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Healthcare Costs Top Concern for CFOs

Posted 5:04 PM by

Manufacturing companies have a wide variety of costs that they must face in the production of their products. Direct costs (such as raw materials) are easy to understand and easy to apply. Overhead costs (i.e., electricity) can be a little more of a challenge at times, but are still managable. However, what do you do about costs that you know you are going to incur, but have no idea how to determine their value? 

This is the case with healthcare costs and a big reason why they are the top concerns for many CFOs. A recent survey by Bank of America Merrill Lynch found that seven out of 10 CFOs ranked healthcare costs as their top concern for 2013 and beyond. Healthcare costs easily topped other concerns noted, such as revenue growth (the next closest with approximately four out of every 10 CFOs), energy costs, taxes and availability of skilled workers, all of which are big concerns for manufacturing companies.  

The biggest challenge is determining how to budget for the upcoming year. Manufacturers need to be able to operate off of accurate budgets, so that they can determine what to bid their work at to ensure profitability on their jobs. The problem is that there are too many variables that are impacted by the Affordable Care Act (ACA) and most companies feel overwhelmed in determining where to start. (The Affordable Care Act: What Should You Be Doing Now?)

Companies need to make sure that they understand the basic provisions of the ACA before they begin their budgeting process. They should determine what costs could be incurred and the likelihood of those costs being incurred, so that accurate budgets can be established. KSM's healthcare reform web page is a good starting point, providing access to an array of healthcare reform resources, such as articles, blog postings and presentations.

About the Author

Justin Hayes is a director in Katz, Sapper & Miller’s Audit and Assurance Services Group as well as being a member of the Not-for-Profit and Governmental Services Groups. Justin works with clients to help them avoid risk and maximize efficiencies by keeping an eye on their bottom line and helping ensure accurate financial reporting. Connect with him on LinkedIn.

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