Member of Russell Bedford International, a global network of independent professional service firms.
Member of Russell Bedford International, a global network of independent professional service firms.
Choosing the right business structure can make or break your bottom line as an entrepreneur. The decision to become an LLC or an S corporation can be confusing. In this episode of CK Small Business Focus, CK Tax Manager Eric Challenger breaks down how these two popular structures differ when it comes to taxes, liability protection and administrative complexity. Whether you’re just starting out or your business has grown past the point where self-employment taxes are eating into your profits, this episode will help you understand the pros, cons and key considerations of each option. Then you can decide which structure fits your business today and when it might be time to make a change.
Transcript:
Welcome everyone to another edition of the CK Small Business Focus. My name is Eric Challenger and I’m a Tax Manager at Cray Kaiser. Today we are going to be analyzing which structure, LLC or S corp, is best suited for your business.
Starting a new business comes with a long list of important decisions and one of the most crucial is selecting the right entity type. The two most common structures for small businesses are the limited liability company and the S corporation. Each offering unique benefits and drawbacks, understanding how these entities differ in terms of taxes, legal treatment, and administrative complexity can help you make the right decision as your business grows.
Let’s start with the LLC, the flexible starting point. An LLC is often the go-to legal structure for new entrepreneurs. It offers limited liability protection, meaning your personal assets are typically shielded from business debts and lawsuits. and allows for flexibility in ownership and income allocation. For tax purposes, the IRS doesn’t recognize an LLC as a distinct tax entity. Instead, a single-member LLC is treated as a disregarded entity with all activity reported on the owner’s individual tax return on Form Schedule C. A multi-member LLC is taxed as a partnership unless it elects to be treated as a corporation.
Simple tax filings for SM LLCs. Just report on your individual return. Flexible ownership and income allocations make it easy for you to allocate income to specific members.
Low administrative burden. Ideal for startups and low-profit operations. However, active owners of an LLC must pay self-employment taxes on the entire net income, which can be costly as the business grows.
Now let’s talk about S corporations. An S corporation isn’t a legal entity. It’s a tax election that an LLC or a C corporation can make with the IRS. Once elected, it changes how the business is taxed and allows owners to reduce their SE tax burden by splitting income into salary and distributions.
Payroll tax savings. Unlike the LLC, S corp owners can pay themselves a quote-unquote reasonable salary and take the rest of their income as distributions exempt from SE tax. Maximize qualified business income deduction. If structured correctly, you can take full advantage of the 20% QBI deduction introduced by the Tax Cuts and Jobs Act.
Lower audit risk. S-corporations file separate business tax returns reducing audit visibility compared to Schedule C filers.
Increased compliance. You’ll need to file payroll, issue W-2s, and submit a separate business return.
Reasonable compensation. Reasonable compensation is required, and the IRS scrutinizes this closely. State recognition varies. Some states may not recognize S corporation election and may impose additional tax filings, or you may have to file as a C corporation.
Electing S corp status makes the most sense when your business is generating net income significantly above your reasonable salary. While “reasonable” is subjective, many practitioners suggest considering an S corporation once your annual income exceeds $150,000. The tax savings from reduced SE taxes can often outweigh the added compliance costs from becoming an S corporation. But not every business is ready for that transition. If your income is modest or irregular, or if you value operational flexibility and minimal paperwork, the LLC structure may still be a better fit.
So the bottom line, your choice of business entity will shape your tax obligations, personal liability, even your ability to raise funds. While most businesses start as LLCs for simplicity, making the S corporation election can be a smart strategic move once you’re generating higher profits. Still unsure which path is right for you? The entity that suits your business today may not be the best option tomorrow. If you’re a single member LLC or a partnership looking to explore the tax benefits of electing S corporation status, reach out to the tax experts at CK for tailored advice at www.craykaiser.com or call us at 630-953-4900.
For more information, download our white paper.
CPA | Manager
Have you ever heard the term “WIP” and wondered what it means? WIP stands for “work in progress” and for construction businesses, it’s a report that shows how a job is doing financially and whether the project is on track. The question is: how much of that work is your accounting software doing and how much is falling on your team’s shoulders? Let’s see why that matters.
What does your monthly WIP reporting look like today?
Let’s take a step back and consider how your monthly close process actually works. As an outside advisor, I often hear clients say things like, “We want our consultants to consult,” or “Is there anything we could be doing better?”
That’s prompted me to approach these conversations a bit differently.
Instead of jumping straight to recommendations, it begins with asking better questions.
For example: does your accounting system generate and keep your WIP up to date on its own? Or does your accounting team still rely on exporting data into Excel—manually updating schedules, recalculating balances, and recording entries after the fact?
If Excel is still where most of this work happens, what does that tell you about the role your system is playing? It might mean your software isn’t being used to its full potential and that your team is doing the work your system could be doing instead.
Which leads to an important question:
Why does updating WIP each month take so much time? Is it simply “the way it’s always been done,” or is something more going on?
Is the system simply unable to handle WIP tracking and calculations?
Or is it capable, but it’s just not set up that way? Somewhere between those answers lies an opportunity. Because every hour spent fixing and double-checking spreadsheets raises a fundamental question:
Should people be doing the work that the software was designed to handle?
From my experience working with contractors, most accounting systems are good at two things: tracking job costs and handling progress billings. As projects change, however, updates to contract values and cost budgets don’t always happen in real time. Instead, they often get handled after data is exported and reworked in Excel.
What would the process look like if those changes were maintained within the system as part of its natural workflow?
Imagine this: instead of exporting data and fixing it in a spreadsheet, your team updates contract values and cost budgets right inside your core accounting system, as part of the natural flow of how information is captured, updated, and maintained over the life of a job.
From there, it’s worth asking:
What processes would need to change to make that possible?
What data would need to be entered differently, or more consistently, to make the system work the way it’s supposed to?
This naturally brings up the role of project managers. They are often the closest to the work and closest to the day-to-day changes like cost updates, job progress, and expectations. Does it make sense to involve them more directly in keeping the job data accurate and current?
What might that look like in practice?
And where is the balance between giving operations more ownership and keeping the right financial checks in place?
All of this comes back to one bigger question:
How is your monthly WIP process built today and how could it look different?
What would it look like to rely less on large, complex spreadsheets and allow the accounting system to carry more of the load?
And if accounting teams weren’t spending hours updating spreadsheets and fixing errors, what could they be doing instead? Probably things like:
And then there’s also the matter of risk.
Spreadsheets are flexible and familiar, which is exactly why so many teams rely on them.
But that flexibility comes with a downside. They depend on formulas, on version control, and on someone entering the right numbers. One small mistake can throw off an entire report.
So the real question is:
Are you actively managing that risk or just quietly accepting it?
At its core, this isn’t just about WIP reporting. It’s about how work gets done, where data lives, and how much your organization relies on people versus systems to keep things accurate and efficient.
The goal isn’t necessarily to eliminate Excel or overhaul everything overnight.
The goal is to start asking better questions:
Just like Steph Curry’s step-back creates an open look, sometimes you have to take a step back before you can take the shot that changes the game.
If this sounds familiar and you aren’t sure where to begin, you don’t have to figure it out alone. The trusted advisors at CK work with contractors to help them make sense of these types of questions and to find practical ways to get more out of the systems they already have. Reach out to us to discuss what your WIP process could look like.
MSA | Accounting & Advisory Services (CAAS) Senior
The period-end close is the process of finalizing a company’s financial records for a given period of time. It can often be stressful, delayed, and overly dependent on a few individuals. Key financial insights are delivered but not always on time, and not always with confidence. This isn’t from a lack of effort, often it is a lack of structure.
CAAS (Client Accounting Advisory Services) is where accountants work as outsourced advisors. Across many of these engagements, the same problem surfaces, the accounting records are accurate, but the process is stressful and slow.
The result is information that leadership relies on arriving too late to be useful. By the time results are finalized, key decisions may have already been made and even the most precise numbers will lack value. This isn’t a people problem, it’s a structure problem.
Four warning signs that the process is broken:
When these gaps exist, accuracy and timeliness do not reinforce each other but instead they work against each other. The result is inconsistent outcomes, extended timelines, and inefficiencies. But ultimately, there is a growing uncertainty around the completeness and reliability of the financial data.
The most effective improvements aren’t sophisticated, they are foundational. Here’s what actually works:
The takeaway is simple: accuracy creates value when it is delivered through a repeatable and well-defined process. With a strong foundation in place the financial data becomes timely, reliable, and worthy of trust. This is where our work as advisors matters most when supporting our clients to bring integrity to the numbers, care to the process, and consistency they can rely on to make informed decisions with confidence. If you would like to learn more about how our CAAS services can help you with your period-end close, please contact us.
CPA, CVA | Manager
As a manufacturer, your inventory isn’t just sitting on shelves, it’s the lifeblood of your company. Every material you buy, every product you’re building and every finished good waiting to ship represents cash your business has already spent. How well you track and value that inventory has a direct impact on profitability and assists in your ability to make informed decisions.
The foundation of effective inventory tracking is knowing what you have, where it is and what it costs you, in real-time. That means recording inventory movements when they happen, from when raw materials arrive, to production, and ultimately, when they ship. Outdated or rough cost estimates lead to poor decisions about what products to focus on, where to invest, and how to price competitively.
It is also important to regularly review your bills of materials (BOMs), by using systems that capture inventory movements at the point of activity. Like anything, your inventory inputs are impacted by macro and microeconomic factors that can change your cost to produce and therefore, BOMs should be reviewed regularly to ensure that these changes are being reflected. Other factors include changing a supplier, swapping out a material or improving a process; these are all examples of changes that need to be reflected in your records right away, not months later. Stale data can turn into material variances or financial misstatements.
Knowing your accurate costing is equally as important as knowing your inventory because it directly influences pricing, margin analysis, and strategic decision-making. However, you choose to calculate what it costs to make something, including standard, actual, or activity-based costing, the method must reflect what’s actually happening on your shop floor. Inaccurate or outdated costs can lead to underpricing, shrinking margins, misinformed product decisions and misleading financial results. Clear policies about what you expected to spend versus what you already spent help you to catch inefficiencies early, before they become bigger problems.
Regular and timely review of costing assumptions matters more than most people realize. If you don’t know what it truly costs to make a product, you risk pricing too low and losing money on every sale. It is important that your costs reflect current material prices, labor rates, and overhead structures. Outdated estimates lead to poor decisions about which products to focus on, where to invest and how to price competitively.
When inventory tracking, BOM management, and costing are kept accurate and up-to-date, the payoff is significant. You’ll gain a clearer picture of what products are actually making you money, have better control over cash flow, and more confidence in management decisions especially during times of inflation, supply chain disruptions, or rapid growth. In short, strong inventory practices aren’t just an accounting exercise. They’re one of the most practical tools you have for running a healthier, more resilient business.
Accounting & Advisory (CAAS) Supervisor
In today’s competitive business environment, staying on top of your company’s financial health is essential for sustaining growth, maintaining profitability, and making informed decisions. Business owners need clear and accurate insight into their financial position in order to make informed decisions, manage risks, identify opportunities for improvement and plan for the future. One of the most effective ways to gain this insight is through consistent financial reporting. Reviewing a few key financial reports each month can help you understand how your business is performing, where improvements can be made and whether you are on track to meet your financial goals.
Below are five financial reports every business owner should review monthly. These reports will provide you with a comprehensive understanding of your company’s financial health.
The Profit and Loss (P&L) statement, also called the income statement, is one of the most important financial reports for any business. This report summarizes your company’s revenue, costs, and expenses over a specific period of time, typically monthly, and shows whether your business generated a profit or a loss. Key metrics to review in this report include gross profit, operating expenses and net income (or loss).
Why this Report Matters:
2. Balance Sheet
A balance sheet provides a snapshot of your company’s financial position at a specific point in time. It outlines what your business owns (assets), what it owes (liabilities), and the value remaining for the owner or shareholders (equity). Key metrics to review in this report include current assets, current liabilities, and owner’s equity.
Why this Report is Matters:
3. Cash Flow Statement
Cash flow is the lifeblood of any business. The cash flow statement tracks how money moves in and out of your business over a given period. Key metrics in this report, include operating cash flow, cash inflows (customer payments or sales revenue) and cash outflows (expenses, payroll and operating costs) and the overall change in your cash position.
Why this Report Matters:
4. Revenue or Sales Performance Report
For many businesses, revenue comes from multiple products, services or business segments. A revenue or sales performance report helps track where income is coming from and how these sources are performing over time. Key metrics in this report may include revenue by product line or service category, sales trends and performance by department or salesperson.
Why this Report Matters:
5. Accounts Receivable Aging Report
The accounts receivable (AR) aging report shows how much money customers owe your business and how long invoices have been outstanding. This report typically groups receivables by time periods such as 30, 60 or 90+ days past due. Key metrics to review include total outstanding accounts receivable, aging categories and the percentage of overdue invoices.
Why this Report Matters:
Successful businesses don’t rely on guesswork; they rely on data. By reviewing these top five financial reports each month, Profit and Loss (P&L) Statement, Balance Sheet, Cash Flow Statement, Revenue or Sales Performance Report, and Accounts Receivable Aging Report, business owners can gain a clearer understanding of their financial position and overall performance.
Regular financial review of these reports not only helps minimize risk and maintain compliance but also provides valuable insights that can support better decision-making, improve profitability and long-term growth. When business owners stay proactive with financial analysis they are better equipped to navigate the challenges, seize opportunities, and builder a stronger, more sustainable business.
If you have questions about your financial reports, please contact the CAAS team at CK. Our trusted advisors work with business owners to improve financial reporting, strengthen accounting processes and provide insights that support smarter business decisions.
CPA | CK Principal
A growth mindset is essential for any business that wants to make a lasting impact on its stakeholders, customers, employees and community. Leveraging technology, tools and expert advisors can help support that growth, but it can also reveal weaknesses within an organization, particularly in its financial infrastructure. As your business expands, accounting should do more than simply track what has already happened. It should actively provide insights, support decision-making and help guide your business forward. The following strategies can help strengthen your financial foundation and support sustainable growth.
Many new businesses begin with cash accounting because it is simple and helps track how much money is coming in and going out. However, cash accounting does not always show the full picture. It only records transactions when cash changes hands, which can make it difficult to see how sales align with related costs.
As your business grows, accrual accounting becomes more useful. It records revenue along with expenses in the same period they occur. This allows you to better understand which products or services are truly profitable.
As your business grows, regular financial reporting is vital. Set a monthly financial reporting cycle for the areas that matter the most for your business and consistently follow it. Accurate and timely reports of these areas help you trust your numbers and make informed decisions. A good practice is to review the previous month’s financial statements by the 15th of the current month.
Accounting software and applications are excellent tools for recording transactions efficiently and accurately. Your team can focus on interpreting numbers and analyzing costs, along with identifying excess expenses and helping leadership make informed business decisions. When technology handles the routine tasks, your team can fully understand and act on the data.
Your past financial statements can help guide future decisions. Use historical financial data to build sales forecasts for each product line. Accurate cost estimates will help you see how those sales translate into profits that help your business grow. It’s also helpful to establish key performance indicators (KPIs). These metrics both financial and non-financial allow you to track progress towards your goals and measure the overall success of your business.
Even strong internal teams can benefit from outside perspectives for financial reporting and analysis. Working with experienced professionals with strong backgrounds in accounting and forecasting can help your staff interpret data effectively. Consulting with these professionals regularly throughout the year, not just at tax time, can provide valuable insights into your business that help refine your growth strategies. Additionally, advisors can also recommend tools and methods for establishing an accounting and reporting system tailored to your needs.
Growth creates opportunity, but it also increases complexity. With clear reporting, effective technology, and forward-looking analysis, your financial data becomes a powerful guide rather than a guess. Supported by the right systems and expertise, you can make confident, informed decisions that turn momentum into lasting success.
If you’re looking to strengthen your accounting department and team, consider contacting Cray Kaiser’s CAAS Department. Our team can work with your staff to improve your financial reporting and build systems that support your business as it grows.
In this video, Matt Richardson and Damian Contreras walk you though how to use our secure client portal. From setting up your account and uploading documents to paying invoices, completing your tax organizer and receiving notifications, this overview will help to make managing your tax information simple and stress-free.
Topics Covered:
How to Access the Portal & Setting Up Your Account – 0:08
How to Upload Files – 1:40
How to Make a Payment – 3:45
How to Edit and Upload Your Tax Organizer – 5:42
Making Changes to Information on Your Tax Organizer – 11:37
Electronic Signatures – 12:05
Forgot Your Password – 13:07
Transcript:
I’m Matt Richardson. I’m a tax senior at Cray Kaiser. I’m Damian Contreras. I’m also a tax senior here at Cray Kaiser. And today we’re going to walk you through our portal that we use and started back in January of 2024. So Matt’s going to take you through the steps of how to set up the portal and how you initially get the invite to the portal.
Yeah, so I’ve just clicked on the link in the email, the notification email you get for setting up your new portal account. It takes you here, and then all you have to do is create a password. And once you’ve done that, you’re in. Once you load in, it brings you to our home landing page, which prompts you at the very top with if there’s any outstanding balances due, as well as right below that is. your to-do list and any recent files that are in your portal for you. If you have multiple accounts, for example, if you have an individual, if you have a trust, if you have a business, if you have children’s returns, you’re managing, to switch between the different accounts, you’ll go down here. There’s a name and there’s a personal. You can switch between a personal and then it’ll show any others that are connected. We just have a fake business client here connected. So anything that’s connected to you with Cray Kaiser, you’ll have a selection there to toggle between. So when you’re uploading documents, you can upload the documents to the specific portal for whatever the documents are for. That way we can kind of make sure everything’s staying nice and sorted.
And now let’s say you are getting your tax documents and you want to give them to us we don’t necessarily even have to request them from you all you have to do is simply go into your portal and upload them and we get notifications that you’re adding new files into your folder. So Matt will show you how to add a new file into your portal. So all you’ve got to do is go over here to files, add a file and then you can select. It’ll bring you over to your computer’s files that anything that you have downloaded to your computer and you can go in and access them and you can click on as many or as little files as you’d like to upload. So you can upload any file type that you would like. The only file type that we request you don’t upload is any JPEGs and pictures. We prefer Word documents, PDFs, Excels, anything of that nature is a great file to upload and our system can handle it. You can even upload zip files if that’s easier for you. If you’re adding in password-protected documents, when you are prompted to rename the file, maybe include the password with it, or else we’re going to have to reach out to you and ask, what’s the password to access this? It is a secure portal, so you are able to do that. Absolutely. And also, if you have a window open, you can just drag and drop as well. Very easy to add something.
Something we have people ask about is how to sort files in the portal. What happens is once you upload it, we’ll get a notification and it will prompt us to sort the files into whatever the relevant tax year or folder is within your portal. So the client doesn’t need to worry about dragging into a particular folder. You can just drop it in here in the file tray and we’ll take it from there. The only thing we ask is you put it in the respective client’s folder. So that’s the only indexing we need you to do is to index it in the proper client, not necessarily the right year and folder type.
So then we can also go down to the billing portion of it. So if you want to go there, let’s say you have a bill due. Any of your bills will be prompted right in the Canopy portal. And you can still, if you’d prefer to make a paper check, you can do that and mail it. But it will give you your invoice in here or you can very easily go and make a payment or view your payment history or what outstanding invoices you have. And to make a payment all you have to do is click the make a payment button. Even if you have no balance due just click on additional payment and you can type in what whatever amount you’re able to pay at that time and you just hit continue and you can pay with either a credit or debit card. There is a fee attached to that. Or you can do a direct bank account debit by putting in your account and routing number.
Whenever we upload documents for you, invoices for you, copies of your tax returns, payment vouchers, we will send you an email notification that’ll prompt you exactly with what we put in there, what’s it called, is it an invoice, is it a copy of your 2024 tax return. So all of that will be sent to you via email and then you can log into your portal, view it, download it, and see all of that within your portal. And it’ll come to you by entity as well. So if you have your personal and then your kids or your business, it will say, you know, uploaded in John Doe’s file or, you know, John Doe Inc’s file for you. So it’ll come to you for each portal you have access to.
Currently, you are not able to see the status of your tax return in the portal. That’s something you’d have to reach out to us for. And whoever’s on your team here at Cray Kaiser would respond to you promptly on where your tax return sits in the queue.
Also something that we’re going to be implementing for the 2025 tax year as it’s creeping up for your individual tax returns is you’re going to see your organizer as a to-do in your personal portal. So when you log in, Matt will show you right there. It says organizer 2025. All you have to do is open that up. We’ll have a PDF file attached. Open it up and there will be our letter and our questionnaire to fill out. And then there will also be your prior information for you to review and see what you need to send us this year. And you can fill this out in the PDF, attach it, re-upload it to us, and we can receive it that way. If you prefer to print it out and re-scan, that’s possible as well. Yeah, and when we send it over to you, you’re going to get an email notification telling you that there’s a new to-do in there for you. It’s going to be the 2025 organizer. And we just request that you review it and write any pertinent information on there. Did you switch jobs, open new accounts, have a kid, expand your family? Are the kids in college? And we have questions on the organizer’s first and second page that go over all major life changes that are very common, that can impact your tax return.
This step we’re going to show you how to download and fill out your organizer through the pdf file. And if you’re not as comfortable with the technology you can still print it out and re-scan it and upload to us but I think for a lot of people it’ll be easier just to do it in the PDF and re-upload it. So the first thing to make sure you have, you do need to have a PDF editing software. So Adobe is a common one that a lot of people have, but there are a lot of other softwares as well. You should be able to do it in any program that allows you to edit a PDF. So make sure you have that. Some of them are browser based. Some of them are desktop based. Again, pretty much anything will let you edit a PDF. So when you’re ready to fill out your organizer, you can just go to the portal. You’ll either have it in your files. There should also be a to-do list item for you as well once we upload them. And then the important thing here is we’ve had some people fill it out in the viewer here, through Canopy. It will let you sometimes edit or type things on here, but unfortunately it does not save back to the portal when you edit just through this viewer. So you do need to actually download it to your desktop computer and then edit it. So we’ll download. And so once you’re in and have it open, you can go through and add all the information you need to. Most of these editors will have comment tools so you can add a check mark, click for yes, no on all these questions. So that’s typically pretty simple. Doesn’t matter, check mark, X, whatever you like to use. If you need to add data or numbers, scroll down to one of these sections for more information. So if you need to add information, there are usually multiple ways you can add a text box. You can add that and tell us, I bought a new rental this year. I’m not sure what you need, but I included some documents. So you can add a note like that for us with a text box. Some of them also allow you to type text directly onto the document without a text box. You know, it looks a little different, but again, as long as you’re putting the information there, we’ll be able to handle it. Same goes for the fields that have number inputs. So if you’re putting in your charity contributions, you can just go in, edit, type the text on here, and then we’ll be good. So what you need to do then, you need to save this once you’re done filling it out. Save the file. And if you want to, just to help us track things, you could always rename it something like filled out, just so we can keep the original one straight from your filled in one. You don’t have to do that, but that would just be a little helpful if you can do it. And then go to files, add a file, and attach your organizer. And then we’ll have it in our portal. So it’ll be in our portal. If we open it up, we’ll see the changes you added to it, the check marks, the numbers, the other information you’ve added. That said, once you’re done, all you do is re-upload it to the portal, add any comments that you’d like, and mark it as complete. And then it’ll let us know that it’s ready for us to review and complete your tax return. If anything changes after you’ve uploaded the initial organizer at that point, it’s probably better just to email or give us a call. Whoever your contact here is and let us know what information has changed that’s definitely something that happens pretty frequently and I think once we’ve got the organizer and looked at it it’ll be much you know easier for us to track down the change and see what we need to do if you just call us and say oh hey I forgot to tell you about this new account I opened or whatever it is then we can kind of get right to it.
We do have a feature within the portal to send electronic signatures. Most of our electronic signatures will come through DocuSign and they’ll go directly to your email from our tax software or our personal DocuSign accounts for those those items. And sadly the IRS is slowly developing accepting electronic signatures so there are still some where we’ll publish documents in the portal that you’re going to have to print out and put a wet signature on. But if we can do things electronically, we definitely try to do those electronic signatures and make it very easy into your emails.
The portal has an automation system in it. So once we set up that to-do for you, we can choose whether it emails you daily, weekly, monthly with reminders until it’s completed. So we’ll probably turn it on to where every week or every other week it’s sending you a reminder to say, hey, this task is in there, this organizer is in there for you to complete. And then until it’s completed, you’re going to keep getting those emails.
What if you forgot your password to the portal? So to get into your portal, all you have to do is go to the Cray Kaiser website, craykaiser.com, and then in the left bar, it’s going to have a little option for portal. So you just click on portal, and it will immediately take you to the Cray Kaiser portal. Once you’re on that landing page, it’ll tell you to put in your email and your password, and there will be an option for forgot password, and it’ll walk you through the steps to reset it.
Thank you for listening to Matt and mine’s explanation and steps on how to use the portal. And if you have any questions, feel free to reach out to your team member here at Cray Kaiser, a member of our admin team, and we’ll further assist you with the portal.
In part 2 of our video series about college foundations, Dan Swanson, an assurance manager at CK, shares his expertise in supporting college foundations. With more than a decade of experience, Dan breaks down the complexities behind managing scholarship funds, maintaining accurate financial reporting and leveraging financial systems to ensure transparency and donor confidence. He explains how thoughtful accounting practices directly translate into real opportunities for students. He highlights why strong financial oversight isn’t just important, but essential to fulfilling a foundation’s mission.
Transcript:
Welcome everybody. I’m very excited to be here today. My name is Dan Swanson. I am an assurance manager here at Cray Kaiser. I’ve been with the firm for about 12, 13 years now. And I wanted to talk about a subject matter that I’m very passionate about. And that is college foundations and some of the important factors that we need to be considering, some of their hot topic issues.
I wanted to kind of talk about foundations and how we here at CK have helped foundations on a number of different areas. So when you think of college foundations, what do you think about? What are some of their big struggles? What are they, what’s their mission, what’s their vision, what are their values. So with college foundations, they get funds, they get dollars, they get money, they get to invest, and hopefully those earnings, it earns, returns, which then turn into scholarships, turns into real dollars for real students to pay for real education. So sounds simple, but when you have, if you only had like two or three scholarship funds, not a big deal, but some of our clients that we serve have over a hundred different individual unique scholarship funds or program funds, and they have millions of dollars of investments. So how do we ensure that everybody’s getting their fair share of these investment earnings? How do we ensure that the financial statements are telling an accurate story to the board, to the executive director, to the finance committee, to all those involved to make sure the end of the day, the maximum amount of dollars are going out to students to serve the mission. So that’s where we here at Cray Kaiser can come in and use all of our knowledge and experience to really help these foundations and a number of different factors.
You know, personally, I’ve helped just with the system setup. You know, what financial system are they using? Is there any setup issues we need to update, adjust, add to it, what type of modules does their system have? Timeliness of financial reporting, are they getting accurate financial statements monthly?
So some shared experience I have while working with foundations, some of the things that keep them up at night. I kind of touched upon this as individual scholarship funds or individual program funds. Your more sophisticated donors are going to ask, how’s my fund doing? How’s my scholarship doing? How much do I have left in that fund? How much did you spend in scholarship funds this year? What did it earn? Can we do better? You know, if my balance is running low, do I need to write another check to get my scholarship funds back up there? So in order to answer all those questions, what do you think we need to do? What’s super important? What’s super important is, you know, accurate financial reporting, both on an overall basis and by an individual scholarship and or project fund.
So the way I tell people is if you’re like a for-profit company, you have kind of one set of books that you need to monitor and track. With these nonprofit foundations, you could have 200 different trial balances or general ledgers that you have to track. Because each individual scholarship fund is its own kind of entity. So you can see where it’s not super simple and straightforward. You really got to be very careful and very meticulous about tracking this activity.
So how do we do that? How do we make sure it’s over cumbersome? Because we the goal is we want to give these donors financial reporting accurately and timely because that’s going to drive them to open up their checkbooks and bring in more funds and more opportunities to these to the students. Again what’s the goal? We want to give out scholarships to help educate young students.
So kind of where I come in, where I get passion is about, is we can see, you know, by accurate financial reporting, by accurate accounting, where it has a direct impact, you know, on America’s youth. So it’s pretty cool. So from that standpoint, it’s very cool. Accounting is cool, right? Accounting is cool, guys, you know, because it translates to real dollars to real students. You know, how do we pay it forward? Well, have good solid accounting records will pay it forward and increase scholarship funds.
Other issues I’m seeing, a lot of these foundations use the same type of software package. And over the years, I’ve gotten pretty good at learning the system and its full capabilities. So what I’m always trying to do is, I understand that this is the financial package that has always gone to the board each month, but what else can we do? What are they looking at? You know, I’ll sit in the board meetings or sit in the trenches. You know, what is it that you hone in on? What is it that you’re looking at? What’s important to you? And then I’ll try to see if the system can generate a better, more improved report to help them do what they need to do to keep the foundation on the straight and arrow. Again, transparency is your best friend. So how do I utilize that system to its fullest potential? Because it’s a powerful system, so let’s utilize it. So what is it that you need? What is it that you want? And then let’s work towards that. So that’s kind of fun. It’s fun to kind of see what, hear what they want, what they need, and then going back to the system and seeing if we can generate a new report and make it part of that standard monthly financial package. So that’s a lot of fun.
Some of the other issues I see is there’s different, like there’s like a dual-based system where one tracks all the donor information and all the contribution information. And then there’s a different system, which is your standard kind of general ledger accounting software. and they talk to each other and they’re integrated to each other. So making sure that both systems talk appropriately is super key. You know, if we have a bunch of donor information, a bunch of contributions in one system and it’s not being linked correctly to the other system, you can see how financial reporting can become out of whack and then you can see how come year-end. When it comes to audit time, it’s going to create a lot of headaches. So how do we get in front of that? How do we make sure the system is set up initially? So both systems are talking to each other and are integrated. So again, over the years, I’ve kind of learned both systems and we know how to make them work. Or at least know who to contact to help us when we notice issues.
If you have any questions that you would want to ask me, you know, please feel free to reach out. You can go to the Cray Kaiser website and you can find me. Again, I’m Dan Swanson. I’m an assurance manager here.
In this first video in our series about supporting college foundations, Dan Swanson, Assurance Manager, shares his passion for helping college foundations fulfill their missions. With more than a decade of experience in the firm and a lifelong connection to education, Dan explores the unique financial challenges and opportunities that college foundations face.
Transcript
Welcome everybody. I’m very excited to be here today. My name is Dan Swanson. I am an Assurance Manager here at Cray Kaiser. I’ve been with the firm for about 12-13 years now, and I wanted to talk about a subject matter that I’m very passionate about. And that is college foundations and some of the important factors that we need to be considering, some of the hot topic issues. I want to talk about some success stories, some issues that they commonly face.
One of the reasons I’m very passionate about this, because we always hear that question, if I wasn’t an accountant, what would I be doing? You know, I’m a big fan of education, my parents were teachers, I have brothers that are teachers, so if I wasn’t an accountant, I would be a teacher. So by serving these college foundations, I feel like I get the best of both worlds. I’m helping students, while getting to use my accounting knowledge and expertise. So, it’s very near and dear to me. So, I wanted to kind of talk about foundations and how we here at CK have helped foundations in a number of different areas.
So, when you think of college foundations, what do you think about? You know, what are some of their big struggles? What are they? What’s their mission? What’s their vision? What are their values? So, with college foundations is they get funds, they get dollars, they get money, they get to invest, and hopefully those earnings, it earns returns, which then turn into scholarships, turns into real dollars for real students to pay for real education. So sounds simple, but if you only had like two or three scholarship funds, not a big deal, but some of our clients that we serve have over a hundred different individual unique scholarship funds or program funds and they have millions of dollars of investments. So how do we ensure that everybody’s getting their fair share of these investment earnings. How do we ensure that the financial statements are telling an accurate story to the board, to the executive director, to the finance committee, to all those involved to make sure the end to the day, the maximum amount of dollars are going out to students to serve the mission.
A big thing that I see with a lot of these foundations is the budgets. Every year, the board, the finance committee comes up with budgets. How much are we going to budget to spend out in scholarships? How much are we going to budget for various, just kind of general expenditures? So how do we make sure on a monthly basis our budgets to actual are being monitored and tracked and appropriately recorded. So that’s the overall goal. That’s the overall purpose of what we here try to accomplish when working with foundations.
The board, the finance committee spends a lot of time coming up with budgets. Whether it’s kind of revenue budgets based upon donations that are coming in or investment earnings. But it’s also some of those management in general costs, you know, because we all know that there’s some just overhead that they need to cover. They need software, they need to pay for people, supplies, printers, etc. So, it’s not 100 % of it’s not going to scholarships. There are these overhead manager, we try to minimize it or they try to minimize it, but there are those costs. So a good way to kind of monitor and track that is through like is through budgets.
So how do we make sure as expenses are being incurred and checks are being cut, that we’re matching up the right expense item to the right budgeted line item. Seems simple but it can get it can get kind of tricky depending on the volume of invoices and who’s coding the invoices. You know, are we consistently coding this vendor to this budgeted line item? So again, what I like is kind of being on the outside is we’re that second set of eyes. You know, we can go in there and kind of build some of these expenses and enter your payables and run your checks for you. But you know, you are the kind of the initial person at you being the foundation, but we’re that second set of eyes. Hey, did you think about that? Did you think about this? Does this match up with the budget? And then we can kind of catch some inconsistencies in real time. And as we catch them, we can try to implement best practices because consistency is key. So, if we can implement these best practices, we’re consistent. And then the financials, again, tell the story. If you have any questions that you would want to ask me, you know, please feel free to reach out. You can go to the Cray Kaiser website and you can find me again I’m Dan Swanson. I’m an assurance manager here.
CPA | Manager
Whether you are a general contractor or a subcontractor, reviewing, updating, and maintaining your work in progress (WIP) schedule is a never-ending process. With multiple active projects, keeping it up-to-date can feel overwhelming. You may have even asked yourself why do we go through this process every month? Is there a more efficient way to review our WIP schedule? What should I be looking for? How can I spot early signs of job performance issues? The key to answering these questions lies in understanding the key components of the WIP schedule and how it drives revenue recognition.
Your estimating and bidding department put together a winning bid and the contract was awarded and signed. The job is entered into your accounting system based upon the awarded contract amount and the estimator’s cost budget information. The job is now underway, materials are ordered, and labor is on-site. Come month end close, what are some issues, we as accountants, should be reviewing?
Clear communication ensures the contract value aligns with reality.
As the job continues to progress and change orders are issued what is happening to the original cost budgets? Do your change orders also include budget information and are these used to update the overall cost budget on the contract? Unfortunately, it’s common to see the revenue from change orders entered, but cost updates are forgotten. This can lead to critical issues such as:
A best practice is to ensure change orders include both revenue and cost adjustments which are used to update the contract and cost budget amounts. Clear and consistent communication between the accounting team and project managers is critical to accurately capturing and reporting this activity on the WIP schedule.
In a traditional work in progress schedule costs drive revenue. For example:
As more costs are incurred, the higher the percent completion will be, and the more revenue and profits a contractor will recognize. This is why accurate job costing is critical in the financial reporting process.
Some best practices to ensure accurate job costing include:
The final step in reviewing the work in progress schedule is the Company’s ability to progress bill for the work performed. If you’ve incurred significant costs on the job but haven’t billed:
Underbillings raise these types of red flags with both internal accounting teams and external financial statement users. Careful monthly review of the WIP schedule and monthly check-ins with project managers are key to keeping underbillings in check and improving cash flow.
There are many moving parts when it comes to your Work in Progress schedule. To manage them effectively:
The more often these discussions occur the fewer surprises you’ll face at month-end, quarter end, and year end.
If your team could use guidance with your work in progress schedule, contact the trusted experts at Cray Kaiser at 630.953.4900 or complete this form. Our team understands the unique challenges contractors face and can help you with your WIP review process and improve financial reporting.
