Consulting Blog

• A logistics company engaged us to review a handful of expense categories, including forklift propane. During our discovery phase, we uncovered two crucial areas that would result in significant cost savings. The first, their CPA firm (not Katz, Sapper & Miller) overlooked a credit that was available on forklift propane. Once corrected, our process resulted in significant savings. The second was the actual price for forklift propane. Our work in this area will save them almost six figures annually. Combined, our client will enjoy more than $500,000 in profit improvements.
• A physician practice group used a laundry service to launder their lab coats, patient gowns and facility linens. The prices and components of their vendor invoice were ripe with opportunity. We corrected these, and this client is now realizing a consistent savings of 48% each month.

On Nov. 23, the congressional “Super Committee” of 12 members failed to reach an agreement on deficit reductions. This will trigger previously enacted budget cuts beginning in 2013. Particularly, Medicare reimbursement may see up to 2% payment cuts with a majority of the cuts to hospitals and a minority to physicians. Potentially hospital and physician Medicare reimbursement cuts from 2013 through 2021 will be $88 billion. Note that the scheduled cuts will not affect Medicaid reimbursements.   

To alleviate the Medicare reimbursement cuts, hospitals and physicians will need to align efforts by honing in on clinical efficiency. One avenue to align efforts is to implement a co-management agreement. Co-management agreements are centered on bringing physician and hospital leaders together, allowing for continuum patient care. One of the advantages of this arrangement is that physicians can remain independent in nature from hospitals.  

In this formal, legally contracted and Stark compliant arrangement, physicians and hospitals can mutually agree on procedures and evidence-based protocols to improve care. Many of the improvements can affect quality, efficiency, IT utilization and recruitment. The anticipated improvements can result in cost savings which will financially benefit hospitals and physicians while offsetting the looming cuts in Medicare reimbursement.         

Eric Leafgreen is a member of Katz, Sapper & Miller's Healthcare Resources Group. For more information, contact Eric at 317.844.4861 or eleafgreen@ksmcpa.com.

U.S. manufacturers face a steep hill to be competitive globally according to a recent report by The Manufacturers Alliances/MAPI and the Manufacturing Institute. The report, titled "The 2011 Structural Costs of Manufacturing in the United States," states that U.S. manufacturers are paying approx. 20% more in costs than nine of its largest competitors in the world (Canada, China, France, Germany, Japan, Korea, Mexico, Taiwan, and the United Kingdom). The impact on manufacturing profitability can be quite large.

The study looked at five key elements, which included corporate taxes, employee benefits costs (including health care costs), tort (legal costs for lawsuits) costs, pollution abatement compliance costs, and energy costs.
 

“The story of the structural cost gap boils down to two issues: health care and corporate taxes,” says Jeremy Leonard, author of the study and an economic consultant with MAPI via the MAPI website. “We have the policy tools to deal with them, but lack the leadership to bring them under control. Absent structural costs, U.S. manufacturers are broadly competitive with their international peers thanks to the tireless efforts to innovate and become more efficient. It is up to the policymakers to step up to the plate to ensure a vibrant manufacturing sector in the years ahead.”

The largest barriers noted in the study relate to corporate taxes and employee benefits, mainly health care costs. The U.S. pays approximately 8.6% more for corporate taxes and 5.7% more for employee benefits on average then their competitors abroad. This can have a dramatic impact on the pricing model of U.S. manufacturers, which will ultimately impact manufacturing profits in the U.S.

Stephen Gold, president and CEO of MAPI stated, “This report tells an important story, one in which the White House and Congress should be very interested. While we recognize American manufacturers face a myriad of challenges from overseas, these data demonstrate that domestically imposed costs further undermine our ability to compete. We hear a great deal from policymakers these days about the need to bring manufacturing back to America, yet these challenges continue to undercut American manufacturing competitiveness.”

Justin Hayes is an accountant in Katz, Sapper & Miller's Audit and Assurance Services Department, which is comprised of individuals skilled at evaluating business and control risks for clients.

Katz, Sapper & Miller, LLP, and KSM Consulting, LLC, have partnered with TechPoint to present the KSM Executive Roundtable series throughout 2011, focusing on major issues technology CEOs are facing. This series offers information that cannot be easily found elsewhere, in a format with a free exchange of ideas with other qualified CEOs.

Our next event is Wednesday, September 21, and the topic will be the Value of Branding and Marketing in the Technology Marketplace.

Branding and marketing are perpetual hot topics because they are constantly changing and evolving – especially during the past few years with the rise of social media and numerous new digital marketing and metrics technologies. The immediacy of the marketplace coupled with the publishing potential of every customer interaction has spread the branding and marketing responsibilities across the entire corporate structure.

• What is the difference between the two disciplines of branding and marketing?
• How should branding and marketing campaigns and other efforts be rolled out to employees, sales force, stakeholders, clients and prospects?
• What are the pros and cons of digital vs. more traditional branding or marketing tactics, or is a combination of both optimal?

Expert peer-panelists will share their own experiences with regard to these topics to kick off the discussion. Panelists will include Doug Karr, CEO of DK New Media, Myra Borshoff Cook, president and principal of Borshoff, and Shawn Schwegman, CMO of ChaCha.

This event is by invitation only. For more information or to RSVP, contact Jim Jay at jjay@techpoint.org or call 317.275.2080.

• Identify the constraining process
• Decide how to improve that constraint or how to exploit it
• Align all other processes in the system to support the decision in number 2
• Make any other changes need to eliminate the constraint
• Reassess if the improvement has created a new constraint

• Thinking a strong market will buy the company time before improvements need to be made
• Thinking that a company can solve its big problems by only improving on one specific area
• Focusing the companies' process on high yields but at the sacrifice of good customer satisfaction
• Purchasing raw materials in large quantities for false economies
• Confusing "Earned Hours" efficiency with actual business effectiveness
• Making processing decisions based on the convenience of the assembly department
• Making processing decisions based on the on the convenience of the finishing department
• Line vs. Item thinking
• Reluctance to let go of the old, comfortable ways, such as standard-cost thinking
• Investing to correct capacity constraints that don't really exist (i.e. identifying the wrong constraint)
• The inability to turn increased capacity into improved customer deliveries
• Not aligning the measurement system used with the outcomes desired
• Over-reliance on forecasts and budgets
• Failure to improve the teamwork between the manufacturing department and the marketing department
• Avoid making any improvements for the fear of failure
• Improperly delegate responsibilities that should not be delegated
• Reluctance to get help from an outside third party
• Avoiding improvement due to a lack of understanding/knowledge of the options available

Imagine your company is in the midst of a major overhaul on its information technology infrastructure. Technology recommendations from a local consulting firm detail the potential for some major improvements. Your company chooses to install a few new servers, a new customer relationship management platform and a new network backbone.

After the implementation is complete, the project enters into the "maintenance" phase of its life cycle.  In placing your first support call to your new managed services support team, you realize that the implementation vendor performed poorly on one of the final (but most crucial) aspects of implementing a new system. The system's documentation is subpar.

The ability of outside consultants to support a complex system of servers, networking equipment and computers they cannot see or touch is limited to the quality of the documentation they can access. While documenting the various aspects of your infrastructure may be tedious and time-consuming, it is an important responsibility of an information technology consultant. As a business owner, ensure that the vendor managing your implementation keeps accurate and up-to-date documentation records. More importantly, ask for a copy of the documentation. When contacting your managed services support team later, this information can be the missing link between a short and effective support call versus a long, expensive and frustrating support ticket.

KSM Consulting’s business technology consultants provide system support services, both on-site and remote, to help solve end-user issues at your company.  Contact Ryan Achterberg at rachterberg@ksmconsulting.com or visit ksmconsulting.com to learn more about the network services we provide.

KSM Consulting hosts educational seminars on issues related to key aspects of running your business – information technology, financial and operational performance, and risk management.

Our next seminar is Tuesday, July 26, 2011, and the topic is, "Maximizing Functionality: Optimizing Your Financial and Business Applications."

Enterprise Resource Planning (ERP) has evolved into something more significant than just the implementation of new financial and business application software. In today's economy, companies are looking for their existing software to provide them with comprehensive business solutions, rather than investing in an entirely new system.

How can you improve the functionality of your current system? Join us on July 26 to discover the solution: ERP system optimization. Understand the benefits of utilizing your financial and business application software to its fullest potential.

Date: Tuesday, July 26, 2011

Time: 7:30-8:00a.m. - Continental Breakfast / Networking 
           8:00-9:00a.m. - Presentation / Q&A

Location: Katz, Sapper & Miller, 800 E. 96th Street, Suite 400, Indianapolis, IN 46240

Suggested Attendees: Owners, CEOs, CFOs, controllers, IT support staff, systems experts

If you are interested in attending this seminar, RSVP to Rachel Rose, rrose@ksmconsulting.com or 317.452.1766, by Monday, July 18, 2011.

The American Institute of Certified Public Accountants (AICPA) finally introduced the SSAE 16 SOC 1 audit guide last week and it looks like it was worth the wait. While planning and fieldwork may have already started since the new standard went live on June 15, this audit guide does include several items that should ease the transition from the SAS 70 report format to the Service Organization Control Reports (SOC) format. 

The guide highlights the differences between the two formats and provides information to help determine the types of services appropriate for SOC 1 attestations. Primary components of SOC 1 attestation and information on how to test the operating effectiveness of controls at the service organization are also included. Additionally, the audit guide includes examples of various components from actual reports across multiple industries. 

An earlier release date would have been beneficial in facilitating preparation for the changes this new standard introduces. In sum, this guide is an incredibly useful tool for planning and executing an SSAE SOC 1 attestation engagement.

To learn more about how the SOC reports will affect your manufacturing, distribution, life sciences, technology or healthcare company, contact Ryan Elmore at 317.452.1714 or visit the KSM Consulting website at ksmconsulting.com.

Summer is upon us and warm days beckon us outdoors, yet there is much to be accomplished indoors at the workplace. Since strategic planning for the upcoming year often occurs during the last quarter, summer can be utilized as a time for evaluation and reflection of the status quo. Information gathered now will be pertinent to the effectiveness of your company’s strategic planning sessions later in the fall.

 The following are a few suggestions that may help turn your summer slump into a seasonal success:

1.      While employees are out enjoying their vacations, summer presents a great time to examine your company’s internal processes and procedures. KSM Consulting (KSMC) has process improvement consultants that can assist you in the examination and documentation of your existing processes and provide meaningful suggestions and guidelines to ensure you are complying with federal regulations, as appropriate. If concerns arise during the review, solutions are provided to help you obtain compliance and gain peace of mind that all assets are properly safeguarded.

2.      In addition to examining processes and procedures, KSMC’s qualified IT security auditors can complete a full range of security audits, including Service Organizational Control Reports (formerly SAS 70 Reports).

3.      Summer may also provide an opportunity to schedule a comprehensive accounting and business system assessment. Have you outgrown your systems? Do your systems meet your needs? KSMC has the necessary expertise to evaluate your current technologies and offer application development solutions to improve internal reporting, aid in creation of at-a-glance key performance indicator metrics or financial dashboards, and work with you to help ensure that your technology is in alignment with your business model. 

Take the opportunity to examine your business this summer. Perhaps, what you learn in June can be useful throughout the other seasons as well.

To obtain more information regarding KSMC’s service offerings regarding internal controls or comprehensive accounting assessments, please contact Steve Combs at 317.452.1716 or visit the KSM Consulting website.

• Community health needs assessment
• Fees charged
• Financial assistance policies

As a follow-up to prior posts regarding the new Service Organization Control (SOC) Reports, the implementation guide called Reporting on Controls at a Service Organization Relevant to Security, Availability, Processing Integrity, Confidentiality or Privacy is now available. This guide provides guidance to CPAs engaged to prepare a SOC 2 report.

Additionally, the AICPA is currently in the process of preparing the highly anticipated guide for CPAs engaged to prepare a SOC 1 report, Service Organizations: Applying SSAE No. 16, Reporting on Controls at a Service Organization.

As implementation of the new standard draws near, you may find additional information on the AICPA’s website under the SOC section. Informational videos on the new reports are also available.

To learn more about how the SOC reports will affect your manufacturing, distribution, life sciences, technology or healthcare company, contact Matt Snively at 317.452.1760, or visit the KSM Consulting website at ksmconsulting.com.

Indiana consulting firms are often faced with asking their clients tough questions.  Do you have a business continuity plan? Does it involve any disaster recovery planning?  What technology alignment and strategies have you implemented to mitigate loss of critical data?  How will you ensure a timely restore of the technology your business relies on to operate effectively?  It is at this point that most consultants are now looking at a client who is staring blankly back at them with no idea how to respond to these questions.  Not all executives are properly prepared or even fully aware of the back-up systems that should be in place as safeguards.  This is where we come in – as network services and information technology consultants, we use this type of planning to avoid disaster…or at least be prepared for disaster when it strikes!

Disaster recovery and business continuity are not one in the same.  Disaster recovery is just one aspect of business continuity planning related to information technology.  Disaster recovery plans address how you will access critical data in the aftermath of a localized disaster or failure of your current network infrastructure.  In this equation, data is the key factor.  Servers, switches, firewalls and applications can be replaced...but data cannot.  There is no single solution to planning for disaster recovery.  Strategic technology alignment requires information technology consultants to examine the needs of a business.  What data, applications and technology infrastructure are most important and how quickly will you need access to them?  The answers to these basic questions will shape the general direction of your consultant's disaster recovery planning efforts. 

While the cost of downtime is difficult to measure as a whole, you can review this link http://www.sudora.com/downtime.html to analyze the cost of downtime for your company.  Armed with this information, there is little excuse for ignoring the potential impact a disaster could have on your business.  It would be a mistake to place disaster recovery at the bottom of your IT to-do list because of budget concerns.  With the advent of virtualization technologies and cloud-based hosting platforms for off-site backups and off-site replication, consulting firms have a plethora of choices to fit almost any budget when it comes to disaster recovery planning. 

To learn more about how KSM Consulting can help devise a disaster recovery plan for your company, visit the KSM Consulting website.

In the March 18, 2011, 10-Q Quarterly Filing by FedEx Corporation is a brief reference to a US Department of Justice investigation into alleged anti-competitive actions:

In February 2011, we received a demand for the production of information and documents in connection with a civil investigation by the Antitrust Division of the U.S. Department of Justice into the policies and practices of FedEx and United Parcel Service, Inc., for dealing with third-party consultants who work with shipping customers to negotiate lower rates. We are also engaged in related litigation with one of these third-party pricing consultants. We do not believe that we have engaged in any anti-competitive activities, and we are cooperating with this investigation and vigorously defending against the litigation.

Both UPS and Fedex are excellent organizations and are extremely profitable. It seems that these carriers have taken notice of the organizations that help their customers reduce their transportation expenses.  

At KSM Profit Advisors we regularly help our clients reduce their transportation costs. Many times the changes we implement are small changes that have more to do with helping our client understand why they pay $8.00 for this or $11.00 for that. We simply educate the customer about how to avoid paying that extra fee in the future. 

More than once, I have attended a meeting with our client and the carrier and listened to the carrier explain how they (the carrier) have the client's best interest at heart. The carrier generally goes on to tell the client that they do not need our (KSM Profit Advisors) help because they (the carrier) are already helping them. 

Isn't this the fox guarding the hen house? As a consumer, you have every right in the world to enlist someone to help. All vendors are willing to help, but they have no incentive to decrease their sales in order to increase your bottom line.

KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.

As an Information Technology consultant in Indiana, I have the pleasure of working with business owners and assisting them with technology alignment and strategy. A question we often face in Network Services Consulting is whether to upgrade, or to continue supporting a customer's existing infrastructure. If you are a business owner, it is important to consider the following points when facing a decision to upgrade. 

Technology Equipment/Software Lifecycle
Most technology consulting firms recommend upgrading critical server and networking hardware every 4-6 years. Most Indiana consultants face the task of recommending an upgrade to their customers at some time or another. As a business owner, it is imperative to understand that planned down time is always less expensive, less intrusive to your business and allows your technology consultants time to strategize for technology alignment. In the event of unplanned down time, there is little time for strategy, as the focus is on returning your technology infrastructure to a workable condition. The cost of unplanned downtime can far exceed planned downtime as well. Not only are most companies unable to continue “production," they are paying employees for work not being performed, paying technology consultants and technicians at emergency rates, and dumping money into hardware/services to rebuild an environment that was in need of an upgrade before it went down. 

There are also a number of intangible costs, such as lost opportunities, damage to customer relationships and loss of employee morale. Upgrading every 4-6 years also ensures you are taking full advantage of technology hardware improvements that can increase performance and security and can reduce overall cost by implementing new technology that may combine several pieces of hardware and services into one.

Just as your server hardware has a lifecycle, so do the applications and Operating Systems they you depend on to run your business. Maintenance contracts with your software vendors and regular patching of programs ensures a less troublesome experience for your employees and a reduction in support cost for business owners. Keeping up-to-date with the most current Operating Systems also ensures you are taking full advantage of new technology as well as staying within the stated support lifecycle.  Again, this ensures that technology is working for you and maintains productivity while keeping your technology support budget more constant.

Strategic Technology Alignment
Equipment and software upgrades give your technology consultant an opportunity to do their job. A review of the role technology plays in your business, disaster recovery needs, remote access strategies, and information security needs can all be planned for and addressed during a planned project or upgrade. For example, if your company cannot tolerate any downtime in the event of a disaster or equipment failure, your technician can build a cloud based recovery model that replicates your onsite environment to a datacenter, equipped with redundant power and internet. In addition, it may also be a good time to get rid of that antiquated phone system and move to a more robust system that better meets the needs of your business.

The bottom line is that sometimes it pays to upgrade. The next time you pick up the phone and call your Information Technology Consultant, take the opportunity to setup a time to sit down and strategize.  Allowing your consultant to work with you can have a very positive impact on how technology works for your business.

Ryan Acterberg is a member of KSM Consulting's business technology practice. To learn more about this or other technology-related topics, contact KSM Consulting.

"It's not what you look at that matters, it's what you see."  -Henry David Thoreau

In my consulting practice, our goal is to improve the profitability of our clients. I often hear prospects tell me they are part of a buying group or purchasing cooperative and that they have no need to consider cost reduction consulting. They are “in good shape.” 

Every time I hear this I am reminded of a New York Times article, “Hospitals Find Buying Groups May Not Come Up With Savings.”

I am not minimizing any buying group or purchasing cooperative activity. These organizations have, in fact, provided their members with savings. My goal here is fairly simple. As the quote above notes, it's not what you look at that matters; what really matters is what you see.

Our economy was founded on free market principles, and these still apply today. If you have not market tested your price for supplies or services, you should. You might be surprised at what you see!

Just as you hire a CPA firm to do your taxes or an attorney to represent you in legal matters, you should hire an expert to review your consumable purchases of products and services. 

KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.