accountant value – Page 4 – Cooper Mann Consulting

September 30, 2014

Revenue Recognition and closing the reporting GAAP

One company earns what the other company spends. This is business, and it seems like it would be pretty straightforward, accounting for the money coming in and the money going out. But it is really not that simple when it comes to business finances and accounting for revenue. With investor pressure to improve share prices and market pressures forcing greater competition, businesses have always sought out ways to make the performance look as good as possible – on paper even if not in reality. It is this requirement to make the business look better than it may actually be that drives “innovation” in financial reporting, and encourages some companies to use whatever rules are available to mislead investors or paint a rosy picture for stakeholders. When the balance is lost and financial reporting standards become so oblique as to allow regular and gross misrepresentation, it is time to change the standards.

There are numerous instances of fraud and scandal reported from the finance departments of big businesses, but instances of improper or misleading revenue recognition can happen in even the smallest of companies, and not necessarily on purpose. It is important to understand that properly and accurately reporting business revenue and earnings isn’t done just for investor satisfaction, it is an essential part of describing business performance that any owner or manager must be able to rely on.

Generally Accepted Accounting Principles (GAAP) provide investors and business owners with some consistency in the financial statements they use to analyze company performance, but only minimally. This is partly due to the fact that GAAP is based not only on some standards established by policy boards (the authoritative standards) but also on “generally accepted” standards, which are often not really standards at all but simply past practice that was found to be accepted. Especially in the global economy where fewer businesses operate solely within traditional territorial boundaries – and where accepted reporting methods vary widely – having a single financial reporting standard has become more important than ever.

Make it so, Number One.

Now there are new rules from FASB (Financial Accounting Standards Board) and IASB (International Accounting Standards Board) which provide clear and detailed guidance for how businesses recognize revenues. These rules are based on a consistently applied set of principles, no matter what sort of business is involved and regardless of where the business is located.

A focus of the new rules of revenue recognition centers on customer contracts, delving into the details of how earnings from those agreements should be recorded. Consider that many businesses combine multiple products and services into a single agreement, even though there may be several deliverables or milestones included. This method of booking customer contracts allowed companies to report revenues they were not yet due as part of a total agreement, often resulting with inflated earnings reports. Stakeholders would perceive that the company had reached one earning threshold, but the reality was something quite different and performance expectations were unmet.

“FASB and the International Accounting Standards Board (IASB) issued converged guidance on recognizing revenue in contracts with customers. The new guidance is a major achievement in the Boards’ joint efforts to improve this important area of financial reporting.” http://www.fasb.org/jsp/FASB/Page/BridgePage&cid=1351027207987

The new rules force an additional level of discussion, including a full set of disclosure requirements that will provide more information about contracts with customers. Businesses must identify each promised deliverable and attached revenue or earning component, which helps to better understand how the revenue may be earned (and recognized) as the business performs on the various obligations to the customer.

Just take a look at some big ERP companies and the lawsuits generated from problems and failures in delivery – problems that might have been more clearly identified to investors and stakeholders if the tie between product sales and services to be performed were more clearly described. In many cases, these situations exemplify the revenue recognition reporting problem, where large customer contracts and license sales were fully booked and recognized even though implementation services milestones attached to those license sales remained undelivered.

“2010 – JDA Software (i2) – Dillard’s, Inc.: Dillard’s had alleged i2 failed to meet obligations regarding two software-license agreements for which the department-store operator had paid $8 million.” http://www.zdnet.com/blog/projectfailures/erp-train-wrecks-failures-and-lawsuits/12055

For private companies, reporting periods beginning after December 15, 2017 must follow the new guidance. It may seem like a long period of time – from the decision to apply the new rules to the effective date – but the number of businesses the new rules will impact is large. The FASB made a decision to delay the effective date because of the broad scope of organizations affected and “the potentially significant effect that a change in revenue recognition has on other financial statement line items.”

Business owners and their accounting professionals need to make sure that financial systems and processes are up to the task and can track and produce the detailed reporting these new rules require. For investors and analysts, the new reporting rules and detailed information they generate will go a long way towards minimizing the impact of innovative revenue reporting practices, and will hopefully bring a new level of believability and usefulness to business financial reports.

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April 29, 2014December 7, 2017

The CPA for Small Business: Proactive, Responsive, and Helps Paint a Beautiful Picture

I once read an article written by Doug Sleeter which describing the findings of a published report titled What SMBs Want from Their CPA. The report was a summary of results from a study conducted by The Sleeter Group, and was intended to help accounting professionals understand the factors in the market which influence business use of professional accounting services. While adoption and use of technology was not named as the top item on the list, capabilities which can be rendered only if such adoption occurs were. In short, it’s not the technology that clients demand, but the level of service that professionals can only deliver by embracing advancements in technology and applying them to the client engagement.

The report and article placed a specific focus on trends relating to technology adoption and use in the professional practice, and establishes a foundation for firms to understand why technology is and always has been a key factor in the success of the CPA-client relationship. It’s not that the accounting professional must become a skilled technologist and promote high technology to the client. Rather, the success factor rests with the firm’s motivation to implement technologies and tools which will improve their ability to deliver more (and more valuable) service to the client in a more direct and timely manner.

The survey’s two critical questions posed to small business owners who use the services of a CPA were 1. What factors played a role in your decision to leave your former CPA?, and 2. What types of services would you like to receive from your CPA? Both questions are pretty straightforward, and the top responses from surveyed SMBs were equally unambiguous.

To the first question (factors playing into a decision to leave former CPA), the top two answers indicated that reactive and/or unresponsive are the problems which ultimately cause a small business owner to change accounting professionals. The top response was “Former CPA didn’t give proactive advice, only reactive”. The close second response was “Former CPA had poor responsiveness”.

Unfortunately, these responses more than accurately describe many professional firms and their approach to client service. These firms are perfectly content with waiting for clients to deliver after-the-fact information, delivering reports long after their relevance has past, and providing no sense of urgency in helping clients address business issues facing them here and now. These firms are content to work with their write-up and trial balance solutions, depreciation and amortization and tax products – and give little consideration to how they could adjust their operation to a better, more relevant and rapid delivery of service and insight to the client.

The second question, “What services do SMBs want from their CPAs?”, was met with the same responses professionals have been hearing for years; small business owners need help with business planning and business strategy and they wish the help would come from their CPA. It is surprising how many accounting professionals list business planning and strategy among the services they promote on their websites, and then just sit back and wait for clients to ask. Communication with clients remains relegated to annual reminders for tax information, or maybe slightly more frequent notes about other tax or compliance work to be done. It may be a bit unfair to place all the blame on the professional. Regulatory and reporting impacts on business are increasing and are increasingly complicated. Many professionals find it challenging enough simply to keep up with changes relating to the services they currently and regularly provide.

This is where practitioners should seriously take notice, and accept that the ability to meet changing market and customer demands is by intelligently leveraging technology to accomplish what people and process cannot do alone.

It takes information technology to speed up the bookkeeping, accounting and reporting processes; technology is required to help turn information into useful and relevant data;
technology facilitates the faster collection of information from and the delivery of information to clients;
technology is applied to reflecting numbers as pictures and helping users visualize the meaning of the data, and
technology enables the collection and analysis of “big data”, which leads to AI advancements and greater intelligence delivered through the applications businesses use.

The Sleeter Group report clearly demonstrated that small business owners continue to need and want more than just tax returns and post-facto reports from their accounting professionals, and that the lack of attention in these areas pose a direct threat to the small business/CPA relationship. Professionals can remove the threat by working closer with their small business clients, applying technology and process controls to get better information in a more timely manner, and returning the result with greater insight. Be proactive and be responsive, and apply the necessary technologies and business philosophy to get there before the client base looks for satisfaction elsewhere.

I’ve said before that small business owners don’t care about the numbers, they care about the picture the numbers paint, and they care about getting to a place where the picture is absolutely beautiful. With the right tools in place, their CPA can help guide them there.

jmbunnyfeet Make Sense?

March 10, 2014

Why #Accountants Should Implement #Cloud Services | QuickBooks and Beyond

Why Accountants Should Implement Cloud Services

Most professional accounting service providers, accounting pros included, are recognizing that customers are increasingly demanding lower costs for service but want more flexible methods for obtaining the service. Where the business value of the service provided used to be enough, providers are now expected to deliver their services how and when clients want them delivered.

Evidence of the mobile and social impacts of technology is visible everywhere, and no business is immune to the requirement to adapt or perish. Rather than viewing the shift in technology application and use as a threat to previous well-rehearsed process models, wise practitioners are finding opportunity to change things around a bit, facilitating workflow and process improvements and creating new opportunities where they didn’t previously exist.

Breaking Down Time and Distance Barriers

via Why Accountants Should Implement Cloud Services | QuickBooks and Beyond.

January 30, 2014March 10, 2015

Client Experience and Perceived Value: It’s Looking Cloudy for Accountants Working with Small Business

Every day it seems there is another professional accounting or bookkeeping firm asking questions about how to get new clients for their new “online accounting” business. Most of these professionals are likely missing the point that their current clients are probably already looking at online accounting solutions and services. Just like in the days when QuickBooks was beginning to take the lead in the market; today’s increasingly popular online accounting solutions are gaining popularity with the direct users, and are bringing those solutions to the professional community (not the other way around). Professionals who wish to build their businesses on what the market demands would do well to recognize that the push to the cloud coming from their clients is a reflection of past activities, and firms riding the wave are much more likely to see success than those fighting it.

In reflection, remember that QuickBooks, unlike the other business accounting and financial products at the time, was a retail product marketed to and sold via retail and direct-to-customer outlets rather than via a channel or reseller approach. At that time, State of the Art Software (which became Peachtree and then Sage 50) was the solution preferred by most accounting professionals, yet more and more small business owners would come to the professionals with the QuickBooks product already in hand, so accountants threw up their hands and adopted (if not embraced) the software. Over the years, QuickBooks became the “go to” software for small business accounting, and many professional firms didn’t just gear up to work with it, but went as far as developing standards and practices based on the product.

With the introduction of high-speed broadband access, business Internet connectivity and affordable remote/mobile service, businesses are now finding that their options for shopping for, purchasing and implementing various solutions to business problems is possible at any time and from anywhere. Even more, social computing and the blurring of the lines between personal and business use has made it all but assured that new business owners will seek online solutions where they can access business information and perform business-related activities regardless of location or mode of access. This is what they have come to expect as consumers of information and services, and the expectation extends no less into their small businesses.

Professional firms must recognize that these evolving paradigms represent opportunity, taking advantage of cloud-based, real-time collaboration models to provide more timely value to their clients. Where the more traditional on-premises and paper-based models have flourished, the online working models representing lean process and sustainability become the focus.

The movement to the cloud for small business accounting started with the consumer, who ultimately became the small business, and who may eventually become the big business. The professionals who recognize the value of and wisely adopt cloud technologies and online application services in their businesses – specifically in terms of how they work with clients and deliver value – are the firms which recognize that the client experience and perception of value delivered are the most important elements of all.

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December 20, 2013

Accounting, Technology and Small Business – The Best of 2013 from CooperMann

It has been an eventful year, hasn’t it? With the NSA lurking about collecting data, innovative new approaches to information and identity theft emerging almost daily, and complete turmoil in the IT services industry challenging trusted sales and distribution models, most of us have simply become numb to the noise. Information technology is evolving at an increasingly rapid pace and the way people and businesses interact with and use technology is being forced to change along with it. It’s starting to become almost, weirdly, natural.

Much of this change can be attributed to “The Cloud”, which is not a thing or a place. Cloud has become the term which applies to just about anything having anything to do with the Internet. For technology “purists”, cloud means something fairly specific, but for normal people (no offense to the nerds and geeks, but you know what I mean), cloud applies to pretty much anything accessible via the Internet. Photos back up to “the cloud”; music gets stored in “the cloud”, websites are hosted in “the cloud”; businesses run their applications in “the cloud”, and you can do darned near anything you need (or want) to with a phone. The cloud could be some guy’s server in his basement, or it could be a sophisticated network of systems housed in secure facilities around the globe. They both qualify, sort of. The point is that mobility, Internet services, subscription access to technology, and social computing are changing how people view technology – resulting with changes not simply in how IT is purchased, but in how IT is used and applied to daily life.

There are, however, some things that do not change even if the working environment does. The accounting profession, for example, is undergoing a great deal of change, and much of it fueled by the advancements in technology and social computing. But accounting fundamentals – the “truth of debits and credits” and the good old accounting equation – remain. The basics of running a business are also unchanged, even as methods of doing business evolve and globalization of markets continues. Business fundamentals – fiscal responsibility, cash and growth management, and focus on value and sustainability – are as necessary now as every before.

With all this change and IT “advancement”, there have certainly been impacts to how and where we work. But the more things change, the more they remain the same. Good business generates goodwill and more business – that doesn’t change – and bad news still tends to spread faster than good news (much faster, given social platforms that are designed to spread the word far and wide). And when it comes down to the fundamentals – the basic and essential foundations supporting building, operating, and accounting for business – we generally find that they remain constant even as the environment in which they exist experiences change.

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Here are the top 20 ranked posts for 2013 from CooperMann.com

Posts by category – with Accounting Professionals, QuickBooks Hosting, QuickBooks Software, and Small Business being the top categories with ranking articles.

ACCOUNTING PROFESSIONALS

Small Business Owner to Accountant: Make Accounting Valuable to ME

Accounting Professionals, You’re right – your clients don’t care about the numbers.

The Language of Accounting: Disconnect between Accountants and Bookkeepers

Why Accountants and Bookkeepers Use the Cloud

Bookkeeping and Benchmarks – Getting the Numbers Right

In Bookkeeping, Accounting, and Information Technology: The Value of Outsourcing

Re-defining the role of the accountant, or going back to the good old days?

The Collaborative Online Model for Small Business Accounting Professionals

Remote access to client bookkeeping comes in many forms because clients come in many forms

QUICKBOOKS AND BUSINESS APPLICATION HOSTING

What Small Businesses Need To Know about QuickBooks and the Cloud

Intuit Introduces Changes to Authorized Commercial Host for QuickBooks Program, Introduces QuickBooks Enterprise Rental Licensing

Hosting All My Applications in the Cloud

Intuit Hosting Program for QuickBooks Website Goes Live

Cloud Computing for Small Business: It’s All About 3 Apps

QuickBooks Hosting: New Program Tier Announced for QuickBooks Hosting Providers

Managed Applications, Cloudpaging, and a New Flavor of Hosted QuickBooks

QUICKBOOKS SOFTWARE

Changing How We See Software: QuickBooks 2013 interface frustrates power users

SMALL BUSINESS

4 Rules of Thumb for Business Success

4 Rules for Building Service Customer Loyalty

December 2, 2013June 12, 2018

4 Rules of Thumb Regarding Workers Compensation Insurance for Employers

In two previous “4 Rules of Thumb” articles, I discussed a few things that businesses can do to create the best possible environment for engaging new customers and providing quality service (4 Rules of Thumb for Business Success) and provided additional tidbits for service businesses – things the company can do to make sure that the work is done completely and correctly the first time, which is what leads to happy and loyal customers (4 Rules for Building Service Customer Loyalty).

This article is focused a bit more internally to the business, discussing a few of the risks and considerations surrounding those dreaded tax burden issues: Unemployment Insurance, Worker Classification and Workers Compensation Insurance.

Unemployment insurance is one of those items that most businesses pay attention to, because rates are impacted based on unemployment claims made and paid. The cost of unemployment insurance is usually calculated just like workers’ compensation, using standardized arithmetic formulas based on the profile and past record of the company.

Workers Compensation insurance is sort of the “elephant in the room” of compliance – it’s a big problem that is frequently the last item of consideration in business compliance and reporting. It is also an item that frequently goes without scrutiny at the state level, so little attention is generally given it by accounting and human resource professionals.

Workers Comp is one of those payroll reports where you select from a broad list of categories relating (hopefully fairly closely) to the work your people do, you calculate the cost, and you pay the fees.

Ideally you’re classifying workers properly in terms of their being employees versus independent contractors – this being the big focus of most workers comp audits and where many advisors say to pay attention. If you use a company to perform some of the work of your business, also pay close attention to the concept of joint-employer status (see article on joint employer status).

An equally big issue – the issue that impacts the business owner perhaps more than the employee – is classifying worker activities too broadly, potentially costing the business hundreds (if not thousands) of dollars in annual workers comp premiums. Improper classification of worker activities can lead not just to increased premium costs, but heavy penalties in the event of a claim finding the worker was not properly covered.

Most workers compensation policies issue blanket risk classifications, yet how these classifications are used in different industries is where the secrets of cost savings exist. In the moving and storage industry, for example, the risk is in the warehouse. If a clerk or administrative worker enters the warehouse, that employee is now actually working under a different classification. However, if the worker often checks warehouse inventory or sells items from the warehouse as part of their sales job, they may operate under yet another classification.

There is a balance required when seeking to reduce premiums while keeping the company compliant. Many companies consider caution to be more affordable than keeping highly detailed activity and work classification records, finding that reporting workers in higher cost work categories is more cost effective than paying for the labor intensive effort of capturing, analyzing and reporting in more detail. That is, until a worker is injured and the risk wasn’t disclosed through accurate workers compensation reporting.

When it comes to workers compensation insurance for the business, give these 4 compliance rules of thumb some strong consideration.

Rule 1: Get informed and get help.

It’s OK for a business owner to not be the expert in all facets of compliance and reporting – – you have accountants and tax advisers that can gain this knowledge from their annual CPE (continuing professional education). The potential costs of mis-handling workers compensation and other aspects of having employees are too great to risk being uninformed and unprepared.

Rule 2: Call an employee an employee

Classifying workers will turn out better for all parties in the long run even if it seems like the more expensive way to go. Misclassification of employee workers as contractors hurts everyone, eventually. There is a big problem with businesses misclassifying workers as contractors rather than as employees, sometimes to avoid paying taxes and benefits, but sometimes not just for that reason. When classified as contractors, workers are generally not covered by the various protections and do not get the benefits that employees do.

Some business owners who are unsure of the state administrative rules may pay workers compensation premiums for workers that are truly independent contractors. Other businesses may require workers to have a workers compensation account as a condition of employment. Either way it is being done improperly and one party or the other ends up bearing unnecessary cost and/or risk.

The unfortunate result is that employers are bearing larger than necessary burdens of supporting injured workers and the unemployed.

Deliberate mis-classification can save dishonest contractors upwards of 30 percent in payroll and other taxes, but for workers, taxpayers and honest employers, the practice amounts to millions in lost wages and revenue. – See more at:

http://www.ibew.org/articles/13ElectricalWorker/EW1305/Misclassification.0513.html#sthash.7u1vtjW

Rule 3: Details Details Details.

Worker classification done properly can save businesses a lot of money simply by being more accurate. Yes, there may be tradeoffs in terms of labor to perform the calculations and reporting, but it can prove to be well worth the effort.

Particularly in businesses where workers may perform multiple duties or work in a variety of locations and conditions, there is value in delving into the details of time, location and work performed to make sure the business is adequately covering itself. Filling out the report by simply selecting the broad category that “seems most likely” is not the best way to go. There are details in the rules, and the smart business takes advantage rather than being surprised by them.

A home installation satellite company did not keep sufficient records for their most hazardous business classification: tower work. During the audit, all their hours were assessed in this one classification that was six times the reported amount. – See more at:http://cath235lni.wordpress.com/

Rule 4: If there is a worker injury claim, pay attention and deal with it right away.

While it seems somewhat like getting car insurance after the wreck, there may be some risk mitigation that can occur if the issue is dealt with directly and in a timely manner – possibly avoiding a claims nightmare.

The last item is more of a suggestion than a rule, which is to be fair and truthful. Treating employees well is part of growing a successful team that will propel the business towards success.

Surprisingly enough, the benefits to the business may not only be a more productive and happier workforce, but lower risk exposure and lower workers comp premiums due to more detailed use of classifications in reporting.Tell employees and independent contractors what workers’ comp does for them – it’s essentially a medical and lost wage policy to protect them and those close to them.

Explaining to employees that keeping the boss informed about what is happening in the plant or in the field is simply part of helping ensure their proper protection.

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Many thanks to my friend Ted Carlson, Certified Fraud Examiner (retired), a veteran of the Department of Labor and Industries (L&I) in Washington State – responsible for Tax Discovery and Fraud Prevention field Audits.

Revenue Recognition and closing the reporting GAAP

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Why Accountants Should Implement Cloud Services

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Client Experience and Perceived Value: It’s Looking Cloudy for Accountants Working with Small Business

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Accounting, Technology and Small Business – The Best of 2013 from CooperMann

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