You specialize in accounting, taxation and computer consulting for small- to medium-size companies. What’s the biggest area of concern when filing this year’s taxes? The one for businesses right now is new regulations around capitalization policies. We have gotten some guidance in terms of how much and what needs to be capitalized and at what point you can just deduct and not capitalize, depending on what your option is. That started as of Jan. 1 this year.
Capitalization is when you buy, build or improve an asset. There are rules on when you deduct it. You can’t just deduct when you pay for it; you set it up and actually depreciate it over the life of the asset. There have been some gray areas they have defined a lot better for us.
During the recession, it seems many small businesses handled their finances in-house during the year and finished off with a CPA during tax season. Is this a growing trend? With different software, we have seen that trend over several years. The trend has definitely shifted back. A lot of business owners don’t have the staff who really know how to interpret these numbers. These are the people who are still coming in and asking for review. It’s a good idea if they aren’t doing that. It’s like every six months you go to the dentist or the doctor and have your blood pressure checked. They are doing things that you can’t personally do. If you are not comfortable, you want to schedule that time to sit with your consultant and review the numbers. Ask them good questions about what you and your industry should be looking at. What should your focus be? Where are your negative things? Set some goals to improve on those numbers. It’s not necessarily just financial numbers. It can be operating statistics and production numbers. You don’t have to look at everything, but if you’re not looking at anything, you are at risk.
What other frequent mistakes are business owners making? Some businesses don’t look at their trends. We had several years of the economy being down, and everybody tightened their belt. You cut everything you possibly could. Now, we are back to not great, but there has been an improvement. You still want to spend your money wisely. Just because you are doing well doesn’t necessarily mean you need to spend it. It might not be a wise spend. Really watch those trends. Go out three years and look at things like the bottom line and gross profit. Watch the key indicators. You may think you are doing well, but there are issues if you dig a bit deeper. Small-business owners tend to look at their cash. If they have cash in the bank, they must be doing well. That oftentimes is not the case. It can really put them in jeopardy. You have got to be looking at your income statement and other indicators in your industry.
Many high-profile embezzlement cases have come to light in recent years. Is this an economic or technological trend? Years ago, a lot of embezzlement, especially in small- to medium-size businesses, would generally be those people who had been there a long time, were a loyal employee and felt comfortable. Then, you catch them. The last few years has been a trend of people who haven’t been with the company long but are riskier and smarter about it. It may also have some to do with the economy. A lot of the time, embezzlement starts out as just borrowing. They don’t intend to keep it; they just need to get by. Internal controls, especially for small businesses, are an area a lot of people have problems with. I always say you have to put your bad hat on and think like someone who would embezzle. Step through all the procedures in your business. It’s more than just cash, such as inventory. Could it be walking out the door on the weekends? Is anybody tracking that? You don’t want to track every little penny because at some point that’s not cost effective, but certainly you have a lot at risk. You want to be watching all the procedures.[[In-content Ad]]
