outside accounting department Archives

Charlie’s Angels and the 21st Century Small Business Service Environment

Remeber the original 1970’s Charlie’s Angels TV program with Ferrah Fawcett? John Forsythe was the boss you heard, but never saw. He would speak through a telephone speaker box to his three female crime fighters. Now that is the ultimate in remote business operations. I don’t think I could ever text any of my bookkeepers or accountants to drop-kick some thug.

Elizabeth Sile talks about running a business remotely in her article, How to Run a Business Remotely. We rare pretty good at running remotely because I chose over ten years ago when very few companies were operating in such a way.

Our style not only accomondates the employees who mostly work remotely (their home or client’s office), but also our clients because of our ability to work paperless. This is not to say that nobody can go into the office. There are some things that must be operated from the office.

However, taking Ms. Sile’s suggestions. These are her points:

Make the right hires: This is the most important of all the points. As Jim Collins says, “You must have the right persons on the bus.” Small business must hire the right people to the right job. If you are bogged down by family hires, you have to make tough decisions.

Use technology to your advantage: This point has been our biggest advantage because we developed systems of virtual filing cabinets and attached scanned documents that speed up our services. Small business must weigh each investment about its logical benefit and payback.

Communication is key: This is obvious, but should not be the small business’s first concern. There are so many ways people communicate remotely. Implementing a system will not be a big task. What is more important is the frequency and style of communication. Text messages could be misinterpreted so choose wisely.

My addition: Think scalable: I am always thinking about our systems and how they will work when we land those next couple of clients. As a small business that has a high profile on the internet, we get prospects every week. Many times these prospects require a short timeframe. I always hire people before my bookkeepers and accountants are over worked. Small business must always have a eye on the horizon to grow.

All of this entails a strategy. Set out the strategy of where you are going and use the tactics laid out above to be a striving small business in the 21st Century.

Employee Development of the Cucci

I worked in my grandparent’s Italian Restaurant from ages 13-18. I started by pointing arriving customer cars to unpainted stalls in the dirt parking lot. When I graduated to busboy, my grandfather personally trained me. Imagine George C Scott as General Patton on a bad day. That was my grandfather’s system of training employees. If I survived, I walked out with the skin of alligator. I was then well-equipped to work for anyone. However, when I screwed up, he called me a jackass in Italian, “cucci.”

As a business owner, I take great care in training my employees. Alix Stuart’s article, 7 Easy (and Cheap) Ways to Develop Employees offers some advice, some of which I don’t agree with.

Set up a feedback framework. This network deminishes in importance with smaller businesses. Usually, companies with 20 or fewer employees that work at a single site, communicate better unless the owner has an ego.
If you’re planning to hire, share with the team how the organization will likely evolve over the coming year and give them a sense of what opportunities might be available. We strategists call this “Tier 3” of implementing a strategy. Tier 3 is the alignment of the plan at the employee level. Available opportunities should be a part of this.
To build communication skills, regularly ask people in your group to stand up at staff meetings and give a brief overview of what they’re currently working on, with the right context for the group. I disagree with this. Meetings are such a waste of time. There are so many opportunities to communicate in smaller workgroups. If you want other departmetnts to know what you are working on, send an email or newsletter.
Help staffers develop a two-minute “elevator pitch” on your company, and have them present it to you and to others in meetings for practice. This may have some benefit, but I believe the downside outweighs the practice. Not everyone is a sales person. They should understand the company vision, but not practice reciting it.
Let a finance staffer tag along when you make customer visits. Again, this advice seems to try to develop a person outside of their expertise. If there are finance issues, then the finance person is valuable. But, only in that case.
Get everyone in finance to regularly help with certain tasks that might otherwise fall through the cracks. This type of cross-training can be valuable. Never train only one person to do a task. If that person were to leave, it could cripple your business. In finance, it is an invitation to fraud.
Encourage employees to ask their managers, “What’s on your plate that you don’t want to do?” and to then find a way to get it done. It is hard to find employees that ask to venture out of their comfort zones. The ones that do are golden.

Employee development is often overlooked, but just like in football, it’s what’s up front that counts. My grandfather knew that concept, he just had his old ways from Italy of implementing it. By the way, he would still think of me as a “cucci” if he were alive today. We all miss him.

Does Your Company Culture Prevent You From Change?

In business, or in a non-profit, one thing that bugs me is when a group of individuals agree on a vision, but very few want to see it through to implimentation. Oh yes, there are excuses, but the result is still failure. The business culture destroys the vision.

Gardini, Guiliani, and Marricchi’s article, Finding the right place to start change discusses change in a business culture. They say, “Our recent experience at a European retail bank shows the benefits of starting to implement change by focusing on the employees who have the most influrence over the daily work that needs to change.” The article discussed how they bank struggled to get bank managers to change. So, what was the article take away? The authors suggested the a company take two concurrent steps to change the company structure:

Change the pivotal people first.
Build a comprehensive program.

This article didn’t really say much and at first glance it looks like it regeritaged Jim Collin’s book, Good to Great. In that book, Collins emphasizes to get the right people on the bus(the wrong people off the bus), and then figure out where to drive it. His theory differs from the article in that once you get the who you can decide the what. The reason is because a company therefore can then easily adapt to a changing world. Secondly, Collins argues that if you have the right people on the bus, the motivation problem goes away. Lastly, the wrong people on the bus will sabotage any advances you try to make.

So how do you know which people to have on your bus? That is really the tricky question. One way is to lead by example as a “Level 5” leader. Collins defines these leaders as those who are ambitous for the company, and not themselves. In other words, a humble, but ambitious leader.

So, the trick to changing any business, small and large, is to change yourself and the leaders around you. Once you do that, you can find those who emulate these qualities as the riders on your bus, and the most likely group to impliment your changes.

Jeff Bridges: Be an Actor or a Singer, His Skills Are Transferable. And In Business, So are Yours

Many articles surfaced earlier this year about Jeff Bridge’s crossing over to country music. Some were not flattering. For example, theweek.com quoted comments that branded Jeff as “country-lite,” and “a troubadour tourist.”

But the critics missed the biggest point about Jeff Bridges. Back in the late 1980s I work on the Bridges family(Lloyd, Jeff, and Beau) in a business management firm. I remember my boss commenting about Jeff being the consummate artist. He said Jeff knew what he loved to do (act) and did it intensely. He also mentioned that Jeff’s wife, Susan, took care of the typical things in life and family allowing him to pursue his career unheeded. It is no surprise that Susan was the first person Jeff acknowledged after receiving his Oscar.

But the critics missed the point. What Jeff demonstrated, was that he could transfer his artistic skills from one medium to another. The movie Crazy Heart was just his first vehicle, and it won’t be his last.

The same can be said for anyone today, whether an artist or small business person. This is echoed in 8 Tips: How to Make Your Company And Career More Dynamic by Shira Levine. In the article, Shira quotes James Marshall Reilly who says:

“We’re lucky, because these days, our skills are more transferable. ‘Advances in technology have facilitated easy access to self-education and idea exploration,’ he says. That makes it easier to take information we’ve previously learned and apply it to other ideas, concepts, industries and businesses. ‘These iterations allow the individual to grow intellectually rather than stagnate in one position,’ says Reilly. ‘They also allow for the influx of new ideas to established fields as people move around and infuse new lines of thinking into conventional and often rigid spaces.'”

The Reilly article equates our current society status to the Renaissance period, when there was an explosion of ideas in society leading to leaps in the area of art, science, literature, etc. If he is right, then everyone reading this article, no matter what you profession, has the opportunity to be a part of it.

For example, if you are a singer/songwriter, are you just trying to match the path of those before you, like acquire a recording contract? Or how about a small/medium sized business? Are you evaluating every new technology in light of how you can change your company?

Looking at our CPA practice, we have done just that. Many companies cannot afford comptrollers and an accounting staff due to the economy. What we have devised systems that provide accounting, tax, bookkeeping, and access to any of our financial affiliates. We have leveraged the current paperless and remote access technology, among other things, to provide this service.

The skill transfer also surfaces from our entertainment industry experience. As business managers, we sometimes deal with all financial aspect of entertainer’s lives. We have transferred that skill to our small business clients if needed.

You don’t have to be an actor to transfer skills. The pallet of gifts are there for you to use. You just have to grab the brush and execute a strategy.

If You Are Reading This, You’ve Proved My Point

Last January, I again participated on the planning committee for the 2011 Entertainment Industry Conference for CPAs and attorneys. We agreed on most of the usual topics to be presented at the conference. Then, I suggested social networking. The idea was written on the board.

Fifteen minutes later, a respectible CPA turned to me and said, “Rick, I know social networking is a sexy topic, but I doubt it is what our attendees are looking for. They won’t come away with anything.” I nodded my head and thought to myself: Thank you. You just gave me an extra 12 months to blow my competition out of the water using social networking and SEO.

Skeptical? 5 Key Social Media Findings That Affect Your Business by Glen Stansberry lists some new findings:

1. Americans spend most of their time online on social network and blogs–If you are reading this blog, you have contributed to the 23% statistic that more time is used reading blogs and social networks than checking emails. You may have also found me because of what I have been doing for over a year. Writing

2. Seventy percent of active online adult social networkers shop online–Sell where your buyers live, online. We are all going there. Have a bigger presence than your competition.

3. Fifty-three percent of active adult social networkers follow a brand(only 32 percent follow a celebrity)–Adults follow brands across social networks.

4. Sixty percent of social media users create reviews of products or services–When was the last time you reviewed a book on Amazon, or rated a restaurant on Opentable? You are contributing the movement. If your business is not on there, then you are behind the curve.

5. The number of mobile Internet users is up 47 percent from last year–I have actually trashed a rude restaurant that made us wait an hour beyond their seating estimate. We were outside with our 85 year old father-in-law on Father’s Day in the dark. My bad review went into Yelp before I reached my car in the parking lot.

If you are resisting the social network, SEO revolution, you are risking the well-being of your business. But, before you jump in, do some research and learn. There are consultants that can help you. Then, create a strategy and stick to its implimentation. Your online presence will not increase overnight, but the constant creation of content will get you noticed.

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.

2010 Small Business Tax Breaks Revisited

It’s always good to practice the basics, like a major league baseball player who may work on his swing by hitting a ball off a tee. So here I am going back to the IRS tax site to remind small business owners of the Tax Relief Act of 2010. There may be benefits that you may be missing.

Sect. 2011: Temporary exclusion of 100% of gain on certain small business stock

Expanding on the provisions of Internal Revenue Code Section 1202 and the American Recovery and Reinvestment Act, the Small Business Jobs Act provides an additional incentive for investment in qualified small businesses. Under this Act, investors in qualified small business stock can exclude up to 100% of the capital gain upon sale of the stock.

Under the SBJA, in order to claim the capital gain exclusion, the qualified small business stock must be:

Acquired after September 27, 2010, and before Jan 1, 2011, and
Held for at least five years before the stock is sold.

However, Section 760, Temporary Exclusion of 100% of Gain on Certain Small Business Stock, of the Tax Relief Act of 2010, extended the exclusion for qualified small business stock acquired before January 1, 2012.

Under current law, the earliest tax year for which this 100% capital gain exclusion can be claimed is 2015. Additional limitations, qualifications and requirements may apply. Capital Gains and Losses has information on reporting capital gains.

Sect. 2012: General business credits of eligible small businesses for 2010 carried back 5 years

The new law allows an eligible small business to carry back general business credits five years. Previously, the credits could only be carried back one year. The carryback is for credits determined in the first taxable year beginning after December 31, 2009.

An “eligible small business” in general is defined as follows:

A corporation whose stock is not publicly traded, a partnership, or a sole proprietorship, and
The taxpayer must have $50,000,000 or less in average annual gross receipts over the three preceding tax years.

This is a one year initiative applicable only to the tax year 2010 (For fiscal year filers, the effective tax year is the first tax year beginning after December 31, 2009). The five-year carryback period is available only for credits carried forward to the tax year 2010 and/or earned in the tax year 2010.

Sect. 2013: General business credits of eligible small businesses in 2010 not subject to alternative minimum tax

The new law allows general business credits to offset both regular income tax and alternative minimum tax of eligible small businesses as described in Section 2012 of the Small Business Jobs Act (see above). The provision is effective for any general business credits determined in the first taxable year beginning after December 31, 2009, and to any carryback of such credits.

This is a one year initiative applicable only to the tax year 2010 (For fiscal year filers, the effective tax year is the first tax year beginning after December 31, 2009).

Sect. 2014: Temporary reduction in S-Corporation built-in gain recognition period

Under the Small Business Jobs Act, if the fifth year of an S Corporation’s recognition period ends before their 2011 taxable year begins, then no entity-level tax is imposed on the net recognized built-in gain for the 2011 tax year. Sect. 2021: Increased expensing limitations for 2010 and 2011; certain real property treated as Code section 179 property.

An expense deduction is allowed for businesses which choose to treat the cost of certain qualified property, called section 179 property, as an expense rather than a capital expenditure. For qualifying property placed in service during the taxable years 2010 and 2011, the new law increases both the maximum amount of the deductible expense under IRC Section 179, as well as the statutory phase-out amount. The provision also expands the definition of IRC Section 179 property to include the following types of real property: qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property.

Sect. 2022: Additional first-year depreciation for 50% of the basis of certain qualified property

Generally, businesses are allowed to recover the cost of capital expenditures over time through depreciation expense. IRC Section 168(k) allows for additional first-year depreciation, for 50% of the basis, of certain qualified property placed in service after December 31, 2009. The new law extends the additional first-year depreciation deduction to qualified property acquired and placed in service during 2010.

Section 401, Extension of Bonus Depreciation, of the Tax Relief Act of 2010, expands the additional first-year depreciation deduction (bonus depreciation) to equal 100 percent of the cost of qualified property placed in service after September 8, 2010, and before January 1, 2012. It also provides for a 50 percent first-year bonus depreciation deduction for qualified property placed in service after December 31, 2011 and before January 1, 2013.

Sect. 2031: Increase in amount allowed as deduction for start-up expenditures in 2010

For taxpayers starting an active trade or business, the new law increases the amount the taxpayer is allowed to elect as a deduction for start-up expenditures under section 195(b) for taxable years beginning after December 31, 2009. Section 2031 allows up to $10,000 as a deduction for start-up expenditures, but requires a dollar-for-dollar reduction of the $10,000 deduction if startup expenditures exceed $60,000. This expense should be claimed as an “Other Deduction” on business returns, such as the Form 1120, 1120S or 1065, or as an “Other Expense” on the Schedules C or F of the Form 1040. The remainder of any start-up expenditures, not deducted under section 195(b), can be amortized ratably over 180 months on Form 4562, Depreciation and Amortization.

Sect. 2042: Deduction for health insurance costs in computing self-employment taxes in 2010

Generally, small business owners may not deduct the cost of health insurance when calculating self-employment tax. Under the Small Business Jobs Act, and subject to specific statutory restrictions (i.e. deduction is not available if self-employed individual is eligible to participate in an employer-subsidized health plan maintained by the employer of the taxpayer or the employer of the taxpayer’s spouse), business owners can deduct the cost of health insurance for themselves and their family in the calculation of their 2010 self-employment tax.

Always consult your tax professional before making any of these 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.

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.