B&F Summary PDF

**Establishing the Contracting Business** **Types of Organizational Structure in Business** There are four main types of business structures in the U.S.: sole proprietorship, partnership, limited liability, and corporation. Each structure has different tax, income and liability implications for bu...

**Establishing the Contracting Business** **Types of Organizational Structure in Business** There are four main types of business structures in the U.S.: sole proprietorship, partnership, limited liability, and corporation. Each structure has different tax, income and liability implications for businesses owners and their companies. **Sole Proprietorship** Businesses structured as a sole proprietorship allows the owner(s) to have total control over company operations. Businesses that typically form sole proprietorships are home-based businesses, shop or retail businesses and one-person consulting firms. Owners of sole proprietor businesses are responsible for their own record keeping and paying the IRS in the form of self-employment taxes. However, this type of business provides no protection for business owners, as they can be held personally responsible for their company\'s debt and financial obligations. **Partnership** A partnership is formed when two or more people join, or partner, together to run a business. Each partner has equal share in the net profits and losses of their business. Like a sole proprietor, each partner reports their income on their personal tax return and pays self-employment taxes to the IRS. They are also personally liable for financial debt and obligations of their company and the actions of other partners. **Limited Liability** The limited liability structure is considered a hybrid as limited liability companies can be formed as corporations or partnerships. LLCs can provide owners, who are commonly referred to members under this structure, the protection from liability and other obligations like a corporation. Limited liability companies can also be set up and managed like partnerships. The taxation of LLCs also depends on its structure.  **Corporation** This type of business structure separates the liabilities and obligations incurred by company operations from being the responsibility of the owners. Corporations are regulated by the laws of the state they are set up in. Unlike sole proprietor and partnership businesses, corporations are taxed as separate entities at corporate tax rates. The IRS taxes corporation owners at individual tax rates. There are two common types of corporation structures: Subchapter C and S. The different between the two subchapters stem from different tax rules. Ordinary corporations are considered Subchapter C corporations. **Write Your Business Plan** Traditional Business Plan Format - Executive Summary - Company Description - Market Analysis - Organization and Management - Service or Product Line - Marketing and Sales - Funding Request - Financial Projections - Appendix Lean Startup Format - Key Partnerships - Key Activities - Key Resources - Value Proposition - Customer Relationships - Customer Segments - Channels - Cost Structure - Revenue Streams **What are Fixed Assets?** Fixed assets refer to long-term tangible assets that are used in the operations of a business. They provide long-term financial benefits, have a useful life of more than one year, and are classified as property, plant, and equipment (PP&E) on the balance sheet. **Key Characteristics of a Fixed Asset** The key characteristics of a fixed asset are listed below: - They have a useful life of more than one year. Fixed assets are non-current assets that have a useful life of more than one year and appear on a company's balance sheet as property, plant, and equipment (PP&E). - They can be depreciated. With the exception of land, fixed assets are depreciated to reflect the wear and tear of using the fixed asset. - They are used in business operations and provide a long-term financial benefit. Fixed assets are used by the company to produce goods and services and generate revenue. They are not sold to customers or held for investment purposes. - They are illiquid. Fixed assets are non-current assets on a company's balance sheet and cannot be easily converted into cash. **Relevance to Financial Statements** A fixed asset has certain implications on a company's financial statements: **Balance Sheet** A fixed asset is capitalized. When a company purchases a fixed asset, they record the cost as an asset on the balance sheet instead of expensing it onto the income statement. Due to the nature of fixed assets being used in the company's operations to generate revenue, the fixed asset is initially capitalized on the balance sheet and then gradually depreciated over its useful life. A fixed asset shows up as property, plant, and equipment (a non-current asset) on a company's balance sheet. **Income Statement** Except for land, fixed assets are depreciated. This is to reflect the wear and tear from using the fixed asset in the company's operations. Depreciation shows up on the income statement and reduces the company's net income. **Statement of Cash Flow** When a company purchases or sells a fixed asset with cash, that is reflected in the investing activities section of the cash flow statement. Purchases of fixed assets are an outflow of cash and are categorized as "capital expenditures," while the sale of fixed assets is an inflow of cash and is categorized as "proceeds from the sale of property and equipment." **Buying vs Leasing Equipment** Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), will require companies that lease fixed assets (lessees) to recognize all leases with terms of more than 12 months on their balance sheets, regardless of their classification as capital or operating leases. Specifically, a business must report a right-to-use asset and a corresponding liability for the obligation to pay rent, discounted to its present value by the rate implicit in the lease or the lessee's incremental borrowing rate. Lessees also will be required to make additional disclosures to help users of financial statements better understand the amounts, timing and uncertainty of cash flows related to leases. They must disclose qualitative and quantitative requirements, including information about variable lease payments and options to renew and terminate leases. **Pros of Buying** The primary advantage of owning fixed assets is that you're free to use them as you see fit. When you own equipment that won't become obsolete, you should get your money's worth from the purchase over time. This is especially true for assets --- such as a desk or drill --- that tend to have a long useful life and aren't affected by technology changes. **Cons of Buying** The primary downside of buying fixed assets is that you're generally required to pay the full cost upfront or in installments, although the Sec. 179 and bonus depreciation tax benefits are still available for property that's financed. If you finance a purchase through a bank, a down payment of at least 20% of the cost is usually required. This could tie up funds and affect your credit rating. **Pros of Leasing** From a cash flow perspective, leasing can be more attractive than buying. But the tax benefits for leasing may not be as valuable. And you don't own equipment at the end of the lease term. So, if you want to replace the asset when the lease is up, you'll face the leasing vs. buying decision all over again. But this could be a good thing if an asset is likely to become obsolete by the end of the term. **Cons of Leasing** Leasing does have drawbacks, however. Over the long run, leasing an asset may cost you more than buying it, because you're continually renewing the lease or acquiring a new one.  **Managing Administrative Duties** **Revenue Streams** Revenue streams are the various sources from which a business earns money from the sale of goods or the provision of services. The types of revenue that a business records on its accounts depend on the types of activities carried out by the business. Generally speaking, the revenue accounts of retail businesses are more diverse, as compared to businesses that provide services. **Types of Revenues** To classify revenues at a high level, there are operating revenues and non-operating revenues. Operating revenues describe the amount earned from the company's core business operations. Sales of goods or services are examples of operating revenues. Non-operating revenues refer to the money earned from a business's side activities. Examples include interest revenue and dividend revenue. Many different revenue accounts are used by businesses in various industries. For the majority of companies, the following are a few common revenue accounts: - **Revenue from goods sales or service fees:** This is the core operating revenue account for most businesses, and it is usually given a specific name, such as sales revenue or service revenue. - **Interest revenue:** This account records the interest earned on investments such as debt securities. This is usually a non-operating revenue. - **Rent revenue:** This account records the amount earned from renting out buildings or equipment and is considered non-operating revenue. - **Dividend revenue:** The amount of dividends earned from holding stocks of other companies. This is also non-operating revenue. **Examples of Revenue Streams** Revenue streams categorize the earnings a business generates from certain pricing mechanisms and channels. To describe it simply, a revenue stream can take the form of one of these revenue models: - **Transaction-based revenue:** Proceeds from sales of goods that are usually one-time customer payments. - **Service revenue:** Revenues are generated by providing service to customers and are calculated based on time. For example, the number of hours of consulting services provided. - **Project revenue:** Revenues earned through one-time projects with existing or new customers. - **Recurring revenue:** Earnings from ongoing payments for continuing services or after-sale services to customers. The recurring revenue model is the model most commonly used by businesses because it is predictable, and it assures the company's source of revenue as ongoing. Possible recurring revenue streams include: - Subscription fees (e.g., monthly fees for Netflix) - Renting, leasing, or lending assets - Licensing content to third parties - Brokerage fees - Advertising fees **Market Share** Market share is the percent of total sales in an industry generated by a particular company. Market share is calculated by dividing the company\'s sales over the period by the industry\'s total sales over the same period. This metric is used to give a general idea of the size of a company in relation to its market and competitors. The market leader in an industry is the company with the largest market share. **List of Services that can be Outsourced** Outsourced services refer to the practice of delegating certain functions or tasks to external providers or third-party companies. These functions can vary widely, ranging from back-office tasks such as payroll processing and accounting to more specialized areas like IT services, marketing, and logistics. The concept of outsourcing revolves around the idea of leveraging external expertise and resources to handle non-core functions that may be time-consuming or require specialized knowledge. By outsourcing these tasks, businesses can free up their internal resources, focus on their core competencies, and improve overall efficiency. Outsourcing allows companies to tap into a global talent pool and access specialized skills that may not be available in-house. It provides the opportunity to leverage cost advantages, access cutting-edge technologies, and streamline operations. Customer service and lead generation Bookkeeping and accounting Social media marketing Tax filing and tax preparation Payroll processing Creative work Event management Customer phone support Web design Legal services Healthcare services Human resources Engineering Research and development Data entry Computer programming Website optimization Hiring Business applications Content writing Digital marketing Video editing Email management Calendar management Booking appointments Manufacturing and production Data storage Inbound marketing **Overheads** Overheads are business costs that are related to the day-to-day running of the business. Unlike operating expenses, overheads cannot be traced to a specific cost unit or business activity. Instead, they support the overall revenue-generating activities of the business. **Types of Overheads** There are three main types of overhead that businesses incur. The overhead expenses vary depending on the nature of the business and the industry it operates in. 1\. Fixed overheads are costs that remain constant every month and do not change with changes in business activity levels. Examples of fixed overheads include salaries, rent, property taxes, depreciation of assets, and government licenses. 2\. Variable overheads are expenses that vary with business activity levels, and they can increase or decrease with different levels of business activity. During high levels of business activity, the expenses will increase, but with reduced business activities, the overheads will substantially decline or even be eliminated. Examples of variable overheads include shipping costs, office supplies, advertising and marketing costs, consultancy service charges, legal expenses, as well as maintenance and repair of equipment. 3\. Semi-variable overheads possess some of the characteristics of both fixed and variable costs. A business may incur such costs at any time, even though the exact cost will fluctuate depending on the business activity level. A semi-variable overhead may come with a base rate that the company must pay at any activity level, plus a variable cost that is determined by the level of usage. Examples of semi-variable overheads include sales commissions, vehicle usage, and some utilities such as power and water costs that have a fixed charge plus an additional cost based on the usage. **Examples of Overhead Costs** Overhead costs are important in determining how much a company must charge for its products or services in order to generate a profit. The most common overhead costs that any business incur include: 1\. Rent is the cost that a business pays for using its business premises. If the property is purchased, then the business will book depreciation expense. 2\. Administrative costs are costs related to the normal running of the business and may include costs incurred in paying salaries to a receptionist, accountant, cleaner, etc. Such costs are treated as overhead costs since they are not directly tied to a particular function of the business and they do not directly result in profit generation. Rather, administrative costs support the general running of the business. Examples of administrative costs may include audit fees, legal fees, employee salaries, and entertainment costs. A business can reduce administrative expenses by laying off some of its employees, switching employees from full-time to part-time, hiring employees on a contract basis, or by eliminating certain expenses, such as entertainment and office supplies. 3\. Utilities are the basic services that the business requires to support its main functions. Examples of utilities include water, gas, electricity, internet, sewer, and phone service. A business may be able to reduce utility expenses by negotiating for lower rates from suppliers. 4\. Insurance is a cost incurred by a business to protect itself from financial loss. There are various types of insurance coverage, depending on the risk that may cause loss to the business. For example, a business may purchase property insurance to protect its property or business premises from certain risks such as flood, damage, or theft. Another type of insurance is professional liability insurance that protects the business (such as an accounting firm or law firm) from liability arising from malpractice. Other types of insurance include health insurance, home insurance, renter's insurance, flood insurance, life insurance, disability insurance, etc. 5\. Sales and marketing overheads are costs incurred in the marketing of a company's products or services to potential customers. Examples of sales and marketing overheads include promotional materials, trade shows, paid advertisements, wages of salespeople, and commissions for sales staff. The activities are geared toward making the company's products and services popular among customers and to compete with similar products in the market. 6\. Repair and maintenance overheads are incurred in businesses that rely on motor vehicles and equipment in their normal functions. Such businesses include distributors, parcel delivery services, landscaping, transport services, and equipment leasing. Motor vehicles and machinery need to be maintained on a continuous basis and repaired whenever they break down. **Preparing and Submitting a Bid or Proposal** **Submitting a bid** General guidelines on how to prepare and submit a bid: - Find an opportunity that seems right for your business. The overview provides a few more details, including important dates. - Each Invitation for Bids has a section called Instructions to Bidders; read carefully and follow all instructions. Closely read the Scope of Work and other solicitation requirements. - Register as a plan holder for the solicitation to ensure you receive the current bid information and addenda. - Attend the pre-bid meeting. - Submit any questions in writing by the date and methods specified in the solicitation -- typically questions must be submitted in writing no later than 10 days prior to the advertised date for receipt of bids. - Review and acknowledge all addenda before submitting your bid, make sure your bid responds to any changes. - Complete and include all required forms. Every bid is different, and the required forms change. Reading the bid documents carefully is important. Examples of forms: - Affirmative Action Certification - Bid Form - Bid Security / Bid Bond - Buy America Certification - Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion - Disadvantaged Business Enterprise DBE, WBE and MBE Information and Certifications - Disclosure and Certification Regarding Conflict of Interest (prime only) - Equal Pay Certification - Lobbying Restrictions Certification - Payment Bond - Performance Bond - Subcontractor Information Form - Sign the bid form manually in ink. - Bids must be placed in a sealed, opaque envelope. - Submit your bid on time. Submittals after the stated close date and time in the solicitation document will be returned unopened. - Complete and include all required post bid forms. Examples: - Subcontractor Information Form: List all subcontractors, successful and unsuccessful, who submitted bids or quotes to you for this project. - Disclosure and Certification Regarding Conflict of Interest (first-tier subcontractors) Contracts will be awarded to the lowest responsive and responsible bidder as confirmed by due diligence conducted by the Council. **Submitting a proposal** General guidelines on how to prepare and submit a proposal: - Carefully read the Request for Proposal (RFP). including all applicable schedules, clauses and attachments. The solicitation is designed to provide proposing vendors with all the information needed to write a successful proposal. - Before developing your proposal, make sure you can comply with all the requirements and can perform the work. - Register as a plan holder for the solicitation to ensure you receive the current proposal information and addenda. - Attend the pre-proposal meeting. - Submit any questions in writing by the date and methods specified in the solicitation. - A good proposal clearly explains how it meets the technical requirements and demonstrates it is the best solution. Differentiate your proposal from your competitors'. Your proposal should be creative, not appear as a "canned" response. An Evaluation Panel will review, analyze, and evaluate all proposals based on the Evaluation Criteria that is published in the RFP. - The order of your proposal contents should follow the order of the requirements in the RFP. This allows the evaluators to know that you have addressed all aspects of the RFP requirements. - Review all addenda before submitting your proposal. Make sure your proposal responds to any changes. - Acknowledge receipt of all addenda. - Complete and include all required forms. Failure to submit a properly completed form may result in no further consideration of the proposal. Every RFP is different, and the required forms change. Reading the proposal documents carefully is important. Examples of forms: - A statement of qualifications and relevant firm experience - A detailed work plan addressing each of the tasks in the Scope of Work - A detailed price proposal executed by an officer of the firm - Affirmative Action Certificate of Compliance, or Affirmative Action Certification Statement - Subcontractor Information Form - Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion - Lobbying Restriction Certification - Disadvantaged Business Enterprise Information and Certifications - Disclosure and Certification Regarding Conflict of Interest - Submit your proposal on time. Submittals after the stated close date and time in the solicitation document will be returned unopened. - During the proposal evaluation stage, you may be asked to clarify your proposal, and enter negotiations. Depending on the nature of the services being purchased, proposing firms need to be prepared for the potential for interviews, site visits and demonstrations. Contracts will be awarded to the to the proposer whose proposal is most advantageous based upon cost and other factors as confirmed by the Evaluation Panel and the due diligence conducted by the Council. **Reviewing a Construction Draw Request** **Invoices / Receipts** To start this discussion, let's focus on the invoices and receipts first. Whether it is the concrete supplier or the architect, the invoices can include an excruciating level of detail down to the number of screws all the way up to a very basic lump sum number that just says "plumbing". But before we approve the invoice, we should confirm that each invoice is: - A Project Expense - Simple, but is the invoice for the project? Sometimes with so many invoices flying around one can accidently end up in the wrong stack! - For an Approved Item - Was the work that was completed approved? No one wants to pay for a swimming pool if the project doesn't have one. - Of an Understood Cost - Do we understand what the charge is for? A line that says "plumbing" is not sufficient. - Not Invoiced Before -- Straightforward, but often since invoices take so long to be paid, they get sent a second time (and potentially aggregated together/carried forward). So, making sure it has not been invoiced previously is sometimes difficult, but important. Once you have confirmed these items, the last part is just performing a visual inspection of the invoiced work, if applicable. **Lien Releases** The release of mechanic's lien rights is an important part of a construction project. Whether they physically step foot on the property or simply supply materials to the property, making sure that you confirm they have been paid is important to avoid issues later. As such there are two types of lien releases to look for: - Conditional Lien Releases - Documentation that states if you pay their invoice, they will not submit a lien. - Unconditional Lien Releases - Documentation that confirms that payments made last month were received by the company submitting the invoice and they have now released their right to file a lien. Tracking lien releases to invoices and payments can sometimes feel like unravelling the cords behind your entertainment center, but it is key to having a clean title at the end of the project. **Schedule of Values** The schedule of values, budget or scope of work shows the progress of the line items in the project. This is where you can track how much is being spent in relation to work completed in the field and overall health of the project. To review this document, you should confirm: - All Amounts Being Requested Have an Invoice - Do the invoices make sense on the budget? If they are billing \$20,000 for plumbing, is there an invoice for \$20,000 worth of plumbing? - The Remaining Balance Is Sufficient to Complete the Work - If there is \$60,000 left in the plumbing line item, is there only \$60,000 of plumbing work to be completed? If anything is getting close to the original budgeted amount, it should be nearing completion on the build site. - Is Proper Retainage Being Held - If the project calls for retainage, this document should show how it is being withheld to make sure it is in line with the invoiced amounts. - Reallocations - Have line items increased or decreased in amounts over the last month? This is typically tracked in an adjustments column and making sure that these adjustments make sense with the project progress is the last step to ensure the budget looks good. A lot of information resides in the schedule of values and making sure all the invoices tie correctly to line items and then to retainage and any adjustments should be clear before approving the draw request. **Change Orders** Inevitably each month there are some surprise costs that come up, which is what a contingency is for. Reviewing these change orders involves the following steps: - Claiming Not in Original Contract - Sometimes something that the vendor may have overlooked is in their contract and you don't want to pay for it twice. - Do the Costs Make Sense - Do we agree that the costs submitted are realistic for the work being performed? - Cause of the Change - Is this change due to a request of the owner, an unforeseen condition, or a mistake from another subcontractor? It is possible that a legitimate cost is the expense of another contractor, not billable to the project and should be handled through a back charge. Each change order is unique, but stepping through those three steps will get you started in the right direction. **How to Start a Workplace Safety Program** **Controlling Hazards** There's a recommended hierarchy of health and safety controls as follows: - Elimination: The best option is to eliminate the hazard if possible. for example, a company could scrap an old and damaged forklift that is no longer safe to operate. - Substitution: Substitute the hazard with something less hazardous. For example, a company could replace a hazardous chemical with a non-hazardous chemical. - Engineering controls: Machine guards to protect from pinch points, rotating parts, etc. - Administrative controls: Use of safety policies and procedures, employee safety training, rotating employees to reduce excessive exposure to loud noises etc. - Personal protective equipment: Safety glasses, hard hats, steel toed boots. Notice that PPE (Personal Protective Equipment) is at the bottom of the list. PPE should be considered the last line of defense only after all other control options have been considered. **OSHA Standards and Compliance** To help employers manage health and safety issues, the Occupational Safety & Health Administration, or OSHA, has developed a series of Standards, each of which is designed to address most of the major hazards that exist in the workplace. For example, there's a standard for fall hazards (Fall Protection), chemical hazards (Hazard Communication), noise hazards (Hearing Conservation), respiratory hazards (Respiratory Protection), forklifts (Powered Industrial Trucks), Control of Hazardous Energy (Lockout Tagout) and even standards to address toxic metals like lead. Each of these standards contain and specify various controls which are intended to help mitigate specific health or safety hazards. **Conduct Safety Assessment to Determine which OSHA Standards are Applicable.** Conduct a health and safety audit or assessment of your company to 1) determine which workplace hazards are present in your operations, which will then 2) determine which OSHA Standards apply to your business. **Correcting Health and Safety Issues** A good, comprehensive OSHA compliance audit not only identifies all relevant hazards, but also itemizes all violations and recommended corrective actions for each.  These corrective actions will include reference to relevant OSHA standards and the specific controls and elements that are required to abate the violation such as engineering controls, written procedures, training, testing, PPE, etc. The audit would also address other "administrative" deficiencies and requirements such as record keeping (i.e.: OSHA 300 logs) and reporting requirements. **Your Health and Safety Manual** While correcting these physical hazards, it's a good idea to begin working on the next major project which is developing your customized health and safety manual.  This document, or group of individual written programs, will contain all of the specific OSHA standards which apply to the company as well as assigning key roles, etc.  This document essentially becomes the company's "safety bible" and spells out exactly what the company needs to do in order to implement and manage their workplace safety program. **Employee Safety Training** - Training must be customized to your operations: Many companies make the mistake of using generic videos or on-line resources. Technically this is a violation of OSHA standards, because training must be customized to address the specific hazards present in a company's operations. - Trainer must be competent: Companies who are serious about managing OSHA compliance will conduct live training sessions using competent trainers who understand the technical aspects of each standard, can engage their employees, and can answer employee questions. Many companies make the mistake of tasking managers and supervisors who lack the qualifications and experience to adequately train employees, which often ends up being a waste of time. - Training is time consuming: most training topics take between 30-60 minutes to properly train, and some topics take much longer. Many companies make the mistake of believing that 10-15 minute "tailgate topics" are sufficient to meet OSHA standards, but they're not. - Frequency requirements: OSHA requirements that some topics only be trained once, but many have annual training requirements. Even though not all topics are required to be trained annually, OSHA recommends that all topics be trained annually. - Employee turnover: Since most companies have employee turnover issues, and since OSHA requires that all impacted employees get trained, training becomes a never-ending process for most companies. **Managing OSHA Compliance** Each of OSHA's standards contain an extensive list of controls and elements that employers must implement and manage on an ongoing basis. These controls include ongoing employee training, conducting evacuation drills, developing equipment specific LOTO procedures, conducting and documenting hazard assessments, health testing and the list goes on. Many companies make the mistake of drafting their health and safety manual only to put it on the shelf to collect dust. Remember, this is your companies "safety bible" and spells out exactly what now needs to be managed on an ongoing basis to maintain OSHA compliance. **Risks and Liabilities for Failing to Manage OSHA Compliance** These are Federal laws that impacted companies must follow or risk major risks and liabilities including serious employee injuries, surprise OSHA inspections that can result in fines and penalties that can run into the tens or even hundreds of thousands of dollars, criminal liabilities if a fatality occurs as a result of employer negligence (\$250,000 fine and up to 6 months of jail time), and then there are civil liabilities that can result in multi-million settlements if an employee get seriously injured as a result of employer negligence. **Business Insurance** **Types of business insurance** There are three major types of business insurance: general liability, professional liability, and BOP (business owners policy). Depending on your specific situation, you may want to consider other types of business insurance as well. For example, if you have employees, you need workers compensation insurance. If you handle sensitive data, you may want to consider cyber security insurance. **Commercial General Liability Insurance** Commercial general liability insurance is a type of policy for all businesses. It\'s considered comprehensive insurance, although it does not protect against all risks. General liability provides coverage for bodily injury, property damage, medical expenses, libel, slander, defending lawsuits, and settlement bonds or judgments. **Professional Liability Insurance** Unlike general liability insurance, which is for any business, professional liability insurance (PLI) is designed for businesses that provide services. Coverage is for loss caused by the service provided. It protects against expenses related to malpractice, negligence, or errors. **Commercial Property Insurance** Property insurance is designed for businesses with significant physical property, such as equipment, signage, inventory, and furniture. It protects the business from losses in events such as fire, storm or theft. Property insurance can cover, for example, damage to things like inventory, computers, furniture, or signage. **Product Liability Insurance** Product liability insurance is designed for businesses that are involved with products, such as manufacturers, wholesale distributors, and retailers. Product liability insurance protects a business from costs associated with damages caused by products, such as a defective product causing bodily injury or harm. Without product liability insurance, a business can be vulnerable to paying for expensive lawsuits. **Business Interruption Insurance** Business interruption (or continuation) policies are a type of insurance that is especially applicable to companies that have physical locations, such as retail stores or manufacturing facilities. Business interruption insurance compensates a business for its lost income due to events that cause a disruption to the normal course of business. It\'s typically added on as a rider to a property insurance policy or as part of a business owner\'s policy. **The Fundamentals of Contract Management** **What are the stages of the contract management process?** While there are many components of contract management, the process can be broken down into five stages: creation, collaboration, signing, tracking and renewal. Each stage contains important steps to ensure adequate contract management, from creation to approval to, eventually, renewal. **Creation** Initial requests: The contract management process begins by identifying contracts and pertinent documents to support the contract's purpose. Authoring contracts: Writing a contract by hand is a time-consuming activity, but using automated contract management systems, the process can become quite streamlined. **Collaboration** Negotiating the contract: After drafting the contract, employees should be able to compare versions of the contract and note any discrepancies to reduce negotiation time. **Signing** Approving the contract: Getting management approval is the step where most bottlenecks occur. Users can preemptively combat this by creating tailored approval workflows, including parallel and serial approvals, to keep decisions moving at a rapid pace. Execution of the contract: Executing the contract allows users to control and shorten the signature process using electronic signatures and fax support. **Tracking** Obligation management: This requires a great deal of project management to ensure deliverables are being met by key stakeholders and the value of the contract isn't deteriorating throughout its early phases of growth. Revisions and amendments: Gathering all documents pertinent to the contract's initial drafting is a difficult task. When overlooked items are found, systems must be in place to amend the original contract. Auditing and reporting: Contract management does not mean drafting a contract and then pushing it into the filing cabinet without another thought. Contract audits are important in determining both organizations' compliance with the terms of the agreement and any problems that might arise. **Renewal** Renewing: Manual contract management methods can often result in missed renewal opportunities and lost business revenue. Automating the process allows an organization to identify renewal opportunities and create new contracts. Contract lifecycle management is critical. As different contract types go through their various stages, contract managers need to be on the lookout for any changes or breaches. Vendor performance and risk management are important considerations during the management of contracts. For example, if a vendor fails to meet its contractual obligations, you may need to rework the contract or enforce some disciplinary measure. If an employee or business is unhappy with its contract, it might be worth making alterations to the contract. It's important to follow contractual obligations while also making sure both sides of the contract are happy. **Managing Trade Operations** **Top 7 Procedures for Purchasing Materials** **Determining Purchase Budget** Purchase Manager prepares a purchase budget for the forthcoming financial year. It contains detailed information regarding quantity to be purchased, quality of materials, time of purchase and the sources of procurement. A schedule of materials and components needed for various jobs, known as bill of materials, is also prescribed. A bill of materials is also useful in exercising control over the utilization of materials. **Receipt of Purchase Requisition** The purchase officer initiates action for the purchase of materials only when he receives a request for the same. The departmental heads send requisition slips to purchase department giving details of materials required by their departments etc. A purchase requisition is a form used as a formal request to the purchasing department to purchase materials. **Determining Sources of Supply** Purchase Manager remains in touch with various suppliers of materials. The quotations are invited for the purchase of specific items. After receiving quotations, a comparative study is made regarding terms and conditions offered. The factors to be considered include price, quantity, quality, time of delivery, terms of payment, trade discount and reputation of suppliers. **Placing Order** After selecting a supplier, a formal purchase order is sent for the supply of goods. This order should contain details about the quantity, quality, price, mode of delivery, terms of payment etc. The purchase order authorizes the vendor to dispatch goods specified in it. It establishes a contractual relation between the buyer and the vendor. **Follow-Up of Purchase Order** A purchase order normally bears a date by which the goods must be delivered It is in the interest of the organization that goods are received in time for keeping uninterrupted flow of materials. **Receipt and Inspection of Materials** In big concerns the task of receiving materials is assigned to the purchase department whereas in small concerns this work is done by the storekeeper. After unpacking goods their quantity is compared to that given in delivery challans. Any discrepancy in items is reported to the purchase department. The specifications and quality of goods is also checked at this stage. **Checking Invoices** Lastly, purchase department checks the invoices supplied by the vendor with that of its own records. The quantity, quality, price, terms etc. are compared with those given in purchase order. After making full checking the invoices are sent to accounts department for payment. **10 Essential Tips for Effective Inventory Management** **1. Prioritize your inventory for better inventory management**. Categorizing your inventory into priority groups can help you understand your ideal ordering quantities and frequencies. You can also determine which items are essential to your business but may cost more and move more slowly. Experts suggest segregating your inventory into A, B and C groups. - A group: Items in the A group are higher-ticket items. You need fewer of these items. - C group: Items in the C category are lower-cost items that turn over quickly. - B group: The B group consists of in-between items. These moderately priced items move more slowly than C items but faster than A items. **2. Track all product information to manage inventory better.** Keep product information for all items in your inventory. This information should include the following: - SKUs - Barcode data - Suppliers - Countries of origin - Lot numbers **3. Audit your inventory for better inventory management.** Some businesses do a comprehensive inventory count once a year. Others do monthly, weekly, or even daily spot checks of their hottest items. Many do all the above. **4. Analyze supplier performance for better inventory management.** An unreliable supplier can cause problems for your inventory. If you have a supplier that's habitually late with deliveries, frequently shorts an order or is the source of supply chain delays, it's time to act. **5. Practice the 80/20 inventory rule for better inventory management.** Generally, 80 percent of your profits come from 20 percent of your stock. Prioritize managing this 20 percent of your inventory. **6. Be consistent in how you receive stock for better inventory management.** It may seem like common sense to ensure your team processes incoming inventory. However, do you have a standard process that everyone follows, or does each employee receiving and processing incoming stock do it differently? **7. Track sales for effective inventory management.** Tracking sales may seem obvious. However, effective sales tracking goes beyond adding up money at the end of the day. You should understand, daily, what items you sold and how many you sold, and update your inventory totals. **8. Order restocks yourself for better inventory management.** Some vendors offer to reorder inventory for you. On the surface, this seems like a plus. Your time -- and your team's time -- is freed while someone else manages the restocking process. However, your vendors don't always share your priorities. They want to move their items, while you want to stock the most profitable items for your business. Take the time to check inventory and order all restocks yourself. **9. Invest in inventory management technology.** Very small businesses might be able to handle inventory management efforts with spreadsheets and notebooks. However, as your business grows, you risk spending excessive time on inventory instead of running your company. **10. Use inventory management tools that integrate with your other solutions.** Inventory management software isn't the only technology for managing stock. For example, mobile scanners and POS systems can help. **Conducting Accounting Functions** **Florida's Construction Lien Law** According to Florida law, those who work on your property or provide materials, and are not paid-in-full, have a right to enforce their claim for payment against your property. This claim is known as a construction lien. If your contractor fails to pay subcontractors or material suppliers, the people who are owed money may look to your property for payment, even if you have paid your contractor in full. This means that if a lien is filed against your property, your property could be sold against your will to pay for labor, materials, or other services which your contractor may have failed to pay. **An Owner's Rights and Duties Under the Florida Construction Lien Law** Investigate the Contractor at the beginning - Ask the contractor for a list of some completed jobs that you can check to see if other owners were happy with the contractor's performance. **Understand the contract** **Record and post a Notice of Commencement** - A Notice of Commencement is the first document that arises in the construction lien context. The form is in Florida Statute 713.13. It is the owner's duty to sign the notice of commencement and to post a certified copy at the jobsite. Obtain a list of subcontractors and suppliers - You may make a written request of the contractor by certified or registered mail to obtain a list of all subcontractors and suppliers. The contractor has a duty to give you this information or lose lien rights. **Obtain releases each time a payment is made** - When an owner makes a payment, he or she should obtain a release from the contractor and from each person who has served the owner with a notice to owner to the extent of the payment made. If an owner makes a payment without obtaining releases from every person who has served a notice to owner, those who did not give a release may claim against the property for sums owed, even though payment was made to the contractor. **Final Payment** - At the time of final payment it is the owner's duty to obtain (and the contractor's duty to furnish) a contractor's final affidavit. The form is now found in the lien law. A final payment made without the owner obtaining a final contractor's affidavit is an improper payment. **If a lien is filed** - If proper payments are made (notice of commencement not expired, releases obtained to the extent of each payment, final contractor's affidavit given) the owner's exposure is limited to the unpaid contract price. **What are Financial Ratios?** **Liquidity Ratios** Liquidity ratios are financial ratios that measure a company's ability to repay both short- and long-term obligations. Common liquidity ratios include the following: - The **current ratio** measures a company's ability to pay off short-term liabilities with current assets. *Current ratio = Current assets / Current liabilities* - The **acid-test ratio** measures a company's ability to pay off short-term liabilities with quick assets. *Acid-test ratio = Current assets -- Inventories / Current liabilities* - The **cash ratio** measures a company's ability to pay off short-term liabilities with cash and cash equivalents. *Cash ratio = Cash and Cash equivalents / Current Liabilities* - The **operating cash flow ratio** is a measure of the number of times a company can pay off current liabilities with the cash generated in a given period. *Operating cash flow ratio = Operating cash flow / Current liabilities* **Leverage Financial Ratios** Leverage ratios measure the amount of capital that comes from debt. In other words, leverage financial ratios are used to evaluate a company's debt levels. Common leverage ratios include the following: - The **debt ratio** measures the relative amount of a company's assets that are provided from debt. *Debt ratio = Total liabilities / Total assets* - The **debt-to-equity ratio** calculates the weight of total debt and financial liabilities against shareholders' equity. *Debt to equity ratio = Total liabilities / Shareholder's equity* - The **interest coverage ratio** shows how easily a company can pay its interest expenses. *Interest coverage ratio = Operating income / Interest expenses* - The **debt service coverage ratio** reveals how easily a company can pay its debt obligations. *Debt service coverage ratio = Operating income / Total debt service* **Efficiency Ratios** Efficiency ratios, also known as activity financial ratios, are used to measure how well a company is utilizing its assets and resources. Common efficiency ratios include: - The **asset turnover ratio** measures a company's ability to generate sales from assets. *Asset turnover ratio = Net sales / Average total assets* - The **inventory turnover ratio** measures how many times a company's inventory is sold and replaced over a given period. *Inventory turnover ratio = Cost of goods sold / Average inventory* - The **accounts receivable turnover ratio** measures how many times a company can turn receivables into cash over a given period. *Receivables turnover ratio = Net credit sales / Average accounts receivable* - The **days sales in inventory ratio** measures the average number of days that a company holds on to inventory before selling it to customers. *Days sales in inventory ratio = 365 days / Inventory turnover ratio* **Profitability Ratios** Profitability ratios measure a company's ability to generate income relative to revenue, balance sheet assets, operating costs, and equity. Common profitability financial ratios include the following: - The **gross margin ratio** compares the gross profit of a company to its net sales to show how much profit a company makes after paying its cost of goods sold. *Gross margin ratio = Gross profit / Net sales* - The **operating margin ratio**, sometimes known as the return on sales ratio, compares the operating income of a company to its net sales to determine operating efficiency. *Operating margin ratio = Operating income / Net sales* - The **return on assets ratio** measures how efficiently a company is using its assets to generate profit. *Return on assets ratio = Net income / Total assets* - The **return on equity ratio** measures how efficiently a company is using its equity to generate profit. *Return on equity ratio = Net income / Shareholder's equity* **Market Value Ratios** Market value ratios are used to evaluate the share price of a company's stock. Common market value ratios include the following: - The **book value per share ratio** calculates the per-share value of a company based on the equity available to shareholders. *Book value per share ratio = (Shareholder's equity -- Preferred equity) / Total common shares outstanding* - The **dividend yield ratio** measures the amount of dividends attributed to shareholders relative to the market value per share. *Dividend yield ratio = Dividend per share / Share price* - The **earnings per share ratio** measures the amount of net income earned for each share outstanding. *Earnings per share ratio = Net earnings / Total shares outstanding* - The **price-earnings ratio** compares a company's share price to its earnings per share. *Price-earnings ratio = Share price / Earnings per share* **Business Taxes** **Income Tax** All businesses except partnerships must file an annual income tax return. Partnerships file an information return. The form you use depends on how your business is organized. **Estimated Tax** Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. **Self-Employment Tax** Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Your payments of SE tax contribute to your coverage under the social security system.  **Employment Taxes** When you have employees, you as the employer have certain employment tax responsibilities that you must pay and forms you must file. Employment taxes include the following: - Social security and Medicare taxes - Federal income tax withholding - Federal unemployment (FUTA) tax **Excise Tax** This section describes the excise taxes you may have to pay and the forms you must file if you do any of the following. - Manufacture or sell certain products. - Operate certain kinds of businesses. - Use various kinds of equipment, facilities, or products. - Receive payment for certain services. **Business Property Tax: The Ultimate Guide** **What Is Business Property Tax?** Business property tax is the tax you are responsible for paying on property, like land or real estate, that your business owns. Business property taxes are assessed at the local level, typically by the city or county where your business property is located. These taxes are a significant source of revenue for municipalities and are used for funding local schools, roads, public safety, government administrators, and more. Like personal property taxes, your tax rate will be based on the assessed value of your business's land or real estate, as opposed to the fair market value. Your local tax authority will determine the assessed value of your property and notify you of the amount of annual taxes you're responsible for paying. However, in addition to the business property tax you'll need to pay on your land or buildings, you may also be obligated to pay another type of business property tax, referred to as business personal property tax. **What Is Business Personal Property Tax?** In addition to your business's real estate or land that can be subject to business property tax, you may be responsible for paying taxes on your business's personal property as well. Business personal property, also referred to as tangible personal property, encompasses any goods or products that your business owns and uses for business purposes. Common examples of business personal property include: - Furniture such as desks, cabinets, chairs, and machinery - Fixtures - Computers, telephones, and printers - Business equipment like cash registers and fax machines - General business tools and supplies Like the taxes that are imposed on businesses for their land and real estate, your local tax authority may require that you pay taxes on these items as well. **How to Collect, Report, and Pay State Sales Tax** Collecting Sales Tax, Step-by-Step To help you sort this out, we\'ve collected the steps you will need to go follow to collect, report, and pay sales taxes on the products or services you sell. Here are the main steps in the process of preparing to collect, report, and pay sales taxes: 1. Begin by determining whether you must collect sales taxes in a specific state (the tax nexus question). 2. If you sell online, you will also need to check to see if you need to collect and pay sales tax on these online transactions in your state. 3. Register with your state\'s taxing agency. If you sell in more than one state, you will need to register in each state. Your state will also have information on what products and services are taxable. 4. Determine the sales tax rate or rates you must charge. It has been estimated that there are 11,000 tax collection entities in the U.S., so determining and collecting sales tax can be very complex. 5. Set up your processes to collect sales tax from your customers. You might be selling online, at a retail store, or at outside venues like flea markets and events. 6. Collect sales taxes from your customers. 7. Gather your records for all your sales and the taxes through your business accounting system. 8. Send reports to your state. 9. Pay sales taxes you have collected to your state. **Track Job Costs Monthly to Stay on Budget** **Maintain updated job cost reports** Set up your construction job cost tracking system by using a spreadsheet like the example shown here. Set it up with the following columns to track your budget versus actual costs:  1. Cost Code 2. Trade Description 3. Contractor / Subcontractor / Supplier 4. Original Budget 5. Approved Change Orders 6. Revised Budget 7. Original Subcontract 8. Subcontractor Change Orders 9. Committed Revised Subcontract 10. Non-Committed Cost to Date 11. Non-Committed Estimated Costs to Complete 12. Estimated Final Costs 13. Variance **How to Calculate Employee Payroll** The Fair Labor Standards Acts sets federal record-keeping laws, which allow an employer to use any timekeeping method he chooses, provided it is accurate and complete. Regardless of the timekeeping method, standard rules apply to calculating timecards. 1. Round employee time up and down to the nearest quarter hour if your timekeeping system does not have this ability. For example, round 7:10 a.m. up to 7:15 a.m. and round 3:04 p.m. down to 3 p.m. Most computerized timekeeping systems perform rounding. You need to ensure that the time is correct and make any necessary changes. 2. Convert fractions to decimals as follows: 1/4 hour =.25, 1/2 hour =.50, and 3/4 hour =.75. For example, if the timecard shows 7 1/2 hours worked on Monday, change that to 7.50 hours. 3. Add daily work hours for the week. For example, from Monday to Friday the timecard shows \"In-8 a.m.; out lunch-12:15 p.m., in lunch-1:15, out-5 p.m.\" Subtract one hour for unpaid lunch and pay the employee eight work hours for each day, which equals 40 hours for the week. 4. Calculate overtime hours, if applicable. For example, from Tuesday to Saturday, the timecard shows \"in-9 a.m., out lunch-1 p.m., in lunch-2 p.m., out-7 p.m.\" Subtract one hour for unpaid lunch and pay the employee nine work hours for each day, which equals 45 hours for the week. Pay 40 hours at the employee\'s regular pay rate and five hours at her overtime rate of 1 1/2 times her regular pay rate. **Managing Human Resources** **How to Develop Essential HR Policies & Procedures** **Posting Requirements** Regulatory issues such as minimum wage rates, workplace accommodations and EEO usually have posting requirements. Employers are required to post notices about the federal and state minimum wage rates, employees\' rights under EEO laws and regulations published by the Occupational Safety and Health Administration. Monitoring conspicuous placement of these postings is HR\'s responsibility and should become part of essential HR policies and procedures. **Confidentiality** Human resources staff are entrusted with personal data on employees, documentation about employees\' job performance and medical-related information such as details concerning leaves of absence for health conditions, workers compensation and group health plan selections. Provide HR staff members with written confidentiality agreements and require their signatures as evidence that they understand the importance of maintaining the privacy of employee information as well as the confidentiality of employment matters. **Work Hours** Ideally, employees should have access to HR staff regardless of their shift. Many HR departments are staffed during normal business hours, 9 a.m. to 5 p.m. However, companies with round-the-clock operations should have at least one HR staff member available to handle urgent matters that arise outside normal business hours. An essential HR policy is one that recognizes the need for HR presence whenever employees are working. Discuss this business principle with HR staff. Devise a schedule that provides HR coverage for employees\' work hours and distribute HR contact information to employees, supervisors, and managers. **Compensation and Benefits** Policies and procedures concerning employee wages, health benefits and retirement savings options generally are handled by the department\'s benefits administrator. The benefits administrator typically is the designee responsible for maintaining confidential medical-related information under the Health Insurance Portability and Accountability Act. Procedures such as open enrollment and COBRA \-- the Consolidated Omnibus Budget Reconciliation Act that permits continuation of health plan benefits when employment status changes \-- are within the purview of a benefits administrator. **Vacation and Sick Leave** Paid time off, or PTO, which includes vacation, sick leave, and personal days, also may be handled by the benefits administrator. However, for record keeping purposes, some companies have their payroll clerks handle PTO matters, except for requests for time off. HR policies and procedures regarding PTO should be clearly worded and disseminated to employees, supervisors, and managers since misuse of PTO can result in disciplinary action or termination. **Responsibility** In organizations with a dedicated HR department, the HR manager would likely develop these policies. However, in small companies that don\'t have HR expertise in-house, a top-ranking manager in the company may create a set of basic rules and consult the company\'s lawyer on policies that involve federal and state regulations. The organization\'s supervisors and managers must be held accountable for interpreting the company\'s guidelines and workplace rules. HR should maintain written policies and update them regularly; also, HR must disseminate copies of the handbook to staff and leadership and require signed acknowledgements that they read and understand them. **Laws to Consider When Doing Employee Evaluations** Performance evaluations are not mandatory, according to the U.S. Department of Labor. They are a matter between you and your employees or your employees' representative. Performance evaluations help you to determine merit increases and come up with employee development strategies. They are also useful in documenting employee conduct or performance that results in termination. If you choose to provide them, you must consider the laws that relate to them. **Civil Rights Act and EEOC** The publication "The Legal Side of Evaluating Performance," by Coastal Training Technologies Corporation, describes Title VII of the Civil Rights Act of 1964 as the law that most deeply affects performance evaluations. Under Title VII, you cannot discriminate against an employee because of her color, race, sex, religion, or national origin. Title VII also created the Equal Employment Opportunity Commission to enforce laws that make it illegal for an employer to refuse to hire or terminate an employee or otherwise discriminate against an employee with regards to his compensation and employment conditions and privileges. Some states add other protected classes, barring discrimination based on sexual orientation, for example, so stay abreast of applicable state laws as well. To avoid being charged with discrimination, you must develop a performance evaluation system that is valid and fair. **Age Discrimination in Employment Act** If you have 20 or more employees, under the Age Discrimination in Employment Act, you cannot discriminate against employees aged 40 and older when making certain employment decisions. Such decisions include hiring, discharge, promotions, demotions, benefits, and performance reviews. The state might have laws that protect employees in different age groups, including those under 40, and may forbid age discrimination by employers with fewer than 20 employees. **Discharge and Lawsuits** If you terminate an employee because of poor performance and she sues you for discrimination, to win the case, she must prove discrimination. According to Personnel Policy Service Inc., you stand a favorable chance in court if you perform evaluations regularly, have a streamlined approach, give your employees adequate feedback and record performance concerns. For example, in an age discrimination lawsuit, the court is likely to rule in your favor if you show that the employee did not meet her job expectations and was not discharged because of her age. Conversely, the employee is likely to have an easier time proving discrimination if she had good performance reviews before being terminated. **Negligence** You could be held liable for negligence if you fail to conduct regularly scheduled evaluations according to company policy. According to Professor Dan Van Bogaert, J.D., of Loyola Marymount University, for you to be liable, the employee must prove that you owed him a duty of care, you violated that duty, he suffered a lawfully recognized injury and your failure to act caused the injury. **System Development** To minimize the risk of lawsuits, develop a practical performance evaluation system that satisfies legal requirements. The Center for Association Leadership suggests creating an appraisal form that specifically matches the employee's position; training your performance evaluators; and establishing a rating scale, with the lowest being "unacceptable" and the highest being "exceptional." To strengthen accuracy, you may use two evaluators for the same employee instead of one. Ensure that your employees are clear about the job duties that their evaluation pertains to and provide an effective appeals process. **Complying with Government Regulations** Are you in compliance? 5 federal employee rights acts and employer regulations you need to know **1. Employment Polygraph Protection Act (EPPA)** Many relationships in life are based on trust, including those between an employer and his employees. And, while honesty may be an integral part of your workplace, the DOL strictly prohibits the use of polygraphs and other psycho-physiological evaluators of lying -- even on a voluntary basis. Some private firms, such as those in a security-related industry, may be able to use a polygraph under extremely limited circumstances. **2. Immigration and Nationality Act (INA)** Whether you own a farm or a dotcom, you may find yourself in need of labor not readily available stateside. Before diving headfirst into an overseas search for prospective employees, peruse the DOL's employer regulations on foreign workers. In short, all employers must complete an Employment Eligibility Verification, or I-9 form, which must be kept on file. **3. Worker Adjustment and Retraining Notification Act (WARN)** While small businesses may not be affected by this DOL act, its principle may help any business owner get through the rough patch that accompanies layoffs. Under WARN, companies that employ 100 or more employees must notify their workers 60 calendar days before major layoffs occur. **4. Uniformed Services Employment and Reemployment Rights Act (USERRA)** Under USERRA, you cannot refuse to employ someone solely because of his or her veteran status or intent to serve. Also, you must rehire previously employed individuals after they return from serving. However, returning troops have a specific timeframe during which they must inform you of their desire to return to the company; and you don't have to rehire dishonorably or punitively discharged troops. **5. Employee Retirement Income Security Act (ERISA)** Although supplying your employees with health care coverage may be well under your radar, this two-pronged reform sets various guidelines for employee benefits. ERISA requires employers who provide an employee pension plan to follow certain rules, such as fulfilling a minimum funding requirement. COBRA and HIPAA, two health care related amendments to ERISA, require employers to follow guidelines when providing employees with health insurance. Under COBRA, employers must provide employees with health care benefits for a limited time after voluntary or involuntary job loss, as well as unexpected circumstances. HIPPA prohibits an employer's health care plan from denying employees coverage or discriminating based on pre-existing conditions or disabilities. **How to Comply with New State and Local Laws** Consider that in recent years, 29 states and at least 40 local governments have raised their minimum wage above the federal rate of \$7.25 an hour. Eleven states and about 20 municipalities have enacted laws requiring employers to provide paid sick leave. At least eight states have passed equal-pay laws that exceed the requirements of the federal Equal Pay Act, and at least eight states and 12 municipalities have enacted legislation prohibiting employers from asking applicants about their previous salaries. Thirty-three states have legalized the medical use of marijuana, and 10 states have also legalized recreational use, requiring employers to re-examine their drug-testing policies.