A new company is highly motivated to obtain clients, thereby, bringing in cash to support the new company's initial employee and administrative costs. However, it is important to understand that obtaining new clients at any price is not a strong financial decision. Obtaining market share while not charging enough to cover for COGS and administrative costs to support the business will eventually bankrupt the company. When determining the rate to charge for goods and/or services, it is critical to understand the direct costs, administrative costs and profitability margin you require. Taking these cost requirements into consideration over a 6 month or an annual period of time divided by the unit of measure of goods or services over the same time period will enable you to determine the average unit cost or service hour cost. This average cost coupled with a percentage increase for profitability is what should be charged for each good or service.  With a startup company it is imperative that a budget has been completed and is accurate. Please see the blog on budgeting. This will be the start-up company's guide to price its goods and services. The company should also complete a competitor pricing analysis. This will determine what your competitors are charging for the same goods and services. Unless the customer or future customer can justify that your goods or services are worth the additional cost, you will have difficulty maintaining or adding new clients. ...read more

An accounting system should not be simply used for recording and storing company transactional data. The main purpose of an accounting system is to allow the user the capability to extract and analyze the transactional information in order to make informed operational decisions. So often companies are forced into investing in a new accounting system because the current one does not work to their expectations, but the real reason for the problem is the poor design from the beginning. In addition, many companies want the software and/or modules to be customized to fit their specific personalized company processes, when in fact there are many off-the-shelf software packages out there that are designed for a specific industry and that will meet their needs. Therefore, process standardization should be the goal. If you still require customization, understand that there will be increased costs to accommodate your needs from add-on software, development, and/or maintenance. Before evaluating a new accounting system, you need to answer and prepare the following:  Are your current accounting policies and procedures documented? See April 2010 blog on Creating an Accounting Manual. The document will need to address what steps of a task are systems oriented and which steps are not. In addition, you will need to document what system data will be required and how it will be generated. Have you simplified all the existing accounting processes? See March 2010 blog on Documenting Company Processes. The last thing you want to do is create poorly designed and\or complex processes in the new accounting system. Have you documented the internal control structure of the accounting department and determined access and processing authority? See June 2010 blog on The Importance on Reviewing Internal Controls. Document the roles and responsibilities each person in the accounting department will have and what system access and authority they will be given. Make sure no person has authority to do all tasks within each area. Establishing checks and balances within each task area is critical.    Does your chart of accounts numbering sequence allow for data extraction and improved reporting capabilities? See December 2009 blog on Designing a Chart of Account Structure. Structure the chart of accounts to enable you to segment, classify and group similar accounts, create a product line and or consolidate different product lines and/or companies. Have you designed the required reports that you require from an accounting system? See January 2010 blog on Financial Reports Every Company Should Use. Understanding what information you require from an accounting system, in order to make operational decisions, will assist you in evaluating the new accounting system's capabilities. ...read more

Due to the severe economic downturn businesses are required to reduce staff and cut operating costs in order to maintain profitability. The normal place to reduce staff is in the administrative areas. However, as you will read from the article below, maintaining segregation of duties and independent annual review of vendor purchasing agreements and vendor payments is worth the time and cost. Business owners rely and put their full trust in their CFO or Controller, but sadly, without strict checks and balances the CFO or Controller could devise a scheme to steal. It is the CEO and Board of Director's responsibility to make sure internal controls are implemented, followed and reviewed on an on-going basis. Relying on the auditors to discover theft is usually unlikely.  For larger companies, it is worthwhile to have an internal audit team, but for smaller and medium sized companies it would be worthwhile to obtain an independent resource. Obtaining an assessment of the internal controls of your organization by an experienced operational accounting professional allows for an independent analysis of potential areas of concern. They will review and assess the internal controls of the finance department and recommend and, if needed, implement the changes. While this will not guarantee the discovery of collusion or individual theft, you will provide the framework to make it very difficult for a perpetrator to start or continue. Taking a proactive position now will dramatically reduce the chances of having to handle negative publicity, increased legal costs, and a material financial issue in the future. Please contact Consult Your CFO at (410) 371-0821 should your organization require an operational accounting assessment.    Ex-CFO at Md. Legal Aid charged in $1.1M scheme POSTED: 8:27 PM WED, MAY 26, 2010BY CARYN TAMBER DAILY RECORD LEGAL AFFAIRS WRITER The former chief financial officer of the Maryland Legal Aid Bureau Inc. schemed to steal over $1.1 million from the organization, federal prosecutors say. In a criminal information filed late Wednesday, the U.S. Attorney's office accuses Benjamin L. "Bennie" King Jr., CFO of Legal Aid for 30 years, until 2008, of conspiring with another man, Wendell "Sonny" Jackson. Prosecutors say the men formed an office supply company, overcharged Legal Aid and skimmed the excess money.   Legal Aid is funded by the Legal Services Corp., a congressionally created organization that allocates federal money for civil representation of the poor.   "It's like a kick in the face, a kick in the head, a kick in the gut, a kick in the teeth, all at once," said Wilhelm Joseph Jr., executive director of Legal Aid.   According to the information, King's department at Legal Aid was in charge of administering the office's office-supply purchasing agreement, prepaying for office supplies and ordering them as needed.   Around 1997, King allegedly approached Jackson, a check-cashing business owner, about starting an office supply firm to sell to Legal Aid. Jackson started a company called Baltimore Office Supply.   "Baltimore Office Supply had no warehouse, no other customers, and in fact, Wendell Jackson, a/k/a Sonny, did not even know how to create invoices," the information reads. "Defendant Benjamin Louis King, a/k/a Bennie King showed defendant Jackson where to purchase supplies and how to create invoices to Legal Aid."   Jackson allegedly submitted inflated invoices to Legal Aid, which King paid. King got about 85 percent of the skimmed money, while Jackson got 15 percent. From 2004 to 2007, the men apparently took more than $1.1 million, about a quarter of which was federal money.   Joseph said King's separation from Legal Aid in 2008 was mutual and had nothing to do with the allegations. He said no one at Legal Aid had any inkling of the scheme until October 2008, when, after King left, employees discovered the discrepancy between supplies received and money paid out.   On advice of counsel, Legal Aid reported the problem to the U.S. Attorney and the Inspector General of the Legal Services Corp.   "We discovered it, we reported it immediately and we cooperated fully," Joseph said.   Joseph said Legal Aid is audited annually, but auditors missed the problem. The office has now changed auditors. In addition, there is an all-new fiscal staff at Legal Aid, he said.   He said the money skimmed could have paid for an additional one-and-a-half staff attorneys per year for every year the scam went on.   U.S. Attorney Rod J. Rosenstein declined to comment on the case.   Assistant Federal Public Defender Joseph L. Evans, who represents Jackson, said the information makes it appear that his client and King sat down and hatched the scheme together. The reality is more complex, he said. "Mr. Jackson was initially sort of duped into this and thought initially it was legitimate," he said. "There came a time … that he realized that it wasn't OK, but he continued on nonetheless."   Evans said he believes King is being represented by Warren A. Brown. Brown did not immediately return a call for comment last night.   King's father, Benjamin L. King Sr., was the first black CPA in Maryland. He died in 2005. The younger King's siblings are accountants as well. ...read more