difficulty,the rules may change on you in the shortterm. As recently as 12 to 18 months ago,bank liquidity and balance sheet positionallowed more aggressive lending. It’s adifferent story today with many banks.”
Smart Business spoke with Ball aboutthe qualities you should look for in abank because using the right bank cansave you time and money.
What qualities should you look for in abank?
- Liquidity, ability to lend and absorb shifts in the balance sheet
- Balance sheet strength
- Loan loss reserve
- Willingness and ability to extend credit
- Consistency of loan policy
- Commitment of the bank to your business/market
How can you find these qualities in a bank?
Liquidity is simply how much money abank has to lend. Their capacity to lenddepends in large part on their capitalbase and the mix of their funding.Furthermore, if a bank has a number oftroubled assets (including loans), itaffects its capital base, and thus impairsits ability to lend. A bank that is wellfunded will have a mix of deposits fromvarious sources of both core and wholesale deposits. Additionally, core depositswill account for more than 50 percent ofthe total liabilities.
Companies should verify that theirbank has comparatively strong performing loans and deposit ratios, as well.
Every bank has troubled loans. Butbecause of today’s economic conditions,there are more of these than at othertimes in the business cycle. To addressthese loans, banks create a loan lossreserve. A proper loan loss reserve provides an accurate picture of the bank’sstrength and durability. A higher loanloss reserve doesn’t necessarily meanthat a bank has more bad debts; it couldmean it’s being conservative. Tier 2 capital calculations include loan lossreserves in capital; the more capital, thegreater flexibility a bank has duringtimes of stress. It gives them a highercapacity to lend and support customers.
In addition, you want a bank that stayscommitted to its market and your business. If you are with a bank that onlydoes business banking during goodtimes, it will not have the appetite orability to support you during a downperiod.
You almost have to apply to a bank tolearn about its willingness and ability toextend credit. You can ask your loan officer about advance rates and monitoring,which will give you an idea of how thebank is lending, but you won’t know about its willingness until you ask.However, just because a bank approvesyour loan request doesn’t mean thatamount of debt is correct for your business. Ask yourself, do I have the capacity to handle that debt? Did my bankerperform an appropriate amount of duediligence to understand my business? Ifyou overleverage yourself, you may notbe able to move your relationship shouldyou want to, or worse, your businesscould suffer. Now, more than ever, youneed a bank that understands your business and can provide appropriate commentary on what leverage might be rightfor your business. A bank that is willingto lend but is just an order taker may notbe providing you with the best service.
What questions should you ask your bankabout the consistency of its loan policy?
- Has your loan policy changed recently and how?
- What are your collateral advance rates?
- What is your approval process?
Some banks have loan committees,while others can have officers sign offbased on dollar amounts. If your loanofficer is the only one seeing andapproving the deal, you run the riskthat no one else in the bank will agreeshould he or she leave.
- Check with other bank customers for references, just like any key business partnership.
Most banks have tightened their creditpolicy in recent months. This is not necessarily to reduce lending but to take acloser look at the businesses they lendto. Lending a business too much moneycan be more detrimental than not lending it enough.
STEPHEN BALL is first vice president of business banking at MB Financial Bank. Reach him at firstname.lastname@example.org or(847) 653-1197.
You always want to find the perfect candidate when you’re hiring. But sifting through stacks of applications and sitting through hours of interviews can be tiring and can take you away from time spent running your business.
“If you choose not to use a professional recruiter, both parties are going into the job relationship blindly,” says M.J. Helms, director of operations for The Ashton Group. “The company may not be the right cultural fit for the candidate, because the person did not know anything about the company, other than what they were told in the interview. Or the candidate does not meet the company’s expectation, because the company did not have time to do references or skills testing.”
Smart Business spoke with Helms about what to look for when using a professional recruiter, how the recruiter can help both you and your potential employees, and when you should consider using a recruiter.
What should you look for in a professional recruiter?
Trust. A professional who is experienced in the staffing industry knows how to listen and cares about his or her company’s reputation. Good recruiters typically work off of referrals instead of completely relying on a job site for a candidate pool. They can also provide you with both client and candidate references for you to check on their level of service provided.
When should you consider using a recruiter?
If you have a human resources department, oftentimes you can use a recruiter for more difficult positions to fill. Other companies will use a recruiter for more executive-level positions that are more time-consuming searches. From a candidate’s point of view, looking for work is work. It can be time-consuming and frustrating not getting your resume to the decision-makers. A good recruiter should have that relationship established with the right people. Also, when you are currently employed and looking to make a change or you know layoffs in your company are just a matter of time, a recruiter can be out there looking for you while you are still working and making an income.
What is the typical cost of using a recruiter?
It can vary depending on where you are located, what kind of position you are recruiting for and if the client’s needs are full-time, direct hire or contract employment. The average recruiting fee in the U.S. is around $15,000, and it is not uncommon for the client to want some sort of guarantee on the candidates placed. This is a big cost savings, because if the placement is not the right fit, the client would typically get a refund or replacement at no charge, if the recruiter had already been paid in full. Most agencies will do a contingency search for a company. The recruiter searches for qualified candidates and allows the client to interview them without incurring a fee. The typical fee is 20 percent of a candidate’s annual salary. This fee can change depending on the level of difficulty and customization of the search. Some companies will pay a retainer fee in advance to ensure that the recruiter has its complete attention on their assignment, in cases where the position to be filled is critical.
The second most common fee is temp-to-hire or contract-to-hire. For contractors, the mark-up percentage is charged on top of their hourly pay rate. When the company decides to convert the contractor to a full-time employee determines if there would be a buyout fee. This option is a money saver — the company pays one flat hourly rate while the contractor is working there on a temporary basis, and the company is not responsible for benefits, unemployment, payroll taxes or workers’ comp insurance. It can choose to let the person go at anytime.
What are the advantages for clients and candidates in using a recruiter?
There are several advantages, one of which is saving time. By using a recruiter, the client will have only qualified candidates to consider interviewing for its job position based on specific fact-finding questions. This cuts down on clients spending time sifting through a pile of resumes, wasting time that they could be using to do their jobs, thus increasing profitability. Working with a recruiter who is experienced and has a pulse on market trends helps a client position itself to attract the best candidates. A good recruiter will put a guarantee on the placement for 90 days. If the hired candidate is not a fit within that time frame, he or she will be replaced or the fee will be refunded based on time worked.
When candidates use a recruiter, they can explain what kind of job they want and what type of company or industry they prefer, not wasting their own time on bad interviews or being over- or underqualified. A good recruiter can help you find jobs that you might otherwise not know about. A recruiter should know the hiring manager and can shed light on specific information for your interview that will help you prepare and stand out from others who are interviewing for the same job. Lastly, a recruiter understands the importance of timing.
M.J. HELMS is the director of operations for The Ashton Group. Reach her at (706) 636-3343 or email@example.com.
Adam Mopsick says that there’s always the risk that when you’re hiring, you may hire the wrong person.
And there’s a lot of lost time when you do that, so you need to get it right the first time.
“If you have the wrong person in place, you may end up spending too much of your time looking over their shoulder; it’s not productive for everybody involved in that process,” says the founder and president of Amicon Development Group.
“The more that an individual can handle on their own, it increases their value to the company because it allows for everyone else to go out and do other things.”
Mopsick has gotten the right 35 employees in place at his construction management and development company, and doing so has helped Amicon reach 2007 revenue of $70 million.
Smart Business spoke with Mopsick about how to get the right people at your company and how to create a level of trust with them.
Let the job candidate do most of
I’ve learned through experience to try and let the candidates do most of the talking if possible. Too often, if you tend to lead them or talk too much about yourself, the company or what the job requires, they tend to regurgitate what they think you want to hear.
It’s better to let them talk about themselves, their experiences and their own values, and you’d be surprised what kind of information you can get out of someone speaking on a topic that’s unrelated to their own work experience. Sometimes it gets quiet; you need to let them kind of go.
We look for two main qualities, and that’s desire and intelligence. We’ll take that over experience any day, because they’ll gain experience over time, but they’ll never gain the motivation or intelligence to do it.
It’s somebody who gets out of bed in the morning, and they have a fire burning, and they want to go out and push. They may not have the experience that somebody else has, but ultimately, they’re going to be the ones who get things done.
It’s not always easy to sift through and talk to find it out in an interview. All you can do is go by your own judgment, maybe bring them back for second interviews, talk to them about other topics, and check resumes and references. If someone doesn’t get those points across during an interview, then they’re not going to be the right person.
Set up a framework that’s more goal-oriented. Rather than say, ‘I want you to finish one, two, three points today,’ try to set up something where they have to go through all those points to get to the end result, because ultimately, it’s the end, it’s the goal that’s the most important.
It may take them more steps than it might have taken you or another manager, but the key is to allow them to get there and allow them to get there by themselves. It’s just as easy for me to pick up the phone and call someone they may need to call to get something accomplished, but they need to go through the process to understand and develop the shortcuts on their own for next time.
The key is to have the right people in the right position. If you have the right people, ultimately they’ll figure out a way to get it done. Develop templates and things that they can’t vary from — certain company standards and systems, standard schedules, standard purchase orders, a framework that they can work within, so that you have some companywide standards, but at least there’s room for variation based on individual ability within the framework.
Recognize your employees.
Every employee is different, and that’s one of the hardest things for people to learn in a management position is that everyone needs to be managed differently. Some people are driven more by financial goals, some are driven more by a pat on the back.
It’s the hardest thing as a manager to understand what it takes to drive certain individuals and what it takes to get the most out of each individual you’re managing. I don’t think that’s something that you’re born with as a manager, that’s something that you develop over time and experience in how to manage your staff.
You may make mistakes with certain people, and you have to know how to correct them. Having to be in touch with individuals’ moods, their morale and how they’re feeling, it’s a bit challenging at times. You need to watch them and make sure they’re on top of it, because it’s easy for things to get out of control.
For some people, it’s important for them to be recognized by their peers, and for others who see that, it’s something for them to strive to. It’s something as simple as a certain method that somebody may have employed to do something well that you can maybe show other people in the company that there are other ways to do things and other ways for them to be successful.
Develop a sense of trust.
It starts with a level of respect and friendship and talking to them on a personal level, going out to lunch, talking about individual things that are going on in their life. It can’t be just about work all the time.
Once you get to know someone on a personal level, you’ll have a better understanding of when they’re stressed or uneasy about certain things and you get a better sense of what they’re going to accomplish.
HOW TO REACH: Amicon Development Group, (305) 573-8030 or www.amicondevelopment.com