Microsoft’s Small Business Accounting 2006 Update

I was reading recently in Accounting Technology about be experiences of my fellow colleagues regarding their experiences with clients inquiring about MS Small Business Accounting (MSSBA) and just like myself many have not received the inquiries that Microsoft was probably hoping for. Most of the comments from their clients were “Microsoft makes a small business software package!?!?” I am here to say I receive the same responses when I notify people of their software offering. When doing a recent seminar for small businesses, I noticed that the attendees all looked at me with blank amazement that there was something else out there for small businesses. With further research into the product, I believe many small businesses may find a benefit in MSSBA.

For the small business owner that requires an accounting software package that seamlessly integrates into all their other Microsoft programs, MSSBA will be a great fit. It also will help the small business owner that is moving from “shoebox” recordkeeping to a more secure technological simple process.

For the accounting professional new to MSSBA, Microsoft is now offering CPE credits for certification on MSSBA, in an effort to get more accountants to become familiar with the software. I recently received information regarding this new update via Microsoft’s Professional Accountants Network (MPAN). These initiatives may allow Microsoft to take a piece of the small business market away from Intuit (QuickBooks, Quicken) and I am eager to see how this plays out.

For information check out:

http://www.microsoft.com/

Keep Your Business In Synergy

Brian N. Stovall
The Brico Group, Inc.
www.thebricogroup.com
bstovall@thebricogroup.com

Found Your Refund Yet???

With this year's tax season over for most taxpayers, many are shifting focus from gathering their tax information to locating that elusive refund from the IRS. If you fall into this category, the IRS has a link on their site for you. Simply click on the "Where's My Refund" link on the IRS website (www.irs.gov.). Information that you will need is your SSN, your amount of your tax refund, the date that your return was sent and how it was sent (paper or electronically).

The IRS does not give definite time frame for your refund, but typically it can take about two weeks for processing if you e-filed and up to a month if the return was paper filed. For more information regarding how long it takes for your refund to arrive you can also take a look at the IRS Tax Topic 152 - "Refunds -How long they should take at the following link.

http://www.irs.gov/taxtopics/tc152.html

Until next time........keep your business in synergy

Brian N. Stovall
The Brico Group, Inc.
www.thebricogroup.com
bstovall@thebricogroup.com

More Woes for America’s Tax Preparation Firms????

Here is a little information for all of you out there that have used or plan to use a tax preparation firm like H&R Block, Jackson Hewitt, or Liberty Tax that may make you want to question the accuracy of their services. In my NSA Special Alert e-mail I just received, it appears that the Senate Finance Committee chairman Charles Grassley (R-IA) is inquiring into the business models, training, and compensation of the major tax preparation firms. This is due to the recent release of the General Accounting Office’s (GAO) report that uncovered dishonesty, inaccurate information, and poor service provided by tax preparation firms.

This is all in the midst of the potential passing of the current legislation, the Taxpayer Protection and Assistance Act (S.832) which would require the registration of all non Circular 230 paid tax preparers (Non CPA’s, EA’s and public accountants). This is something that the average consumer must keep in mind when relying on a tax preparation firm to prepare and file their taxes. Many times these tax franchises are owned and operated by CPA’s, EA’s, and other Circular 230 tax professionals, but sometimes the staffs are not as fully trained. Be sure to do your due diligence when selecting a tax preparation firm and remember that the tax responsibility ALWAYS falls upon the tax payer.

To your prosperity

Brian N. Stovall
The Brico Group, Inc.
www.thebricogroup.com
bstovall@thebricogroup.com

Accounting Seminar Facts

Back from a long tax season folks and wanted to share some information from a seminar I did for small business owners this past weekend. The topic was how to make your accounting function more innovative and productive. Most small businesses break down into one of three categories for assessing accounting needs:


Pen and Paper businesses
Microsoft Excel businesses
Accounting Software businesses

Pen and paper businesses have may have the largest challenge but also have an opportunity to build a customized accounting system that can grow with their business. Businesses using Microsoftsof Excel can also benefit by having a smooth transfer to an existing accounting software. Small businesses using accounting software presently can build on their existing software by integrating their human resources, sales, and lead generation systems with their accounting software.

Always remember that your small business must stay agile so that you can stay competitive in the markets that you serve. Changes to your business structure may mean changes to your software infrastructure. Be sure that you are prepared.

For a copy of the Innovative Accounting Presentation send an e-mail to:

contactus@thebricogroup.com

Brian N. Stovall
Consultant - Accounting and Business Advisory
The Brico Group, Inc.
www.thebricogroup.com

Commerical Software vs. Open Source...Is There a Clear Winner?

As I casually flipped through one of the IT Trade magazines I recieve I came across a statement by an executive of a software company. His statement was a bold one indeed as he said, "...the days of commerical software are numbered as Open Source is truly taking over."

First off, Open Source software is usually free software that companies give out. Now as a commericial software developer myself that statement truly made me wonder. Is this gentleman right?

It depends. First off, Open Source software is a good thing. Alot of times the code of the software is written using a non-Microsoft software language (i.e. Java, RealBasic, etc.). Also the label "Open Source" software comes from the fact that these software applications are often developed by a community. That is a group of individuals start writing the software application and then share the code so others can contribute. Thus there is a "community" that develops from all the contributors of the software development and the subsequent users of the software.

The most popular Open Source software on the internet today is from the Mozilla foundation. They developed Mozilla, Firefox and Thunderbird (web browsers and email clients). Anyone can go to their site and download the software...and millions of individuals across the world have.

Ok so now let's get into a debate - which is better...open source or commerical software? I believe that their is no distinct winner. For example, the open source browser Firefox is a tremendous piece of software. Often times it is thought of better than Internet Explorer. Since it is a community developed software there are hundreds of add-ins such as having customized weather reports, password checkers, and the list goes on and on. AVG Free (a free anti-virus program) from GriSoft is another excellent piece of open source software. I often recommend that program to my clients as it is extremely reliable for home users.

So at this point your saying..."looks as if Open Source software is the better choice!". Well not necessairily. A good deal of open source software is more technically advanced than the traditional commercial software. Sometimes just installing the software is enough to drive users crazy! Also, the technical support for the software may be somewhat limited due to the lack of a centralized development team. Perhaps the most important fact is that alot of the open source software items on the internet that are indeed free are the basic versions of the software. For example, AVG Free is the free anti-virus software for home users but for business use GriSoft only has commerical versions. Some companies are bringing open source into the enterprise but for the most part that's the trend. You get a free basic version but for professional versions you have to pay.

Now for most folks (i.e. home users) that is fine. However for business use, the small business owner should take a minute and closely evaluate each piece of software (open source vs. commericial) before deciding.

For questions or comments please reply to this post or email me directly at bwinston@thebricogroup.com

Blog On.

Brian J. Winston

Block Goofs on Their Own Taxes!?!?

Another weekend in tax season (of course I’m working the weekend) and my business partner forwarded me an e-mail regarding the tax bill that H&R Block just had to shell out. Found this to be rather interesting that a firm that prides them selves on preparing taxes for individuals and businesses would make a mistake on their own taxes. The company underestimated their own tax liability by 32 million last year, which kind of makes you wonder if they are passing these “strategies” on to their customers. People who use these “tax boutiques” to prepare their taxes must also know that the responsibility ultimately falls on the tax payer so tread with caution when going to a tax prep company to get your taxes done. I guess it all comes down to buyer beware.

Brian N. Stovall
Consultant - Accounting & Business Advisory
The Brico Group, Inc.
bstovall@thebricogroup.com
www.thebricogroup.com

Entrepreneurs in Your Small Business

While checking my e-mail this week, I came across one from the GrowThink team regarding hiring like minded entrepreneurs in your small business and would it would it work. On one had an entrepreneur type came bring about new creative was to do business or develop new product lines. On the other hand however, this same person could pose a risk, by learning your model and taking it to start their own. Typically a small business is comprised of three types of people the technician, the manager and the visionary with the entrepreneur holding the visionary title. Technicians perform the work, manager direct the work and the world is suppose to go around…right? Here are some of the reasons this style can and can not work according to the eMyth book writer Michael Gerber and GrowThink:

Gerber's analysis sheds light on the question of whether an entrepreneur should hire an entrepreneur. In some respects, entrepreneurs should only hire technicians and managers. These people will enable the organization to perform the necessary tasks effectively and provide value to customers and shareholders. However, if the employees are not entrepreneurial, will they be able to come up with new ideas and better ways of doing business?

Conversely, entrepreneurs within an organization can be a threat. They may constantly come up with new ideas that prevent them from expertly completing the tasks at hand. These ideas may also cause other employees to lose focus on the current execution strategy. Likewise, the entrepreneur-employee may be prone to start a competing business in the future.

Seems to me that there is really no right or wrong way to operate your small business based on these situations. I guess the key would be to treat everyone (clients, vendors, employees, etc.) with respect and make sure that there is group cohesiveness between you and your employees.

Let me know your thoughts

Brian N. Stovall
Consultant – Accounting & Business Advisory
The Brico Group, Inc.
bstovall@thebricogroup.com
www.thebricogroup.com

The IRS "DIRTY DOZEN"

The IRS has recently published their tally of the most notorious tax scams for 2006. Individuals should watch out for these schemes to evade income taxes. There are many individuals and firms out there that say they can gurantee you a larger refund, but BEWARE. They may be using one of the schemes below and it is the taxpayer's responsibility to ensure that their tax return is filed correctly. Now on to the list:

1. Zero Wages. In this scam, new to the Dirty Dozen, a taxpayer attaches to his or her return either a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 that shows zero or little wages or other income. The taxpayer may include a statement indicating the taxpayer is rebutting information submitted to the IRS by the payer.An explanation on the Form 4852 may cite "statutory language behind IRC 3401 and 3121" or may include some reference to the paying company refusing to issue a corrected Form W-2 for fear of IRS retaliation. The Form 4852 or 1099 is usually attached to a “Zero Return.” (See number four below.)

2. Form 843 Tax Abatement. This scam, also new to the Dirty Dozen, rests on faulty interpretation of the Internal Revenue Code. It involves the filer requesting abatement of previously assessed tax using Form 843. Many using this scam have not previously filed tax returns and the tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program. The filer uses the Form 843 to list reasons for the request. Often, one of the reasons is: "Failed to properly compute and/or calculate IRC Sec 83––Property Transferred in Connection with Performance of Service."

3. Phishing. Phishing is a technique used by identity thieves to acquire personal financial data in order to gain access to the financial accounts of unsuspecting consumers, run up charges on their credit cards or apply for new loans in their names. These Internet-based criminals pose as representatives of a financial institution and send out fictitious e-mail correspondence in an attempt to trick consumers into disclosing private information. Sometimes scammers pose as the IRS itself. In recent months, some taxpayers have received e-mails that appear to come from the IRS. A typical e-mail notifies a taxpayer of an outstanding refund and urges the taxpayer to click on a hyperlink and visit an official-looking Web site. The Web site then solicits a social security and credit card number. In a variation of this scheme, criminals have used e-mail to announce to unsuspecting taxpayers they are “under audit” and could make things right by divulging selected private financial information. Taxpayers should take note: The IRS does not use e-mail to initiate contact with taxpayers about issues related to their accounts. If a taxpayer has any doubt whether a contact from the IRS is authentic, the taxpayer should call 1-800-829-1040 to confirm it.

4. Zero Return. Promoters instruct taxpayers to enter all zeros on their federal income tax filings. In a twist on this scheme, filers enter zero income, report their withholding and then write “nunc pro tunc”–– Latin for “now for then”––on the return. They often also do this with amended returns in the hope the IRS will disregard the original return in which they reported wages and other income.

5. Trust Misuse. For years unscrupulous promoters have urged taxpayers to transfer assets into trusts. They promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. However, some trusts do not deliver the promised tax benefits, and the IRS is actively examining these arrangements. There are currently more than 200 active investigations underway and three dozen injunctions have been obtained against promoters since 2001. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust.

6. Frivolous Arguments. Promoters have been known to make the following outlandish claims: the Sixteenth Amendment concerning congressional power to lay and collect income taxes was never ratified; wages are not income; filing a return and paying taxes are merely voluntary; and being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. Don’t believe these or other similar claims. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

7. Return Preparer Fraud. Dishonest return preparers can cause many headaches for taxpayers who fall victim to their schemes. Such preparers derive financial gain by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Taxpayers should choose carefully when hiring a tax preparer. As the old saying goes, “If it sounds too good to be true, it probably is.” And remember, no matter who prepares the return, the taxpayer is ultimately responsible for its accuracy. Since 2002, the courts have issued injunctions ordering dozens of individuals to cease preparing returns, and the Department of Justice has filed complaints against dozens of others. During fiscal year 2005, more than 110 tax return preparers were convicted of tax crimes.

8. Credit Counseling Agencies. Taxpayers should be careful with credit counseling organizations that claim they can fix credit ratings, push debt payment plans or impose high set-up fees or monthly service charges that may add to existing debt. The IRS Tax Exempt and Government Entities Division is in the process of revoking the tax-exempt status of numerous credit counseling organizations that operated under the guise of educating financially distressed consumers with debt problems while charging debtors large fees and providing little or no counseling.

9. Abuse of Charitable Organizations and Deductions. The IRS has observed increased use of tax-exempt organizations to improperly shield income or assets from taxation. This can occur, for example, when a taxpayer moves assets or income to a tax-exempt supporting organization or donor-advised fund but maintains control over the assets or income, thereby obtaining a tax deduction without transferring a commensurate benefit to charity. A “contribution” of a historic facade easement to a tax-exempt conservation organization is another example. In many cases, local historic preservation laws already prohibit alteration of the home’s facade, making the contributed easement superfluous. Even if the facade could be altered, the deduction claimed for the easement contribution may far exceed the easement’s impact on the value of the property.

10. Offshore Transactions. Despite a crackdown by the IRS and state tax agencies, individuals continue to try to avoid U.S. taxes by illegally hiding income in offshore bank and brokerage accounts or using offshore credit cards, wire transfers, foreign trusts, employee leasing schemes, private annuities or life insurance to do so. The IRS and the tax agencies of U.S. states and possessions continue to aggressively pursue taxpayers and promoters involved in such abusive transactions. During fiscal 2005, 68 individuals were convicted on charges of promotion and use of abusive tax schemes designed to evade taxes.

11. Employment Tax Evasion. The IRS has seen a number of illegal schemes that instruct employers not to withhold federal income tax or other employment taxes from wages paid to their employees. Such advice is based on an incorrect interpretation of Section 861 and other parts of the tax law and has been refuted in court. Lately, the IRS has seen an increase in activity in the area of “double-dip” parking and medical reimbursement issues. In recent years, the courts have issued injunctions against more than a dozen persons ordering them to stop promoting the scheme. During fiscal 2005, more than 50 individuals were sentenced to an average of 30 months in prison for employment tax evasion. Employer participants can also be held responsible for back payments of employment taxes, plus penalties and interest. It is worth noting that employees who have nothing withheld from their wages are still responsible for payment of their personal taxes.

12. “No Gain” Deduction. Filers attempt to eliminate their entire adjusted gross income (AGI) by deducting it on Schedule A. The filer lists his or her AGI under the Schedule A section labeled “Other Miscellaneous Deductions” and attaches a statement to the return that refers to court documents and includes the words “No Gain Realized.”

Here's to a less stressful Tax Filing Season

Brian N. Stovall
Consultant - Accounting & Business Advisory
The Brico Group, Inc.
bstovall@thebricogroup.com
www.thebricogroup.com

Google Growing??...At What Risk??

Google announced their earnings today and here is what the CEO had to say about 2005:

"We are very pleased with our results for the fourth quarter as we achieved excellent performance across our businesses," said Eric Schmidt, CEO of Google. "We generated significant revenue growth in our core search and advertising business, driven by continued strength in traffic and monetization. We will continue to invest significantly as we develop innovative new products and as we extend our core technologies to new user access points and to different channels."

Just prior to their earnings today I was fortunate to read about some of the company's strategies for growth and how the Wall Street analysts come up with their estimates. Here is a brief analysis I prepared of two articles about both issues. Have business ethics rules been forgotten? You be the judge.

The financial decision making process for an organization can get quite complicated at times. There are many different variables that managers must take into account and their decisions affect a great deal of stakeholders/stockholders in the organization. One major variable that managers must take into account are the ethical impacts of their actions. Presently Google struggles with ethical issues and how to satisfy stakeholders. In today’s print of Financial Times (01/30/06) two articles, “Google is putting its own freedoms at risk in China”, and “Google set to test forecasts’ accuracy again”, additional insight can be gained on the ethical dilemmas Google is facing.

John Gapper’s commentary regarding Google’s, expansion strategy into China provides a interesting view of what length top level executives will reach to increase their market share and profits. Google is providing a “censored” Google service in China in an effort to maximize their profits. Due to the restrain on by the government in China Google feels that by providing a speedy Google it is okay to censor their search services. Google’s financial objective is to maximize their profit and possibly do it by providing an inferior product knowingly? Google calls this the lesser of two evils due to the environment, ironically one of Google’s founding principles is “Don’t be Evil.” This is a rather unique way of making a capital budgeting decision.

Google’s capital structure and investment issues can be examined in Richard Water’s article regarding their stock price and the earnings report that will be presented tomorrow. Google’s earnings have been beating the “street” estimates by 6-15% each quarter. However, these estimates are from analysts that are known for understating popular stocks. Analysts are already speculating that the earnings report will beat their estimates and this speculation can affect the stock and derivatives markets. By providing these low estimates analysts feel they are being “cautiously aggressive” with their approach with one analyst saying they don’t want to be too aggressive ….predicting that they will outperform. This stage is similar to what was seen in during the dotcom boom of the 90’s when analyst’s unethical estimates cause many individuals to loose their nest eggs.

Google and many companies like them have a great deal of ethical decisions to consider when making decisions that affect many. One the one hand should they provide an inferior product just to make a quick buck. Should the “street” analysts give understated numbers in an effort to “prop” up a stock? In the financial world we live in today, the answer is yes.


References:

Gapper, John. (2006, January 30). Google is putting its own freedoms at risk in China. Financial Times, pp.15.

Waters, Richard. (2006, January 30). Google set to test forecasts’ accuracy again. Financial Times, pp.18.

Brian N. Stovall
Consultant - Accounting & Business Advisory
The Brico Group, Inc.
bstovall@thebricogroup.com

Corporative Housing Corporations and Tax Tip

If you are an owner/stockholder of a cooperative housing corporation, you own shares of stock in a corporation that leases or owns housing facilities. Typically you can deduct your share of the corporation’s deductible real estate taxes just like a standard home owner. To qualify as a cooperative housing corporation, the business must meet the following conditions:

There is only one class of outstanding stock for the business
Each stockholder, solely because of ownership of stock can live in the dwelling owned by the corporation
No stockholder can receive any distribution out of capital, except when the corporation is partially or completely liquidated
Tenant-stockholders pay at least 80% of the corporation’s gross income for the tax year (income received during the entire year even if the corporation was not a cooperative housing corporation for the whole year)

To figure your share of real estate taxes (1) divide the number of shares of stock by the total outstanding (including shares owned by the corporation). (2) Then multiply the corporation’s deductible real estate taxes by the number you figured in one.

If the corporation received a refund of real estate taxes paid in a prior year, it must reduce the amount of real estate taxes paid this year when it allocates the taxes to each stockholder. Your deduction for real estate taxes paid this year will be reduced by your share of the refund the corporation received. For more information see IRS Publication 530.

Brian N. Stovall
Consultant - Accounting & Business Advisory
The Brico Group, Inc.
bstovall@thebricogroup.com
www.thebricogroup.com

Mid-Range Accounting Software for Your Growing Business

Alas 2006 is upon us! Time for your businesses to spring out of the blocks with your best foot forward and turn those creative ideas into new product and/or service offerings. The New Year brings about a time of change for the small business owner and this may be a good time to see if you are getting the most out of your small business accounting software investments. Your accounting software plays an integral role in your profitability and in the growth of your business as a whole. This is why it may be a good time to see if you have outgrown your small business software and need to move to the next level – “Mid Range Accounting” software.

Entry level packages provide the small business owner with all the necessary tools they may need to track expenses and invoice clients. They also give the small business owner insightful reports to make business decisions. These systems are good for small business owners that typically enter the data themselves or have a part-time bookkeeper to assist them. However what if your small business has recently experienced unprecedented growth and there is more information to enter. The small business owner may need to hire additional staff and the number of transactions within your existing small business software may be too much for the software to handle. This is where mid-range accounting software may make your operations more efficient.

Mid-range accounting software is typically for small businesses that have 25 or more users that need simultaneous access to financial information. It also provides the small business owner with more detailed analysis features, dashboard snapshots, and continuous updates as changes are made within the system. Most mid-range accounting systems are “modular” in nature meaning that they are purchased in parts or modules. The most basic modular system typically includes a company manager, general ledger, accounts payable, account receivable, and payroll. The more robust modules will include inventory tracking, CRM, and web capability. Mid-range accounting software does not require a total technology overhaul either. Many software packages can be run on your existing client/server configurations and this will definitely be a relief to your IT department or IT consultant.

Take a look at the following options if you are in the market for a mid-range accounting software platform:

Cougar Mountain Accounting 10
www.cougarmtn.com

Quickbooks Enterprise Solutions 6.0
www.quickbooks.com

Turning Point 4.0
www.redwingsoftware.com

Sage Business Vision V. 7 & Sage BusinessWorks 6
www.sagebusinessvision.com www.sagesoftware.com

To Your Prosperity

Brian N. Stovall
Consultant – Accounting & Business Advisory
The Brico Group, Inc.
bstovall@thebricogroup.com
www.thebricogroup.com

Windows One Care Live...Beta

The software giant Microsoft is at it again. They are starting off the new year with more goodies for us techies. Some are truly useful and some are bad for small business owners. I am going to evaluate Windows One Care in today's blog.

First of all what is One Care Live? The folks at Microsoft describe One Care as this:
"Windows OneCare is a comprehensive PC health service that goes beyond security to take an integrated approach to help protect and care for your computer." Bascially, its a complete pc protection program. Its a pretty novel idea. Most companies focus in on providing security for your computer. Some focus on the diagnostics of your pc. With OneCare Live they deliver the whole package all in one.

Hmmm...sounds pretty interesting. Opps did I forget to mention that this software is in beta right now. With that in mind one would expect some flaws. I downloaded and installed the beta on my machine a couple of weeks back. The install process was fairly simple. Just following the steps in the setup wizard is all that is necessary. After install the software loads.
Once in the software you can adjust the anti-virus settings, firewall settings and additional security features. It also provides you the ability to "tune-up" your pc. You also have the ability to backup your files (serves as a backup program also).

Those are some pretty good features in a one-stop software suite. Of course the features are more detailed but for this blog's purposes I just wanted to highlight them. After I setup all my One Care settings I powered my machine off. The next day and subsequent day thereafter I noticed "slowness" in my browser. Pages that would normally take a second to load would now take over 30 seconds to a minute. Frustrating. Another frustrating thing is that you have to use Internet Explorer 6.0 as your default browser. At the time Firefox was my default browser. One Care had major problems trying to access the internet for updates via Firefox. Frustrating once again.

Now I am a patient guy but after 4 days of being frustrated I said enough. Yes I uninstalled Windows One Care beta. During uninstallation I filled out a survey from Microsoft. I basically told them my frustrations with using the product...I truly hope they listen. The good things about all this is that again this software is in beta so they have time to get all the bugs out before the final release. Truth be told all the features of One Care live can be peformed via the control panel. However, the key concept of One Care is to perform those actions for 1)people who do not know how to do them or 2)for people who do not have time to do them.
I'm not giving up on One Care totally. The final version should be released sometime this winter. I'll check it out again then and see if my frustrations will continue.

Brian J. Winston
Consultant - Sofware & Web Development Services
The Brico Group, Inc.
bwinston@thebricogroup.com

Managing Your Small Business Risks

This year has brought about many different instances where small business owners had to deal with disasters and potential risk exposures. From the hurricanes that hit the gulf coast to the even more recent mass transit strike in New York City business owners must be responsive to the ever changing and unexpected occurrences in the daily operations.

This is why it is important for small business owners to plan for the unexpected by developing a contingency plan if a disaster or any other exposure arises. Although a small business owner may have more on their plate (dealing with day to day tasks) it is important to have a contingency plan to ensure the business can continue to operate after any unexpected risk exposure.

A typical business contingency plan would consist of addressing the following areas:

Technology Issues – How will data be handled, Is data backed up?
Financial Issues – Can income and expenses be tracked and completed? How will this be done?
Operations Issues - How will communication between employees, and locations be done
Any other business segments/infrastructure

By addressing this issues before risk exposure occurs can even make a small business more productive. When a small business “tests” various risk scenarios, they can often devise new product and service offerings and new ways to “do business” that can create additional revenue for the business.

Let me also take this time to wish everyone Happy Holidays and much success in the coming year!

Brian N. Stovall
Consultant – Accounting & Business Advisory
The Brico Group, Inc.
www.thebricogroup.com
bstovall@thebricogroup.com

OutSourcing Your Accounting Function

Small Businesses make up 50% of businesses and employ more than 98% of the workforce in America. Being that small businesses play such an important role in the American economy, typically what affects the economy will affect the small business owner. In the wake of large businesses financial scandals that are changing the way the government and regulatory agencies mandate new regulations, one would think what are the consequences if small businesses fall prey to similar scandals. The small business owner must take these issues into consideration for accurate financial reporting is not only a “Big Business” problem.

When a small business owner tries to tackle the financial problem alone, they are usually too caught up in the activities of bringing in new business to take any time out to “look over the books” or balance the checkbook. It is also difficult for the small business owner to stay current on all the new changes in the tax law that may affect their business. Despite all the government talks of tax simplification Congress has made more than 5000 changes in the federal tax law since 1986. Many of these changes resulted in new tax forms and instructions. The simple 1040 form with instructions is 107 pages. Small business owner must take into account these issues to ensure a solid future.

Typically a small business owner may attempt to alleviate the problem by purchasing an easy-to use software program to in a sense “do the work for them”. This attempt usually only puts the small business owner back into the same loop of trying to bring in new business at the same time managing day-to-day activities. The time training on the software and entering the data alone could be spent on revenue producing activities which is why often time a small business needs the assistance of a financial consultant to understand the in’s and out’s of financial record keeping.

Partnering with a Financial Consultant

When a small business brings aboard a financial consultant in conjunction with an accounting software package, all financial issues can be addressed. This will ensure that the smartest course of action is taken when making business decisions. At the same time the small business owner can focus their efforts on the revenue producing activities that will help the company grow. In particular entrusting financial activities to a consultant a small business can:

· Have more efficient tax planning- By preparing year round
· Improve cash flow- By knowing where the business stands at all times
· Have better insight as to where it is going- By utilizing accurate reports for decision-making.

Tax Planning

By partnering with a financial consultant, a small business will be able to uncover potential tax saving they can apply throughout the year instead of only at tax time. A financial consultant will have the time and access to various tax information sources that will provide the business owner with relevant information and concepts to apply to virtually any small business tax situation.

Cash Flow

Cash is the life-blood of any business especially a small business. Without cash the business will suffer and will possibly be forced to cease operations. By partnering with a financial consultant a small business’ cash flow position can be improved. The consultant can provide the small business owner with the numbers beyond just the bank balances so cash and/or financing needs can be addressed efficiently and effectively.

Management Controls

Many small businesses operate under a blindfold when it comes to planning for the future. By allowing a financial consultant to handle the tasks the small business owner will have a better grasp on where they are and where they plan to go. By focusing on journal entries, and various other financial reports the financial consultant can “forecast” potential business scenarios before they occur. This will empower the business owner will the necessary information they need to stay in line with their strategic vision.

The Financial Consultant- Your Business Partner

By investing in a financial consultant a small business can improve its tax planning, effectively manage their cash flow, and improve their management controls. It will also allow the small business owner to spend more time on revenue producing activities. Small business is a contact sport, it is important for the small business owner to make new contacts, maintain their present contacts, and keep in contact with their bottom line. By partnering with a financial consultant, small businesses can continue to be the backbone of the economy.

Brian N. Stovall
Consultant- Accounting and Business Advisory
The Brico Group, Inc.
www.thebricogroup.com
bstovall@thebricogroup.com

Accounting Software ***NOW OPEN***

The accounting industry is taking more strides to provide more efficient software for small business owners. Although it has been around for quite some time, Open Source Accounting Software is gaining steam and additional customers from small business owners who are looking for a customizable solution to their accounting and reporting needs. Open source accounting software is software where the underlying code to develop it is shared with partners, Accountants/VAR’s (value added resellers), and end users to make everyone’s life a bit easier. Software developers have full access to the code and can create customized modules for small businesses to improve business operations. Accountants/VAR’s can improve their flexibility, by allowing them to import and export data between various other software systems, and management has the ability to be more efficient through better reporting and decision making.

There are some considerations that must be taken before implementing an open source accounting system. Upgrades to the software may be problematic if for some reason the underlying code of the system is altered somehow. This is why, as with any accounting system a small business utilizes that any technological upgrades and updates should be performed by your trusted technology consultant.

The market for open source accounting system has been seeing tremendous growth. Recently many Fortune 100 companies have requested open source accounting systems for their operations and some of the major players in the conventional accounting software market have developed tools to assist businesses. Sage Software’s MAS 90/500 accounting packages come with a tool call the “Customizer” that allows users to make changes to better fit their needs. Open source accounting software also make business operations move more efficiently with the addition of programming tools like XML interfaces, object oriented technology, and software integration modules that help businesses increase productivity.

Typically small businesses need a more customizable software program to operate their business and open source accounting software just may be the way. For more information on open source accounting software check out these sites:

AccountMate

OSAS – Open Systems Inc.

Netsuite

Until next time

Brian N. Stovall
Consultant - Accounting & Business Advisory
The Brico Group, Inc.
Small Business Consulting & Outsourcing
bstovall@thebricogroup.com
www.thebricogroup.com

Small Business Tax Planning Part 2

Businesses may take these tax moves before the end of 2005 if they are on a calendar year end. On of the major tax actions a small business can make is to purchase new equipment for an immediate reduction in year 2005. This process of “expensing” is allowed up to $105,000 and is subject to a dollar for dollar reduction for purchases over $420,000. The equipment must however be put into use before the end of the year.

The income tax rules for depreciation include conventions that determine how much depreciation a small business can claim in the first year, thus it is important to time your purchase to reap the best tax benefit. The two types of conventions are “half-year” and “mid-quarter” conventions. The half year conventions applies to all property that you begin using during the year as if it was placed in service at the mid point of the year regardless of when it was actually placed in service. The mid –quarter convention is used if the cost of the equipment placed in service during the last three months is more than 40% of the total equipment placed in service for the year. The half year convention can no be used if the mid-quarter rule applies. As you can see it is important to know the cost of all the equipment placed in service for your business to ensure that you reap the benefits of the half-year convention. So if you are thinking about purchasing additional equipment before the end of 2005, speak to your tax advisor to map out a strategy for depreciation.

Other small business tax moves to make before the end of 2005 are:

Delay or accelerate income (billings) to accomplish you tax planning goals
S-Corp and partnerships’ owners can increase their basis by making a capital contribution or loaning the company money before the end of 2005. If a loss is expected these owners can deduct those losses up to their percentage basis in the business.
Sole Proprietors should setup retirement plans before the year end to lower their taxable income.
Paying dividends to stockholders (including yourself) will qualify for a reduced tax rate. These dividends reduce the risk of taxes on accumulate earning and may alleviate any payroll compliance issues relating to excessive executive pay.

One of the most important areas to uncover tax saving is through the creation of a budget. It is important for small business owners to speak with their accountant or tax advisor and setup a budget to ensure that the business goals are met and there is adequate cash flow to reach those goals.

Until next time

Brian N. Stovall
Consultant – Accounting and Business Advisory
The Brico Group, Inc.
Small Business Consulting and Outsourcing
bstovall@thebricogroup.com
www.thebricogroup.com

Year End Tax Planning For You And Your Small Business Part I

As the year 2005 comes to a close, there is no better time than the present to begin to evaluate your tax situation. The fall is the best time of the year to assess your tax liability and make the necessary transactions to maximize your tax savings for the year. For a typical small business owner, your personal tax situation and company’s tax situation may overlap. In the coming days we will take a look at various year end tax saving ideas for yourself and your business. The first post will deal with individual tax saving strategies and the next with tax savings for your business.

Individual Tax Saving Strategies

Let’s first deal with retirement plan contributions and health saving accounts. This is a great time to maximize your retirement plan contributions to lower your taxable income and invest more for retirement. If you are a business owner it is also a good time to setup a retirement plan if you don’t already have one set up. If your business is a sole proprietor, consider setting up an IRA to lower your taxable income. Health savings accounts (HSA) are another way to lower your tax bill for 2005. Consider setting up a HSA because you can deduct contributions to the account and the account earns interest. These earnings are tax –deferred until withdrawn and any amounts used to pay medical expenses are withdrawn tax free. If amounts are withdrawn after the age of 64 and not used for medical bills, these will be treated like an IRA.

If you invest in mutual funds, it is a good idea to determine whether the mutual fund will pay a dividend that will occur early in the next year but considered paid in the year 2005. The year end dividend can make a difference in the amount of tax you pay for the year 2005. If the mutual fund has an automatic reinvestment of dividends option, those dividends reinvested will be taxable as a long term capital gain. These gains will qualify for tax relief as long as they are considered long term. Short term capital gains will not qualify as tax relief and will be considered as “ordinary dividends.” To get the best tax advantage, it will be good to wait till after the dividend to buy additional shares and to buy those shares in 2005. Also it is important to opt to take the dividend in cash instead of reinvesting it.

Speaking more on gains and losses, a great way to minimize your tax liability is to match your gains with your losses for the year. Try to avoid short-term gains which are usually taxed at up to 35% as opposed to long-term gains of 15%. If possible try to reduce short-term gains with short-term losses (up to $3000). Some ways to accomplish this are to sell an investment that you have accumulated a loss on in the year that you have a large capital gain, selling an investment that has generated a loss and repurchasing the same security or a similar security within 30 days, and if you have losses selling another investment as a gain and immediately repurchasing it.

Another way to minimize your tax bill is to either accelerate deductions and/or defer income. Great ways to accelerate deductions are the following:
· pay state estimated taxes in December as opposed to the January due date. The payment must be reasonable estimate of your tax liability.
· Paying your property taxes in 2005 instead of in installments due in 2006
· Bunching “threshold expenses” into one year. These expenses include itemized deductions, medical expenses and dues.
· Purchasing large items subject to state sales taxes that may give you a larger deduction that your state income tax deduction

Ways to defer income for 2005 are:

Selling investments that will produce a gain at the end of the year to defer payment of taxes to another year
Deferring receipt of a year-end bonus till next year to defer payment of taxes (other that the withheld portion). Only works for bonuses that are not contractually due in 2005
Waiting till next year to exercise stock option sells
If self employed, delay cash inflows until the end of December. Consider billing customers until the end of December.

These are just a few personal tax moves for you to make in 2005. In the next post we will uncover additional tax saving for small business owners and how those strategies may affect their personal tax situation. As with any suggestions on tax planning, check with your tax advisor for more specific suggestions and strategies for your own tax situation. Until next time, happy tax planning.

Brian N. Stovall
Consultant – Accounting and Business Advisory
The Brico Group, Inc.
Small Business Consulting and Outsourcing
bstovall@thebricogroup.com
www.thebricogroup.com

Benefits of a Small Business Network

Have you ever considered having a network for your small business? You may respond to this question, “Sure I have several contacts of colleagues in my field who I can work with to build my client base.” Well as a small business owner that is all well, in good but for our purposes today I am talking about a small business computer network.

When people hear the term network, especially when they are dealing with computers, they tend to think of a conglomerate of computers linked together by means of a mega-server stored in the company server room – and that is a good example of a network. However, for a small business owner, having a computer network is just the same as a large, enterprise network – only smaller.

Here is the deal, the criteria for determining if your small business is “eligible” to setup a computer network is simple – if you have more than one computer in your office, you are indeed a candidate to create a small business network. A two pc network may seem small in comparison to a large enterprise network however; the functions it provides are similar and powerful.

For our purposes today, I will highlight two possible network architectures that you can use for your small business. The two the most popular small business networks are a peer-to peer and a traditional network. The main differentiation between the two is the use of a server (will explain what exactly a server is in a moment). In a peer-to-peer network what you have is two computers connected together by means of a crossover cable (a crossover cable is similar in appearance to a Cat5 network cable). The crossover cable enables users of the two connected computers to share files, documents, etc. However, security is an issue with the peer-to-peer network. The reason being is that with a peer-to-peer all the files are shared between the two computers. Therefore, anyone using PC number 1 can see all the files and documents on PC number 2. That is not a good situation if you have files on PC number 2 that you do not want the user of PC number 1 to see.

With that in mind, we discuss the traditional network. With a traditional network, files, documents and resources are shared by means of a server. A server is where all the files, documents, etc that are needed by everyone are stored and shared out. Personal files can also be stored on a server. Different access levels can be granted to each file, document or whatever for that matter which makes a traditional network a far more secure option.

In my next blog, we will go into depth about the two kinds of network and even provide some network planning and setup tips.

Til’ next time…Blog on!
Brian J. Winston
CTS Consultant
The Brico Group, Inc.
bwinston@thebricogroup.com
www.thebricogroup.com.

The Paperless IRS!!

Is The IRS Going Paperless?!?!


As I read thru the Fall 2005 SSA/IRS Reporter newsletter I can not help but noticed almost every article has something to do with the new initiatives both offices are taking to stay ahead of the technological curve. The main story on the front deals with the new Social Security Number Verification Service (SSVS) that allows employers to go online and match employees with their social security numbers before filing W-2 forms. This provides the company the added benefit of due diligence so that additional processing costs will not be incurred for mistakes.

As I read on, another story deals with the new 2006 filing regulations for large corporations (gross assets of 50 million and file 250 returns a year) making it a requirement to file returns electronically. This may be problematic for corporations initially (increased transition costs to conform to the new electronic system), but something corporations must deal with for the 2006 filing. Over time I am sure that corporations will realize better efficiency and scaled economies with the transfer to electronic filing. Another article states that the IRS is now accepting fax signatures on employment tax returns making it easier for businesses to file and submit returns.

The SSA follows suit with an article announcing that magnetic tape will not be allowed in tax year 2006 for W-2 filing. All W-2 forms must be filed online via their secure online suite. One of the more interesting articles I thought was the new EFTPS (Electronic Federal Tax Payment System) batch software that is in development. With the new software tax professionals can send up to 1000 enrollments and 5000 payments in one transmission making our lives a bit easier. I can’t wait for that.

One thing a small business owner can not wait for is to take a practical look at their business operations and see of there are ways to cut costs by going paperless. From paperless filing, and data storage to paperless engagements for service businesses many paperless options can be purchased at a small cost and implemented quickly. Paperless environments also make your daily operations move more efficiently and effectively. A small investment in technology may make a large impact on the bottom line.

Brian N. Stovall
Consultant - Accounting and Busiess Advisory
The Brico Group, Inc.
www.thebricogroup.com

Intuit v. Microsoft The Fight Has Begun!!!

With the official launch of Microsoft’s Small Business Accounting 2006 on September 7th 2005 the stage has been set for an all out battle for the lucrative small business market for accounting software programs. On one side there is Intuit’s QuickBooks software lines that include Simple Start, Pro, Premier, and Enterprise Solutions 2006 and on the other the new Microsoft Small Business Accounting 2006 product. Both products offer small businesses, accountants and software developers a wide array of functions and features, but there are some limitations to each product. Among those are the ability to work with other software titles, and the functionality of the modules within each. In the October issue of the NSA Technology Advisor ( www.NSATechAdvisor.com ), there is a detailed analysis of each software offering and the strengths and limitations of both. One thing to keep in mind when comparing these two software offerings is to understand what each company is offering the end user, the key features of each software and how they relate to your business operations, if any third part software can be seamlessly integrated into the software and understanding the limitations of each software in regards to your business operations.

Small business owners will be happy to know that with the addition of MS SBA there is greater variety within the small business accounting market. Both QB 2006 and MS SBA 2006 are priced competitively and there are versions to fit any size business and budget. Both products have robust features, however each falls short in the inventory, and job costing area. Both products offer free trials (http://accountant.intuit.com and http://www.microsoft.com/accountants ).

The products differ in that MS SBA 2006 is written in the industry standard .NET language which provides Microsoft and edge for additional development inside the company (MS Office and other products) and outside the company (SDK Software Developers Kits). QuickBooks 2006 is written in a different code that has been around for quite some time which makes it difficult to develop additional products. Microsoft may have a long term advantage in this area if the strategy is to build loyalty thru the use of ancillary desktop applications that work with MS SBA.

I have been privileged to take a view of the new MS SBA 2006 product earlier this year and found it to be rather user friendly and easy to navigate. The screens are set up similar to other Microsoft offerings, thus it is familiar to new users. I did find it lacking in the reporting area, whereas QuickBooks offers more reports for the user. All in all it is a sound product that can only grow with the addition of more products that will seamlessly integrate into the .NET program. I would like to see a conversion built that will convert QuickBooks data to MS SBA 2006, for that would make it easier for new users to convert data.

Both companies must play close attention to the needs of accountants, small business owners and developers for each have a different need respectively. Whereas accountants want better accurate reporting and an audit trail, small business owners want something that is easy to use and learn. This is a difficult task for both companies and I look forward to see how each addresses the needs of both.

Brian N. Stovall
Consultant – Accounting Business Advisory
The Brico Group, Inc.
www.thebricogroup.com