Tag Archives | compensation

Form 1099

See Also:
Form 1098
W2 Form
401k
Tax Efficiency
Internal Revenue Service (IRS)

Form 1099 Definition

The Form 1099 definition is used by the Internal Revenue Service (IRS) determine the amounts of income that is not in the form of wages, salary, and tips. An individual’s employer fills out the 1099.

Form 1099 Meaning

A form 1099 meaning is very similar to the business form W2. Often times a company will have to fill out hundreds of this form. Its requirements are that the employer submit three copies for every 1099 form. One is for the business, one is for the employee, and the other is for the IRS itself.

Another 1099 requirement is that the company post the forms electronically if the amount per year is in excess of 250 forms. Independent contractors most often use the form because the IRS considers the payments to a contractor to be non-employee compensation. Thus, for each job that an independent contractor performs there must be a form 1099 filled out. If the amount paid is less than $600 then there need not be a form filled out by the employer or business. There are currently 16 types of 1099 which all refer to a different form of non-wage income. These forms range from distributions made from pension funds to real estate transactions.

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Controller Duties

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Controller Definition
Controller
Separation Of Duties
Controller Vs Comptroller
Duties Of A Financial Controller
Controller Vs. CFO

Financial Controller Duties

The duties of a financial controller are to oversee the accounting functions within an organization and internal controls at the highest level of management. Financial controller responsibilities are to work alongside the executive management team and provide informative business financial information and coordinate business financial planning and budget management functions. Financial controller duties are to provide accurate, secure and timely recording of business activities and the ability to report of those business activities. The role of a controller can vary depending on a size of an organization. Controllers in smaller organizations may often have a range of responsibilities while the responsibilities of a financial controller in larger organizations may have limited requirements due to a larger executive accounting team.

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Financial Controller Requirements

Financial controller requirements can differ depending on the size of an organization. Businesses may require a controller to have a certain number of years of experience within the industry. This is important for the controller to understand the business processes for interpreting and providing financial analysis reports. A controller must have an extensive knowledge and understanding of accounting and finance. Controllers are required to properly document all financial functions. For this reason, it is becoming more importantly necessary for a controller to be knowledgeable of accounting software packages and have a basic, if not advanced, understanding of technology infrastructure. A controller should have professional written and verbal communication and interpersonal skills.

Financial controller education requirements are determined by individual businesses. A master’s degree in accounting or a master’s degree in business administration is essential for a financial controller role. A controller resume should document the level of education that a controller has studied and the number of years of experience. A financial controller education can include financial controller training that an individual has taken. It is important for a controller to have had courses in statistics and management.

In addition, ongoing training is essential for controllers in order to stay updated with any significant changes to the generally accepted accounting principles (GAAP). For individuals inspiring to learn how to become a financial controller, there are designations offered that would aid in the chances of acquiring this executive position. Those designations are The Institute of Management Accountants offers the Certified Public Accountant (CPA) and the Certified Management Accountant (CMA) designations for financial managers specializing in accounting.

Controller Compensation

Controller compensation will weigh on a controller’s education level and industry expertise. Since there are a range of skills that a controller must possess, a controller’s experience level and their communication abilities contribute to determining controller salary. Employers will commit to the controller job description salary prior to filling the position. In the United States, the average expected controller compensation was $165,661.00 in November 2009.

Controller Career

For individuals seeking a controller career, a bachelor’s degree in finance or accounting is the preliminary requirement. The advanced education, such as a master’s degree in business administration, is a fundamental financial controller education requirement. That will set you apart from the others. This is because of the analytical skills that are developed with this education level. Industry expertise is another crucial requirement for a financial controller career. Continuing education programs are a resource for acquiring knowledge of the latest financial analysis methods and technology that are beneficial to an ongoing controller career path.

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Compensation Plan

See Also:
Sales and Marketing Compensation
PEO or Outsource Payroll
Wage Rate
Employee Stock Ownership Plan (ESOP)
Employee Health Insurance Plans

Compensation Plan Definition

A plan, defined as the plan of how to compensate employees for their work efforts, is one of the most common concepts in the professional world. Compensation plans design a number of payment schemes: wages associated with the amount of hours spent at work, wages gained from productivity while working, health benefits, bonuses, and even a cafeteria plan.

Compensation Plan Explanation

A compensation plan, explained as the motivational factor which makes employees show up to work, is the most central concept in the study of human resources. HR professionals around the world spend most of their work day working with compensation plan benefits. The two main methods are salary and commission-based pay.

Salaried employees receive a consistent amount of income. This method is perfect for employees who’s performance is not related to sales in the company: administrative staff, analysts, and others. The benefit of a salaried compensation plan for a sales team is that it provides a consistent platform for an employee to survive on.

Productivity based compensation plans are perfect for employees who drive sales. These employees, such as sales staff, need a motivation to be more productive each day. If a company were able to create this behavior it would result, in the end, in increased shareholder wealth. Many employees with this type of compensation plan receive some salary in addition to commission. This allows them to have some stability while they attempt to grow their success.

Other compensation plans provide an additional perk to employment. Health benefits, for example, make an employee feel like a company cares about their health. Cafeteria plans project the same image. In reality, a company experiences the benefit of this morale boost while also ensuring the ability of employees to work effectively. Regardless, the compensation plan for the CEO should be very different from that of the office manager.

Compensation Plan Example

For example, Crystal is a human resources professional with a major corporation. In her work she makes sure to create compensation plans for professional employees which motivate success for the firm as well as workers. Crystal is now working with two employees: an administrative assistant and an executive salesman.

With the administrative assistant, Crystal uses a salaried plan. Due to the fact that this employee will be showing up to work on a consistent basis, she includes medical, dental, and cafeteria plan benefits. This allows the assistant to have a consistent life to match the consistent work schedule.

For the executive salesman, Crystal takes a different approach. She includes a meager salary. Then, she also includes 10% commission on every sale. Crystal knows that the salesman can afford his own medical and meal benefits. So, instead, she provides two other benefits: a bonus for exceeding the sales quota and allowing the salesman to keep the miles he gets from the flights he takes to visit clients. This way, he will be motivated by more money. Also, when he takes his family on two rather than one vacation a year, he will thank the company for appreciating him as an employee.

Crystal attempts to get creative with her compensation plans. Rather than sticking with expectations, she creates a new motivation. This way she can make her company stand out. Her hope is that employees will appreciate customized compensation because it fits their needs better. So far, she has been correct with at least two of her choices. She looks forward to pleasing other employees as well.

Conclusion

Employee compensation is typically one of the largest line items on a company’s financial statements. Many companies are quick to hire, only to find out their hire was a dud. Determine which candidates are the right fit for your company by downloading the free 5 Guiding Principles For Recruiting a Star-Quality Team.

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Commission Accounting

See Also:
Accounting Principles
Accounting Concepts
Income Statement
Accrual Based Accounting
Payroll Accounting

Commission Accounting Definition

Commission Accounting can easily be defined as a revenue or expense to the company during the process of a sale. Typically this type of accounting is used for real estate firms who work off of commission or a similar type of sales company. The expense side of accounting can be based off of pay to employees which would be the amount of commission each employee makes off of a sale. Typically, there is a percentage amount that a company or person receives upon the receipt of a sale. However, some companies have been known to accept or pay their employees a fixed amount based off each individual sale. The policies are individual to each company and it is up to each customer or employee to find the exact terms of the agreement.

Commission Accounting Example

Frank works at Blimp Real Estate Co. and has been hired by Growing Fast Inc. to search out and find land to build on, or a suitable building in which Growing Fast can move into for its expansion. First, Frank explains to the company that the commission for either is 5% of the costs. Frank has the perfect building in mind in downtown Houston, Texas. Growing Fast is impressed with the place and decides that they will in fact buy the building. Frank then sets up the contract between the buyer and the owner of the building. The final price is set for $20 million, thus Blimp Real Estate receives $1 million in commission revenue. However, Blimp also has a commission expense to record because Frank has an incentive package stating that he receives 10% of the commission on each sale. Therefore, Frank will receive $100,000 for the sale.

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Commercial Agent

See Also:
Agency Costs
SKU
Lease Term
Logistics Chain
Gross Up

Commercial Agent Definition

Commercial agent is defined as a person who finds customers for a company who has hired the commercial agent. A commercial agent is both a job as well as a business. They find prospective customers for a variety of businesses, from commercial real estate companies to oil pipeline product manufacturers, so commercial agents function as independent salespeople. Commercial agent compensation is usually paid a commission for each product which they have sold.

Commercial Agent Explanation

Explained also as a private salesperson, a commercial agent is useful for many business to business companies which are trying to increase sales. Due to the fact that commercial agent fees are paid on the commission from each sale, they only form a cost after they have created client income. This makes commercial agents very useful: the only time they draw from company finances is when they contribute to them. The method commercial agents operate with ensures that they only increase firm value. There are exceptions to this, however, as with a commercial agent salary, signing fee, or maintenance fee for keeping agents on a project. Still, they often create less of a cost than a salaried salesperson.

Commercial Agent Example

For example, Sayid is a commercial agent who specializes in commercial real estate deals. Rather than spending some of his time completing deals and the associated paperwork, Sayid chooses to focus his efforts on his expertise: finding and selling clients. He has chosen a career where he can maximize his efforts for as long as he can stay productive.

Sayid has recently found a client who wants to purchase several spaces in a strip center to create a large store which sells finely crafted rugs. Sayid wants to make this deal work for all parties. Then he can gain his commission while expanding his reputation.

He needs to do this quickly so that the customer can begin the process of opening their store. The problem with this is that the seller of real estate is taking longer than expected in hopes of finding a higher bid on the property.

Because Sayid is not an employee for the commercial real estate company, he can use methods which may not be available to an employee. Sayid enters the office of the real estate firm and speaks with the CEO of the company. Rather than acting as an employee, Sayid can negotiate on a different level because he is a contractor. He emphasizes that slowing on this deal will reduce his ability to find other buyers, causing total income for the real estate company to decrease. Sayid has more power of persuasion as a performance-based contractor than as an employee who takes salary and commission.

Sayid is able to complete the deal in a way that benefits both vendor and purchaser. He appreciates his position and realizes that he made the correct career decision when he began years ago.

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Benchmarking

See Also:
Are You Collecting Business Data?
Business Intelligence and Finance
Marking-to-Market
Company Life Cycle
Market Positioning
Budgeting 101: Creating Successful Budgets
Navigating Black Swan Events
Problems When Experiencing Business Growth

Benchmarking Analysis

What is benchmarking analysis? Benchmarking is the process of comparing a company’s performance to the performance of other companies. Management can do this by comparing business groups within a company, by comparing companies within an industry, or by comparing companies in different industries. Conduct benchmark tests in terms of:

For example, a company could benchmark its own characteristics against the characteristics of other companies. Characteristics that can be compared in benchmarking include financial performance measures such as net revenues and net income, operational performance measures such as cycle-time and percent of on-time product deliveries, organizational features such as compensation rates at certain hierarchical levels, and product features such a quality and manufacturing costs of particular products.

Benchmarking Best Practices

The idea behind benchmarking best practices is to identify the company’s strengths and weaknesses, to make comparisons of functional activities and areas between the company and the companies considered to be the best in those activities or areas. Then determine ways to emphasize the strengths and improve upon the weaknesses of the company based on the findings of the analysis.

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A company can improve its efficiency, productivity, and profitability by examining best practices. Then try to improve its own performance by upgrading its processes or by imitating or implementing the best practices or benchmarking standards that were identified in the benchmarking analysis.

Benchmarking Techniques

There are two types of benchmarking techniques: benchmark results and benchmark process. Results benchmarking includes analyzing products or services offered by competitors or similar companies. For example, a battery maker may perform results benchmarking by comparing the features, performance, and characteristics of its own batteries against the batteries of another battery maker. Most likely, they would compare using the best battery maker in the industry.

Process benchmarking refers to when you benchmark an operational process. For example, a company that distributes computers might analyze the distribution process of a retailer known for efficient logistics and distribution. Process benchmarking aims to improve operational efficiency in a certain process. You also do not need to conduct the comparison within a given industry. Because it can involve companies that perform similar operational functions in different industries.

Benchmarking is a great way to identify if there any weaknesses that need to be resolved or strengths that need to be enhanced. Click here to download the Internal Analysis whitepaper to take a deeper look at how each strength and weakness is impacting your business. Take care of your business.

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