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September 2017


"Why Quantity Discount is a Bad Idea for Companies"

When you purchase inventory or office supplies, you should avoid purchasing large quantities in order to take advantage of volume discounts.

If you have a large inventory, you will need additional space or even a new warehouse. This adds additional cost.

In addition, inventory carries interest charge as cash is tied up with inventory items.

Also, there is significant risk that if anything changes, such as design modification, your existing inventory may become completely obsolete.  So it is better to keep the risk lower.

On top of this, you must usually do an annual physical inventory count, which requires labor.  So the more inventory you carry, the more time your employees must spend on this task.  For inventory that becomes obsolete, you must spend time to dispose of them. That also adds labor hours and additional effort and energy.

When your employees see the abundant inventory or supply in storage, they tend to be less careful in handling them. If they make a mistake, they can simply go to the warehouse and get a replacement. If there is no replacement, they will have to be careful in handling the inventory. So, the employees’ attitude can change.

When you get a purchase discount, you may feel that you got a good deal. However, often, such purchase will result in higher expenses.

This principle can be applied to purchasing office supplies or manufacturing supply. Even if a unit price appears to be more expensive, you should only buy what you immediately need. Keep the minimum quantity on hand and ask your suppliers to deliver small quantities more often or find a new supplier that can deliver small quantities more frequently.


Koh Fujimoto
Managing Principal
CDH  
 


Does Being a Tech Savvy CFO Matter?

The simple answer is Yes.  In today’s fast paced markets, a CFO must be able to make real-time decisions that impact an entire organization. This requires two essential elements — speed and savvy. Enter CDH. Our breadth of services and solutions allow you to quickly and accurately analyze trusted data so you can eliminate risk, respond to opportunity, and set the stage for growth.

Our cloud based Sage Intacct software provides analysis, at your fingertips, of your most important business metrics so you can focus on what matters most — your bottom line.

Being a Tech Savvy CFO: What’s The Impact For Your Company?
The more you can see, the faster you can respond. We care about the things that matter to you. And we’ve shaped our solutions around your successes. Here’s how our Sage Intacct software can make a difference in your business:



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  • Access Trusted Data in Real-Time
  • Accelerate Business Goals
  • Eliminate Risk
  • Increase Efficiency
  • Seize Important Opportunities
  • Grow Stronger, Faster


How CDH Can Help and Why We’re Different
Technology isn’t slowing down and you can’t either. In our dynamic business world, successful companies must continually prepare for and adapt to new business situations. We are more than just your run of the mill accounting firm, we provide accounting and business consulting services that allow you to think smarter, respond quicker and grow faster. (
read more)

Two Cost Saving Cases

By Koh Fujimoto

Case 1: A large non-profit organization was paying astronomical amounts of workers’ comp insurance premium each year. One property insurance broker decided to review the claims of this non-profit organization even if this was not his client. This individual wanted to help others because he is a very good person in nature.

He reviewed the individual claims of this non-profit organization and found that the majority of claims were coming from its maintenance department. To repair or set-up events, this organization used its internal maintenance crew to meet their needs.  Therefore,  many injuries and accidents were in the maintenance operations.

He reported his findings to this non-profit organization’s management. As a result, this organization decided to outsource its maintenance operations.

I do not have to tell you the results. This organization obtained significant cost savings and the broker obtained this organization as his new client.  This is a true story of DSP Insurance.

Case 2: I was at a management study session last weekend in LA. My friend was working for a hotel chain with about 1,700 rooms in North America. Two years ago, his company was bought by another hotel company. So, he is now working for a new company as his employment was retained. (read more)

 

An understanding of Accounting Standard Updates (ASU) ahead of time is necessary for business entities to recognize the impact and to properly prepare for implementation.

Below are some highlights regarding the ASU No. 2016-02, Leases (Topic 842):

  • For private companies, the new standards will be effective for annual periods beginning after December 15, 2019 and interim periods thereafter
  • Operating leases with more than 12 months lease term recognized on the balance sheet
  • The criteria to determine if an arrangement is a lease specifically depends on whether or not a lessee has the right to control the identifiable asset
  • Lease payments are calculated based on the present value of future payments and  property taxes and insurance are included in the lease payments
  • Application of sale-leaseback transaction
  • Increased financial statements disclosures


Also, please refer to the FASB website for more information:

The new leases guidance requires companies to recognize assets and liabilities for all leases with terms longer than 12 months. The change in lease classification will potentially increase companies’ lease obligations and therefore having a critical impact on corporate ratios such as the leverage ratio, current ratio and return on assets. This will then cause pressure for business entities with debt covenants and financing cost. (read more)


It has become increasingly important for employers to offer some form of an employee benefits package in order to attract and retain a strong workforce. Additionally, employers may want to protect their company from the risks associated with offering employee benefits.

While employers have traditionally insured their employee benefits risks through an outside insurance carrier, the increased demand for employee benefits has resulted in an inflation of costs associated with insuring employee benefits risks. Because of this, many employers have opted to cut out insurance carriers altogether and instead fund their group employee benefits risks with captives.

What is a Captive?

A captive is an independent insurance company that is created and owned by at least one non-insurance company for the purpose of insuring the employee benefits risks of its owner (or owners). In other words, captives are a form of self-insurance in which the insured owns the insurer. Employers might choose to form a captive as an alternative to traditional insurance in order to better control costs and manage the risks associated with providing employee benefits.

Advantages

A captive can offer significant savings and become a substantial long-term investment.

By creating and owning its own captive insurance company, an employer is able to keep all of the savings and interest income it earns from the captive.

This means that instead of spending money on insurance, an employer can actually earn money from its captive policy over time. (read more)

 

When it comes to insuring employee benefits risks, there are many options and factors to consider. To find out more about whether captive insurance is right for you, please contact John Jaeger at OneDigital Health & Benefits; jjaeger@onedigital.com

For the 9th annual Illinois CPA Day of Service, CDH volunteered at Bernie's Book Bank.  Bernie's Book Bank strives to provide at-risk children with at least 12 quality books of their very own for 12 years.  According to their website, this year they are on track to reach their goal to distribute 4 million books annually to over 333,000 Chicagoland children.  CDH had the opportunity to help them reach this goal by assisting with the sorting and packing of books for distribution.

Please visit their
website for more information on how you can help!