Category: business finance

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Report Right or It’ll Cost You (double)

Report Right or It’ll Cost You (double)

paper-stackReporting requirements for business just keep growing, and so do the penalties for doing it wrong.  New this year and just in time for the annual reporting season (makes it sound almost fun, huh?) are new forms to file and an increase in penalties for not making an effort to get the information correct and into the hands of the proper recipient. Failure to file by the due date can cost businesses $250 per item, up to $3,000,000 in penalties ($1,000,000 for small businesses).  Add to that the warning about intentionally not filing or having an “intentional disregard of the requirements to furnish a correct payee statement”, which carries a penalty of at least $500 per payee statement and has no maximum penalty. Clearly, the cost of making sure the information is correct and filed in a timely manner is far less than the cost of not getting it done – or done right.

Growing problems around wage and revenue reporting have caused the IRS to pursue a variety of measures over the years to try to improve information reporting.  The Affordable Care Act has also had quite an impact on wage and benefit reporting, increasing reporting requirements substantially.  From the introduction of health plan reporting on W2s to the new mandatory forms 1095-C and 1094-C (for applicable large employers), businesses of all sizes are feeling the pressure.

February 2016 marks the date when employers and healthcare providers are required to file those shiny new IRS information returns regarding employer-provided healthcare coverage, providing a copy of the return to each employee much like a W2. The information would then enable the IRS to enforce rules established under the Affordable Care Act by revealing whether an individual might be eligible for a premium tax credit, or if an employer may be subject to non-compliance penalties. Penalties for failing to comply essentially double in 2016.  And the IRS suggests that a “good faith effort” standard will be applied to information reporting, offering no relief for employers that fail to make the effort to file timely and correctly.

It wasn’t very long ago that 1099 filing requirements expanded substantially, forcing businesses to get far more detailed in their production of information to the IRS and to payment recipients.  While this filing requirement impacted businesses both large and small, most lived through it (with the help of their trusted accounting professional!) and were able to comply.  That effort informed the IRS on a wide variety of business payments and expenses not previously tracked, in particular payments made for services and non-employee compensation.

The increasing scrutiny of wage and earning information may also help in efforts to curtail tax refund fraud.  Identity thieves use stolen (or borrowed) social security numbers to file false tax returns early in the year. Unfortunately, with the IRS motto of “pay first, prove later” the cross checking won’t likely be done until after the refund check has been sent. Once the task is performed, however, the taxpayer could end up getting a letter from the IRS stating that more than one tax return was filed using the social security number, they owe for a tax year for which they did not file a return, or the IRS indicates that wages were reported from an employer the taxpayer doesn’t know.

The IRS expects tax refund fraud to top $21 billion by 2016, which is an increase of 223% from 2013 numbers. Tax refund fraud costs every taxpayer.  No wonder the IRS is getting tougher with the penalties for not filing information returns accurately or on time.

jmbunnyfeetMake Sense?

J

Following is the text from the IRS, which outlines the “Increase in Penalties for Failure to File Correct Information Returns and to Provide Correct Payee Statements — 31-JUL-2015

L. 114-27, section 806, increased penalties for failure to file correct information returns and provide correct payee statements for information returns required to be filed after December 31, 2015.

Penalties are discussed in Section O in the General Instructions for Certain Information Returns. The penalties in the bulleted list under “Failure To File Correct Information Returns by the Due Date (Section 6721)” are revised as follows.

  • $50 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $500,000 per year ($175,000 for small businesses).
  • $100 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $1,500,000 per year ($500,000 for small businesses).
  • $250 per information return if you file after August 1 or you do not file required information returns; maximum penalty $3,000,000 per year ($1,000,000 for small businesses).
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Franchise FUD: Browning-Ferris Industries, the NLRB, and Joint-Employer Status

Franchise FUD: Browning-Ferris Industries, the NLRB, and Joint-Employer Status

iconicAn August decision by the NLRB is likely to have a broad impact in the coming years, forcing a great deal of change in how many businesses do business.  While the issue may be under the radar for some business owners, those in the franchise industry are paying very close attention – which makes sense because the ruling could easily be construed as the beginning of the end for the franchise business model.  At stake are the definition of “employer” and the determination of who is really responsible for the workers.

The issue stems from a 3-2 decision by the NLRB on a case involving Browning-Ferris Industries of California.  Browning-Ferris Industries is a waste management company that contracted with another company – Leadpoint – to supply employees to perform a variety of work functions.  Under the NLRB ruling, it was determined that Browning-Ferris was a joint employer with Leadpoint.  What is interesting in this case (and where the FUD – fear, uncertainty and doubt – come in) is that “indirect control” of the employees became the primary factor determining whether a joint employer relationship existed under the National Labor Relations Act. Going against years of precedent, the board ruled that Browning-Ferris and Leadpoint were jointly employing the workers.

In the decision, the Board applies long-established principles to find that two or more entities are joint employers of a single workforce if (1) they are both employers within the meaning of the common law;  and (2) they share or codetermine those matters governing the essential terms and conditions of employment. In evaluating whether an employer possesses sufficient control over employees to qualify as a joint employer, the Board will – among other factors — consider whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so.

https://www.nlrb.gov/news-outreach/news-story/board-issues-decision-browning-ferris-industries

There are many who believe Browning-Ferris is a precursor to the pending proceeding against McDonald’s Corp. in which the NLRB general counsel charges McDonald’s Corp as a joint employer of its franchisees’ employees.  Possibly in response to outcries of wage inequality and fast-food worker strikes to force an increase in the minimum wage, the NLRB seems to be adjusting its definitions in favor of the movement and may inadvertently destroy the foundations of the franchise business model according to some.

Clearly the franchise business model is in the crosshairs.  In an article published on Law360 by David J. Kaufmann, Breton H. Permesly and Dale A. Cohen, the authors cite from the June amicus brief on the Browning-Ferris proceeding, in which NLRB General Counsel Richard F. Griffin Jr “directly addressed and attacked franchising, claiming that it was merely an “outsourcing arrangement” and insisting that franchisors are the joint employers of their franchisees’ employees because franchisors can exert significant control over the day-to-day operations of their franchisees”. No ambiguity there.

There have always been questions when workers are classified as contractors, forcing regulatory agencies to delve into the details of the relationship to determine whether or not independence actually exists.  But this decision changes things in a big way.  From Unions gaining more strength in forcing contracting organizations to participate in bargaining processes, to franchise businesses electing to run only company-owned locations to minimize exposure and risk, there is likely to be some troubling times for businesses large and small in the coming months and years as the new definitions take hold.

jmbunnyfeetMake Sense?

J

here’s a shortlink to this article http://wp.me/p2hGOJ-Om

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Payment Card Roll Call: “Not Present” fraud likely to increase as EMV takes hold

Payment Card Roll Call: “Not Present” fraud likely to increase as EMV takes hold

rollingballNo retailer wants to become the next Target (pun intended).  Payment card fraud costs businesses and consumers billions of dollars every year.  What’s even more frightening, many of the breaches in the news are the result of innocent participants inadvertently granting access to the bad guys.  The Target breach in 2013 exposed the data of 110 million payment cards.  Hackers got into the network using perfectly good credentials of the HVAC company.  Sometimes password security just isn’t enough, which might bring in to question the security of all those SaaS subscriptions and online shopping sites folks use these days.

EMV chip technology, the standard around the world which has just recently become a standard in the United States, has done a lot to stem the tide of credit card fraud in other countries.  As it was implemented in various countries, guess where it pushed the fraudsters?  Where the anti-fraud technology wasn’t, of course! The United States was among the laggards in requiring EMV chip technology for payment cards, opening the door for bad guys and turning the US into a veritable haven for credit card fraud, “accounting for nearly 50% of global fraud losses, according to the Nilson Report[1]”.

EMV chip (or chip and pin) technology will go a long way to prevent credit card fraud for businesses accepting payment cards… in-person and counterfeit card fraud, anyway. Online retail, on the other hand, not so much.  A chip on the card doesn’t really help when the transaction is completed with the card not present (CNP).  Some industry analysts suggest that CNP fraud losses will exceed $6 billion within the next few years, making e-commerce and online payment security a high stakes game for even the smallest of retailers.  As it gets more difficult to hack the payment system when the card is presented, bad guys will fall back in even greater numbers to the card-not-present model to find their victims.

Online retailers and service providers must take additional steps to secure their systems and protect customers and business partners, and face the challenge with the understanding that effort must be ongoing as new threats emerge. Tokenization is a prime method of layering the system with security, making the merchant system somewhat less of a worthy target by not storing the card data in the system.  Even if the system becomes compromised, the bad guys wouldn’t find customer payment card information.  There are numerous other steps a business can take to secure the CNP sales, including applying behavioral analytics which might identify rogue activities, or using 3D Secure to authenticate a cardholder’s identity at the time of purchase.   The point is that CNP fraud is likely to spike as EMV technology takes a firm hold in the US.

Card fraud is already escalating rapidly for ecommerce retailers and other card not present channels – it didn’t take EMV to start on that roll but it will surely give it a push.  Paperless payment systems, SaaS subscription services and online application service usage are increasing dramatically and there’s no chip to get in the way of these transactions.  Sellers of any and every service utilizing online payments need to now pay particular attention to system and information security.  The risk has always been there, and EMV chips and other shifts in pay card technology simply give it a push.

jmbunnyfeetMake Sense?

J

 

[1] Chipping away at Credit Card Fraud with EMV; Information Week Tech Digest powered by Dark Reading, Nov 2015; NilsonReport http://www.nilsonreport.com/publication_newsletter_archive_issue.php?issue=1071

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Analysis, forecasts and modeling: What’s the point?

Analysis, forecasts and modeling: What’s the point?

financeIn today’s business world, risk, uncertainty and volatility are just par for the course – everyday realities of simply being in business.  Nothing is certain, they say, except death and taxes.  Yet there is a fine art to driving profitable growth in a business, and adapting to existing and emerging risk takes a great deal of experience, information and agility.  While planning and process development may occur at many levels within the organization, it is the FP&A (financial planning and analysis) capability which helps top performing businesses be top performers.

Financial planning and analysis are activities central to enterprise performance management (EPM) and must necessarily extend beyond finance.  Integrating various functional domains in the business (financial, operational and strategic), FP&A should bring data together from the various facets of the business and use the information to help structure and guide the organization toward meeting short-term and long-term goals.  Among the most critical of the duties of FP&A is calculating the financial impact, the monetary effects, of potential business decisions.  Everything in business means money, so there is always an impact to a decision.  With the right information supporting the decision, it is far more likely to have a positive impact and a level of sustainability.

While many CFOs may recognize the importance of performance measurement, planning and forecasting, a great many also believe the process isn’t very effective. The cause is frequently the divide between the various domains in the business and the information systems supporting them.  Operational data are distilled into summary financial information and fed to finance systems, losing much of the underlying intelligence that might be gained from analysis of the details.  Strategic development and planning may overlook certain volatile elements in the market, or may base successful outcomes on an expectation that conditions within the business will not change.  Finding ways to integrate the data from the respective domains into a comprehensive model is essential to developing a better and more robust forecasting and scenario-playing capability.  With the right information, analytics may be applied to all facets of management decision-making, anticipating and shaping business outcomes far more effectively than could be done without the insight.

Small business owners may believe that things like “predictive modeling” and “enterprise performance management” aren’t things they need to worry about, but the small business could use this information just as beneficially as a larger enterprise – perhaps even more as the insight could be the key to small business survival and growth.

Using analytics, the owner is able to adjust and re-align strategy in real-time to keep on the right path and goals clearly in sight.  Analytics can also help a business better understand what really drives revenue, working capital and profits.  Analytics can even help managers align compensation and strategy with business objectives, preventing compensation issues from outpacing business benefit.

There is a cost to growing a business, and some strategies might be more sustainable than others.  Time will tell, but it is great if the business owner has some business intelligence that might indicate what’s going to happen before it actually does.

Make Sense?

J

 

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The Cloud, The Desktop and QuickBooks

subtitle: Just When They Told You the Desktop Was Dead… 

along comes another desktop app.

Everything is moving to the cloud! Everything is going online!  At least, that is what they’re telling you.  And, to a certain extent, it is true that a lot of things are moving to the cloud; just not everything.  And some of what has moved in is moving right back out.  Use of the cloud and cloud services is increasing, but that certainly isn’t proving that the desktop is going away anytime soon.  The only thing we can be certain of is that things are going to continue to change fairly rapidly, yet the lion’s share of business users will retain working models they have come to trust and rely upon until they are forced to do something else. Today, many accounting and business professionals feel that they are being forced out of the software they have known and worked with for years: QuickBooks desktop software.

I was recently asked to present to a group of accounting and tax professionals, the topic being “alternatives to QuickBooks Online”.  I thought it was interesting that this would be a topic of such interest, as QuickBooks has long been recognized as the market leading application for small business bookkeeping and accounting.  Accountants and bookkeepers, as well as tax professionals, have worked with QuickBooks for years – many having even styled their practices around the QuickBooks brand and offering QuickBooks-specific training and other services.  Why are these professionals now asking to learn about alternatives?  Well, it is an alternative to the online version of QuickBooks that these folks are seeking, and they have been given the impression that the desktop editions of their beloved QuickBooks are no more and their businesses are being forced to change.

Due to Intuit’s focus on promotion of the QuickBooks Online edition as THE  QuickBooks to buy, there is a growing belief that the desktop products are going away.  Many professionals who have worked with the product line for years are now operating under a belief that their only future with QuickBooks is with the online edition, so they are searching for alternatives for their clients and their own practices.  The QuickBooks Desktop editions aren’t being eliminated (2016 editions and certifications coming!), but any real mention of them in the direct marketing is gone, because Intuit isn’t pushing these solutions to new customers. It is no wonder the accounting and tax pros are looking at alternatives – and their customers are, too.

QuickBooks has always been a direct-to-consumer solution and was pretty much the only thing a small business owner would find if they shopped for software at the local computer or office supply store. The high-value desktop editions continue to be available, but it is difficult to tell a business owner they need to purchase licensing and then pay for mobility for QuickBooks desktop editions while QBO sounds much cheaper and they can get it on their tablet or PC for that cheap price. Also, there is more shopping online – from phones and tablets as well as PCs – so consumers are being exposed to other brands and the plethora of new online solutions. Now that they are considering buying or changing accounting/bookkeeping software… they could just as easily elect to use something completely free and not spend anything with Intuit or anybody else.

The small business owner isn’t focusing on the qualities of the accounting solution or how it impacts their accounting professional’s processes – they are focusing on monthly price of the solution.  Accounting professionals are now recognizing that the software isn’t (or shouldn’t be) the basis for their practices, it is simply a tool.  And there are a LOT of tools available to work with, not just QuickBooks, so the value of aligning solely with that solution is perhaps not as good an idea as it once was, but it is not gone.  There is still a tremendous volume of work to be done with businesses using the QB desktop products – you just wouldn’t know it from the marketing hype around QBO.

The thrill of exploring SaaS (software-as-a-service) and online application models has introduced new competition in markets where the dominant player once felt secure (small business accounting, for example).  While Intuit’s QuickBooks products were a defacto standard and essentially owned the smb accounting market, the diminished response to the QBO product has created opportunity for many newcomers.  Xero, for example, has been able to make great progress, even recruiting long-standing QB ProAdvisors as Xero advisors and promoters.  gnuCash, once a bit of an outlier, is getting new business because it IS desktop based (some people like that!) yet it doesn’t require an an ongoing commitment to internet connectivity or to pay fees to the developer. NolaPro, Wave, Freshbooks and more are growing in popularity as more freelancers and small business owners begin using applications other than spreadsheets to manage their business finances.  The generation that grew up with online banking is now readily adopting computerized bookkeeping, but they aren’t necessarily interested in QBO.  Still, a great many move to QuickBooks desktop editions because QBD is a recognized and respected solution.

It also remains to be seen what happens with usage of some of these online smb accounting solutions when the business reaches some size or complexity.  While they may be highly useful for startup or freelance business, many are not likely to satisfy business requirements far into the business lifecycle.  This is when the going concern and growing business demands more functionality and performance, which often becomes the catalyst for seeking faster and more powerful software and systems and has been a driving force for businesses returning to locally-installed or hosted accounting and ERP solutions.  Along with QuickBooks desktop editions, Sage is positioned extremely well here. The Sage 50 solutions (good old Peachtree!) can scale and also have very strong accounting functionality.  These were actually the preferred solutions for most accounting pros for a time, but the momentum of QuickBooks pushed them to the side.  With the attempt to now leverage the QB user base to the QB Online solution, Intuit has created the opportunity for Sage to regain a position with accounting professionals and their clients who demand more.

As these software and systems have (in some part) migrated from the local infrastructure to the web, we have also seen a lot of hybrid or “tweener” approaches come about.  These approaches, just as cloud service of any type, come in many varieties and exist to solve different problems.  The problem of browser-based functionality and modality is among the issues identified with QBO.  The browser-based app doesn’t allow for multiple operating windows – you have to use browser functionality for that.  And it is relatively slow – performing data updates and screen refreshes like with a website and not as one would require of a business application.  The solution provided is a great example of a hybrid approach.  The desktop app for QuickBooks Online (yeah) is a software app that comes in a flavor for Windows and Mac, and which provides more of a desktop user experience even though it mimics the interface and connects to the data of QBO.  It is faster, and multiple windows can be used, and more… which are some of the great benefits of running software on the local device and why desktop software is so great a performer.  This hybrid model simply allows for desktop software to work with cloud-stored data and back-end processes, and potentially delivers some of the best of both technology models: cloud and localized.

If you consider how much of the actual QuickBooks desktop product has been turned into web service (payroll, merchant processing, etc), it seems like QuickBooks desktop is already beginning to be a bit of a hybrid approach.  And when QB desktop is run with a hosting service provider, the whole thing becomes available anytime/anywhere.  Hosting is the way to provide the management and mobility aspects of QuickBooks and other desktop software.  The hosting model delivers benefits of cloud service – providing users with all the features and functionality of the desktop solution – and introduces the system management and mobility that is part of the underlying value of a web-based or SaaS application approach.

The real discussion, I believe, is not about the death or  near death of the desktop and locally installed applications – that’s just silly. Even phones are now being touted as possible desktop replacements, as the processing and storage capacity has increased to rival the most useful portables and laptops.  Clearly, devices continue to be more powerful and capable, and these advancements aren’t done solely to make web browsing more enjoyable.

pendulumDevices are more powerful so that they can run more applications – fast – and deliver more useful functionality to the user. Maybe the data will be in a cloud, and maybe even some app functionality will be delivered via a cloud, but it is very unlikely that everything will be in the cloud.  Complexity and cost drove developers to seek out alternatives, and advancements in technology will introduce new options that change everyone’s thinking again.  While the pendulum did swing to one extreme (move it all to the cloud and off the device!), we are now seeing it swing back  in the other direction a bit and those who didn’t swing all the way the first time are in a position to reap some benefit.

Joanie Mann Bunny FeetMake Sense?

J

 

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Confused about QuickBooks and the Cloud? Join the club

cloud-computingIn most regions around the country high-speed broadband is readily available, and using the Internet for working and playing online is a part of everyday life.  Facebook and Twitter and Instagram are household names and just about every conversation starts or ends with a reference to a meme.  It seems that everyone is connected and app-savvy, using high technology while doing business, doing homework, or doing just about anything.  Yet this move to online and cloud technologies has come with a high price tag for some businesses, especially small businesses trying to keep up with the pace of change and who are being encouraged to adopt just about every new thing that comes their way.  It’ll make them more efficient, more profitable, more attractive to customers, more interesting to prospects, and will allow them to do more in less time.  All of the “apps” for this and that have created a great deal of confusion for the average small business owner who may need a few tools to help get business done, and who is now facing the daunting task of figuring out which ones to use as the type and number of tools grows exponentially every day.  It used to be so simple, but now even the simple things are becoming difficult to understand – like QuickBooks, for example.

QuickBooks desktop editions, born from Quicken personal finance management software, continues to be the most popular small business bookkeeping solution available.  Yet QuickBooks is now offered as either desktop application (software you install on your PC), as a hosted solution (software installed and run on service provider systems and which you access via the Internet), or as an online application (QuickBooks online edition).  Initially, the lines were fairly clearly drawn – the desktop software gets installed on the local machine and the online edition runs from Intuit’s servers.  Then things got a bit more complicated as hosted services rolled out, and users were able to have their desktop QuickBooks managed with a service provider and accessible via an Internet connection.  Now, just to add to the confusion, Intuit delivers a new desktop app to access the online version of QuickBooks.   What?!  Yeah, you heard me.  There’s a desktop app to install to the PC (97MB!) that accesses the QuickBooks online system.

When Intuit, like to many other software companies, began pushing the online-only version of their solution, the messaging was all about making life easier with “no software” to install or manage.  Customers could simply sign up and have all the features and capability they need using only the browser on an Internet-connected machine.  Failing to consider that computing devices (PCs, tablets, phones, et al) continue to get smarter and more powerful each day, the software companies firmly believed that everything would eventually be on the Web, and the “access device” wouldn’t matter any more.  However, things haven’t turned out quite as planned, and users continue to not only demand desktop and device-based apps, they will often forgo the browser-only approach until a better app and interface comes along.  The truth is that the market wants apps and software running on their devices because the user experience and performance is almost always better than with a purely browser-based approach.  Browsers are great for visiting websites, but not so much when it comes to running business applications.  Sure, there are a lot of browser-based solutions out there, but not too many of them are as trusted or as heavily used as their desktop-based counterparts or competitors.

There is little argument to be made regarding the fact that many software developers are working towards entirely online application models, where little or no software would exist on the device and all data is managed and stored online.  What is arguable is whether or not the “fully online” model will ultimately win, or whether software will continue to be installed and maintained on the device.  Performance, functionality, integration with other applications, and usability will all influence the buyer’s decision regardless of the marketing hype.  It may simply be that users will have to try each model before they decide which one works best for them.  It seems that, with the introduction of the desktop app for QuickBooks Online, the QuickBooks-users club has voiced an opinion which sounds a lot like they liked the desktop software approach best.

Joanie Mann Bunny FeetMake Sense?

J