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LOOKING BEYOND TAX-TIME: WAS TAX TIME A WAKE-UP CALL? With Frank Coker & Tom Stimson You learn a lot about your business at tax time. It’s always important to avoid paying taxes that you don’t need to pay, and that means capturing as many allowable expenses as possible. But optimizing for taxes can distort the business performance picture. It can be difficult to keep business accounting for tax purposes and financial analysis separate, but it is essential. This is one of the reasons that InfoComm, USAV and PSNI have teamed up to get a financial analytics dashboard in place for the AV industry. USAV and PSNI members can now see their current business trends, and future forecasts and can benchmark their performance with peers. Hear from Professor Frank Coker about real-world finance and steps you can take for a healthier business.
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Looking Beyond Tax-Time:Was Tax Time a Wake-Up Call?
Frank Coker, MBA, CMCCEOCoreConnex, Inc.www.coreconnex.comfrank@coreconnex.com425-454-5006
Tom Stimson, MBA, CTSCEOStimson Grouphttp://trstimson.com/tom@trstimson.com214-553-7077
Agenda• Industry highlights• Tax accounting vs.
financial analysis• Key challenges• Importance of BI• Analytics with BI• Tips
Industry Numbers
• Sales and GM looking great• What’s happening to cash?
LOB Mix Changing
• Integration is steadily gaining• Major drop in Product Sales
Survey Results
• [info from 3 questions sent out the day before the webinar]
Tax accounting vs. financial analysis
• Tax Goal – minimize tax– Increase expenses– Minimize profits
• Financial Analysis Goal – maximize profit– Recognize all obligations– Treat bonuses and incentives as profit– Show ability to generate “free cash”
Tax Accounting Actions
• Pay out profits in bonuses and incentives• Take depreciation early and often• Cash-basis for revenue• Accrual basis for some expenses• Others?
Financial Analysis Actions
• Recognize revenues and expenses when obligations incurred– e.g., spread depreciation across all months
• Match expenses to revenues• Use standard salaries and treat all
excesses as profits• Others?
Financial Management Dilemma
• Accounting systems are designed for tax compliance and operations, not analysis
• Accounting reports are static – as of a point in time
• Traditional accounting does not incorporate external data
• Budgeting not the same as goal setting and tracking
Gross Margin / COGS
• Transitioning from a Job Cost mentality to a smart cost culture
• Costing to jobs often leads to ignoring inefficient processes
• Un-captured job cost is still COGS • Common mistake: putting “shop time”
into overhead
Metrics for Management
• Key Performance Indicators (KPI) – By department or individual– Quantitative or Qualitative– Reference to benchmarks
• Pro Forma P&L statements by LOB– Don’t overthink overhead allocation
• Managers can better understand performance– If it’s quick, easy, simple
Why trend analysis?
• Trends show direction• Trends are a strong indication of future
direction• Trends are easy to compare among
peers• Combining multiple trend lines shows
where underlying problems lie – can’t be seen in standard financial data
Performance Analysis
Trends
Goals Benchmarks
Ratios
Why is financial analysis more important now?
• Technology costs and profits decreasing• Technology margins are smaller• Growing demand for products and services• Economic squeeze making buyers more cost
conscious• Workforce expectations/productivity gap• Old business processes no longer apply• Industry consolidation will favor the fittest
New Generation Analysis
Combines data from multiple sources– Internal financial data– Internal operations metrics– External market data– External market benchmarks
Result: Business Intelligence
Business Intelligence
Internal Financial Data and Operating Metrics• For each “industry standard” LOB• Combined with goals• Evaluated monthly• Integrated into management process
External Market Data and Benchmarks• Updated monthly and quarterly• Integrated into analytical reporting
External BI Problems(from most common sources)
• Survey based – not accurate• Out of date – data gathered for past year• Does not integrate financial and operating data• Not granular – can’t drill down by business
characteristics• Not dynamic – usually not available monthly or
quarterly
The “usual” problems… But InfoComm is Changing all that!
Analysis Process
• P&L’s and metrics for each LOB• Include all accrued obligations• Convert bonuses and incentives to profit• Spread annual adjustments monthly• Compare internal and external trends• Set financial performance goals• Monitor progress toward goals monthly• Share financial picture with staff
LOBs are Key!
Where is your profit coming from?
Where is your revenue coming from?
How do your LOBs compare to market?
Poll – 3 questions
The best progress occurs when the whole team is on the same page!
Let the whole team see the same picture!
The Team Process
• Need to do it every month• Minimize the time (30 min monthly)• Focus on “3 big priorities” per month• Get everyone involved
– On the same page– Finding solutions– Producing results
Getting your Team on the Same Page
https://infocomm.corelytics.com
Life on an island can be limited!
Free Financial Health Check
Your Company, Inc.
https://healthcheck.corelytics.com/pub/sign_up.aspx
For More Informationhttps://infocomm.corelytics.com
Thank You!
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