Health savings accounts (HSAs) are a savings vehicle increasingly being used to offset health care costs and improve awareness when utilizing health care simply because there is additional skin in the game. Further, HSAs provide potential savings and accumulation of assets that work well with long-term financial planning.

“HSAs encourage us to be better consumers, plan ahead and consider the ramifications of health care, as it applies to your long-term financial plan,” says Michael Bartolini, President and CEO of First Commonwealth Insurance Agency.

“It might be a very good opportunity to save more tax-deferred and tax-free money, depending on your situation,” says Nancy Kunz, Lead Financial Planner at First Commonwealth Financial Advisors.

Smart Business spoke with Bartolini and Kunz about how health savings accounts operate and where they fit in with your financial planning.

How does an HSA work in conjunction with your health insurance?

Many people are going to a high-deductible health care plan that has premium savings as a result of the larger upfront deductible. The idea is to shift those premium savings to an HSA, which can be used to pay for unreimbursed medical expenses on a pre-tax basis. The list of applicable expenses is long and includes dental, vision, long-term care insurance premiums, home improvements for medically necessary conditions, etc.

An HSA does not have to be provided by an employer; it can be set up on an individual basis. You also are able to accumulate funds year after year, with the idea of using those dollars against future medical expenses.

The current annual contribution limits, which tend to increase, are $6,450 for a family or $3,250 for an individual. If you are over the age of 50, you are able to contribute an additional $1,000.

How does this differ from a flexible spending account?

Typically provided by employers, a flexible spending account (FSA) works on a pre-tax basis for many of the same unreimbursed medical expenses, but the money does not roll over to the following year. If the monies that are in the FSA are not spent by the end of the calendar year, they are lost. Unlike an HSA, all monies you plan to contribute to the FSA throughout the year are available as soon as you sign up, whereas only the actual contributions are available in an HSA.

How does an HSA help you better manage health care expenses?

When something hits your pocket or you have a new cost, it causes you to be more responsible and a better consumer. If you have to pay $2,000 first with the high-deductible health plan, you’re going to be more mindful of where you go for health care expenses, including which hospital or provider you choose for a procedure.

The economics of health care don’t follow traditional economics where you choose wisely based on price points and/or quality. What one provider may charge for an MRI versus what another provider charges could be very different, but you’re not likely to care if it’s a $10 or $15 copay. We don’t have the mindset that even if insurance companies are paying, so are we — one way or another.

HSAs and high-deductible health plans with their greater level of upfront deductible  pushes consumers to exert more energy to pick up the phone and find out what a procedure costs. In addition, many health insurance carrier websites are starting to populate this kind of transparent data to show provider price points.

How does an HSA fit into your overall financial plan?

An HSA can act as another retirement vehicle, especially if you start young enough to accumulate funds without having to — or choosing not to — use those dollars against medical expenses. Once you’ve reached age 65, HSA funds can be used without penalty for any purpose. An HSA also will follow you wherever you go; it’s not tied to an employer.

Many people have reached their maximum on 401(k) or IRA contributions, so depending on your age and health needs, this may be an option to look at seriously for tax benefits and long-range financial planning.

Michael Bartolini is president and CEO at First Commonwealth Insurance Agency. Reach him at (724) 349-6028 or michael.bartolini@fcfins.com.

Nancy Kunz, CFP®, ChFC®, CLU®, is lead financial planner at First Commonwealth Financial Advisors. Reach her at (412) 562-3232 or nkunz@fcbanking.com.

Insights Wealth Management  is brought to you by First Commonwealth Bank

 

 

Published in National

Effective leadership essentially involves a leader’s ability to influence the behavior of followers in pursuit of goals and objectives. Therefore, those in leadership positions must possess the knowledge, skills and abilities that will allow them to influence the behavior of others.

“Organizational leaders must focus on developing the less experienced members of their organization if they hope to preserve the longevity and sustainability of their organization. Successful organizations typically include employee development as one of their strategic goals and have detailed plans for its execution,” says Mary Ellen Harris, director of Human Resources at Kreischer Miller.

Smart Business spoke with Harris about effective succession planning.

How do you bridge the generational gap?

What constitutes strong leadership characteristics and skills remain constant. In other words, leadership skills are universal and do not differ based on the age of the potential leader. However, in order to bridge the gap between generations, organizations need to be more focused on the communication methods and development vehicles employed in an effort to develop the members of the other generations, as opposed to focusing on the content of the development program itself. Don’t get caught up in the differences that people attribute between generations. Regardless of when a person was born, human beings possess similar core needs/desires such as being treated with respect, feeling valued by peers and having the chance to achieve goals. Bridging the gap is best approached by collaborating with the target group on the design of your leadership development program.

What are the keys to an effective program?

The best approach will include a combination of both formal and informal methods of developing employees. A useful informal approach is as simple as having successful veteran leaders within your organization spend time with aspiring leaders. The veteran leaders model appropriate leadership behavior and the aspiring leaders can observe how a successful leader performs.

You can also expose aspiring leaders to successful veteran leaders from outside of your organization, or provide recommended reading assignments such as books, journal articles and other respected resources to help them take responsibility for developing themselves.

From a more formalized standpoint, the inclusion of training classes and mentoring programs are effective techniques for developing leadership skills. In addition, incorporating leadership skills in your performance appraisal system and ensuring that employees are given specific leadership development targets, feedback and assessments is essential. Shadowing programs and short-term ‘leadership’ role assignments, such as leading a project team, are also effective.

Finally, formal education through college courses and internal training classes are effective leadership development strategies.

What role does context or environment play in the creation of an effective leadership development program for the next generation?

Context is a very important factor that influences the approach to developing your next generation of leaders. A not-for-profit organization will likely approach things differently than a for-profit organization, and similarly a large organization will likely approach development efforts differently than a small organization. The type of industry will also have an impact on the approach and options available for the development of aspiring leaders. For example, some contexts may not be conducive to the use of mentoring programs, but they may be extremely effective elsewhere. Similarly, shadowing programs work in some environments but might not be productive or feasible in other environments.

There is no one specific formula for preparing your next generation of leaders. It is imperative that organizations customize their approach and include such factors as the context, industry, size of the organization, and people involved in order to design a unique combination of methods and techniques that are best suited for the organization’s specific needs, goals and objectives.

Mary Ellen Harris is the director, Human Resources at Kreischer Miller. Reach her at (215) 441-4600 or mharris@kmco.com.

 

Find news, tools and other resources related to this and other accounting and consulting issues.

 

Insights Accounting & Consulting is brought to you by Kreischer Miller

 

Published in National

Although commercial leasing and rental rates are coming back in Chicago, new tenants are still able to negotiate certain benefits from their landlords. Among these benefits are exclusivity provisions, which limit a landlord’s ability to lease space to a tenant’s competitors.

Smart Business spoke with Andrew D. Campbell, a partner at Novack and Macey LLP, about exclusivity provisions.

What is an exclusivity provision?

An exclusivity provision in a lease protects a tenant by prohibiting a landlord from leasing space to others engaged in the same line of business as the tenant. These provisions are especially common in leases for retail tenants, but they can be applied in many contexts.

There are two basic ways to create an exclusivity provision:

1. Expressly identifying the types of businesses to be excluded, or the types of goods that may not be sold in the landlord’s other spaces.

2. Creating an implied exclusivity provision.

An implied exclusivity provision arises when a lease provides that a tenant will have ‘exclusive’ rights — for example, ‘tenant shall have the exclusive right to operate a restaurant with a liquor license.’

Exclusivity provisions restrain trade — are they enforceable?

Yes, exclusivity provisions restrain trade, but this does not render them unenforceable. Courts enforce exclusivity provisions where they do not unreasonably restrain trade. If an exclusivity provision is reasonably necessary for the tenant, reasonable in duration and territorial scope, and does not unduly prejudice the interests of the public, they are generally enforceable.

But because exclusivity provisions restrain trade, some courts construe these provisions strictly.  So, if an exclusivity provision is susceptible to two reasonable interpretations, courts often will choose the interpretation that imposes the least restraint on trade.

What should an exclusivity provision say?

To avoid disputes, exclusivity provisions should be as clear and specific as possible. For instance, suppose a McDonald’s restaurant is leasing space in a mall and it wants an exclusivity provision. A provision that excludes all other ‘fast-food restaurants that sell hamburgers’ would probably be too vague. It leaves questions unanswered such as to what constitutes ‘fast food’ and what it means to ‘sell hamburgers.’

A better limitation would be to specifically describe the types of businesses to be excluded — for example, excluding ‘restaurants that do not have table service and that derive 30 percent or more of their gross sales from the sale of hamburgers.’

An even better limitation would give specific examples of restaurants to be excluded — Burger King, Wendy’s, Five Guys, etc. A catchall provision at the end of this list, such as, ‘all other similar restaurants,’ may also be useful in case a relevant competitor was inadvertently omitted from the list. Although catchall provisions lack specificity, courts generally will apply them, but only to the extent the ‘other’ restaurant is similar to those listed.

What are a tenant’s remedies if a landlord violates an exclusivity provision?

While remedies will vary based on the specific terms in the lease, and the governing state law, tenants’ remedies for violation of an exclusivity provision can include repudiating the lease — that is, walking away from any remaining lease obligations — or suing the landlord for injunctive relief and/or damages. So, a tenant may file a lawsuit seeking to preclude a competitor from opening in the landlord’s space and/or the tenant may seek monetary damages that may have resulted from the opening of the competing store.

To minimize this risk, landlords should be sure to check the exclusivity provisions in other tenants’ leases before signing a new tenant.

Andrew D. Campbell is a partner at Novack and Macey LLP. Reach him at (312) 419-6900 or acampbell@novackmacey.com.

Learn more about Novack and Macey LLP on LinkedIn.

Insights Legal Affairs is brought to you by Novack and Macey LLP.

Published in Chicago

The Deductible Program was implemented in 2009 by the Ohio Bureau of Workers’ Compensation (BWC) as another alternative for employers to control their costs while promoting workplace safety. Over the past few years, the program has been enhanced to include a small and large deductible program so that employers of different sizes, hazard groups and risk tolerance levels have options that best fit their organization.

“The Deductible Program can be financially beneficial for those employers that have a focus on their safety efforts and are able to keep their claim costs low,” says Mark MaGinn, vice president at CompManagement, Inc. “An employer should consider having a feasibility study performed by their third-party administrator prior to participating in order to analyze the deductible levels available and ensure it is the best program for their organization.”

Smart Business spoke with MaGinn about how this alternative rating program works.

How does the Deductible Program work? 

Similar to other insurance deductible plans, an employer agrees to pay the portion of a workers’ compensation claim that falls below their selected deductible level in exchange for an upfront premium discount. Claims costs are paid in full by the BWC, then the employer reimburses the BWC for the claim costs up to the selected deductible level. The employer will receive monthly invoices from the BWC until the selected deductible level is reached. All deductible bills must be paid within 28 days of the invoice date.

What deductible amounts are available to choose from?

Deductible levels range from $500 to $200,000. The small deductible program includes levels of $500, $1,000, $2,500, $5,000 and $10,000. The large deductible program includes levels of $25,000, $50,000, $100,000 and $200,000. There is no deductible level available between $10,000 and $25,000. An employer is limited to 25 percent of its annual premium if the deductible selected is less than $10,000, and 40 percent of annual premium if the deductible is $25,000 or more.

How does an employer join the Deductible Program?

An employer must complete a BWC Application for Deductible Program (U-148) to enroll in the Deductible Program, and meet eligibility requirements. The enrollment deadline for private, state-funded employers is the last business day in April for coverage beginning July 1, and for public employers it is the last business day of October for coverage beginning Jan. 1. Changes to the deductible level or withdrawal from the program are not allowed until the next policy year.

Is there any method to cap the annual out of pocket?

Employers selecting a deductible level of $25,000 or more have the option to request an annual aggregate stop-loss limit of three times the deductible, allowing them to cap the potential annual out-of-pocket expense that may arise from participating in the program.

How is the Deductible Program savings projection calculated?

Based on the deductible level chosen and the employer’s hazard group, which is based on the employer’s manual classifications and risk level, the BWC will establish the savings percent. This discount can range anywhere from 1.4 to 26 percent for small deductible options and is applied to the employer’s standard premium.

An example for a midsize service company selecting a $5,000 deductible within the small deductible program:

• Payroll — $5,000,000.

• Individual premium — $460,000.

• Deductible discount savings — $32,000.

• Premium with discount — $428,000.

• Plus estimated deductible billing — $10,000.

• Net premium — $438,000.

• Net savings — $22,000.

In addition to this savings, deductible payments under the small deductible program will not be charged to the claim, therefore possibly reducing future rate calculations. ?

Savings reflected above do not include the additional savings that can be realized by also participating in programs compatible with either the small or large deductible program, such as the Go Green or Safety Council discounts.

Mark MaGinn is vice president at CompManagement, Inc. Reach him at (800) 825-6755, ext. 65868 or mark.maginn@sedgwickcms.com.

Insights Workers’ Compensation is brought to you by CompManagement, Inc.

 

Published in Cincinnati

Virtually every business and individual borrows money at some point. Although there are many different loan types available, some universal concerns apply to every loan. Borrowers need to understand these issues and know that they may be able to limit their risk through negotiating their loan documents.

“Borrowers don’t always fully appreciate the risks they are taking when borrowing,” says Catherine A. Marriott, a member at Semanoff Ormsby Greenberg & Torchia, LLC. “Often, a default which could have been avoided can result in acceleration of a loan, putting personal and business assets at risk.”

Smart Business spoke with Marriott about what provisions counsel should review, whether or not he or she participates in the negotiations.

What are issues borrowers should consider?

Often, borrowers extend lines of credit via a simple modification document, without reviewing the documents signed when the loan was first obtained. In doing so, they run the risk of violating representations and warranties that were true when the loan was first made, but are not necessarily true when the loan is modified. Further, borrowers may not be aware of operating and financial covenants that apply to their business, and often think that because they have not had any issues in the past, there is no need for concern now. While that may be true, reviewing the initial documents is critical in avoiding defaults going forward, as circumstances and goals may have changed.

For new and existing loans, borrowers must be sure that they understand:

  • All business terms, such as the monthly payment obligation, interest rate, amortization term, prepayment penalty, and operating and financial covenants.

  • What collateral is pledged for the loan, including security interests in equipment, inventory and accounts receivable, and, most importantly, personal guarantees.

  • The remedies that the lender has upon a default, including confession of judgment for money or possession of real property, and what effect enforcement of these remedies could have on business and personal assets.

What should be considered regarding personal guarantees?

Many borrowers form entities to keep business and personal assets and liabilities separate. Notwithstanding this goal, principals of small and midsize businesses are almost always required to personally guarantee business loans, resulting in risk to personal assets. Although these individuals are aware of their personal liability, the extent of their exposure may not truly be appreciated.

How does confession of judgment work to increase borrower risk?

Confession of judgment is a powerful remedy available to commercial lenders in Pennsylvania. It allows a lender to immediately obtain a judgment against a borrower or guarantor (or both) for money or possession of mortgaged property. The money judgment will include the accelerated amount of the balance of the loan, plus interest, late fees, attorney’s fees and costs of collection. A borrower or guarantor will have the opportunity to open the judgment only after it is entered, rather than defend the matter before it becomes a judgment. An attorney can advise of the risks and consequences of confession of judgment.

When should counsel be reviewing the loan documents?

Certain loan provisions are legal in nature, so borrowers should consult with an attorney to understand the legal risks. By doing so at the outset, counsel can advise not only on whether borrowers are receiving market terms, but also can assist with modifying or eliminating provisions that are negotiable. Counsel can make sure that borrowers understand their obligations, and that the loan terms adequately address the borrowers’ needs and business goals. The later counsel gets involved, the more difficult it becomes to improve the loan terms.

Even if a borrower has never had problems with its loans or lender, things can happen. Considering what is at stake, all borrowers should strive to minimize their risk. Spending a little time and money now to protect business and personal assets in the future is invaluable.

Catherine A. Marriott is a member at Semanoff Ormsby Greenberg & Torchia, LLC. Reach her at (215) 887-0200 or cmarriott@sogtlaw.com.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC

 

Published in National

As an executive, you probably spend a lot more time thinking about economics than ergonomics. But ergonomics, the applied science of maximizing productivity by reducing employee fatigue and discomfort, may be able to help your business.

“Whether you work at a desk, a factory line or you’re driving a truck, ergonomics is something that needs to be addressed across all industries,” says Jonathan Theders, president of Clark-Theders Insurance Agency Inc.

“Often it’s related just to safety, or some people look at it as a barrier to do business — a cost we must incur to get our keyboards at the right height or our piece of machinery to where we’re not bending to use it. In all actuality, any costs incurred are far outweighed by the benefits of increased productivity, worker safety and efficiency.”

Smart Business spoke with Theders about how to find ergonomic problems in your business and solve them.

Why should businesses consider ergonomics in their workplaces?

It’s about keeping people well and preventing losses. Poor ergonomic conditions are directly tied to workplace injuries. Studies show 40 to 75 percent of recordable workplace injuries happened because of poor ergonomic conditions.

Some of the most common pains people get are in their neck and lower back, shoulders, elbows, wrists and hands, especially through repetitive motions. If employees’ desks are not set up in the proper fashion, or they are regularly bending or twisting in their regular tasks, that is what leads to injury.

Once one worker gets injured, there is a heightened risk for additional injuries. The injured employee is usually replaced with someone who is asked to perform unfamiliar duties. They are tired and overworked, which makes them more susceptible to injury. Productivity suffers, too. When people work in awkward or uncomfortable positions, they are more likely to make mistakes.

Having good ergonomic programs in place can cut workers’ compensation costs 60 to 90 percent. So the ROI can be very substantial.

How can businesses find ways to improve ergonomics in the workplace?

When you manage ergonomics correctly, you are looking at overall systems and the way procedures work. What almost always happens is you have other continuous improvements or benefits that come out of it.

Look at how people exert themselves on a daily basis, like the way they reach for things in their workspace. Focus on awkward postures, tasks or objects that create force, pressure, and keep an eye on duration and frequency. Anytime you prevent or reduce exertion, or take a process and simplify it, you are ultimately going to increase efficiency.

Encourage employees to warm-up before work — to take five minutes to stretch. That stretching can be their best ward against injuries. Teach proper lifting techniques. From an ergonomic standpoint, if something in the flow of the business is causing them to twist their bodies, the increase in productivity, speed, efficiency and accuracy from preventing it will definitely outweigh any of the costs.

How can you tell if your ergonomic improvements are working?

People often forget to monitor these changes. When you implement change or a new ergonomic procedure or piece of equipment, it’s important to follow up and check if it’s working. Use the new procedure or equipment for a few weeks or a month and talk about if it is making a difference.

However, sometimes ideas don’t work and they become a nuisance. People start to avoid the new procedures and they become part of the problem. So take the time to assess the impact. You could find that it is perfect, or you may need to make tweaks or go in a completely different direction.

Jonathan Theders is president at Clark-Theders Insurance Agency Inc. Reach him at (513) 779-2800 or jtheders@ctia.com.

Insights Business Insurance is brought to you by Clark-Theders Insurance Agency Inc.

 

 

Published in Cincinnati

A data center is the infrastructure a business uses to house its IT assets — space, power, cooling, network connectivity, wiring, etc. Depending on the business’ size, it may be a spare closet, a dedicated building or space leased at a public data center.

“The data center itself is infrastructure and doesn’t generate revenue or create differentiated business value,” says Mike Tighe, executive director, Data Products at Comcast Business. “So, the CFO frequently says, ‘Rather than utilize precious capital to build or expand a data center, there are other options including great public data centers where we can lease space.’”

Smart Business spoke with Tighe about data center best practices, including network and bandwidth considerations.

Why are data centers so important today, and what’s in store for the future?

The function of a data center is to ensure availability of IT applications and data. If employees don’t have access, they can’t be as productive and in some cases, the business can’t run. The trend to place IT assets -—applications, servers and storage — in public data centers is rapidly evolving for businesses of all sizes, either as a main data center or as part of business continuity strategy.

Over the next five years the trend of renting rather than owning IT infrastructure will accelerate as businesses utilize cloud-based infrastructure and applications. This is not just because of better economics, the ‘cloud’ enables rapid deployment and the ability to scale applications that drive better productivity.

When should you look at outsourcing a data center?

When IT becomes an important component of how you run your business, you have to ensure high availability. If, for example, you install specialized applications used for resource planning and creation of content, but the server starts going down because of power or network connectivity loss, it impacts your business’s ability to run.

Another factor is economic. As businesses make IT decisions, they may not have the capital to build or upgrade data centers, so they’ll look at alternatives.

What are some options to consider with public data centers?

By their very nature, there are more capabilities in a public data center because everyone is sharing the cost of the generator, the physical security monitoring, having multiple network providers, etc. However, some things to consider are:

  • Physical security procedures.

  • Redundancy of critical components.

  • The ability to expand as your IT infrastructure requirements increase.

  • Network for primary and backup connections. What providers have extended their network into the data center to provide connectivity and ensure access?

  • Location. Regional events including loss of power and natural disasters dictate that the backup site be located far enough from the main data center so as not to be affected by a single incident. Hurricane Sandy certainly brought home the point that a redundant data center far enough inland on a separate power grid helps ensure application availability.

How can companies build the right network?

Strong network connectivity becomes more important as IT assets are put into public data centers. Know how much your company’s bandwidth requirements are growing, and your network’s ability to scale for future requirements. On average, over the past decade, a business’s bandwidth requirements have grown around 50 percent per year. Look at network technologies that can cost-effectively scale — from 10 megabytes, an average site requirement, to one gigabyte, for example. Ethernet technology, which local-area networks are built on, is one solution that businesses are leveraging for their networks.

How do data center solutions impact a business’s bottom line?

With the economic downturn, use of company capital became a focus. Executives decided that the data center, while important, doesn’t produce any intrinsic value. And you can lease the space and preserve capital for projects that improve the bottom line. Companies can rent space by the square foot, rather than having to build another data center as IT needs expand.

Mike Tighe is a executive director, Data Products at Comcast Business. Reach him at (215) 286-5276 or michael_tighe@cable.comcast.com.

Insights Telecommunications is brought to you by Comcast Business

 

Published in National

Since infiltrating the business world, the use of social media has increased at an incredible rate. Last year, Netflix CEO Reed Hastings caused considerable commotion in the financial community when he announced via Facebook that Netflix had exceeded 1 billion viewing hours in a month for the first time. There was heavy debate as to whether it was appropriate for a high-level executive to divulge material information regarding a public entity’s success through social media.

Fast forward one year and the SEC just released a statement in April allowing companies to make announcements through social media outlets provided investors have the ability to gain access to material information at the same time. Clearly, social media has become a mainstream tool for companies and is an issue management must address.

Smart Business spoke with Matthew P. Breuer, J.D., an associate with Cendrowski Corporate Advisors, about how the use of social media can introduce risk to your company.

What are some of the major risks and issues with social media?

Social media pose risks to companies in a variety of ways. Perhaps the biggest risk stems from reputational impact on an organization, which can come from both social media interaction by the company and/or through public discussion about the organization through social media.

The potential damages of posting confidential information is another risk companies must take into account. This can be particularly difficult to prevent because the release of confidential information could be done inadvertently by an employee or by an unknown individual with insider knowledge, which makes it all the more important for a company to manage and document who will have access to key material information. An unauthorized employee speaking on the behalf of the company and libelous statements are other major risks that should not be overlooked. In addition, the risks of social media can trickle down to affect a company even at the level of an individual employee with a risk as simple as decreased employee productivity. Consequently, these risks should all be addressed by management when developing a strategic plan.

Why is social media such a difficult subject for companies to address?

Companies are increasingly using social media, but still have difficulty grasping its changing intricacies, especially as it continues to evolve at a rapid pace and revolutionize marketing and customer interaction. The difficulty of handling the identified risks of social media can also be attributed to the balancing that needs to be done to ensure an organization still reaps the benefits of social media.

Despite all of the risks, social media serves as an excellent channel for marketing contact, increasing company exposure, customer base development, increasing sales activity and as a tool for recruiting. Moreover, using social media can allow a company to gain a better understanding of customer or consumer perception of the company. Developing an approach to utilize the benefits while mitigating the risks of social media is never an easy task.

What can companies do to mitigate risk?

Mitigating the risks associated with social media begins from the top. Management must have a clear and defined social media policy already entrenched within a company. The policy should clearly outline expectations and address social media interaction deemed to be forbidden. This policy is especially imperative in smaller companies. While larger companies may be able to have positions created for this purpose or outsource the responsibilities to outside agencies, smaller companies will have less resources and time to monitor their company’s interaction with social media. In addition, management must be aware of any legal ramifications that could arise from the use of social media. Management’s strategic plan should also determine the individual(s) who will have access to a company’s social media.

Companies may never be able to eliminate all of the risks of using social media, but management having a clearly communicated plan already in place is an effective way to mitigate these risks.

Matthew P. Brewer, J.D., is an associate with Cendrowski Corporate Advisors LLC. Reach him at (866) 717-1607 or mpb@cendsel.com.

For additional information, visit Cendrowski's website.

Insights Accounting is brought to you by Cendrowski Corporate Advisors LLC.

Published in Chicago

Cloud computing is a broad term that can include hosting a website and data management. Unfortunately, small businesses are picking up many misconceptions in the marketplace about what the cloud is and what it means to be in the cloud.

“It’s not always the right solution for every business,” says Ryan Niddel, CEO of QuickLaunch Solutions. “It takes research and consultation from someone with knowledge to really understand how it can work for your business.”

Smart Business spoke with Niddel about cloud computing and its applications for small businesses.

What is the cloud?

There are two main aspects to cloud computing. There’s the data management side, which is primarily utilized to back up files — think Dropbox or iCloud. This allows anyone, anytime, anywhere to store and access files on servers that exist all over the world.

The other aspect to cloud computing is hosting services, which provides the infrastructure that allows a company to host its website entirely in the cloud. Anything from an entry-level blog to something of enterprise value could be hosted in the cloud. There’s no need for redundancy between the cloud and a dedicated server because the cloud gives you myriad hosting options in its architecture. Even if you’re on a dedicated server now, that data can be easily migrated to the cloud.

http://youtu.be/dxaNfcFkjQs

Is cloud hosting cost prohibitive?

Cloud hosting for small businesses is really the entry-level for commoditization of a website, and there are pay-as-you-go options that suit each company’s needs. While many hosting services take a one-size-fits-all approach, the pay-as-you-go model is more fluid, offering a billing program similar to those offered by utility companies where you pay for what you use. Using this model, business owners can spend 20 percent less than those using a dedicated server.

There are also deeper cost savings. For example, research has shown that cloud computing reduces IT labor by more than 50 percent. Because the cloud is extremely stable, it’s unnecessary to pay for IT support staff to ensure infrastructure stays operational. Cloud hosting saves money on maintenance, hardware, licensing and support, and is all around more efficient than using a dedicated server.

Is cloud hosting secure and reliable?

Cloud infrastructure is at least as secure and possibly more secure than the dedicated servers many companies are currently using. The hardware virtualization architecture used in cloud hosting keeps systems working through redundancy, which means utilizing multiple servers to back up clients’ data. And the transition from one environment to another happens with no perceived interruption in service. There’s no easier way to have that kind of redundancy. It’s a very fluid, secure and dynamic environment that seamlessly adapts to the needs of the client.

Is cloud computing a fad?

Amazon, Google and Apple have adopted the cloud as the new wave of Internet technology, and this new commoditization, pay-as-you-go model is being widely used. More companies are shifting to the cloud from dedicated servers, and much of the new infrastructure being developed by startup companies is in the cloud, so it’s here to stay. It’s where data management and hosting are going.

What sort of savings might a company realize by utilizing the cloud?

On average, companies can expect to realize an 80 percent reduction in their hosting bill if they can optimize their cloud correctly. Once in the cloud, a company can have its bandwidth utilization monitored to establish benchmarks that show usage during high- and low-traffic periods. Bandwidth will be monitored during a three-month settling period to determine the right services for that company’s needs and ensure it’s only paying for what it uses.

Hosting in the cloud is the wave of future. It allows companies to operate more efficiently and effectively, and keeps the bottom line healthy. It’s also the logical progression in the evolution of data management. And with a good partner in the endeavor, it can be a painless and seamless transition.

Ryan Niddel is CEO of QuickLaunch Solutions. Reach him at (419) 631-1270 or ryan@quicklaunchsolutions.com.

Insights Internet is brought to you by QuickLaunch Solutions

 

 

Published in Akron/Canton

You are insured and sustained a fire loss. The township has now told you to demolish the damaged and undamaged portions of your building, and when you re-build make sure the building is fully sprinklered. How will you pay for these additional costs?

“The additional costs to comply with an ordinance due to the loss can be substantial, such as the loss of value of an undamaged portion of the building, demolition costs and the additional costs to reconstruct a building to comply with the ordinance,” says Phil Coyne, vice president at ECBM.

Smart Business spoke with Coyne about how building ordinance or law coverage would fill this gap in your standard property insurance policy.

What is ordinance or law coverage?

Standard property ‘cause of loss’ forms have a coverage exclusion for loss or damages that occur as a direct result of enforcement of any law or ordinance regarding construction, use or repair of the property, which includes demolition. Three coverages are available to address this exclusion under the ordinance or law coverage of your property loss form:

  • Coverage A — Loss to the undamaged portion of the building. The limit should be included in the building limit.

  • Coverage B — Demolition coverage, the cost to demolish and clear the building. The amount of coverage should be determined.

  • Coverage C — Increased cost of construction, which covers the additional costs to comply with the ordinance or law. Limits should be determined.

In some cases, Coverage B and C are combined under one limit.

Why is ordinance coverage necessary?

Each state, county, township and municipality chooses to adopt and amend national codes, such as the National Fire Protection Association’s Fire Code, according to their needs and concerns. It can be an ever-changing landscape, and many times older buildings are grandfathered or exempt from these codes until a loss occurs.

The coverage should be on every insured’s wish list. It’s probably most critical for buildings that are older, or have older portions, and may have grandfathered codes or regulations for square footage and density. Many lenders have a requirement for this coverage in mortgage agreements.

What triggers the coverage?

There has to be a covered cause of loss that results in the application of a building ordinance. For instance, in 1990 a city ordinance said every new building in excess of three stories had to be sprinklered. Your building is four stories and built in 1985, so the ordinance doesn’t apply. However, the ordinance also might say if 50 percent of an older building is damaged, the entire building has to be demolished and rebuilt. If, after a large fire, you must demolish the building and put in a sprinkler system, this triggers your ordinance or law coverage.

Where might this coverage not apply?

The ordinance or law coverage will not apply if an insured was required to comply with an ordinance and chose not to. Let’s say, a township requires buildings with four or more apartment units to have hardwired smoke detectors and you decided not to install them. If you chose not to install them and then the building sustains a covered loss, the coverage won’t apply.

The three ordinance coverages all have to do with direct loss to the building or property. There’s no provision for the loss of business income. Standard business income policies exclude coverage for the increased period of restoration due to the enforcement of laws or ordinances. Therefore, you would need to endorse your policy to pick up coverage for this increased time.

Also, anything excluded from the policy would not be covered, such as flood loss. Every building ordinance and business income policy excludes any costs regarding pollution or mold and fungi.

What should you consider when buying this coverage?

Look at the current value on your building(s) and what coverage you get under your policy form because each insurance company adapts it differently. Have a thorough discussion with your broker regarding what coverage you think you need and what you can actually get. The insurance company may limit the amount of coverage, based on your premium and portfolio size.

Phil Coyne is a vice president at ECBM. Reach him at (610) 668-7100 or pcoyne@ecbm.com.

 

For more information about risk management, visit ECBM's blog.

 

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Published in National