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In order to conduct an effective assessment, strategic managers must first identify these activities. This knowledge comes from business process mapping. This strategy maps out all business processes and identifies the activities and resources required to complete these activities, thereby providing a detailed and accurate snapshot of all that occurs within a company.

This is often the first time management is able to obtain a crisp awareness of the processes that occur in all areas of the organization. This holistic view facilitates the identification of the activities that are involved in the design, production, marketing, delivery and support of products and services.

A meaningful value analysis also requires an internal cost analysis. By identifying all of the internal costs attributable to each value-creating process, an organization can begin to get a firm handle on where it does and doesnt meet the low cost value-creating criteria; thereby demonstrating to the organization where it is able to maintain and perhaps even increase its cost advantage to its customer base.

The next phase is to examine all of the processes to identify where and how the organization creates differentiation value for its customers. This type of analysis can be more complex as the ‘data’ is not as easily identifiable as cost drivers. Differentiation value creators are solely from the perspective of the customers, therefore it will be necessary to keep that perspective in mind when developing strategies for sustaining and enhancing this value. Some of the strategy areas that should be considered are product features, marketing channels, pricing, product image and customer service and support.

The final phase of the value chain analysis requires expanding the parameters of the processes to include all links from the supplier sources to the disposal or recycling of the product. This analysis can uncover unique advantages for a competitive edge, by creative strategies for activities involving an organization’s suppliers, channels or users.

By addressing the issue of value chain analysis, an organization can give itself a real competitive edge. Not only will it be intimately aware of all of the factors and activities that contribute to its value attainment level, but it can exceed the performance and offerings of the competition.

Today’s customer is more sophisticated and better informed. Through effective value chain analysis, the organization will also become savvier at identifying the needs and wants of its customer base and surpassing their expectations.

Copyright – Kelly Melanson, Certified Management Accountant

Business Process Mapping is a tool that is used to provide a company with a clear picture of how it does what is does. BPM is applicable no matter what type of company or its focus product or service. Every company is comprised of business processes. These processes address every area and function that exist within an organization. A business process is defined as a series of activities that occur to deliver a specific business value or goal. While this sounds simple enough, the act of actually mapping out these processes requires a skilled and systematic approach; if the results are to have any real management value.

Understanding how you do what you do is a key component of strategic management. Too often as an organization grows, delineation occurs between departments and these business areas begin functioning as completely separate business entities. Often a by-product of this occurrence is that growth and development occur in a silo fashion. Departmental team members are very knowledgeable about their own business areas but have only a limited understanding of the processes that occur in others and how these processes relate to and impact on theirs.

BPM actually maps out all of the business processes and clearly identifies the activities that are required to carry out these processes and the resources required to complete these activities, thereby providing a detailed and accurate as-is organization-wide snapshot of all the business processes that occur within a company. It is very often the first time that management is able to obtain a crisp awareness of the processes that occur in all areas of the organization. This holistic view facilitates the identification of gaps and overlaps that exist within these processes, both within and between departments.

This information can then be used to optimize and streamline existing business processes; which should always be the first step in any growth initiative. Before introducing the added volume and strains of growth, a company should ensure that it does a complete tune up to ensure that the existing infrastructure can support these increased demands.

Another benefit of BPM, is the knowledge that is obtained by detailing business processes component by component. The crisp identification of activities and resources can also be used for strategic financial management. BPM creates a framework that supports the implementation of Activity-Based Costing (ABC). By utilizing the strategic management tool of ABC, it is possible to attribute exact costs to each activity and required resource. These costs can then be rolled up to the related business processes to ascertain the total costs of providing these business processes. This information can be used in a variety of ways such as, budget setting, quoting and efficiencies targeting.

By knowing the components of how you do what you do, it is possible to begin practicing meaningful performance measurement. Strategic managers are now able to define and create clear, consistent and measurable performance metrics for each resource, activity and business processes. With clearly defined performance metrics defined and communicated to stakeholders within the organization, these metrics can be tracked to ensure that each component is functioning at desired criteria levels. This information can be used in a variety of managerial functions from efficiency tracking and reporting to employee performance reviews. The practice of measuring organizational functions provides meaningful feedback to stakeholders to assist in determining required adjustments and how these can be conducted in a timely manner.

BPM can also assist in the strategic assessment of information systems. The ability to view and organization component by component allows management to determine which information is required by which resource, activity and process, as well as the directional flows of that information to facilitate and manage business processes. By mapping out this information, management can conduct meaningful information systems assessments of legacy systems, and strategically identify the functionally requirements of future systems.

While Business Process Mapping may seem like an obvious approach, it is surprising how many companies do not have a true and detailed understanding of how they do what they do. It is the strategic manager who fully understands that breaking things down to their most basic components is the best way to see the whole picture.

Copyright – Kelly Melanson, Certified Management Accountant

Activity Based Costing is an excellent tool to use in understanding the actual cost of a product or service that a company is producing and selling. For far too long businesses have been allocating or applying what were thought to be “indirect costs” based on some arbitrary assumption … square footage or sales volume to mention just a few. At one time the cost of a good was mainly in the direct labour component but with the wide spread use of machines and robots in today’s businesses it has now become a minor component. These allocations were also based on historical data which may or may not be relevant given the ever changing business environment in which we now work.

While it may seem an onerous task to implement ABC, by simply taking it one step, or product/service, at a time the process is very manageable. Some businesses find it easier to start with the end product/service and work back to its individual components. Take the product/service and map it back to its origins. What are the physical components that make up the final good? What labour is added at what stage in the process? How many processes are involved and how many times is the product handled along the way?

Once the mapping has been completed, it is time to cost out what these activities actually cost. How much does each component and step along the way cost in the production of the final product? What’s the final dollar total?

Activity Based Management then takes this information and makes strategic business decisions based on this information. On a grand scale, these decisions may include whether to drop or expand an existing product or service.

It is also important to analyze the process in getting to the final product. The term “value added” is used in ABM. Does the activity that has been mapped add any value to the final product? If the answer is yes then the activity should remain. If the answer is no, very serious thought should be given to dropping this “non-value added” activity. While these two situations may seem very clear cut they are not.

What about those activities that add some value but that value may be questionable? This gray area requires more thought with the end user or customer in mind. Can this activity be eliminated and be invisible to the end user or customer? If the answer is yes to this question there is sound support for dropping the activity. However, if the answer is no, then the activity is more than likely best left in the process.

As with any new undertaking, employee input into the process of Activity Based Costing and Management is key to its success. Employees must feel that their suggestions and input are respected and valued. They need to understand why this process is being undertaken and the importance of it. They also need to see that senior management supports it and uses the information it provides in shaping the direction of the business.

ABC and ABM should be considered valuable tools to assist today’s manager in making sound business decisions; based on information that accurately reflects their line of business and the true market conditions.

Copyright – Kelly Melanson, Certified Management Accountant

While there’s still snow on the ground and time is on your side, here are some tips that should assist you in ensuring that you collect the data you need, so when the first blooms of Spring arrive you are relaxed and ready.

In order to save money on accounting fees you should be organized. That means having your ‘shoebox’ cleaned up before you get to your accountant’s office. If this is more than you face, you may want to hire a bookkeeper, who bills at a lower hourly rate, to get you up to date. Regular bookkeeping keeps you informed on how your company is doing and shows you your bottom line whenever you want to see it. This information allows you to make focused and accurate management decisions that are critical for the success and growth of your company.

There are many deduction opportunities if you know what records you need to keep in order to qualify. Here are some things to watch for:

Any expenses that are paid cash with no receipt can still be deducted as long as you keep a log book. Examples of these are meter parking, car washes, pay telephone. You must state the date of these expenses, the amount and the business related reason that this expense was incurred.

When you use your car for work it is critical you track your mileage for business use. Be sure to note the destination and total mileage for each trip in your car expense logbook. Along with the logbook should be all receipts for gas, insurance, and maintenance. If these receipts are not retained you could be disallowed the total expense and that could be a lot of dollars out of your pocket.

In order to write off any business expenses that are paid by a credit card, you must have the original credit card slip with your signature on it. It’s a good idea to jot down on that slip the reason for that expense. If the charge is for meals remember you can only deduct fifty percent and therefore only take in fifty percent of the GST for the company portion.

Be sure to keep all invoices and expenses pertaining to advertising and marketing your business. These expenses are one hundred percent deductible.

There is often a lot of confusion at tax time for sole proprietors, because of the overlap of personal and professional expenses. Here are a few pointers to help clarify these tax issues:

If a business is run out of the home, or if a home office is maintained, many of the related expenses are deductible. A percentage of the expenses relating to mortgage interest, property taxes and house insurance are deductible. Utilities (except phone expenses) are also deductible. To determine the percentage, calculate the square footage of your home and space used for the office. Divide the office footage by the home footage and multiply by one hundred. This will show the deductible percentage of these expenses.

If the following expenditures have been made by December 31, 2000 they will be eligible for 2000 tax deductions: moving expenses, child care expenses, safety deposit box fees, charitable donations, political contributions, professional association membership and medical expenses.

Registered Retirement Savings Plan (RRSP) contribution amounts are noted on your 1999 personal income tax return assessment notices. Be sure to check this before you top up your RRSP, as you don’t want to contribute more then you are allowed. You have until March 1, 2001 to make a tax-deductible RRSP contribution for the year 2000. The maximum 2001 addition to deductible RRSP contribution room is $13,500. Therefore $75,000 of 2000 earned income is needed to reach this maximum. Consider contributing to a spousal RRSP to achieve income splitting in the future.

Persons turning age 69 in 2000 must mature their RRSP into cash, an annuity or Registered Retirement Income Fund (RRIF) by December 31, 2000. Certain 2000 excess contributions may be deducted in the year 2001 if contribution room is available.

If you own a business, consider paying a reasonable salary to family members for their services rendered to the business.

Ensure all alimony or maintenance payments were made by December 31,2000 in order for them to be deductible in 2000.

Individuals may claim a non-refundable federal credit of seventeen percent on the interest portion of student loan payments made in 2000.

Health and dental premiums are also eligible deductions for self-employed individuals, as long as the self-employment income is the primary source of income and any income from other sources does not exceed $10,000.

With the holiday season behind us, it is a good time to turn your attention to preparing for your tax return. So start organizing your records now and make an appointment to meet with a bookkeeper or accountant if you need assistance. That way, come April you will have the time to smell the Spring flowers with a bit more money in your pocket.

Courtesy of
Kelly Melanson

Today, marketing is a holistic approach that is often more complex than first thought. What is marketing? It is a process through which an organization identifies a need and then provides a means of filling or satisfying that need.

Customers are more informed and savvy than in the past and they expect more — in the quality of both products and service. Today’s customer is not willing to merely sit passively by and consume — he wants a voice and relationship with the companies with whom he chooses to conduct business.

Marketing is not merely deciding where and how to advertise. This is only one component of the process. Effective managers ensure they have a well-defined and mapped out strategy that deals with the entire lifecycle of the process. The most successful companies have a keenly honed customer-centric marketing model.

This model outlines a process that allows the company to determine the needs and wants of a target market and deliver this while instilling in the customer the belief their company’s ‘satisfaction solution’ is a better value than the competition’s.

The first step in a marketing strategy involves the identification of unmet needs within a market and delivering-developing products and-or services to meet those needs. A company must first define its market: is it a business-to-consumer company, a business-to-business company, or both? Regardless of the target(s) a company must be able to clearly identify a common need amongst a large portion of this market, as well as that portion’s propensity and ability to buy that product or service.

Once the target market has been identified it is time to do some analysis. The depth, complexity and related costs should remain proportionate to the ratio of overall business this product or service is anticipated to generate.

The first analysis should be an internal one: what will be involved in creating this product or service? Is there access to all the necessary components? How much volume can be handled? Are there efficient distribution channels? What will it cost to make this? The next phase is an external analysis that looks at specific trends within the target market. With this information in hand, a company is then able to make an informed decision as to whether or not it is feasible to proceed.

Now that the target market has been identified and the operational side has been flushed out, a strategy can be addressed. How a company decides to communicate its message should be in correlation to its overall marketing strategy. Whether the most effective method of conveying your message to the target audience is through traditional advertising channels, the Internet or more innovative activities, it should be apparent from the prior analysis.

The final phase of a marketing strategy should examine the component of customer relationship management: What processes are in place to service our customers? How do you ensure a positive resolution of customer complaints? What performance measurements will be used to determine how well clients are being serviced? And, most importantly: How will customer relationships be maintained so they will do business with us again and again? By developing a comprehensive marketing strategy that spans the entire lifecycle of new to repeat client, a company will find it is able to effectively address the present needs and wants of its target markets, as well as being able to incorporate new areas as they develop.

Strategic managers have concluded that to survive and thrive in the challenging market conditions of this new reality they must pay attention to employee needs and morale in order to maintain a competitive edge through a more highly motivated and productive workforce.

Rather that just focusing on the bottom line in the reality of todays slower economy, effective managers are utilizing innovative strategies to retain quality employees that recognize the two main shifts in employee perspective, concern over job security and a need to experience a sense of purpose and value in the work they do.

Within this challenging economy, employees are faced with the uncertainty of future job security. In order to combat this uncertainty, strategic managers are addressing this issue through direct and clear communication. Rather than leave employees in the dark to draw their own conclusions regarding their future of the company and employment opportunities, managers are clearly restating job roles and expectations and sharing senior managements strategies for maintaining and increasing market share in the new economy. While this information may not always be what employees want to hear, employees appreciate being in the loop because it allows them access to accurate data rather than rely solely on misinformation and rumour. This direct communication allows employees to understand the whys and where fores that are behind managements decisions regarding any redistribution of responsibility areas, requirements for increased workloads and the knowledge that management has allotted adequate resources to allow employees to get the job done within this new structure.

The other side of the communication coin is this must be a truly two-way dialogue. While management will most likely make decisions regarding some of the initial changes, it would be foolhardy to overlook the invaluable resource of the companys employees as a source for innovative solutions for cutting costs and increasing revenue generation. Effective managers must open channels and create tools to allow employees to participate in the solution process. This strategy is a viable one no matter how small or large the company. Even huge corporations are findings ways to tap into the creativity and knowledge of their employee stakeholders. Recently the Bank of Montreals Chairman and Chief Executive Officer Tony Comper announced to staff in an organization-wide e-mail that the bank has set a target of increasing its pretax profit by 500 million dollars through a mixture of cost cutting and revenue growth within the next three years. Staff are encouraged to share their ideas for new revenue generation avenues and cost cutting strategies via a new web-based tool called Ideanet. This intranet tool is an open forum for all staff to contribute their ideas. These ideas are then directly funneled to executive management for review and evaluation for potential implementation within the organization.

In the wake of the new reality people are reassessing their priorities and rethinking how they balance their lives. Many, who only a few months ago derived a great deal of pleasure and their identity from their jobs, are now looking elsewhere for a sense of security and meaning in their lives. There has been a strong shift back to family and home. Home is now definitely where the heart is. The challenge for todays managers is to bring some heart and meaning to the workplace so that employees can feel enthusiastic about making a significant contribution through their jobs. This sense of meaning comes from feeling part of the process and challenged in their position. A recent Gallup poll report revealed that only 24 percent of Canadian employees feel fully utilized and challenged by their work. Many proactive employers are now creating unique opportunities for staff that allow them to feel fulfilled at work, both professionally and personally.

A great number of these initiatives are a result of employee input. For the most part employees are sensitive to the fact that business is business and the bottom line is the ultimate decision-maker of expenditures. Many are open to new job structures that only a few months ago would not have been entertained at all. New job structures such as reduced work weeks, job sharing and companies allowing employees to do volunteer work during company time are allowing those employees to maintain their sense of job security while simultaneously maintaining a sense of balance between their personal and professional lives, while also making a meaningful contribution to the community.

Education is another area in which employers and employees are working together. An employer, not wishing to lose a valuable employee, may offer to continue to pay staff at full or partial salary while they upgrade their knowledge and skills. Many employees are happy to foot the tuition bills themselves, knowing that they will be earning while they are learning and coming out the other end to a secure job with a employer who really cares about them.

The past few months have presented many challenges to businesses everywhere. Defying all odds strategic managers are finding the silver lining in this very dark cloud and building stronger companies that are staffed by individuals who are true members of the company team and feel an increased sense of loyalty to their employers.

Copyright – Kelly Melanson, Certified Management Accountant

What does teamwork bring to a business? Synergy; where the efforts of the group exceeds the sum of the individual efforts. While not every project requires that a team be created, some tasks are too onerous for an individual to complete on his or her own.

New thinking. How often has someone with little or no experience brought a new idea to a table of “experts” in their field? As a result of a federal government initiative, a finance associate was asked to sit on a committee at her company that was to look at reducing product packaging by 10% for the current year. In less than a minute she had reduced one product’s packaging by more than 50% without jeopardizing the integrity of that product! As mentioned, her field of expertise is accounting! All it takes is one person to “think outside the box” to get the group charged.

However, caution must be exercised when putting a team together. Each person has a responsibility to the group and it is important that some thought go into the personality traits of the individuals being considered when forming the group. There are no individual successes as the achievements made within the group become those of the group. As a result, a “team player” personality is crucial to the success of the group. Each member has a responsibility to the group to participate as well as listen with respect and an open mind to the thoughts of the other members. Caution must be used to ensure that any individual member of the group does not become too powerful and influence or coerce the group in a direction they would otherwise not have collectively taken.

In “Assets and Liabilities in Group Problem Solving: The “Need for Integrative Function” by Norman R.F. Maier, he discusses “group assets,” “group liabilities”, and “the leader’s role for integrated groups.” He summarizes with “the merits of group versus individual problem solving depends on the nature of the problem, the goal to be achieved… and the skills of the discussion leader.”

In his article, “Groupthink,” Irving L. Janis discusses the potential problems that result from team members being too eager to reach consensus rather than solving the issue for which the group was initially brought together. Mr. Janis also puts forward nine recommendations for avoiding the “groupthink” phenomenon.

Teamwork in decision-making can be an asset given the right elements. It requires a cohesive group with the skills necessary to move in the “right” direction and a leader to facilitate and ensure that the group does move in that “right” direction… wherever it may lead!

Copyright – Kelly Melanson, Certified Management Accountant

“Personal information” is defined as “information about an identifiable individual”. That means that information such as race, age, marital status, religion, employment history, credit history, assets, home address, home telephone number and even opinions about an individual would be protected under this ACT.

“Commercial activity” is also defined in PIPEDA as “any particular transaction, act or conduct or any regular course of conduct that is of a commercial character, including the selling, bartering or leasing of donor, membership or other fundraising lists”.

If you think the Act doesn’t pertain to your organization, think again. If you collect any information that could in any way be linked to a specific person, you must ensure that your organization is compliant with the following requirements:

You must designate an individual who is accountable for your organization’s compliance with PIPEDA. When you collect personal information about an individual, you must explain to that person the purposes for which you are collecting the information, and you must obtain that person’s consent before you can collect, use or disclose the information. (Note: PIPEDA does not specify that consent must be obtained in writing, but it would be prudent to obtain it in writing so there are no misunderstandings down the road.)

You must not collect more information than is necessary to achieve your clearly stated purposes. You also must not use or disclose the information for any other purposes without the individual’s consent, so be sure you account for all the uses in your new policies and articulate these in writing.

You must destroy the personal information once you no longer need it to achieve your stated purposes; the length of time will vary on the information as there may be legal requirements for terms of information retention.

You must ensure the personal information is accurate and complete to the best of your ability. If an individual requests it, that person must be given access to their information including the details regarding the existence, use and disclosure of their personal information. It is your organizations responsibility to change any inaccurate information.

You must protect all personal information by taking appropriate security measures. The level and extent of these measures will be dictated by the sensitivity of the information, but should at the very least include:

1. physical measures, for example, locked filing cabinets and restricted access to offices
2. organizational measures, like security clearances and limiting access on a “need-to-know” basis
3. technological measures, such as the use of passwords and encryption.

And finally, you must make your policies and practices regarding the management of personal information available upon request. Your website is an effective method of conveying your organizations internal compliance officer(s), your privacy statement and methods in which individuals can access your documented PIPEDA compliance policies.

If you find all of this rather daunting, take comfort in the fact that you are in good company. Most of the people whom we have recently polled were only vaguely aware of the existence of a new privacy act. It would follow that they have done nothing to initiate their compliance with PIPEDA.

However you have now taken the first step by reading this article and familiarizing yourself with the key compliance issues of this act. If you would be interested in accessing more resources to assist in your organizations compliance initiative, please contact us for more information.

Copyright – Kelly Melanson, Certified Management Accountant

Simply put … it is hiring an outside service to perform tasks that are currently being completed within your organization of work that you feel important to your business but never seem to find the time to implement and maintain.

What should I outsource?

There are many benefits to outsourcing activities you currently complete in-house. If “right sizing” is now an integral part of your company’s plans, you may find yourself with fewer people to complete required work. Perhaps there are not enough hours in the day to complete work other than that which gets you through to the next day. By “employing” an outside service at a fixed hourly rate or set fee scale (and eliminating payroll benefits and government deductions), you may find yourself saving money in the long run.

There are two avenues that you may wish to consider depending on the “level” of outsourcing with which you are most comfortable. You may wish to outsource some or all of the day to day functions so that you (or a staff member) can focus on your company’s future and how to get there … where you see your organization in five, ten, even fifteen years. If you are more comfortable with keeping your hands on the day to day operations, you may want a “higher” level of outsourcing where a management accountant works with you to develop your vision statement and strategic plan. They will then complete the neccessary series of steps (budget implementation, reporting, procedures) that will assist you in attaining your goal.

Conceivably, you may even be inclined to consider outsourcing your entire accounting function. This enables you to focus your efforts on running your business and generating increased revenue.

Is outsourcing right for me?

That question is best answered by you and your management accountant. It will involve a detailed cost benefit analysis of the work that you are contemplating outsourcing. Also, do not forget the benefits that you may reap which are more difficult to put a cost to.

You also need to consider the entire service being offered through outsourcing. Will financial and management reporting necessary to your organization be more timely? This will enable you to be more proactive rather than reactive in the operation of your business. In addition to this, having a management accountant on your “team” all year round (rather than just at tax time) may enable him or her to prove valuable information or alternative courses of action that you had not considered in the past. For example, cash flow management by an expert means money in your bank account longer.

Where do I get started?

If you are currently working with a Certified Management Accountant you may wish to start with that person. If this is not their area of expertise, they may be able to refer you to someone who is. Keep in mind that you need to be comfortable with and confident of the person and their skills which you will be employing.

Copyright – Kelly Melanson, Certified Management Accountant