With all of the curveballs 2020 has thrown at the nation, the economy, and businesses, there’s never been a better time to get an early jump on year-end planning for your business. While all the usual year-end tasks are still on the docket, you’ll want to consider implications related to the Paycheck Protection Program (PPP), any disaster loan assistance you received, and changes made by the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
We’ve put together a checklist of what you need to do now to prepare for a great year-end that includes annual tasks as well as 2020-specific tasks. Keep reading for assistance getting your financials organized, reviewing your tax strategy, and preparing for next year.
1. Bring order to your books – Now is the time to collect, organize, and file all of your receipts for the year if you haven’t been staying on top of it. Get with your CPA to ensure everything is clean and in order before the end of the year to help avoid surprises come tax time.
2. Examine your finances – This includes having your balance sheet, income statement, and cash-flow statements prepared and up to date. Reviewing this information allows you to see where your money went for the year so you can properly prepare for next year.
3. Work with your CPA on your PPP loan forgiveness application – We are currently awaiting further guidance on the PPP’s impact to taxes, but it’s important to work with your CPA on your PPP loan forgiveness application. Knowing where your PPP loan lies can help determine how to spread out your cash flow for the remainder of the year.
4. Organize all disaster loan assistance documentation – This includes your Economic Injury Disaster Loan (EIDL) documentation if you received an advance grant. EIDL advances must be added to your taxable income (unless different guidance is released), but you’ll be able to deduct any expenses paid with this grant.
Review your tax strategy
5. Review your taxes with your CPA – Do not put off your tax planning meeting with your CPA. Especially after the year you’ve had and any potential federal state aid your business received, your tax plan needs a review. Getting a jump on this early, well before the new year, can help you plan for what’s to come on Tax Day. It’s even more imperative to plan early for any tax obligations you may have at tax time as it’s likely the COVID-19 pandemic will continue to create a volatile environment for many industries’ revenue projections.
6. Execute on year-end tax strategy adjustments such as:
- Accelerating AMT refunds – The CARES Act has accelerated the alternative minimum tax following changes made by the Tax Cuts & Jobs Act. Corporations can claim all remaining credits in 2018 or 2019 thus allowing for filing of quick refunds.
- Using current losses for quick refunds – The CARES Act allows businesses to claim immediate refunds by using current losses against past income, for example.
- Submitting a retroactive refund for bonus depreciation – Businesses can now deduct qualified improvements dating back to Jan. 1, 2018, thanks to a fix made by the CARES Act. This could offer a quick refund.
- Claiming quick disaster loss refunds – Nearly every U.S. business is eligible for disaster-related refunds from losses in 2020 on an amended 2019 return for a quicker refund.
- Timing out your payroll tax deduction – While the CARES Act allows employers to defer paying their share of Social Security taxes, you should review the best strategy with your accountant. In some cases, it’s better to pay on time to take a loss. In others, it provides a liquidity benefit.
- Cash in on generous Section 179 deduction rules – For qualifying property placed in service in tax years beginning in 2020, the maximum Section 179 deduction is $1.04 million. The Section 179 deduction phase-out threshold amount is $2.59 million.
7. Prepare your tax documents – Once you’ve met with your CPA, it’s time to line up all the info you need to prepare your final tax documents or have your CPA take care of it. Be sure not to put this off to the last minute as it will be a complicated year for everyone.
8. Automate your tax function – Instead of spending valuable time and energy on manual tasks and repetitive processes this year, consider investing in data analytics and automation tools to optimize and streamline your in-house accounting and tax functions. There’s never been a better time to invest in technology that will help you become more efficient and accurate.
Plan for the future
9. Evaluate your goals – There’s no doubt that 2020 likely threw a wrench in many of your goals for the year. However, you should still review the goals you set last year and see if you’ve met or made progress on any of them. This will help with 2021 business planning.
10. Set goals for the new year – No one knows how 2021 will play out, and it’s unlikely the market or business will return to normal in the first part of the year. Take into consideration the challenges you’ve faced so far in the pandemic as you plan for 2021. Work with your trusted advisor to determine several back-up plans for what if scenarios in case of any state or national lockdowns.
In a year like no other, it’s crucial to prepare like no other so you’re not met with any surprises or devastating fees. Contact us today to set up your tax and business planning appointment.
With the M&A market in flux after all the unexpected challenges of 2020, buyers and sellers are likely wondering how their Paycheck Protection Program (PPP) loan comes into play in an M&A transaction. On Oct. 2, we got some answers when the Small Business Administration (SBA) released guidance on what to do if you are buying or selling a business with a PPP loan. The Procedural Notice was addressed to SBA employees and PPP lenders and clarifies how a change of ownership is defined, the steps that need to be taken with a PPP loan, and the obligations of borrowers regardless of change of ownership. Here’s what you need to know:
What defines a change of ownership?
The guidance states that a change of ownership requires at least one of the following conditions to be true for a PPP borrower:
- A sale or transfer of at least 20% of common stock or other ownership interests has occurred. This can be done in one or more transactions and can be to an affiliate or an existing owner of the entity.
- A sale or transfer of at least 50% of the PPP borrower’s assets measured by the fair market value in one or more transactions.
- A PPP borrower merges with or into another entity.
Aggregation of sales and transfers since the date of the approval of the PPP loan is required. Sales or other transfers for publicly traded borrowers must be aggregated when they result in one person or entity holding or owning at least 20% of the common stock or other ownership interest.
What must I do before the ownership change?
1. Notify your lender if you are contemplating a transaction that will change ownership – this must be done in writing and include relevant documentation.
2. If your lender is accepting PPP loan forgiveness applications, submit your application with all required documentation (we can help with this).
3. Set up an interest-bearing escrow account with your PPP lender which will be required in most cases by the SBA.
4. Determine if SBA approval of the change of ownership is required for your transaction.
How do I determine if SBA approval is required for my transaction?
SBA approval is not required for:
- Equity sales where the transaction is of 50% or less of the borrower’s equity.
- Equity or asset sales where the PPP borrower submits a forgiveness application that shows usage of all PPP loan proceeds and that an interest-bearing escrow account has been established with the PPP lender with funds equal to the balance of the outstanding PPP loan. After forgiveness has been processed, the escrow funds are to be used to pay any remaining loan balance plus interest.
SBA approval is required for sales that cannot meet the above criteria. The SBA will have 60 calendar days to review and approve or not approve. The PPP lender is responsible for notifying the SBA within five business days from the completion of the transaction and must submit to the SBA:
- Reasoning for why the above requirements cannot be met and details of the requested transaction
- A copy of the executed PPP note
- A letter of intent and the purchase or sale agreement that includes the PPP borrower, seller (if different than borrower), and buyer’s responsibilities
- Disclosure of buyer’s existing PPP loan, if any, including SBA loan number and an ownership list of 20% or more of purchasing entity
- Monthly 1502 reports until the PPP loan is satisfied
What if I don’t set up an escrow account?
Borrowers attempting to make an asset sale with 50% of assets and no escrow account will require a condition of the purchasing entity to assume all of the PPP borrower’s obligations under the PPP loan. The purchaser will then be responsible for compliance with PPP loan terms, and the assumption must be part of the purchase and sale agreement.
What do I do if I end up with two PPP loans?
Transactions resulting in an owner holding two PPP loans will require the owner to segregate and delineate the PPP funds and expenses with documentation demonstrating PPP requirement compliance for both loans. Being thorough and accurate with your documentation is key.
Anything else I should know?
Loans that are repaid in full or are fully forgiven by the SBA have no restrictions for change in ownership. Note that all PPP borrowers are responsible for the performance of PPP loan obligations, certifications related to the PPP loan application including economic necessity, compliance with all PPP requirements, and supporting PPP documentation and forms. Borrowers will be responsible for providing any and all of this documentation to a PPP lender/servicer or the SBA upon request.
For questions and assistance with an M&A transaction and your PPP loan, reach out to us.
If you haven’t converted to cloud-based accounting, it’s likely that COVID-19 may prompt you to make the switch. With more and more businesses and industries operating virtually, cloud access and real-time data has become more important than ever for making the best business decisions possible in uncertain times. With so much up in the air, you don’t want to be caught with a static accounting system that cannot keep up and provide the answers you need.
If you’re on the fence, we’ve put together the top 11 benefits of cloud-based accounting and the real-time data it provides.
1. Drill down on business performance – Real-time data through cloud-based accounting allows you to drill down on the key components of your business’s performance. You can get global or granular on factors such as location, project, customer, vendor, or department and see how each part is impacting your business in real-time. Additionally, you can use snapshots of your cash flow, revenue, expenses, and more to see how they compare year-over-year and how they are measuring up to your goals for this year.
2. Make better data-driven, real-time decisions – You’ve likely experience that last year’s or even last month’s data is irrelevant during these uncertain times. With real-time data, you can see clearly what’s holding you back now, or what’s working, and adjust accordingly. Without the real, hard data, these decisions can feel like a guessing game with a wait-and-see outcome, which is something most businesses cannot afford right now.
3. Make accurate predictions and forecasts – This accurate, up-to-date data allows you to feel more confident in the forecasting for the future your business. You have the facts in front of you to make more strategic predictions over the course of the year. Through the real-time data and historical facts, you can assess past performance, identify trends, and set goals and plans, making adjustments as needed along the way.
4. Automate processes – More and more, businesses are focused on automation, and there’s no better place to start than with your accounting. With cloud-based solutions, you can create automated workflows that handle much of the busy work for you like invoicing and paying vendors. This all funnels back into your real-time data so you can stay on top of your revenue and expenses.
5. Mitigate fraud and reduce errors – Mistakes and fraudulent activity can be more quickly and easily identified when you can see the transactions in real-time. The simplification of the software means less memorization of accounting practices, formulas, and Excel shortcuts – all of which can contribute to errors. And, the automatic reconciliation can help you detect fraud early. Being able to take timely action on errors and fraud can save your business big in the long run.
6. Simplify your reporting and EOY – Have you ever scrambled when a stakeholder asked for an up-to-date report on your business? Cloud-based accounting allows you to present an accurate, timely report in no time, simplifying the process for you and your stakeholders. Additionally, you avoid the end-of-year rush because you’ve been entering your information and tracking all year long, so tax bills aren’t as much of a surprise.
7. Simplify GST compliance – If you have general sales tax to track and monitor, you know it can be a challenge to assemble and file your GST returns. Cloud-based accounting tracks and applies GST automatically for you and allows you to pull a quick report when you’re ready to file.
8. Get access from anywhere – One of the best benefits of cloud-based accounting is that you can access your data from anywhere at any time. In the age of COVID-19 and working from home, this is especially beneficial for you and your team so everyone can stay on track and on task.
9. Collaborate with your accountant – Cloud-based accounting has simplified the transfer process of client information to accountant and saved both sides time and energy in equal measure. Gone are the days of having to download everything to a CD or flash drive and delivering it to your accountant. Now, you can collaborate together virtually and trust you’re both on the same page.
10. Simplify your technology – Cloud-based accounting eliminates hard downloads across multiple computers and saves your IT department (or you) the headache of making sure everyone is up-to-date across the company. Thanks to online hosting, IT doesn’t have to worry about updating the software either, so they can focus on other projects.
11. Get the tech support you need – Most cloud-based accounting platforms offer regular tech support to help you any hour of the day. You’ll also have access to forums of thousands of other users so you can discuss issues and share best practices. Keeping your program up and running and optimized contributes to better real-time data.
For assistance with choosing the right cloud-based accounting platform for your business, contact us today.
Economic downturns are an almost inevitable reality for nearly every business owner. Decisions made far away from your community, catastrophic and unpredictable weather events, and even global pandemics as we’ve seen this year can disrupt the health and viability of a business. During these challenging times, business owners have to make difficult decisions about the future of their business that not only affect them but also their employees, vendors, clients, and communities. It’s an enormous responsibility to bear, but you don’t have to go it alone.
Your CPA advisor is your best resource for tackling the challenges of an economic downturn. As an outside party, they can help you make smart business decisions that protect your vision and mission while remaining financially responsible. Your CPA can help you:
Optimize your books
Never underestimate the power of good bookkeeping. By keeping your books in order, your CPA can help you plan and project for the future at each stage of an economic downturn. This includes planning for temporary closures and tiered re-openings (and potentially a back-and-forth of both depending on the state of the country and market). When your books are clean and up to date, you can better project how events and decisions will impact your finances on a weekly, monthly, and quarterly basis. Your CPA can help you flex the numbers on fixed and variable expenses to account for increases in costs, decreases in income, and potential changes to payroll. Knowing your numbers intimately can help you make better-informed decisions.
Minimize your tax burden
During times of economic crisis, staying abreast of new and changing tax legislation will be essential to projecting tax burden and uncovering tax savings opportunities. Your CPA is the best person to handle this because they know your business and your industry inside and out and can help you uncover tax savings opportunities that are unique to your circumstances. They do all the research, and you reap the rewards. With a CPA’s assistance, you achieve deductions and credits you may not have realized were available and develop a plan to defer costs where allowed depending on your business, industry, and location. Taxes are not an area you should or need to face alone during an economic downturn. Your CPA has done the homework, so you don’t have to.
Rationalize your decision making
When markets are in flux and your business is facing unprecedented challenges, the decisions you make can make or break your business. But you don’t have to go it alone. Your accountant can help you make data-informed decisions whether that be how to pay vendors, when and how to apply lines of credit, and the best ways to use your capital. Negotiating contracts with vendors that meet your needs and theirs during a downturn will not only achieve cost savings but also preserve relationships – your CPA can help develop a plan that makes sense. Knowing when to engage lines of credit can help you make better moves that you can either afford to pay back later, or maybe prevent you from taking on credit you can’t handle – your CPA can guide you in this process. Knowing where to allocate capital will be key to maintaining operations, and you may need guidance on what expenses to cut and what to keep such as marketing and payroll – your CPA can help you project the ramifications. With your CPA by your side, you don’t have to operate in a silo of decision-making.
Maximize your sense of relief
Most of all, your CPA can provide perspective, alleviate business back-end burden, and help advise you on financially feasible and sound decisions when much of the world feels like it’s in chaos. You have a lot to focus on during a downturn including how to handle your customers and employees in a changing marketplace. Having someone who can help you stay fiscally viable as you work through tough times, and develop a plan for future success, provides a welcome peace of mind.
You don’t have to go through any economic downturn alone. Your CPA can help you shoulder the challenges and weather the storms so you can continue doing what you do best – running your business.
The Internal Revenue Service recently issued the 2020 optional standard mileage rates to be used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
As of January 1, 2020, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) are:
- 57.5 cents per mile for business miles driven, down one half of a cent from 2019
- 17 cents per mile driven for medical or moving purposes, down 3 cents from 2019
- 14 cents per mile driven in service of charitable organizations; the mileage rate for service to a charitable organization is not alterable by the IRS. Instead, it must be changed by a statute passed by Congress.
It is important to remember that a taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.
Taxpayers always have the option of calculating the actual costs of using their vehicle, rather than using the standard mileage rates. For more information, please contact one of our professionals today.
Have you ever thought, I know we made more money than our
statement shows, or I know we don’t owe that much in taxes; we never
have any money! These moments of confusion are usually the result of either
an assumption that your data is accurate, or a misunderstanding of how
financial statements work.
Where did all the cash go?
You can always find the answer in your balance
sheet. One of the first red flags that something is amiss is when your balance
sheet tells a different story than your income statement. The key to unraveling
the mystery is understanding the balance sheet, which shows your financial data
at a fixed point in time. There are three pillars of a balance sheet.
- Assets: WHAT YOU OWN – Cash, receivables, equipment,
supplies, inventory, land, etc.
- Liabilities: WHAT YOU OWE –
Accounts payable, accrued expenses, bank debt, credit, etc.
- Equity: NET VALUE – Assets minus Liabilities
A business owner’s primary goal is to increase profit month over month. So, when a CEO reviews a balance sheet, their eyes typically skim right to net value. A mistake on the balance sheet will never be in your favor. If the value is inflated, demise awaits. If the value is deflated, you miss opportunities. Novice bookkeepers tend to make the mistake of confusing assets and expenses. The ripple effect is showing less expense and more profit and failing to price future jobs with the true associated costs. Ensuring the right people with the correct understanding control your books is the first step to avoiding errors. Outsourcing accounting services is a great way to make sure the job is done right the first time.
Another tip is to approach your assets, liabilities,
and equity in the same the way you look at your income statements. Keep a
historical record or your balance sheet and compare the data month over month.
A snapshot view is great for a quick assessment, but if you want to avoid
discrepancies, you need to look at the whole story.
Understanding your financial statements
When a CEO lacks the financial knowledge to catch nuances in their statements, they are unable to take corrective action to change the results. Once you understand the language of your financial statements, you can interpret what they mean to your organization’s financial health. For example, knowing what you sell beyond the widget is a critical step to calculating your true assets. Likewise, a mature business owner knows that most likely reason for a discrepancy between a healthy P&L statement and a low cash account is lagging receivables. The numbers on the page are clues. When you learn to read the clues with the big picture in mind, you are better positioned to make sound business decisions. Failing to understand variances, overreacting to numbers on a page, and not catching insufficient and inaccurate data are clear indications that you are a good candidate for external help.
Financial statements can be misleading. As a business owner, noticing when something is amiss is a key element to managing your organization and driving growth. Do not let misleading financial information or a misunderstanding of financial statements be the downfall of your company. Ensure that you and your managers have the right financial management skills. We can assist you in developing accounting practices that will help make your company more profitable. Call us to learn more about our outsourced accounting services.
Outsourced accounting services are a cocktail experience – a
carefully chosen mix of professionals, curated to leverage their expertise to
grow your business. Each firm does things a little differently, but there are a
few fundamentals across the board.
- Remote accountants work in sync with technology to help you do
more with less.
- Virtual accounting is a hybrid of traditional accounting and great
software; in fact, virtual accounting is typically considered a software as a
service (SaaS) option.
- Remote bookkeepers use customized software, cloud-based tech, and
a human touch to provide optimal solutions.
The most successful engagements begin with the right expectations and proper set up. Many businesses do not take the time to set their office up with right considerations. Here are a few ways to make sure your virtual accounting office is efficient and successful.
- Virtual means virtual! If you want to go remote, you will need to establish procedures for sending items (scanning, email, etc.) to the virtual office. Snail mail is not efficient! Likely, your CPA will have an implementation plan, but if you aren’t positioned to use the cloud, virtual services will be a learning curve. Make sure you have a conversation with your provider to determine appropriate technology integrations.
- Streamline invoices. Set up a “generic” email for the accounting department so multiple people have access. All invoices should be sent to this email, which can then be routed to a billing platform, like Bill.com.
- Internal controls. Establishing a system for the virtual approval of invoices and payments will ensure the flow of information is accurate, on-time, and properly classified. Virtual accountants typically have at least two sets of eyes on each step and multiple levels of staff working on one account.
- Uniform procedures. Make it simple to issue invoices and payments and require the company to follow the procedures with no exceptions!
- Align communications. Designate an in-house contact person for your virtual team. Without someone in the office physically, assigning a point person will ensure minimal interruption of service.
- Easy, not absent. Owners must review financials on a regular basis and set up monthly or quarterly meetings with their remote accountants to make sure that everyone is on the same page. Owners have a tendency to turn away from their financials when they think it is all taken care of. This lapse violates the first rule of ownership – always have one finger on the pulse of your bottom line!
- Accessible Accounts. To be efficient, your virtual office is going to need partial access to bank accounts, credit cards, payroll and routine vendor accounts. Access to view these accounts online should not come as a surprise. After all, how else can your virtual accountant keep track of your income and expenses and reconcile the books each month without it? It is crucial that you take the time to set account permissions correctly. Full access to authorize transactions is not necessary. Providing access to these accounts will allow you to have a much more efficient (and less costly) accounting team!
Regardless of your industry, size or
stage of growth, outsourcing accounting services can be a tremendous advantage
to your business. When the arrangement is a good fit, it allows business owners
to operate more effectively. Starting off on the right foot, with the right
expectations is critical to overall success. Our experienced CPAs and
consultants can help you get started working with a virtual accounting office.
Call us today.
Payroll fraud can put a huge dent in your bottom line – costing companies billions of dollars annually. Unfortunately, companies are often unaware that a corrupt employee is in their midst. According to data from the Association of Certified Fraud Examiner’s (ACFE) 2016 global fraud study, Report to the Nations on Occupational Fraud and Abuse, payroll fraud is an especially high risk for small organizations. In the United States, 131 cases of payroll fraud, representing 12.6% of all asset misappropriation schemes, were reported in 2016. While most fraud is uncovered within one fiscal year, payroll fraud tends to fly under the radar for an average of two years before detection and on average costs companies $90,000 per occurrence.
As business advisors, we stress the importance of internal controls to prevent fraud and theft and to ensure the accuracy of accounting data. However, many situations still exist in which organizations fail to establish adequate control systems to reduce transaction costs for many reasons. Whether it is a lack of information or a lack of personnel, the fact of the matter is that payroll fraud is usually perpetrated by a single or multiple insiders. The following strategies can help prevent and detect payroll fraud in your organization.
This is one of the most effective strategies, and if you do not already have one, we strongly recommend implementing processes that regularly check for schemes. Consider specialized software that combats ghost employee tactics by looking for red flags such as duplicate Social Security numbers, addresses or direct-deposit accounts. Another step is to be transparent with your audit plan. Making employees aware that you conduct such audits may be enough to deter them.
Compare payroll numbers against output. A spike in overtime hours during a slow month, for example, should prompt further investigation. We can help you analyze your data and identify any red flags.
- Adequately separate duties.
This will prevent incompatible functions from being performed by the same individual, especially in the accounting department. Ask your payroll company if they allow multiple people to be in the authorization chain of command. Most payroll companies allow for multiple recipients of payroll reports; be sure you send final reports to an outside accountant and the owner. If one employee handles payroll, we recommend hiring an outside person to input the information into the accounting system, acting as the internal control.
- Routinely check documentation.
Check documents such as timecards and any other payroll documentation. You should be on the lookout for employees who are claiming excess hours and overtime as well as any other items that seem suspect. If employees know you are regularly checking time cards, they will be less likely to test the waters.
- Controls for new and terminated employees.
These are often overlooked. Make sure you collect the right documentation when adding new employees. Equally important is following protocol for terminated employees. While failure to remove a terminated employee from payroll is not fraud, controls will help you avoid the embarrassment of paying an employee after termination.
If you have
concerns about payroll fraud in your organization, please call one of our
Have you ever stopped to think about whether outsourcing financial management functions of your business would benefit your organization?
You will probably be surprised how many activities they encompass and how vital they are to the success of your company. Your business thrives when these activities are in order. When faced with the options, a business owner quickly realizes that either they will need to manage their organization’s finances or hire someone else to do it.
planning, financial risk assessment, record-keeping, and financial reporting
are time-consuming cogs in the wheel of a functional business and are best
managed by someone who has the right qualifications. But the fact of the matter
is, CFOs cost money, and most small businesses do not have forty hours of work
for a qualified individual. Rightly dividing resources within an organization
is a critical matter, which is why outsourcing CFO services makes a lot of
What is an outsourced CFO?
An Outsourced CFO is a valuable partner that can:
- provide budget guidance,
- prepare and analyze financial statements,
- forecast cash flow,
- provide strategic financial planning and advisement,
- evaluate current bookkeeping systems, and
- act as a negotiator.
Beyond these critical finance utilities, an Outsourced CFO can deliver expert “back office” support to organizations so they can focus on growing their business. The finance function can be broken up into three main activities, each with a series of sub-functions.
- Transaction processing – accounts receivable, customer billing, credit and collections,
accounts payable, general accounting, payroll, tax accounting, cost accounting,
fixed asset accounting, benefits administration, and internal and external
- Control and risk management – budgeting, cash flow
management, insurance risk management, forecasting, tax planning, performance
reporting, treasury management, and internal and external audit
- Decision support – business performance analyses (ratio analysis, cost analysis,
pricing analysis), business planning support, and finance function
Is it time to consider outsourcing?
Determining whether to outsource requires a focused and deliberate
approach. Below are six advantages that
will help you decide whether outsourcing financial management would benefit
Operating Costs – Any change that will reduce costs without otherwise endangering
operations will generally be positive. Many businesses are just too small to
justify hiring a full-time, in-house CFO.
Efficiency – Inefficient operations harm your organization. A real advantage of outsourcing is that behind
your outsourced financial planning expert stands an entire team of accountants,
partners, consultants, and bookkeepers. When financial activities are
outsourced and analyzed by an independent party specializing in that activity,
efficiencies will result.
Flexibility – When a business owner wears too many hats, one is bound to fall
off. Outsourcing CFO functions will
allow your organization to become more flexible in its ability to deal with its
environment and core activities. Changes
that make an organization more agile will make it better able to excel.
Risk – Outsourcing a function may reduce the risk an organization
faces. Outsourcing payroll, for example,
is likely to reduce risk, as experts will now do the job.
Ideas – Outsourcing CFO duties will bring new ideas to the table. Small
businesses need to recognize that outsourcing an expert will give them a clear
advantage with complex financial activities.
Growth Potential – Many organizations are limited in their ability to take on more
activities because their current staff is spread too thin. Outsourcing financial activities can allow
business owners and other staff to engage in better-targeted tasks.
Before determining whether to outsource financial management functions, there are many factors to consider including the size of your business, industry, number of employees, volume of transactions, and skill sets.
As a business owner, accepting the “virtual” reality of outsourcing means adjusting your expectations. In this environment, you will not be your CFOs only client, but you will have access to exceptional quality. If you are involved in the authorization process and can extend trust beyond your four walls, then you will truly benefit from this arrangement. However, if you are hung up on signing checks and are not able to hand over responsibilities, you will hinder the process and negate the experience.
Outsourcing services from your organization may enable you to operate more effectively. With our requisite knowledge of different types of organizational structures, we can help you create innovative changes in your organization. If you would like to learn more, please call our office to speak with one of our professionals and learn how you can enhance the success of your business.
Learn more about our outsourced CFO services by clicking here.
There are many reasons why
revenue can slip through the cracks of an organization. Common culprits include
outdated technology, lack of training, employee turnover and complacency. Accounts
Payable tends to be the land of the lost – overlooked and underappreciated.
Ignoring best practices in this department leads to lost revenue and exposes
your operation to significant financial risk. Accounts Payable is critical to
capital optimization; it is time to bring this core strategy into the light.
Taking a strategic approach
to Accounts Payable requires a business owner first to identify which practices
are holding up their business. Common mistakes include:
suppliers without following a standardized procedure
payments due to workarounds in the ERP system
- Missing the risky
behaviors that expose your business to disbursement fraud
- Taking liberties
with late vendor payments
- Not separating
the duties of new supplier approval from invoice payment
A well-functioning Accounts
Payable department is an opportunity to optimize payables and free up the
working capital needed to fuel growth. Strengthening your accounts payable
department processes and procedures is a big task. Addressing the following
areas first will help build momentum:
- Automated invoice and payment processes. Too often, small businesses use error-prone manual
processes to approve requisitions, scan supplier invoices, and issue payments.
Adopting automated systems will reduce the number and mistakes and increase the
effectiveness of process controls.
- AP Workflow.
Unless you have an AP workflow in place, your ERP system will only act as a
gatekeeper. Without an intentional
workflow, manual loopholes make it possible to outsmart the very systems you
have in place to prevent these mistakes. Setting up a workflow – a series of
checks and balances – will help you avoid these errors before they begin. For example,
- Duplicate Payments. One challenging area for some of our clients are payments to vendors
via check and by credit card. To avoid duplicate payments, we often suggest
requiring PO numbers for payments made by credit card.
- Three-Way Matching. It is always a good idea to confirm that the supplier invoice amount
aligns with the goods or services you have purchased. Failure to do this can
leave your organization susceptible to paying for things you did not order,
receive or approve. To prevent this, consider adopting a three-way matching
approach to your checks and balances. These steps triple check your process for
oversights or mistakes. The three documents you will review are the vendor
invoice, purchase order and receiving document (packing slip or report).
- Airtight Master Files. Take vendor management seriously before an internal audit. Establishing and maintaining a clean
vendor master file will safeguard you against potential fraud. Keeping records and
contracts up-to-date will help you identify red flags and make it easier for
your procurement personnel to do their jobs.
- Proactive Behaviors. Your organization will benefit from a proactive approach, but three
main areas will outshine in the Accounts Payable department.
discounting produces a risk-free, annualized return on investments, simply by
leveraging payments terms to your advantage. In simplified terms, the
purchasing organization offers to pay their suppliers early in exchange for a
discount. This synergistic approach is dependent on transparent and up-to-date
disbursement systems and works best in organizations that have an efficient AP
- On average, fraud
takes 18 months to uncover.In
addition to internal and external audits, businesses need to commit to regular,
rigorous fraud monitoring. Being proactive in this area means establishing
controls that look for red flags such as employee-vendor matches, invoice
anomalies, or prohibited entities in your master list. Aggressive monitoring
should not invoke a culture of distrust; it should instill a core value around
- A great byproduct
to careful monitoring is an instinct toward recovery audits. When a department
initiates recovery audits as part of their quarterly review process, they catch
incidents like overpayments and pricing compliance before they require
- A Thriving Team. If members of your accounting team have made a habit of extending
payment cycles or accepting discounts without calculating the costs or neglect to
take advantage of maximum savings through volume rebates, it might be time to
reassess your staffing structure. Reactive accounting will not support your
growth; it will curb your progress. Be sure your AP team knows their value, is adequately
staffed, sufficiently trained, and has the right skillsets for tasks at hand.
Personnel in this department need to have an analytical mind and the tools to
get the job done.
Poor Accounts Payable practices
occur in both emerging and mature businesses. If you need assistance
strengthening your Accounts Payable department process and procedures or would
like to talk about creating a strategy around capital optimization, the
professionals in our office can help! Give us a call today to get started.