For a new business startup, many of the ‘negatives’ can turn into positives. High unemployment means you are more likely to find high quality employees at a lower wage than you could during better economic times. Commercial space is also likely to be in low demand, which can mean lower rent and more flexible lease terms. In general this means lower overhead, which gives you a very competitive edge against established competitors who may have become top heavy during previous years. Low interest rates and increased government incentives also will work in the startups favor during these times.

Another positive for the new business during an economic slowdown is the fact that consumers will be doing more comparison shopping than they did before. When people are operating on a tighter budget, they are more inclined to look for new vendors who may give them a lower price than they have paid in the past. The only other thing a new business needs is the basic ingredient for any successful business; you need to provide a product or a service that meets a current need, or want, of the public.

Now may be the perfect time for some of those dormant business ideas to take bloom. Creative, but prudent entrepreneurs may find that this is the right time to put their business plans into motion.

Here are few things to ask yourself, when planning a transition of business leadership within your family.

1. What is your reasoning behind this decision? Is it a business decision or one based solely on emotion? Emotion based decision are seldom good business decisions.
2. Who do you plan to hand the reins to? Will it be one individual or a group of siblings, which must share the responsibility? Do they have the business experience necessary to handle the lead position?
3. When would the transition take place? Would you wait until you are ready to totally step out of the picture, or would you be able to step back and allow them to make decisions, while you are still a part of the business operation?
4. How would the new family leadership be received by employees? It is often assumed that employees will have the same loyalty to the family heirs as they did to the parental leadership, this is not always true. Employees can sometimes resent being given direction by those who haven’t put as much time into the business as they have.
5. Where are the potential heirs living? If taking an interest in the business would require a family move on their part is that truly likely to happen, or is going to be a difficult hurdle for them to overcome?

These are some important points to consider. The legal and financial aspects of such a transition of ownership should also be carefully looked at prior to making that decision.

• The rate reductions for long-term capital gains tax that were put into effect for 2010 will remain in place for 2011 and 2012.
• Home improvements that increase a residences energy efficiency may qualify for a tax credit. Improvements include some insulation; exterior windows, skylights and doors; electric heat pumps; central air conditioners; natural gas, propane or oil water heaters; biomass stoves; furnaces and boilers that meet higher energy efficiency standards may help decrease their tax amount for 2011.
• Mortgage insurance premiums paid on a qualified mortgage can be deducted as mortgage interest for 2011, provided that the taxpayer’s adjusted gross income meets the guidelines.
• The dependent and child care tax credit has been expanded for 2011 – 2012. This can be worth between 20-35% of qualifying child care expenses for children under the age of 13.
• Adoption credits are worth a maximum of $13,170 for 2011 returns for adoptions initiated in 2011 or before and finalized before the end of 2012. This amount will be decreasing in 2012.
• Eligible taxpayer, spouse or dependent enrolled in an eligible postsecondary institution may deduct up to $4,000 paid for tuition and fees in 2011. This can be claimed by both those itemizing and those taking the standard deduction.

Maintaining accurate records and reviews of financial reports is like preventative maintenance on your vehicle. It costs money to have the oil and filters changed on a regular basis. Having your tires rotating and balanced can seem like just one more thing to fit into your schedule. However, if you don’t take the time to have these things done on a regular basis, the end result can cost you much more in vehicle repairs and new tires, than if you’d simply paid for the maintenance as it was needed. Accounting works the same way.
Accurate accounting boosts your bottom line, not by increasing your revenue, but by avoiding unnecessary expense. When invoices are reconciled with vendor statements, mistakes and overcharges are caught and corrected. Early pay discounts can be earned, instead of lost, if invoices are entered into your payables and paid before discount dates. The faster your billing goes out, the sooner payments will come back to be deposited in the bank. This improves your cash flow. Improved cash flow means that you can pay your bills on time and avoid finance charges. With accurate accounting, your taxes get deposited, paid, and filed on time, which means penalties and interest are avoided. It’s all preventative maintenance.

When payables and receivables spiral out of control because a business manager is too busy ‘running’ the business and not making sure the accounting is being kept up to date, a cash flow crunch will develop. One of the biggest causes of business failure is a lack of cash flow. Accurate accounting is what keeps the gears greased and the money flowing into and out of a business.

Having up-t0-date and professionally prepared financial statements is another aspect of your business’ preventative maintenance program. The work your accountant does on these forms assists you in obtaining credit at reasonable rates.

Don’t underestimate the value of your accounting staff and CPA firm. They make a bigger effect on your bottom line than you may realize.

• Call your CPA before you respond to the letter. They are more familiar with these situations than you are. They will likely want you to fax or email a copy of the notice to them, so that can make a determination on the best way to respond.

• Ask for more time. Don’t be afraid to ask for more time to get your information together if the timeline seems a bit short. This is a common request and will generally be granted, as long as the rescheduled date is not too far in the future.

• Ask questions about the audit requirements. Most audit notices will have a long list of records needed or required for the audit. This does not mean that the auditor actually plans to look at all of those documents. They should, of course, be available, but the auditor will generally tell you what records he wants to start with and will need immediately available.

• An audit isn’t over until it’s over. Once the auditor has completed his review, and provided you with his initial report, there remains another phase to be completed. It will be your turn to review his findings and provide any challenges or correcting documentation.

Many business owners have found that the easiest way to deal with an audit notification is to simply engage their CPA firm to handle the process for them, as their representative. As certified financial professionals, we are used to communicating with revenue agencies and we can speak their language. Having a CPA represent your interests can relieve the stress and often provide more positive results, than trying to handle these situations yourself.

2.    Major investments. This can cover a lot of different types of investments. It may mean a major equipment purchase or it may mean purchasing stock in another company. It could also be an investment in the terms of a real estate purchase. Consulting with an accountant who can help assess the pros and cons of the situation before making the decision will help you make that decision with more confidence.

3.    Expansions and down-sizing. Regardless of whether you are considering expanding the size of your business, or decreasing it, the advice of an accountant can be invaluable in developing the proper financial strategy to accomplish your goals in the most beneficial manner possible.

A professional accountant will not try to tell you what decision to make in these situations, but will help you sift through the financial data in a way that will help you make a more informed decision yourself.

There are three different reporting levels that are generally offered by a CPA firm: Compilation, reviewed and audited. The type of reporting level desired is determined by the client, though publicly held companies are required by regulation to provide audited financial statements to their holders.

Compilation
This type of financial statement report provides the lowest level of assurance from a CPA firm. There are some basic standards which must be adhered to, such as understanding the client’s industry and its operations. However, as the title suggests, this situation simply requires the CPA to ‘compile’ financial reports based off the data provided to them by the client.

Reviewed
Financial statements, which include a report of review, have undergone a higher level of scrutiny than provided by a simple compilation. The CPA firm will make inquiries and perform some analysis on the client’s accounting records. Their report, which will accompany the final financial statements, will state that a review has been performed in accordance with AICPA professional standards and the level of satisfaction that they found through their review. Private companies desiring to provide an extra level of financial confidence to their lenders and bankers, will often request reviewed financial statements.

Audited
This is the highest level of assurance that a CPA firm can provide a client’s financial statements. An audit goes beyond a review in that it provides an expressed opinion on the integrity of the financial statements. In order to provide this opinion, a CPA firm will make inquiries into the internal accounting procedures of the client and also perform verification of measures on amounts owed to creditors, inventory statements and several other areas of the financial records.

Each level of reporting requires an increased amount of inquiry and verification, which of course will require more time from the staff at the CPA firm, and a corresponding fee level. Which reporting level is chosen by the client will generally depend upon the requests made upon them by outside sources seeking a level of confidence in their financial reports.

These tools are things like budgets and performance ratios and goals. Some companies will enter them in, but never adjust them or verify their accuracy. Many systems have great reporting features that are never used, simply because data is not entered or not entered consistently. It can seem like a waste of time to enter the data on the front end, but trying to create reports and pull data later on often takes much more time than entering the measuring tools in the first place.

If you want to be able to measure the performance of certain areas of your business, a strategy for collecting and reporting on that data needs to be put in place. The data and reports need to be tested for accuracy. Garbage in equals garbage out, as the old saying goes. Usually a consultation with an accountant who is also familiar with your accounting software will provide you with the best direction in developing a data collection system that will provide the results you need.

Separation of duties, refers to dividing the responsibilities related to a businesses’ cash accounts between two or more people. In a very small company, this may just be the owner and the accountant or bookkeeper. In a larger company, it may include two or more accounting staff.

Having one person who issues checks, records deposits and reconciles the bank statements, puts too much control over the cash accounts in the hands of one person. Separating these duties among two or more individuals creates a cross-check where unusual activity is more likely to be noticed.
Many small business owners have given their bookkeeper the authority to sign checks for the company; usually as a matter of convenience. This should never be done. A bookkeeper or staff accountant should never accept that responsibility, for their own protection. Separation of duties is as much about protecting accounting staff from suspicion as it is about protecting business owners from theft.

Many ‘trustworthy’ employees have succumbed to temptation when their personal finances have gotten out of control and the access to funds in their work environment did not have sufficient financial controls put in place. The greatest danger of embezzlement is generally not from new employees, but from long term employees who have developed a level of trust.

When an employee ‘borrows’ from company funds for the first time, and finds that it hasn’t been noticed, it increases the temptation to continue the practice. Although there is often the intention to repay what was taken, usually the ease of access and the financial conditions which prompted the original theft will prevent that repayment from taking place. Instead the fraudulent behavior continues and even escalates.

We’d be happy to review your company’s financial controls and give recommendations that will help safeguard the integrity of your accounting staff and the assets of your company.

If you really want to stay on top of your insurance expense, you’ll want to go one step further. Worker’s compensation and general liability insurance premiums are generally estimated at the beginning of the insurance year and then adjusted to actual at the end of the year. Since these premiums are based on amounts that can change during the year, payroll and sales, the estimate is the usually based on the previous year’s performance. If you are in an industry where these numbers can fluctuate greatly from year to year, you may want to be calculating and accruing these insurance costs throughout the year so that you know whether to expect a refund or additional premium costs for these insurance expenses.

Your worker’s compensation calculation will be based on your payroll, and many payroll systems have a feature that will allow you to enter the rates for your employees and automatically calculate the accrual expenses for you. The general liability insurance can be a bit more complicated because of the combination of figures used in the formula for calculating the premium, but it still can be done.

By having these insurance costs accurately accrued throughout the year, a business can also calculate their true expected profits more accurately as well. A large insurance bill after your annual insurance audit doesn’t need to come as a surprise, if you take time to set up the proper accruals.