Wednesday, May 4, 2011
IRS Announces Its Selection Of Vendors For Return Preparer Programs
IRS on April 27 announced it has chosen Prometric, Inc. to administer a new competency examination and fingerprinting program for certain paid tax return preparers. As described in the IRS statement, Prometric will be responsible for conducting a job analysis, with the assistance of subject matter experts from IRS and the preparer community, “to ascertain the capabilities and necessary knowledge for return preparers.” Upon the approval of a test plan, the agency “will make test specifications available to assist individuals in preparation for the examination.” IRS must approve all test questions. A second company, Daon Trusted Identity Services, was selected to provide fingerprinting services. The company will assist IRS “in evaluating the background and suitability of certain PTIN applicants, but the IRS will make all determinations regarding suitability issues,” the agency said. Testing and suitability checks are parts of the second phase of increased IRS oversight of federal tax return preparers. Mandatory registration and issuance of Preparer Tax Identification Numbers (PTINs) was the first phase, which began last September. These program phases were originally described in the agency's Return Preparer Review that was unveiled in January 2010.
IRS Plans May 12 Webinar Addressing Payments Made To Foreign Persons
IRS has scheduled a webinar for May 12 as part of a series of such events dealing with international tax issues affecting governments. The webinar is entitled “Payments Made to Foreign Persons: A Basic Overview for Government Entities.” The program will cover such topics as U.S. sourced income; employer responsibilities for withholding on payments to aliens; Forms 1042 and 1042-S; and documentation required from nonresident aliens who receive U.S. income. “The webinar should be especially helpful to public universities, as well as other units of government that employ nonresident aliens or do business with foreign vendors; as well as tax practitioners and advisors to these organizations,” IRS said. Participating enrolled agents may receive Continuing Professional Education credit. Complete details, including registration procedures, can be found at http://www.irs.gov/pub/irs-tege/international_issues_webinar_flyer.pdf.
TIGTA Audit Uncovers Security Flaws In The IRS E-File Program
IRS controls over its e-file Program are not sufficient to prevent the unauthorized use of another individual's Electronic Filing Identification Number (EFIN), according to a heavily redacted audit released on April 27 by the Treasury Inspector General for Tax Administration (TIGTA). (Audit Report No. 2011-40-031) All applicants who complete an application to participate in the program are assigned an EFIN. Those who also transmit federal tax returns are assigned an Electronic Transmitter Identification Number (ETIN). “An individual can electronically submit a federal income tax return using another individual's EFIN without that person's knowledge,” TIGTA said. During the period of March 2005 through October 2010, there were 1,192 EFINs reported to IRS ”as compromised,” the audit said. In addition, since fiscal year 2006, there have been at least 14 closed criminal investigations involving ETINs. It remains unknown exactly how many false tax returns were involved with the cases or the amount of the refunds involved. Four of the 14 investigations resulted in prison time and/or payment of restitution, the audit noted. It is available at http://www.treasury.gov/tigta/auditreports/2011reports/201140031fr.pdf.
U.S. Business Has High Tax Rates but Pays Less
By DAVID KOCIENIEWSKI — New York Times
The United States may soon wind up with a distinction that makes business leaders cringe — the highest corporate tax rate in the world.
Topping out at 35 percent, America’s official corporate income tax rate trails that of only Japan, at 39.5 percent, which has said it plans to lower its rate. It is nearly triple Ireland’s and 10 percentage points higher than in Denmark, Austria or China. To help companies here stay competitive, many executives say, Congress should lower it.
But by taking advantage of myriad breaks and loopholes that other countries generally do not offer, United States corporations pay only slightly more on average than their counterparts in other industrial countries. And some American corporations use aggressive strategies to pay less — often far less — than their competitors abroad and at home. A Government Accountability Office study released in 2008 found that 55 percent of United States companies paid no federal income taxes during at least one year in a seven-year period it studied.
The paradox of the United States tax code — high rates with a bounty of subsidies, shelters and special breaks — has made American multinationals “world leaders in tax avoidance,” according to Edward D. Kleinbard, a professor at the University of Southern California who was head of the Congressional joint committee on taxes. This has profound implications for businesses, the economy and the federal budget.
As Congress wrestles with how to get the deficit under control, one big point of contention is whether spending cuts will need to be accompanied by an increase in taxes on some individuals or businesses. Facing a full-court press from business leaders who say the tax system is outdated and onerous, President Obama, Congress and business leaders have been warily negotiating various proposals, though mostly about whether to cut the top corporate rate and to tighten tax laws and not about whether to increase revenue.
The United States is virtually alone in trying to tax its multinational corporations on their foreign earnings, but it allows companies to avoid those taxes indefinitely by keeping profits overseas. That encourages companies to use accounting maneuvers to shift profits to low-tax countries and to invest profits offshore, says David S. Miller, a partner at Cadwalader, Wickersham & Taft in New York.
Honeywell International, the New Jersey company that makes things as diverse as aerospace components and First Alert smoke detectors, reported in regulatory filings that in the last five years, it paid cash income taxes in the United States and abroad equal to 15 percent of its profits. On Friday, a Honeywell spokeswoman pointed out that the company had since made a large pension contribution, which effectively cut its profits and made its tax rate closer to 22 percent.
A major domestic competitor, United Technologies, reported an average of 24 percent over that time. A German rival, Siemens, reported 29 percent of its total profit.
In addition to being complex and uneven, the United States corporate tax code is inefficient and has become a diminishing source of revenue. Corporate taxes accounted for about 9 percent of all federal revenue in 2010. At $191 billion, they were equal to 1.3 percent of the nation’s gross domestic product. Most industrial countries collect more from companies, about 2.5 percent of output. Only a portion of that disparity can be explained by the many types of businesses in the United States that elect to be taxed at an individual rate.
“Whether the test is fairness or efficiency, the U.S. system gets really low marks,” said Michelle Hanlon, an M.I.T. professor who says the country needs to completely revamp the way it taxes corporations.
Not all American companies are willing or able to reduce their taxes drastically. Taxes vary more by industry here than abroad, according to a study released in February by Kevin S. Markle of Dartmouth and Douglas A. Shackelford of the University of North Carolina. At the high end, American retailers paid 31 percent in total income taxes, construction 30 percent and manufacturers 26 percent. Financial services companies paid an average of 20 percent, real estate 19 percent and mining 6 percent.
(Measuring taxes paid by companies is imprecise because tax filings remain private. In many cases, the estimates reported in a company’s financial filings with regulators overstate taxes paid in a year because they include deferred taxes. Nonetheless, academics, economists and elected officials use the estimates for comparative purposes.)
Because some companies are so effective at minimizing taxes, the average works out to far less than the official rate. United States companies pay about a quarter of their profits in federal income taxes, a few percentage points higher than the rate paid by companies in most other major industrial countries, according to a number of studies and tax experts.
Assorted proposals being discussed in Washington call for the rate to be lowered officially to about 25 percent and some tax breaks to be eliminated so that revenue remains unchanged.
But some prominent business leaders, including the chief executive of Procter & Gamble, are pushing for the rate to be reduced without reining in tax shelters. That would make the United States virtually the only country to change corporate taxes in recent years in a way that ended up adding to its deficit.
“One fact we know is that in all of the countries that have lowered their corporate rates in recent years, they still collected the same amount in revenues or more,” said Reuven S. Avi-Yonah, an international tax lawyer who teaches at the University of Michigan. “This means that they were broadening the base of the profits that corporations were actually taxed on.”
Procter & Gamble, whose products include Tide detergent and Crest toothpaste, paid an average of 24 percent of its profits in worldwide income taxes over the last three years, according to regulatory filings. That is nearly the same rate reported by two big European rivals, Unilever and Henkel.
Yet Robert A. McDonald, P.& G.’s top executive, testified before a Congressional committee this year about the need to cut the United States tax rate without ending tax breaks and shelters. “We need a tax system that addresses today’s hypercompetitive global marketplace,” Mr. McDonald said, arguing that the playing field was tilted away from American businesses.
Many liberal groups counter that ending the breaks, subsidies and shelters in the corporate tax code could provide enough money to lower the rate several percentage points and still increase revenue.
Furthermore, some business owners complain that the American system unfairly rewards disingenuous bookkeeping rather than innovation. It forces companies to compete “based not on product quality and services, but on accounting gymnastics,” said Paul Egerman, former chairman and chief executive of eScription, a medical transcription service in Boston.
No one is certain how much creative accounting costs the federal government in lost revenue, but most estimates say it easily exceeds $50 billion a year. Targeted tax preferences, which Congress created to intentionally benefit specific companies or industries, cost an estimated $100 billion more a year.
Many tax analysts are skeptical that Congress, business leaders and the Obama administration will be able to reach a deal before the 2012 election.
“It’s human nature that people are going to fight harder to preserve a benefit they already have than to get some new benefit,” said Clint Stretch, a principal at Deloitte Tax and a former counsel to the Congressional Joint Committee on Taxation. “The only way tax reform makes everyone happy is if everyone wins. And with the federal budget where it is today, that’s not possible.”
The United States may soon wind up with a distinction that makes business leaders cringe — the highest corporate tax rate in the world.
Topping out at 35 percent, America’s official corporate income tax rate trails that of only Japan, at 39.5 percent, which has said it plans to lower its rate. It is nearly triple Ireland’s and 10 percentage points higher than in Denmark, Austria or China. To help companies here stay competitive, many executives say, Congress should lower it.
But by taking advantage of myriad breaks and loopholes that other countries generally do not offer, United States corporations pay only slightly more on average than their counterparts in other industrial countries. And some American corporations use aggressive strategies to pay less — often far less — than their competitors abroad and at home. A Government Accountability Office study released in 2008 found that 55 percent of United States companies paid no federal income taxes during at least one year in a seven-year period it studied.
The paradox of the United States tax code — high rates with a bounty of subsidies, shelters and special breaks — has made American multinationals “world leaders in tax avoidance,” according to Edward D. Kleinbard, a professor at the University of Southern California who was head of the Congressional joint committee on taxes. This has profound implications for businesses, the economy and the federal budget.
As Congress wrestles with how to get the deficit under control, one big point of contention is whether spending cuts will need to be accompanied by an increase in taxes on some individuals or businesses. Facing a full-court press from business leaders who say the tax system is outdated and onerous, President Obama, Congress and business leaders have been warily negotiating various proposals, though mostly about whether to cut the top corporate rate and to tighten tax laws and not about whether to increase revenue.
The United States is virtually alone in trying to tax its multinational corporations on their foreign earnings, but it allows companies to avoid those taxes indefinitely by keeping profits overseas. That encourages companies to use accounting maneuvers to shift profits to low-tax countries and to invest profits offshore, says David S. Miller, a partner at Cadwalader, Wickersham & Taft in New York.
Honeywell International, the New Jersey company that makes things as diverse as aerospace components and First Alert smoke detectors, reported in regulatory filings that in the last five years, it paid cash income taxes in the United States and abroad equal to 15 percent of its profits. On Friday, a Honeywell spokeswoman pointed out that the company had since made a large pension contribution, which effectively cut its profits and made its tax rate closer to 22 percent.
A major domestic competitor, United Technologies, reported an average of 24 percent over that time. A German rival, Siemens, reported 29 percent of its total profit.
In addition to being complex and uneven, the United States corporate tax code is inefficient and has become a diminishing source of revenue. Corporate taxes accounted for about 9 percent of all federal revenue in 2010. At $191 billion, they were equal to 1.3 percent of the nation’s gross domestic product. Most industrial countries collect more from companies, about 2.5 percent of output. Only a portion of that disparity can be explained by the many types of businesses in the United States that elect to be taxed at an individual rate.
“Whether the test is fairness or efficiency, the U.S. system gets really low marks,” said Michelle Hanlon, an M.I.T. professor who says the country needs to completely revamp the way it taxes corporations.
Not all American companies are willing or able to reduce their taxes drastically. Taxes vary more by industry here than abroad, according to a study released in February by Kevin S. Markle of Dartmouth and Douglas A. Shackelford of the University of North Carolina. At the high end, American retailers paid 31 percent in total income taxes, construction 30 percent and manufacturers 26 percent. Financial services companies paid an average of 20 percent, real estate 19 percent and mining 6 percent.
(Measuring taxes paid by companies is imprecise because tax filings remain private. In many cases, the estimates reported in a company’s financial filings with regulators overstate taxes paid in a year because they include deferred taxes. Nonetheless, academics, economists and elected officials use the estimates for comparative purposes.)
Because some companies are so effective at minimizing taxes, the average works out to far less than the official rate. United States companies pay about a quarter of their profits in federal income taxes, a few percentage points higher than the rate paid by companies in most other major industrial countries, according to a number of studies and tax experts.
Assorted proposals being discussed in Washington call for the rate to be lowered officially to about 25 percent and some tax breaks to be eliminated so that revenue remains unchanged.
But some prominent business leaders, including the chief executive of Procter & Gamble, are pushing for the rate to be reduced without reining in tax shelters. That would make the United States virtually the only country to change corporate taxes in recent years in a way that ended up adding to its deficit.
“One fact we know is that in all of the countries that have lowered their corporate rates in recent years, they still collected the same amount in revenues or more,” said Reuven S. Avi-Yonah, an international tax lawyer who teaches at the University of Michigan. “This means that they were broadening the base of the profits that corporations were actually taxed on.”
Procter & Gamble, whose products include Tide detergent and Crest toothpaste, paid an average of 24 percent of its profits in worldwide income taxes over the last three years, according to regulatory filings. That is nearly the same rate reported by two big European rivals, Unilever and Henkel.
Yet Robert A. McDonald, P.& G.’s top executive, testified before a Congressional committee this year about the need to cut the United States tax rate without ending tax breaks and shelters. “We need a tax system that addresses today’s hypercompetitive global marketplace,” Mr. McDonald said, arguing that the playing field was tilted away from American businesses.
Many liberal groups counter that ending the breaks, subsidies and shelters in the corporate tax code could provide enough money to lower the rate several percentage points and still increase revenue.
Furthermore, some business owners complain that the American system unfairly rewards disingenuous bookkeeping rather than innovation. It forces companies to compete “based not on product quality and services, but on accounting gymnastics,” said Paul Egerman, former chairman and chief executive of eScription, a medical transcription service in Boston.
No one is certain how much creative accounting costs the federal government in lost revenue, but most estimates say it easily exceeds $50 billion a year. Targeted tax preferences, which Congress created to intentionally benefit specific companies or industries, cost an estimated $100 billion more a year.
Many tax analysts are skeptical that Congress, business leaders and the Obama administration will be able to reach a deal before the 2012 election.
“It’s human nature that people are going to fight harder to preserve a benefit they already have than to get some new benefit,” said Clint Stretch, a principal at Deloitte Tax and a former counsel to the Congressional Joint Committee on Taxation. “The only way tax reform makes everyone happy is if everyone wins. And with the federal budget where it is today, that’s not possible.”
Tuesday, May 3, 2011
The costliest mistakes made by start-up businesses
Anyone who wants to start their own business needs to consider many options before starting their own business. Many of the options that need to be considered are directly related to the business operations. Many of these considerations are related to the products and/or services that the business will offer. Many of the considerations are less obvious, and can be the costliest options if not considered and thoroughly investigated.
If you believe you have what it takes to start your own business - you have the experience, training, and/or know-how to start a business, you might be able to start your business - and perhaps even run it successfully - as far as being able to provide the products or services your business provides to its customers.
Have you considered what type of business entity your business will be? What about the financial records? Have you considered what accounting software you will use? Do you know how to use the software? Do you know how to properly setup the software so that you can get good financial reports from the software that can help you run your business? Do you have employees? Are you familiar with your state's employment laws, and what types of insurance (and other benefits) must be provided for your employees?
Every state is different with regard to the types of benefits employees are entitled to receive. However, in almost every state, any business that hires employees (other than immediate family members for a sole proprietor) is required to have Worker's Compensation insurance. Some states require this insurance be purchased through the state. Other states allow this insurance to be purchased through an insurance company that is licensed and registered with the state to provide this type of insurance.
Every state requires employers to pay Unemployment Insurance (paid to the state's department of unemployment insurance). Unemployment insurance is paid for every single employee who receives a paycheck, up to whatever the state's annual limit is. The annual limit varies by state. The percentage paid to the state also varies by state, and will normally vary by employer as well. If your business has employees in multiple states, you must provide worker's compensation insurance in each state where you have workers, and you must also pay unemployment insurance in each state where you have workers. Your business will also have federal unemployment taxes to pay for each and every employee.
Employment taxes, both federal and state, must be withheld. Social Security and Medicare taxes must be withheld and matched by the employer. These taxes must be submitted to the IRS and to the State's Department of Revenue in each state where you have workers. Failure to remit the payroll taxes to the IRS or the State can result in penalties, fines, and interest. The business owner(s) can be held responsible for these taxes if they are not paid.
These are just a few of the many things that need to be considered when starting a business. But we are forgetting three very important things that must be considered when starting a business.
First, you need to consult with legal counsel that is familiar with business laws in your state (and perhaps in each state where you plan to have locations and/or workers). Proper legal counsel can help you navigate the various laws that apply to businesses within your state(s) and that apply specifically to your business. Legal counsel can also help you navigate federal laws that affect your specific business. Legal counsel can help you with contract laws - lease agreements, licenses required by the state, county, and/or city where you plan to open your business, etc. Without legal counsel, you might open your business without having all of the proper licenses, or without following the proper legal procedures required by your state, county, or city when opening your business.
Second, you need to meet with a competent accountant or a CPA. A competent accountant is cheaper than a CPA, and in most cases, should be able to help you with choosing the type of business entity for your business. The accountant should also be able to help you file the proper paperwork with the State, city, and/or county (such as incorporation papers, partnership papers, etc.). Your accountant might have to work with your legal counsel regarding filing certain types of forms to the state (such as LLC and Partnership papers). But these are minor things that the accountant will help you with.
The main reason you need to consult with an accountant is so the accountant can help you choose the right accounting software for your business, and then the accountant can properly setup your accounting software (i.e., the chart of accounts, payroll function, sales tax, items, etc.). If this information is not properly setup from the very beginning, you will find that you have to pay a lot more money to correct the problem(s) than you would have paid to have the information setup properly in the first place. For instance, you might have to pay an accountant perhaps $5,000 to properly setup your accounting software (from the very beginning). If you don't do this, you could end up paying $10,000 or more, to hire an accountant to "clean up" the mess, if it can even be cleaned up. I have seen situations where the original accounting records were so badly messed up that they were deleted - they could not be used at all - and a totally NEW accounting file is created (and everything is then re-entered into the new file).
Third, you need to see a banker in order to open a checking account in your business name. Depending on the type of business entity your business is, you might have to wait until you receive certain documents from various government agencies (such as your EIN certificate from the IRS, papers from the State that show your business is registered with the state, etc.). You need to establish a relationship with your banker so that your banker knows who you are. This will help later on when you need to obtain a business loan, or to open new accounts for your business (perhaps a second checking account to be used as a payroll account, or perhaps to open a savings account or a CD/money market account).
Outside of the legal counsel and a banker, you should also consider having a "board of directors" which is made up of business executives in various types of businesses that you can turn to for advice and help in guiding your business and helping both you and your business to be successful. Your legal counsel, your accountant, and your banker can be on this "board", as well as several other business owners or executives from successful businesses. I recommend that you have at least 7 people on your "board", not including yourself.
The costliest mistakes made by start-up businesses are not having good legal counsel (familiar with business law), an accountant, and a banker. Not having a good, diverse "board of directors" can also be costly, especially for the first couple of years that you are in business.
Some ideas on people you might want to have on your "board" include:
* a good marketing person;
* a good accountant;
* a good banker (not necessarily someone from the big national banks such as Bank of America or Citibank)
* a good HR (Human Resources) person;
* someone from a similar business to yours (not a competitor);
* someone from the same type of business as yours who is not a direct competitor (perhaps from another city in the same state, but who is close enough to come to meetings, or whom you can call if necessary). You might even be able to find someone in the same business as you, but who does not compete for the same "type" of customers or clients;
* someone from a totally non-related business (to bounce ideas off of, to learn from his or her mistakes, etc.).
For example, an accountant might look for an "advisor" to be on the "board" who is another accountant. Not all accountants work with the same type of clients. It would be easy to find another accountant who does not work with the same type of clients that you plan to work with (if you are an accountant). If you want to work with business clients that only have income less than $5M, you can easily find an accountant that works with clients that work with clients that only have income of more than $5M.
If you believe you have what it takes to start your own business - you have the experience, training, and/or know-how to start a business, you might be able to start your business - and perhaps even run it successfully - as far as being able to provide the products or services your business provides to its customers.
Have you considered what type of business entity your business will be? What about the financial records? Have you considered what accounting software you will use? Do you know how to use the software? Do you know how to properly setup the software so that you can get good financial reports from the software that can help you run your business? Do you have employees? Are you familiar with your state's employment laws, and what types of insurance (and other benefits) must be provided for your employees?
Every state is different with regard to the types of benefits employees are entitled to receive. However, in almost every state, any business that hires employees (other than immediate family members for a sole proprietor) is required to have Worker's Compensation insurance. Some states require this insurance be purchased through the state. Other states allow this insurance to be purchased through an insurance company that is licensed and registered with the state to provide this type of insurance.
Every state requires employers to pay Unemployment Insurance (paid to the state's department of unemployment insurance). Unemployment insurance is paid for every single employee who receives a paycheck, up to whatever the state's annual limit is. The annual limit varies by state. The percentage paid to the state also varies by state, and will normally vary by employer as well. If your business has employees in multiple states, you must provide worker's compensation insurance in each state where you have workers, and you must also pay unemployment insurance in each state where you have workers. Your business will also have federal unemployment taxes to pay for each and every employee.
Employment taxes, both federal and state, must be withheld. Social Security and Medicare taxes must be withheld and matched by the employer. These taxes must be submitted to the IRS and to the State's Department of Revenue in each state where you have workers. Failure to remit the payroll taxes to the IRS or the State can result in penalties, fines, and interest. The business owner(s) can be held responsible for these taxes if they are not paid.
These are just a few of the many things that need to be considered when starting a business. But we are forgetting three very important things that must be considered when starting a business.
First, you need to consult with legal counsel that is familiar with business laws in your state (and perhaps in each state where you plan to have locations and/or workers). Proper legal counsel can help you navigate the various laws that apply to businesses within your state(s) and that apply specifically to your business. Legal counsel can also help you navigate federal laws that affect your specific business. Legal counsel can help you with contract laws - lease agreements, licenses required by the state, county, and/or city where you plan to open your business, etc. Without legal counsel, you might open your business without having all of the proper licenses, or without following the proper legal procedures required by your state, county, or city when opening your business.
Second, you need to meet with a competent accountant or a CPA. A competent accountant is cheaper than a CPA, and in most cases, should be able to help you with choosing the type of business entity for your business. The accountant should also be able to help you file the proper paperwork with the State, city, and/or county (such as incorporation papers, partnership papers, etc.). Your accountant might have to work with your legal counsel regarding filing certain types of forms to the state (such as LLC and Partnership papers). But these are minor things that the accountant will help you with.
The main reason you need to consult with an accountant is so the accountant can help you choose the right accounting software for your business, and then the accountant can properly setup your accounting software (i.e., the chart of accounts, payroll function, sales tax, items, etc.). If this information is not properly setup from the very beginning, you will find that you have to pay a lot more money to correct the problem(s) than you would have paid to have the information setup properly in the first place. For instance, you might have to pay an accountant perhaps $5,000 to properly setup your accounting software (from the very beginning). If you don't do this, you could end up paying $10,000 or more, to hire an accountant to "clean up" the mess, if it can even be cleaned up. I have seen situations where the original accounting records were so badly messed up that they were deleted - they could not be used at all - and a totally NEW accounting file is created (and everything is then re-entered into the new file).
Third, you need to see a banker in order to open a checking account in your business name. Depending on the type of business entity your business is, you might have to wait until you receive certain documents from various government agencies (such as your EIN certificate from the IRS, papers from the State that show your business is registered with the state, etc.). You need to establish a relationship with your banker so that your banker knows who you are. This will help later on when you need to obtain a business loan, or to open new accounts for your business (perhaps a second checking account to be used as a payroll account, or perhaps to open a savings account or a CD/money market account).
Outside of the legal counsel and a banker, you should also consider having a "board of directors" which is made up of business executives in various types of businesses that you can turn to for advice and help in guiding your business and helping both you and your business to be successful. Your legal counsel, your accountant, and your banker can be on this "board", as well as several other business owners or executives from successful businesses. I recommend that you have at least 7 people on your "board", not including yourself.
The costliest mistakes made by start-up businesses are not having good legal counsel (familiar with business law), an accountant, and a banker. Not having a good, diverse "board of directors" can also be costly, especially for the first couple of years that you are in business.
Some ideas on people you might want to have on your "board" include:
* a good marketing person;
* a good accountant;
* a good banker (not necessarily someone from the big national banks such as Bank of America or Citibank)
* a good HR (Human Resources) person;
* someone from a similar business to yours (not a competitor);
* someone from the same type of business as yours who is not a direct competitor (perhaps from another city in the same state, but who is close enough to come to meetings, or whom you can call if necessary). You might even be able to find someone in the same business as you, but who does not compete for the same "type" of customers or clients;
* someone from a totally non-related business (to bounce ideas off of, to learn from his or her mistakes, etc.).
For example, an accountant might look for an "advisor" to be on the "board" who is another accountant. Not all accountants work with the same type of clients. It would be easy to find another accountant who does not work with the same type of clients that you plan to work with (if you are an accountant). If you want to work with business clients that only have income less than $5M, you can easily find an accountant that works with clients that work with clients that only have income of more than $5M.
7 Common Mistakes You Should Avoid to Build a Profitable Small Business
By Joan Nowak
While experience can be a great teacher, learning from others' experiences--successes and failures--can save you time, money and a lot of frustration. So when it comes to growing your small business, here are some mistakes you want to avoid or fix.
Mistake No. 1: I Can Do It On My Own
Most of us became entrepreneurs because we are experts or skilled at something and believed we could do it better than our competitors or maybe our current boss. But building a successful business requires more than technical know-how. None of us are experts at everything. So surround yourself with other experts to fill the gaps. Whether you hire employees, sub-contract work, create joint ventures, work with coaches/consultants or develop strategic alliances, the support you need is available. Don't try to do it all yourself.
Mistake No. 2: Great Products the Market Doesn't Want
The best products or services will go unsold if you are talking to the wrong people--those who will likely never buy! Investing your time and money promoting your products or services to people who don't have the resources, authority or need--today or in the future--is both frustrating and costly. Who are the ideal customers for YOUR products and services? Be clear on this, find out where they are and how to reach them and then apply your resources to pull them in.
Mistake No. 3: Talk More Than You Listen
If you want to earn a customer's business, you need to solve their problem or fill a need. So, before you jump into your sales pitch, take the time to ask questions, listen carefully and determine what the customer needs. Your features and benefits are only relevant when they solve a customer's problem or fill a need. Successful people tend to be good listeners--so you'll achieve greater success when you spend less time talking and more time listening.
Mistake No. 4: No Follow Up
Investing resources to generate leads for your company without a proven method to convert them to paying customers is a costly mistake. Whether potential customers come to you by phone, email, online or in person, a system for consistent and timely follow up is key to sales growth. Take the time to develop a procedure for moving prospects to customers. Take advantage of technology, templates and scripts for efficiency and effectiveness. Be consistent and watch your sales soar.
Mistake No. 5: Disjointed or No Procedures
Documented procedures for all the critical tasks and operations is a key to efficiency, consistency, continuous improvement and profitability. Yet despite the benefits, it's ignored by too many small businesses. This mistake becomes obvious when you hire and train new people, attempt to outsource or start losing customers due to poor service or missed deadlines. Take it one at a time, but make written procedures a priority in your business. The results will surprise you.
Mistake No. 6: Hiring on the Fly
"Quick to hire and slow to fire" describes many small businesses. A strong team of people to support your business is certainly important, but only if they are the right people. There are proven hiring systems and tools, including a job description and clear goals, to help small businesses attract and retain quality people. Always hire with a purpose, invest in training, commit to developing your team and be willing to let go of those who don't fit.
Mistake No. 7: Roller Coaster Marketing
For many small businesses, marketing activities and spending looks like a roller coaster, up and down based on how busy you are or how sales are doing. If your marketing is sporadic, your results will likely be the same. The key to attracting and retaining customers is consistency. It is better to do 5-6 lead generation strategies well and consistently than doing 10-20 of them periodically.
Which of these mistakes are impacting your growth and profit? Make it a priority to fix them--one at a time, if necessary. The sooner you do, the sooner your sales and profit will grow.
About the Author: Joan Nowak, Business Coach, Speaker and Trainer, inspires and helps small business owners create the changes needed in their business to achieve the income and lifestyle they want. Her 7P System brings together all the key elements of business success, and breaks them down into simple, easy to implement strategies -- so clients achieve real results - more sales, profit, control and freedom - quickly and easily.
While experience can be a great teacher, learning from others' experiences--successes and failures--can save you time, money and a lot of frustration. So when it comes to growing your small business, here are some mistakes you want to avoid or fix.
Mistake No. 1: I Can Do It On My Own
Most of us became entrepreneurs because we are experts or skilled at something and believed we could do it better than our competitors or maybe our current boss. But building a successful business requires more than technical know-how. None of us are experts at everything. So surround yourself with other experts to fill the gaps. Whether you hire employees, sub-contract work, create joint ventures, work with coaches/consultants or develop strategic alliances, the support you need is available. Don't try to do it all yourself.
Mistake No. 2: Great Products the Market Doesn't Want
The best products or services will go unsold if you are talking to the wrong people--those who will likely never buy! Investing your time and money promoting your products or services to people who don't have the resources, authority or need--today or in the future--is both frustrating and costly. Who are the ideal customers for YOUR products and services? Be clear on this, find out where they are and how to reach them and then apply your resources to pull them in.
Mistake No. 3: Talk More Than You Listen
If you want to earn a customer's business, you need to solve their problem or fill a need. So, before you jump into your sales pitch, take the time to ask questions, listen carefully and determine what the customer needs. Your features and benefits are only relevant when they solve a customer's problem or fill a need. Successful people tend to be good listeners--so you'll achieve greater success when you spend less time talking and more time listening.
Mistake No. 4: No Follow Up
Investing resources to generate leads for your company without a proven method to convert them to paying customers is a costly mistake. Whether potential customers come to you by phone, email, online or in person, a system for consistent and timely follow up is key to sales growth. Take the time to develop a procedure for moving prospects to customers. Take advantage of technology, templates and scripts for efficiency and effectiveness. Be consistent and watch your sales soar.
Mistake No. 5: Disjointed or No Procedures
Documented procedures for all the critical tasks and operations is a key to efficiency, consistency, continuous improvement and profitability. Yet despite the benefits, it's ignored by too many small businesses. This mistake becomes obvious when you hire and train new people, attempt to outsource or start losing customers due to poor service or missed deadlines. Take it one at a time, but make written procedures a priority in your business. The results will surprise you.
Mistake No. 6: Hiring on the Fly
"Quick to hire and slow to fire" describes many small businesses. A strong team of people to support your business is certainly important, but only if they are the right people. There are proven hiring systems and tools, including a job description and clear goals, to help small businesses attract and retain quality people. Always hire with a purpose, invest in training, commit to developing your team and be willing to let go of those who don't fit.
Mistake No. 7: Roller Coaster Marketing
For many small businesses, marketing activities and spending looks like a roller coaster, up and down based on how busy you are or how sales are doing. If your marketing is sporadic, your results will likely be the same. The key to attracting and retaining customers is consistency. It is better to do 5-6 lead generation strategies well and consistently than doing 10-20 of them periodically.
Which of these mistakes are impacting your growth and profit? Make it a priority to fix them--one at a time, if necessary. The sooner you do, the sooner your sales and profit will grow.
About the Author: Joan Nowak, Business Coach, Speaker and Trainer, inspires and helps small business owners create the changes needed in their business to achieve the income and lifestyle they want. Her 7P System brings together all the key elements of business success, and breaks them down into simple, easy to implement strategies -- so clients achieve real results - more sales, profit, control and freedom - quickly and easily.
Treasury, IRS Seek Public Input on Certain Employer Provisions of the Affordable Care Act
WASHINGTON — The Treasury Department and Internal Revenue Service today requested public comment on issues relating to the shared responsibility provisions included in the Affordable Care Act that will apply to certain employers starting in 2014.
Under the Affordable Care Act, employers with 50 or more full-time employees that do not offer affordable health coverage to their full-time employees may be required to make a shared responsibility payment. The law specifically exempts small firms that have fewer than 50 full-time employees. This provision takes effect in 2014.
Notice 2011-36, posted today on IRS.gov, solicits public input and comment on several issues that will be the subject of future proposed guidance as Treasury and the IRS work to provide information to employers on how to comply with the shared responsibility provisions. In particular, the notice requests comment on possible approaches employers could use to determine who is a full-time employee.
Today’s request for comment is designed to ensure that Treasury and IRS continue to receive broad input from stakeholders on how best to implement the shared responsibility provisions in a way that is workable and administrable for employers, allowing them flexibility and minimizing burdens. Employers have asked for guidance on this provision, and a number of stakeholder groups have approached Treasury and IRS with information and initial suggestions, which have been taken into account in developing today’s notice. By soliciting comments and feedback now, Treasury and IRS are giving all interested parties the opportunity for input before proposed regulations are issued at a later date.
Consistent with the coordinated approach the Departments of Treasury, Labor, and Health and Human Services are taking in developing the regulations and other guidance under the Affordable Care Act, the notice also solicits input on how the three Departments should interpret and apply the Act’s provisions limiting the ability of plans and issuers to impose a waiting period for health coverage of longer than 90 days starting in 2014. In addition, the notice invites comment on how guidance under the 90-day provisions should be coordinated with the rules Treasury and IRS will propose regarding the shared responsibility provisions.
There are three ways to submit comments.
• E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Notice 2011-36” in the subject line.
• Mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2011-36), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
• Hand deliver to: CC:PA:LPD:PR (Notice 2011-36), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.
The deadline for comments is June 17, 2011.
Under the Affordable Care Act, employers with 50 or more full-time employees that do not offer affordable health coverage to their full-time employees may be required to make a shared responsibility payment. The law specifically exempts small firms that have fewer than 50 full-time employees. This provision takes effect in 2014.
Notice 2011-36, posted today on IRS.gov, solicits public input and comment on several issues that will be the subject of future proposed guidance as Treasury and the IRS work to provide information to employers on how to comply with the shared responsibility provisions. In particular, the notice requests comment on possible approaches employers could use to determine who is a full-time employee.
Today’s request for comment is designed to ensure that Treasury and IRS continue to receive broad input from stakeholders on how best to implement the shared responsibility provisions in a way that is workable and administrable for employers, allowing them flexibility and minimizing burdens. Employers have asked for guidance on this provision, and a number of stakeholder groups have approached Treasury and IRS with information and initial suggestions, which have been taken into account in developing today’s notice. By soliciting comments and feedback now, Treasury and IRS are giving all interested parties the opportunity for input before proposed regulations are issued at a later date.
Consistent with the coordinated approach the Departments of Treasury, Labor, and Health and Human Services are taking in developing the regulations and other guidance under the Affordable Care Act, the notice also solicits input on how the three Departments should interpret and apply the Act’s provisions limiting the ability of plans and issuers to impose a waiting period for health coverage of longer than 90 days starting in 2014. In addition, the notice invites comment on how guidance under the 90-day provisions should be coordinated with the rules Treasury and IRS will propose regarding the shared responsibility provisions.
There are three ways to submit comments.
• E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Notice 2011-36” in the subject line.
• Mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2011-36), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
• Hand deliver to: CC:PA:LPD:PR (Notice 2011-36), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.
The deadline for comments is June 17, 2011.
Monday, May 2, 2011
QuickBooks Tips: The Audit Trail
I have had several clients ask me over the past few months about the Audit Trail. A couple of the questions that have been asked were: How do I understand and utilize the Audit Trail? and What does the column names "State" mean and why does dome data display in bold?
The audit trail is always on (since the database change in 2006). While there have not been many changes in the report since then, it is useful in looking for what has changed in a file.
The "State" refers to the historical progression of the transaction. "Latest" is the transaction as it is (in its current state) in the QuickBooks file (i.e., how it appears on the general ledger and any other reports). "Prior" is the transaction as it was previously. For example, if a transaction is listed with a "Latest" entry and three "Prior" entries, this means the transaction has been edited (or changed) three times since it was first entered.
From the date and time stamp you can determine when the entry was changes and which user made the change (assuming good business practices are followed and every user has a unique login and password rather than using Admin). It is also possible to determine who changed the report.
Just a quick side note: when someone leave, do not delete the user, since the Audit Trail report will then be blank for that user. Instead, change the password. The same is true if there is turnover for a position. Don't give the new person the previous person's login information. Setup a new user and password. Otherwise, you will not know what the new user entered and what the old user entered.
Finally, the information in bold is what has been changed. I was very excited when this feature was added several versions ago because you can now quickly scroll through the report to see what has changed.. For example, was it just a memo that was changed, or was it actually an amount.
The audit trail is always on (since the database change in 2006). While there have not been many changes in the report since then, it is useful in looking for what has changed in a file.
The "State" refers to the historical progression of the transaction. "Latest" is the transaction as it is (in its current state) in the QuickBooks file (i.e., how it appears on the general ledger and any other reports). "Prior" is the transaction as it was previously. For example, if a transaction is listed with a "Latest" entry and three "Prior" entries, this means the transaction has been edited (or changed) three times since it was first entered.
From the date and time stamp you can determine when the entry was changes and which user made the change (assuming good business practices are followed and every user has a unique login and password rather than using Admin). It is also possible to determine who changed the report.
Just a quick side note: when someone leave, do not delete the user, since the Audit Trail report will then be blank for that user. Instead, change the password. The same is true if there is turnover for a position. Don't give the new person the previous person's login information. Setup a new user and password. Otherwise, you will not know what the new user entered and what the old user entered.
Finally, the information in bold is what has been changed. I was very excited when this feature was added several versions ago because you can now quickly scroll through the report to see what has changed.. For example, was it just a memo that was changed, or was it actually an amount.
QuickBooks Tips & Trcks: Inventory Assembly Build Enhancements
Inventory Assembly type items are the best method for entering a bill of materials to detail the components which are required to build a finished good, or a sub-assembly item. The advantage of this method over group items is that the components are actually removed from other inventory items and/or additional costs are included to create this new item which is tracked going forward. This feature is available in the QuickBooks Premier and Enterprise Solutions products.
QuickBooks Enterprise Solutions has two additional features related to the inventory assembly items:
1.) Variable Bill of Materials. What this means is that as the build is entered, you can change the bill of materials at that time. So if this build actually required more of a specific item, you can update it, or if a different component was used, you can change it. All of this from right in the build screen rather than needing to edit the bill of materials from the item list as is required with Premier.
2.) Print the Build. While neither product has a true work order process, with QuickBooks Enterprise Solutions, it is possible to print the build to provide a paper trail for the process.
QuickBooks Enterprise Solutions has two additional features related to the inventory assembly items:
1.) Variable Bill of Materials. What this means is that as the build is entered, you can change the bill of materials at that time. So if this build actually required more of a specific item, you can update it, or if a different component was used, you can change it. All of this from right in the build screen rather than needing to edit the bill of materials from the item list as is required with Premier.
2.) Print the Build. While neither product has a true work order process, with QuickBooks Enterprise Solutions, it is possible to print the build to provide a paper trail for the process.
QuickBooks Tips and Tricks: Fixed Asset Manager
If you have not used the Fixed Asset Manager (an add-in program which is included with Premier Accountant Edition and all editions of Enterprise Solutions), it is definitely time to check it out! The Fixed Asset Manager calculates depreciation on many different basis. All versions of QuickBooks have the Fixed Asset List for tracking the information as part of the accounting process, and are then synced with the Fixed asset Manager.
I used to use the Fixed Asset List because it provided an easy way to track the serial number, when the warranty expired, and any other notes specific to that particular asset. But since the Fixed Asset Manager previously only calculated depreciation annually, I suggested to my clients that they just get the depreciation schedule for the next year from their tax preparer/tax accountant (if I was not doing their tax return for them already).
Now, the Fixed Asset Manager allows you to enter the date for the depreciation entry and the desired depreciation basis. It will then calculate the amount accordingly. You can edit the entry, if needed, before you actually post if to QuickBooks. This will permit including a depreciation entry as part of the month end entries which has been updated for asset purchases and sales.
I used to use the Fixed Asset List because it provided an easy way to track the serial number, when the warranty expired, and any other notes specific to that particular asset. But since the Fixed Asset Manager previously only calculated depreciation annually, I suggested to my clients that they just get the depreciation schedule for the next year from their tax preparer/tax accountant (if I was not doing their tax return for them already).
Now, the Fixed Asset Manager allows you to enter the date for the depreciation entry and the desired depreciation basis. It will then calculate the amount accordingly. You can edit the entry, if needed, before you actually post if to QuickBooks. This will permit including a depreciation entry as part of the month end entries which has been updated for asset purchases and sales.
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