Financial Management

Tax Deadline and Other Tax Season Changes

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Tax Deadline and Other Tax Season Changes

tax dealine

Many tax changes, including the tax day deadline, are occurring in light of the COVID-19 pandemic. These changes are affecting individuals, small business, and tax-exempt entities alike. This article provides a general overview of the federal tax relief measures and changes recently implemented.

 

Tax Deadline Day

The Treasury Department and Internal Revenue Service announced that the federal income tax deadline for filing has been extended from April 15, 2020, to July 15, 2020. Federal income tax payments are also deferred to July 15, 2020, without interest or penalties, regardless of the amount owed. The postponement applies to all taxpayers, including individuals, estates, trusts, corporations and other non-corporate tax filers as well as those who pay self-employment tax.

 

Tax Credits and Relief

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, is designed to encourage eligible employers to keep employees on their payroll, despite experiencing economic hardship related to COVID-19, with an employee retention tax credit.

The Employee Retention Credit is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021.

The Families First Coronavirus Response Act (FFCRA) contains two separate provisions: The Emergency Paid Sick Leave Act (EPSLA) and The Emergency Family and Medical Leave Expansion Act (Expanded FMLA). It provides small and midsize businesses a refundable tax credits that reimburses them, dollar-for-dollar, for the cost of providing paid sick and family leave wages to their employees for leave related to COVID-19.

Small-Employer FICA Tax Relief relates to sick leave and family medical leave payments authorized by the Act are exempt from the 6.2% Social Security tax component of the employer’s federal payroll tax that normally applies to wages. Employers must pay the 1.45% Medicare tax component of the federal payroll tax, but they can claim a credit for that amount.

 

Other Tax Updates

The Standard Deduction amounts will be increased slightly this year compared to previous years.

Single & Married Filing Separate $12,200

Head of Household $18,350

Married Filing Joint $24,400

 

The Insurance Penalty for not having health insurance no longer applies for 2019 federal tax returns. However, some states have their own individual health insurance mandate.

The Alimony Deduction was eliminated for divorce rulings signed after December 31, 2018 that require alimony payments. The payer will not be allowed a deduction for payments made, nor will the payee be required to claim the alimony as income on their respective tax returns.

 

Do your financial statements and accounting records give you what you need to optimize tax savings? Have you considered working with a reputable and experienced accounting firm?

If you need help with bookkeeping services or accounting services, or have questions understanding the new tax changes, please reach out to Consultance Accounting and we will be happy to assist.

 

Disclaimer: Consultance Accounting does not provide tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax or legal advice.

Love Running Your Organization, But Hate Paperwork? 3 Reasons to Outsource Bill Payment

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If I asked the leaders of nonprofit organizations and associations, as well as business owners, how much time they spent on their true business at hand, or the things that matter most, I’d venture to say that most of them would say “not enough.”

When I bring new clients on board, I find that many of them spend a lot of time shifting through mounds of paper, trying to stay on top of vendor bills and payments and other administrative activities. By outsourcing their back office functions to Consultance Accounting and switching to Bill.com, an automated bill payment process solution, organizations can focus on what matters most, and let us handle their bookkeeping and accounting needs.

As a cloud-based firm that provides outsourced accounting services to clients across the country, Consultance Accounting leverages the use of top technology platforms, such as Bill.com, to streamline our clients’ operations. Bill.com is a bill payment process solution that integrates with QuickBooks Online and other accounting systems. Bill.com outlines Ten Reasons to Outsource (and Upgrade) Your Bill Payment. Here’s my take on some of the key points they discuss:

Bill Payment Process
Credit: Quinn Dombrowski CC BY-SA 2.0 via flickr

Get Rid of Paper Hassles: Have you heard of that tip about handling a piece of paper only once to increase your efficiency? With an automated bill pay solution, you can take that tip to the next level by eliminating those pieces of paper entirely! Here’s how it works for our clients’ Accounts Payable processes: We work with clients and their vendors to eliminate all paper bills, so instead, they are electronically remitted directly to a dedicated Bill.com email account. From there, our accounting specialists ensure the proper account coding and payment dates, and the Bill.com system will automatically forward the on-line bills to the appropriate people for approval. All the supporting documents are stored securely on-line, leaving you with a paper-less work environment.

 

 

Bill Payment ProcessEnhance Your Mobility: Do you ever feel like your handcuffed to your desk due to all the administrative work you have to handle? By outsourcing your accounting function and using Bill.com, you can free yourself from your physical office space and conduct business anywhere using your mobile device(s). This occurs for multiple reasons. First, you eliminate the need for an in-house bookkeeper to handle your accounting transactions, which saves you the time in the office managing that employee. Second, your vendor and payment data is easily accessible on your mobile device(s). As a business owner who is always on the move, I can personally attest to how easy it is to access my vendor invoices using my smart phone. For example, if a vendor calls me up and asks about a payment, I can easily pull up the Bill.com app on my smart phone, review the vendor’s information, and approve a payment on the spot. It’s that simple.

 

Bill Payment Process
Credit: 401calculator.org via flickr

Experience Financial Savings: In addition to helping you reprioritize your precious time, it’s important to note the opportunity to save money too. By outsourcing your back-office functions to an accounting services firm, you can reduce your employee-related overhead costs (e.g., training, office space, benefits, etc.). By using a bill payment solution like Bill.com, you can save by transitioning your paper checks to electronic payments. Bill.com estimates that the total yearly cost for paper checks can be $24,540, as compared to total yearly cost for electronic payments of $1,680.  Click here for more info.

 

 

 

If you’re like most business owners and leaders of nonprofit organizations, you take great pride in the services or products you provide. You want to focus your time and energy on business strategy and goals. Outsourcing your back-office functions to a dedicated, highly-skilled accounting services firm that uses proven technology apps to streamline your workflows allows you to do exactly that.

So, are you ready to concentrate like Arnold Palmer? Whether it’s serving your customers, fundraising for future growth, or expanding your reach in the community, Consultance Accounting in partnership with Bill.com can help you save valuable time, reduce operating costs and gain peace of mind that you’re focused on what matters most.  Contact Us if you’d like to learn more.

Consultance leverages exceptional talent, proven processes, and top technology platforms to deliver timely & accurate financial solutions that help small and medium-sized organizations improve productivity, increase profitability, and achieve their goals.

Consultance Accounting Services

 

Expense Management: 6 Ways to $ave in 2020

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Image by Shutterbug75 from Pixabay

Expense Management

The challenges of running a business or nonprofit and staying on top of the financial bottom line can be challenging. Growing your top line revenues is critical to your success in 2020. However, keeping your expenses in check is just as important and can help sustain your business while you build your revenues.

Having an expense management process, where you review and analyze the details of your spending activity, will help keep your costs down and in line with your industry standards. Here are six expenses that will yield the biggest bang for your buck and are worth investing time reviewing to reduce your costs:

  1. Payroll – Payroll is often the largest expense for most businesses and it’s easy to ignore. If you are over-staffed, then you are reducing your chances of sustaining your business. Look at each staff position and assess employee productivity.  Determine how much headcount your business can actually sustain based on industry averages. If your payroll is too high, you should consider alternative staffing scenarios to better fit your current ability.
  2. Inventory/Cost of Goods Sold – For many businesses, cost of goods sold is typically a large expense. Make sure you have an inventory tracking system in place. Review your costs of goods sold each month as a percentage of sales. If you’re not where you need it to be, it’s time to take a deeper dive and figure out why your business is not producing the desired results.
  3. Credit Card Fees – When was the last time you looked at your merchant fees? Better yet, how about converting credit card payments into ePayments, where the fees are a fraction of the cost? Give your customers and clients better options to pay that don’t have high merchant fees.
  4. Advertising/Marketing – When was the last time you calculated your Return on Investment (ROI) for your various Advertising and Marketing expenses? Many businesses have recurring charges that are returning very little to the financial bottom line. It may be time to get rid of these charges and tighten up your budget.
  5. Equipment Rental/Leases – New equipment to service customers and clients can generate new revenue streams, but having the wrong lease on your equipment rentals can cost you in higher interest.  These costs can add up over a 3-5 year term. When pursuing a new lease, shop around for the best financing and don’t just go with what is offered because it is convenient. Also, make sure you have a capital budget plan in place each year to account for new equipment and the cost that comes along with it.
  6. Professional Fees – How many third party consultants and other professional service providers are you paying? Are the services they are performing helping you achieve your strategic goals? Calculate the ROI and value each one is providing. If they are not helping you achieve your desired results, you need to re-evaluate the expenditure.

In sum, by putting a process in place to review your largest expenses on a regular basis, you can achieve the cost reductions that you desire.

Contact Us if you’d like to learn more about how Consultance can help you with cost management through our CFO Services.

Consultance leverages exceptional talent, proven processes, and top technology platforms to deliver timely & accurate financial solutions that help small and medium-sized organizations improve productivity, increase profitability, and achieve their goals.

If you have any questions, feel free to contact us here.

Consultance Accounting Services

New Tax Provision

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New Tax Provision: Plan to Optimize Tax Savings Through Organized Accounting Records

This article provides a general overview of the new Section 199A tax provision and its potential impact to small businesses. As of the date of this blog, business owners and their tax advisors are still seeking clarity about its application and the various limitations within the provision. However, there are some concrete tax-saving actions that you can take now.

Background:
The Tax Cuts and Jobs Act was enacted on December 22, 2017. It includes a new provision, Section 199A, providing a 20% business income deduction. Under Section 199A, sole proprietors, S corps, and partnerships may qualify for the 20% deduction of qualified business income in a qualified trade or business, under certain conditions. The intent is to provide a tax cut to these type of businesses, similar to the favorable tax cut provided to C corporations.

Does It Apply to Your Business?
The short answer is, it depends. You have to be a qualified trade or business, with qualified business income. Fair warning – the new provision is complex, with lots of limitations, but bear with me as I give you some of the highlights!

Qualified Trade or Business: Certain businesses won’t be able to take the deduction. According to IRS guidance, a “specified service trade or business” (SSTB) is not qualified to take the deduction – unless its income is below certain thresholds.

So for example, if you are the owner or co-owner of a business that performs services in the fields of health, law, accounting, or consulting unfortunately you’ll generally fit in this SSTB category, since your business involves the performance of services where the principal asset is the reputation or skill of one or more of its employees. Many other service professionals are in this SSTB category as well. However, if all of your taxable income on your Form 1040 is under the limits ($315,000 if married filing jointly, or $157,500 for all other taxpayers), the full deduction may apply.

Qualified Business Income (QBI):
According to IRS guidance, “QBI is the net amount of qualified items of income, gain, deduction and loss from any qualified trade or business. Only items included in taxable income are counted. In addition, the items must be effectively connected with a U.S. trade or business. Items such as capital gains and losses, certain dividends and interest income are excluded.”

How Is the Deduction Calculated?
The total deduction amount may be limited based on your situation. If you are under the $315,000/$157,500 threshold mentioned above, you get the full deduction. For those over the thresholds, there are some deduction limits based on your W-2 wages and certain qualified property amounts. These limitations are phased in over specific ranges in tax year 2018. For details, refer to IRS guidance.

What About Income From Retail Sales?
For SSTB businesses who not only perform skilled services but also sell some type of product(s), I recommend speaking with your tax advisor about the ability to take the deduction for those lines of business, as it could make a significant impact to your finances. This leads to my advice on what you can do to facilitate good planning now, in order to help your tax advisor assist you with being in the best position to optimize your tax savings.

What Can You Do Now to Prepare?
You may be scratching your head right now, wondering what you can do before more guidance is issued on this provision and many others recently enacted. To understand the possible tax impacts to your business – both positive and negative, you and your tax advisor need a firm grasp of the following:

• How much income you’re making in each line of business within your practice
• What the costs associated with each activity are
• An accurate accounting of what you own and what you owe (i.e., your asset and liability categories)

Do your financial statements and underlying accounting records give you what you need to optimize your tax savings? If not, it’s time to consider working with a reputable and experienced accounting firm!

Questions? Need Help?
If you have questions and/or need help getting your financial records in order, please reach out to me, I’ll be happy to talk with you. Orin Schepps, Founder and CEO @consultanceaccounting  https://www.consultancellc.com

Disclaimer: Consultance Accounting does not provide tax or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax or legal advice.

Protect Your Business From Financial Failure Through K P I’s

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Key Performance Indicators

Survival of the Fittest: Protect Your Business From Financial Failure Through Key Performance Indicators

How confident are you about the financial viability of your business or not-for-profit organization? According to the SBA Office of Advocacy, about two-thirds of small businesses with employees survive at least 2 years and about half survive at least 5 years. Only one-third survive 10 years or longer. These statistics should be a wake up call – to invest the time in assessing your financial operations.

How can you increase your odds of surviving? You may be regularly producing financial statements, but do you really understand what the data is telling you? Just generating the numbers isn’t enough. You need to leverage your financial information in order to not only survive, but also thrive in our volatile business environment.

Tone Up by Zoning In on Key Performance Indicators
Key Performance Indicators, or KPIs, are ways to measure how you’re doing in areas important to your organization. KPIs help you evaluate your success in achieving targeted objectives. Your business/not-for-profit should have KPIs that cover all integral aspects of the business, such as:

• Strategic KPIs (e.g., metrics on customer satisfaction, program effectiveness)
• Operational KPIs (e.g., metrics on marketing and sales, human resources)
• Financial KPIs (e.g., metrics on profitability, cash management, expense control).

This article focuses on Financial KPIs; however, the same principles apply across all areas.

Why are KPIs important?
Financial KPIs help you make decisions based on supportable data, whether it’s deciding whether to expand your programs, hire another staff person or raise prices on your products/services. You may inherently feel that your business is running smoothly, but you can gain a lot more comfort on your long-term viability by analyzing financial metrics regularly and gauging how you’re faring compared to other similar businesses. Further, creating, tracking and monitoring KPIs can help you and your staff focus on areas you need to improve, and can help assess your progress toward established goals.

Getting Started
Here’s a suggested roadmap to start you on your way to financial fitness using KPIs:

• Identify Financial Areas of Importance – Think about what matters most to your organization from a financial perspective. If you’re just starting out, keep it as simple as possible in the beginning and identify only a few KPIs (for example, no more than five). Remember, the goal is to provide a disciplined FOCUS on improving your financial health. Therefore, avoid taking on too much at one time.

• Define Your Metrics – Once you’ve figured out important financial focal points, you can then create specific metrics to address them, and start tracking them.

For example, let’s say Profitability is an area of financial focus. There are several metrics to consider. One example would be to track your Gross Profit Margin Percentage on a monthly basis. Gross Profit Margin is a measure of the proportion of revenue that is left after deducting all costs directly related to services and sales. The Gross Profit Margin serves as the source for paying operating expense (such as rent and other administrative costs); having a higher one facilitates a stronger net profit for you.

To calculate your Gross Profit Margin Percentage, you take your Gross Profit (which is Total Revenues minus Cost of Goods sold), then divide the result by your Total Revenues. To get the percentage, multiply that number by 100:

[(Total Revenues – Cost of Goods Sold)/Total Revenues] x 100

• Understand Your Status – Understand the historical and current status of your KPIs by calculating the metrics using data from your accounting system and financial statements. So using our above example, let’s say you’ve been in business for two years and you’ve calculated your Gross Profit Margin Percentage as follows:

Key Performance Indicators

You now have an understanding of your overall profitability and can compare it against industry standards to get a feel for where you stand. If you’re overall Gross Profit Margin Percentage is significantly below industry benchmarks, you can delve into the details further, by analyzing the Gross Profit Margin Percentage for each major service type and product line. This will help you see where the outliers are. This knowledge helps you to set a course for the future, which is the next step in the process.

• Establish Clear Objectives and Strategies for the Future – Knowing where your organization stands in terms of your KPIs can lead you to taking a proactive and focused approach to improving your future. For example, in our Illustration above, if your goal is to improve your Gross Profit Margin Percentage by the end of next year by at least 3%, you should consider adjustments to either your prices, the volume of clients/customers served, and/or lower the cost of goods and services sold. It may take time for such adjustments in strategy to take hold, but by tracking your KPIs, you’ll have the tools to facilitate a thoughtful approach.

• Monitor, Evaluate and Adjust as Needed – Now that you have KPIs to track and goals for where you want the results to be in the future, establish a regular process for reviewing and evaluating the results. For example, after the monthly books are closed and your financial statements are generated, a good process would be to review your KPIs in conjunction with your financial statements. As part of this step, you’ll want to assess whether your strategies are working or not, and adjust as needed. Also, don’t be afraid to refine your KPI metrics if they are not meeting your needs. Remember, it’s better to start the process and make changes as needed, than to avoid taking any actions for fear of making mistakes.

KPI Examples
There is a wide range of financial KPIs to choose from, covering areas such as Profitability, Cash Flow, Liquidity, Growth, and Efficiency. What’s important may vary from across businesses. However, here are some common examples of KPIs for you to consider tracking monthly:

• Cash Flow – The amount of Cash received, minus the amount of Cash paid.
• Accounts Receivable Days – How long it takes to collect the amounts due from clients/customers.
• Inventory Turnover – The number of times you’ve sold and replaced inventory.
• Operating Profit Margin – The proportion of revenue that is left after deducting all operating expenses.
• Revenue Growth – The percentage change in revenue.

Other Best Practice Considerations
As you gain more experience with using KPIs to assess and manage your financial fitness, consider ways to enhance the process. You may want to involve your staff team in the process. At a minimum, to the extent your staff’s actions have an affect on the metrics, they should be aware of what the KPIs are and their importance, and how staff can aid in making established targets. Some businesses even tie staff bonuses to attaining certain KPIs.

As your process matures, you may consider creating a KPI Dashboard Report that enhances your ability to review and analyze your KPI data. For example, there are apps, such as FATHOM, that integrate seamlessly with QuickBooks and other accounting software, allowing you to create dynamic reports without having to manually enter in your data and calculate your metrics; the app does the work for you.

“You can’t manage what you don’t measure” – Peter Drucker (leading management consultant/expert)
Take charge of your financial fitness and avoid the path of failure experienced by many other small businesses. By identifying Key Performance Indicators to measure, track and monitor over time, you’ll strengthen your practice’s ability to not only survive, but prosper!

Questions? Need Help?
If you have questions and/or would like to understand more about KPIs and how they can help your business or not-for-profit organization, please reach out to me, I’ll be happy to talk with you. Orin Schepps, Founder and CEO @consultanceaccounting https://www.consultancellc.com

Outsourced Accounting Services: Next Step to Successful Growth

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Outsourced Accounting Services:
Outsourced Accounting Services

Why Outsourcing Accounting Can Be The Next Step To Successful Growth

Who does the Accounting for your business? Do you use internal or outsourced  accounting services? Based on my experience, many small businesses and not-for-profit organizations have someone internal perform this work when first starting out, since these organizations are focused initially on getting their primary operations up and running, “wearing all the hats” in the early years. However, over the past decade, more businesses and not-for-profits are realizing the advantages of outsourced accounting services and bookkeeping. You should understand this trend as well, as it could lead to your organization’s successful future growth.

Whether it’s technology, the regulatory environment, or your customers’/clients’/members’ needs and preferences, the world in which we live rapidly changes and we all need to adapt to this fast pace. As you ponder the types of changes you need to ensure the success of your organization in the future, outsourcing your bookkeeping and accounting needs to a virtual accounting services provider should be part of that consideration.

In this article, I’ll provide Answers to some Frequently-Asked Questions about Outsourced Virtual Accounting, and demystify the process.

What exactly does it mean to virtually outsource my practice’s bookkeeping and accounting?

This means assigning to an outside professional(s) the responsibility for tasks normally assigned to a controller and chief financial officer within your business – a lot of times, this is you at the start of your business. Tasks include finance and accounting services, such as cash flow management, general ledger management and financial statement preparation and analysis. It also includes all related back-office support, such as payroll processing and tax filings, sales inventory management, accounts payables and receivables and other transaction processing. While you may choose to outsource only portions of your operations, such as the payroll processing, many business owners take advantage of more full-scoped outsourcing in order to gain additional efficiencies.

When outsourcing accounting and bookkeeping tasks to a virtual accounting firm, the firm will use technology to provide your services, without you having to provide physical office space. The firm can fetch, send and store your documents electronically. For example, your virtual accountant can set up automated workflows so that source documents such as your bank statements can be retrieved automatically each month, without you having to be involved in that administrative process. The firm uses applications, often cloud-based apps, to process and record your transactions, resulting in increased cost efficiencies due to automation and integration. You the business owner maintain control and 24/7 access to your data.

What are the advantages of outsourced accounting services?

  • Easy Access to Specialized Knowledge: When hiring an outside, accounting services provider, you are able to tap into their specialized knowledge and insights gained from having worked with many other businesses. So instead of you personally having to learn and keep up with the latest technology to help you run your back office, you can rely on your outsourced professional to ensure you’re using the most proven cost-effective ways to process your transactions.
  • Free Up Your Valuable Time and Money: As you grow, by outsourcing your accounting, your practice will no longer have to endure the hiring process and lose valuable time and money training bookkeepers. And, by hiring a virtual firm, you’ll free up valuable space in your office and save on related overhead costs, including expensive employee benefits. Or, if you have been doing the accounting yourself, you can finally free up your time to focus on things more important to you and your business and avoid costly mistakes that occur when you’re spread too thin across too many responsibilities.
  • Improve Internal Controls: Partnering with an independent professional provider to perform your bookkeeping and accounting allows you to implement a separation of duties across important financial transactions, so that they are not handled by just one person. This helps strengthen your internal controls through proper checks and balances, preventing costly mistakes, including potential fraud. You also gain a second set of eyes to review your business for blind spots in its accounting operations. See my article for more details.

Still on the fence?

Then consider this 2018 Client Accounting Services Survey.  According to the survey results, businesses that outsource all accounting report both hard and soft returns on their investment, including higher profits and revenues, being better armed to make business decisions, and enjoying an easier accounting experience. Survey results include:

  • 80% of respondents answered that Client Accounting Services (CAS) gave them more time to focus on the business.
  • 68% said that CAS makes accounting easier and efficient.
  • Respondents who outsourced their CAS reported a greater increase in profit and revenue than those who do not outsource. Almost one-quarter of those outsourcing worked with their accountant to create a plan for growth, further paving the path for long-term success.
  • Businesses open to new accounting technologies (most often introduced by their accountant) are twice as likely to report a higher profit than those who do not.

What are the downsides to outsourced accounting services?

One big downside to outsourcing would be if your service provider doesn’t bring the value you’re looking for. To avoid this risk, I recommend doing a little bit of planning before you reach out to any firms. This includes identifying your accounting needs; for example, whether you need help with bank and credit card reconciliations, inventory management, sales and use taxes, accounts payable, etc. You should also identify your biggest “pain points” and the places where you spend a lot time processing transactions.

With the same diligence you’d invest when hiring full-time staff in your organization, you should be prepared to interview prospective firms to understand their client service model and approach, and the pricing structure for their services. Once hired, regular communications with your service provider facilitates a strong client/service provider relationship, resulting in high quality client service.

Will I lose control over my finances if I outsource?

The short answer is “No.” You will actually now have more control since you will have improved financials at your fingertips and have more time and money to plan instead of simply reacting to business events. What you’re delegating to your outsourced accountant is the heavy lifting related to processing and recording of the transactions. Professional accounting firms are able to leverage their experience and knowledge of technology to make these transactional processes more efficient and accurate, leaving them time to provide you with sound business advice as you make important financial decisions. You’ll have more accurate and timely financial information and an expert’s analysis of that information, while you retain the oversight and control and decision-making.

When is the best time to consider the transition to an outsourced model?

While every practice is different, here are some clues as to when it may be a good time to move your bookkeeping and accounting to an outsourced, virtual professional firm:

  •  You find yourself spending more time on your back-office functions than on customer/client-facing services and growing your business.
  •  You are having trouble finding and/or keeping competent internal bookkeeping staff.
  •  You’re encountering too many mistakes because you and your current staff are spread too thin.
  •  You’d like to pursue efficiencies through the use of accounting technology but don’t know how and where to start.
  •  You’re drowning in a mound of paperwork and having a hard time keeping up with paying the bills, reconciling your bank and credit card accounts, or other back-office functions.

How can I find out more about outsourcing?

If you still have questions and/or would like to understand more about outsourced bookkeeping and accounting services, please reach out to me. I’ll be happy to talk with you. Orin Schepps, Founder and CEO @consultanceaccounting  https://www.consultancellc.com

Don’t Be a Victim! Manage the Risk of Fraud in Your Organization

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Manage fraud riskBased on a recently-released AFP Payments Fraud And Control Survey Report, chances are, your business or organization has been a victim of actual and/or attempted fraud.  Sound hard to believe? According to the Report, 78% of companies were targets of payments fraud in 2017. And the trend has continued to increase since 2013.

The relentlessness of fraudsters makes it important for businesses and not-for-profits to take stock of their payment processes and ensure good internal controls are in place to prevent and detect fraud – whether it’s committed by someone inside or outside of your office.

To protect your organization, here are some ways to shore up your accounting processes and minimize the risk of payment fraud:

Move Paper Checks to E-Payments: Lots of fraud can occur with a paper check because it contains important information about your bank account. Due to the nature of how paper checks are processed, there are many opportunities for fraudsters to steal them – from the time you receive and store the check stock in your office, to the time you send them out in the mail and hope that they are received by the intended recipient. Once accessed, fraudsters can easily alter paper checks, changing the payees and amounts, and/or create a whole new set of fake checks with your account information. Moving from paper checks to e-Payments such as EFT’s and ACH transfers provides increased security and is more cost-effective than paper checks. To learn more visit www.electronicpayments.org.

Perform Bank Reconciliations: Bank reconciliations involve comparing what’s recorded in your accounting records to what’s recorded in the bank statement. Due to timing differences, you normally will have differences between the two balances, such as outstanding checks that haven’t cleared the bank yet, or monthly interest fee charges that you haven’t added to your books yet. However, unexplained differences between your book and bank balances may represent fraudulent activity, or at a minimum, errors that need to be addressed. Timely bank reconciliations are a great internal control for many reasons: They give you a good handle of your actual cash flows, help detect potential fraud or other errors early, help you to avoid bouncing checks and incurring fees for insufficient funds, and help you to follow up on outstanding payments.

Segregate Duties Where Possible: Segregation of duties is another great internal control to include in your organization. Basically, it means setting up your accounting workflows so that financial transactions are not handled by just one person. The objective is to incorporate checks and balances by separating out key duties; ideally, for your payment processes, the person preparing payments should not also be responsible for approving the payments and performing the bank reconciliations. In smaller organizations, it can be hard to segregate duties completely, but at a minimum, you should be reviewing the bank and credit card statements for unauthorized activity on a timely basis and signing all checks that exceed a set minimum amount. Click here See for more on segregation of duties.

Take Advantage of Positive Pay: Does your bank use Positive Pay? If you don’t know the answer to this question, you should ask! Positive Pay is a way for banks to help prevent fraud. Under this internal control, you as a business provide your bank with your disbursements information, such as a list of check numbers and amounts disbursed. As checks are presented for payment, the bank double checks this information prior to payment, to make sure the information matches. If there’s a mismatch, the bank alerts you before any funds are issued.

Be Aware of Email Fraud Schemes: In this fast-paced environment, it can be easy to fall prey to various email schemes out there. Even if your staff are generally aware of the various phishing scams out there, in the rush of the day and after working long hours, it can be easy to miss when something’s not quite right. When the person who processes your payments gets that email request from a supposed vendor asking to direct their payment to a different account, you want to be sure they recognize fraud red flags. You can help by taking the time to promote fraud awareness. Keep up to date on the latest scams and share them with your staff.

Review Vendor Lists for Unusual Activity: A common payments fraud scheme occurs when someone inside your organization (all too often, a trusted employee) creates a fictitious vendor. If someone other than you processes your accounts payable and disbursements, you should periodically review the list of vendors in your accounting system. If you identify any unfamiliar payees, follow up promptly to rule out any fictitious vendors.

Look Beyond Payment Fraud

Fraud reaches beyond payments, so be sure to review your controls in other areas, such as inventory. To protect your inventory from the risk of theft, manage your inventory levels to avoid overstocking items, leaving them open to potential theft or damage. Control access to your valuable products by keeping them in locked display/storage cases when possible. Also, you should take regular inventory counts and follow up on any unreconciled differences between your book balances versus your physical inventory count.

Although the statistics are alarming, you can take proactive steps such as the ones above, and decrease the likelihood that you’ll become a victim of losses from fraud.

How Consultance Accounting can help: Consultance leverages exceptional talent, proven processes, and top technology platforms to deliver timely & accurate financial solutions that help small and medium-sized organizations improve productivity, increase profitability, and achieve their goals. We use cloud-based technologies that integrate with each other to streamline the process. Contact Us if you have questions and/or need more assistance.

Seeing Clearly: 3 Tips for Effective Sales Inventory Management

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Inventory Management
Credit: Max Pixel via flickr

After payroll expenses, the cost of goods sold is typically a large expense for many businesses, and inventory is often a major asset on the financial statements. Are you confident that your inventory is appropriately managed, and do you have an accurate handle on what you have in stock in any given moment?

It’s important to manage your inventory effectively because your sales activity is dependent on having the right type and amount of products available to your customers, at the right time. By optimizing your inventory levels, you avoid losing sales due to items not being in stock, and you minimize the cost of having too much in stock for lower-demand items. Here are some tips:

If you don’t currently track your sales inventory, implement a system. It all starts with having a way to track your products for sale. According to a 2017 State of Small Business Report, businesses use a variety of methods, ranging from manual processes and excel spreadsheets, to more specialized software. Ideally, you want your inventory management system to integrate with your accounting system so that you have up-to-date financial information to help you understand how your business is doing, so that you can make timely and well-informed decisions. For businesses that already use Intuit’s QuickBooks accounting software, inventory valuations can be tracked in real-time and the financial statements are updated seamlessly for inventory changes.

Whatever system you decide to use, maintain its effectiveness by conducting regular inventory counts of what you have in stock, and reconcile any differences between your physical inventory account and your inventory records on a timely basis. You should understand why these reconciling differences occur and manage the potential risk of theft.

Understand Your Sales Activity to Anticipate Your Inventory Needs. Do you know what your top selling items are? How about your lowest selling items? If not, you should. An effective inventory management process helps you to understand your sales activity and control the number of products you have, so that you have the right amount in inventory to meet the demands of your customers. You want to avoid overstocks for several reasons, such as the risk of theft, damage or obsolescence. Also, if your products aren’t turning over timely, then your cash flow is impacted, since it’s tied up in assets that are sitting on the shelves. So, take a step back from your daily operational duties; look at your monthly, quarterly and annual sale trends, so that you can anticipate what you need – and don’t need – in your stock, at the appropriate times in the year.

Analyze your Gross Profit Margins. Since the cost of goods sold is likely a large expense item on your Profit and Loss Statement, it’s a good idea to review your costs of goods sold each month as a percentage of product sales. If your margin is not where you need it to be, it’s time to take a deeper dive and figure out why it’s not producing the desired results. Perhaps certain product items are causing a significant negative impact and are not worth continuing in your product offerings.

Feeling overwhelmed? Don’t panic. You can start off slowly but surely, by focusing on one part of your inventory first, for example, the inventory coming from one supplier, or your top 10 best-selling products. This way, you can learn what works for your practice and continuously improve as you broaden your scope to other parts of your inventory.

By taking action on these three tips, you’ll be well on your way to better inventory management, leading to better bottom line financial results!

How Consultance Accounting can help: Consultance leverages exceptional talent, proven processes, and top technology platforms to deliver timely & accurate financial solutions that help small and medium-sized organizations improve productivity, increase profitability, and achieve their goals. We use cloud-based technologies that integrate with each other to streamline the process. Contact Us if you have questions and/or need more assistance.

Expenses Impact Bottom Line

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Impact Bottom Line:

Review These 6 Expenses that Impact your Bottom Line

Keep Your Expenses in Check

Impact Bottom Line

The challenges of running a business and staying on top of the financial bottom line can be challenging.  Many things impact bottom line and growing your top line revenues is critical to your success. However, keeping your expenses in check is just as important and can help sustain your business while you build your revenues.

Having a process, where you review and analyze the details of your spending activity, will help keep your costs down and in line with your industry standards. Here are six business expenses that will yield the biggest bang for your buck and are worth investing time reviewing to reduce your costs:

  1. Payroll – Payroll is often the largest expense for most businesses and it’s easy to ignore. If you are over-staffed, then you are reducing your chances of sustaining your business. Look at each staff position and assess employee productivity.  Determine how much headcount your business can actually sustain based on industry averages. If your payroll is too high, you should consider alternative staffing scenarios to better fit your current ability.
  2. Inventory/Cost of Goods Sold – For many businesses, cost of goods sold is typically a large expense. Make sure you have an inventory tracking system in place. Review your costs of goods sold each month as a percentage of sales. If you’re not where you need it to be, it’s time to take a deeper dive and figure out why your business is not producing the desired results.
  3. Credit Card Fees – When was the last time you looked at your merchant fees? Better yet, how about converting credit card payments into ePayments, where the fees are a fraction of the cost? Give your customers and clients better options to pay that don’t have high merchant fees.
  4. Advertising/Marketing – When was the last time you calculated your Return on Investment (ROI) for your various Advertising and Marketing expenses? Many businesses have recurring charges that are returning very little to the financial bottom line. It may be time to get rid of these charges and tighten up your budget.
  5. Equipment Rental/Leases – New equipment to service customers and clients can generate new revenue streams, but having the wrong lease on your equipment rentals can cost you in higher interest.  These costs can add up over a 3-5 year term. When pursuing a new lease, shop around for the best financing and don’t just go with what is offered because it is convenient. Also, make sure you have a capital budget plan in place each year to account for new equipment and the cost that comes along with it.
  6. Professional Fees – How many third party consultants and other professional service providers are you paying? Are the services they are performing helping you achieve your strategic goals? Calculate the ROI and value each one is providing. If they are not helping you achieve your desired results, you need to re-evaluate the expenditure.

In sum, by putting a process in place to review your largest expenses on a regular basis, you can achieve the cost reductions that you desire.

Contact Us if you’d like to learn more about how Consultance can help you with cost management through our CFO Services.

Consultance leverages exceptional talent, proven processes, and top technology platforms to deliver timely & accurate financial solutions that help small and medium-sized organizations improve productivity, increase profitability, and achieve their goals.

If you have any questions, feel free to contact us here.

Consultance Accounting Services

Key Benefits of Outsourcing Your Bill Payment Process

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“What do I mean by concentration? I mean focusing totally on the business at hand and commanding your body to do exactly what you want it to do.” Arnold Palmer

If I asked the leaders of nonprofit organizations and associations, as well as business owners, how much time they spent on their true business at hand, or the things that matter most, I’d venture to say that most of them would say “not enough.”

When I bring new clients on board, I find that many of them spend a lot of time shifting through mounds of paper, trying to stay on top of vendor bills and payments and other administrative activities. By outsourcing their back office functions to Consultance Accounting and switching to Bill.com, an automated bill payment process solution, organizations can focus on what matters most, and let us handle their bookkeeping and accounting needs.

As a cloud-based firm that provides outsourced accounting services to clients across the country, Consultance Accounting leverages the use of top technology platforms, such as Bill.com, to streamline our clients’ operations. Bill.com is a bill payment process solution that integrates with QuickBooks Online and other accounting systems. Bill.com outlines Ten Reasons to Outsource (and Upgrade) Your Bill Payment. Here’s my take on some of the key points they discuss:

Bill Payment Process
Credit: Quinn Dombrowski CC BY-SA 2.0 via flickr

Get Rid of Paper Hassles: Have you heard of that tip about handling a piece of paper only once to increase your efficiency? With an automated bill pay solution, you can take that tip to the next level by eliminating those pieces of paper entirely! Here’s how it works for our clients’ Accounts Payable processes: We work with clients and their vendors to eliminate all paper bills, so instead, they are electronically remitted directly to a dedicated Bill.com email account. From there, our accounting specialists ensure the proper account coding and payment dates, and the Bill.com system will automatically forward the on-line bills to the appropriate people for approval. All the supporting documents are stored securely on-line, leaving you with a paper-less work environment.

 

 

Bill Payment ProcessEnhance Your Mobility: Do you ever feel like your handcuffed to your desk due to all the administrative work you have to handle? By outsourcing your accounting function and using Bill.com, you can free yourself from your physical office space and conduct business anywhere using your mobile device(s). This occurs for multiple reasons. First, you eliminate the need for an in-house bookkeeper to handle your accounting transactions, which saves you the time in the office managing that employee. Second, your vendor and payment data is easily accessible on your mobile device(s). As a business owner who is always on the move, I can personally attest to how easy it is to access my vendor invoices using my smart phone. For example, if a vendor calls me up and asks about a payment, I can easily pull up the Bill.com app on my smart phone, review the vendor’s information, and approve a payment on the spot. It’s that simple.

 

Bill Payment Process
Credit: 401calculator.org via flickr

Experience Financial Savings: In addition to helping you reprioritize your precious time, it’s important to note the opportunity to save money too. By outsourcing your back-office functions to an accounting services firm, you can reduce your employee-related overhead costs (e.g., training, office space, benefits, etc.). By using a bill payment solution like Bill.com, you can save by transitioning your paper checks to electronic payments. Bill.com estimates that the total yearly cost for paper checks can be $24,540, as compared to total yearly cost for electronic payments of $1,680.  Click here for more info.

 

 

 

Summary:  If you’re like most business owners and leaders of nonprofit organizations, you take great pride in the services or products you provide. You want to focus your time and energy on business strategy and goals. Outsourcing your back-office functions to a dedicated, highly-skilled accounting services firm that uses proven technology apps to streamline your workflows allows you to do exactly that.

So, are you ready to concentrate like Arnold Palmer? Whether it’s serving your customers, fundraising for future growth, or expanding your reach in the community, Consultance Accounting in partnership with Bill.com can help you save valuable time, reduce operating costs and gain peace of mind that you’re focused on what matters most.  Contact Us if you’d like to learn more.

Consultance leverages exceptional talent, proven processes, and top technology platforms to deliver timely & accurate financial solutions that help small and medium-sized organizations improve productivity, increase profitability, and achieve their goals.

Consultance Accounting Services