certified public accountant Archives

Business and the Artist: The Butterflies of our Society

You’ve probably heard of the story about an old man and the cocoon. He watched the cocoon for days, and then it started to move. The butterfly struggled, so the old man slit the cocoon to let the butterfly out. The butterfly emerged underdeveloped with weak wings. The reason was that the butterfly needed to forcefully squeeze through a small whole to open circulation to its wings. The man deprived it of this process. The struggle for life gave it life.

I have worked as an entertainment business manager since 1985. For the last 15 years I have helped artists strategically position themselves in new business ventures. What I have found is those who do not start out with easy financing (parents for example), tend to have a better chance of success. From a CPA business manager prospective, the adage, “easy come, easy go” has somewhat predicted the ventures. Even though our firm works as consultants, I usually take an emotional stake in my projects because I want to see them succeed. Most entertainment CPA business managers don’t do what we do, but come in after the business is funded. We have found that entering after the initial planning stage is too late.

From an entertainment CPA business manager point of view, here are some steps I suggest you take before opening up your next venture:

Research your proposed industry thoroughly: You should start by speaking to people in the industry that you trust. Don’t be afraid to ask the difficult questions, and don’t bury your head in the sand. Try to find statistics or news of your competitors and the industry you are venturing in. Most important, speak to your target market. Find out what the industry is not providing to them, and what the industry is providing to them that is unnecessary.
Find people in areas you lack expertise: If you have areas that are outside your expertise, bring in people who can fill those weaknesses. They may sign on and be a major stakeholder for you once you get started.
Develop a strategic plan with a long range vision: Start 20 years or more from now and describe a vision that is more than making money. Are you out to change communication and entertainment by putting it in the palms of every person like Steve Jobs? Once your vision and horizon is set, work backwards and set milestones. You should end on your first day of business.
Consolidate a team: If there are others that will help you, line them up and get them on board. It will show your investors that this business is more than you.
Build a business plan: A business plan is not a strategy, but a management tool. It starts today and works forward for five years. It is essential that you include the cash flow of the first twelve months. This is when businesses struggle to stay afloat. Make sure your business plan milestones correspond to your strategic milestones. Insert your team bios along with your bio.
Present the package: Now you can go to your money people. Practice your dog and pony show. A video or slide show can help bring the message across.

Like moving from a worm to a butterfly, artists must go through the “pain” before the doors open. The more pain you endure, then better informed you will be when you meet your investors and launch the enterprise.

As CPA entertainments business managers, we have seen failed ventures that did not take these steps. By engaging in this practice, it does not guaranty success, but will at least give you the wings to soar a little higher.

CPA Tips: Tax Extensions and Payment Options

CPAs work hard this time of year, but for those of you who do not (or cannot) get your taxes done in time, here are some options that are listed on the IRS site. But don’t wait, the post office will be a mess if you decide to mail something in.

If you need more time to file your return, you can get an automatic
six-month extension of time to file from the IRS. You must file for an
extension by the April deadline. An extension will give you extra time
to get your paperwork to the IRS, but it does not extend the time you have to
pay any tax due. You will owe interest on any amount not paid by the deadline,
plus you may owe penalties. To get an extension:

• IRS Free File – Traditional Free File and Free File
Fillable Forms can both be used to file an extension for FREE. Access the
Free File page at www.irs.gov.

• IRS e-file – Use IRS e-file to request an extension by
using tax preparation software on your own computer or by going to a tax
preparer.

• Form to File – Mail in IRS Form 4868, Application for
Automatic Extension of Time to File U.S. Individual Income Tax Return. It must
be postmarked by April 15, 2013. A CPA can create this for you with your authorization. Just provide your name, address, and social security numbers.

Taxpayers that are ready to file their returns and those that have already
filed and need to pay a tax bill have payment options:

• E-file – File electronically and authorize an electronic
funds withdrawal via tax preparation software or a tax professional. Your CPA can explain the situations when the State of California require mandatory electronic payments.

• Phone – Pay by phone or online using a credit card.

• Mail – Pay by check or money order made payable to the
“United States Treasury.” Be sure to include your name, address, Social
Security number listed first on the tax form, daytime telephone number, tax
year and form number. Complete and include Form 1040-V, Payment Voucher, when
mailing your payment to the IRS.

If you owe tax with your federal tax return, but can’t afford to pay it all
when you file, the IRS has options to help you keep interest and penalties to a
minimum. File your return on time and pay as much as you can with the return,
then:

• Request an installment agreement – Use the Online Payment
Agreement application at www.irs.gov
or by file Form 9465, Installment Agreement Request with your return. The IRS
charges a user fee to set up your payment agreement. Your CPA can represent you on setting this up, but you need to provide a Power of Attorney.

• Additional time to pay – You may request a short
additional time to pay your tax in full using the Online Payment Agreement
application on www.irs.gov.
Taxpayers who request and are granted an additional 120 days to pay the tax in
full generally will pay less in penalties and interest than if the debt were
repaid through an installment agreement over a greater period of time. There is
no fee for this short extension of time to pay.

• Extension of time to pay – Qualifying individuals may
request an extension of time to pay and have late payment penalties waived as
part of the IRS Fresh Start initiative. To see if you qualify visit www.irs.gov
and get Form 1127-A, Application for Extension of Time for Payment. This
application must be filed by April 15, 2013.

CPA’s are always trying to get client’s to plan ahead whether they have businesses, or not. If you are running late this year, this would be a good opportunity to start preparing for 2013. You can accumulate receipts in envelopes and start EXCEL spreadsheets to keep track of them. The reward will not only be your peace of mind, but also you may save more money in taxes next year.

All situations are different, so discuss this with a tax professional before making any decisions.

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IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the U.S. Department of the Treasury and Internal Revenue Service, we inform you that any tax advice contained in this e-mail (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or state tax authority, or (b) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

IRS Fraudulent Tax E-mails: Never Give a Sucker an Even Break

“Never give a sucker an even break,” is attributed to W.C Fields in the 1923 movie, Poppy. However, some say it represents the real personality of W.C. Fields as a ruthless businessman.

So, don’t be a “sucker” to fraudulent tax notices.

CPA’s usually see through tax fraudsters because we know how the system works. Still, it facenates me when I get an email stating that my tax payment was rejected, or that my tax refund has not been claimed. Fortunately, the IRS gives us some guidance to those who don’t wallow between the lines of the 1040.

Here are five things the IRS wants you to know about phishing scams:

The IRS doesn’t ask for detailed personal and financial information like PIN
numbers, passwords or similar secret access information for credit card, bank or
other financial accounts.
The IRS does not initiate taxpayer communications through e-mail and won’t
send a message about your tax account. If you receive an e-mail from someone
claiming to be the IRS or directing you to an IRS site:
• Do not reply to
the message.
• Do not open any attachments. Attachments may contain
malicious code that will infect your computer.
• Do not click on any
links. If you clicked on links in a suspicious e-mail or phishing website and
entered confidential information, visit the IRS website and enter the search
term ‘identity theft’ for more information and resources to help.
The address of the official IRS website is https://www.irs.gov. Do not be confused or misled
by sites claiming to be the IRS but ending in .com, .net, .org or other
designations instead of .gov. If you discover a website that claims to be the
IRS but you suspect it is bogus, do not provide any personal information on the
suspicious site and report it to the IRS.
If you receive a phone call, fax or letter in the mail from an individual
claiming to be from the IRS but you suspect they are not an IRS employee,
contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need
to contact you. Report any bogus correspondence.
You can help shut down these schemes and prevent others from being
victimized. Details on how to report specific types of scams and what to do if
you’ve been victimized are available at https://www.irs.gov, keyword “phishing.”

If you are unsure, do not do anything until you contact your CPA. One phone call to a CPA can save you a bundle by keeping you out of a fraudulant transaction.

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Strategic Planning for the Artist: A Los Angeles CPA Business Manager’s Attempt to Integrate Business Concepts

Tomorrow, as a Los Angeles CPA business manager, I will be merging two of my skills with a client. My entertainment business management skills, and my strategic planning skills. This client is a singer/songwriter who produced a music demo and video. My question to her was, “So what?” If you pursue the path of other musicians to acquire a contract, a 360 deal, you are no better than them, and may be just one of many homogeneous artists trying to make it.

This actually happened to my dad, Bobby Norris, in the 1950s. He signed with Capitol Records as a rockabilly artist, only to receive very little promotion for his records. It wasn’t until after he died, 2003, that he receives the recognition that he longed for as one of the original rockabilly personalities.

As a Los Angeles CPA business manager, I really don’t see artists driven in their profession from a real strategic planning position. I did stumble onto a book that seemed to address strategic issues. But I will have to buy the book to see if they do more than just scratch the surface.

So how would I, as a Los Angeles CPA business manager recommend how an artist should strategically work their career? Here is a short answer to a long question:

Identify an issue. What are you really trying to accomplish? It has to be more than “be a star.” You have to really focus on something and list your assumptions on why you are equipped or not equipped.
What is your vision? Quantify what you want. For example, to have 1 top ten single on the charts every year, or play to an average of 200,000 per event. See Jim Collin’s Good to Great and Build to Last for big, hairy audacious goals.
Why would the fans want you? You must focus on your fans. Many books like Blue Ocean Strategy help you think on a level of satisfying your fans and creating an uncontested marketplace. Don’t give the fan more of what they heard. Find out their needs and satisfy them.
SWOT analysis and quantifying: Now you can look at your strengths, weaknesses, opportunities, and threats. You must also put some real numbers to your goals.
Lay out your strategy
Reduce the strategy to tactics

I’ve produced this approach, in part, from Johnson and Smith’s 60 Minute Strategic Plan.

In my opinion, as a Los Angeles CPA entertainment business manager, you must think strategically about your career and stop focusing on yourself. Focus on your fan base and serve them the art they deserve and are entitled to. As Los Angeles CPA business managers, we try to work with clients on the front end, not just record the results on the back end. That is where we strategically differ in our profession.

EXIMBANK, A CPA Perspective: Small Can Be Global with a Little Help From Your Government Friends

Around 1993, as a CPA I played a pinnacle role in trying to bring 100,000 jobs to Los Angeles. I worked with four non-CPA partners, Chemical Bank, the Dept of Commerce, the Dept of Labor, and Senator Barbara Boxer to use the Export-Import Bank of the United States (EXIMBANK)to insure foreign movie presale contracts. We didn’t prevail.

However, as a CPA, what I learned was EXIMBANK is a great partner to a small business aspires to go global. Their site says, “Global Access for Small Business is a top priority of Ex-Im Bank. This initiative is dedicated to dramatically increasing the number of small businesses exporting goods and services to maintain and create U.S. jobs.”

As a strategists and CPAs, we involve ourselves on various levels of business. One option we suggest for manufacturers in increasing their top line is EXIMBANK. They are a US agency that insures foreign receivables. A small business in turn secures a business loan with the insurance policy removing risk from the bank. If the foreign customer doesn’t pay, EXIMBANK pays off the bank loan.

In 2010, more than 700 small businesses used EXIMBANK to sell their products overseas. By 2015, EXIMBANK aims to approve at least $30 billion in small business transactions.

CPA financial statements really don’t tell a small business owners very much about strategizing. So, we look beyond the horizons and advise small business where they can prosper. In addition, as CPAs we have an obligation to help create jobs with our strategies. EXIMBANK reaches both of these objectives.

Even Entertainment CPAs in Los Angeles Make Odd Business Decisions

In the last few weeks I have received not one, not two, but three phone calls from actors who are looking for a Los Angeles Entertainment CPA. Two of the calls actually were the parents of child actors. The services they requested varied a little, but the one thing that they did not like was the fact that they could not find a Los Angeles Entertainment CPA who prepared tax returns. What they usually found were Entertainment Business Managers who wanted to charge 5% of their income to handle their financial affairs(including tax returns). As one mother told the business manager, “What could you possibly do to justify taking 5% of my daughter’s income? She doesn’t own a house, or require any more than a few bills to be paid a month.”

I told each of the prospects, as entertainment CPA business managers, that we have never gauged services by billing a percentage of a client’s income. Over twenty years ago, I had worked for firms that billed that way. But, I believed it to be an inaccurate way of gauging a business manager’s value of service. Sure agents, personal managers, and some attorneys who help “create” the wealth. They have a legitimate reason to charge in such a way, but not entertainment CPA business managers and accountants. It’s true at times, that I am involved with contract negotiations, but my function is not to promote the client and create the opportunities.

A year ago I heard that entertainment CPA business managers and accountants are shying away from this practice, possibly because of the economy. But these last phone calls seemed to say otherwise.

So, what’s the point? If you are reading this, you are probably not an entertainment CPA business management firm like us. The point is whatever business you are in, you must always, always , always focus on the value you are providing the client and customer. Just because you think you are worth your fees or price doesn’t mean you have convinced the client that you are.

Whenever you are fortunate to get a phone call from a prospect who tells you that your billing structure is obsolete, you should re-evaluate your business strategy and billing practices.

Now some entertainment CPA business managers and accountants may say, ” Fine, you take the little guys and we’ll concentrate on the A+ level actors and musicians.” This attitude is what drove US Steel and Bethlehem Steel out of business. Micro mills slowly chipped away from the bottom up with a better strategy starting with the lowest grade of steel. Eventually, the smaller mills moved up to take the high grade steel, too, driving the big companies out of business.

As entertainment CPA business managers, our company promotes good business strategies, not just for our CPA firm, but for our clients. The small flame client you have today could be the big shining star tomorrow. And the shining star of today may be just a little brighter than what you think.

Small Business Promotion Using Social Media–How We Did It

I couldn’t believe it. Well, actually I could, but I didn’t want to. Gregg Towsley of WSI Quality Solutions sat down with me me 18 months ago and showed me that my business’s social profile was dead. In other words, if you typed in industry key words, we didn’t even show up on ANY page.

I came across What Drives Small Business Social Media Engagement? by Dan Schawbel. He cited a study by Roost which offered advice to small business owners who want to create brand awareness, customer, acquisition, and customer services.

Using only Facebook and Twitter, the study suggested the following:

Publishing photos: The study suggested photos of employees, products, and functions. I remember when I first put up our web page, our most valuable search term was my assistant Maddy Curley. She was an actress that had (and has) some success on television and film. People googled her after seeing her on a TV episode and came up with her picture on our personnel page.
Ask Questions:Start a discussion by asking questions. You see this a lot on LinkedIn. I feel that providing information along with questions is a better strategy. What do you think?
Share Quotes:There are way too many twitter sites and blogs quoting wise people. I don’t like to. I find it is far more interesting to coin my own phrases that display my expertise. You don’t convince others of you knowledge and wisdom by using someone else’s brain. (You can quote that).

The main activity that got our firm on the front Google page ahead of CPA firms much larger than us is our content and consistency. To be successful, you must give to the business community. We provide advice and steps to individual businesses that can help them in managing their finances.

The Tightrope of Employee Tax Classification is Getting Frayed

My grandfather was Alfano the Great. In the 1920’s he walked between 2 eight story buildings with no net. In addition, he walked on his hands, rode a bicycle and did wheelies. All for a few bucks. Obviously, he never fell, or I wouldn’t be here.

The IRS, US Labor Department, and several state labor departments are about to cut the tight rope of some employers who classify employees as independent contractors.

Michael Cohen report, IRS to Team with Labor Dept. on Employee Classification, discusses the IRS and the Labor Dept. combine efforts with seven states to tackle the problem of employee tax classification. This could be a game-changer because one of the problems in employee tax classification has been defining what an “employee” is.

This move among all of these agencies (and I can only guess that the number of states signing on will grow), will allow a sharing of information about employee tax classifications. Now, this may seem harmless, but remember when you can operate a business in Los Angeles without a business license? Ten or fifteen years ago, one of the main ways L A City found you was to look at the business marques in buildings and cross-check them to the business license lists. Now, they get their information from Sacramento and individual tax return schedule C. All they do now is match the addresses to the individual tax return and send out penalty notices.

I have been writing about this issue for a long time. Here is an article in relation to the healthcare deduction. Healthcare Reform: If It Walks Like a Duck and Quacks Like a Duck…We’ll Call it a Toad

Employee tax classification databases may change the odds for those employers who are skirting the issue. The penalties could be stiff. Discuss your tax situation with your advisor before making any decisions.

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Business Vision and Goals: Understand the Target You are Aiming For

In the early 1970s, I watched a Stanford professor choose Jim Plunkett, (Stanford’s star quarterback) to demonstrate perception and the brain. The professor placed a pair of glasses on Jim that caused his vision to be distorted, shifting everything he sees to the right about 20 degrees. Jim missed his attended receiver throwing consistantly to the right by 20 degrees.

Drawing his share of laughter, Jim compensated and started aiming 20 degrees to the left, thus hitting his receiver about five times. The professor explained his point about perception and congratulated Jim on his adjustment. As Jim took off the glasses and proceeded to sit down, the professor asked him to throw one more pass with no impairment to show the crowd that the professor did not ruin the star quarterback’s talents. Jim laughed and passed the ball one last time. The ball soared past the receiver by 20 degrees to the left. His brain had not re-adjusted.

The Association for Strategic Planning-Los Angeles (ASP) had the honor of hearing Deepa Prahalad speak on September 13 at the beautiful Dole Corporation auditoium. Deepa spoke of her book, Predictable Magic, and its message to identify company goals. She stressed that if you have only broad goals, both your customers and employees will not understand what the company stands for. She suggested that you must become the interpretor of your message.

As in the case of Jim Plunkett, if you cannot see what you are aiming for, you will miss your target. The start of a good strategy is to have a clear vision of what you want to accomplish. Just to have a vision to be your industry leader is not good enough. Once a business establishes a viable vision, they can create a path with quantitative metrics to move towards that vision. Jim Plunkett’s vision changed, so he has to alter his tactics to get there.

Business today is always changing, so a vision you had five years ago will most likely be obsolete, or commonplace in your industry. The ASP preaches the steps of Think-Plan-Act, but if you are thinking about the wrong vision, your plans and actions will lead you towards a failing destination.

How Does a Small Business Grow? You Can Try to Think Like A Rock Band

We were called the Mini Playboys. Three ten year old musicians who temporarily put down their rock roots to play old standards, big band, and Italian songs. The band consisted of a drum, guitar, and accordion. We almost never played like this for our friends for the obvious reasons, but played at old folks parties and restaurants. Heck, we each earned $5.00 an hour in 1967 when minimum wage was $1.40. Great money! Our band focused on a strategy to hit a particular niche market, and it worked for 2 years until we went our separate ways.

I came across an article by Apryl Peredo, So, You Want a Label Contract? The article listed 5 reasons why bands are not signed by record labels. The article laid out some good, though basic advice to young band members. However, as I read the article I substituted the word “small business” for “band.” It also seemed to translate into good advice to those small businesses that are looking to grow their business. Here is what I mean:

We don’t sign “newly formed” bands. Customers who are looking for value and trust like to see an established business. This also pertains to expertise. I remember working for an accounting firm who declared themselves as experts in any area where they performed a single engagement. That hardly builds up the trust you want with your customers.
We don’t sign undeveloped bands.As a business owner, you must walk before you run. Starting small is not bad, it allows you to make mistakes without risking too much. Design your strategy to build slowly and in control or you may find yourself in the “white water” (Les McKeown’s definition in Predictable Success).
We don’t sign unknown bands. Customers and clients like to see a reputation, a good reputation. In looking at E-Bay, I noticed that some of the most successful businesses are those who have hundreds of good ratings. This weighs a lot with a new customer, so build your fan base.
We don’t sign people/band we meet at parties. Very few people would hire an attorney who advertised door to door. There is just a culture that discourages that kind of selling for that profession. It may work for a realtor, but not a surgeon. Learn your industry’s norms and culture.
We don’t sign based on “oral” favors. Business character counts. Always be beyond reproach in your client solicitation practices.

The article summed up a band’s quest to secure a label contract with “persistence, practice, professionalism, creative development, and hard work”

That is good advice for any small business looking to grow. Very few businesses make it “big” over night, and the ones that seem like they do, worked at it for years.