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Ratio Analysis is a Key Metric

One important tool that can help sort out the data you need is “ratio analysis.” Ratio analysis looks at the relationships between key numbers on a company’s financial statements. After the ratios are calculated, they can be compared to industry standards — and the company’s past results, projections, and goals — to highlight trends and identify strengths and weaknesses. The bottom line is that ratio analysis can give you valuable feedback which, in turn, may yield profitable results for your business.

Higher Sales May Equal Higher Profits

Recent increases in a company’s sales’ figures may be impressive when viewed in isolation. However, business owners must take measures to ensure that the additional revenues are being translated into greater profits. Net profit margin measures the proportion of each sales dollar that represents a profit, after taking into account all expenses. So, if a company’s margins aren’t keeping pace during sales growth periods, a thorough review of overhead and other expenses may be in order.

Focus on Accounts Receivable

Commonly, companies extend credit to their customers. As a result, a firm needs to keep a close watch on outstanding accounts so that slow payers can be contacted about past due amounts. From a broader view, knowing the company’s average collection period would be insightful. In general, the faster a company can collect money from its customers, the better its cash flow will be. However, management should also be aware that, if credit and collection policies are too restrictive, potential customers may decide to take their business elsewhere.

Efficiently Manage Inventory

Inventory turnover measures the speed at which inventories are sold. A slow turnover ratio relative to industry standards may indicate that stock levels are excessive. The excess money tied up in inventories could be used for other purposes. Or it could be that inventories simply aren’t moving, and that could also lead to cash flow issues. In contrast, a high turnover ratio is usually a good sign, unless inventory levels aren’t sufficient to fulfill customer orders in a timely manner.

Look to Us

We can help you calculate and review the financial analysis ratios that are meaningful to your business. Contact our firm today for more details.

Background

The law’s goal is to provide covered individuals with a document that accurately describes the health plan’s benefits and coverage. The SBC must be presented in clear language and in a uniform format. It must contain a “uniform glossary” of terms used in the SBC. The material should be written in such a manner that consumers will be better able to understand their coverage and to compare coverage options.

SBC Basics

Certain information must be contained in an SBC, including:

• Key benefits and coverage
• Costs to the participants
• List of excluded services
• Other significant conditions or limitations
• “Covered examples”
• List of definitions (the official “uniform glossary”) of commonly used health insurance terms

Guidance Issued

In an effort to clear up many questions raised about the final regulations subsequent to their issuance, the government recently released 24 Frequently Asked Questions. The FAQs cover various areas designed to promote operational efficiencies and ensure a plan’s successful implementation of the final regulations, including:

• Matters relating to plan coverage tiers
• COBRA beneficiaries
• SBC trigger events for self- insured plans
• Variations in the SBC’s form or content
• Carve-out arrangements
• The requirement to provide an SBC within seven business days.

When the SBC Must Be Provided

In general, participants who enroll (or re-enroll) in group health plans (as well as other employer-provided benefits) make their elections during the employer’s “open enrollment” period. The guidance provides that group health plans must generally provide plan participants SBCs beginning on the first day of the open enrollment period that begins on or after September 23, 2012. For individuals who enroll in an employer’s group health plan through a process other than open enrollment, the SBC must be provided beginning on the first day of the first plan year that begins on or after September 23, 2012.

Example 1: Company XYZ’s open enrollment period begins on October 1, 2012. Under the regulations, XYZ must provide plan participants with SBCs beginning no later than October 1, 2012.

Example 2: ABC Corporation’s plan year is based on a calendar year. Jane Doe is hired on November 18, 2012. ABC must provide Jane Doe with an SBC by January 1, 2013.

For those who have individual health plan coverage — as opposed to group coverage — disclosures must be provided by September 23, 2012. Issuers must also provide SBCs to group health plans by the same September 23, 2012, deadline.

Health plans are also required to provide an SBC at least 60 days before the effective date of any changes in plan coverage. Furthermore, when a consumer is “shopping” for a plan and is seeking pertinent information, an SBC must be provided upon request.

Penalty Grace Period

The DOL, EBSA, and HHS will not impose any penalties on plans and issuers in the first year of applicability, so long as they are working diligently and in good faith to provide the required SBC content in line with the regulation’s requirements.

If you have any questions relating to the Affordable Care Act’s requirements for your organization’s health benefit plans, let us be of assistance.

Background

As part of an economic stimulus law, the Social Security payroll tax for 2011 was reduced by two percentage points, from 6.2% to 4.2%. A similar reduction was applied to the self-employment tax for self-employed individuals. At the end of last year, those payroll and self-employment tax cuts were extended for two months, through February 2012.

Payroll Tax Cut Extended Through 2012

For the balance of 2012 only, employees will continue to pay a 4.2% Social Security tax rate on wages up to $110,100 (the 2012 Social Security Wage Base). Similarly, the Act reduces the tax rate for the Social Security portion of self-employment tax on self-employment net earnings up to $110,100.

Therefore, the maximum savings for employees and self-employed individuals in 2012 will be $2,202 (i.e., 2% of $110,100). For spouses who both earn at least as much as the Social Security Wage Base in 2012, the maximum savings will be $4,404.

Note that employers continue to pay the full employer portion of Social Security taxes for their employees.

Call Us

We can help you determine how the extension affects you or your business. Contact us at 800-269-6466.

Determined by an independent survey conducted by the research firm Campbell Rinker, the award is based on the high proportion of Sage Fund Accounting customers who say they would recommend the product to others.

Sage Fund Accounting is the only nonprofit software to receive five consecutive Campbell Rinker awards for customer satisfaction.

Sage HRMS helps employers actively support company objective by centralizing employee data and simplifying core human resource (HR) and payroll administration, enabling better workforce-related decisions and improving overall company efficiency.  The 2012 release includes 70 customer-requested quality and usability enhancements in the HRMS Payroll, and Sage Employee Self Service (Sage ESS) solutions.  The new Sage Employee Analytics technology provides advanced customization, enabling users to include custom data from Sage HRMS user-defined fields as well as pull in external data sources from third-party applications in the views they create, allowing them to leverage workforce data like never before in order to make the best possible business.

Self-service mobility allows employees and managers to view payment history and time off balances, request time off and view approvals, and manage time off requests using an instant connection to Sage ESS.  Employee self-service mobility works on a variety of hand-held devices including a variety of smart phones.

If you’d like more information on Sage HRMS 2012 (formerly Sage Abra SQL HRMS) please give us at call at 1-800- 269-6466.

The review listed the strengths of the system as:

• Extensive list of modules
• Excellent budgeting capabilities
• On-premises or hosted options of the solution

The review covered several areas of evaluation.  Here is how Sage Fund Accounting was rated in each category:

• Basic system functions – 4.75 stars
• Core NFP/Fund Accounting Capabilities – 5 stars
• Management Features – 5 stars
• Financial statements & reporting – 5 stars
• Integration & Import/Export – 5 stars
• Help/support – 5 stars

It comes as no surprise that we are in complete agreement with this assessment – we have seen the degree to which nonprofit organizations have benefitted from this powerful software solution.

Congratulations to Sage for this outstanding review.

In Arkansas, Colorado, Michigan, Minnesota, Missouri, Kansas, Nebraska, Oklahoma, Texas and Wisconsin, Huckstep & Associates supports nonprofits, governmental, and for-profit organizations by building and maintaining the best professional team of accounting and human resource experts and support staff.

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• Personal exemption — $3,800 per eligible person, up from $3,700.

• Basic standard deduction — $11,900 (married filing jointly), up from $11,600; $8,700 (head of household), up from $8,500; $5,950 (single and married separate), up from $5,800.

• Social Security taxable wage base — $110,100, up from $106,800.

• 401(k), 403(b), and 457 plan elective salary deferrals (annual) — $17,000 (up from $16,500).

• Roth IRA contribution allowability — phaseout range $173,000 to $183,000 of annual adjusted gross income for married couples filing jointly, up from $169,000 to $179,000; $110,000 to $125,000 for single taxpayers and heads of household, up from $107,000 to $122,000.

• Defined contribution retirement plan dollar limit on annual additions — $50,000, up from $49,000.

• Phaseout range for those who make deductible contributions to a

traditional IRA and are covered by a workplace retirement plan:

o Singles and heads of household — $58,000 to $68,000 of modified adjusted income, up from $56,000 to $66,000;

o Married couples filing jointly — in which the spouse who makes the IRA contribution is covered by a workplace retirement plan — is $92,000 to $112,000, up from $90,000 to $110,000.

For IRA contributors who are not covered by a workplace retirement plan but are married to someone who is covered, the phaseout range is $173,000 to $183,000, up from $169,000 to $179,000.

• Defined benefit plan limit on annual benefits — $200,000, up from $195,000.

• Maximum annual compensation used to determine benefits or contributions — $250,000, up from $245,000.

• Dollar limit used to define highly compensated employee – $115,000, up from $110,000.

• Compensation limitation defining key employee/officer to “top heavy” plan purposes – $165,000, up from $160,000.

• “Nanny” tax threshold — annual payment of $1,800, up from $1,700.

• The gift-tax, generation-skipping-transfer (GST) tax, and estate-tax exemption amount — $5,120,000, up from $5,000,000.

• Dollar limitation on property eligible for Section 179 expensing election used in a trade or business — $139,000, up from a previously scheduled $125,000. Limit is reduced dollar for dollar as the cost of eligible property placed in service exceeds $560,000, up from $500,000.

Also, tax bracket thresholds increase for each income-tax filing status and rate. For example, for a married couple filing a joint return, the taxable income threshold separating the 15% bracket from the 25% bracket is $70,700 in 2012, up from $69,000 in 2011.

We Can Help

Please contact us if you have any questions regarding these, or any other, tax law limits for 2012. We can also assist with all of your 2011 tax return preparation needs.

Composed of CPAs and staff with professional accounting and human resource experience, training and certification, Huckstep & Associates is the trusted advisor for organizations from Nebraska to Arkansas, from Michigan to Colorado.