Accounting & Finance

Business Owner's Guide to Profit Planning

Owner's Guide to Profit Planning

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Smart hiring decisions begin with asking the right questions

Article courtesy of SBAM Approved Partner AdvanceHR

Bad hiring decisions can be costly, especially for small employers who lack the staff "cushion" to absorb the impact of non-performers and turnover. Some of the costs are calculable hard dollar expenses while others are hard-to-measure. The intangible costs may include damaged customer relations, missed business opportunities and low morale among co-workers who bear the brunt of another employee's shortcomings. Avoiding these costs can be accomplished by investing time upfront in better hiring techniques.

Why do employers make bad hiring decisions? Recognizing a few of the common culprits sets the stage for embracing what may be a better hiring process. Here are some of the main reasons, according to authors Lori Davila and Louise Kursmark.

  • Not really knowing what you are looking for: A failure to carefully think through the specific skills, behavioral patterns and motivators that are key to the job you are trying to fill.
  • Inadequate interview preparation and poor choice of questions: Giving short shrift to gearing up for an interview almost always will result in limited insights on the job candidate, and thus an uninformed hiring decision.
  • Hasty hiring decisions: The temptation may be strong for a manager to make a snap decision when time is tight, especially for managers who rarely have to hire. But the results can be costly.
  • Looking for a clone: People tend to hire people -- frequently unconsciously -- who they have something in common with, or who remind them of themselves. It's called the "halo effect," and it creates problems if you need someone with other characteristics, or simply are blinded to the candidate's shortcomings.
  • Lacking a formal interview process: Effective interviewing amounts to a technical skill; informal, subjective approaches often fail.
Additional hiring issues are described in detail by Davila and Kursmark in their practical primer titled How to Choose the Right Person for the Right Job Every Time (published by McGraw Hill). They include using only one interviewer, hiring over-qualified candidates who will be insufficiently challenged, and failing to check references thoroughly.

Behavior-Based Interviewing

Davila and Kursmark place great emphasis on the use of behavior-based interviewing. This means posing questions that are not hypothetical, but instead elicit concrete examples of how a job candidate has handled situations in the past. That approach may reveal whether a candidate has a track record that's appropriate to the job you are trying to fill.

This is not new, but still not universally applied. Behavior-based interviewing evolved years ago out of a recognition of the limitations of traditional theoretical interview questions, such as "What would you do if a customer or supervisor asked you to do something unethical?" Behavior-based interviewing, instead, requires asking the candidate to provide an example of how he or she responded to a situation or scenario described by the interviewer.

"Pre-selected questions, carefully correlated with the essential functions of the job, (emphasis added) allow candidates to describe specific examples of their past behavior," the authors explain. The broad job qualification parameters should cover not just technical skills and knowledge, but also "behaviors and performance skills" as well as motivation.

Today, coming up with probing behavior-based interview questions has become a burgeoning industry; "Google" the phrase and a myriad of vendors fill your computer screen. Davila and Kursmark devote a chapter of their book to such inquiries and provide 401 such questions, organized according to 50 competencies the interviewer may seek to pr

PPT elimination clears first legislative hurdle

After many hours of testimony, the Senate Finance Committee this week approved legislation that would phase out the industrial Personal Property Tax (PPT) and drastically cuts levies on commercial property as well. The vote on each of the eight bills was, 5-2, which was split along party lines. 

Opponents of the legislation, primarily local units of government, have pushed for a constitutional amendment guaranteeing a replacement for the $450 million in lost revenue, something Senate Republican aren't interested in. Senate Majority Leader Randy Richardville has stated several times in the past weeks that it is his intention to pass the package before summer break. A vote could take place as early as next week, some sources have indicated.

SBAM President and CEO Rob Fowler addressed the Senate Finance Committee this week, testifying that elimination of the Personal Property Tax is the next key step on the path of Michigan’s economic recovery. Fowler stated that the corporate income tax passing last year was critical to "repositioning" Michigan. He argued that it didn't help big business or oil companies, but primarily helped small businesses. "I'd like to offer you some encouragement that you're on the right track," he said. "A growing economy solves a lot of problems that we've been facing over the last decade" adding that he was "very, very optimistic about our state economic trends today."

Fowler also referred to the Entrepreneurship Scorecard and Michigan Jobs Insight project in his testimony to showcase the positive direction Michigan’s economy is heading partially as a result of the reform efforts made in the legislature thus far.

The four questions you need to answer if you’re going to be a successful entrepreneur: today at 10 a.m. on the free Business Next audio seminar

On Friday's program: retired CPA and longtime small business advocate Paul Hense talks about the four questions you need to answer if you’re going to be a successful entrepreneur; Chris Carrigan, representing the Potterville Gizzard Fest, talks about the positive small business impact of local festivals and fairs; Jennifer Acevedo of the Michigan Department of Environmental Quality’s Office of Environmental Assistance talks about a fall conference that can help small business owners “green up” Michigan’s environment and economy.

Listen today at 10 a.m., 3 p.m. and 8 p.m. on the 
Michigan Business NetworkSBAM members can log in and listen to archived programs anytime on a PC or mobile device by going to the Business Next show page

Get Business Next audio seminars delivered three times a week automatically to your iPhone or other mobile device. Subscribe in iTunes using this URL.      

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Sustainable microbrewing, avoiding office distractions, and a May 15 conference in Lansing that can help you make money with exporting

Interview with Kris Spaulding, Sustainability Director for Brewery Vivant. Her Grand Rapids brewery became the first LEED certified microbrewery in the U.S. And, business consultant Mike Pircer offers his top tips for having a productive and distraction-free day in your office. Finally, Brent Case, vice president of International Business Services for the Lansing Regional Chamber of Commerce, talks about the May 15 Port Lansing Global Logistics Conference.

Listen today at 10 a.m., 3 p.m. and 8 p.m. on the 
Michigan Business NetworkSBAM members can log in and listen to archived programs anytime on a PC or mobile device by going to the Business Next show page

Get Business Next audio seminars delivered three times a week automatically to your iPhone or other mobile device. Subscribe in iTunes using this URL.     

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Has Your Company 401(k) Plan Made These 11 Mistakes?

Article courtesy of SBAM Approved Partner AdvanceHR

The IRS released a list of 11 potential 401(k) plan errors. Has your company's plan made any of them? Ignoring these mistakes can lead to costly penalties and even disqualification of a plan's tax-favored status. The good news is you may be able to correct errors before the IRS comes calling.

It is critical to keep your company's 401(k) plan in compliance with numerous federal laws and regulations. Plans that are found to be in violation risk expensive penalties and disqualification.

The IRS recently issued this list of 11 potential errors:
  1. Has your 401(k) plan document been updated within the past few years to reflect recent law changes?
  2. Are the plan's operations based on the terms of the plan document?
  3. Is the plan's definition of compensation for all deferrals and allocations used correctly?
  4. Were employer matching contributions made to all appropriate employees under the terms of the plan?
  5. Has your plan satisfied the nondiscrimination tests? Traditional 401(k) plans must be regularly tested to ensure that the contributions made by, and on behalf of, rank-and-file employees are proportional to contributions made for owners and managers.
  6. Were all eligible employees identified and given the opportunity to make an elective deferral election?
  7. Are elective deferrals limited to the amounts allowed under the tax code for the calendar year and have any excess deferrals been distributed?
  8. Have you deposited employee elective deferrals on time? Plan documents generally contain language about the timing of these deposits. There are also federal laws and regulations regarding deposits of elective deferrals, as well as matching employer contributions. Failing to follow the terms of the plan could lead to "prohibited transactions."     
  9. If the 401(k) was top-heavy (favoring highly compensated executives), were the required minimum contributions made to the plan?
  10. Were hardship distributions made properly? These distributions may be allowed by a 401(k) plan in the event an employee has an immediate financial need, such as medical bills or college tuition.
  11. Have you filed a Form 5500 series return with the IRS and have you distributed a Summary Annual Report to all plan participants this year?
Abusive or prohibited transactions can put the tax-favored status of your company's 401(k) plan in jeopardy and result in expensive penalties.

Keep in Mind: The IRS is not the only government agency overseeing employee benefit plan compliance. The Labor Department's Employee Benefits Security Administration and the Pension Benefit Guaranty Corporation also scrutinize benefit plans and have their own compliance processes.

The good news is that 401(k) plan errors can often be voluntarily corrected. Your tax adviser or employee benefits professional can determine if changes should be made to your company's plan to achieve and maintain compliance.

Staying current with numerous complex requirements is challenging for business owners and executives. With professional help, you can identify and correct any problems associated with qualified plans ... before the IRS comes calling.