In health issues, the difference between treating symptoms and curing a medical problemseems obvious. We know that taking painkillers for a broken toe, will not cure the toe but will dull the pain.
Moving into the world of business, finding the root cause is like finding the medial problem. When a problem arises at work, how you approach it will either fix the surface issues with the problem likely happening again or you can find and treat the root cause by developing a process to eliminate the problem.
Using Root Cause Analysis helps answer questions of why the problem incurred in the first place:
Determine what happened
Determine why it happened
Figure out what to do to reduce the likelihood that it wil happen again
Most root causes will fit into these three areas
1. Physical causes - Something broke or didn't perform. The brakes were faulty; the door won't latch properly; the faucet is leaking.
2. Human causes - Someone did something wrong or just didn't do something that was needed. Human failures have their own causes including "I forgot", "I thought so-and-so was doing that", "That's not in my job description", "Sue did it that way" and . . . a myriad of other excuses when things go wrong.
3. Organizational causes - A system, process or policy that staff use to make decisions is faulty or no longer is applicable but still being used. This often has "but we've always done it that way" in the excuses.
Root Cause Analysis can be applied to almost any situation. Asking questions is essential to getting to the bottom of a problem. Questions are essetial and be wary of finding blame. Blame will often help mask a root cause.
Copyright 2010 Linda Lucas Fayerweather MBA EA
http://www.changinglanes.biz/
419-897-0528
linda@changinglanes.biz
Business Plans Make Profit!
Burning Down The House
Election Day is almost here, and that means it's time for candidates to start flinging you-know-what at each other like monkeys at the zoo. Taxes are a key issue this election, so it's no surprise that candidates are scouring each others' tax returns for anything they can use for political ammunition.
Former Portland Trailblazer center Chris Dudley is running for Governor of Oregon. He's a Republican, so you would expect him to oppose higher taxes. But he's come under fire, almost literally, for some personal tax planning that may have saved him as much as $140,000.
In 2002, Dudley paid $1.12 million for a 4,927 square foot house on nearly two acres overlooking Oswego Lake Country Club. Most of his prospective constituents would have been perfectly happy with four bedrooms, four bathrooms, three fireplaces, and a four-car garage. But Dudley wanted something bigger. He could have renovated the existing house. He could have bulldozed it and started new. But neither of those would have been tax-deductible. So instead, Dudley donated the house to the Lake Oswego Fire Department. Firefighters used the house for a series of drills in June, 2004, and Dudley took a charitable deduction for the house's $350,000 appraised value.
Back in 1973, the Tax Court issued a decision specifically approving this strategy (Scharf v. Commissioner, TC Memo 1973-265). But since that decision, Congress has changed the law on losses related to demolition of property, and the IRS has cracked down on similar gifts. Earlier this year, the IRS won a high-profile cases against former Ohio State quarterback and ESPN analyst Kirk Herbstriet, who claimed a $330,000 deduction for donating his Columbus-area home to the Upper Arlington Fire Department. However, the Tax Court's decision in Herbstriet's case turned on the validity of the appraisal that Herbstriet used to establish the value of the donation, and noton the validity of the strategy itself.
The Dudley controversy is actually a great example of what goes into proactive tax planning. Charitable gifts are typically allowed only for gifts of "complete interests" in property. Does burning down a house qualify as a gift of a "complete interest"? And gifts of property are generally valued at "fair market value." How much was Dudley's house really worth? Would anyone pay $350,000 for the house without the land underneath it? Would the fire department actually pay that much just for live fire training?
Clients sometimes mistakenly believe that taxes are just about "the numbers." But tax law and tax planning are really about far more.
What sort of expenses are deductible from your income?
How can you justify them to an increasingly skeptical IRS?
And how can you document them to protect your deductions?
Copyright 2010 Tim Pinkelman, CPA
Accounting Center & Tax Services, Inc.
419-882-9255 or 734-847-0400
http://www.accounting-centers.com/
