2SBD New Site - Accounting, Tax

Tax Preparation, Calculation May Be More Difficult

dmazzella@is-incorp.com — Thu, 20 Jan 2022 20:15:28 +0000

This year, navigating tax season may feel like navigating a minefield because of the dramatic changes that many businesses and individuals were forced to implement as a result of the COVID-19 pandemic.
According to Bryan Cannon, CFP®, a seasoned stock market analyst, navigating tax season always requires paying special attention to the ways in which business practices and tax laws may have changed from the prior year.
Here are some tips to make it easier and safer for small business leaders as tax season approaches:
Gathering and organizing documents: For the most part, the documents that are needed to complete tax fillings have not changed from recent years. For individuals, the list includes W-2 forms and 1099 forms, tax deduction documents such as Mortgage Interest Statements (Form 1098), and receipts for expenses such as medical bills. For businesses, the list includes business reports related to income and expenses, information on assets and loans, and payroll data.
Documenting advance child tax credit payments: For parents who opted to receive advance child tax credit payments that were made available under the American Rescue Plan, it will be important to hold on to Letter 6419, which the IRS began mailing out in late December 2021. Letter 6419 has information that filers must use to claim their remaining child tax credit money.
Claiming recovery rebate credits: Economic impact payments, also known as stimulus payments, were distributed to individuals in 2020 and 2021. Letter 6475, which the IRS will begin sending out in late January 2022, documents the amount of money individuals received from stimulus payments during 2021. Those who did not receive the full amount of stimulus payments available may be able to claim the recovery rebate credit, but will need the information provided on Letter 6475.
Reporting unemployment income: Under the American Rescue Plan Act, up to $10,200 in unemployment income was exempt from 2020 income taxes. The exemption does not apply to 2021 unemployment income. The form that documents unemployment benefits is Form 1099-G, which should be provided by the state in which unemployment was claimed.
Determining home office deductions: While many employees have shifted to working from home during the pandemic, tax law does not permit individuals to claim deductions for a home office unless they are self-employed. Full-time W-2 employees who are working from home are not eligible for a home office deduction.
Claiming employee retention credits: Employee retention credits were extended to certain businesses affected by COVID-19 under the CARES Act. The Infrastructure Investment and Job Act stipulates that employers cannot claim employee retention credits on any wages paid after September 30, 2021. As a result, the maximum amount that can be claimed per employee for 2021 is $21,000.

Bryan Cannon, CFP®, is a seasoned stock market technical analyst with over 25 years of investment and financial planning experience who closely follows overall market trends, market conditions, and specific equities. He serves as the host of Markets ‘N5, a bi-weekly video series focused on analyzing market trends based on technical analysis.

Section:

Accounting, Tax

Warning Signs Of Fraudulent Behavior In Your Company

dmazzella@is-incorp.com — Mon, 06 Jan 2020 16:07:43 +0000

For small business owners, trust can be the foundation for success.
Trusted relationships with customers, partners, employers and investors are vital to growth and even survival – but, unfortunately, trust can easily be broken.
According to two experts from accounting firm

Section:

Accounting, Tax

Consistency Is Key To Small Business Growth

dmazzella@is-incorp.com — Mon, 25 Nov 2019 20:26:28 +0000

Growing small businesses often fail to use the elements of basic accounting to identify current, future opportunities and problems.

According to Will Stewart, Corporate Controller, MidCap Credit & Capital, the general ledger – it is essentially the master accounting document presenting a complete record of a company’s financial transactions.

Adds Stewart, paying attention to this vital process can help companies grow.

Consistency is Key

One of the biggest challenges for any small business is always going to be the question of maintaining consistency across the accounting process. The lack of consistency across processes, general ledger accounts, and accounting practices generally stems from having different people maintain different sets of ledgers. Frequently, the individual posting to a general ledger is primarily focused on completing their task and will have a tunnel vision that only takes into consideration their singular ledger.

The potential result is the ways in which different individuals maintain their ledgers may vary from one to the other, introducing inconsistency into accounting and reporting practices. It especially rings true for small businesses that have multiple locations where they don’t necessarily have the same people performing the same tasks across the multiple ledgers they possess – with an even greater risk when they are working in different instances of the accounting software. Additionally, when a diversity of practices evolves around recording intercompany transactions, significant consolidation challenges are created because it is more difficult to identify the intercompany transactions that need to be eliminated.

These challenges become too complex for entry-level financial systems, which are not built to scale, to take on and typically require significant manual effort to overcome. Senior financial professionals then spend a significant amount of time making corrections to the general ledger in order to ensure the results of the business are consistently reported. This takes away their time and mental energy that they could have invested in more strategic initiatives for their organization.

Having inconsistent practices can also have detrimental effects on business outcomes. For example, if a small business owner is seeking new financing sources, the potential financier performing financial statement due diligence procedures potentially may identify those inconsistencies. This can create a negative perception of the company’s accounting practices and may call into question the reliability of its financial results. The greater perceived risk may result in a greater cost of capital to the company or may result in the company not receiving financing at all.

Solution

If a small business has determined that a pain point has developed from either the time spent correcting financial results due to inconsistent accounting practices and/or making adjustments to ensure financial results from multiple operations are reported consistently, this is a key indicator that a change needs to happen. When MidCap Credit & Capital reached this point in our maturation, we implemented a robust cloud-based financial solution that eliminated the shortcomings of the previous system. The results of the implementation enabled our leaders to be empowered to restructure the business, to unlock valuable insights into how they could consolidate our accounting practices, and to implement necessary
automation processes. The initial benefits of doing so include material contributions to obtaining new financing, which offered a lower cost of capital, and a significant reduction of operating expenses at the management company.

Implementing cloud-based financial technologies ensures that everyone, regardless of where they are physically located, is working within the same system and helps administer improved consistency over accounting processes. Additionally, the strategic assessment required to implement an integrated system, can offer significant business insights to financial leadership stemming from the assessment of their organization’s actual needs and forecasting where it is headed. Ultimately, small businesses should be able to focus on growing their business while allowing technology to help streamline their accounting processes, generating more efficient outcomes and setting them up to scale the business without adding more complexity to their internal workflows.

Section:

Accounting, Tax

The Right Time for a Fast-growth Company to Hire a CFO

dmazzella@is-incorp.com — Thu, 07 Mar 2019 13:55:44 +0000

Fast growing small businesses reach a point when specialized finance expertise can be critical to continuing success.
Determining when that time is, and what the expertise looks like, can make a big impact for a company.
Mary Cook, managing director of Finance & Accounting at Salo in Chicago, helps companies evaluate this transitional time.

One Basic Of Debt Collection For Small Businesses: Talk With Customers

dmazzella@is-incorp.com — Tue, 15 Jan 2019 18:04:19 +0000

As a small business leader, growth is a top priority.

Acquiring customers is hard but getting paid for work already accomplished is sometimes harder. Customers avoid paying for various given reasons, seldom because of bad intent.

According to Ohad Samet, co-founder and CEO of

Section:

Accounting, Tax

Buying Versus Leasing Key Decision For Small Business Leaders

dmazzella@is-incorp.com — Tue, 30 Oct 2018 15:51:31 +0000

One recent small business leader survey indicated they were more interested in buying the property their brick-and-mortar facility domiciled in than at any time in the past 10 years.
The decision to buy or lease is one of the toughest such choices they face.
Like so many business decisions, there are pros and cons to either choice which can have a huge impact on the profitability of the business.
According to Steve Hazan is Director of Business Lending at SECU credit union, much like buying a house, owning the building for small or mid-sized business owners can provide significant benefits, ranging from building equity to tax deductions.
Adds Hazan, one of the most important benefits is to lock in a commercial mortgage rate for the long-term. Even in today’s rising rate environment, commercial mortgage rates are historically low. Locking in at today’s rates for a minimum of 15 years allows small business owners to reduce (or perhaps completely eliminate) the need to refinance during the life of the loan and provides a much better way to budget monthly expenses. There is no need to worry about rent increases that could have a significant impact on the business.
Like a house, building ownership also enables small business owners to build equity over time which, in turn, can be used as collateral if business expansion is being considered. Owners potentially can also use that equity to fund their retirement or create an ongoing source of income, even if they decide to sell their interest in the business.
Building ownership also represents a ready tax deduction. Small businesses that own their buildings can depreciate the space and deduct mortgage interest expenses on their taxes. Unlike a lease, however, the monthly payment cannot be deducted and the cost of the building cannot be written off.
Finally, building owners can rent any extra space in their buildings. That translates into yet another source of income, as well as the potential for leasing to complementary businesses that can serve as possible referral sources.
There are some cons to buying though. One of the most significant is the upfront cost. Initially, the cost of buying a building will far outweigh any lease. The business will also be hit with property, appraisal, and maintenance costs, as well as a large down payment and possible property improvement costs.
Those high upfront costs potentially could hurt a small business if it simultaneously encounters some unanticipated expenses, such as the loss of a key customer or the need to make a major equipment purchase. Leasing, on the other hand, frees up more working capital, providing more flexibility to respond to new opportunities.
Leasing also has several very practical advantages. Leasing space enables a small business to locate in a more prestigious property, or move to a larger space if growth occurs at a faster rate than expected. Leasing also allows the business owner to ask for periodic space improvements, while avoiding many of the headaches associated with property ownership.
Like most business decisions, building ownership should not be taken lightly. It potentially can provide numerous benefits for a small business, but could just as easily have the opposite effect if it is not carefully considered in light of the other financial, tax, and personal issues the business is likely to face. With that in mind, small business owners should always consult with professionals who know the business well before reaching any decision on building ownership.

Steve Hazan is Director of Business Lending at SECU, Maryland’s largest credit union. He can be reached at 410-487-7187 or Steve.Hazan@secumd.com.

Section:

Accounting, Tax

Small Businesses Fall Prey To Non-Existing Dummy Companies.

dmazzella@is-incorp.com — Mon, 14 May 2018 20:33:08 +0000

A surprising number of businesses fall prey to fraud by doing transactions with non-existent companies..
This fraud allows non-existent, or otherwise fraudulent businesses, to establish credit. These firms then dupe unwary small businesses.
Once duped, these victims sometimes employ specialized firms to collect bad debts.
According to Dean Kaplan is President of The Kaplan Group, a commercial collection agency, “because it is almost always impossible for even an experienced and skilled collection agent to collect from a nonexistent business, this type of fraud is extremely costly to victims.”
But Kaplan argues that most cases of this kind of fraud can be prevented with a little caution and research.
Here are several free or low-cost ways Kaplan says small businesses can quickly and easily detect fraud.

Look for Professionalism: Generally speaking, if a company does not have a website, has an unprofessional website, or has a website that is under construction, it’s a warning sign. Similarly, be on alert if the company’s email address is a free service such as Gmail or Hotmail, as opposed to their own domain name. The contact information on the website should be the same as that provided on any business cards, emails or other communication provided by the company.
Make a Call: Any company that does not publish a phone number on their website does not want their customers calling. That is usually not a good sign.
Type the phone number they gave you into a Google search. Cross reference that information with the information on any paperwork submitted. If the number doesn't come up in a search directly tied to the business, take the extra step to learn more about that business before extending credit.
Make sure to get the company’s main phone number. For smaller businesses, get the owners’ mobile phone number and direct email address. If the business phone is a mobile phone, that is typically an indicator of the size or the legitimacy of the business.
Verify Entity: If the company indicates they are a corporation, LLC (limited liability company), or partnership, confirm this with the appropriate secretary of state. Forty-seven of the 50 states have free websites with this information easily available.
If the business is required to have a professional license, such as a contractor, real estate broker, or medical professional, use a similar process with the respective licensing authority’s website.
Addresses: Once the business address has been verified, type it into Google Maps. Use the satellite view to quickly establish the type of building at the location and access the street view when available. Further investigation is recommended if:
• The building does not look appropriate for the type of business;
• signage viewable on street view shows a different company name; and
• it is a residential location.
Most importantly, confirm that this address is not a mailbox service. Google Maps or standard Google search typically will give a list of the businesses located at a specific address. More research is needed if:
• Several businesses are listed at the address;
• the businesses have suite numbers, which might actually be mailbox numbers; and
• the name of one of the businesses indicates a print, copy, package or mail service such as The UPS Store.
Always make sure to confirm a physical location. It is critical to have a home address if the business does not have a permanent physical location or if a personal guaranty is received.
Check References: Use the Internet to get the phone number and other contact information for the trade references provided by the potential customer. Some fraudulent businesses provide the name of a legitimate company as a reference, but the contact information is directed towards a conspirator instead of the actual company.
Check Reputation: In addition to confirming that the information provided is correct, dig a little into a company’s reputation. Many non-fraudulent businesses are still horrible credit risks. Pay attention to reviews on sites like Yelp, Google, the Better Business Bureau, and Ripoff Report.

Adds Kaplan, “uncovering a red flag does not mean that fraud is being attempted, it simply means that more investigation and caution are needed.”

Dean Kaplan is President of The Kaplan Group, a commercial collection agency specializing in large claims and international transactions. He provides business planning and other consulting services to a wide variety of at

Section:

Accounting, Tax

Going Paperless This Tax Season Can Save Money, Time, Angst

dmazzella@is-incorp.com — Wed, 21 Feb 2018 16:53:09 +0000

For those companies thinking about transitioning accounting departments to paperless have this 2018 tax season, these tips can turn a potentially negative experience into a positive one.
Jesse Wood, CEO of eFileCabinet offers these five tips.
5. Know That “Paperless” Only Describes Half the Benefits: There are many ways to go paperless before tax season, but not all are created equal. The best paperless strategies are backed by software solutions that automate, simplify, and securitize processes traditionally completed with paper, and this is where the resulting efficiencies and cost reductions can be tracked.
For instance, going paperless would serve little purpose if all one used was a scanner and a traditional Windows folder structure.
The benefits of paperless can’t be realized without the right document management software. Going paperless with nothing more than a scanner and Windows folder structure will cause the same problems paper-based processes cause in accounting offices: misfiling, difficulty retrieving information, poor security, and limited collaboration.
4. Think Paperless Means Breaking the Bank? Think Again: There’s a widespread belief in the accounting community that going paperless can cost over $20,000. However, after implementation fees of a document management solution and a monthly subscription fee of roughly $50 per month to use the software, the return on investment begins quickly if the system is leveraged and embedded across existing business processes.
One of the most common mistakes accountants and CPAs make when going paperless is forgetting to leverage the features of a document management solution. This is easily avoidable if selecting a system as intuitive as possible, and therefore easy to remember to utilize and embed into an existing process architecture.
3. Choose a Software Vendor That Can Automate and Encrypt Your Entire Process: To succeed in the 2018 tax season, most accountants will need the following features in a document management solution to automate and encrypt processes deeply embedded in their existing, paper-based routines:
Templates
When adding a new client to file structures, accounting must manually create the folder, store it, and tag it. Templates mean that instead of copying, pasting, and moving file and folder and drawer structures, accountants can replicate them in different places, automating a file and folder creation process that would otherwise be repetitive and time-consuming.
Zonal OCR
Zonal OCR for accountants automates the scanning and information management portion of scanned documents. It also enables throughput continuity and simplifies using a document management solution over the long-term, automatically routing documents where they need to go in the solution by identifying relevant metadata.
Encrypted File Sharing
Sending files with sensitive client information via email is no longer acceptable given that email is susceptible to breach and customers are warier of sharing their information than ever. Relying on a web portal as an encrypted file sharing feature has two benefits over email:
1) Never having to remove items from the portal, but rather letting clients access documents via the portal, and 2) impressed clients who feel safe sharing their information. Additionally, some accountants even charge their clients to use these portals and collect extra income because of their ease of use and security.
2. Head for the Cloud to Integrate with Solutions You Already Use
The cloud is the future of all software interdependence and connection, so learning to rely on it sooner rather than later will remove any need to convert data from an on premises technology to the cloud, and also enable longevity to the integrations with software accountants already use, such as Lacerte from Intuit or QuickBooks.
1. You Don’t Need to Rush to Get It Done
Going paperless with even the best software should never feel like a rushed, confusing process. Many accountants can complete the process within the span of several weeks without shutting down operations, but still, others choose to opt in for a “phased” implementation, merely scanning a document into their document management solution of choice whenever it’s touched. Neither option is better than the other, but a matter of preference.
If accountants remember these tips to prepare for the 2018 tax season, they are bound to succeed in their paperless endeavors.
Jesse Wood is the CEO of document management software vendor, eFileCabinet. Founded in 2001, eFileCabinet, Inc

Section:
Accounting, Tax

Higher Mandated Labor Costs Next Food Industry Challenge

dmazzella@is-incorp.com — Tue, 31 Jan 2017 16:25:08 +0000

As more and more consumers purchase prepared food rather than cook at home, the currently attractive margins for such offerings face mounting challenges. Not the least are labor costs, which are under pressure from economic and regulatory trends. Integrating higher labor costs into the pricing algorithm represents the next major challenge for food sector leaders.

Whether a neighborhood deli, central food kitchen, or gourmet restaurant, the need to find ways of doing more with the same or fewer employees is expected to become more important in 2017.

At all employee levels from mixer, baker, decorator, sales person, many food industry establishments are facing increased labor costs due to higher demand for workers and regulators intent on raising salaries. While most news stories focus on the situation as one involving fast food outlets or restaurants, the trend also impacts centralized food preparation centers as well.

These latter establishments will also need to deal with not only competition for workers but higher minimum wage floors in many states. Already some fallout from this trend is being experienced. Higher salaries were one of the factors for Whole Foods to close three of its key central kitchens in January.

The increased salary cost trend first noted in 2016 is expected to accelerate as the hoped-for economic recovery picks up steam. With the greater availability of job opening, food purveyors will need to create more attractive industry opportunities. Pressure from this trend is expected to ramp up towards the end of 2017.

More immediate and with higher personnel costs are new city and state minimum wage floors which are driving hourly rates to $15. While popular with some voters, these initiatives directly impact the bottom-line of labor intensive sectors like food preparation and delivery.

For the past eight years, labor costs have been held down by the availability of workers in a less than robust economy. At the same time, this has been occurring at a time when more and more families have opted to bringing home prepared meals and popping them in an oven or radar wave unit. The sale prices of these offerings have provided food and supermarket retail outlets with hefty margins. Some economists now estimate a majority of American families now primarily rely on outside kitchens for their dinners.

However, in many cases the higher labor costs will be difficult to pass on to customers. According to Dr. Kenneth E. Lehrer, a Houston, TX based economists, higher labor costs will eat away at 2-4% of margins when average minimum wages hit $14 as expected in 2018.

Given these trends, what can food establishments do to protect margins in 2017?

·         Develop more efficient operations holding the line on employee growth.

·         Introduce strategic distribution programs to reduce costs.

·         Add robotic functions where possible.

·         Install fuel-efficient machinery.

·         Reduce costs of raw materials by using better sourcing strategies.

·         Locate is regulatory friendly municipalities.

As the prepared food industry matures, there will be greater opportunities for expansion. The key is doing it more efficiently.

Section:
Accounting, Tax

The Good News About Bad Credit

dmazzella@is-incorp.com — Mon, 17 Oct 2016 21:00:24 +0000

As recently as a decade ago, if you were a small business owner with a bad personal or business credit score, you could forget about getting a loan from a traditional bank or credit union.

Their underwriting models didn’t allow much room for weakness in a small business client. “Big data” analysis--using computer programs to gather and review large volumes of information--was just gaining interest, but most banks didn’t have the data capabilities that would enable them to look beyond a credit score to see a business’ potential creditworthiness.

Bad credit isn’t as uniformly bad as it used to be, and even when it is less than ideal, a business owner is much more likely to be able to find the funding he or she needs.

There are now funding options for business owners with personal scores belw 630 from as wide range of sources, even banks.

Stephen Sheinbaum is the founder of Small business owners who know where to look and know what to ask for will find many novel solutions that can help grow their businesses.

Here are just a few of the funding options now:

Revenue-based loans: This type of capital is provided to small or growing businesses based on the funds deposited into the business’ bank account on a monthly basis. The more steady and strong those deposits are, the better a business’ funding chances will be. Unlike a typical bank loan, no collateral is required for a revenue-based loan, and the investor group providing the loan will not look for immediate equity in the business the way an angel investor or venture capital firm might. (A provider of a revenue-based loan might ask for a warrant, which is the right to buy shares in the business at some time in the future at a price established now.) Normally, a business can obtain a business loan equal to 10 percent of its annual gross deposits, regardless of having bad credit.

Credit card sales: This is another option for funding based on the strength of the business at hand and not past weaknesses in the business owner’s credit. In this approach, a funder looks at the amount of business an entrepreneur is doing on credit cards and makes a short-term advance based on projections of future credit card sales. The business owner gets the funding in one lump sum, often in a matter of days, and the funding is repaid automatically from the daily credit card receipts. If the business’ revenues fluctuate during the year, the repayment on this kind of funding can be lower during your slow season and higher in busy season.

Alternative financing: Funding for small businesses is now available from many sources other than banks and credit unions. These non-bank lenders have developed computer programs which can gather a variety of data on their own, saving the business owner time and hassle on paperwork, which is always a sore point for small companies with limited accounting and bookkeeping resources. Some alternative finance companies specialize in one kind of funding, but the larger funders can offer a wide range of options, from short-term funding to invoice and equipment financing, medium-term loans and even long-term loans backed by a guarantee from the U.S. Small Business Administration (SBA). This latter program has been one of the big success stories in alternative finance: SBA-based loans are the lowest cost financing for small businesses, but because applications have to be processed by the lending bank and the SBA, they had required an extensive amount of paperwork. Alternative funders marry both applications to speed the process. If you’re a business owner who needs $200,000 or less fairly quickly, alternative financing may be an option.

Whatever approach you take to getting funding now, your long-term goal should be to improve a lagging credit score, whether personal or business. You can get a free copy of your personal credit score from one of the three credit bureaus--Equifax, Experian and TransUnion--once a year. Review yours for errors and get them corrected ASAP. You should know borrowing from lenders that report to credit bureaus can actually boost your business credit if you make all your payments on time.

For your business credit score, be sure to get a free D-U-N-S number from If you already have a D-U-N-S number, check your current business credit score. While you can get a free copy of your personal credit report once a year from the credit reporting agencies, you will need to pay to get a copy of your business credit report. Spend the money and check this report for errors too every year.

Your business score is calculated from data collected on your business. The scoring agencies are looking at how your business deals with its suppliers and its finances, and they comb public databases and records, including court records, to do so. If a supplier has extended credit to you, the credit scoring companies are going to be looking at how much of that credit you use and how promptly you pay it back. They look for liens against the business, business bankruptcies and what you might owe other lenders.

If your business credit score is weak, take steps to improve it. Start by paying your suppliers promptly and catching up on old bills. All of the business credit agencies are getting reports on your business from the companies you do business with. If they’re not happy with you, the agencies will know. Then manage whatever credit is extended to you wisely. If you get a line of credit, draw it down responsibly and pay it back as required. It can all add up to good news on your next funding application.

Stephen Sheinbaum is the founder of Bizfi, a FinTech company combining aggregation, funding and a participation marketplace on a single platform for small businesses. Founded in 2005, Bizfi and its family of companies have provided more than $1.8 billion in financing to more than 32,000 small businesses in a wide variety of industries across the United States.

Section:
Accounting, Tax