Thursday, June 9, 2011

Financial Statements, So What? Part II

In PART I, I discussed some important factors regarding “canned” accounting package financials and the simplest form of financial statements which are Compiled Financial Statements, which a CPA prepares. In this Section I will discuss some general items in regards to Reviewed Financial Statements.

Just as in Compiled Financials the most common basis of accounting used in reviewed financial statements are either Modified Cash, GAAP and the Income Tax Basis of accounting. In some cases where the financials are prepared based on industry or other regulatory accounting rules -Statutory Basis may be used.

The basic methodology used in the preparation of reviewed financials is similar to compiled financial statements. There are many rules which must be observed for the proper disclosure and the fair presentation of financial information. In addition there are the minimum set of financials that are typically reported on. The underlying accounting and the financial statements themselves are the assertions of management. As such management is responsible for the contents of the financial information. The difference from Compiled financials is that analytical procedures and professional analysis and judgment are applied to gain an additional level of assurance that the financial statements present fairly management’s assertions. Some of these procedures might involve calculation of financial ratios, comparison to past historical financials to current financials or industry standard metrics. Review of accounting records, statement line items and other reconciliations. Additionally, inquiries are made of management to make sure all the relevant facts regarding the company and its financial affairs are either presented in the body of the financial statements or in the notes and other disclosures that may be provided.  This inquiry is later confirmed by management to the CPA by means of a “Management Representation Letter” which details all these "representations”  and is signed by management for the benefit of the CPA’s. A fair amount of work is involved for a CPA to issue reviewed financial information. Yet it is not as much or as extensive as those procedures employed in an audit. For that reason Reviewed financials are regarded as an intermediate type of financial statement to audited statements. In fact many auditors might require that at minimum a new client have at least Reviewed financials prior to having audited financials. This is because it provides a good base from which to perform audit work.  However, not having Reviewed financials would not necessarily preclude you from being auditable. An important point is that CPA’s must be independent in order to issue a Reviewed financial. This means they generally can not audit their own accounting, or be so involved with the client in providing additional services so as to audit their own work.

The reason for undergoing a review typically is a matter of compliance. It is possible some user of your financial information may require you to undergo this process in order to satisfy a condition of their involvement with the company. For example, investors often make Reviews a condition in the operating agreement of a company, banking institutions might require it also as part of a loan agreement. Likewise bonding companies, which provide for different types of insurance and many regulatory and licensing agencies also may require at minimum Reviewed financial statements. In some cases it can be triggered because some event in a company causes an interested party to force the company to undergo a Review. For instance a dissatisfied investor or partner or even a divorce. Given the state of the financial markets, Reviews may become much more common or even a requirement as many banks and lenders try to reduce their lending risks by requiring CPA prepared financials that are prepared on higher standards.  

A Review is a valuable exercise for any company who attains a level of success. It does require that a formal accounting system be in place and that management has some system of internal control.  For many first time companies, it is an exercise that prepares the company and its management for even higher standards of financial reporting.

A company that is planning to undergo a Review might hire another CPA firm, such as mine, to make preparations for the Review process. This has the potential of reducing Review costs and fees and also to address weaknesses the company might have in its accounting systems and controls.

In the next part of this series I will address Audited financials.

Business Intelligence PART III

In PART I, I made the Statement that all businesses are in the information and technology business. In PART II, I explained that the important factor to realize is how to leverage that information to create business opportunity. Now in this PART III, I want to illustrate a simple case study of a “Shoe Shine” business that is in the information and technology business.


            A shoe shine business operator leases a small 6 Ft. by 12 Ft. space in the lobby of an office building. The building is a prominent business location with plenty of lobby traffic. The business operator; we will call him “Ira” does well in his business and he is very well liked because of his people skills. He also has the daily paper, and current magazines for his patrons to read while he performs his shoe shine services. Over the years he has made many friends in the building and he always asks for a business card so that if any of his patrons leave anything behind he can always call them to let them know. Besides you never know when you might need a good insurance man, lawyer or accountant who work in the building. Ira acquired a simple “non smart” cell phone.  As he learned how to use it he realized he can input all is business card contacts into his cell phone directory. In doing this he realized that a small percentage of clients were from the surrounding office building but by far most of his clients where from the businesses that operated in his building. (Here Ira analyzes data!)

            Ira, is an entrepreneur who is always busy thinking, He asks the building owner if he can place a sign outside to advertise his business after he recalled many of his clients comment; they had no idea he was in the building and that only by chance did they stop in on business and notice his stand. However, the city won’t allow him to put a sign outside and the building owner was not willing to allow him to affix a sign on the building wall for fear of damage.

            Ira kept thinking about the customers in other buildings that came very infrequently. He realized there was a whole untapped source of clients he wanted to serve. On a slow day he started looking at the directory and came across some executives he knew from other buildings. He decided to call them and asked a simple question;  Would you be interested in a shoe shine while you sit in your office and have lunch or make phone calls? Essentially, Ira let his clients know he would come to them on a schedule convenient to them. The answer was a loud YES!,  from almost all of those executives. (Here Ira has leveraged data into useful information to increase sales)

            By scheduling visits, on one day every other week Ira was able to triple his income and increase traffic to his lobby. As word spread more people would stop by and visit his building. In addition he started a pick up and delivery service. He would pick up shoes when he visited the other buildings, shine and repair shoes, and either deliver them on his next round or call his new customers for a pick up when they were done.  (Here Ira differentiated his business from other shoe shine businesses)  His business picked up so much he had to hire an apprentice. Soon Ira had so many clients he had to figure out how to group his contact list on his cell phone by building. Ira is in fact in the information and technology business by the simple fact that he used a simple cell phone database and leveraged that information to generate more business.


            The Economist, a business magazine, published an article on January 27th, 2011; “Not Just Talk”, commenting on the use of cell phones and simple text capability for many business uses in non developed countries. The uses included providing market rates and quantities for common commodities by use of text messaging. An informal market of demand and supply allowing subscribers to find goods for sale by various vendors and locals. Another was a texting service where codes could be texted into a database system which would validate the authenticity of prescription drugs. A system designed to thwart drug counterfeiters. Even simple “non smart” phones have boundless capabilities in their use.

            A qualified external CPA, with an operations approach, can take a fresh look at your business and provide valuable support. But looking beyond the numbers is skill set that takes years in the making.

Financial Statements, So What? PART I

With the proliferation of accounting systems which come with “canned” financial statements many business owners are absent minded about financial statements prepared by the CPA. In all honesty, if you don’t need to pay for CPA prepared financial statements, don’t spend the money.  With one caveat; do you really understand what they mean? Do you trust your internal accountants to tell you what you “don’t” want to hear? CPA’s prepare three general kinds of financial statements:

(1)   Compiled Financial Statements.
(2)   Reviewed Financial Statements.
(3)   Audited Financial Statements.


            Many people have the belief that compiled financial statements is accomplished by taking those “canned” financials that come out of your accounting system and simply placing them on CPA stationary. Nothing could be further from the truth. In fact there are volumes of standards and rules which must be diligently followed by a CPA to conform to Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accounting. These standards provide for the presentation, disclosures, basis of accounting, the basic set of financial statements to be presented and a variety of other provisions that must be adhered to in order to issue a report. Compiled financial statements are typically the cheapest form of financial statements many CPA’s prepare simply because they do not require the labor of examination, confirmation and other attestation procedures performed under reviewed or audited financial statements. But in no terms does that mean a CPA can prepare them blindly. Generally, for many businesses  the basis of accounting most frequently used are Modified Cash Basis, Income Tax Basis and GAAP. In some cases where the financials are prepared based on industry or other regulatory accounting rules -Statutory Basis may be used.

            Year after year I find all kinds of mistakes on “internally” prepared financial statements. Often, I find financials that overstate Gross Profit Margin, leaving owners to believe their profit margin is higher than they thought.  I have even found financials that omitted some line items of expenses all together. Balance Sheets that don’t balance. Most amazing is the enormous percentage of businesses that do not employ a Cash Flow statement.  Everyone knows Cash is King right? The simple truth is many bookkeepers do not know how to prepare even a simple cash flow statement, or how to use the system report generator. Some report generators can be tricky devils. Owners and managers need to be aware today’s accounting systems allow you to prepare financials in any which way you can dream of thanks to flexible report generators. This is a great thing, but un-managed and un-checked can lead users of these reports to very wrong conclusions. For this very reason many outside users require that financial statements be submitted only if they are prepared by a CPA. Simply put, more sophisticated users know that although the financials are not reviewed or audited, due care was taken by a professional to present fairly financial information.

            One last note, every set of financial statements issued by a company is the responsibility of management. This is to say that even if a CPA prepared those financials the underlying information is the representation of management and therefore they are responsible for that information. This is true even of financial statements which have been audited by outside independent accountants. Just take a look a Dow Chemical, Ford Motor Company or any large organization and the auditor’s report clearly sates that fact.

            I will continue this news segment with the other two types of financial statements “reviewed” and “audited” financial statements.

Business Intelligence PART II

In PART I of this discussion I made the argument that every business is in the information and technology business. Yes, I realize that giving some thought to that concept, everyone that focuses on that statement tries to come up with a business that can’t possibly be in the information and technology business.  So, I will say this: Even the Shoeshine guy or gal is in the technology and information business, and I can prove it. But, I will leave that to the end.

            Let’s just assume that you happen to be in a line of business that does produce or have access to information. What’s next? The answer is in knowing how to harness that information to gain additional revenues, decrease costs, or simply stay competitive. These days with mounting pressure from every angle its not just enough to have terabytes of information, it’s about leveraging data so that the information it provides makes you better able to make a sale, to create operating efficiency, or simply to stay ahead of the curve. You have to really look at the data that you have and extrapolate its meaning. Of course there are many ways to do this but, I typically start with two simple approaches. I look at those types of information that tells me about the environment I operate in and, secondly I look at those types of information that tell me about how well my business is doing. Some business analysts say this is the “External” and “Internal” point of view. In some cases you may hear the terms “Macro view” vs. the “Micro view”, respectively. Yet another way, is to look at information you can not control, vs. information on things you can control. So let’s take a quick look at that. Say you are in the business of automotive replacement parts. Some of the areas you might want to look at and why they are important to you are as follows:

The External Information:

(1)   Look at trends of how long people are keeping their cars, or perhaps whether automobile consumers are buying or leasing vehicles.
It may not seem obvious but, during this recession owners, and businesses were holding on to their vehicles slightly longer. Partly, due to tight credit markets, but also because of high unemployment and job security issues, compounded by doubts about the automobile industry.
Why is this important? It means your sales should be going up as owners who plan to keep their auto’s longer tend to fix and repair their autos as they plan to hold on to them longer. If your sales have shown no increases, your marketing efforts are off, your pricing structure may be wrong and this is a sign management needs to pay close attention to this.

(2)   Who is your competition? What is their pricing? What value added features do they have?
You can rest assured that it is very likely your customers know they have alternatives. They too are users of information. And the best way to compete is to know what your competitors are doing, and find a way to differentiate yourself from them.
What can you do? Analyze if you can offer free delivery for large orders. If you use the same suppliers, why aren’t you getting a better price? Is there a service you can offer that your competition can not? An analysis of all of these questions may lead to some action that could mean a better bottom line.

The Internal Information:

(1)   What are the top 200 items purchased? What are the top 150 items with the highest profit margin?
Every business should know what their bread and butter is. Knowing how to leverage these items gives you insight in how best to manage the products and services you offer. They give you the answers you need to maximize the platform that gives you a stable base and allows you to innovate and try new things that either grow your business with additional sales or makes you more competitive.
What can you do?  Try to negotiate a better price and or get a volume discount with your supplier. Pass the savings on to your customers if they make larger purchases. Offer promotions geared towards grabbing market share from competitors.

(2)   What is my inventory turnover rate? What is the relationship of storage space required for the slowest moving inventory items?
Inventory is very capital intensive. In other words, it takes a lot of money to keep that inventory on the floor ready for a sale. It’s not just the cost of the products itself, but also the cost of storage, waste, breakage, theft. Inventory is also real estate intensive. The larger the product you sell the bigger the real estate you need to store that product.
            What can you do? Change how you buy inventory. It might be cheaper to pay additional delivery fees than to pay high cost real estate to store items. It might be cheaper to special order large inventory items, and perhaps your clients don’t mind either, than to store slow moving, large items that do not sell quickly.

Clearly, the most profitable and successful businesses look at every angle. After many years of dealing with businesses, all too often I see management that is stuck in a rut of simply selling for a higher price than cost and simply making sure that the right product gets to the client. Of course this is a substantial challenge all on its own but, in today’s business environment it’s not enough.

Of course service industry’s can use the same methodology to analyze external and internal factors that affect their business.

It’s is very difficult for many companies to find the right type of employees that know how to analyze and prepare information. It’s even more of a challenge to find talented people that are capable of making the cause and effect type relationship analysis to solve business problems.

Business advisory services provided by qualified CPA’s is a very valuable service. Sometimes, it is the best way to bring innovation into an organization that needs to get to that next level. If you are one of those businesses, maybe we need to talk.

Saturday, June 4, 2011

Buy Sell Agreements

For those of you who are business owners, with partners, you should pay close attention. Whenever I mention a "Buy-Sell Agreement" many business owners think I am talking about a contract to buy and sell a business. That's partially correct but it gets better. A properly structured buy sell agreement gives you the money to buy and sell that business, or a portion of it.  Here is a typical candidate:

John is a 41 year old 50/50 partner in a specialty paint and body shop with Harry who is age 60. Both are in excellent health. John is the business minded and organizing force of the business that makes sure the business runs right, aside from being very skilled in auto repairs. John is married has two kids and his wife knows very little about the business. Harry is legend in the business, has helped the company earn a solid reputation for excellent work and his extensive contacts has landed very valuable long term contracts. He's a real workaholic but, he hates numbers, can't manage a check book and spends almost everything he earns. His wife of 36 years has medical problems and his only son, a bright engineer not only hates the business, but seems to have a drinking problem.

John loves his partner because they make a great team. But he knows that in the next 10 to 15 years Harry would like to retire. Worse yet he may just die working on the Job! If something happens to Harry his wife would inherit the stock in the company. Being that she has health problems and she doesn't understand the business, John doesn't want her as a partner. An even worse scenario is if Harry's wife gifts the stock to her son, who she believes can do no wrong. In that case John could have a partner with a drinking problem.

 John and Harry are willing to enter into a buy sell agreement in advance should anything happen to Harry. All Harry wants is that the proceeds for his share of the business go towards taking care of his wife if he's not around. The problem is John can't figure out how to pay Harry's estate for his 50% interest. The business does well but not enough to buy Harry out at a potential future cost of $950,000.

Solution:  If the buy sell agreement is tied to a life insurance policy on Harry's life, and John or the business can afford to pay for the monthly premiums, then the payout of his partner's 50% interest is guaranteed by the proceeds of the life insurance.
The essential elements of this buy sell agreement is a properly drafted and enforceable legal document prepared by an attorney, and a life insurance product from a knowledgeable insurance agent. In addition the work of a qualified certified business valuation accountant may be required.

There are various tax implications for this type of scenario, which I will not discuss simply to keep it short. Further, there are lots of possibilities in how to structure the deal.

If you want to know more about how to establish a succession plan please give me a call. Your business is a very big part of your life. Don't just manage it day to day. Having an outside CPA that offers advisory services helps you look outside your field of vision and prepare for the future.

Business Intelligence Part I

When I was in college earning a degree in business, as I looked at the courses required to earn a business degree I realized, it takes a bit of intelligence to run a business. After these many years both, as a senior manager in business and as a public accountant this has never been more true. But what is business intelligence? A question I often ask business people is; What business are you in? At this juncture in my career it is a line used not only to get an understanding of the owners of that business and what they do for a living. It's also a way for me to potentially sell my services. Strangely, the answers I get range from deer in the headlights look to some classification that neatly places their business model into a category.
Some of the classifications I get are:
- I am in the food products distribution business.
- I sell auto parts.
- I am an exporter.
- I am a developer.
- I am an investment advisor.

These are all very general in nature. They are definitions that the average lay person understands and can absorb. They are short and easy to verbalize in a casual setting of small talk. However, I have a habit of listening to what people "do not tell me". More and more I relate to just about every kind of business as an information and technology business. After all we have an information and technology economy. In fact none of the above classifications will operate effectively or efficiently without information and a good dose of technology.  All of the above classifications are in the information and technology business and what I continually find odd is; they often don't even know it.

In each and every business classification above, as different as they are, each relies on a very detailed database of who their ultimate customers are. Customer name, customer contact, telephone numbers, email address, physical address, zip code, city, region, typical purchase size or service level, typical product or service sought. In addition each has a vast database of their products and options. Product brand, product name, unit size, specifications, manufacturer, service provider. Even the investment advisor can size up a potential client to an array of financial products depending on earnings, disposable revenue and even the risks to which they may be exposed. Each employs a database of knowledge to be able to logistically deliver a product or service. In other words how to get the product to that place of business, at specific times, the costs of delivering that product or service, alternative transport methods. For the developer logistics is critical. How long will it take to build an office building? What construction trades do I need? Can I schedule them when needed?, What are the costs?, What are the component parts of construction? In what order do you begin in building?.

The vast majority of businesses use vast amounts of information in providing a product or service. The prior paragraph is only the tip of the iceberg of information in carrying out the daily operations of these businesses. Each one of these businesses uses computers to connect to the internet, to transmit information, to receive information, to receive and to give quotes, for billing, for payments, for planning, for accounting, taxation issues. Each employs a host of different types of software applications to carry out their business objective.

One only has to look at the vast size of the technology sector of the United States and how much business spends on information and technology and it quickly becomes apparent, every business is in the information and technology business. No matter what you do!

The accounting profession today goes beyond posting entries into your books or preparing a tax return. We too use technology extensively not only in providing a product or service. We also are relied upon by our clients to help them make better decisions by evaluating their financial, accounting, tax and their management information systems. As a business owner or manager you need to evaluate how well your trusted financial advisor sees beyond your accounting, and taxation issues. How well does your accountant understand your business and the world in which you operate?  Does your accountant really understand information and technology and the business intelligence behind the scenes?

Is it time for you to reconsider your CPA?

It's Not That Simple

Yes it's tax season again. One of the many common recurring questions that taxpayers have every year is; "Why don't they make the tax system simpler"?. I guess everybody has some notion that if everybody paid some flat amount of tax, the whole system would be easier. Well that certainly would make my job easier but, rest assured it's not going to happen.

            The simple fact is that our tax laws are not just a method of raising revenues. It is also used to discourage and to encourage our citizens to engage in certain activities.  Tax laws are complicated and quirky partly because they are used as a way to set national economic and social policy. For example:
(1) Non Taxable IRA Contributions: This law is set up to encourage savings for retirement. Simply because if you don't then, later in life you become a burden to government for food and housing.
(2) Non Deductibility of Tax Penalties: This tax rule is designed so that individuals and businesses that do not abide by tax laws, do not get rewarded by being able to deduct tax penalties assessed. This nullifies, to some degree,  anyone's ability to gamble on doing something they shouldn't because in the end any penalty shields other income from taxes.
(3) The Earned Income Credit: If your income falls below a certain level,  this is a credit you receive, even if you paid no income taxes at all. This is called a refundable tax credit. It's the governments way of "Re-Allocating" tax dollars to poor citizens. (Who said taxing the rich and giving it to the poor is something new?, We have been doing it for many years.)
           You really have to do a lot of reading between the lines to understand all the policy that is written into our tax laws. Additionally, the laws are complicated because the human mind is very creative. For every rule you make, someone finds a creative way to circumvent, to contest and to create the need for further complications.

           Like I said....It's not that simple!

Florida Sales Tax

What is the Florida sales tax rate? If you said 7% you would be wrong and you're probably from Miami Dade County. The sales tax rate in Florida is actually 6%. In Miami Dade we pay an extra "Sales Surtax" of .5% to fund Jackson Memorial Hospital and then another .5% to fund the transit system. So..... that's why we pay 7%  on purchases. So why is this important to know? If you're a business owner that sells widgets from your warehouse in Miami Dade County and you received an order for your widgets to be delivered to a customer in Palm Beach County and charged 7% sales tax, you would be overcharging the customer on sales tax. Worse yet you would be violating a sales tax provision. Why? The sales tax you should charge for a taxable widget to be delivered to Palm Beach should be 6%, That's because Palm Beach does not have a "Sales Surtax". Likewise many counties in Florida only have a 6.25% or 6.5% sales tax. The impact is large if you receive a sales tax audit. Not only did you not charge the correct sales tax rate, but the sales tax return and the commission you took is also wrong for all the periods filed.  This is a situation that I have come a cross a few times. It occurs because, (1) the order taker may not be aware of the differences in tax rates, (2) because the people that set up the accounting system never provided for a different sales tax, or (3) simply the company is just venturing outside of the city limits and has not considered all the issues of dealing out side of home base.  Yet another reason having an outside CPA that knows your business, can be a very valuable part of your business resources.

What is an Annuity?

In  the realm of our capitalist society there is no shortage of financial products for consumers. One of these is an "Annuity Contract".  An annuity is simply a contract which you purchase for a lump sum payment. In return the company that issues the contract invests your money into a wide array of investment choices, depending on your degree of risk acceptance. The idea is that at the end of that contract you can either receive monthly payouts (typically for a five year period), a lump sum distribution or in some cases you can roll over your investment into another contract.  As far as taxes are concerned, the amount of money you paid for the contract is not taxable, only the earnings that are distributed become taxable.  Annuities give you the benefit of professionally managed investments. For example your funds could be invested  into some kind of mutual fund or a variety of funds, and index, or some emerging market fund.  A well planned investment typically fetches a higher yield than you would get in a savings account or a bank CD.  Again there are many variations of annuities so you really need to define your investment goal. 

Annuities are typically a financial product sold by CFP's , (Certified Financial Planners) and other investment advisors. However, there are a number of different ways to buy annuity contracts.

Talking to your CPA on a yearly basis is an opportunity for ideas, to establish financial goals and learn about financial products.

The Stimulating Section 179

For several years now we have had the ability to expense purchases of company capital assets that typically can not be expensed and must be capitalized and depreciated over their useful lives. Thanks to a tax code provision under Section 179. Under the Small Business Jobs Act (SBJA) of 2010, an increase to the limits of Section 179 were made available for 2010 and 2011. The limit is now raised from $250,000 to $500,000 for 2010. This can be a real tax savings if you invested in qualified property and you have taxable income in your business.

This tax law was designed to encourage the purchases of capital goods in the hopes of stimulating the economy. The reward for businesses that are motivated to make big ticket capital purchases is the possibility to expense the purchase and reduce taxable income.

This is a fairly simple alternative treatment of a capital asset that is within the tax code yet, a little planning could be in order. For example, If you have very little taxable income this year but plan on having increased taxable income in years to come. In cases such as these it's possible that depreciation may work better over the long term.  This goes to show, planning the timing of capital purchases can be a very worthy effort.

Foriegn Transactions with A Domestic Affiliate

If you are a domestic U.S. Corporation who does business with a foreign affiliate you may be subject to having to file form 5472, "Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business" as part of your 1120. The form discloses the nature of the related parties as well as the transactions that have taken place between the two. Here in Miami, we have a substantial number of small businesses that conduct international trade and care should be taken to assure yourself of the required compliance. The form should be attached to your tax return when filed and the form by itself also needs to be mailed to the IRS separately. A hefty penalty of $10,000 may be imposed for failure to file the form as required. In addition, if the form is filed but is substantially inaccurate it may be deemed the same as failure to file.  

A key part of making sure clients are in compliance is to have a good relationship with your tax preparer and advisor. This type of tax matter is one that can easily be overlooked by both the tax preparer and the client company. Firstly, the transactions and relationships are unknown, and not self evident to the tax advisor or preparer. Secondly, the client does not know enough to volunteer the information. This is the perfect example why good tax preparation takes time, skill and knowledge. It's safe to say, and I think you will agree, that relationship is worth $10,000.

Cloud Computing

In the last year many of us have come to hear the term "Cloud Computing", but many still do not know what that is.  One explanation is that cloud computing is what the baby boomers will be doing when they pass away. Makes sense since the baby boomers are one very well connected generation that is likely to stay connected to the Internet once they ascend into the heavens. All kidding aside, Cloud Computing is the wave of the future. Think of it this way.......

Cloud Computing essentially does away with an in house network system. The concept is that all you do is buy a very simple stripped down computer that allows you access to the Internet and we simply log on to a subscribed service portal; kind of a server farm, via the Internet that provides us with everything we want. No loading programs, no maintenance, no hardware upgrades, no updates, no fixing, patches, security or virus protection.........they do it all for you. Even back ups are performed for you. All you do is subscribe to what you want or need and pay a monthly fee for service. If you are in some industry that uses specialized software, they can even handle that. Simply send in the software, they will install it and maintain it according to your specifications.

Cloud Computing has many benefits. Some of these include world wide access, back up capability, scalability, virus prevention, data security, system maintenance and updates, catastrophe back up plans, reduced costs in hardware, up-grades and capital investment. There is talk many will offer bundled packages that include many of the basic needs of the average user. Imagine a bundled package that gives you, an accounting  package, spreadsheet, word processing, desktop publishing, database software, database storage, Internet access, email, voice over IP,  faxing service, web site. Yes, all for a monthly fee that may be about what your cable TV bill is, per user. The low price is due in large part to economies of scale.

Let's face it, in light of more powerful smart phones, the day will come when your entire computer will be your cell phone, which you simply connect wirelessly next to a screen and a key board and all of your computing will be in some remote location somewhere in the internet. No more desktops or laptops. One disadvantage is that all your data is literally somewhere else. What are the legal terms and your rights in regards to that data?  Who will have access? How is your privacy safeguarded? How can you verify your security? Are you being billed correctly for usage? These are very important questions. Do we as users give up some of our privacy? Who is looking at our files? Rest assured someone will have access at some point as it is simply part of managing your account. For many companies, trade secrets, critical research, pending law suits, financial information, all of this and more will be out there. You can rest assured security is a very big deal for these types of users. Additionally, for some it will not do away with an IT department entirely. Especially, for very large companies that are technology intensive.

Many companies use it already, in some cases because regulations require them to have some remote, parallel back-up system in the event of a catastrophe. This is true of banking, investment banks and other businesses which, by law, can not be down for extended periods of time. Cloud Computing is something we will all eventually get into. But there are still many challenges to overcome before everyone buys into it. It is definitely something some of you may wish to look into as many companies already provide good service at reasonable prices.

Regulate Yourself Accordingly

One of the best aspects of the work I do is talking to people about current events. In the end each person has his own opinion and, I do not hesitate to give my own view. So here goes a little entertainment.....

            There has been much in the news about the good and bad of regulation. Well...... no doubt some regulation is absolutely foolish and wasteful. You have to realize that the core of most regulation is needed and good. Yet when our legislature(s) get around towards passing new regulation we seem to have a bad habit of passing these piecemeal bits and pieces of regs. and laws, that get added on. After a while these add-ins, if you will, become costly, complicated, burdensome and further over time might not even make sense. Some simply are outdated as the times and our economy have changed. Some conflict with one another, for example a state against federal regulations. Further, there are layers of rules and regulations for the same activity. You could have local city regulation, state regulation, federal regulation all layered to the point where compliance is very costly and confusing. Worst yet is regulation that is on the books and may have a designated government agency, is fairly clear yet, it does not get enforced. At least as long as you don't get caught. All of these inefficiencies give rise to the public's perception that regulation is a waste of time and taxpayer money. And of course many jump onto that way of thinking because........ it's an opportunity to rid yourself of bad medicine.

            Donald Trump recently came out and called China our enemy. This is a smart man; that would be difficult to deny.  He backed his claim with issues like( I am not quoting him) , violating human rights, poor working conditions, pollution, stealing patents, price dumping, copyright infringements, violating privacy laws, hacking into computers, jailing a Nobel Peace Prize winner, currency manipulation, etc., etc. Without getting into the politics of whether China is our enemy,...... it suddenly came to my attention. China's embrace for the "capitalist ideal" is what we might have in this country if capitalism was practiced with total abandon. If we had no rules and regulations and it was truly a free market, a wild west of profiteering. If the rich and powerful were the only consideration. (i.e., big business)  If we would follow the strict rule of "caveat emptor" instead of having any sense of fairness.  Considering the bad things that do happen even with regulation (after three years of recession) ................Good God what a scary thought!

            I have to admit, we could stand a good house cleaning to get things back on track. Then again, as I think of health care reform......should I be fearful of what I wish for?

Review Your Employment Records

A recent lunch with an immigration attorney lead to an interesting conversation. It appears that ICE, (Immigration and Customs Enforcement) is making the rounds to businesses to make sure that each employee file contains verification that employees have the right to work in this country legally. Each employee hired needs to have an I-9 (Employment Eligibility Verification) form filled out along with a copy of the document used to verify eligibility and must be signed by the employer. Recently "Abercrombie and Fitch" received a million dollar fine not because they were not doing this but because of infractions in the process used by the company. In another case a Hialeah, FL. General Contractor, his wife and son are being imprisoned for hiring undocumented workers. None of this is too unusual, except typically these office inspections only come after a tip off, or under reasonable cause. Random inspections are not the norm.  Can this be the leading edge of protectionism? Can this be a form of raising revenue? You be the judge. When hiring employees and subcontractors, you need to make sure you follow the rules. Generally, it's the employers responsibility to process the correct paper work "before" that worker begins work. Call our offices if you need help.

Florida Unemployment Tax Assessment

If you are an employer who had payroll last year, you will soon get a bill in the mail from the Florida Department of Revenue  for your allocated share of the interest expense for debt the state incurred to pay unemployment benefits. During this past recession the state had to borrow funds from the federal government in order to pay out unemployment claims. These loans carry an interest expense component which according to state law has to be paid by employers. The bills should go out in February of 2011 and will need to be paid by June 30, 2011. You can read more about all the provisions by clicking above on the hyperlink for Florida Department of Revenue.

Foriegn Workers - FICA Payroll Taxes

If you are a U.S. company who employs a foreigner under a work Visa, you may be paying FICA payroll taxes that you do not have to pay. Since FICA taxes deducted from the employee's pay is matched by the employer, this could potentially mean thousands of dollars you are both paying that you don't have to. Under certain tax treaties with a number of foreign countries we have what is called a "Totalization Agreement", that exempts certain foreign employees and employers from having to pay the FICA portion of payroll taxes from wages earned while in the U.S.. A person who earns $70,000 in gross wages would be paying $10,710 in combined FICA taxes that need not be paid. Not all countries have this agreement with the U.S. and certain conditions apply. If you may be in this category, give us a call to see if you may be the lucky winner of a refund.

Economic Trends

With a rising national debt there is a great deal of talk as to what our government needs to accomplish to reduce this monumental debt. Cutting spending is a scary thing because government spending helps prop up our national economy. Not the best thing to do now that the economy is showing some minor signs of recovery. Raising taxes? Again, no matter how you do that, either raising taxes on the rich or the middle class, will likely also hurt a recovering economy. But after all is said we need to do both to make a dent. It's no different than what households do when they find themselves in economic straights. Increase revenue by taking a second job, and cut out every expense that is not needed.

The real question is not what needs to be done but rather, how it will be done. I suspect both increased taxes and a cut in government spending is likely. This spells a very sluggish economic recovery in the future. But there's another weapon that is less suicidal for politicians. Protectionism. This is an ideology to protect USA jobs, tax foreign firms, cut down on illegal immigrants, promote "Made in America", start a business in America. Can the government be effective in this? Is it already starting? Pay close attention to the news in the comming months to see if my theory is right.