Thursday, October 18, 2012

What You Need to Know to Claim Cost of Money - Part 5

Today we conclude our series on cost of money with a few closing thoughts and comments. To read the earlier posts in this series, start here.

Calculate a ROM to see what it is worth to you. This is pretty simple and you should do it to determine whether it is worth pursuing. The more assets you have, the more likely it is that it will be worth your while to go through the exercise. Take the net book value of assets times the Treasury rate times the percentage of your negotiated Government contracts to your total business. A company with $100,000 in net book value of assets and with 50 percent negotiated contracts could earn an additional $875; not much but probably worth the effort.

Monitor the treasury rate. The treasury rate is now at an all-time low but three years ago it was higher than five percent. An increasing rate might make a difference on whether its worthwhile to propose/claim cost of money.

Become familiar with the form. Cost of money is proposed/claimed using Form CASB-CMF. This form is readily available on the web in both Word and PDF fill-in.

Track your assets in a manner that facilitates the completion of the CASB-CMF form. Most asset management software provides for fields or user-defined fields that can be used to sort and compile asset values that correspond to the fields in the CASB-CMF form. This will reduce the time it takes to prepare cost of money calculations.

Remember to use net book values for financial reporting purposes. Most companies have multiple depreciation schedules. There is one for financial reporting, another for federal income tax, another for federal alternative minimum tax, and possibly one for state income tax.

If you would like to discuss cost of money further, contact David Koeltzow toll free at 866-849-4887, Extension 6.

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