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You have learned about Six Sigma methodology and the ways in which it can benefit your business by reducing defects and increasing efficiency, morale, and productivity. Now you want to learn how to earn Six Sigma certification and apply its principles to your organization’s processes to positively influence the future of your company.

The final part in our Lean Six Sigma series will explain certification levels and show how certification can benefit your business and your employees.

The skill levels of Six Sigma demonstrate various degrees of proficiency and experience in improving business processes and increasing efficiency. There are five certification levels, which accreditation bodies such as the American Society for Quality recognize.

These accredited programs offer training classes on Six Sigma. Skill levels include:

• White Belt. This basic training involves the Six Sigma basic concepts and supporting change management. White belts develop teams that solve problems in company projects.
• Yellow Belt. A yellow belt has a basic comprehension of Six Sigma and supports the efforts of green belts and black belts.
• Green Belt. Six Sigma green belts collect data and work together with black belts. Their responsibilities generally extend beyond the Six Sigma project.
• Black Belt. Six Sigma black belts are fully engaged in the project and oversee it full time. They are project managers who train and call the shots for green, yellow, and white belts.
• Master Black Belt. This is the highest level of Six Sigma training. The master black belts act as coaches, consultants, and experts that lower level Six Sigma professionals turn to when problems arise. They develop key metrics, strategize, and solve difficult issues.

Gilmore Jasion Mahler’s six green belts have shared Six Sigma goals with our entire firm and helped all staff to embrace these new ways of thinking and new processes. Many of the internal process changes in recent years are directly attributable to Lean Six Sigma.

GJM staff certified in Six Sigma have also been able to share best practices with clients.

“This is knowledge that can help any business to streamline, be more efficient and save time & money,” says GJM Partner Mike Brough who is a member of the firm’s Manufacturing Specialist Team. “I’ve had the opportunity to share some ideas with manufacturing clients that they can take back to their staff and implement.”

Having Six Sigma certification has benefits from a professional development standpoint as well. For example, certification noted on a resume could help you land a rewarding and lucrative job. Employers know that certification for higher level belts involves years of work and studies. As a business owner, Six Sigma certification within your organization increases productivity, reduces defects, and brings in more revenue. To get certified start by finding an accredited training program in your area or you can pursue online and virtual training options. Enroll yourself and interested employees in the program, then be prepared to study. It’s a rigorous and challenging program. The exams are serious accomplishments. The yellow belt test takes around two hours, the green belt exam takes roughly three hours, and for the black belt, four hours of exam time is normal. Lastly, complete your written exam and projects to earn your belt. Then take your knowledge back to your team and you’re on your way.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities. 

Implementing Lean Six Sigma management principles in your operations can benefit your company by utilizing data, statistics, and measurements to eliminate defects in your processes. Once inefficiencies in your business’ processes have been identified, the Six Sigma methodology applies the use of proper tools to decrease defects and anything that doesn’t fit client specifications. 

Part two of our three-part series on Lean Six Sigma will focus on why your company might pursue the methodology and what will you and your staff get out of it. We’ll also share how Gilmore Jasion Mahler has embraced Lean Six Sigma and some of the benefits we have seen in our own firm.

Lean Six Sigma’s goal is pretty simple: to improve efficiency and eliminate waste. What type of improvements might you see?

• Reduced Cycle Time. If you have experienced missed deadlines due to unexpected delays in projects or shifts in management policy, Six Sigma can help by setting up a team that can identify the reasons for long cycle times and find solutions to these problems. Lean Six Sigma says in many cases, cycle times are reduced by up to 35%.
• Motivated Employees. Employees need their companies to fully engage with them to keep them on task. Six Sigma problem solving tools improve employee development and create the proper environment to keep workers motivated. Properly motivated employees experience a 25-50% increase in productivity.
• Improved Customer Loyalty. Better quality control and improved processes through Six Sigma result in a consistently better product and more satisfied clients. It’s no secret that when your customers are happy with your product, they return to you for future needs and recommend your company to others.
• Help With Time Management. The principles of Lean Six Sigma involve looking at learning, performance, and fulfillment. Having employees set goals and apply these principles to their work ethic leads to more effectively managed time. The action plan that Six Sigma helps employees to develop is said to increase efficiency by up to 30%.
• Better Managed Supply Chain. Reducing the number of suppliers your company uses is a key component of the Six Sigma methodology. Changes and variations in the supply chain have an effect on the defect rate of your product, so reducing the number of suppliers reduces the chance of defects in your products.
• Improved Bottom Line. The customer loyalty mentioned above directly affects your profits in a very basic way. Your happy customers continue to buy from you and will likely recommend your company to others who are looking for a similar product. This leads to increased revenues for your company.

For several years Gilmore Jasion Mahler has been engaged with the Lean Six Sigma methodology. The firm currently has six green belts who have conducted various projects throughout our firm. We’ve embraced the mind-set and applied Lean to all facets of our business: from employee expense account reimbursement to the client experience.

“We’ve learned that sometimes we had to ‘fail forward,’ in other words, we needed to learn that not every project was going to be a success, but we learned something from every project that we implemented,” says GJM Partner Deanna Hall, who is a Six Sigma green belt.

Here are five critical factors that led to GJM’s success with Lean Six Sigma:

1. Buy-in from the top
2. Change in mindset across the firm – needed to change to a mindset of continuous improvement, always “hungry” for improvement
3. Adopted the motto:  Strive for Excellence, Not Perfection
4. Get all levels in the firm involved – could not just be at the management level
5. Understand that change is hard for most people  

Change may be hard, but it isn’t impossible. Sometimes starting with smaller changes can demonstrate the ability to improve processes and encourage staff to embrace larger Lean initiatives moving forward.

Part one of our series on Lean Six Sigma offers some basic information, including the basic principles and definitions of the methodology. Be sure to watch for the next part in our series, which will cover what’s involved in acquiring Lean Six Sigma certification.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

The COVID-19 pandemic has changed modern industry and commerce in many surprising ways. More people are working from home than ever before, and public officials are weighing their options when it comes to pursuing projects and maintaining financial flexibility in uncertain times.

The pandemic’s financial toll spans just about every industry. But there’s an exception, at least for now. You’ve probably noticed building and road projects underway this summer as contactors continue their work on projects planned prior to COVID-19. While there may be plenty of work now, heavy highway contractors know that next year will likely be another story. These service providers are typically responsible for building and restoring the nation’s highways, but it’s unclear whether those projects will be funded in 2021.

Three Factors Influencing the Anticipated Heavy Highway Contracting Slowdown

The anticipated lack of work facing members of the heavy highway contracting sector is a multifaceted issue, but it ultimately boils down to spending.

1. Tax revenue from motor fuel sales is down for every county in Ohio as people are driving much less than usual overall. This means less funding available for the state’s transportation budget, the first roadblock facing the heavy highway contracting industry.
2. Local municipalities are hesitant to give new road projects the green light due to the economic uncertainty the COVID-19 virus has caused. Many cities and towns have delayed ongoing heavy highway construction projects or postponed them indefinitely.
3. Yet another hurdle facing the heavy highway construction industry is the intense competition for the limited number of contracts awarded at the state and county level.

These are just three of the reasons why the heavy highway contracting industry faces such potential dire straits in the months ahead.  

Government Assistance

Heavy highway and other contractors have received some much-needed assistance from the Small Business Administration (SBA) Paycheck Protection Program (PPP), designed to infuse companies with liquidity to help weather the pandemic. In fact, according to SBA figures released in late June, construction is one of the top three industries to receive PPP loans.

SBA PPP Loans:

1. Healthcare/Social assistance
2. Professional, scientific & technical services
3. Construction

Source: SBA PPP loan report as of June 27, 2020

According to SBA figures, construction companies had received about 12% of PPP loans as of June 27, not far behind the top two categories: healthcare and professional services.

GJM partner Bob Bobek leads the firm’s Construction & Real Estate Specialist Team. He’s counseled many of the firm’s construction clients through the process of applying for a PPP loan and requesting loan forgiveness.

“The Paycheck Protection Program (PPP) pumped some much-needed cash into many construction businesses,” he says. “In fact, almost all of our construction clients participated in the PPP. More support from the government moving forward will definitely help the industry to recover from the pandemic-induced recession.”

Bobek has presented a number of webinars in recent weeks on the PPP Program. You can access recordings of the webinars in the GJM COVID-19 Resource Center. Bob encourages any construction business, or any other business for that matter, to look into the PPP if they haven’t already. The deadline to apply for a PPP loan has been extended to August 8, 2020, with over $134-billion in loan dollars still available (as of June 27, 2020) to businesses that qualify.

Legislative Changes on the Horizon 

Policymakers at all levels, from municipal leaders to the federal government, are watching the COVID-19 situation evolve so they may respond accordingly. Many leaders are unwilling to completely lift their respective lockdown orders out of concern for public health and safety. In fact, some are strengthening restrictions as COVID cases are increasing in many parts of the country.

All this uncertainty has led to hundreds of millions of dollars in lost tax revenue. Now, members of the heavy highway construction industry are looking to the federal government for help. The American Association of State Highway and Transportation Officials (AASHTO) submitted a proposal to the United States Congress this spring requesting a $50 billion fiscal backstop. The AASHTO reports that about $17 billion would go toward the 2020 fiscal year while the rest would go toward the 2021 fiscal year.  

In addition to the PPP, the recent $3 billion stimulus package that came with the CARES Act offered financial relief to average American households as well as businesses across many sectors, and a second stimulus is appearing more possible with each passing day.

Ultimately, it is impossible to predict the effects the COVID-19 pandemic will have on American business for the foreseeable future. The heavy highway construction industry faces more uncertainty than most as states’ coffers dry up from low tax revenue and officials at all levels put projects on hold. Hopefully, things will change in the months to come and highway projects across the country can resume with confidence. But for now, contractors, and all of us, need to find a way to reach a comfort level with uncertainty as we all wait to see how the COVID pandemic continues to unfold.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

Gilmore Jasion Mahler is pleased to announce that continued growth has led to a number of promotions and further strengthening of the leadership team at Gilmore Jasion Mahler (GJM).

Greg Taylor, CPA joined Gilmore Jasion Mahler in October as a partner. A member of the GJM Manufacturing Specialist Group, Greg brings to his role thirty years of experience in both public accounting and industry, having worked as a chief financial offer/vice president of finance for multiple businesses. 

J. Kenneth Saggese, CPA was promoted to partner in the assurance department after eleven years with the firm. A member of GJM’s Construction and Real Estate Specialist Team, Ken works with clients across the industry, with an expertise in affordable housing.  

Mike Brough, CPA was also recently promoted from senior manager to partner in the assurance department. Mike works in a number of industries, including manufacturing & distribution, government, and nonprofit. Among his areas of expertise: employee benefit plans.

Other recent promotions at Gilmore Jasion Mahler include:

Healthcare Specialist Group members Matt Cavanagh and Jamie Dixon have been promoted to senior manager. Construction Specialist Group member Alex Spieker has been promoted to manager and Ben Lochbihler, also a member of the construction team, has been promoted to supervisor. A number of GJM associates have been promoted to senior associate, including Cole Bruner, Jennifer Bryant, Mackenzie Gross, Stacie Heitmeyer, Krista Huff, Hannah Nowak, Lucas Pennington, Sadie Purk and Jodi Rabquer.

The GJM administrative team has grown as well, with the addition of Amy McCurdy and Karen Mossing. They join administrative team members, many of whom have been in their roles for ten to twenty years, or longer.

”It’s exciting to see the changes at Gilmore Jasion Mahler,” says Managing Partner Kevin Gilmore. “I’m proud of the accomplishments of our staff, and pleased to have Greg Taylor join our already strong leadership team. We’ve put together a team of the best public accounting professionals in the area to serve our clients.”

Established in 1996, Gilmore Jasion Mahler, LTD is the largest public accounting firm in the region, with offices in Maumee and Findlay. Locally owned, GJM offers comprehensive financial services including assurance, business advisory, tax, risk advisory and healthcare management. GJM’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

Ask any business owner and they’ll no doubt tell you there’s much to consider when contemplating either buying or selling a business. The process can last months or even years as the owner pulls in experts, reviews reports and considers all the facts before signing on the dotted line. A critical piece of this due diligence is the quality of earnings report (Q of E) that provides a detailed analysis of how a company records its revenues, such as cash or non-cash, recurring or nonrecurring. The Q of E report’s goal is to provide assurance that earnings are sustainable and will also translate into cash flows. Reports are usually focused on sustainable earnings before interest, taxes, depreciation and amortization (EBITDA) or free cash flow (FCF). FCF performs an analysis of working capital needs for the business as well as capital expenditures that are needed. Q of E reports are prepared by independent third parties and usually by the buyer or their representative. The seller may also have an independent third party prepare a Q of E report in preparation for a sale. 

In this blog we will further define the quality of earnings report, examine why this is a critical report to review during the buy/sell process, and offer a list of the most important components of a reliable Q of E report. You’ll also hear from the CEO of a global manufacturer about what he views as the most crucial takeaways.

Quality of Earnings: What is it?

A Q of E report offers a close examination of company finances. Unlike an audit, Q of E reports typically focus on trailing 12 months (TTM) and usually a few historic periods as well. They are also more focused than an audit. It typically can take anywhere from three to four weeks to complete a Q of E report depending upon the availability of data and management’s responsiveness.

Components: What’s in a Q of E Report?

Q of E reports usually include but are not limited to:

• Executive Summary including a business overview and the transaction overview (if known)
• Income statement section that may include the following:
  • Breakdown of revenue by components such as customer/product lines/service lines
  • Historical revenue trends
  • Determination of one-time income/expenses vs recurring expenses
  • Management EBITDA adjustments are analyzed
  • Diligence adjustments to EBITDA suggested by the preparer
• Balance Sheet is disclosed and analyzed
• Working capital is analyzed in detail and normalized
• Recommendations and findings by the preparer of the report

Gilmore Jasion Mahler (GJM) consulting and assurance partner Greg Taylor leads the GJM Private Equity Advisory practice and advises many businesses. He views the quality of earnings report as an opportunity to discover any “skeletons in the closet” before due diligence is performed by a potential buyer. Taylor says in the past most Q of E reports were strictly buy-side but in the past few years, he says he’s seen more companies also performing sell-side in preparation for a sale. Many investment bankers are also strongly recommending a Q of E report be performed before they will take the company to market. One thing that hasn’t changed: Q of E reports are frequently prepared by an independent third-party firm.

“Buyers usually want independent parties to perform this analysis for a couple of reasons,” says Taylor. “One: another party is taking an independent look and two: these reports can also be provided to third parties for funding or investment reasons.”

Key Questions

Taylor says there are three key questions business owners should ask themselves when reviewing a Q of E with their financial team and advisors:

1. How accurate are the management proposed addbacks? 
2. How sustainable are the numbers? 
3. What are other factors that are not just in the numbers, but the intangibles? For example: the management team, market trends and operational expertise.

CEO Perspective

Findlay-based Rowmark is a leading global manufacturer of sheet plastic for many uses, including signage, awards and other applications. President and CEO Jim Ellward says the company continues to stay active in many acquisitions, and a Q of E report is an important component when exploring any potential acquisition. He has worked with GJM to provide the report to Rowmark when needed.

“You have to have confidence in that third-party advisor that they are going to focus on the details, point out the positive and negative aspects of the business through their findings and truly be that advisor,” says Ellward. “GJM has earned our confidence and we view them as a trusted partner with our business.”

In fact, selecting a professional or firm to provide a quality of earnings report may be equally as important as the report itself. Many firms provide Q of Es, but not all are experts. Ellward says GJM is the right partner for Rowmark.

“Gilmore Jasion Mahler understands our business,” he says.  “They have taken the time to learn our business and understand our long-term strategy. This, coupled with their accuracy, attentive service and fact-based assessments, allows us to feel confident with the information and guidance we are able to attain from the Q of E reports.”

Sometimes a Q of E report brings answers a business owner may not be hoping for, but they wind up being the answers that will guide the business in the right direction. Ellward described once such scenario for Rowmark.

“GJM helped us assess a recent potential acquisition that we ultimately decided to pass on as we moved deeper through diligence. Our decision to exit was based on multiple factors regarding the overall health of the business. The Q of E provided the basis of additional questions that we wanted to dive deeper into understanding and in turn allowed us to identify areas of concern and focus on making the right decision for the business.”

Here’s what Ellward says he looks for in a Q of E report:

• A more detailed picture of just how well the business is really doing and whether or not it is worth the price negotiated
• The analysis of customer sales and accounts
• The identification of any significant or unusual accounting adjustments or policies that need explanation
• The ability to see an independent, non-biased view evaluating the on-going operations and cash flows  

As this information bubbles up in a Q of E report, the answer often becomes very clear whether it is wise to move forward with the transaction or to walk away and wait for the next opportunity to arise.  

Established in 1996, GJM is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.